BUSINESS LAW EXAM REVISION WORKBOOK - …letslearnmore.weebly.com/uploads/1/3/4/0/13403059/wb_memo.pdf · BUSINESS LAW EXAM REVISION WORKBOOK ... Learning Unit 6 – Law of Insurance

BUSINESS LAW

EXAM REVISION WORKBOOK

DISCLAIMER:

This Workbook is designed to assist you with your exam preparations. Please note that this

Workbook does not substitute your Study Guide or prescribed text book and that you are required

to know the outcomes as designated for each Learning Unit. The absence or presence of anything

in this Workbook does not imply that the topic or question will or will not be covered in the exam.

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DC/Mancosa/RFG/WB0815

Learning Unit 1 – Introduction to Business Law

1. List four sources of South African Law

Statutory law/Legislation, Common Law, Customary Law, Judicial Precedent/case law, Old

Authorities, Constitution

2. Fill in the missing words in the paragraph below:

Persons to whom the law applies are known as legal subjects. There are two types of legal

subjects; natural persons and legal/juristic/artificial persons. The two types of legal rights

are real rights and personal rights. Ownership is an example of a real right. In terms of the

stare decisis doctrine, the decisions of our Courts become binding on the courts below. The

reason for the Courts decision is known as the ratio decidendi and is distinguishable from a

remark made in passing which is referred to as obiter dictum.

3. Match the concepts in column A with the words in column B

Column A Column B Answer

1 Head of Constitutional Court Summons 4

2 Head of Supreme Court of Appeal English Law 5

3 Right of way over land Judge President 2

4 Document starting civil proceedings Germanic Law

5 Strongly influenced our law Chief Justice 1

Servitude 3

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Learning Unit 2 – Law of Contract

1. List the eight requirements for a valid contract.

Lawfulness, Contractual capacity, Serious intention, Communication of intent, Certainty,

Parties of the same mind, Possibility of performance, Compliance with formalities

2. Jane agrees to accompany Sipho to dinner and the movies on Friday night. However at the

last minute Sipho agrees to go with Dave to watch a soccer match. Does Jane have valid

grounds on which to sue Sipho for breach of contract? Explain.

No, this was a date or social engagement

There was no intention to create a legally binding obligation – not every agreement leads

to a contract

3. Seventeen year old widow Candice enters into a verbal contract with forty year old alcoholic

Dave on Friday night while they are both sitting at the local bar to purchase his 2014 model

Mercedes Benz C180 for R200 000.00. They agree that that Candice will pay the money on

the following Monday to Dave at 17:00 in cash at which time he will give her the car.

Answer the following questions with reference to the above facts:

a. Discuss in detail whether or not the contact is valid based on the contractual

capacity of the parties.

It would appear that the parties have contractual capacity and that the contract is

valid;

Candice, although a minor is a widow – when a minor marries they attain full

contractual capacity which they keep even if the marriage ends

Although Dave is an alcoholic he still has contractual capacity – it is only if it can be

proven that he was under the influence at the time of contracting to the extent

that he did not understand what he was doing that will render the contract void

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b. On Sunday morning Dave receives an SMS from Candice reading “Just won a car,

don’t need yours anymore. Tks, C”. Is this a valid cancellation of the contract? If

not, explain what it is and what remedies would be available to Dave.

No, it is not a valid cancellation

What Candice has done is called repudiation – it is a form of breach of contract

where a party denies the existence of a contract or where they show that they

have no intention of fulfilling their contractual obligations

c. Discuss what the situation would be if the car was stolen out of Dave’s locked garage

on Sunday night.

Candice would still be liable to pay the purchase price to Dave because the risk had

already passed from Dave to Candice as soon as the sale was perfecta

Learning Unit 3 – Law of Sale

1. Sherry badly wants to sell her house because of rats living in her roof. She therefore plays

music when Nadia comes to inspect the house and she assures Nadia that there is nothing

wrong with the house. Nadia buys the house, which she would never of done had she known

about the rats.

a. What type of misrepresentation has taken place? Fraudulent misrepresentation

b. Advise Nadia of the remedies available to her when she discovers the rats.

The presence of the rats constitute a latent defect. Nadia can therefore use the

Actio Redhibitoria – she tenders return of the house and claims back the purchase

price plus interest and any improvements made.

