Paper 2.

2(ZWE)
Corporate and
Business Law
(Zimbabwe)

PART 2

TUESDAY 8 JUNE 2004

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A SIX questions ONLY to be answered

Section B TWO questions ONLY to be answered

Do not open this paper until instructed by the supervisor

This question paper must not be removed from the examination

hall

The Association of Chartered Certified Accountants

Section A – SIX questions ONLY to be attempted

1 Explain how the notion of judicial precedent (stare decisis) operates in the Zimbabwean legal system and state
the advantages and disadvantages of it.
(10 marks)

2 ‘If whatever a man’s real intention may be, he so conducts himself that a reasonable man
would believe that he was assenting to the terms proposed by the other party and that other
party upon the belief enters into the contract with him, the man thus conducting himself would
be equally bound as if he had intended to agree to the other party’s terms . . .’
State the context within which this statement operates in the law of contract in Zimbabwe.
(10 marks)

3 ‘A contract induced by mistake is void ab initio in our law’.

In relation to the law of contract explain the validity of this statement.
(10 marks)

4 ‘When performance of a contractual obligation becomes impossible through an event which

cannot be avoided even if ordinary precautions are taken, the obligation is in general
discharged as if it has been impossible from the inception . . .’
Explain the concept of supervening impossibility in the law of contract in light of the above quote.
(10 marks)

5 ‘The contract of agency is underpinned by certain basic rights and obligations which flow in
either direction . . .’
In relation to agency in Roman – Dutch law, state the major obligations of the agent towards the principal in light
of this statement.
(10 marks)

6 Explain what is meant by:

(a) the conversion of a private to a public company; (5 marks)
(b) the conversion of a public to a private company. (5 marks)
(10 marks)

7 In relation to company law state the main statutory obligations of a registered company in Zimbabwe.
(10 marks)

8 In relation to employment law discuss the approach of our courts to the question of vicarious liability on the part
of the employer in situations involving the following people:
(a) an employee who is a servant; (5 marks)
(b) an independent contractor. (5 marks)
(10 marks)

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Section B – TWO questions ONLY to be attempted

9 (a) The directors of green Valley Enterprises Ltd, a public company duly registered and operating in terms of the laws
of Zimbabwe, wish to raise additional capital. They decide to do so by way of a rights issue to existing
shareholders. It is proposed that an additional fifty million shares of $8·00 each are to be issued at a price of
$10·00. However the authorized share capital of the company is fully issued.
Required:
What steps must be taken in order for the directors’ decision to be carried out? (10 marks)

(b) John Wuyrayayi, an indigenous businessman with extensive business interests in Mutare and Nyanga is owed
$10 000 000 by Samanyika Fast Foods (Pvt) Ltd for various goods and services supplied over a period of
10 months. He demanded payment and was given a cheque which he deposited with his bank, First National
Bank of Zimbabwe. The bank returned the cheque which has been endorsed ‘Refer to Drawer’. A month after he
received the cheque, he still had not been paid and he instructed his legal practitioners, Dube and Shoko Law
Firm to apply for a winding up order, which they did.
Required:
(a) What alternative does the court have other than to grant a winding up order?
(b) In what circumstances may it grant the alternative and what steps are taken thereafter? (10 marks)
(20 marks)

10 Dadirai Moyo a commercial farmer decided to convert his farming enterprise into a private limited liability company.
Pursuant to this objective he incorporated his farm as New Dawn Investments (Pvt) Ltd. Dadirai took up 70% of the
issued share capital of the company and his wife Shupikai and their two sons, Alvin and Martin each had 10%. The
four of them comprised the entire Board of Directors of the new company. All the farming assets previously owned by
Dadirai and his family were transferred to the new company.
Recently the following developments took place in the company.
(i) Dadirai wished to dispose of valuable dairy equipment belonging to the farm in order to raise a deposit on the
latest model of a BMW car.
(ii) He wanted to sell 10% of his shares to his best friend Smart Aleck and invite him to take a seat on the Board
of Directors.
(iii) Dadirai wanted the company to diversify and venture into mining. The objects clause limits the company to
agricultural and allied activities. His fellow directors were of the opinion that it would be unwise for the company
to embark on mining due to the depressed prices of minerals on the world market.
Required:
Advise Dadirai’s fellow shareholders and directors who were strongly opposed to the various initiatives that he
wanted to take.
(20 marks)

