Contract Law and Corporate Governance: A Case Study Analysis
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Question 1.
1.1
Issue:
When and where was the contract between Lungile and Naledi concluded?
Law:
Assuming all other requirements for a valid contract such as “intention to contract and that the
acceptance is clear, certain and unambiguous, and that the contents of the acceptance
correspond with those of the offer have been met”, the contract was concluded as per the
prescribed theory of acceptance, which are prescribed as per section 4(44) (a)-(b) in the
common law of contract law.
The four theories refer to four different phases of the communication process through which an
acceptance is made and transferred to the offeror, namely (Nagel et al,2018):
a) Where it is declared or made (Declaration Theory)
b) Where it is sent off or despatched to the offeror (Expedition Theory)
c) Where the offeror receives the offer (Reception Theory)
d) Where the offeror takes note of the acceptance as well as the content of it as an
acceptance of his last offer (Information Theory)
Application:
With the application of the information theory, the general rule is that the contract is concluded
at the time and place where the offeror who made the final offer ascertains that the offeree has
accepted his offer. This theory is applied in all situations where contracts are concluded in
person, by telephone, or by fax.
Conclusion:
The contract was concluded on the 15th of May 2023, in Gateway Durban, KZN, RSA. The
contract was concluded by Naledi, the offeror through a telephonic channel and verbally
confirming the sale to the Offeree, Lungile.
1.1
Issue:
When and where was the contract between Lungile and Naledi concluded?
Law:
Assuming all other requirements for a valid contract such as “intention to contract and that the
acceptance is clear, certain and unambiguous, and that the contents of the acceptance
correspond with those of the offer have been met”, the contract was concluded as per the
prescribed theory of acceptance, which are prescribed as per section 4(44) (a)-(b) in the
common law of contract law.
The four theories refer to four different phases of the communication process through which an
acceptance is made and transferred to the offeror, namely (Nagel et al,2018):
a) Where it is declared or made (Declaration Theory)
b) Where it is sent off or despatched to the offeror (Expedition Theory)
c) Where the offeror receives the offer (Reception Theory)
d) Where the offeror takes note of the acceptance as well as the content of it as an
acceptance of his last offer (Information Theory)
Application:
With the application of the information theory, the general rule is that the contract is concluded
at the time and place where the offeror who made the final offer ascertains that the offeree has
accepted his offer. This theory is applied in all situations where contracts are concluded in
person, by telephone, or by fax.
Conclusion:
The contract was concluded on the 15th of May 2023, in Gateway Durban, KZN, RSA. The
contract was concluded by Naledi, the offeror through a telephonic channel and verbally
confirming the sale to the Offeree, Lungile.
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1.2
The offeror in this scenario is Naledi and the offeree is Lungile.
The offeror is the person who is making the offer, and Naledi is the person who is selling the
Perfumes to Lungile, offering them to him for a price value of R20 000. She also confirms the
sale offer as her duty as an offeror.
The offeree is the person receiving the offer or the person who has accepted the offer. An offer
was made to Lungile to purchase the perfumes for the stipulated amount, which he paid to the
offeror. Lungile also inquiries about the perfumes, contracting the offeror and requesting to
make a purchase from them for what they are offering.
1.3
Issue:
is there a breach of a valid contract committed/constituted by Naledi?
Law:
A breach of contract occurs when a party fails to honour his/her contractual obligations. The
law recognizes five forms of breach of contract with their own set of rules, requirements, and
consequences. A breach occurs when parties do not perform or accept performance timeously,
do not make proper performance, refuse to continue with their contractual undertakings, or
render performance impossible.
There are five types of breach of contract as prescribed by the South African Common law
which is: repudiation, impossibility, mora debitors, mora creditors, and malperformance.
The requirements for malperformance are:
a) Positive duty. The debtor must perform an act in terms of the contract, if he does not
perform in terms of the contract, but the performance is defective the debtor is guilty of
positive malperformance.
