Answers

Applied Skills, LW – ZWE

Corporate and Business Law – Zimbabwe (LW – ZWE) December 2019 Answers

Section A

1 Supreme Court
The Supreme Court is only an appeal court. Cases can originate in all the other courts including the Apex Court and the Constitutional
Court, if a matter pertains to an interpretation of the rights and privileges afforded to citizens by the Constitution.

2 The literal rule

The correct answer is the literal rule. However, if the literal rule produces an absurd result, then the other aids to interpretation would
then be resorted to.

3 Private companies
Private companies enjoy perpetual succession. The other two forms of business organisation do not enjoy perpetual succession.

4 2 and 4
Whereas 1 and 3 are based on statute, 2 and 4 are based on common law.

5 None
If a trader sells their goods at a lower price, thereby undercutting their competitors, they have not committed a civil wrong (delict).

6 At the time of posting the letter of acceptance

In Roman-Dutch law, where an offer and acceptance of the offer are made through the post, the contract is concluded at the time
and place of posting of the letter of acceptance.

7 The objective test

The objective test is used by the courts to establish an objective manifestation of consent when determining the existence of a
contract.

8 It is binding in all future cases in the lower courts

Ratio decidendi means the rationale of the judgement and where applicable, the lower courts are enjoined to follow decisions of the
higher courts in future cases.

9 An ordinary resolution with special notice

Under s.151 of the Companies Act, Chapter 24:03, an ordinary resolution with special notice is required either to appoint or remove
and auditor.

10 An invitation to treat
Advertisements and invitations to tender normally constitute invitations to treat rather than firm offers.

11 It operates in favour of the defendant

In the law of delict, where the defence of volenti non fit injuria is successfully invoked, it absolves the defendant of any liability.

12 1 and 2
Dividends may only be declared out of profits. The other statements are either partially or totally incorrect.

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13 Culpa
In delictual actions based on negligence, the plaintiff must establish against the defendant the existence of culpa (negligence).

14 All directors owe a duty of utmost good faith to the company

Both executive and non-executive directors owe a duty of utmost good faith to the company and not to individual shareholders.

15 Both Acts of Parliament and Statutory Instruments

Both primary legislation (Acts of Parliament) and delegated legislation (Statutory Instruments) must be intra vires the Constitution.

16 Mora
Mora is delay in the performance of a contract without lawful excuse. On the other hand, novation and waiver involve agreement to
terminate an existing contract between two parties.

17 1 year
A female employee has to serve a minimum of 12 months before she becomes eligible for paid maternity leave.

18 2 and 4
The second and final statements are true. The first and third statements do not accurately reflect the law.

19 Rights issue
A rights issue is the process whereby new shares are created and sold to existing shareholders.

20 Option
An option is a subsidiary contract to keep the main offer open for a specific period of time.

21 Workers in managerial positions have a right to form and join trade unions of their choice
Both managerial and non-managerial workers have a right to form and join trade unions of their choice.

22 It consists of a single written document

All matters pertaining to governance and constitutionalism are contained in a single written document. However, there are numerous
Acts of Parliament which elaborate on various constitutional provisions.

23 To compensate the claimant for foreseeable material loss

The purpose behind an award of damages for breach of contract is to put the injured party in the position which they would have
occupied had the contract been performed, insofar as that can be done by the payment of money and without undue hardship to
the defaulting party.

24 Parole evidence rule

Where parties reduce the terms of their agreement to writing, it becomes the sole and exclusive memorial of their agreement.

25 The company itself in a general meeting

At the next meeting, minutes of the previous meeting should be read and approved by the members in general meeting.

26 It is formed for purposes of making a profit

The main purpose behind the formation of a partnership is making a profit.

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27 The parties
Whilst custom, the courts and legislation may imply certain terms into a contract, the parties themselves may not.

28. They are payable at the discretion of the employer

Unless the employment contract specifies otherwise, bonus payments to both managerial and non-managerial employees are
effected solely at the discretion of the employer.

