Answers

Part 2 Examination – Paper 2.2(ZWE)

Corporate and Business Law (Zimbabwe) December 2002 Answers

1 Legislation, which is frequently referred to as Statute Law is the most important source of law in many of the world’s jurisdictions
including Zimbabwe. In terms of the Constitution of Zimbabwe legislative power of the Republic is vested in the Parliament of
Zimbabwe and the President.
There are two main forms of legislation, Acts of Parliament and delegated legislation.
Delegated legislation is passed by bodies to whom Parliament has delegated authority. Although statutes of Parliament are the
primary source of legislation, other types of legislation (delegated legislation) are promulgated by bodies and persons empowered
to do so. Examples of such forms of legislation are:
(a) Proclamations by the State President in terms of the Constitution.
(b) Ordinances, regulations and statutory instruments by Government Ministers in charge of state departments in terms of the
relevant empowering statutes.
(c) Bye-laws of the various municipalities and rural district councils throughout the country.
(d) Rules and regulations by statutory bodies such as the Health Professions Council, The Traffic Safety Council etc.
Sometimes legislation may be needed so urgently that the legislature can act very quickly (fast tracking) to enact the requisite
legislation. But usually the legislative process goes through a lengthy and protracted procedure. The legislative phases can be
broken down as follows:
(a) First Reading of the bill which is a mere formality.
(b) Second Reading – this is the most important stage in the introduction of most bills and the main principles of the Bill are
discussed at this stage.
(c) Committee Stage – this gives members of Parliament an opportunity to discuss the Bill clause by clause and improve the
wording and make amendments where necessary.
(d) Report Stage – if any amendments have been made at the previous stage they will be debated and considered by the House
and further amendments can still be made.
(e) Third Reading – finally a bill is given a formal third reading and goes to the President for his approval and when the President
signs a Bill it becomes an Act of Parliament and part of the law. To inform everybody what the new law is, it will be published
in the Government Gazette (constructive notice).
Some of the well-known (if not controversial in some cases) pieces of legislation that have been enacted by Parliament in the last
twelve months include:
(1) The Public Order and Security Act No. 1 of 2002
(2) The Sexual Offences Act No. 8 of 2001 and
(3) The Access to Information and Protection of Privacy Act No. 5 of 2002
Both the High Court and the Supreme Court have got the power to set aside legislation which is ultra vires the Constitution, for
example where legislation purports to derogate from rights enshrined under Chapter Three of the Declaration of Rights in the
Constitution. This is because our Declaration of Rights is justiciable (can be vindicated in a court of law).
As for delegated legislation, there are many factors/reasons which justify its existence. Briefly some of the reasons are:
1. Pressure on Parliamentary time – the Parliamentary calendar is very congested and there is no time to debate in detail all the
matters which require legislation in the country;
2. Flexibility and adaptability-delegated legislation can easily be adapted to suit a change in circumstances.
3. Certain matters such as tax law, medical and engineering matters require unique expertise in terms of the legislative agenda
of the Government and the details are then worked out by the experts and technocrats who are employed by the relevant
government ministries, departments and statutory bodies.
4. In an emergency there may be insufficient time to resort to the laborious processes of Parliament; statutory instruments and
proclamations can be brought into force much more quickly and expeditiously than statutes.

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 The major criticism that is often made against delegated legislation is that it is undemocratic if not unconstitutional, in that
important rules and regulations are made without recourse to the properly elected authority, Parliament. However, such criticism
can be rebutted by the following factors:
1. Parliament still ultimately retains some control over delegated legislation. Statutory instruments are vetted by Parliament.
2. In our jurisdiction the superior courts (the High Court and Supreme Court) have control over delegated legislation and
normally the validity of a statutory instrument can be challenged on two grounds namely:
(i) if the Statutory Instrument is ultra vires (outside the scope) the parent legislation
(ii) if the correct procedures were not followed in making the statutory instrument.
In all it can be said that it is quite clear that legislation is the most important and authoritative source of law in our jurisdiction and
the most common way by which legislation is terminated is through repealing.

2 A valid contract gives rise to rights, obligations and powers that are vested in one or both of the parties to the contract. These
rights always include a personal right to claim performance from the other party. If the latter does not perform in terms of the
contract, he may face a claim based on breach of contract. The parties however must achieve consensus ad idem (meeting of
minds) before a contract can come about. Where a party understood something incorrectly it is said that he acted as a result of
mistake and in cases of mistake one cannot be said to have consented to that which the other party has in mind. There is therefore
no consensus between the parties and likewise no contract. In cases involving duress, undue influence and misrepresentation,
consensus will have been obtained improperly and therefore it would be defective. Such a contract would be voidable at the
instance of the weaker party.
From the foregoing it is clear that there are factors which may influence consensus between the parties to the extent that the
contract may be rendered void and voidable.
These factors which will be discussed in detail below are the following:
1. Mistake (error)
2. Misrepresentation
3. Duress
4. Undue Influence

1. Mistake
Error or mistake is one of the greatest defects that can occur in a contract, for agreements can only be formed by the consent
of the parties and there can be no consent where the parties are in error in relation to the object of their agreement. Mistake
can be described as a misunderstanding or misapprehension by one or both of the parties regarding facts, events or
circumstances in the contract. The rule is that a mistake renders the contract void if it is:
(a) one of fact rather than law
(b) essential (material)
(c) reasonable (justus error)
This mistake (error) must concern only the facts of the contract and in particular the essential facts of the agreement in order
to have any influence on the consensus between the parties.
In Maritz v Pratley (1894) items were displayed for auction each bearing a number for identification. Prospective purchasers
were requested to inspect the goods which were to be put up for auction. A mirror was displayed on a marble table and
Pratley made a bid on the table thinking that the mirror formed part of the table. He refused to pay separately for the mirror
and was sued by the auctioneer for the purchase price. The court ruled that there had been a mistake (error) regarding a
fact material to the contract and consequently that no consensus had been reached and the contract was therefore void.
The fact that the error is essential and therefore that there is dissensus between the parties is not sufficient on its own to
render the contract void. In addition the mistake must be a justus error (reasonable mistake). An error is justus when it is
reasonable or excusable in all the circumstances of a particular case. This means that the mistake (error) must not be due
to the negligence of the party who relies on mistake in order to avoid liability.
In George v Fairmead (1958). A guest at an hotel signed the register without acquainting himself with a clause which
indemnified the hotel from claims arising from theft. George maintained that his action was a case of mistake but the court
decided that it was not a reasonable mistake and therefore had no effect on the contract.

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2. Misrepresentation
A contract can be set aside by the aggrieved party on the ground of misrepresentation where:
(a) A representation was made by one party or his agent to the other in order to induce him to enter into the contract.
(b) The representation was material
(c) It was false in fact
(d) The other party entered into the contract on the faith of the representation.
A party cannot claim misrepresentation unless he has been induced thereby to conclude the contract. He must therefore
prove that he accepted the represented facts as being true and that they constituted a reason for him to conclude the contract
before he will be able to contest the contract. The test which is applied is whether the innocent party would have concluded
the contract if the misrepresentation had not been made.
In Poole and McLennan v Nourse (1918) a misrepresentation was made concerning the qualities of a farm. However before
the purchaser bought the farm they were acquainted with the true facts and they nevertheless decided to go ahead and
purchase the farm. The court decided that they had not been induced to purchase the farm by the misrepresentation and
therefore the contract could not be rescinded.
The choice between the enforcement and setting aside of the contract must be made by the innocent party within a reasonable
time after knowledge of the deception. He has a choice between enforcing or rescinding the contract and once he has chosen,
he is bound by his choice and he loses the alternative option. (Bowditch v Peel and Magill (1921).
In our law a distinction is drawn between fraudulent/intentional, innocent and negligent misrepresentation. The party alleging
that a misrepresentation is fraudulent has to prove the absence of honest belief by showing in the words of Lord Herschell in
Derry v Peek (1889) that a false representation has been made.
(1) knowingly or
(2) without belief in its true or
(3) recklessly careless whether it be true or false.
The person to whom the fraudulent misrepresentation was made has the choice of the following remedies.
(a) He may ignore the contract and if sued on it use the fraud as a defence.
(b) He may rescind the contract and claim restitution – Dibley v Furter (1951)
(c) He may claim rescission of the contract, restitution and damages – Gous v De Kock (1887)
(d) He may treat the contract as binding and claim damages for any loss he has suffered.
Coomers Motor Spares (Pvt) Ltd v Albania (1979)