The requirements of prevention of performance according to the meaning in the common law as
defined by Nagel et al, section 9(40), “the third form of impossibility is where performance is
prevented as it is rendered impossible through the culpable conduct of any one of the parties to
The offeror in this scenario is Naledi and the offeree is Lungile.
The offeror is the person who is making the offer, and Naledi is the person who is selling the
Perfumes to Lungile, offering them to him for a price value of R20 000. She also confirms the
sale offer as her duty as an offeror.
The offeree is the person receiving the offer or the person who has accepted the offer. An offer
was made to Lungile to purchase the perfumes for the stipulated amount, which he paid to the
offeror. Lungile also inquiries about the perfumes, contracting the offeror and requesting to
make a purchase from them for what they are offering.
1.3
Issue:
is there a breach of a valid contract committed/constituted by Naledi?
Law:
A breach of contract occurs when a party fails to honour his/her contractual obligations. The
law recognizes five forms of breach of contract with their own set of rules, requirements, and
consequences. A breach occurs when parties do not perform or accept performance timeously,
do not make proper performance, refuse to continue with their contractual undertakings, or
render performance impossible.
There are five types of breach of contract as prescribed by the South African Common law
which is: repudiation, impossibility, mora debitors, mora creditors, and malperformance.
The requirements for malperformance are:
a) Positive duty. The debtor must perform an act in terms of the contract, if he does not
perform in terms of the contract, but the performance is defective the debtor is guilty of
positive malperformance.
The requirements of prevention of performance according to the meaning in the common law as
defined by Nagel et al, section 9(40), “the third form of impossibility is where performance is
prevented as it is rendered impossible through the culpable conduct of any one of the parties to
the contract. The party who culpably prevents performance by rendering performance
impossible is guilty of a breach of contract’’.
Application:
Positive duty: naledi did not act in a manner that was in favour of her agreement with Lungile,
she could not supply Chanel No. 5 as per Lungile’s acceptance of the offer. She also held back
information from Lungile, which could have given Lungile the chance to understand the new
terms and conditions of the alternation to the already existing contract. Although Naledi gave an
alternative option, she did not disclose the quality of the product being offered, her performance
was defective.
Section 9(40): Naledi further culpably prevents performance by rendering performance
impossible. Knowing that the second offered perfumes were sample bottles that were not
intended for resale, she violated this clause.
Conclusion:
Due to Naledi delivering a defective performance, Lungile has no duty to cooperate to enable
Naledi to perform properly, nor does Lungile have to cooperate to enable Naledi to fix her
defective performance. Naledi has committed a breach of the contract. Remedies that are
applicable in this case are compensation remedies., where Naledi would be ordered to
compensate Lungile for the damages he may have accrued.
1.4
The type of court that has jurisdiction over the matter is the lower court system in the
magistrate’s court, under the district small claims court. The court runs a commissioner who
deals with small claims up to R20 000 and the parties do not need a lawyer. Lungile may
choose to take the matter to this court as it also takes matters claiming monies owed, enforcing a
claim based on a legal document, and claiming damages. Once the order has been made, the
parties have 14 days granted to them to fulfill their obligations owed, (SABC, yilungelo
lakho,2023).
impossible is guilty of a breach of contract’’.
Application:
Positive duty: naledi did not act in a manner that was in favour of her agreement with Lungile,
she could not supply Chanel No. 5 as per Lungile’s acceptance of the offer. She also held back
information from Lungile, which could have given Lungile the chance to understand the new
terms and conditions of the alternation to the already existing contract. Although Naledi gave an
alternative option, she did not disclose the quality of the product being offered, her performance
was defective.
Section 9(40): Naledi further culpably prevents performance by rendering performance
impossible. Knowing that the second offered perfumes were sample bottles that were not
intended for resale, she violated this clause.