29 The Master of the High Court

The Deputy Sheriff of the High Court executes both judgments of the High Court and the Supreme Court and the Messenger of
Court executes judgments of the Magistrates’ Courts. On the other hand, the Master of the High Court presides over administrative
processes such as estates (appointment of heirs, will, etc), and processes such as those involving liquidation of companies.

30 The creditors’ nominee becomes liquidator but any director, member or creditor may apply to appoint the members’ nominee
In a voluntary liquidation, where the members and the creditors have nominated different persons to act as liquidators, the creditors’
nominee becomes liquidator. However, any director, member or creditor may apply to appoint the members’ nominee as liquidator.

31 1 and 3
Novation and compromise involve agreement between the parties to terminate the contract. On the other hand, effluxion and set off
involve termination of the contract through the operation of law.

32 2 and 3
An executive company director and partner are by operation of law agents of the business entities which they represent whereas
auditors and shareholders are not.

33 The Judicial Service Commission

In terms of the Constitution, the Judicial Service Commission employs members of the judiciary.

34 Buying and selling goods on the firm’s account

Buying and selling goods on the firm’s account, receiving payments of debts and giving valid receipts all fall within the implied
authority of a partner, but a partner would require express authority from fellow partners for the other acts.

35 Passing off
Passing off involves the holding out or copycatting of another business person’s colours, logos, etc as one’s own to their detriment.

36 1 and 4
Exemption clauses must be brought to the attention of the customer and the courts will give them the narrowest possible interpretation.
The other two statements are incorrect.

37 Actio pro socio

Where a partner has failed to carry out the terms of the partnership agreement, for example, in relation to contributions, the agreed
partners can sue for a remedy using the actio pro socio.

38 2 and 4
The second and final options are grounds for voluntary liquidation. (The other two options pertain to grounds relating to compulsory
liquidation.)

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39 Employers in conjunction with the relevant trade union representatives
In the private sector, minimum wages are determined through negotiations conducted between employers and the relevant trade
union representatives of employees on a sector by sector basis (e.g. transport, hospitality, banking, etc).

40 She owes no duty to those who have existing contracts with Stoney Ltd and is not liable to them
A judicial manager owes no duty to those who have existing contracts with the company under judicial management and so is not
liable to them.

41 Debentures
Whilst debentures are securities, the rest, such as floating charges, bills of exchange and letters of comfort, do not fall within the
definition of securities.

42 The capital clause

Unlike the capital clause, the objects clause and the articles of association must necessarily be intra vires the memorandum of
association.

43 Both statutory and common law sources

In Zimbabwe, legal controls relating to bribery and corruption are derived from both statutory and common law sources.

44 Constructive dismissal
Whilst on paper Amanda has not been expressly dismissed from employment, her new circumstances are so untenable as to amount
to constructive dismissal.

45 2 and 4
Unless it is explicitly spelt out in the contract of employment, the employer has no obligation to provide a reference letter to the
employee upon the termination of the employment contract. Equally, payment of an annual bonus is subject to the employer’s
discretion.

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Section B

46 (a) There are several controls which the law places on the construction and interpretation of exemption clauses. First, exemption
clauses are given a very narrow and parochial interpretation. Second, if the exemption clause goes to the root of the contract,
the courts will disregard it. Third, if the effect of an exemption clause is to encourage fraud or bad faith on the part of the person
seeking to rely on it, it will be disregarded by the courts.

(b) Usually, terms are included in standard term contracts which exclude the liability of the one party (usually the provider of
services) in the event of a specified adverse occurrence taking place, for example, loss or damage to property through theft,
fire, negligence, etc.
For an exemption clause to be binding, not only must it be incorporated into the contract, it must be clear and precise. Hence
exemption clauses which are included in a signed document are usually binding because the assumption is that the customer
will have read and agreed with the terms. In this case, the exemption clause was prominently displayed before Veronica entered
into the contract, even if the printed ticket was issued after the contract had been entered into. It would therefore seem likely
that the garage owner can rely on the exemption clause against Veronica.

47 (a) Joan’s position as a sleeping partner does not afford her protection from the unlimited liability which applies to partners in an
ordinary partnership. Her personal assets are liable to be seized by creditors of the partnership. However, if creditors of the
company such as Limu were to be aware of the fact that Joan was a sleeping partner (prior to the conclusion of a contract
which gives rise to the partnership’s indebtedness), Joan would be absolved of liability towards the partnership’s creditors.

