Answers

Part 2 Examination – Paper 2.2(ZWE)

Corporate and Business Law (Zimbabwe) December 2005 Answers

1 A dual legal system is the co-existence of legal systems as valid sources of law. The existence of the two legal systems was created
by s.89 of the Constitution of Zimbabwe, which sanctions the applicability of both customary law and general law (Roman-Dutch
law) as valid sources of law. As a result of this system of co-existence a lot of problems arise as discussed below:
Section 89 of the Constitution states as follows:
‘subject to the provisions of any law … relating to the application of African customary law, the law to be administered shall
be the law in force in the Colony of Good Hope as at 10 June 1891, as modified by subsequent legislation ….’
It is clear that the Constitution recognises both sources of law. The first problem of the dual legal system stems from the choice of
law process. The system responds in this regard by conferring a duty on the courts to judicially determine which source of law
should apply to a particular case. The court in deciding which law is applicable, guidelines are provided for in terms of s.3 of the
Customary Law and Local Courts Act [Chapter 7:02]. It provides that customary law will apply where the parties in dispute agree
that it must apply. In the absence of express agreement, customary law will apply, where having regard to the nature of the case
and the surrounding circumstances, it appears that the parties have agreed that it shall apply. The court can also decide whether
in view of the particular circumstances, and nature of the case, it is proper and just that customary law should apply. For example,
a contractual dispute relating to the payment of lobola (bride price) or a succession dispute over chieftainship would necessarily
involve an application of customary law. Section 3 of the Act further defines surrounding circumstances to include the parties’ mode
of life, subject matter of the case, knowledge of the parties of customary law and general law and the closeness of the case to
general law or customary law. This section further abolishes the old colonial choice of law, which was based on racial
considerations. Ultimately the court is supposed to reach a decision after weighing all the above given factors.
The choice of law problem is more pronounced if there is a legal dispute between Africans and non-Africans. This was encountered
in the case of Lopez v Nxumalo (1985), where the appellant was a white man of Portuguese extraction, while the respondent was
a black Zimbabwean woman. The appeal was against the decision of a Community Court, (as it then was) which had held that it
had jurisdiction to entertain an action under customary law, for damages for seduction by the respondent against the defendant.
The appellant’s contention was that he knew no African custom and therefore was not acquainted with African customary law. The
Supreme Court rejected the appellant’s argument and ruled that it was just and proper for customary law to be applied and saw
no basis for interfering with the decision of the Community Court.
Some argue that the guidelines afford creative flexibility in the choice of law process. Guidelines end up leaving too much discretion
to the court. The ambiguity created by phrases such as ‘… unless the justice of the case requires’ makes the system too fluid to
give it judicial effect and, resultantly, it would be uncertain and flawed with unpredictability and inconsistency.
According to customary law, it is the eldest male child who becomes heir to his deceased father’s intestate estate. However the
eldest female child does not enjoy a similar right. In the case of Chihowa v Mangwende (1987), the Supreme Court ruled that the
eldest child, regardless of gender, inherits his or her deceased father’s estate by virtue of the Legal Age of Majority Act, now part
of The General Law Amendment Act s.15. The unpredictability of the dual legal system was revealed in Vareta v Vareta (1990)
where it was held that the eldest son is the natural heir of his father’s estate even if there is an older daughter irrespective of the
Legal Age of Majority Law. In Magaya v Magaya the Supreme Court ruled that the Chihowa v Mangwende case was incorrectly
decided.
Complexities are created where there exists the potential application of two different systems of law with different legal
consequences in the same case. The conflict heightens, especially when customary society might not accept or identify with the
rulings of general law. In S v Matyenyika (1996) which involved the crime of incest, the High Court set aside the conviction of two
first cousins, who according to customary law are prohibited from having sexual relations. Under Roman Dutch law, there is no
similar prohibition because the two do not fall within the prohibited degree of consanguinity of blood affinity. Whilst there are
anomalies and contradictions inherent in the application of a dual system of law, it is also true to say that in many ways the concept
of dualism has stood (in spite of the imperfections) the test of time since it started operating with the advent of colonialism in
1890. After independence in 1980 the system was retained and it will continue to be our law for the foreseeable future. The
Magistrate had convicted them on the basis of customary law. The decision was set aside because customary law did not apply
to criminal law.
In summation it can be said that the legal complexities that arise as a result of applying a dual system of law inevitably provide
our superior courts (High Court and Supreme Court) with an opportunity to break new legal ground in the application of customary
law.

2 Contracts in restraint of trade are one of the most important categories of void contracts at common law. Broadly, agreements in
restraint of trade are agreements in which one or both parties limit the freedom to work or carry on their profession or business in
some way, such as by agreeing not to compete with each other in certain places or activities. Commonly such agreements may be
attacked because they conflict with public interest and because they are unfair in unduly restricting personal freedom.
In today’s business it sometimes seems to be in the public interest and sometimes the question of fairness between the parties,
which is the most important factor in agreements involving restraints of trade. Contracts in restraint of trade are one aspect of a
very large and complex problem with important economic and social implications. Essentially, the question is to what extent the
law should interfere with the freedom of citizens to do business in such a way as to limit or restrain competition in the market and
thus to harm the public interest as a whole.