Conclusion:
Due to Naledi delivering a defective performance, Lungile has no duty to cooperate to enable
Naledi to perform properly, nor does Lungile have to cooperate to enable Naledi to fix her
defective performance. Naledi has committed a breach of the contract. Remedies that are
applicable in this case are compensation remedies., where Naledi would be ordered to
compensate Lungile for the damages he may have accrued.
1.4
The type of court that has jurisdiction over the matter is the lower court system in the
magistrate’s court, under the district small claims court. The court runs a commissioner who
deals with small claims up to R20 000 and the parties do not need a lawyer. Lungile may
choose to take the matter to this court as it also takes matters claiming monies owed, enforcing a
claim based on a legal document, and claiming damages. Once the order has been made, the
parties have 14 days granted to them to fulfill their obligations owed, (SABC, yilungelo
lakho,2023).
1.5
The Counterfeit Act, act 37 of 1997 intends to prohibit certain acts in relation to counterfeit
goods as well as the possession of counterfeit goods in certain circumstances. As stated in
section 2.1:
a) “goods that are counterfeit may not be in possession or under the control of any person in the
course of business for the purpose of dealing in those goods.”
c) “be sold, hired out, bartered or exchanged, or be offered or exposed for sale, hiring out, barter
or exchange’’.
The Intellectual Property Rule also applies as the creation of perfumes involves certain skills
and knowledge, which could be seen as a violation of copyrights.
The scent and design belong to Dior and Naledi does not have a license to distribute samples of
Dior, nor clone their signature and use it to generate sales and this constitutes for Naledi to face
criminal charges of theft. Dior may also apply for a court interdict which will prohibit Naledi
from distributing counterfeit items under its brand name.
Question 2.
2.1
Issue:
Did the agency violate the authority granted by the principal?
Law:
Agency law aims to regulate the performance of a juristic act on behalf or in the name of one
person by another, who is authorized by the principal to act with the results that a legal tie arises
between the principal and a third party which creates, alters or discharges legal relations
between the principal and a third party.
In the principal-agent relationship, whereby, the terms of the contract between them govern
their legal relation, an agreement between the principal and agency is formed when:
The Counterfeit Act, act 37 of 1997 intends to prohibit certain acts in relation to counterfeit
goods as well as the possession of counterfeit goods in certain circumstances. As stated in
section 2.1:
a) “goods that are counterfeit may not be in possession or under the control of any person in the
course of business for the purpose of dealing in those goods.”
c) “be sold, hired out, bartered or exchanged, or be offered or exposed for sale, hiring out, barter
or exchange’’.
The Intellectual Property Rule also applies as the creation of perfumes involves certain skills
and knowledge, which could be seen as a violation of copyrights.
The scent and design belong to Dior and Naledi does not have a license to distribute samples of
Dior, nor clone their signature and use it to generate sales and this constitutes for Naledi to face
criminal charges of theft. Dior may also apply for a court interdict which will prohibit Naledi
from distributing counterfeit items under its brand name.
Question 2.
2.1
Issue:
Did the agency violate the authority granted by the principal?
Law:
Agency law aims to regulate the performance of a juristic act on behalf or in the name of one
person by another, who is authorized by the principal to act with the results that a legal tie arises
between the principal and a third party which creates, alters or discharges legal relations
between the principal and a third party.
In the principal-agent relationship, whereby, the terms of the contract between them govern
their legal relation, an agreement between the principal and agency is formed when:
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a) Agent receives authority to act on behalf of another via a contract between the principal
and agent.
b) The agent accepts the offer by agreeing to perform the relevant acts, taking the form of a
mandate.
c) The contract between the agent and the principal must comply with the normal
requirements for a valid contract.
Principle 1 of the King The board should lead ethically and effectively, act in good faith and the
best interests of the company, and not use their positions for personal gain, but practice best due
diligence concerning economic, social, and environmental factors.