3. Simple/Innocent Misrepresentation
A misrepresentation made without fraud and without negligence is a simple misrepresentation. The party making the
misrepresentation genuinely believes the facts to be true while they are actually false.
The only remedy available in circumstances involving innocent misrepresentation is rescission and damages are not available.
The remedy of rescission is available to all the three forms of misrepresentation.
Rescission means that the parties have to be restored to the status quo ante. The innocent party is entitled to claim back
whatever he has parted with as a result of the contract but he is also obliged to return what he has taken from the other party.
Harper v Webster (1956)
Negligent misrepresentation occurs where the maker of a misrepresentation fails to display that degree of care which a
reasonable man in his position would display. He is negligent if he should have verified the truth of the facts before conveying
them to the other contracting party.
Whilst the remedy of rescission is available for negligent misrepresentation for many years it was a debatable point as to
whether damages were available for negligent misrepresentation in Zimbabwean law. It is now settled law that in appropriate
cases damages are available for negligent misrepresentation. Autorama (Pvt) Ltd v Farm Equipment Auctions (1984).

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 4. Duress
Duress may be described as a threat or intimidation which engenders fear in a person, causing him to conclude a contract
as a result of this fear. In order to succeed voiding the contract the fear to which the threat gives rise must be reasonable
fear, in other words it must be clear that a reasonable person would also have been fearful in the given circumstances. The
innocent party must have been threatened by the other contracting party and not by an outsider.
In our law the leading case on this subject is Broodryk v Smuts (1942) where Broodryk was threatened with internment or
arrest if he were to refuse to enlist with the defence force.
The requirements for duress were set out in this case and are the following:
(a) the fear must be reasonable
(b) the fear must be caused by a threat of ‘considerable evil’ and directed at the contracting party or his family or property
(c) it must be a threat of immediate danger which cannot be averted
(d) the threat or intimidation must be contra bones mores (contrary to good morals)
(e) the moral pressure which is exerted must cause damage.
Duress renders the contract voidable at the option of the threatened person and he has the choice between enforcing and
setting aside the contract, as well as the right to claim damages.

5. Undue Influence
Undue influence and the consequences thereof were described by Fagan JA in Preller and Others v Jordaan (1956).
As the influence which one person has over another which weakens the latter’s resistance and renders his resolve pliable so
that the other person may exercise his influence in an unconscionable manner to persuade the victim to conclude a prejudicial
contract which he would normally not have concluded. Once again because the weaker party’s consent has been improperly
obtained the contract is consequently voidable at the instance of the person who has suffered.
The requirements for undue influence are as follows:
(a) one party obtains influence over the other party
(b) this influence weakens the other party’s resistence and renders his resolve malleable
(c) the party exerting the influence uses this influence in an unscrupulous manner
(d) this influence leads to the conclusion of a contract which is to the detriment of the other party. Patel v Grobbelaar (1974)

3 Agency is a contract whereby one person, the agent concludes a juristic act for and on behalf of another who is called the principal
with the result that a legal tie arises between the principal and a third party.
The activities of an agent are thus concerned with the formation, variation or termination of contractual obligations. The essential
characteristics of a contract of agency are as follows:
(a) one person acts on behalf of another
(b) this act on behalf of another person is a juristic act
(c) the act is authorised
(d) the act results in a legal tie between two parties one of which was not involved in the original action.
There are various ways through which the authority of an agent can be established, namely by means of agreement, by operation
of law, estoppel and ratification. Although the juristic act is concluded between the agent and a third party, the legal bond exists
between the principal and the third party. The agent does not acquire any rights or duties (except in very limited cases) and the
rights and duties exist between the principal and the third party.
Agency can be terminated in a variety of ways and some of them are as follows:
(a) Performance of the transaction authorised. If for example the agent was given a mandate to find a specific property for the
principal the relationship is terminated when both sides have fulfilled all their obligations. The Castle Wine and Brandy
Company Ltd v Morris (1931)
(b) Expiry of fixed time
Where the contract of agency is to run for a set time, for example one year, the agency comes to an end when the time is up.
However it is possible that the parties could expressly or impliedly renew the contract before it expires.
An example of implied renewal is to be found in the case of Fiat SA v Kolbe Motors (1975) in which Fiat SA appointed Kolbe
Motors in writing as its agent. The agreement in terms of which Kolbe was authorised to sell Fiat’s products (mostly motor vehicles
and spares) was for one year but was renewed annually, until the end of 1972 at which time it was not renewed. The contract
stipulated that it would cease to exist if it was not renewed in writing. During 1973 Fiat proceeded to supply its product to Kolbe
and Kolbe continued to sell it. At the end of 1973 Fiat unilaterally terminated the contract. Kolbe claimed that it was entitled to
1 year’s notice of termination as was stipulated in the contract of agency. Fiat disputed this based on the fact that the contract
was not renewed at the end of 1972. The court ruled that the parties entered into a tacit agreement and that one could conclude
that they included the provisions of the original contract in the tacitly concluded new contract

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 (c) Death of the principal or his insanity or insolvency. Pheasant v Warne (1922)
(d) Death of the agent or his insanity. The death of the contracting party does not normally terminate a contract. The rights and
obligations pass to the deceased estate which is represented by the executor, on the other hand, contracts of a personal nature
such as marriage, agency or employment are however terminated by death. Ward v Barrett (1962)
(e) Revocation by the principal. Save for a few exceptions the principal may summarily revoke his agent’s authority to perform
a juristic act on his behalf provided that the act in question has not already been performed. For example if A employs B to
find a suitable purchaser to buy his house and authorises B to sell the house on his behalf. A may change his mind and
revoke the authority granted to B and B cannot thereafter bind A to a sale of the house. Of course, if A (the principal) has
bound himself by contract not to revoke the authority but nevertheless does so, he will be liable in damages for breach of
contract. Ward v Barrett (1962)
(f) Renunciation by the agent. The agent may at any time but on just grounds renounce his authority. In the absence of such
just grounds the agent will be liable in damages, to the principal.
(g) Supervening impossibility of performance. This refers to a situation whose performance was possible at the conclusion of
the agreement but subsequently became impossible. The impossibility must be beyond the control of the parties due to vis
major or casus fortuitous (an act of God or an inevitable accident). In Peters, Flamman and Co. Ltd v Kokstad Municipality
(1919)
The municipality had concluded a contract with the appellants in terms of which the latter were to supply electricity to the town
for a number of years. Before this period had expired, the appellants were interned as enemies of the state and their business was
wound up under the relevant legislation.
The court decided that supervening impossibility had terminated the contract.
As soon as performance of a contract has become impossible because of supervening impossibility the contract is terminated and
the parties are freed of their obligations.