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Because the misrepresentation was fraudulent she can also use the Actio eEx

Empti to claim compensation

2. List the essential elements of a contract of sale.

Agreement to deliver, agreement on goods/merchandise, agreement on purchase price

Learning Unit 4 – Law of Lease

1. Thandi agrees to lease out her Camps Bay apartment, in which she previously lived, to Vanessa

for R20 000 per month rental. They agree to a two year lease starting on 1 July 2015.

a. Vanessa opens a beauty salon in the flat which causes the neighbours to complain to

Thandi because of the noise. When Thandi speaks to Vanessa she tells Thandi that as

long as she is paying the rent on time she can do what she likes. Advise Thandi.

Vanessa is incorrect – the lessee has certain duties, one of which is to use the leased

premises for the purposes for which it was let. If the lease does not specify the use

we must look at what was previously done on the premises – in this case we know

Thandi lived there – so Vanessa must also use it as residential premises. Vanessa

also has to observe any rules made by the Body Corporate. Thandi must send her a

letter to immediately rectify her breach of contract – if she does not rectify it then

Thandi would be entitled to cancel the contract.

b. Vanessa pays her rent on time every month until December when she does not pay

on the 1st as agreed. Thandi wanted the money for Christmas so she comes to you for

advise as she has another tenant ready to pay and move in and her brother has

offered to evict Vanessa. Is Thandi entitled to cancel the lease and evict Vanessa?

No, Thandi cannot take the law into her own hands. She can also not just cancel

because of the non payment. She must first send Vanessa a letter giving her a

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reasonable period to pay her rent (maybe a week). If she still does not pay she can

then cancel the lease but cannot simply evict her – she has to follow the procedures

laid down in the law and apply to Court.

Three months into the lease Thandi sells the apartment to Dave who wants to move

in himself. He sends a notice to Vanessa on 1 September advising that he is the new

owner and cancelling the lease with effect from 30 September. Advise Vanessa of her

rights.

In terms of the “Huur gaat voor Koop” principle Dave simply takes over from Thandi

as landlord and he has to honour the lease.

Learning Unit 5 – Law of Agency

1. Kobus wants to buy the tyre fitment centre owned by his arch-rival Jaco. He is convinced that

Jaco would never sell to him out of spite so he appoints Gawie as his agent with the specific

instruction that Gawie must not disclose to Jaco that he is acting as an agent. Gawie

successfully negotiates a purchase agreement and then drops the bombshell on Jaco that he

was in fact acting as Kobus’s agent.

a. What is this type of arrangement called?

Doctrine of the Undisclosed Principal

b. Jaco comes to you for advise. What would you tell him?

Gawie was acting as an undisclosed principal – Jaco can elect to either hold Gawie

responsible or he can agree to sell to Kobus. Once he has made a decision he has to

stick to it. Jaco should see who (of Gawie and Kobus) is in a better position

financially to pay for the business and should sell to that person.

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2. List three ways that agency may be terminated.

By agreement, completion of mandate, effluxion of time, revocation by principal,

renunciation by agent etc…

3. Explain the difference between a Special and a General Power of Attorney

Both are written agreements of agency but a GPA is very wide and gives extensive powers

to the agent while a special power of attorney is more limited and gives only specific powers

Learning Unit 6 – Law of Insurance

1. Briefly explain the difference between indemnity and non-indemnity insurance.

Indemnity insurance is where the insurer agrees to indemnify the insured against an

uncertain specified future loss – we don’t know if the loss will occur or when or even how

big the loss will be, but if it occurs the insurer will pay or make good. Eg: insure your car

against accidents

Non-indemnity insurance is where you agree at the time of taking out the policy what the

insurer will pay if the loss occurs – eg: life insurance – you agree up front how much the

insurer will pay when you die.

2. John meets Sally in a bar one night. She tells him that she is a professional stunt pilot.

a. John thinks it may be a good investment to take out a R5 million policy on her life.

May he do this? Explain why or why not.

No, he cannot do this as it would be no different to gambling in a casino – the law

says gambling debts are unenforceable as it is contra bones mores (against public

morals). There must be an insurable interest before you can insure something

b. Sally decides to take out insurance on her aeroplane. The policy application form does

not ask what she uses the plane for. Three months later the plane is damaged in an

accident while she is performing a stunt. The insurer refuses to pay because the plane

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was involved in a stunt at the time of the accident. Discuss whether the insurer was

entitled to refuse to pay Sally’s claim.

Yes, the insurer could refuse to pay – insurance contracts are contracts of the utmost

good faith – ubermae fides – and there is a duty to disclose all material information,

even if the insurer did not ask the question.