Application:
The Agent has duties to form which are entrusted to him by the principal. To perform the tasks
that he was appointed to do and if not, he shall not be entitled to the compensation that might be
agreed to. He will be liable for any damage suffered by the principal because of the agent's
breach of duty. The agent should not exceed the authority that was granted, if he does something
that falls outside the scope of his authority, he will be liable for any damage suffered by the
principal. The principal will also not be bound by the contracts concluded by the agent while
acting outside the scope of his authority. The agent must perform his duties with the necessary
knowledge, care, skill, and due diligence, if not, he will be liable for any damages suffered by
the principal.
The agent should act in good faith as the relationship is based on the contract of mandate, and a
good relationship of good faith exists between them. The agent should always be in good faith
towards the principal when performing his appointed tasks, as the agent holds a position of trust
and confidence. He must always prefer the principal's interest above his own, especially where
his interests conflict with those of the principal, with reference to [ A v the commissioner of the
SARB, case IT 11282]:
and agent.
b) The agent accepts the offer by agreeing to perform the relevant acts, taking the form of a
mandate.
c) The contract between the agent and the principal must comply with the normal
requirements for a valid contract.
Principle 1 of the King The board should lead ethically and effectively, act in good faith and the
best interests of the company, and not use their positions for personal gain, but practice best due
diligence concerning economic, social, and environmental factors.
Application:
The Agent has duties to form which are entrusted to him by the principal. To perform the tasks
that he was appointed to do and if not, he shall not be entitled to the compensation that might be
agreed to. He will be liable for any damage suffered by the principal because of the agent's
breach of duty. The agent should not exceed the authority that was granted, if he does something
that falls outside the scope of his authority, he will be liable for any damage suffered by the
principal. The principal will also not be bound by the contracts concluded by the agent while
acting outside the scope of his authority. The agent must perform his duties with the necessary
knowledge, care, skill, and due diligence, if not, he will be liable for any damages suffered by
the principal.
The agent should act in good faith as the relationship is based on the contract of mandate, and a
good relationship of good faith exists between them. The agent should always be in good faith
towards the principal when performing his appointed tasks, as the agent holds a position of trust
and confidence. He must always prefer the principal's interest above his own, especially where
his interests conflict with those of the principal, with reference to [ A v the commissioner of the
SARB, case IT 11282]:
The agent has the duty to keep updated records of all transactions, payments, expenses, and
receipts that relate to the performance of his tasks on the principal's behalf so that he can
provide a proper account to the principal. The principal has the right to inspect these records and
he can even obtain a court order compelling the agent to grant him access to them.
The agent must deliver all the property, together with its benefits or accessories, or documents,
to the principal and must pay the principal all the proceeds received in connection with the
transaction. This includes all secret profits made by the agent. An agent who uses the proceeds,
including money received from that transaction for the agent's own purpose is guilty of theft,
with reference to [ A v the commissioner of the SARB, case IT 11282]:
Conclusion:
The agent (Thabo) committed a breach of duty by exceeding the authority granted. He did not
act in good faith, nor did he fulfill his duty to keep updated records of all transactions. He also
did not have the intention to deliver all the property together with its benefits and accessories to
the principal, making him culpable to be found guilty of Theft. Thabo also violated King IV,
principle 1 which could hold ethical consequences for him in the court of law, as the King is
referred to in the courts, with reference to [ A v the commissioner of the SARB, case IT 11282]:
receipts that relate to the performance of his tasks on the principal's behalf so that he can
provide a proper account to the principal. The principal has the right to inspect these records and
he can even obtain a court order compelling the agent to grant him access to them.
The agent must deliver all the property, together with its benefits or accessories, or documents,
to the principal and must pay the principal all the proceeds received in connection with the
transaction. This includes all secret profits made by the agent. An agent who uses the proceeds,
including money received from that transaction for the agent's own purpose is guilty of theft,
with reference to [ A v the commissioner of the SARB, case IT 11282]:
Conclusion:
The agent (Thabo) committed a breach of duty by exceeding the authority granted. He did not
act in good faith, nor did he fulfill his duty to keep updated records of all transactions. He also
did not have the intention to deliver all the property together with its benefits and accessories to
the principal, making him culpable to be found guilty of Theft. Thabo also violated King IV,
principle 1 which could hold ethical consequences for him in the court of law, as the King is
referred to in the courts, with reference to [ A v the commissioner of the SARB, case IT 11282]:
2.2
Issue:
Did Manqoba breach corporate governance principles and his directorial responsibilities as a
director?