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 Broadly speaking, the traditional attitude of the courts was to leave businessmen to use their own methods of conducting business
even if this was likely to lead to the creation of monopolies, or unfair competition, or the enforcement of restrictive practices of
various kinds. Surely, as a general rule it is not the court’s business to improve on the contract the parties have made, even if they
have made an unreasonable or prejudicial contract, they must live with it. As an exception to this general rule, the courts will not
enforce a contract in an unreasonable restraint of trade. In the case of Rhodesia Milling Company (Pvt) Ltd v Super Bakery (Pvt)
Ltd (1973) Goldin J said:
‘most contracts result in a restraint of trade but that by itself does not justify the application of the doctrine of restraint of trade
so as to entitle the court to relieve a party from contractual obligations freely assumed.’
The learned judge held that a contract is in restraint of trade if it sterilises or stifles production of services, but if it merely regulates
and promotes trade by encouraging production of services the restraint of trade doctrine cannot apply to it. Its reasonableness will
not be investigated. This test was laid down by the English House of Lords in Esso Petroleum Co Ltd v Harper’s Garage Stowport
Ltd (1967). The approach was confirmed as part of Zimbabwean law in the case of Shacklock Phillips-Page (Pvt) Ltd v Johnson
(1978).
As indicated earlier, covenants in restraint of trade are prima facie contrary to public policy and for them to be justified they must
protect a legitimate interest. In deciding whether a restraint of trade is reasonable, the courts have long taken the view that regard
must be had to the ‘interests’ which the restraint is designed to protect. When the contract has been classified as in restraint of
trade it will nevertheless be upheld if the restraint is reasonable in the interests of the public and of the parties. The onus is on the
promisor/affected person to prove that the restraint is not binding on him because enforcement of it would be contrary to public
policy. This was decided in Book v Davison (1988) and was confirmed in Mangwana v Muparadzi (1989) settling the question
of onus.
In the case of Book v Davison (1988) the Zimbabwean Supreme Court held that the question is whether enforcement of restraint
would be contrary to public policy. To answer this question the court must have regard to the circumstances prevailing at the time
it is asked to enforce the restraint.
Although unreasonable restraint may be unenforceable, they can be saved by severing what is too wide and enforcing as reasonable
what remains, provided the two parts are separately identified in the contract. This was demonstrated in Gabriel v Fox and Carney
(Pvt) Ltd (1977) in which the parties had made a laudable attempt to confine a restraint on an ex-employee to a reasonable area
by making it apply ‘within the area of Rhodesia (now Zimbabwe) in which the company is carrying on its business’. The attempt
failed because although the company’s business was concentrated in Salisbury (now Harare) it had put through transactions in a
number of other parts of the country. It would have been unreasonable to restrain the ex-employee from operating in all these
places, but they could not be severed because that would have been the act of the court and not the parties. To cure this problem
Zimbabwean courts have adopted the doctrine of restriction, permitting them to restrict an unreasonable restraint to what is
reasonable even if the division is not made in the contract itself. Mangwana v Muparadzi (1989) and Direct Response Marketing
(Pvt) Ltd v Shephered (1993).
In assessing the reasonableness of the restraint, the position of the contracting parties should be taken into account. In the case
of Bopgrafoc Pvt Ltd v Wilson (1974), Davies J said
‘whilst the onus is always on the stipulator to show that a restraint clause is reasonable inter partes and goes no further than
is reasonably necessary to protect the interests of the parties, this onus is easier to discharge where the parties contracted on
an equal footing (as is normally the case between vendor and a vendee) than it is where the parties bargain from an unequal
footing (as is often the case in contracts of employment) …’
It has been argued that a restraint may be unreasonable because it prohibits an unnecessarily wide range of activities. A trading
or price fixing agreement must obviously be considered in relation to the interests of the public. The restraint may not be enforceable
if it creates a pernicious monopoly. In Spa Foods Products v Sarif (1951) it was illustrated that the restraint may even be
unreasonable in relation to the parties’ interests as well. However in Commercial and Industrial Holdings v Leigh Smith (1982) it
was accepted that a restraint against competition per se is not objectionable if it is reasonably necessary for the protection of
goodwill.
All in all it is now quite clear that for a restraint of trade agreement to be deemed reasonable by our courts and therefore
enforceable, the time and area covered by the agreement are critical considerations. For example, Mangwana v Muparadzi (1989),
a young lawyer who had covenanted not to work as a lawyer for five years either on his own or in association with others, anywhere
in Zimbabwe, upon leaving his employer had the restraint agreement modified by the court to operate for three years in Chinhoyi
town (about 120 kilometres from Harare), where he had been based.

3 Parties to a contract can agree on anything as long as it is legal. This is called freedom of contract. Parties can agree on whatever
term of their contract either expressly or impliedly. Terms of a contract determine the consequences of a contract. In the absence
of express agreement, certain terms are implied by operation of the law, trade usage or facts. In the event of any dispute, it should
be borne in mind that it is not the court’s business to improve on the contract the parties have made. The court should imply terms
reasonably necessary in the circumstances. Courts should not make contracts for the parties implying terms which parties would
never have agreed.
In the case of Reigate v Union Manufacturing Co (1918) Sculton L J said
‘a term can be implied if it is necessary in the business sense to give efficacy to the contract i.e. if it is such a term that it
can confidently be said that if at the time the contract was negotiated someone had said to the parties: What will happen in
such a case? They would both have agreed that: of course so and so will happen we did not trouble to say that, it is too clear.’

