Paper 2.

2(ZWE)
Corporate and
Business Law
(Zimbabwe)

PART 2

TUESDAY 3 DECEMBER 2002

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A SIX questions ONLY to be answered

Section B TWO questions ONLY to be answered

Section A – SIX questions ONLY to be attempted

1 Explain and discuss legislation as a source of law in Zimbabwe.

(10 marks)

2 Assuming that all the essentials of a contract are present in the agreement, there may nevertheless be some cause,
reason or flaw existing at the time of the agreement which entitles one of the parties to cancel the contract and to
claim that both parties be restored, where possible, to their original position.
Required:
Analyse and discuss the above statement in relation to the law of contract.
(10 marks)

3 Describe how a contract of agency may be terminated.

(10 marks)

4 ‘By becoming a shareholder in a company, a person undertakes, by his contract, to be bound by the decisions of the
prescribed majority of shareholders, if those decisions on the affairs of the company are arrived at in accordance with
the law, even when they adversely affect his own rights as a shareholder .... That principle of the supremacy of the
majority is essential to the proper functioning of the companies.’
Per Trollip J.A in Sammel and Others v President Brand Gold Mining Company Limited [1969]
Required:
What limitations exist in terms of the current law (both statutory and common law) on the supremacy of the
majority rule principle?
(10 marks)

5 The whole object of running a commercial company is to make a profit and to share out the profit amongst those who
put the capital into the company i.e shareholders. This profit when distributed is called a dividend.
Required:
Discuss the general principles governing the payment of dividends in a company.
(10 marks)

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6 In terms of the Insolvency Act (Chapter 6.04) explain:
(a) the meaning of the word rehabilitation and its legal effect.
(b) the circumstances in which an insolvent person can be rehabilitated.
(10 marks)

7 Explain the obligations of the employer to his employee with regards to:
(a) providing the employee with work, (5 marks)
(b) payment of wages. (5 marks)
(10 marks)

8 What remedies are available to the buyer under the seller’s ‘implied warranty against latent defects’ in the
merchandise? When does each remedy apply and what does each remedy give to the buyer?
(10 marks)

3 [P.T.O.
Section B – TWO questions ONLY to be attempted

9 (a) Ngonidzashe is a director of a private company called Masarakufa Investments (Pvt) Ltd. The company
specialises in the manufacturing and production of ‘leisureware, camping equipment, canvas products, suitcases
and other forms of travelware’.
Ngonidzashe decides to retire from the Board on grounds of ill health. He will be replaced by Bonzo.
Required:
What steps must be taken to effect the resignation of Ngonidzashe from the Board of Directors and the
appointment of Bonzo in his place? What further practical issues should Kudzai, the company secretary,
take care of whenever a change takes place in the directorate of the company? (10 marks)

(b) You are the secretary of Dryland Products (Pvt) Ltd, a small manufacturing company which specialises in the
manufacturing and installation of drilling and borehole equipment. There are only two shareholders, Mujere and
Nhidza who are also the only directors. They concern themselves primarily with the manufacturing and sales
aspects of the business and rely on you for guidance on accountancy and finance. The company has had three
successive adverse trading years and one of the creditors, Tamai who is owed $2 000 000.00 has reached the
conclusion that the company’s losses are caused by the mismanagement of the two directors. Last week he
presented a creditor’s petition to the High Court for a winding up order because the company is unable to pay
its debts.
Required:
What alternative action may the court take in the circumstances? Briefly describe the procedure to be
followed to effect the action. (10 marks)

(20 marks)

10 (a) On Monday, April 1st an advertisement together with application forms for shares in Egoli Mines Limited, at $5
per share, appears in the Daily News. Adolf sees the advertisement and on the same day sends off an application
for 10 000 shares in Egoli Mines together with a cheque for $50 000.00. The application is received by Egoli
Mines on April 2nd. It is processed on Wednesday April 3rd and the share certificate is posted to Adolf that
morning.
Meanwhile, Adolf changes his mind. Later that day (April 3rd) Adolf posts a letter to Winston, the company
secretary for Egoli Mines Ltd indicating that he no longer wishes to purchase the shares. He asks for a refund
of his $50 000.00.
On April 4th, it emerges that Egoli Mines have discovered vast new reserves of gold along the Great Dyke region
in North-West Zimbabwe. It contacts Adolf by telephone later that day (April 4th) to tell him that it is not
accepting his application to purchase shares and asking him to return the certificates when they arrive. Having
heard of the gold finds at the Great Dyke, Adolf does not want to return the share certificate and in the meanwhile
the company’s share price has shot to $40.00 a share.
Required:
Advise Adolf as to his legal position in relation to the company. (10 marks)

