Assignment 2
ENTREPRENEURIAL LAW
MRL2601
Semester 2
Department of Mercantile Law
, QUESTION 1
Johannes, Phineas and Beauty are Mnandi CC’s members. Beauty has discovered that
Phineas concluded a contract on behalf of Mnandi CC for the purchase of a yacht
without consent of any of the other members. She is of the opinion that Mnandi CC
should not be bound to the contract because the corporation’s main business is
catering. In addition, she shows you the association agreement which stipulates that
only Johannes is authorised to conclude contracts on behalf of Mnandi CC. Advise
Beauty whether or not Mnandi CC is bound to the contract concluded by Phineas. Refer
to relevant case law in your answer.
To determine whether Mnandi CC is bound by the contract Phineas concluded for the
purchase of a yacht, we need to consider several legal principles surrounding agency,
authority, and the limits of a company’s activities.
1. Authority to Contract
According to the association agreement of Mnandi CC, only Johannes is authorized to
conclude contracts on behalf of the company. This clearly indicates that Phineas acted
outside his authority by entering into the contract without the required consent.
2. Actual vs. Apparent Authority
- Actual Authority: Phineas did not have actual authority to enter the contract, as per the
association agreement.
- Apparent Authority: For Mnandi CC to be bound by Phineas’s actions, it would need to be
shown that he had apparent authority. This generally requires that third parties have
reasonable grounds to believe that the agent had authority.
3. Case Law
ENTREPRENEURIAL LAW
MRL2601
Semester 2
Department of Mercantile Law
, QUESTION 1
Johannes, Phineas and Beauty are Mnandi CC’s members. Beauty has discovered that
Phineas concluded a contract on behalf of Mnandi CC for the purchase of a yacht
without consent of any of the other members. She is of the opinion that Mnandi CC
should not be bound to the contract because the corporation’s main business is
catering. In addition, she shows you the association agreement which stipulates that
only Johannes is authorised to conclude contracts on behalf of Mnandi CC. Advise
Beauty whether or not Mnandi CC is bound to the contract concluded by Phineas. Refer
to relevant case law in your answer.
To determine whether Mnandi CC is bound by the contract Phineas concluded for the
purchase of a yacht, we need to consider several legal principles surrounding agency,
authority, and the limits of a company’s activities.
1. Authority to Contract
According to the association agreement of Mnandi CC, only Johannes is authorized to
conclude contracts on behalf of the company. This clearly indicates that Phineas acted
outside his authority by entering into the contract without the required consent.
2. Actual vs. Apparent Authority
- Actual Authority: Phineas did not have actual authority to enter the contract, as per the
association agreement.
- Apparent Authority: For Mnandi CC to be bound by Phineas’s actions, it would need to be
shown that he had apparent authority. This generally requires that third parties have
reasonable grounds to believe that the agent had authority.
3. Case Law