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Necessity in the business sense must be clearly distinguished from reasonableness and a term will not be implied merely because
it would seem reasonable to do so. Business efficacy must be judged against the circumstances contemplated by the parties and
not in light of any unusual situations that have subsequently developed.
An implied term is a term which is implied either ex lege or as a result of circumstances pertaining when the contract was
concluded. In the case of Alfred McAlpine and Son (Pty) Ltd v Transvaal Provincial Administration (1974), Corbet JA said the term
‘implied term’ denotes two distinct concepts. Firstly, it is used to describe an unexpressed provision of a contract which the law
imports, generally as a matter of course. It is imposed by the law from without, often where it is by no means clear that the parties
would have agreed to incorporate it in the contract. Secondly, an implied term is used to denote an unexpressed provision of the
contract which derives from the common intention of the parties as inferred by the court from the express terms of the contract
and surrounding circumstances.
It should be emphasised that in order to have business completeness, common intention should include not only the actual
intention but also imputed intention. In other words, the court implies not only terms which the parties must actually have had in
mind but did not trouble to express, but also terms which the parties, whether or not they actually had them in mind, would have
expressed if the question, or the situation requiring the term had been drawn to their attention.
Implied terms of law may be derived from the common law, trade usage or custom, or from the statute. Despite the general principle
that parties are free to contract as they wish, the common law permits the term that would be implied to be expressed, modified
or excluded (Electra Rubber Products (Pvt) Ltd v Socrat (Pvt) (1981)). Under the common law, the seller’s implied guarantee or
warranty against latent defects is usually an implied term in a contract of sale. However, parties can agree to expressly exclude the
implied term in a contract of sale. The same applies where parties can agree to expressly exclude the implied warranties see Elston
v Dicker (1995). Under the sale of movables some terms of a contract are implied from the Consumer Contracts Act [Chapter
8:03].
By implying so many terms in the sale of many movables, it saves a lot of time, effort and affords protection to weaker parties in
the contract, particularly consumers. For instance, every day one buys bread, salt or cooking oil in a supermarket, it is not
necessary to enter into full contracts of sale expressly stating all terms and conditions of sale.
Terms implied by law may be affected by trade usage. This occurs when a person enters into an agreement under circumstances
which are governed by a particular trade. That usage must be considered part of the agreement whether the parties knew of the
usage or not, unless they have expressly agreed to exclude it. The requirements of trade usage are that it must be notorious, certain,
reasonable and not contrary to positive law. Coults v Jacobs (1927). The application of these requirements is exemplified by
Barclays Bank Ltd v Smallman (1976) in which the banking usage of charging compound interest on overdrafts was sufficiently
proved. Similarly, in the case of Greenacres Farm (Pvt) Ltd v Haddon Motors (Pvt) Ltd (1983) in which an alleged usage in the
motor vehicle trade that a request to ‘check over’ a vehicle included putting it to running order was not properly and sufficiently
proved.
It should be noted that some terms of a contract may be implied from the facts. In Elite Electrical Contractors (EEC) v The Covered
Wagon Restaurant (CWR) (1973) CWR, a restaurateur, hired EEC, a proprietor of a small electrical business, to do all the electrical
work involved in moving a stove and other electrical appliances from one part of his kitchen to another. Due to difficulties in making
an advance estimate of the cost of work of this kind, no firm quotation was given and the parties agreed that EEC would proceed
on this basis. Having duly completed the work, EEC contended there had been an implied agreement that CWR would pay a fair
and reasonable price for the materials supplied and services rendered. The court held that the term implied and relied upon by
EEC was valid and enforceable. The court emphasised that the term implied in any particular contract will depend upon the
circumstances surrounding that contract and it is not a matter to be decided by reference to other cases.
Implied terms are necessary to enhance business efficacy but there is a danger that the courts may end up making contracts for
the parties, by implying terms which the parties never agreed on. This would end up conflicting with the time honoured Roman
Dutch principles of freedom of contract and the doctrine of sanctity of contracts. In Hamlyn and Company v Wood (1891) W, who
were brewers, agreed in writing to supply H all the grains made by W for ten years. After five years W sold their business. The
court held that, a term would not be implied that W would not by any voluntary act of their own prevent themselves from continuing
the sales of grains to H for ten years. The court ought not to imply the term unless it necessarily arises from the language of the
contract itself, and the circumstances under which it is entered into. Such interference with the parties’ contract, that the parties
must have intended the stipulation in question must be exercised cautiously and sparingly.
Unless specifically excluded by the agreement of sale it can be said in summary that the corresponding duties and rights of the
buyer and seller are in a way part of the implied terms of an agreement of sale. These are as follows:
The buyer (implied duties)
1. To pay the price as agreed and if no specific figure has been mentioned it is implied that the purchaser is liable to pay a
reasonable price.
2. To compensate the seller for any expenses incurred in safe-keeping and maintaining the thing sold until delivery can take
place.
The seller’s duties are the following:
1. To care for the thing sold until delivery takes place.
2. To deliver the thing sold.
3. To guarantee the purchaser undisturbed possession. This is known as the tacit warranty against eviction and it forms an
integral (ex lege) part of the contract of sale. The warranty ensures that the purchaser will not be disturbed in his possession,
that is, he will have peaceful and quiet enjoyment of the thing.

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 4. To give the purchaser a warranty against latent defects. The seller (ex lege) is obliged to deliver the thing sold to the purchaser
without defects. The seller is therefore liable for any latent defects in the thing sold irrespective of whether he was aware of
such defects at the time of the conclusion of the contract of sale.
Apart from the contract of sale there are a lot more other forms of contracts in which the rights and duties of the parties are
regulated and governed by the implied terms of the agreement. The parties are at liberty to agree on the regulatory framework of
their contract as long as the proposed terms are not specifically outlawed by legislation or any other positive law. Examples (among
others) of such contracts include agency, lease, partnership and many more.

4 (a) A number of statutory provisions deal with the appointment of an auditor by two categories of a company: public companies
and other companies. In terms of s.150(1) of the Companies Act [Chapter 24:03] the first auditor of a public company shall
be appointed within one month of the issue of the certificate of incorporation. The appointment of the first auditor is made
by directors of the company; if they fail to do so, the company in a general meeting may appoint the first auditor. If neither
the board of directors nor the company appoints the auditor, the Minister may on the application of a member do so. This
may happen when a shareholder with a sufficient voting strength vetoes such appointment. In terms of s.150(2) of the
Companies Act subsequent auditors shall be appointed by the company at the conclusion of each annual general meeting to
hold office until the conclusion of the next annual general meeting. As regards private companies, the first auditor shall be
appointed within 30 days of the issue of a certificate of incorporation. This is in terms of s.151. However, s.150(7) of the
Act provides that a private company shall not be required to appoint an auditor in the following situations, if:
(i) the number of members does not exceed ten and;
(ii) none of the members is a company and
(iii) all the members agree that an auditor shall not be appointed.

(b) An auditor may be removed at a general meeting and a substitute appointed in his place. This is provided for in terms of
s.150(1) of the Companies Act [Chapter 24:03] which states that a company may at a general meeting remove an auditor
and appoint in his place any person. The nomination of the substitute auditor shall be made by a special notice by a member
of the company to the other members not less than fourteen days before the date of the meeting.
In terms of s.150(2), a company in the course of ordinary proceedings in a general meeting is not permitted to dismiss or
remove an auditor from office without following the statutorily laid down procedures. If during the course of the year, an
auditor tenders his resignation to the company or is otherwise disqualified by death or other cause as provided for in s.152
of the Act, it is not necessary to call a general meeting for the purpose of appointing a substitute, as such a resignation or
disability creates ‘casual vacancy in office of auditor’ which the directors are authorised to fill in terms of s.150(5) of the Act.
When the next annual general meeting is held the provision of s.150(2) will apply.

5 The Companies Act [Chapter 24:03] contains a number of provisions which are meant to preserve the share capital structure of
the company. The general principle is that a company must maintain its capital, it cannot give money which has been contributed
by the shareholders back to those same people and there are a number of strict rules which seek to maintain adherence to that
principle. If such money is returned to shareholders, except in a few specific and clearly defined situations, then it becomes an
unlawful reduction of share capital. Some of the rules which are designed to preserve the share capital structure of a company are
the following:
(a) Prohibition of financial assistance by the company for the purchase of its own or its holding company’s shares (s.73)
It is unlawful for the company to give whether directly or indirectly, whether by means of a loan, guarantee, the provision of
security or otherwise any financial assistance for the purpose of buying shares in the company or where the company is a
subsidiary company in its holding company unless:
(i) such assistance is given in accordance with a special resolution of the company;
(ii) the company’s assets exceed its liabilities and it is able to pay its debts as they become due in the ordinary course of
its business.
(b) The Share Premium Account (s.74)
If a company issues shares at a premium whether for cash or otherwise, a sum equal to the aggregate amount or value of
the premiums on those shares shall be transferred to an account called the ‘share premium account’. The share premium
account cannot be used anyhow and in terms of the Act, its use is restricted to the following (among others):
(i) in paying up unissued shares to be allotted to the company’s members, directors, employees or to a trustee for such
persons, as fully paid bonus shares or
(ii) in writing off the company’s preliminary expenses or the expenses of or the commission paid or discount allowed on any
issue of shares or debentures of the company.
(c) Power to Issue Shares at a Discount
Whilst it is permissible for a company to issue shares at a discount of a class already issued, this has to be done in accordance
with strictly laid down criteria which is as follows:
(i) the issue of the shares at a discount must be authorised by special resolution of the company and must be sanctioned
by the court and