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 (b) In early 2000 Elsie, a black, female Zimbabwean, aged 19 years, started a computer software business. After
the first six months Elsie’s business was on the verge of bankruptcy. To save the business Elsie’s uncle Shasha
advanced Elsie the sum of $400 000.00. Elsie and Shasha did not bother to reduce their agreement to writing.
It was verbally agreed that Elsie would liquidate the sum:
‘in instalments, if you like, as and when you think you can . . . .’
To date Elsie has not made any repayments to Shasha. Elsie and her uncle have had a bitter quarrel, totally
unrelated to the said loan agreement. However in order to fix her, Shasha has made demands for an immediate
refund of the full amount of $400 000.00. Shasha now wishes to sue Elsie for the sum of $400 000.00 plus
interest at the rate of 12 per cent per annum.
In another development, Elsie is being sued by her former boyfriend, Infidel for the return of gifts valued at
$100 000.00 which he donated to her in 2001 in anticipation of marriage. At the time of the donation Infidel
was validly married to another woman, Sekai. Infidel had promised to divorce Sekai first and when Infidel
managed to obtain a divorce in November 2001 he was utterly shocked to learn that Elsie was no longer
interested in marrying him.
Required:
Advise Elsie as to her legal position in relation to the claims by Shasha and Infidel. (10 marks)
(20 marks)

11 Mr Svotwai is the Managing Director of Tatco (Pvt) Limited. When the company started making huge losses the other
directors realised that something was wrong and launched an investigation. They discovered that Mr Svotwai had been
secretly trading with Tatco through another company Madhiri (Pvt) Ltd, in which Mr Svotwai has a substantial
beneficial interest. Madhiri (Pvt) Ltd had been receiving huge trade discounts from Tatco (Pvt) Ltd which no other
customer was getting.
An independent audit also revealed the fact that Mr Svotwai had defrauded Tatco of an amount of $10 million to
support his extravagant lifestyle. Besides owning a holiday home at the prestigious Mhlanga Rocks, along the Durban
Coast, he also owns a small, private aeroplane.
Required:

(a) In what respects has Mr Svotwai breached the statutory and common law applicable to directors?
(14 marks)

(b) Tatco (Pvt) Ltd is placed into liquidation. What action can be taken by the creditors to recover their money
from the company? (3 marks)

(c) What action can be taken by the liquidators to recover money personally from Svotwai? (3 marks)
(20 marks)

5 [P.T.O.
12 (a) Mr Shumba and Mr Mhofu are partners in an eco-tourism venture called Wildlife Delights which has its
operations in the Zambezi Valley. The firm specialises in organising hunting expeditions for overseas professional
hunters. Mr Shumba went to Harare and bought a truck for $5 000 000.00 for the partnership’s operations.
He immediately resold the truck for $8 000 000.00 to a desperate customer of the firm and pocketed the profit.
Mr Mhofu was furious on hearing this and demanded that the profits should be paid to the firm. Mr Shumba
refuses to do this and also refuses to call meetings of the partnership or to let Mr Mhofu see the firm’s accounts,
which, as the senior partner, he has decided to keep at home. He tells suppliers and customers that Mr Mhofu
has gone a ‘bit funny’ and no longer has authority to represent the partnership. Mr Mhofu comes to you for legal
advice.
Required:
Advise Mr Mhofu of his legal rights and any remedies that may be available to him in the light of the above
facts. (10 marks)

(b) Lucky is a driver employed by Tender Meat Supplies (Pvt) Ltd, a large wholesale supplier of fresh and frozen beef,
pork, poultry, fish and processed meat products to various outlets throughout Harare and its environs. He is
instructed by his supervisor to take a delivery of the company’s products from the company’s factory in
Graniteside to several retail outlets in Chitungwiza about 30 kilometres away. After his delivery Lucky decides to
pass through Glen Norah Township which is twenty kilometres away from Chitungwiza and is markedly off route
from the company’s headquarters. After spending two hours at a braai with Zodwa his girlfriend and in his
eagerness to make up for lost time he fails to stop at a stop sign. As a result his delivery van is involved in an
accident with another car driven by Mr Munyama, a resident of Glen Norah Township. Mr Munyama’s car is
extensively damaged. Mr Munyama confronts Lucky’s employer, Tender Meat Supplies with a bill of
$300 000.00 being the estimated cost of repairing his vehicle. Lucky’s employer wants to repudiate liability
arguing that Lucky was on ‘a frolic of his own’ at the time of the accident.
Required:
Advise Munyama as to the approach which the courts are likely to adopt. (10 marks)

(20 marks)

End of Question Paper