Law:
As defined by section 1 of the Companies Act, a director is a member of the board of a company,
as contemplated in section 66.
Section 75(5)- if a director of a company, other than a company contemplated in subsection (2b
or 3), has a personal financial interest in respect of a manner to be considered at a meeting of a
board, or knows that a relayed person has a personal financial interest in the matter, the director
must:
a) Disclose the interest and its general nature before the matter is considered in the
meeting.
b) Must disclose to the meeting any material information relating to the matter and known
to the director.
c) Disclose any observations or pertinent insights relating to the matter if requested to do
so by other directors.
d) If present at the meeting, must leave the meeting immediately after making any
disclosure contemplated in paragraph (b)/(c).
e) Must not take part in the consideration of the matter, except to the extent contemplated
in paragraphs b/c.
f) Must not execute any documents on behalf of the company in relation to the matter,
unless specifically requested or directed to do so by the board.
Issue:
Did Manqoba breach corporate governance principles and his directorial responsibilities as a
director?
Law:
As defined by section 1 of the Companies Act, a director is a member of the board of a company,
as contemplated in section 66.
Section 75(5)- if a director of a company, other than a company contemplated in subsection (2b
or 3), has a personal financial interest in respect of a manner to be considered at a meeting of a
board, or knows that a relayed person has a personal financial interest in the matter, the director
must:
a) Disclose the interest and its general nature before the matter is considered in the
meeting.
b) Must disclose to the meeting any material information relating to the matter and known
to the director.
c) Disclose any observations or pertinent insights relating to the matter if requested to do
so by other directors.
d) If present at the meeting, must leave the meeting immediately after making any
disclosure contemplated in paragraph (b)/(c).
e) Must not take part in the consideration of the matter, except to the extent contemplated
in paragraphs b/c.
f) Must not execute any documents on behalf of the company in relation to the matter,
unless specifically requested or directed to do so by the board.
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Section 75 (6)- if a director of a company acquired a personal financial interest in an agreement
or other matter in which the company has a material interest or knows that a related person has
acquired a personal financial interest in the matter after the agreement or other matter has been
approved by the company, the director must promptly disclose to the board. Section 76 (2)(a), a
director of a company must not use the position of director, or any information while acting in
the capacity of a director to gain an advantage for the director or for another person other than
the company or to knowingly cause harm to the company or a subsidiary to it.
Application:
Section 77 (2)(a)- in accordance with the principles of the common law relating to breach of
fiduciary duty, the director will be held liable for any loss, damage, or costs sustained by the
company as a consequence of any breach by the director of a duty contemplated on sections 75,
76 (2) or 76 (3)a) or (b).
The common law also related to the delict law for the loss, damage, or costs sustained by the
company because of any breach by the director, the director will be liable. The director also
bears the liability if they acted in the name of a company, signed anything on behalf of the
company, or purported to bind the company or authorize the taking of any action or on behalf of
the company knowing that the director lacked the authority to do so.
Conclusion:
Manqoba is liable as a director for any damages, loss, or cost that will be sustained by Global
Trade Solutions. His actions have potentially caused harm to the company or caused a
subsidiary of the company. The company also faces ethical misconduct issues in the actions of
Manqoba.
Question 3
Issue:
what is the corporate governance issue in the CyberTech Solutions company?
Law:
King IV, principle 7: the boards should compromise the appropriate balance of knowledge,
skills, experience, diversity, and independence for its discharge of governance roles and
responsibilities, objectively and effectively.
or other matter in which the company has a material interest or knows that a related person has
acquired a personal financial interest in the matter after the agreement or other matter has been
approved by the company, the director must promptly disclose to the board. Section 76 (2)(a), a
director of a company must not use the position of director, or any information while acting in
the capacity of a director to gain an advantage for the director or for another person other than
the company or to knowingly cause harm to the company or a subsidiary to it.