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 (ii) the special resolution must specify the maximum rates of discount at which the shares are to be issued.
(d) Prohibition of Loans to Directors (s.177)
It shall not be lawful for a company to make a loan to any person who is its director or a director of its holding company
unless:
(i) the company’s ordinary business includes the lending of money or the giving of guarantees in connection with loans
made by other persons to anything done by the company in the ordinary course of that business or
(ii) where the company is a non-subsidiary company and the consent of members holding at least nine-tenths of the issued
share capital has been secured.
(e) Payment of Dividends
As a way of preserving the share capital structure the Companies Act makes it clear (Article 16) that ‘No dividend shall be
paid otherwise than out of profits …’
Even if a company makes profits, shareholders are not automatically entitled to a dividend until and unless the directors have
declared one. Members in general meeting cannot outride or veto a decision of the Board of Directors over matters pertaining
to a declaration of a dividend. Ultimately the provisions cited above are meant to ensure that as far as possible, the share
capital structure of the company, is not unlawfully interfered with.

6 (a) Section 35(1) of the Companies Act [Chapter 24:03] provides that if a company, being a private company, alters its articles
in such a manner that they no longer include the provisions required under s.33 (relating to private companies) the company
ceases to be a private company as from the date of alteration. The company is required within one month after the date of
alteration to remove the term (Private) from its name. It is also required to deliver to the Registrar for registering a statement
in lieu of prospectus in the form and containing the particulars set out in Part I of the Third Schedule of the Companies Act
[Chapter 24:03].
However, a statement in lieu of a prospectus need not be delivered if within a month as indicated earlier, a prospectus relating
to the company which complies with the fourth schedule of the Act, is submitted.
Section 35(2) provides that every statement in lieu of a prospectus submitted shall be endorsed or attached to it a written
statement signed by the persons setting out the adjustments and giving reasons therefore.
It is emphasised under s.35 that the removal of the term private shall not be regarded as a change of name for the purposes
of s.33(1).
If an officer of the company concerned fails to comply with the provisions of s.35 they would be guilty of an offence and liable
to a fine. Before a public company may offer shares to the public as one of the ways through which capital is raised, it is
enjoined under the law either to issue a prospectus or alternatively a statement in lieu of a prospectus.

(b) A company must have a registered office in Zimbabwe, to which all communications and notices may be addressed and at
which all court processes such as summons may be served. The insistence upon the company having a registered office is
explained by the fact that although the company is a juristic or legal persona it has no physical existence, so it is necessary
for it to have a physical place where communications can be sent and collected.
In terms of s.112 of the Companies Act [Chapter 24:03] every company shall have a registered office in Zimbabwe. Upon
the incorporation of a company notice of the situation and postal address of the registered office shall be given to the Registrar
and notice of any change in such situation or postal address shall be given to the Registrar before such change is made.
In terms of s.113 of the Companies Act [Chapter 24:03] every company shall continuously display its name on the outside
of every office or place in which its business is carried on, in a conspicuous position, in letters easily legible.

7 The Companies Act [Chapter 24:03], s.17, provides for the registration of the Articles of Association signed by subscribers, together
with the memorandum of association. The articles of association are regarded as the internal constitution of the company, which
governs the inter-relations of the members of the company.
Section 27 of the Companies Act [Chapter 24:03] provides that:
‘subject to this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the
same extent as if they respectively had been signed by each member and contained undertakings on the part of each member
to observe all the provisions of the memorandum and of the articles’.
There is division amongst the authorities as to the interpretation of this provision. Some authorities argue that the articles bind
members inter se while others say it binds the members and the company.
Some have argued that this section (s.27) should be construed to create a contract only in respect of regulating mutual rights and
duties of members. Thus one member may without the company being a party to the action, enforce a right given to him by the
articles in his capacity as a member against another member. This was the position in Rayfield v Hands (1958) where the
company’s articles contained a clause requiring every member who intended to transfer shares in the company to inform the
directors, and the directors were then required to take shares equally between them at a fair value. The plaintiff shareholder notified
the directors of his intention to transfer his shares, but the directors denied that the articles imposed any liability on them to take

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 the shares. The directors, who were also shareholders in the company were described, by Vaisey J, as working members of the
company, and said that the relationship contemplated by the relevant article was between the plaintiff as a member and the
defendants, not as directors but as members. The plaintiff’s claim was therefore enforced.
The same conclusion was reached in the case of Salomon v Quinn and Axtens Ltd (1909) where the learned Judge Farwell, L J
expressed some doubts as to the meaning of the words equivalent of our s.27 when he said:
‘the articles … are made equivalent to a deed of covenant signed by all the shareholders. The Act does not say with whom
that covenant is entered into, and there have no doubt been varying statements by learned judges, some of them saying it is
with the company, some of them saying it is both with the company and with the shareholders’.
However, a contrasting view was held by Ashbury J in the case of Hickman v Kent and Romney Marsh Sheepbreeders’ Association
(1915) where he stated that each member is under an obligation to the company to act in accordance with the articles. Ashbury
J in Hickman (supra) declared that:
‘An outsider to whom rights purport to be given by the articles in his capacity as such outsider, whether he is or subsequently
becomes a member, cannot sue on those articles treating them as contract between himself and the company to enforce those
rights. These rights are not part of the general regulations of the company, applicable alike to all shareholders and can only
exist by virtue of some contract between such person and the company, and the subsequent allotment of shares to an outsider
in whose favour such an article is inserted does not enable him to sue the company on such an article …’
It is made clear from this quotation that s.27 can create a contract but can only do so between the company and its members in
their capacity as members. This position is further affirmed in the cases of Elly v Positive Government Security Life Assurance
(1896) and Beatie v E F Beatie (1938).
In conclusion it is submitted that the Articles of Association should bind both members inter se and the company. This seems to
be the preponderant view, not only in Zimbabwe but also amongst other Roman-Dutch jurisdictions in our sub-region.

