RHODES UNIVERSITY FACULTY OF LAW EXAMINATIONS: JUNE 2013 LAW OF CONTRACT A (LLB) LEGAL THEORY 3 (BA, BSoc Sci,

BCom, BSc) External Examiner: Internal Examiner: Adv GJ Gajjar Prof G Glover Marks: 70 Duration: 2 hours

ANSWER ANY TWO QUESTIONS

Question 1 (a) Nazeem runs a DVD rental store. He has seen his profit margin shrink due to the ease with which people can access films on the internet. Hence, he decides to diversify his business and to combine it with an internet caf. He approaches Bandwidth CC, a computer company, and seeks a quote for eight Lenovo computers. The quote that comes back seems very cheap. Nazeem asks the manager why the quote is so good, and he is told that the business has excellent international contacts in the Far East, and gets its stock at below-cost prices as a result. Nazeem decides to purchase the computers, certain he has made a good choice of contracting partner. However, two weeks later, representatives from the South African Revenue Service (SARS) swoop on his store and impound the computers. The SARS investigator tells Nazeem that the computers, while carrying the trade mark of a Lenovo, are in fact not properly licensed, and in fact also contain components that are supplied by other component makers or which are second-hand. The investigator says it has been watching Bandwidth CC for a long time in this regard. Nazeem is upset, and wishes to know whether he has any recourse against Bandwidth CC as a result of what has happened. He seeks your advice. Advise him fully. (20) (b) Write a case note on the decision in Broodryk v Smuts NO 1942 TPD 47, indicating why the law on determining when a contract may be set aside for duress in the decision could be criticised. (15) [35]

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Question 2 (a) Jordan insured his car with Umbrella Insurance Company in early 2012. He did so by telephoning the company and giving it some basic information about the car and where he lived, after which he was faxed a five-page proposed contract to sign. He simply added some basic details to some blank spaces on page 1, and appended a signature to the document in the relevant place without reading it any further. He then faxed it back to the company. Jordan paid his premiums every month without fail after that. A year later his car is damaged when someone drives their car into the side of his vehicle in a shopping-mall parking lot. Hence, Jordan submits a claim to his insurance company, and includes all the information the company requires, which includes a copy of his drivers licence. Jordan is shocked when, a week later, he receives an e-mail from the insurance company informing him that it is denying liability; and furthermore, it considers the contract between them cancelled, and that all premiums he has paid are forfeit. When Jordan asks why, he is informed that clause 13 of the contract which he signed read: I, the undersigned, guarantee that all information I have provided here is true and correct. In the document he had filled-in and signed he had been asked to state his age at his last birthday. In a rush, Jordan had read this to mean his next birthday, and had filled in 26, rather than 25. The discrepancy had been noted from his ID number on his drivers licence. Clause 21 of the contract states that any failure to comply with clause 13 will result in automatic cancellation of the policy, and that all paid-up premiums are forfeit to the insurance company. Jordan finds this all hard to believe: he had no idea the contract held such consequences for him, but he is informed by a broker friend that it is his fault for being foolish and not checking what he had signed. He seeks advice from you, a lawyer, as to whether the insurance company can really do this to him, on the basis of such an innocuous slip of the pen on his part. He tells you he would definitely have taken more care had he known about the consequences of getting something wrong. (25) (b) In Digest 50.17.185 the Roman jurist Celsus is quoted as saying that no obligation arises that is impossible (impossibilium nulla obligatio est). Explain the application of this principle in modern South African contract law. (10) [35]

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Question 3 (a) In early 2013 the National Water Regulator (NWRSA) announces an unpopular decision that the cost of water to consumers will quadruple in the next three years. The rationale is to provide funding for the replacement of ailing infrastructure, and to construct more storage capacity for South Africas growing population. Consumers are also urged to treat water as a scarce commodity. Meanwhile, rumours emerge that the SA Government, with the approval of NWRSA, has just concluded a water-supply contract with a major mining company (British-USA). Despite attempts to keep the details secret, a High Court application by other mining companies for access to information succeeds, and the contract is made public. What emerges is that the contract will give British-USA access to all the water supply it needs for its operations, for the next twenty years, at 10% of the cost of water, fixed at 2012 prices, for the duration of the contract. A prominent civic organisation, Liberty under Law, decides to challenge the validity of this arrangement, arguing it smells funny. The Government, NWRSA and British-USA say that they will resist any such action, as they negotiated the deal with great care, and the needs of the economy and the mining industry justify the arrangement. You may assume that Liberty under Law has the standing to proceed to court. Advise Liberty under Law whether or not it has grounds to challenge the contract. (25) (b) Write a note in which you explain, with reference to authority, the concept of rectification. (10) [35] END OF THE EXAMINATION PAPER

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