MRL2601 ASSIGNMENT 2 SEMESTER 2 - 2024
UNIQUE NUMBER: 867625
DUE DATE: 20 SEPTEMBER 2024
QUESTION 1
Johannes, Phineas and Beauty are Mnandi CC’s members. Beauty has discovered that Phineas concluded a contract on behalf of Mnandi CC for the purchase of a yacht without consent of any of ...
Johannes, Phineas and Beauty are Mnandi CC’s members. Beauty has discovered that Phineas
concluded a contract on behalf of Mnandi CC for the purchase of a yacht without consent of
any of the other members. She is of the opinion that Mnandi CC should not be bound to the
contract because the corporation’s main business is catering. In addition, she shows you the
association agreement which stipulates that only Johannes is authorised to conclude
contracts on behalf of Mnandi CC. Advise Beauty whether or not Mnandi CC is bound to the
contract concluded by Phineas. Refer to relevant case law in your answer. (5)
1. Authority of Members under Section 54 of the Close Corporations Act:
Section 54 of the Close Corporations Act states that every member of a close corporation has
the authority to conclude contracts on behalf of the corporation with third parties. This means
that, regardless of any internal agreement to the contrary, any member of Mnandi CC, including
Phineas, is legally able to bind the corporation in dealings with outsiders.
2. Doctrine of Constructive Notice:
The doctrine of constructive notice does not apply to close corporations. This means that
external parties are not required to be aware of the internal rules or restrictions specified in the
association agreement. Consequently, a third party dealing with a member of the close
corporation is not bound to check whether that member has the authority to act on behalf of
the corporation beyond what is apparent from their position as a member.
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