8 The aim of appointment of an agent is the performance of a service for the principal on the formation of a contract involving the
agency function, each party is bound by the obligations which he has expressly or impliedly undertaken and by those which the
law imposes upon him in the absence of such express or implied agreement.
The contract of agency terminates in the following ways:
(i) Performance
The relationship of principal and agent terminates when both parties have fulfilled all their obligations. Thus in the case of
Martin v Currie (1921) Gregorowski J said – the auctioneer was employed exclusively as an auctioneer to see whether he
could get the reserve price by public auction; there was not a word or suggestion that he was to be a general agent to sell
the property, and there was not a single circumstance to show the property was put into the hands of the auctioneer to sell
out of hand and generally. His contract was strictly limited to putting his property up to public auction at a reserve price of
£5 per Morgen or more, if there was such a bid at the auction, and the moment that the auction was concluded and the £5
reserve was reached, there was no further contractual relation of any kind existing between the auctioneer and the appellant.
(ii) Effluxion of Time
When they enter into a contract of agency the parties may stipulate the period during which their relationship will exist. The
end of the period may be defined by reference to a date of a specified year or to an event, e.g. when the principal returns
from a journey. In the case of National Board Pretoria (Pty) Ltd and Anor v Estate Swanepoel (1975) one of the questions
for decision was whether a general power of attorney granted by S to one B on 14 December 1959 was still in force on
21 February 1973. Botha JA said in the facts ‘the evidence established on a balance of probabilities that the power of attorney
was given to B for the limited purpose of acting for S during his absence overseas if the need should arise, and that it therefore
lapsed on S’s return from overseas’.
(iii) Agreement
The relationship of principal and agent being based on agreement, may naturally terminate by agreement.
(iv) Revocation of the Principal
The general rule is that a principal is entitled to revoke the mandate and when notice of the revocation or the facts which
allow it to be assumed is brought, or may be considered to have been brought, to the knowledge of the agent the contract is
terminated.
(v) Renunciation by the Agent
A mandate is dissolved by renunciation on the part of the agent and depending on the circumstances of the renunciation, the
agent may be liable to the principal for breach of contract.
(vi) Death of the Principal
According to the old Roman-Dutch authorities such as Van Leevwen and Grotius, a mandate terminates when the agent learns
of the principal’s death. The death of the principal terminates not only the original mandate but also any sub-mandate.
However, there are exceptions to the above rule. Thus, if the parties clearly intend that the agency shall continue after death
it will not terminate.

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 (vii) Death of the Agent
If an agent dies before he begins to peform the mandate it terminates on his death. This was stated in the case of Ward v
Barrett NO and Anor (1982). If performance has begun and the part which remains to be performed requires the exercise
of discretion, the mandate terminates on the agent’s death. However, if the part which remains to be done does not require
the exercise of discretion and is necessary in the circumstances the executor or heir of the agent is bound to complete the
performance.
(viii) Insolvency of the Principal
The principal’s insolvency terminates his agent’s power. This was aptly stated in the case of Natal Bank Ltd v Matorp and
Registrar of Deeds (1908).
(ix) Insolvency of the Agent
The fact that the agent goes insolvent may affect the confidence the principal has in him. The established view is that an
agent’s insolvency gives the principal grounds to revoke the granting of power if he so wishes.
(x) Mental Incapacity of the Principal or Agent
The relationship of principal and agent terminates, if the principal becomes insane. This was stated in the case of Tucker’s
Fresh Meat Supply (Pty) Ltd v Echakowitz (1958). As in the case of death, it is on the date when the other party acquires
knowledge of the changed circumstances that the relationship comes to an end.
(xi) Subjection of the Principal to Another
The common law position is that if the principal is a woman and she subsequently marries subject to the marital power, the
agency ceases when the agent learns of the fact.
However, this traditional or common law position has now necessarily been amended by statute (The Legal Age of Majority
Act). The Legal Age of Majority Act says that once a person attains 18 years of age they acquire locus standi in judicio and
in the case of a woman they can contract in their own right and without reference to anyone else (including the husband,
where they are married).
(xii) Supervening Impossibility of Performance
If the performance of the principal’s mandate becomes impossible (either through an act of State or an act of God) subsequent
to the conclusion of the contract of agency the parties are then discharged from their obligations. A typical example would be
that of an act which was perfectly legal at the time of the conclusion of the contract but has since become illegal on account
of subsequent legislation.

9 The question canvasses issues arising from a partnership. A partnership is defined as a legal relationship arising from a contract
between two or more persons in terms of which they agree to carry on an enterprise with the object of making a profit to be divided
among them. Each agrees to contribute property and/or labour for the purposes of that enterprise.
It is important at this point to note the legal nature or status of a partnership. A partnership is not a legal entity having an existence
separate from the individual person constituting it. During the existence of the partnership, partners are joint co-creditors and joint
co-debtors of the rights and obligations of the partnership Shingadia Brothers v Shingadia.
A partnership is a contract and as such all essentials of a contract must be present. The essentials of the special contract of
partnership were stated in the frequently cited case of Joubert v Tarry and Co (1915) which states as follows:
‘now what constitutes a partnership between persons is not always an easy matter to determine… the definitions … differ to
some extent …we are safe if we adopt the essentials which have been laid down in Pothier on Partnership… These essentials
are fourfold. First that, each of the parties brings something into the partnership, or binds himself to bring something into it,
whether it may be money, or his labour or skill. The second is that, the business should be carried on for the benefit of the
partners. The third is that the object should be to make profit. Finally, the contract between the parties should be a legitimate
contract….’
It is clear from the facts that the fourfold test stated in Joubert (supra) is fulfilled. The object of the partnership is to make profit
through the garage enterprise. Fadzai contributed capital, while Farai works full time at the garage (labour and skill). Therefore all
the essentials for the existence of a valid contract between the parties are present and as such the partnership is valid. This is
emphasised in the case of Oblowitz v Oblowitz (1953).
The term partnership is used in two senses. It may refer either to the contract between the parties or to the relationship brought
about by the contract. The essential feature, however, is the contract, for the rights and obligations of the partners flow from the
terms, express or implied, of their agreement Ex parte Butner Brothers (1930).
In the carrying out of the partnership objectives parties should scrupulously comply with the terms and conditions of their
agreement. It should also be borne in mind that to a large extent the principles of agency apply in a partnership. For the benefit
of the partnership, partners should comply with the terms of the partnership agreement. In the case of Divine Gates & Co v African
Clothing Factory (1930) the court emphasised that ‘parties are very often styled agents of each other. Whether they are actually
agents or not … they certainly have the power of agents and the broad principles of the law … applicable to agents apply to an
extent to partners. However, although partners may have the powers of agents, they are much more than agents. The character
sustained by a partner is much more complex than merely that of agent … Not only is the partner an agent, but sustains the double