Application:
Section 77 (2)(a)- in accordance with the principles of the common law relating to breach of
fiduciary duty, the director will be held liable for any loss, damage, or costs sustained by the
company as a consequence of any breach by the director of a duty contemplated on sections 75,
76 (2) or 76 (3)a) or (b).
The common law also related to the delict law for the loss, damage, or costs sustained by the
company because of any breach by the director, the director will be liable. The director also
bears the liability if they acted in the name of a company, signed anything on behalf of the
company, or purported to bind the company or authorize the taking of any action or on behalf of
the company knowing that the director lacked the authority to do so.
Conclusion:
Manqoba is liable as a director for any damages, loss, or cost that will be sustained by Global
Trade Solutions. His actions have potentially caused harm to the company or caused a
subsidiary of the company. The company also faces ethical misconduct issues in the actions of
Manqoba.
Question 3
Issue:
what is the corporate governance issue in the CyberTech Solutions company?
Law:
King IV, principle 7: the boards should compromise the appropriate balance of knowledge,
skills, experience, diversity, and independence for its discharge of governance roles and
responsibilities, objectively and effectively.
The company should comply with the following requirements for appointing board members:
a) Set direction and approve the process of attaining appropriate composition of the board.
b) Determine the appropriate number of members of the board based on required skills,
and knowledge such as academic qualifications, technical expertise, industry
knowledge, ETC.
c) There should be an appropriate mix of executive, non-executive, and independent non-
executive directors.
d) They should consider having sufficient members to serve on other committees.
e) They should consider the need to secure a quorum at meetings.
f) Regulatory requirements, where a company must have a finance director and a social
and ethics committee.
g) Diversity targets in terms of experience, age, race, and gender.
Application:
Failure to compile with having a diverse board of a mix of executives, non-executives, and
independent non-executives, CyberTech only has non-executive board members. All these non-
executive directors have a qualification in cybersecurity, violating the requirement for a diverse
board in terms of academic qualifications, technical expertise, and industry knowledge, as
prescribed by King IV, principal 7. The board members of CTS are all in their early 30’s, which
is also a breach of the prescribed requirements of the 7th principle that, the board should
encompass of diversified targets in terms of experience, age, race, and gender.
Conclusion:
Board diversity should reflect SA’s demographics and practice good governance by employing
directors from diverse backgrounds, genders, ages, ethnicities, and geographic backgrounds.
They should also meet the board's requirements for skills and qualifications. Diverse boards
make better decisions by reducing “Group thinking”, paying attention to managing and
controlling risks, and understanding the group clients, The failure to meet cooperate
governance practice and by implication of the principles set out in King IV, the court may evoke
liability on the board in certain circumstances. A court will consider King IV when evaluating
what is regarded as practice in a particular situation, especially where governance duties are
involved.
a) Set direction and approve the process of attaining appropriate composition of the board.
b) Determine the appropriate number of members of the board based on required skills,
and knowledge such as academic qualifications, technical expertise, industry
knowledge, ETC.
c) There should be an appropriate mix of executive, non-executive, and independent non-
executive directors.
d) They should consider having sufficient members to serve on other committees.
e) They should consider the need to secure a quorum at meetings.
f) Regulatory requirements, where a company must have a finance director and a social
and ethics committee.
g) Diversity targets in terms of experience, age, race, and gender.
Application:
Failure to compile with having a diverse board of a mix of executives, non-executives, and
independent non-executives, CyberTech only has non-executive board members. All these non-
executive directors have a qualification in cybersecurity, violating the requirement for a diverse
board in terms of academic qualifications, technical expertise, and industry knowledge, as
prescribed by King IV, principal 7. The board members of CTS are all in their early 30’s, which
is also a breach of the prescribed requirements of the 7th principle that, the board should
encompass of diversified targets in terms of experience, age, race, and gender.
