QUESTION 1
1.1 Discuss the relevant section of the Companies Act 71 of 2008 that appears to be a codification of the common-law Turquand rule and highlight the similarities and the differences between the provisions of that particular section and the common-law Turquand rule. (10)
1.2 David i...
lml4806 portfolio memo semester 2 2022 octnov unisa with detailed footnotes and a bibliography
question 1 11 discuss the relevant section of the companies act 71 of 2008 that appears
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University of South Africa (Unisa)
LML4806 - Company Law
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QUESTION 1
1.1 Discuss the relevant section of the Companies Act 71 of 2008 that appears
to be a codification of the common-law Turquand rule and highlight the
similarities and the differences between the provisions of that particular
section and the common-law Turquand rule. (10)
The Turquand rule emanates from the seminal English of Royal British Bank v
Turquand1. According to the common law Turquand rule, an outsider doing business
with the company in good faith is entitled to assume that all internal requirements
and procedures, which the contracting party should have followed, have been
complied with. As a result the company will be bound by the contract even if the
internal requirements and procedures have not been complied with. It would be a
different case if:
a) if the outsider was aware of the fact that the requirements and procedures
had not been complied with; or
b) if the circumstances in which the contract was concluded were suspicious.
The Turquand rule was formulated to keep an outsider’s duty to inquire into the
affairs of the company within reasonable bounds. 2 In the case of Wolpert3, it was
provided in the Articles of the company that the board of directors are empowered to
allow a person to sign promissory notes on its behalf. Clearly, the board could
authorise anyone to sign promissory notes on its behalf. In the Wolpert case, one of
the company’s ordinary directors signed promissory notes on behalf of the company
without authorisation and the question arose whether the outsider was entitled to
assume that the director was authorised to do so.4
The court found that an outsider with express or constructive notice of the Articles
could assume that someone was authorised to sign the notes, but not that a specific
1
Royal British Bank v Turquand (1856) 6 El. & Bl. 327; 119 ER 886
2
Cassim FHI , Cassim MF, Cassim R, Jooste R, Shev J and Yeats J The Law of Business Structures
Juta ( Cape Town 2012) p 200.
3
Wolpert v Uitzigt Properties (Pty) Ltd 1961 (2) SA 257 (W.,
4
Cassim FHI , Cassim MF, Cassim R, Jooste R, Shev J and Yeats J The Law of Business Structures
Juta ( Cape Town 2012) p 200.
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