SURNAME: INITIALS:

STUDENT NUMBER:

QUESTION 1

Thabo, the promoter of a company not yet formed, entered into a written agreement with
Cannon (Pty) Ltd in terms of which he secured the rental of photocopiers for the company.
Since the company did not yet exist and Cannon was worried about the risk of the company
not coming into existence or, if it did, not abiding by the contract, Cannon added a 10%
premium onto the rental of the equipment. As a result the rental was R3 300 per month as
opposed to R3 000 which would have been a market related price. The contract was
entered into on the 1st of January and the company was incorporated on the 1st of March.
The incorporators had had the use of the photocopiers from the 1st of January until the 1st of
May when they decided not to continue with the contract and informed Cannon of their
decision.

1.1. Discuss Cannon’s legal position. Does Cannon have a claim, and if so, against
whom and for how much? (4)

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1.2. What are Thabo’s legal options if he is adversely affected by Cannon’s claim?
(4)
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QUESTION 2

Exmeco (Pty) Ltd is a private company that has stipulated in its Memorandum of
Incorporation (MOI) that its sole purpose is that of carrying on the business of a metal
foundry. The company’s business consisted of the precision manufacture of metal parts and
valves of all types. This stipulation may only be amended by a resolution passed
unanimously by all the shareholders. The MOI further stipulates that the directors are
authorised to represent the company up to a value of R100 000 (One hundred thousand
Rand). Should a director wish to bind the company to a transaction in excess of that
amount, the contract would have to be countersigned by at least one other director.

John Exely is a director of Exmeco (Pty) Ltd . Notwithstanding the stipulations in the MOI,
he signed a contract with Rand Air (Pty) Ltd committing the company to supply Rand Air
with air valves to the value of R150 000 over a period of 6 months.

When this came to the attention of the other directors they were dismayed. The company
does not have the ability to supply the amount of valves stipulated in the period. In the light
of this the other directors wished to escape liability under the contract by claiming that it is
void on the basis that the company lacked the capacity to enter the contract.

2.1. Advise them as to whether they could do so and what the consequences of such
action will be to the contract. (4)

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John Exely entered into a contract with Classic Cars in terms of which he bought a second-
hand car for Exmeco. The idea was that the car was a classic and that, after fixing it up it
could be sold for a profit. The car cost R100 000.

2.2. Discuss the validity of the contract. Could Classic cars hold Exmeco to the
contract? (2)

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