4 The majority rule position in relation to a company’s governance is as captured by the Foss v Harbottle principle. The rule of law
known as the Foss v Harbottle rule has resulted from the refusal of the court to interfere with the management of the company at
the instance of minority shareholders who for one reason or the other are dissatisfied with the conduct of the company’s affairs by
the majority or by the board of directors. The Foss v Harbottle principle was first clearly articulated in 1843 in the case from which
it takes its name and it has since spawned an immense volume of case law and legal literature.
In practical business terms it is generally the directors who run the company and make business decisions but the general meeting
of the company is the ultimate authority of the company. Major decisions regarding the structure and fate of the company such
as alterations in the memorandum or articles, increase and reductions of capital, change of name, variations of shareholders’ rights,
disposal of the undertaking or major assets of the company, compromises, amalgamation and reconstructions and the voluntary
winding up of the company have to be taken or approved by the majority in many instances by way of special resolution.
The majority rule concept applies also where a wrong is done to the company. The rule is that where a wrong is done to the
company, for example by its directors failing to fulfill their duties it is the company alone, through its majority that can sue for the
injury inflicted.
The proper plaintiff is thus the company itself. Individual members cannot sue even though their shares have fallen in value
because of the wrong done to the company. The power to decide whether to use in the company’s name is usually delegated to
the directors by the articles but should they decline to sue a general meeting of the company may resolve that an action shall be
instituted.
In Foss v Harbottle (1943) an action was brought by two shareholders in a company on behalf of themselves and all other
shareholders except the defendants who were the directors and promoters of the company to which they had sold the company at
an undisclosed profit. The action was dismissed because the shareholders were not the proper plaintiffs. The company itself was
the proper plaintiff unless the act complained of was ultra vires.
In the case of Edwards v Halliwell Jenkins L.J summarised the position in a very lucid manner and two of the propositions that he
underlined bear repeating. These are:
1. The proper plaintiff in an action in respect of a wrong alleged to be done to a company is prima facie the company itself.
2. Where the alleged wrong is a transaction which might be made binding on the company and on all its members by a simple
majority of the members, no individual member of the company is allowed to maintain an action in respect of that matter
because if the majority confirms the transaction, the question falls away or if the majority challenges the transaction, there is
no valid reason why the company should not sue.
In terms of the current law there are limitations which exist on the majority rule principle. In appropriate cases (where justice so
demands) the courts will depart from the majority rule principle.
There is no room for the operation of the rule if the alleged wrong is ultra vires the memorandum or articles of association of the
company. This clearly seems to be the intention of the legislature despite the existence of section 10 of the Companies Act which
modifies the operation of the ultra vires rule in Zimbabwean law. Section 10(2)(a) entitles a member to bring proceedings to
restrain the company from making or entering into any transaction which exceeds its objects.

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 There is also no room for the operation of the rule if the transactions complained of could be validly done or sanctioned only by a
special resolution or the like because a simple majority cannot confirm a transaction which requires the concurrence of a greater
majority. There are many sections of the Act that require prescribed majorities, not a mere simple majority (For example s. 20,
25, 75, 78, 242 etc). In certain cases, the authority of the courts is required. For example s.91 which relates to variation of
rights attaching to shares and s.92 which makes reduction of share capital subject to both confirmation by the court and a special
resolution. One of the most important common law exceptions to the majority rule principle applies where what has been done
amounts to fraud and the wrongdoers themselves are the controlling majority. In that case the rule is relaxed in favour of the
aggrieved minority who are allowed to bring a minority shareholders’ action on behalf of themselves and all others. The practical
reason for this is that if they were denied that right, their grievance would never reach the courts because the wrongdoers
themselves, being in control, would not allow the company to sue.
In Burland v Earle (1902) the court made the following observation (in part)
‘. . . where the persons against whom the relief is sought themselves hold and control the majority of the shares in the
company and will not permit an action to be brought in the name of the company. In that case the courts allow the
shareholders complaining to bring an action in their own names . . . .’

5 A dividend is a share in the profits of a company. The manner in which profits are to be divided is determined by the articles of
the company. The articles may provide for the declaration of dividends by the company in a general meeting with the right of
directors to pay such interim dividends as are justified by the profits of the company or they may authorise the directors to declare
dividends without reference to a general meeting.
Usually the articles prescribe that no dividend may be paid otherwise than out of profits. It is now settled law both in terms of the
common law and statutory law that dividends may not be paid out of capital even if the memorandum or articles purport to
authorise payment because such payment would constitute an illegal or unauthorised reduction of capital. Article 116 of Table A
of the Companies Act Chapter 23.04 says ‘no dividend shall be paid, otherwise than out of profits . . . .’
Whilst the company in general meeting may declare dividends, no dividend shall exceed the amount recommended by the directors
(Article 114, Table A). Thus, while the shareholders can vote to reduce the amount of the dividend, they cannot vote to increase
it.
The directors may before recommending any dividend set aside out of the profits of the company such sums as they think proper
as a reserve or reserves which shall, at the discretion of the directors be applicable for any purpose to which the profits of the
company may be properly applied and pending such application, may, at their discretion either be employed in the business of the
company or be invested in such investments, other than shares of the company as the directors may from time to time think fit.
In the case of Buenos Aires Great Southern Railway Company Ltd v Preston after incurring heavy losses on its trading account for
several years, a company made profits in one year sufficient to pay the full dividends on preference shares. The directors however
considered that it would be unwise to pay such dividends and decided to transfer the profits to reserve. The court held that they
had power to do so and that the preference sharesholders were not entitled to claim their dividends.
Romer J made the following observation:
‘having regard to the articles it is clear that the dividends on the ordinary capital were payable only out of the net profit of the
company in the sense that the powers of the company or the board to carry profits to reserve override the rights of the
shareholders to dividend. The procedure would be that the board would consider the profits of the company on the one hand
and its requirements as to maintenance and so on, on the other. Having decided the amount of profit, if any, which was
available the directors would make the necessary recommendation to the company and the company would consider the
matter . . . .’
Whilst it is true to say that dividends are declared at the sole discretion of the directors and that shareholders cannot insist on the
company declaring a dividend, once a dividend is declared a company becomes indebted to its shareholders in the amounts of
their dividends. However such dividends are debts which bear no interest against the company. This is as a result of article 122
of Table A which states that no dividend shall bear interest against the company. Whilst the legal position is that dividends may
only be paid out of profits it is also clear that if the directors have, without negligence, formed the bona fide belief that the company
has earned sufficient profits to pay a dividend when in fact it has not, no liability will accrue to them. On the other hand, if they
were negligent in declaring a dividend, they can be held liable.
Finally, the directors may deduct from any dividend payable to any member all sums of money, if any, presently payable by him
to the company on account of calls or otherwise in relation to the shares of the company.

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6 (a) The insolvency of a debtor comes to an end when he is rehabilitated. Rehabilitation may take place by lapse of a prescribed
period of time, but the debtor often asks the court to rehabilitate him before expiry of the prescribed period of time. Although
he still enjoys his personal freedom a declaration of insolvency imposes severe legal restrictions on the debtor. In terms of
the Insolvency Act, Chapter 6:04 the administration of the insolvent’s estate is placed in the hands of a trustee and the
insolvent is deprived of the power to enter into significant contracts. He is disqualified from holding certain positions in terms
of the Companies Act, Chapter 24:03. For example he may not be appointed as a director or liquidator of a company. Subject
to such conditions as the High Court may have imposed in granting a rehabilitation the rehabilitation of the insolvent person
shall have the following legal effects:
(i) of putting an end to sequestration
(ii) of discharging all debts of the insolvent which were due or the cause of which had arisen, before the sequestration and
which did not arise out of any fraud on his part and
(iii) of relieving the insolvent of every disability resulting from the sequestration