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 character of agent and principal in one and the same transaction.’ See also Potchefstroom Daines and Industries Co Pvt Ltd v
Standard Fresh Milk Supply Co (1913).
As has been mentioned earlier on, a partnership is not a legal entity. Any liability of one partner attaches to the other partner as
well. The fact that Farai has pledged the partnership account in the amount of $200 million without the consent of Fadzai does
not exempt Fadzai from liability. A partner is an agent of the other partners. The result of this relationship is that partners must
display the highest degree of good faith in their dealings with one another. The principle of uberrammae fides (utmost good faith)
applies to partnerships among other contractual relationships such as agency and suretyship. Not only are partners enjoined by
the law to avoid a situation of conflict of interest but partners must avoid making a secret profit or deriving a secret benefit (be it
monetary or otherwise) at the expense of the partnership business. The common interest of the partners in the carrying on of
partnership business leads to the general rule that each partner is the agent of the other. However, there is implied authority of a
partner to act as agent for other partners and bind them in the scope of the partnership business. Blismal v Dardagen (1951).
Therefore, Fadzai and Farai have two options namely dissolving the partnership, or restructure the agreement and give Farai a
salary on top of the profit he gets as a partner.

10 The problem question canvasses the following issues, the effect of the objects clause of a company, the role and duties of a director,
the appointment of a managing director, the liability of a company for the acts of a director. A Memorandum of Association is a
fundamental document, which spells the company’s position vis-à-vis the outside world. The objects clause is an important clause
of a company’s memorandum of association because it sets out the business activities which the company is authorised to engage
in.
In terms of s.10 of the Companies Act [Chapter 24:03] the effect of a statement of the objects of a company, whether in its
memorandum or elsewhere, shall not be to invalidate any transaction which exceeds those objects and which was made by the
company or entered into by the company with any other person, not withstanding that the other person was aware of the statement
of the objects. However, while the outsiders can now ignore the ultra vires rule, such rule is still maintained for the benefit of
members, namely they will be allowed to apply for an interdict to restrain a threatened breach of the objects clause and will be
entitled to sue the directors for loss caused to the company as a result of any actual breach of the objects clause. Thus the objects
clause of Petery and Sunday (Pvt) Ltd allowed the directors to act as stated.
It is a common cause that a company acts through directors and other officers. Directors represent and act on behalf of the
company. In practical business life it is generally the directors and the executive officers who run the company and make the
business decisions. Although the managing director has considerable powers, he nevertheless remains under the control of the
board of directors. It is emphasised that it is the board of directors, which delegates this power to the managing director. A director
should exercise his power bona fide and for the benefit of the company. Fanuel assumed the position of managing director although
not formally appointed as such but other directors consented to the actions of Fanuel. There is no dispute that by accepting the
offer Fanuel was acting in good faith and for the benefit of the company. It is submitted that though the deal flopped Petery and
Sunday Pvt Ltd is liable to pay the $60,000,000 advertising bill and cannot raise the defence that Fanuel had no authority to act
on behalf of the company. The company should not allow its problems to affect third parties or cannot raise the defence that the
act of Fanuel was ultra vires the objects of the company as the objects clause (c) gave directors the latitude to undertake such
activities that they may decide for the benefit of the company.
The facts in issue fall within the ambit of the famous rule in Royal British Bank v Turquand. The rule states that although a person
dealing with the company was presumed to be fixed with notice of the contents of the memorandum and articles, he was not
concerned with any irregularities in the company’s internal proceedings, for whilst he had the means of acquainting himself with
the memorandum and articles there was no special means available to him for discovering whether the company’s indoor
management was in order. The facts in Royal British Bank v Turquand were that the bank lent money to a company on the security
of a bond signed by two directors under the company’s common seal as required by its deed of settlement (articles of association).
The deed also required the company to pass a general resolution before such borrowing could be authorised. No such resolution
was passed. It was held that the bond was binding on the company, as the bank was entitled to assume that the necessary
resolution had been passed.
The above stated position clearly applies in this situation. Leisure, Pleasure and Mafaro Company were entitled to assume that
Fanuel had the necessary authority to act on behalf of the company.
It seems that the rule in Turquand was manifestly based on business convenience, for business could not be expeditiously done if
everybody who had dealings with a company had meticulously to examine its internal machinery in order to ensure that officers
with whom he dealt with had actual authority. Not only was it convenient, it was also just and reasonable. This is because if the
doctrine of constructive notice was applied to its logical conclusion and without the protection of Turquand, the third party would
be obliged to involve himself in the complex internal affairs of the modern company.
However, the rule is not without exceptions. The rule does not apply in favour of persons acting in bad faith. Thus a person who
enters into a transaction with another person acting on behalf of a company and who knows of an irregularity in the transaction
could not claim the benefit of the rule. Equally where the person dealing with the company had been put on enquiry, but through
his own omission has not made reasonable enquiries, again he cannot have the benefit of the rule. The above stated exceptions
probably do not apply in this situation as Fanuel acted in good faith and for the benefit of the company. It is therefore submitted
that Petery and Sunday Pvt Ltd is liable to pay the $60,000,000 advertising bill.

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 However, Petery and Sunday (Pvt) Limited have got a remedy, they can sue Fanuel in his capacity as a director if they can prove
that he acted ultra vires the objects of the company and recover the $60,000,000. However, its chances of success are remote
as the object gives directors wide discretion and latitude to act on behalf of the company.
Petery and Sunday (Pvt) Limited would have to pay $60,000,000 and sue Mafaro to pay the $150,000,000.

11 The problem question involves the following issues: the effect of articles of association to a company, the removal of life directors,
effect of a general meeting and voting rights, appointment of a director and the position of a shareholder and his/her rights in a
company. The articles of association is the internal constitution of the company, which binds the relationship between members
and the company. A company acts through the general meeting because that is where important decisions are made while voting
in a company is based on the number of shares which a shareholder owns in the company.
In terms of s.175 of the Companies Act [Chapter 24:03] a company may by resolution of which special notice has been given
remove a director before the expiration of his office notwithstanding anything in its articles or in any agreement between the
company and him. It is submitted that despite the provision in the articles of association, which made Tonderai’s wife, Paidamoyo,
a life director, she could be removed provided the terms of s.175 of the Act are complied with. However, regard has to be given
to the provision which states that s.175 shall not, in the case of a private company, authorise the removal of a director for life after
1 January 1952 whether or not subject to retirement under an age limit by virtue of the articles or otherwise.

