Contract Law and Corporate Governance: A Case Study Analysis


Added on  2024-07-04

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Question 1.
When and where was the contract between Lungile and Naledi concluded?
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)
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.
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.
Contract Law and Corporate Governance: A Case Study Analysis_1

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.
is there a breach of a valid contract committed/constituted by Naledi?
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
Contract Law and Corporate Governance: A Case Study Analysis_2

one of the parties to the contract. The party who culpably prevents performance by rendering
performance impossible is guilty of a breach of contract’’.
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.
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.
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).
Contract Law and Corporate Governance: A Case Study Analysis_3

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.
Did the agency violate the authority granted by the principal?
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:
Contract Law and Corporate Governance: A Case Study Analysis_4

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