(b) Application to the court for rehabilitation of the insolvent person may be made in the following circumstances:
(i) an insolvent may immediately seek an order of rehabilitation if he has obtained a certificate from the Master of the High
Court that creditors have accepted an offer of composition in which payment has been made, or security has been given
for payment in terms of s.141 of the Insolvency Act.
(ii) If the insolvent has been convicted of a fraudulent act in relation to his existing or any previous insolvency and five years
have elapsed from the date of his conviction in terms of s.141 (2)(c) of the Act.
(iii) If the insolvent has been sequestrated on a previous occasion and three years have elapsed from the confirmation of the
trustee’s first account in terms of s.141(2)(b) of the Insolvency Act.
(iv) If twelve months have elapsed since the confirmation of the trustee’s first account or two years from the final
sequestration order whichever is the earlier.
The insolvent must provide security for the payment of the costs of any opposition to the application for rehabilitation. The
purpose of this provision is to encourage creditors and others to place before the court facts relevant to the application.
(Ex parte Schoeman (1943).
The security must be furnished to the Registrar of the court not less than three weeks before the hearing of the application.
The costs are paid to any person who may oppose the rehabilitation and is entitled to an award of costs by the High Court.
The rehabilitation of the insolvent is a matter which rests within the discretion of the court. The court has to decide whether
the insolvent is a fit person to be rehabilitated i.e. whether he should be allowed to trade with the public on the same basis
as any other honest man. (Ex parte Hittersay 1974)
Whilst the rehabilitation of an insolvent is a matter which lies solely within the discretion of the court, this discretion must be
exercised judicially and not arbitrarily.

7 (a) From our court cases it would appear that the employer is not legally bound to provide work for the employee. Provided that
he pays the employee the agreed remuneration the employer therefore does not commit breach of contract if he fails to provide
work for the employee to do.
An employer is however obliged to provide work under certain circumstances. In the following situations the employer has
a duty to provide work and should he fail to discharge it he would be committing breach of contract:
(i) where the amount of the remuneration is based on the amount of the work done in the case of someone doing piece
work or a salesman who gets a commission for the work done.
(ii) where the failure to provide work brings about a reduction in the status of the employee (Stewart Wrightson (Pvt) Ltd v
Thorpe 1974).
(iii) where the employer has undertaken to train the employee in a certain profession or trade. For example the case of an
apprentice jockey who is professionally being trained to ride horses.
(iv) where a person’s earning capacity is linked to the publicity which he receives from the work he does, for example an
actor. This person’s employer must provide him with work in order to ensure his professional success.
(v) where an employee’s career path or professional development is directly dependent upon his constant exposure to work
(Muzondo v University of Zimbabwe 1982).

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 (b) Payment of Wages
It is the employer’s most important obligation to pay the employee the agreed remuneration when the wages are due.
Where there is no agreement regarding the time of payment the common law prescribes that payment will take place at the
end of the period of service. When the employee is working for an indeterminate period it is important that he be paid on a
regular basis for example on a weekly, fortnightly or monthly basis. However reference will be made to trade usage in the
particular industry and area in order to determine the time for payment. It is trite that an employee will first render his services
before receiving payment. Once the payment is overdue the employee has a right of action to recover the unpaid wages.
(Brismas v Dardagan 1950)
At common law the employee is entitled to full pay during suspension and if misconduct charges are confirmed and he is
dismissed the dismissal cannot operate retrospectively.
On the death of the employer the employee is paid up to the end of his period of service, or where he was employed for an
unspecified period, up to the date when the contract may validly be terminated. If the services are of a personal nature the
contract will be terminated by the death of the employer. The death of the employee terminates the contract of service.
The insolvency of the employer terminates the contract of service but the employee may institute a claim for damages
sustained as a result of the termination.

8 One of the fundamental obligations of the seller is the duty to deliver property which is free from latent defects. This duty only
relates to defects which are material and an objective test is used to determine materiality. (Dibley v Furter 1951).
A latent defect is one which would not be apparent upon a reasonable inspection by a prudent man even though it might not
escape the notice of an expert.
In Roman – Dutch law, a buyer who inspects the property cannot be heard to complain of the patent defects which the inspection
should have revealed. A seller who sells property voetstoots (as it stands) is protected from liability in the event that the
merchandise turns out to be latently defective. However a voetstoots clause does not protect the seller from fraudulent non-
disclosure of latent defects. Thus in the Zimbabwean case of Matambo v Chakauya (1992) the plaintiff purchased a house
voetstoots from the defendant. When the rainy season arrived it was discovered that there were bad leaks of water through the
roof. The court ruled that the defect was a latent one and the defendant had deliberately not disclosed it at the time of the
conclusion of the agreement of sale. As a result of the fraud the court ruled that the seller was not absolved of liability,
notwithstanding the voetstoots clause.
Where the sale is not voetstoots and the buyer discovers that the merchandise is latently defective he is entitled to claim one of
the Aedilition remedies, namely the Actio Redhibitoria (action for rescission of the contract) and the Actio quanti minoris (reduction
of purchase price). The Actio Redhibitoria is an action for cancellation of the contract because the defect is so serious as to make
the property unfit for the purposes intended by the contract.
The rationale underlying this remedy is that if the purchaser had known of the defect prior to the conclusion of the agreement of
sale he would not have bought the article when he did. The defect is so fundamental that it makes the merchandise unsuitable
for the purpose for which it was bought. By instituting this action, he cancels the contract. He thus claims the return of the
purchase price, interest, repayment of all expenses with regards to the delivery and preservation of the article and reimbursement
of improvements effected by him.
The purchaser must however return the article together with anything that has accrued to it.
Before the purchaser can hold the seller liable for latent defects he will have to prove that:
(1) the defect existed at the time of the conclusion of the contract
(2) the defect is in fact latent i.e it could not readily have been noticed
(3) the purchaser was unaware of the defect at the conclusion of the contract and that
(4) the defect is material in that it renders the merx useless or less useful for the purpose for which it was bought.
Some examples of latent defects in the merchandise are:
(a) lung sickness in cattle (Haviside v Jordan (1903)
(b) heartwater disease in sheep (Ackermann v Komfass (1904)
(c) a welded crankshaft in a motor vehicle (Goldblatt v Sweeney (1918)
(d) a leaking roof (Matambo v Chakauya (1992)
Under the Actio Redhibitoria, it is a condition precedent that the purchaser should restore the article plus any fruits and accessories
to the seller if he wants to recover the purchase price and his interest back. The purchaser forfeits the right to the remedy of
redhibitoria in the following situations:
(a) if the article is not capable of redelivery to the seller;
(b) if the article has been materially damaged because of the purchaser’s negligence or by a person for whom he is responsible;
(c) where the purchaser by exercising unequivocal acts of ownership over the article has delayed to such an extent as to amount
to a waiver;
(d) where the defect is of a trivial nature.

