, MRL2601 ASSIGNMENT 2
SEMESTER 2 2026 (24 AUGUST 2026)
Question 1
The issue is whether Abahlali (Pty) Ltd can rely on the limitation contained in its
Memorandum of Incorporation (MOI), which requires prior approval from the general
meeting for contracts exceeding R150 000, to avoid liability for the R350 000 purchase
of the beach house from Nawana. The answer requires a distinction between the
capacity of the company and the authority of the person acting on behalf of the
company.
In terms of section 19(1)(b) of the Companies Act 71 of 2008, a company has all the legal
powers and capacity of an individual, subject to any restrictions contained in its MOI.1
The fact that Abahlali's main object is the manufacture of furniture does not, on its own,
prevent the company from purchasing immovable property such as a beach house. The
Companies Act has moved away from the strict common-law approach to the ultra vires
doctrine, where an act outside the stated objects of a company could be regarded as
invalid.2 The main issue in this case is therefore not whether Abahlali had the capacity to
purchase the beach house, but whether Gadifele had the necessary authority to enter
into the contract on behalf of the company. According to the MOI, contracts exceeding
R150 000 require prior consent from the general meeting. Since the beach house was
purchased for R350 000, the transaction exceeded this internal limitation. Gadifele
therefore acted without complying with the procedure required by the MOI.
1
Companies Act 71 of 2008, s 19(1)(b).
2
Cassim FHI et al The Law of Business Structures 2 ed (Juta 2021) 104–106.
SEMESTER 2 2026 (24 AUGUST 2026)
Question 1
The issue is whether Abahlali (Pty) Ltd can rely on the limitation contained in its
Memorandum of Incorporation (MOI), which requires prior approval from the general
meeting for contracts exceeding R150 000, to avoid liability for the R350 000 purchase
of the beach house from Nawana. The answer requires a distinction between the
capacity of the company and the authority of the person acting on behalf of the
company.
In terms of section 19(1)(b) of the Companies Act 71 of 2008, a company has all the legal
powers and capacity of an individual, subject to any restrictions contained in its MOI.1
The fact that Abahlali's main object is the manufacture of furniture does not, on its own,
prevent the company from purchasing immovable property such as a beach house. The
Companies Act has moved away from the strict common-law approach to the ultra vires
doctrine, where an act outside the stated objects of a company could be regarded as
invalid.2 The main issue in this case is therefore not whether Abahlali had the capacity to
purchase the beach house, but whether Gadifele had the necessary authority to enter
into the contract on behalf of the company. According to the MOI, contracts exceeding
R150 000 require prior consent from the general meeting. Since the beach house was
purchased for R350 000, the transaction exceeded this internal limitation. Gadifele
therefore acted without complying with the procedure required by the MOI.
1
Companies Act 71 of 2008, s 19(1)(b).
2
Cassim FHI et al The Law of Business Structures 2 ed (Juta 2021) 104–106.