Conclusion:
Board diversity should reflect SA’s demographics and practice good governance by employing
directors from diverse backgrounds, genders, ages, ethnicities, and geographic backgrounds.
They should also meet the board's requirements for skills and qualifications. Diverse boards
make better decisions by reducing “Group thinking”, paying attention to managing and
controlling risks, and understanding the group clients, The failure to meet cooperate
governance practice and by implication of the principles set out in King IV, the court may evoke
liability on the board in certain circumstances. A court will consider King IV when evaluating
what is regarded as practice in a particular situation, especially where governance duties are
involved.
3.2
Issue:
What are the potential challenges related to Sipho’s involvement in the winning idea without
credit from Lungile?
Law:
The Intellectual Property law as per the common law in South Africa, gives juristic property
rights to their original work so that they can profit from their ideas and innovations exclusively
and receive the recognition they deserve.
Copyright protects the expression of intellectual property but does not protect the idea of it
being expressed. The idea cannot be performed, copied, or rented without permission. The
permission to use the copyright must be issued in terms of a “license to use”, by paying a certain
fee for the license.
King IV, principle 1 states that the board should lead ethically and effectively.
Application:
IP law gives the right to Lungile to be recognized for his contribution to the winning encrypted
algorithm. He must be acknowledged, and he should receive a certain amount of prize money
for his ideas. The copyrights also require Lungile to be recognized for his contribution,
however, although the idea was innovated under the capacity of employment to Lungile, the
ideas belong to CTS company, however, for the board to be as fair as possible and to be ethical
in terms of the principle of King IV, they should ensure that all those who contributed to the
competition are recognized for their efforts, should their idea be used. Failure to credit Lungile
may cause tension between her and her colleagues, affecting everyone's work performance.
Conclusion:
The board of CTS needs to ensure that they act ethically as prescribed by their fiduciary duties
as directors and as prescribed by King IV, Principle 1. They need to ensure that Lungile gets
recognized for his contribution like all other participants in the competition, particularly those
who won and were compensated for their efforts.
Issue:
What are the potential challenges related to Sipho’s involvement in the winning idea without
credit from Lungile?
Law:
The Intellectual Property law as per the common law in South Africa, gives juristic property
rights to their original work so that they can profit from their ideas and innovations exclusively
and receive the recognition they deserve.
Copyright protects the expression of intellectual property but does not protect the idea of it
being expressed. The idea cannot be performed, copied, or rented without permission. The
permission to use the copyright must be issued in terms of a “license to use”, by paying a certain
fee for the license.
King IV, principle 1 states that the board should lead ethically and effectively.
Application:
IP law gives the right to Lungile to be recognized for his contribution to the winning encrypted
algorithm. He must be acknowledged, and he should receive a certain amount of prize money
for his ideas. The copyrights also require Lungile to be recognized for his contribution,
however, although the idea was innovated under the capacity of employment to Lungile, the
ideas belong to CTS company, however, for the board to be as fair as possible and to be ethical
in terms of the principle of King IV, they should ensure that all those who contributed to the
competition are recognized for their efforts, should their idea be used. Failure to credit Lungile
may cause tension between her and her colleagues, affecting everyone's work performance.
Conclusion:
The board of CTS needs to ensure that they act ethically as prescribed by their fiduciary duties
as directors and as prescribed by King IV, Principle 1. They need to ensure that Lungile gets
recognized for his contribution like all other participants in the competition, particularly those
who won and were compensated for their efforts.
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3.3
Issue:
The ethical consequences of the biased algorithm in criminal profiling.
Law:
Section 9 as per Chapter 2, Bill of Rights of the constitution of South Africa, guarantees the
right of every person not to be unfairly discriminated against, directly or indirectly, on the basis
of race, gender, sex, pregnancy, marital status, ethnic, or social origins, colour, sexual
orientation, age, disability, religion, conscience, belief, and language.