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 On the other hand, if the merx has perished due to the very defect complained of and in the absence of fault on the part of the
purchaser he will still be entitled to recover the purchase price despite the fact that the merchandise would be incapable of
redelivery to the seller.
In Dodd v Spitaleri (1949) the purchaser bought a horse which was suffering from a severe bone disease. There was conclusive
veterinary evidence that the disease was incurable and to save it from any further pain the purchaser had the horse shot. The
court ruled that the purchaser could recover his purchase price despite the fact that he was unable to return the horse.
And in the case of Marks v Laughton (1932) the buyer sought to rescind the sale of eggs which had been condemned as unfit for
human consumption and as a consequence had already been destroyed by the local authority. The seller argued that the buyer’s
inability to restore the eggs was fatal to his right to rescind the contract.
The court said, ‘despite the basic prerequisite that latently defective goods must be returned, the Actio Redhibitoria may
nevertheless apply even where goods cannot be returned if this is because they have been destroyed due to the latent defects and
without fault on the part of the purchaser . . .’
The Actio quanti minoris (action for reduction of the purchase price) is instituted when the latent defect is not so material as to
render the article completely useless. Alternatively, the purchaser might opt not to rescind the contract and have the purchase
price reduced in circumstances in which if he had so desired he could have cancelled the agreement on account of the gravity or
seriousness of the defect. Under Actio quanti minoris, the defect however affects the value of the article. The purchaser keeps
the article but claims a price reduction which is the difference between the purchase price and the actual value of the article.
Aedilitian remedies are available to the seller only in cases where the thing sold has latent defects. Depending on the
circumstances they offer him only cancellations or a price reduction. However ordinary damages cannot be claimed in the case
of latent defects except in three cases (and where ordinary damages are awarded for latent defects, they are given in addition to
the Aedilitian remedies) which are as follows:
(a) where the seller acted fraudulently by not disclosing to the purchaser the existence of a latent defect of which he was aware.
This is not simply withholding information, the intention of the seller is to defraud the purchaser.
(b) where the seller is the manufacturer of the thing sold or a dealer who publicises his expert knowledge and skills regarding
the article he may also be held liable ex empto for damages.
In Odendaal v Bethlehem Romery (1954) the purchaser bought livestock feed form a dealer. The dealer dealt almost exclusively
in stock feeds. The feed was infested with a particular germ, but both parties were unaware of this. After the purchaser had fed
the feed to his stock, thirteen head of cattle died. The seller was held liable for damages because he was a dealer with expert
knowledge regarding that which was sold.
(c) where the seller gives an express warranty against latent defects, he will be liable for damages if there should be a defect in
the thing purchased.

9 (a) The procedure for appointing and removing directors is invariably governed by the company’s articles of association. If Table
A has been adopted, articles 90-98 specify the formalities for electing directors and in terms of article 96 the directors shall
have power at any time and from time to time to appoint any person to be a director, either to fill a casual vacancy or as an
addition to the existing directors. At a Board meeting Ngonidzashe would tender his resignation and Kudzai, the Company
Secretary, would note the resignation in the minutes. At the same time the directors would decide at a Board meeting to
invite Bonzo to fill the seat vacated by Ngonidzashe and this decision would be recorded in the minutes. The Secretary would
delete Ngonidzashe’s name and details from the Register of Directors and Secretaries and insert Bonzo’s particulars in terms
of s.187 of the Companies Act. Kudzai, the Secretary, would be obliged to complete a CR14 form advising the Registrar of
Companies within one month of the change. At the same time the company’s letterheads and other printed stationery should
reflect the new changes.
The Secretary should send a letter to Bonzo, the new board member congratulating him upon his appointment and enclosing
a copy of the company’s memorandum and articles of association. The new director should also be reminded that he is
required to give notice of interest that he may have in contracts involving the company as per s.186 of the Act. If the new
director is to be signatory on one or more of the company’s bank accounts, his details and specimen signatures should be
sent to the bank.

(b) Tamai, a creditor to Dryland Products (Pvt) Ltd, has instituted a creditor’s petition for winding up the company due to Dryland
Products (Pvt) Ltd’s inability to pay its debts. Tamai is owed $2 000 000.00 by the company. Section 205 as read with
s.206 (f) of the Companies Act, Chapter 24:03 defines the concept of inability to pay debts. A company shall be deemed to
be unable to pay its debts if a creditor by cession or otherwise to whom the company is indebted in a sum exceeding one
hundred dollars then due has served on the company a demand requiring it to pay the sum so due by leaving the demand
at its registered office and if the company has for three weeks thereafter neglected to pay the sum or to secure or compound
for it to the reasonable satisfaction of the creditor. Alternatively a company may be deemed to be unable to pay its debts if
it is proved to the satisfaction of the court that the company is unable to pay its debts and in determining whether a company
is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.

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 It is clear from the facts of the case that Dryland Products (Pvt) Ltd is unable to pay its debts. By way of alternative action
the court may grant a provisional management order in respect of the company in terms of s.300 of the Act. In the
circumstances of the case it should be possible to establish that by reason of mismanagement of the two directors, Mujere
and Nhidza the company is unable to pay its debts and has not become or is prevented from becoming a successful concern
and that there is a reasonable probability that if the company is placed under judicial management it will be enabled to pay
its debts or meet its obligations and become a successful concern.
On the return day fixed in the provisional judicial management order (which shall not be less than sixty days from the date
of the grant of the provisional judicial management order) and after considering the opinions and wishes of the creditors,
members and other relevant stakeholders, the report of the provisional judicial manager, the report of the Master and Registrar,
the court may grant a final judicial management order.
A final judicial manager shall subject to the memorandum and articles of the company take over from the provisional judicial
manager and assume management of the company. He would manage the company subject to any order of the court in
such manner as he may consider most economic and most likely to promote the interests of the members and creditors of
the company.

10 (a) An offer is an unconditional declaration by the offeror of his intention to conclude a contract and the offer must comply with
the following requirements. It must be:
(a) clear and unambiguous
(b) complete
(c) communicated to the offeree
(d) made with the intention that it will serve as an offer that it may be accepted and that a valid contract will result
therefrom.
From our case law it is clear that an advertisement (as in this case) is merely an invitation to do business (to treat) and not
a firm offer.
In Crawley v R (1909) Smith J ruled as follows:
‘the mere fact that a tradesman advertises the price at which he sells goods, does not appear to me to be an offer to
any member of the public to enter the shop and purchase goods nor do I think that a contract is constituted when any
member of the public comes in and tenders the price mentioned in the advertisement. It seems to me to amount simply
to an announcement of his intention to sell at the price he advertises . . .’.
It is clear from the facts of the case that Adolf is the offeror and Egoli Mines Limited is the offeree who is at liberty either to
accept or reject the offer. If an offer is made by post and acceptance also takes place postally a contract comes into being at
the place where and at the time when the letter of acceptance is posted.
In the case of Cape Explosives Works Ltd v SA Oil and Fat Industries Ltd (1921) the court ruled that the expedition theory
is to be applied in the case of postal contracts
‘where in the ordinary course the post office is used as the channel of communication, and a written offer is made, the
offer becomes a contract on the posting of the letter of acceptance.’
Kotze J based his judgment on practical considerations because the applications of the expedition theory gives rise to fewer
problems. Where an effective postal system exists, there is a reasonable level of certainty that a letter which is properly posted
will reach its destination.
The decision that the expedition theory applies to postal contracts was ratified by the appeal court in Kergeulen Sealing and
Whaling Company Ltd v CIR (1939) and is now generally accepted as the ruling principle in our law. It is now clear that
with postal contracts, the expedition theory applies and the contract comes into existence where and when the letter of
acceptance is posted unless the offeror expressly states that he required notice of the acceptance.
It is also settled law that the offer may therefore not be withdrawn after the letter of acceptance has been posted even if the
offeror has no knowledge of the posting (A to Z Bazaars v Minister of Agriculture (1942).
By processing Adolf’s application and posting him a share certificate on Wednesday April 3rd it means that there is a complete
and binding contract between the parties. Adolf’s purported revocation of the offer is of no force or effect because the contract
is already “a done deal”. Equally Egoli Mine’s purported withdrawal of their acceptance of Adolf’s offer is null and void. In
summary it can be said that since Adolf’s offer was validly accepted by Egoli Mines Ltd there is a binding contract between
the two parties. Adolf is entitled to keep his shares and he has become a member of Egoli Mines Limited whose share price
has been considerably boosted by the discovery of vast gold reserves along the Great Dyke region of North-West Zimbabwe.

(b) The Legal Age of Majority Act, 1982 conferred majority status on all Zimbabweans above the age of eighteen years. African
women who were hitherto perpetual minors acquired majority status at the age of eighteen years. As a result all African
women older than eighteen years of age are emancipated from the authority of guardians (like their male counterparts). In
Katekwe v Muchabaiwa (1984) the Supreme Court ruled that as a result of the Legal Age of Majority Act upon attaining
eighteen years of age an African woman acquires locus standi in judicio (contractual capacity).