For the purpose of this discussion, it is presumed that the provisions of s.175 apply on the removal of a director. The meeting was
properly called, but Paidamoyo was not called at the meeting nor given notice of the meeting as a member and director and to
make representations, which would be circulated to the members, and to make oral submissions on the meeting as per
s.175(2)(b). The removal of Paidamoyo from a directorship is procedurally wrong but however, as already discussed, voting in a
company depends on the number of shares (which attract voting rights) that one has and the majority can ratify the procedural
irregularity as Tonderai rightly claims. This is one of the fundamental principles of corporate governance, the principle of majority
control.
Usually it is the articles of association, which lay down the method of appointment. The power is formally exercisable by the
shareholders in the general meeting, but there is nothing to prevent the articles of association giving the power of appointment to
one or more of the directors. It is debatable whether Tonderai had power to appoint a director, but what is clear is that Ms Lucky’s
appointment was not formalised either at an Annual General Meeting or at any Extraordinary General Meeting which clearly
indicates that her appointment as a director was illegal unless it was formalised at a general meeting – s.174 of the Companies
Act [Chapter 24:05] refers.
From the facts, it can be established that Tonderai is using his majority shareholding to make all the decisions in the company. In
company law, it is the majority that rules and courts are reluctant to question the motives of the majority shareholder in respect of
why he voted the way he did. This is because they regard what the shareholders do with their votes as an internal/domestic affair
with their company in which they ought not to interfere. This is illustrated by the case of In Lewin v Felt and Tweeds Ltd (1951)
where Centlivres CJ stated that:
‘It is not part of the business of a court of justice to determine the wisdom of a course adopted by a company of its own
affairs. I cannot find any trace in the statute of a suggestion that the court has a right to review the opinion of the company
and its directors in regard to a question which primarily at least is domestic and commercial.’
In the case of Samuel and Others v President Gold Mining Co Ltd (1969) Trollip JA stated thus:
‘By becoming a shareholder in a company, a person undertakes by his contract to be bound by the decisions of the prescribed
majority of the shareholders. If those decisions on the affairs of the company are arrived at in accordance with the law, even
where they adversely affect his own rights as a shareholder the affected person may not have a remedy.’
Although the sons of Tonderai do not support his move, he is the majority and they are bound by his decisions as the majority
shareholder of the company and as long as everything is above board aggrieved minority shareholders have no remedy.
On the other hand, Paidamoyo as a minority shareholder of the company can approach the court in terms of s.196 of the
Companies Act on the grounds that the affairs of the company are being conducted in a manner oppressive to the minority
shareholders. Paidamoyo must show that the act or omission in the manner of the conduct of the company’s affairs was or is
unfairly prejudicial or oppressive to the complainant. The court must consider the justice and equitability of its intervention first
before it intervenes. In such proceedings, the applicant would have to establish a prima facie case that the affairs of the company
are being run in a manner that is oppressive.
In the case of Re Jermyn Street Turkish Baths (1971) Buckley L J stated:
‘… oppression occurs when shareholders, having a dominant power in a company either (i) exercise that power that
something is not done in the conduct of the company’s affairs and when such conduct is unfair or to use the expression
adopted by Viscount Simonds in Scottish Co-operative Wholesale Society Ltd v Meyer (1958) burdensome, harsh and
wrongful to the other members of the company or some of them and lacks that degree of probity which they are entitled to
expect in the conduct of the company’s affairs …’
Paidamoyo can again in terms of s.157 of the Companies Act [Chapter 24:03] apply to the Minister who in turn appoints
inspectors to investigate the affairs of a company. The minister will, in terms of s.197 of the Act, apply to court for an order in
terms of s.198 of the Companies Act.

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 All in all, it is submitted that though the majority rules in a company, the minority are also with rights over which they can apply
to court for redress. Although the majority may control the company and their wishes and desires are often adopted in a general
meeting either as company programmes or policies, at the same time, the majority does not have an unfettered discretion to do as
they please. One of the common law and statutory rights, which the minority enjoys, is the right to resist oppression. Oppressive
conduct has broadly been defined in a number of cases to mean conduct which is wrongful, illicit, unlawful, unreasonable and
unfair.

12 The problem involves issues governed by employment law. In labour law, the employment contract is the starting point for the
entire web of labour rules, as it links the employer and the employee in an employment relationship. Of course, the employment
control is merely one of the sources of legal rules governing the relationship between the employer and the employee. Some of the
other sources especially legislation in particular, the Labour Act [Chapter 28:01] and the decisions of the courts have increased in
importance in recent years.
It is common cause that Tendai and Green Valley Enterprises entered into a contract of employment. A contract of employment is
like any other contract save that it is further governed by the Labour Act [Chapter 28:01]. A contract of employment should
measure up to the requirements of the statutes. If it fails to comply with the Act that particular provision shall be of no force or
effect.
It should be emphasised that when Tendai went on maternity leave she retained her rights as an employee of Green Valley
Enterprises. In terms of s.14(7) of the Labour Act
‘during the period when a female employee is on maternity leave in accordance with this section her normal benefits and
entitlement, including her rights to seniority or advancement and the accumulation of pension rights, shall continue
uninterrupted in the manner in which they would have continued had she not gone on such leave and her period of service
shall not be considered as having been interrupted, reduced or broken by the exercise of her right to maternity leave in terms
of this section…’
This provision protects female employees from employers who may want to discriminate against women on the basis that they are
on maternity leave. Therefore Tendai is also protected in terms of this provision.
Protection against discrimination is a fundamental right in terms of Part II s.5 of the Labour Act [Chapter 28:01]. Section 5(1) of
the said Act reads:
‘No employer shall discriminate against any employee or prospective employee on the grounds of race, tribe…sex … in
relation to
(c) creation, classification or abolition of jobs or posts or
(e) the choice of persons for jobs or posts, training, advancement, apprenticeship, transfer or promotion.
(g) any matter related to employment.’
Green Valley Enterprises (Pvt) Ltd has no right to vary the job description, terms and conditions of Tendai’s work especially when
she was on maternity leave. This raises suspicion of discrimination based on sex. This is a violation of a fundamental right. The
net effect of a fundamental right is that it lessens the burden of proof on the part of the employee. Once the employee alleges
discrimination, the onus shifts to the employer to prove that there is no discrimination as alleged. In any case, discrimination based
on any ground (be it sex, religion, etc) would contravene the Constitution.
On the other hand, by unilaterally varying the terms of employment of Tendai, this amounts to constructive dismissal. Since Tendai
wants to leave Green Valley Enterprises’ employment immediately she can simply leave without giving any notice because she is
deemed to have been unfairly dismissed in terms of s.12(B) of the Act. Section 12(B)(3)(a) reads as follows:
‘An employee is deemed to have been unlawfully dismisssed
(a) if the employee terminated the contract with or without notice because the employer deliberately made continued
employment intolerable for the employee.’
By varying Tendai’s terms and conditions of employment Green Valley made employment intolerable for Tendai. She has the option
to give notice or not in terms of s.12(B)(3)(a).
Prior to the enactment of the Labour Act Amendment No. 17 of 2002, constructive dismissal was not part of the Zimbabwean
Labour law. The position would not have been the same if the Labour Relations Act [Chapter 28:01] as it then was, was still
applicable. See Backley v City of Salisbury (1978).