The application of King IV, principle 3 which is in relation to responsible corporate citizenship.
Application:
The board of CTS needs to consider the triple context (profit/planet/people) and establish an
ethical relationship between company and the society. They need to take accountability for the
biased algorithm and ensure to apologize and clear the names of those wrongfully profiled. All
faults found in the algorithm should be noted and explained to society, and how will these errors
be mitigated should also be made public.
The human rights of those affected need to be protected as set out in the Bill of Rights. These
bias reports have the potential to cause racial discrimination, which may lead to those
individuals being stripped of dignity, being victims of community rejection, and facing
defamation of character challenges.
Conclusion:
CTS should do right by the society and those directly affected by their algorithm. They should
fulfill their responsibilities as set out by King IV, principle 3, or could be found guilty in a court
of law to perform their fiduciary duties. The human rights of all those affected should be
protected or CTS could have a human rights court trial for violating the constitutional rights of
those affected.
Issue:
The ethical consequences of the biased algorithm in criminal profiling.
Law:
Section 9 as per Chapter 2, Bill of Rights of the constitution of South Africa, guarantees the
right of every person not to be unfairly discriminated against, directly or indirectly, on the basis
of race, gender, sex, pregnancy, marital status, ethnic, or social origins, colour, sexual
orientation, age, disability, religion, conscience, belief, and language.
The application of King IV, principle 3 which is in relation to responsible corporate citizenship.
Application:
The board of CTS needs to consider the triple context (profit/planet/people) and establish an
ethical relationship between company and the society. They need to take accountability for the
biased algorithm and ensure to apologize and clear the names of those wrongfully profiled. All
faults found in the algorithm should be noted and explained to society, and how will these errors
be mitigated should also be made public.
The human rights of those affected need to be protected as set out in the Bill of Rights. These
bias reports have the potential to cause racial discrimination, which may lead to those
individuals being stripped of dignity, being victims of community rejection, and facing
defamation of character challenges.
Conclusion:
CTS should do right by the society and those directly affected by their algorithm. They should
fulfill their responsibilities as set out by King IV, principle 3, or could be found guilty in a court
of law to perform their fiduciary duties. The human rights of all those affected should be
protected or CTS could have a human rights court trial for violating the constitutional rights of
those affected.
Reference List:
1. Agency law https://lawguide.co.za/south-african-law-of-agency accessed 8 May 2024.
2. Case law: “A v the commissioner of the South African Reserve Bank”. Case IT 11282.
3. Companies Act of South Africa, sections 1,66,75-76.
4. Constitution of South Africa of 1997, chapter 2, Bill of Rights, section 9.
5. Contract law of South Africa, section 4, and 9.
6. Counterfeit Act of South Africa, act 37 of 1997, section 2.1
7. King IV principles 1-7.
8. Nagel et al, 2018. ‘Commercial law book’ 6th edition, LexisNexis.
9. Nzama-Sithole, L. 2024. University of Johannesburg, 241BUS1110, lecture slides.
10. SABC News “Yilungelo Lakho, YouTube June 2023. Accessed 8 May 2024.
1. Agency law https://lawguide.co.za/south-african-law-of-agency accessed 8 May 2024.
2. Case law: “A v the commissioner of the South African Reserve Bank”. Case IT 11282.
3. Companies Act of South Africa, sections 1,66,75-76.
4. Constitution of South Africa of 1997, chapter 2, Bill of Rights, section 9.
5. Contract law of South Africa, section 4, and 9.
6. Counterfeit Act of South Africa, act 37 of 1997, section 2.1
7. King IV principles 1-7.
8. Nagel et al, 2018. ‘Commercial law book’ 6th edition, LexisNexis.
9. Nzama-Sithole, L. 2024. University of Johannesburg, 241BUS1110, lecture slides.
10. SABC News “Yilungelo Lakho, YouTube June 2023. Accessed 8 May 2024.
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