Learning Unit 7 – Law of Security

1. List the three special defences available to a surety.

Excussion, Division and Cession of Action

2. “The common law position in respect of suretyship is that the creditor must first proceed

against the debtor unless the surety waives their right in this regard”. In light of the above

discuss the benefit of excussion and the instances when this defence may not be available.

Excussion means that the surety raises the defence that the creditor must first proceed

against the principal debtor and exhaust all remedies against hime before coming after the

Surety.

Excussion not available when:

Surety has renounced the benefit, Principal debtors estate already sequestrated, Principal

debtor clearly unable to pay, Principal debtor outside SA without local assets, Principal

debtor has a personal defence, Principal debtor hinders creditor in excussion

Learning Unit 8 – Forms of Business Enterprise

1. Briefly discuss give acts that may be regarded as criminal offences by company officers or

directors.

Fraudulent or reckless conduct by the company officers

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See pages 143/144

2. Explain the concept of limited liability

The shareholders (owners) of a company are not liable for all the debts of the company but

only to the extent of their initial investment (what they paid to buy their shares). This is

because a company is separate from its owners.

3. Briefly explain each of the following:

a. A (Pty) Ltd Private Company

b. NPC Non Profit Company

c. Limited Public Company

d. SOC State Owned Company

4. List any four rights or duties of a partner in a partnership.

See page 130 of Study Guide

5. Buhle, a single mom with a seven year old daughter wants to open her own interior decorating

business. She has inherited R1 million from her late grandmother and wants to use R100 000

of this money to start the business. Her suppliers have agreed to extend her credit totalling

R500 000.

a. Buhle is not sure if she should become a sole trader or go to the expense of registering

a company. Advise her based on the above facts.

Based on her circumstances it would be advisable to register a company. This will

allow for protection of her personal assets if the company is liquidated whereas she

would be personally liable if she was a sole trader. In other words with a company

she will stand to lose the R100 000 but as a sole trader she can lose R600 000 of her

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R1 million. This is because a company has a separate legal personality and because

of the principle of limited liability

b. Buhle comes across premises that would be perfect for her business. Supposing she

had decided to form a company but had not yet done so, what could she do to ensure

that she does not lose the opportunity to lease the premises?

She can enter into a pre-incorporation contract which is allowed by section 21 of

the 2008 Companies Act (see page 134)

6. List any three items of business that must be conducted at a company AGM.


7. Discuss the requirements for the giving of notice for a shareholder meeting.

See page 138 and 139 of Study Guide

Learning Unit 9 – Employment Law

1. Portia and John both see the following advert in their local newspaper and respond:

a. Discuss whether the conditions imposed in the notes are lawful.

Note 1 is lawful as it is in line with Employment Equity provisions while notes 2 and

3 are unlawful because they amount to unlawful discrimination (prohibited by both

Wanted; Shady Juice Company requires the following new staff:

1. We are looking to employ an experienced driver/merchandiser who has a

Code C1 license. Full training given and competitive salary with benefits.

2. We require a senior management accountant who has experience on Pastel

to work in our Paarl offices.

Notes:

Only black males or coloured females considered for post 1 above

Only good looking single females will be short listed for position 2 above

We do not employ Catholics or anyone who weighs over 100kg

Normal big company benefits include 14 days annual leave

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the Employment Equity Act and the Constitution. Note 4 is incorrect as it says 14

days leave the BCEA stipulates 21 days – you cannot agree to less

b. John is hired but his contract describes him as an independent contractor. He has to

work from 07:00 to 16:00 Monday to Friday and reports to the transport manager

who gives him his daily delivery schedule. When he is not doing deliveries he is

required to wash vehicles and clean the yard. After a month he requests two days

leave but is told that as an independent contractor he does not get paid leave. Advise

him.

Based on the facts it appears John is in fact an employee – the presumptions

contained in the BCEA and LRA will in any event shift the onus to the employer to

prove he is not an employee. The fact that he is supervised, works set hours, only

works for one employee etc all indicate that he is an employee

c. Suppose between deliveries John decides to visit his girlfriend. After spending an hour

at her flat he bumps the car in front as he is pulling away to drive to the next delivery.

Is Shady Juice Co liable for the damage he caused? Discuss.