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Part 2 Examination – Paper 2.2(ZWE)
Corporate and Business Law (Zimbabwe) December 2005 Marking Scheme

1 7–10 marks A full and comprehensive explanation of the dual legal system in Zimbabwe and the problems associated with
it. Citation of cases and relevant constitutional provisions enhances the quality of the answer.
4–6 marks An average answer which does not fully explain the manner in which the dual legal system operates. Lacks
case law.
0–3 marks Very little or limited knowledge of the meaning and operation of the dual legal system.

2 7–10 marks Top band marks awarded to candidates who correctly identify the law relating to contracts in restraint of trade.
This answer correctly identifies the circumstances under which these contracts are enforceable. It also cites
relevant case law.
4–6 marks A rather lukewarm answer in which some aspects of the answer are not properly explained. No citation of
case law.
0–3 marks An inadequate answer.

3 7–10 marks A full analysis of the operation of implied terms in the contract of sale, with citation of relevant cases and
legislation.
4–6 marks An answer which does not address all the pertinent and critical aspects of the question. Omission of relevant
case law.
0–3 marks A brief answer.

4 (a) 3–5 marks A full answer which correctly cites relevant provisions of the Companies Act [Chapter 24:03] s.150.
0–2 marks An inadequate answer.

(b) 3–5 marks A full answer which correctly cites relevant provisions of the Companies Act [Chapter 24:03] s.150.
0–2 marks An inadequate answer.

5 7–10 marks Answers in this bracket would extensively discuss the various statutory provisions that are meant to protect
the integrity of the share capital structure of a company. Specific reference to the Companies Act is a must.
4–6 marks An average answer with omissions here and there.
0–3 marks A deficient answer which does not make reference to the relevant statutory provisions.

6 (a) 3–5 marks An accurate answer which correctly cites the relevant provisions of the Companies Act ss.35(1)–(4).
0–2 marks A rather deficient answer which does not cite the relevant sections of the Act.

(b) 3–5 marks A full description of the requirements of the registered office of a company. Correctly cites the relevant
provisions of the Companies Act, ss.112, 113.
0–2 marks An indifferent answer.

7 7–10 marks Top band marks will be awarded to answers which correctly explain the two conflicting views of the legal
nature of articles of association. This answer would cite relevant provisions, s.27 of the Companies Act and
relevant case law.
4–6 marks An average answer which lacks specific references to the relevant provisions of the Act. Omits relevant case
law.
0–3 marks A totally deficient and an unsatisfactory answer.

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8 7–10 marks A full and comprehensive understanding of the ways in which the contract of agency terminates. Answers
in this bracket will cite relevant case law.
4–6 marks An average answer which omits case law authorities.
0–3 marks A poor answer with very limited understanding of the subject matter.

9 The question in broad terms is about the requirements and consequences as a partnership agreement.
16–20 marks Top band marks awarded for answers which clearly show the basic requirements of a partnership
agreement. Answers in this bracket spell out the consequences of breach of the terms of the agreement.
Citation of relevant case law adds quality to the answer.
The answer should highlight that Fadzai and Farai have two options, either to dissolve the partnership or
to award Farai an additional salary on top of the share of profit.
11–15 marks Answers would have identified some issues but unable to explain the law adequately in light of the facts.
Advice to Farai and Fadzai is vague.
6–10 marks Has vague grasp of the issues full of inaccuracies of the law and serious omissions.
0–5 marks A very unsatisfactory answer with a very limited understanding of the issues at stake.

10 16–20 marks Answers in this bracket will adequately cover the various issues raised by the facts of the case. It is
important to cite the relevant sections dealing with the objects clause of a company, the role and duties
of directors, s.10. Citation of the relevant case law is important.
The answer should underscore that Fanuel’s acts bound Petery and Sunday (Pvt) Ltd. Therefore Petery
and Sunday (Pvt) Ltd is indebted to Leisure, Pleasure and Mafaro Company.
11–15 marks An average answer which does not make specific reference to the relevant provisions of the Act and case
law.
6–10 marks Answers in this bracket show a vague understanding of the facts and lack specifics of the relevant law.
0–5 marks A totally deficient and unsatisfactory answer.

11 16–20 marks Answers in this bracket satisfactorily identify the issues from the facts of the case and cite the relevant
statutory provisions (ss.174, 175, 196, 157, 197, 198) and relevant case law authorities.
Answers in this bracket should clearly advise Paidamoyo that she can approach the court for redress in
terms of s.96 of the Companies Act or can approach the Minister in terms of s.157. Generally answers
should appreciate that the majority shareholders have an overriding say and courts rarely interfere with
their decisions.
11–15 marks The answer would have identified some of the issues but failed to explain the law satisfactorily, advice to
Paidamoyo not clear and in some instances omitted.
6–10 marks There are serious omissions coupled with serious inaccuracies of law.
0–5 marks A very little or limited understanding of what the question required.

12 The question in the main pertains to an employment dispute.

16–20 marks Top band marks awarded for answers which appreciated that an employment contract should be in
agreement with the provisions of the Labour Act [Chapter 28:01]. Tendai should be advised that Green
Valley Enterprises has constructively dismissed her in terms of s.12(B)(3)(a). Note should be taken of the
fact that Tendai’s rights are protected in terms of s.14(7) of the Labour Act as a fundamental right.
11–15 marks An average answer which understands the facts and identifies a few issues. It omits the relevant
provisions of the Act.
6–10 marks A lukewarm answer with a very limited appreciation of the law relevant to employment contracts.
0–5 marks A totally unsatisfactory answer.

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