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 Whilst it is clear that the new post-independence legislation gives Elsie the legal competence to acquire rights and incur
obligations even if Elsie had been an unassisted minor she would still probably be bound by the contract on the basis that
she was tacitly emancipated (her involvement in business etc).
Elsie might want to argue that she is not liable on the loan because the agreement is vague and open ended. It was verbally
agreed that she could liquidate the sum ‘in instalments if you like, as and when you think you can . . .’.
In our law an agreement which is so vague that its meaning cannot be ascertained by a court is void ab initio (from the initial
instance). In Baretta v Baretta (1924) a contract between parties by which a debt was acknowledged and certain property
pledged, provided that the debtor ‘thereby undertakes to pay off a substantial sum every year’. The court said that this
stipulation was too vague to be enforced in law.
On the other hand the mere fact that a contract appears to be incomplete or uncertain does not render it void for vagueness
if its meaning can in fact, be determined by a court on the evidence before it. In Anegate v Muckulal’s Estate (1954) A was
employed by his uncle who agreed to pay him ‘something, sometime for his services’. The court held that the language of
the contract was not so much vague as silent and the amount of remuneration could easily be determined by having recourse
to the ordinary rules governing implication of terms into a contract. There was therefore in this case an implied term requiring
the uncle to pay a reasonable remuneration.
In any case even if the court were to determine that the contract was void for vagueness Elsie would still be under an
obligation to make restitution to the other party to the extent to which she has been enriched. The idea is to avoid a situation
of unjust enrichment and therefore the capital sum of $400 000.00 is recoverable.
As for Infidel’s claim, the agreement giving rise to it is immoral and therefore contrary to public policy. An unlawful agreement
is unenforceable at law, the principle being expressed in the maxim ‘ex turpi causa non oritur actio’ (no action arises from a
base cause). In Pietzsch v Thompson (1972), P claimed the return of certain gifts from T in pursuance of their agreement
to marry each other after T’s divorce from her husband. The court said that the agreement was contrary to public policy and
therefore void.
And in Friedman v Harris (1928) H, a married man was sued by F a spinster for damages for seduction. H agreed to pay F
£1000.00 in settlement. Subsequently, they agreed that if F would repay what was left of the £1000.00, H would proceed
with a divorce action and subsequently marry F. F paid H £800.00 in pursuance of this agreement but H did not divorce
his wife. The court held that the agreement was void.
In conclusion it can be said that whilst the money owed by Elsie to Shasha is recoverable she has no liability towards Infidel
in view of the fact that the agreement is void on account of public policy.

11 (a) A director owes the company a number of common law and statutory obligations.
The duties of a director can conveniently and usefully be broken down into the following categories.
(1) fiduciary duties
(2) the duty to exercise powers ‘bona fide in the company’s interest’
(3) the duty not to make ‘secret profits’
(4) the duty not to have personal interest conflicting with those of the company
(5) the duty to disclose
(6) the duty of care and skill
(7) the duty to act intra vires the company’s statutes (memorandum and articles of association)
At common law a director is subject to certain fiduciary duties which require him to exercise his powers bona fide and for
the benefit of the company. A person possesses fiduciary duties when he is in a position of trust or occupying a position of
power and confidence with respect to another person such that he is obliged by law to act solely in the interest of that other
person’s rights which he is to protect. It cannot be doubted that directors occupy a position of trust or as is usually stated, a
fiduciary position towards the company similar in some respects to that of an agent entrusted with the control and
management of the money or effects of another person.
The fiduciary duties are owed to the company and to the company alone and not necessarily to individual shareholders
(Pergamon Press Ltd v Maxwell).
The fiduciary duty of directors in respect of the shareholders is akin to the duty owed by the trustees to their beneficiaries and
thus the fiduciary duty can conveniently be broken down into two parts:
(1) the directors must act bona fide for the benefit of the company and not for an ulterior motive and
(2) the director must refrain from embarking upon an act which will lead to a conflict of his interests with those of the
company.
Roodpoort Limited Main Rep v Du Toit (1928)
An important consequence of the relationship between a director and his company is the director’s duty to exhibit utmost
good faith in his dealings with the company. He must refrain from placing himself in a position where his own interests clash
with those of the company and he must never take an improper advantage of his position by acquiring for himself assets or
opportunities that rightly belong to the company.

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 In Robinson v Randfontein Estates Gold Mining Company Ltd (1921).
The Managing Director of a company using information he acquired in the course of his official duties bought immovable
property worth £60 000, which the company was interested in acquiring and using a front immediately resold it to the
company for £275 000.000. The court held that the plaintiff company was entitled to claim from the defendant the profit
of £215 000.00 made by him on this transaction. Innes CJ said
‘where one man stands to another in a position of confidence involving a duty to protect the interests of that other he is
not allowed to make a secret profit at the other’s expense or place himself in a position where his interests conflict with
his duty’
In Magnus Diamond Mining Syndicate v Macdonald and Hawthorne (1909), the defendant while directors and managers of
a company acquired information as to the value of certain diamondiferous property. They thereupon purchased the property
in competition with the company without disclosing their intention to the company. The court decided that the defendants
were obliged to transfer the property to the company and to account to it for profits already received. The court made the
following observation that ‘it is the duty of all agents including directors of companies to conduct the affairs of their principal
in the interests of the principal and not for their own benefit.’
By trading with Tatco through another company Madhiri (Pvt) Ltd Mr Svotwai has involved himself in a conflict of interest.
He has unlawfully placed his personal interests above those of Tatco. He has probably made illicit use of personal information
which he acquired in his capacity as Managing Director and has made secret profits as well. By defrauding the company
and giving huge trade discounts to Madhiri (Pvt) Ltd in an irregular manner he has not exhibited utmost good faith to Tatco
(Pvt) Ltd, his principal. Neither has he acted with due diligence, care and skill that is required to manage the company.
One of the major statutory duties of the directors is the duty to disclose his interest in contracts (where he has either a
beneficial direct or indirect interest) between a director and his company. Section 186(1) of the Companies Act Chapter
24:03 says that ‘it shall be the duty of a director of a company who is in any way whether directly or indirectly interested in
a contract or proposed contract with the company to declare the nature and full extent of his interest at a meeting of the
directors of the company’.
In the case of Aberdeen Railway Company v Blaikie Bros (1854) the defendant company entered into a contract to purchase
a quantity of chairs from the plaintiff partnership. At the time that the contract was concluded, a director of the company
was a member of the partnership. The court held that the company was entitled to avoid the contract. In this case Svotwai
has been in flagrant breach of his common law and statutory duties.

(b) A creditor with a liquidated claim against Tatco (Pvt) Ltd in liquidation may prove a claim at a meeting of creditors. The claim
must be proved by affidavit in the prescribed form and the affidavit shall specify the nature and particular of the claim.
The affidavit and any supporting documents are lodged at the Master’s office at least 48 hours before the advertised time of
the meeting. The presiding officer examines the documents and either admits or rejects the claim. If the claim is confirmed
creditors will usually be entitled to some payment (unless there are insufficient funds available).
Secured and preferent creditors receive payment before concurrent creditors who would usually receive a pro rata share of
the free residue.

(c) In terms of the common law, the liquidators have a claim against Svotwai for misfeasance (misapplication and or fraudulent
application of company assets). The holiday home, the small private aeroplane and any other assets he may have can be
judicially attached in order to satisfy the company’s claim against him. By way of statutory remedy, in terms of s.318 of the
Companies Act, Chapter 24:03 the law has provided relief as follows:
(1) If at any time it appears that any business of a company was being carried on:
(a) recklessly or
(b) with gross negligence or
(c) with intent to defraud any person or for any fraudulent purpose, the court may, on the application of the master or
liquidator or judicial manager or any creditor of or contributory to the company, if it thinks it proper to do so declare
that any of the past or present directors of the company or any other persons who were knowingly parties to the
carrying on of the business in the manner or circumstances aforesaid shall be personally responsible without
limitation of liability for all or any of the debts or other liabilities of the company as the court may direct.