Yes, Shady Juice are responsible based on the principle of vicarious liability – an

employer is liable for the delicts (civil wrongs) committed by its employees if these

occurred during the course and scope of employment and in furtherance of the

employer’s interests. However, the employer is not responsible if the employee is

on a frolic of their own

d. Portia is employed as a management accountant. After a month she discovers that

she is pregnant. She is scared to tell her boss in case she is fired. What should she do?

She can safely tell her boss that she is pregnant as she cannot be fired for this – it

would amount to automatic unfair discrimination under the LRA

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e. Three months into her job Portia is stopped by security at the gate one afternoon on

her way out. They find two expensive laptop computers in her car. They call her

manager and she is fired on the spot. Discuss the lawfulness of her dismissal.

She cannot be fired on the spot – dismissal has two elements; substantive fairness

and procedural fairness and both must be present for a valid dismissal. Substantive

fairness relates to the reason, eg: theft, so it would probably be fair to dismiss her

from this perspective but there must also be a fair procedure followed – she must

be given details of the charges against her, time to prepare and a hearing to give her

side and question opposing witnesses etc – in this case there was no procedural

fairness

f. Would it have made a difference if they had only found 2 litre packs of Shady Juice in

her car.

No, it would make no difference

Learning Unit 10 – Law of Competition

1. Explain three ways in which competition may be restricted.


Learning Unit 11 – Insolvency

1. List four requirements for voluntary surrender.

Comply with formalities, debtor must prove he is factually insolvent, must prove advantage

to creditors and must be enough assets to cover the costs of sequestration

2. Explain what is meant by composition.

An arrangement between the insolvent and his creditors to pay an amount as full settlement

– see page 197

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3. Explain what is meant by rehabilitation.

The process by which the insolvent is restored to full capacity – it happens automatically

after 10 years but can happen much sooner on application to court

Learning Unit 12 – Instruments of Payment

1. Explain the difference between an instrument “payable to bearer” and one “payable to order”

Payable to bearer is like cash – whoever has it in their possession can use it to pay someone

else, while payable to order means it must be given to the person named on the instrument

or to someone nominated by them through endorsement (signing the back of the

instrument)

2. Look at the following:

a. Who is the drawer? D Kriel

b. Who is the payee? Albert Kock

c. Who is the drawee? National bank Limited

d. What is this instrument called? Cheque

e. How can it be negotiated? By delivery

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3. List any five requirements to be a holder in due course?

See bottom page 208 and top of page 209

Learning Unit 13 – Intellectual Property Law

1. Briefly explain the two theories regarding patents under SA law.

See page 220 for incentive theory and disclosure theory

2. Explain when the copyright in a literary or artistic work would not vest in the author or creator.

When the author or creator has given the ownership to his employer – for example

journalists employment contracts normally assign the copyright to the employer and where

someone is paid or commissioned to create something – I pay you to do a painting of my

wife – I will own the copyright even though you did the painting

3. List two classes of work that are protected by copyright.

See page 223 and 224

4. Look at the picture and answer the questions:

Do you think this mark can be successfully registered

as a trademark? Why?

No, because it too closely resembles Nike

a. What remedies are available?

Interdict, damages, also an order to deliver

up all stock to Nike for destruction. Criminal

charge

http://www.google.co.za/imgres?imgurl=http://www.kahsoon.com/images1/Fake-Brand14.jpg&imgrefurl=http://figueroanike.blogspot.com/2010_12_01_archive.html&h=434&w=450&tbnid=9ufEGxZr4x3GiM:&docid=C37Wo-__LaQehM&ei=-M3dVaD6N8H_ULHykuAC&tbm=isch&ved=0CDsQMygWMBZqFQoTCKDWjcH7xscCFcE_FAodMbkELA

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Learning Unit 14 – Internet Laws

1. Look at the picture and answer the questions

a. What is the domain name? mymancosa.com

b. What is the top level domain name .com

2. What is a hyperlink?

a link that takes you to another website if you click on it

3. Briefly discuss some of the issues you should cover when drafting a corporate e-mail policy.

See page 235

employee may not distribute offensive material, may not say anything derogatory about

employer, employers rights to monitor and intercept e-mails, use of signatures,

distribution of confidential material, virus protection etc…

Acknowledgements: HCIBM Study Guide, MANCOSA & MANCOSA past exam papers

Documents

BUSINESS LAW EXAM REVISION WORKBOOK - …letslearnmore.weebly.com/uploads/1/3/4/0/13403059/wb_memo.pdf · BUSINESS LAW EXAM REVISION WORKBOOK ... Learning Unit 6 – Law of Insurance