(b) For Kirsty not to be liable to the creditors of the partnership, she would have to inform customers of the partnership of the fact
that she had retired from the partnership. The usual way of informing customers of the partnership would be to advertise in
a daily newspaper the fact that Kirsty had retired from the partnership. Such notice is regarded as constructive notice, so a
particular customer is bound even if they do not read the actual advertisement.

(c) Limu can claim from all four partners (active and non-active), namely Joan, Kirsty, Rumbi and Bridget. However, if Limu is
aware that Joan is a sleeping partner and that Kirsty has since retired from the partnership, the only two partners liable for the
debts owed to Limu would be the active partners, Rumbi and Bridget.

48 (a) The charge which was created over the book debts of Uchi Limited is a fixed charge. The company cannot deal with the
property without the lender’s consent and, subject to registration, it gives the holder of the charge an immediate security over
the property in priority to subsequent claimants.

(b) The charge created by Pure Oil is a floating charge and, unlike a fixed charge, Fidelity Bank’s consent is not required to deal
with the proceeds of the book debts. A floating charge is suitable for assets which keep changing from time to time. It turns
into a fixed charge by the process of crystallisation. Crystallisation occurs in any of the following circumstances:
(i) the liquidation of the company;
(ii) the cessation of the company’s business;
(iii) if a judicial manager is appointed over the company’s assets either by the court or under the terms of the debenture.

49 (a) Executive directors are salaried employees of the company who sit on the board whereas non-executive directors only attend
board and committee meetings as and when they are convened. Executive directors are in full-time employment of the
company whereas non-executive directors are not. Together with the managers of the company, executive directors run the
day-to-day business affairs of the company.

(b) Since Sweet Petals (Pvt) Ltd is exclusively controlled by Christopher’s wife, Theresa, Christopher has an indirect beneficial
interest in the company. Under s.186 Companies Act, Chapter 23:04, he should have declared his indirect interest in Sweet
Petals (Pvt) Ltd to the other board members before any business could be transacted between the two companies.

(c) Under s.9 Companies Act, Chapter 23:04, one person can be the sole shareholder of a company. On the other hand, the
minimum number of directors of a company is two (s.169). Therefore, Theresa is breaking the law by being the sole director.

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50 (a) Under the Securities Act, Chapter 24:25, insider dealing involves information which relates to the securities themselves or
to the state of affairs of the company which issued them. The information must not be in the public domain and must be
information which, had it been made public, would have been likely to have a significant effect on the price of the securities.
Examples of such information would be information about falling or rising profits or decisions to pay a higher dividend than
expected or lower one or no dividend at all.

(b) Ruth knew of price-sensitive information relating to Everglow Industries Ltd which was not in the public domain and she sold
her shares in the light of that information. She is therefore guilty of insider dealing.

(c) Although Solomon was aware of the developments relating to the losses incurred by Everglow Industries Ltd, he did not tell
anyone. Solomon’s younger brother, Joshua, sold his shares without reference to anybody and, therefore, Solomon would not
be guilty of any insider dealing.

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Applied Skills, LW – ZWE
Corporate and Business Law – Zimbabwe (LW – ZWE) December 2019 Marking Scheme

Section A

1–45 One or two marks per question; total 70 marks.

Section B

46 (a) 2 marks Explanation of legal controls on exemption clauses.

(b) 4 marks Correct explanation and application.

47 (a) 2 marks Correct explanation and correct application re Joan.

(b) 2 marks Correct explanation and correct application re Kirsty.

(c) 2 marks Correct explanation and correct application re Limu.

48 (a) 2 marks Correct explanation and application.

(b) 4 marks Correct explanation and application.

49 (a) 2 marks Difference between types of directors.

(b) 2 marks Identification of interest and need to declare it.

(c) 2 marks Correct explanation and application.

50 (a) 2 marks Correct explanation of insider dealing.

(b) 2 marks Application to Ruth.

(c) 2 marks Application to Solomon.