3 [P.T.O.
11 (a) Senzeni Shumba who lives in the resort border town of Nyanga about 300 kilometres from Harare makes a living
through the manufacturing of woollen dresses of distinctive and unique pattern which are much sought after by
foreign tourists. She and the Nyanga Hotel (Pvt) Ltd anticipate a boom in foreign tourist arrivals. They enter into
a contract whereunder it is agreed that for a period of three years Senzeni will not sell any dresses in Zimbabwe
except to the Nyanga Hotel Ltd. The hotel will pay $50 000·00 for every dress it decides to buy up to a maximum
of a thousand dresses per year, a limitation which the parties agree is necessary to preserve the rarity and
uniqueness of the dresses. Due to the unsettled political situation prevailing in the country the anticipated boom
in the tourist Industry did not materialize and the hotel bought only a hundred dresses in the first year.
Senzeni received a single order for four hundred dresses from Mosi-O-Tunya curios, a curio shop operating in the
resort town of Victoria Falls, about one thousand and two hundred kilometres away from Nyanga. Senzeni would
like to supply the curio shop with their order and upon hearing this, the Nyanga Hotel (Pvt) Ltd threaten to
interdict her from fulfiling the order.
Required:
Advise Senzeni as to the attitude which the court is likely to adopt should the Nyanga Hotel Company litigate
against her. (10 marks)

(b) John, a Bulawayo businessman, met Simon, a Harare manufacturer, at the Bulawayo Trade Fair. They discussed
a new line of items to be brought out by Simon. John expressed interest in the line and asked Simon to send
him a range of samples of the product. The price was not mentioned, Simon sent the samples and further
indicated in an accompanying letter that as supplies were short he would set aside one hundred items for John.
The closing words of the letter were:
‘If I don’t hear from you by 30 December I will assume that you are purchasing the 100 items’.
John considered the product viable but did not inform Simon as to his intentions with regard to purchase.
However, John decided on or about the 28 of December that he wanted the items. On 3 January he phoned
Simon and enquired about proposed delivery dates.
Simon replied that he had no intention of sending John anything. John is now contemplating litigation over the
matter.
Required:
Advise John about his prospects of success in relation to the proposed litigation. (10 marks)
(20 marks)

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12 John Dube and his wife, Nomsa own the entire issued capital of a transport company called Dube Haulage Trucks
(Pvt) Ltd. The company owns several trucks which are used to carry goods on contract.
John and Nomsa bought a house for $80 000 000·00 in Ballantyne Park, Harare but after a fire destroyed the house
they refused to pay any further instalments on the price, saying that defective wiring caused the fire. In order to recover
the outstanding balance on the purchase price of the house, the seller Mr Moyo sought to have two of the trucks that
were being used in the transport business sold. His argument was that the business really belonged to Dube and his
wife and that since they owed money on the house he was entitled to have the trucks sold.
Meanwhile, Solomon Ngwarai who was 17-years-old, worked as a mechanic for Dube Haulage Trucks (Pvt) Ltd. He
lived in a flat in downtown Harare which he shared with his girlfriend, Zodwa who worked in a salon as a beauty
therapist and manicurist. One day he saw a yellow sports car in a show room at Elite Car Sales (Pvt) Ltd and
immediately decided to buy it.
After a few inquiries he signed an agreement to buy the car for $6 000 000·00. He paid a deposit of $3 000 000·00
by bank cheque and undertook to pay the balance in six monthly instalments. He arranged to collect the car two
weeks later, after it had been repainted red, his favourite colour. A week later a fire broke out and burnt down the
garage and the car was reduced to ashes. Solomon asked for his money back and the garage countered and
demanded payment of the balance of the purchase price from Solomon who further argued that at any rate he was
not liable to the seller on account of his minority.
Required:
Advise John Dube, his wife and Solomon of their rights and liabilities in relation to the legal issues raised by the
facts.
(20 marks)

End of Question Paper