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12 (a) A partnership is a contractual association involving a minimum of two persons and not exceeding twenty in number in which
the persons concerned agree to contribute money, labour or skill to a common project and to carry on business with the object
of making a profit for their joint benefit.
In our law no formalities are required for the creation of a partnership and although writing or registration is not necessary
the partners may agree to writing as a requirement for the validity of their contract (condition precedent).
In Jourbert v Tarry and Co (1915) the essentials of a partnership were stated as follows:
(a) contribution (whether goods, money or labour)
(b) objective must be the making of profit
(c) for the joint benefit of the parties
(d) the partnership agreement must be lawful and it is essential that the parties must intend to create a partnership.
It is quite clear from the facts of this case that Mr Shumba has breached the partnership agreement in a significant number
of ways. Some of the obligations of a partnership which Shumba has breached are as follows:

1. Sharing of Management
Every partner is entitled to participate in the management of the partnership business and may not be excluded
therefrom. In addition a partner may not transact any partnership business without the consent of all his co-partners.
Muller v Pienaar (1968)
2. A partner may not use partnership property contrary to the terms of the agreement. It has been stated that ‘one partner
cannot use the property of the partnership so as to exclude the other partner entirely from the control of the partnership
property’. Munro v Ekerold (1949)
A partner may not sell, donate or alienate partnership property (as Mr Shumba has done in this instance) without the
consent of his co-partners. Furthermore a partner who has forcibly or fraudulently been dispossessed by a co-partner
of partnership assets may obtain a mandament van spolie (spoliation order) restoring him to possession. Shapiro v Roth
(1962)
3. Duty of Good Faith
Partners stand in a fiduciary relation to one another and are obliged to observe uberrimae fides, the highest degree of
good faith. Not only must a partner avoid a conflict of interest situation but also he must refrain from securing for himself
a secret benefit or profit at the expense of the partnership.
Apart from suing for the recovery of the secret profit Shumba made when he resold to a third party for $8000 000.00
a truck belonging to the partnership the aggrieved partner, Mhofu is entitled in law to sue for a dissolution of the
partnership due to a breach of the duty of good faith on the part of Mr Shumba.
4. Access to Books
In the absence of an express agreement to the contrary, every partner has a right without permission of his co-partners
to inspect, examine and make extracts from all the books of the firm. This right may be exercised at all reasonable times.
A partner is entitled to insist that all partnership records be kept at the principal place of business of the partnership at
least in situations where constant reference is essential to the day to day conduct of the business. Mr Mhofu can obtain
a court order to compel Shumba to give him access to the partnership’s books. If a court order to that effect is secured
and Shumba chooses to ignore it, that would be tantamount to contempt of court.
5. Duty to account and to share profits
A partner is obliged to account for and deliver to the partnership whatever he has obtained as a partner on behalf of the
partnership or within the scope of the partnership business or in continuance of partnership transactions. Each partner
must allow his co-partner the latter’s share of the profits.
In De Jager v Olifants Tin ‘B’ Syndicate (1912)
A syndicate formed to prospect for tin directed a member X to prospect a farm on its behalf. He discovered tin on a
neighbouring farm to the right of which he then claimed he was solely entitled. He was held bound to account to the
syndicate since he had acquired the rights in the course of operations conducted on behalf of the partnership. Likewise
Mhofu can insist on having his share of the profits.
From the foregoing discussion it is clear that Mhofu has a whole range of options available to him by way of judicial
relief. Apart from the possibilities that have already been discussed the ultimate remedy which he can have recourse to
is a dissolution of the partnership. In addition he could sue Shumba for defamation. Shumba has been telling
customers of the partnership that Mhofu has gone a ‘bit funny’.

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(b) The central issue at stake in this case is whether or not the employer, Tender Meat Supplies (Pvt) Ltd is liable for the delict
of their employee, Lucky. In our law, an employer is as a rule liable to third parties for delicts committed by the employee
within the scope of his employment.
In order to hold the employer liable for the delicts of his employee the following requirements must be present:
(a) the agent should be a servant and not an independent contractor. He should be subject to the employer’s control and
direction as to what to do and the manner in which he carries out his work. If the employer has a right to issue
commands to the employee and to exercise control over him it will serve as a prima facie proof of the existence of a
contract in which the agent is a servant rather than an independent contractor.
(b) the acts should have been committed when the servant was within the scope of his employment. It is not sufficient
that the employee committed an act during his ordinary working hours. If he does something entirely for his own
purposes or benefit which doesn’t form part of his duties as a servant, then the master would not be held liable. In
other words the master could easily repudiate liability where the agent is on a ‘frolic of his own’.

Whether an action falls in the course of the employee’s service or not is a question of fact and depends on the particular
circumstances of each case.
If the employee is acting within the scope of his employment whether during or after working hours the employer will be liable
for any delict committed.
In Hendricks v Cutting (1947), the employee was a lorry driver. While he was doing his work he stopped at a filling station
for fuel. He lit a cigarette, causing a fire in which the pump attendant was injured and the employer was held liable.
And in Minister of Justice v Khoza (1966) two police constables were going about their work. They were, inter alia, guarding
prisoners, one of the constables aimed a pistol at the other in jest, the pistol went off and the second constable was injured.
The employer was held liable.
In this case Lucky deviated from his route by some twenty kilometres in order to spend some time with his girlfriend, Zodwa
and on his way back to work he was involved in an accident. Can it be said that the deviation was so serious as to amount
to the fact that Lucky was now on a ‘frolic of his own’? It has been held in some cases that the fact that the servant deviates
from the course of employment will not necessarily mean that there is no vicarious liability. Sometimes, considerations of
social justice have led courts to adopt the approach that the degree of deviation from the master’s instructions has to be to a
major extent before they will decide that the servant was not acting in the course of his employment.
For example, where the employee is partially promoting the interests of the employer and partially his own, the employer will
also be liable.
In Feldman v Mall (1945) the employee had to deliver goods and return immediately to his place of work. On the way back
he deviated from the route to partake of a drink with his friends. Later on his way back to his place of work, he knocked
down and killed someone. The court decided that he had left his work only partially to promote his interests. He was,
however, still promoting the interests of the employer because he retained control of the vehicle and took it back to work later.
The employer was liable.
In the light of this and other cases Munyama stands a reasonable chance of being able to hold Tender Meat Suppliers (Pvt)
Ltd vicariously liable for the damages caused to his car on account of the negligence of their employee, Lucky.

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Part 2 Examination – Paper 2.2(ZWE)
Corporate and Business Law (Zimbabwe) December 2002 Marking Scheme

1 The emphasis is on legislation as the primary and most authoritative source of law in Zimbabwe.
7 – 10 marks Answers in this band will provide a full analysis of the question area demonstrating a clear understanding of
legislation as the primary source of law in Zimbabwe. An appreciation of the distinction between primary legislation
on the one hand and delegated legislation on the other hand is imperative.
4 – 6 marks A lukewarm answer which is rather deficient in relation to the process that leads to the creation of both acts of
Parliament and delegated legislation.
0 – 3 marks A rather poor answer in which the concept of legislation is hardly understood.

2 In order to answer this question adequately it is important for candidates to appreciate the nature of contracts and in particular
factors that vitiate agreements:
7 – 10 marks Top band marks will be awarded to candidates who comprehensively discuss factors that vitiate contracts like
mistake, misrepresentation, duress and undue influence. In the majority of the cases the agreement becomes
voidable at the instance of the weaker party. It would be useful to cite relevant case law.
4 – 6 marks An average answer which does not fully explain the nature of voidable agreements.
0 – 3 marks An indifferent answer which is grossly inadequate.

