[Type the company name]
CLA2601 Assignment 2
Semester 1 | Due 16 April
2025
NO PLAGIARISM
[Year]
, Exam (elaborations)
CLA2601 Assignment 2 Semester 1 | Due 16
April 2025 Course
Commercial Law IIA (CLA2601)
Institution
University Of South Africa (Unisa)
Book
General Principles of Commercial Law
CLA2601 Assignment 2 Semester 1 | Due 16 April 2025. All questions
answered.
Question 1 Lesego and Phumudzo are the trustees of the Build Your Own
Home Trust, which carries on its business in the construction industry. Even
though the trust deed of Build Your Own Home Trust does not explicitly
authorise the trustee/s to purchase a back actor to excavate and prepare
building sites for construction, Lesego and Phumudzo purchase a back actor
for the Trust. Considering the requirement that trustees must preserve trust
assets, discuss whether Lesego and Phumudzo have acted lawfully. 5 marks
In South African trust law, trustees have a fiduciary duty to act in the best interests of the
trust and must comply with the trust deed. This duty includes the preservation and proper
management of trust assets. However, trustees are also bound by the terms of the trust deed and
cannot act beyond their powers (ultra vires acts) unless explicitly authorized.
Legal Considerations
1. Authority of Trustees
o Trustees must act within the powers granted by the trust deed.
o If the trust deed does not explicitly authorize the purchase of a back actor, Lesego
and Phumudzo may have exceeded their authority by making the purchase.
2. Preservation vs. Risk to Trust Assets
o While trustees have a duty to preserve and enhance trust assets, the purchase of a
back actor is a financial decision that could either benefit or harm the trust.
o If the purchase improves the trust’s ability to operate and generate income, it
could be seen as acting in the best interests of the trust.
o However, if the purchase puts the trust at financial risk (e.g., if it was
unaffordable or unnecessary), they may have breached their fiduciary duty.
3. Ultra Vires and Ratification
o If the trustees acted outside their powers (ultra vires), the transaction may be
invalid unless it can be ratified by the beneficiaries or a court.
CLA2601 Assignment 2
Semester 1 | Due 16 April
2025
NO PLAGIARISM
[Year]
, Exam (elaborations)
CLA2601 Assignment 2 Semester 1 | Due 16
April 2025 Course
Commercial Law IIA (CLA2601)
Institution
University Of South Africa (Unisa)
Book
General Principles of Commercial Law
CLA2601 Assignment 2 Semester 1 | Due 16 April 2025. All questions
answered.
Question 1 Lesego and Phumudzo are the trustees of the Build Your Own
Home Trust, which carries on its business in the construction industry. Even
though the trust deed of Build Your Own Home Trust does not explicitly
authorise the trustee/s to purchase a back actor to excavate and prepare
building sites for construction, Lesego and Phumudzo purchase a back actor
for the Trust. Considering the requirement that trustees must preserve trust
assets, discuss whether Lesego and Phumudzo have acted lawfully. 5 marks
In South African trust law, trustees have a fiduciary duty to act in the best interests of the
trust and must comply with the trust deed. This duty includes the preservation and proper
management of trust assets. However, trustees are also bound by the terms of the trust deed and
cannot act beyond their powers (ultra vires acts) unless explicitly authorized.
Legal Considerations
1. Authority of Trustees
o Trustees must act within the powers granted by the trust deed.
o If the trust deed does not explicitly authorize the purchase of a back actor, Lesego
and Phumudzo may have exceeded their authority by making the purchase.
2. Preservation vs. Risk to Trust Assets
o While trustees have a duty to preserve and enhance trust assets, the purchase of a
back actor is a financial decision that could either benefit or harm the trust.
o If the purchase improves the trust’s ability to operate and generate income, it
could be seen as acting in the best interests of the trust.
o However, if the purchase puts the trust at financial risk (e.g., if it was
unaffordable or unnecessary), they may have breached their fiduciary duty.
3. Ultra Vires and Ratification
o If the trustees acted outside their powers (ultra vires), the transaction may be
invalid unless it can be ratified by the beneficiaries or a court.