3 7 – 10 marks A full analysis of the concept of agency and how such contracts can be terminated. Appropriate case law has to
be cited.

4 – 6 marks Omissions here and there which are not of a major character.

0 – 3 marks An answer which does not adequately cover the area of the law of agency.

4 The question is centred on the principle of majority control (the Foss v Harbottle rule) and the context within which it operates in
our law.
7 – 10 marks A full discussion of the principle of majority control and the exceptions to the rule (both common law and statutory)
is essential and citation of relevant case law is a must.
4 – 6 marks A rather incoherent answer in which some aspects of the principle of majority control are not properly understood.
0 – 3 marks An unimpressive answer which is full of omissions.

5 The question relates to the rules and regulations (both common and statutory) which govern the payment of dividends.
7 – 10 marks A full explanation of the law that regulates the payment of dividends and citation of both the common law (mostly
cases) and statutory sources is a must.
4 – 6 marks An answer which emphasises one aspect (e.g common law) without looking at the other aspect (say statutory
provisions).
0 – 3 marks A rather inaccurate answer which is deficient in many respects.

6 Although this is largely one topic, the two aspects (a) and (b) can be treated individually as stand-alone topics.
(a) 3 – 5 marks A full and comprehensive explanation of the concept of rehabilitation and its legal effects. It is important to
make references to the Insolvency Act (Chapter 6:04).
0 – 2 marks An inadequate explanation of the term rehabilitation and the legal effects thereof.

(b) 3 – 5 marks A comprehensive ‘inventory’ of the circumstances under which an insolvent person can be rehabilitated.

0 – 2 marks Very little or limited knowledge of the area of rehabilitation in insolvency law.

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7 The two stand alone sub-questions relate to some of the basic obligations of the employer towards his employee.
(a) to provide the employee with work
3 – 5 marks Answers in this bracket will show an appreciation of the general rule in our law which says that an employer
is not legally bound to provide work for the employee as long as he is paying the employee’s wages. However
there are a number of notable exceptions to this rule which must be mentioned.

0 – 2 marks An indifferent answer in which the relevant principle has hardly been understood.

(b) Payment of Wages

3 – 5 marks Answers in this bracket will show evidence of the fact that candidates appreciate the primacy of the obligation
by the employer to pay wages.
0 – 2 marks An unsatisfactory answer.

8 The question pertains to the common law remedies that are available to the buyer in the event that the merchandise (merx) is
latently defective.
7 – 10 marks Answers in this band should adequately define the concept of latent defects and the two separate remedies
available (Actio Redhibitoria or Actio Quanti Minoris) to the buyer depending upon the nature and extent of the
defect. The answer should comprehensively define when each remedy is available and what it entails in practical
terms. It is imperative to cite relevant case law.
4 – 6 marks A rather average answer where the relevant principles are not clearly spelt out and there is no supporting case law.
0 – 3 marks A very unbalanced answer. Focusing only on one aspect of the question and completely ignoring the others or an
answer which shows little understanding of the subject matter of the question.

9 The two subsections are stand alone questions with each one attracting 10 marks.
(a) 7 – 10 marks Candidates should have knowledge of the procedures involved in appointing and removing directors from the
Board. The company’s memorandum and articles of association should be used as the starting point. Marks
in this band would show an appreciation of some practical aspects of Company Secretarial Practice (e.g what
the Company Secretary is expected to do whenever there is a Board vacancy).
4 – 6 marks An average answer which is short on specifics.
0 – 3 marks A rather poor answer in which the candidate displays lack of knowledge of the subject.

(b) 7 – 10 marks Answers in this mark range would display a thorough knowledge of the alternatives to winding up and in
particular, judicial management. It is important to describe the procedure to be followed in effecting a judicial
management order and a citation of the relevant statutory provisions is a must.
4 – 6 marks A lukewarm answer which does not make reference to statutory provisions.
0 – 3 marks An indifferent answer which is vague and inaccurate.

10 (a) 7 – 10 marks Answers in this bracket would manifest a correct understanding of the elementary issues involved in making
contracts namely, offer and acceptance, the use of post and telephonic communication and the issue of
revocation of an offer. Relevant case law is absolutely a must and drawing the correct conclusions is
important.
4 – 6 marks An average answer which omits some of the critical aspects of the question and case law might even be
wrongly cited.
0 – 3 marks A unbalanced answer demonstrating no real understanding of the fundamental legal issues at stake.

(b) 7 – 10 marks Answers in this bracket will show a clear grasp of the fundamental legal principles involved such as
contractual capacity, vague agreements and immoral and/or illegal agreements. Both statutory and common
law (case law) sources have to be cited.
4 – 6 marks An average answer in which some of the legal issues and the context within which they operate are not
properly understood.
0 – 3 marks A vague answer where the candidate clearly does not understand what the question is all about.

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11 The question has been split into three parts with section (a) attracting the bulk of the marks.
(a) 10 – 14 marks Answers in this band will comprehensively discuss the common law and statutory duties of directors.
Critically it is important to discuss the concept of fiduciary duties and how Mr Svotwai has violated this
obligation by placing his personal interests above those of his principal, Tatco (Pvt) Ltd. In the light of the
Managing Director’s flagrant violation of the obligation of utmost good faith which he owes his principal it
is important to discuss the extent and nature of remedies that are available to the Principal. Case law must
be cited in order to have a complete and meaningful answer.
5 – 9 marks An average answer which omits some of the essential elements of the concept of fiduciary duties. Case law
is not adequately cited and where it is cited, it is not incisive enough.
0 – 4 marks An unbalanced answer demonstrating no real understanding of the nature and demands of the question.

(b) 2 – 3 marks The general formalities which creditors would have to follow in order to recover money from a company that
is in liquidation.
0 – 1 mark Irrelevant or inadequate information in relation to the problem area.

(c) 2 – 3 marks It is important to refer to the common law remedy of misfeasance which the liquidators can have recourse
to in order to recover money personally from an errant director. The statutory remedy provided under s.318
of the Companies Act, Chapter 24:03 must also be mentioned.
0 – 1 mark A poor answer in which both the common law and statutory law provisions relating to the subject matter
are unknown.

12 (a) 7 – 10 marks Marks in this band would be awarded for an answer that comprehensively discusses the duties of partners
in their entirety. Shumba is in breach of a number of his common law obligations towards his partner,
Mhofu and it is important to define the whole range of options available to Mhofu by way of judicial relief
such as damages and ultimately a dissolution of the partnership. This area of the law is replete with case
law and it is absolutely important to cite relevant case law.
In the light of Mhofu’s deep sense of grievance over the conduct of the partnership’s affairs, there are a
number of sensible options available to him and accordingly such advice must be given to him.
4 – 6 marks An average answer with omissions here and there. Relevant case law has not been cited.
0 – 3 marks A poor answer which reflects a fundamental lack of proper insights into the problem.

(b) 7 – 10 marks Answers will provide a full analysis of the question area, demonstrating an understanding of the concept of
vicarious liability and the legal context within which it operates in our law. It is important to be able to
distinguish between an agent who is an independent contractor and one who is a servant for purposes of
establishing the principal’s vicarious liability for delicts that have been committed by the agent. Appropriate
case law must be cited in the light of the above discussion.
4 – 6 marks Answers in this bracket may show a rudimentary understanding of the subject matter but would lack the
detailed knowledge of answers in the higher bracket. Alternatively the answers may be unbalanced in
structure and content or miss out on important issues.
0 – 3 marks Vague and inaccurate. At the lower end of the band, candidates would show very little knowledge of what
the question is all about.

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