Botswana College of Distance & Open Learning

Diploma in Business Management

Business Law
Assignment: 2
Mmoniemang Motsele
Student No: 201006379

Question 1
a) Distinguish between a contract of agency and a contract of employment
A contract of agency is a contractual agreement which exist between the two legal persons, the
principal and the agent, in which the function of the agent is to form a contract between his principal
and a third party.
A contract of employment is governed by the employment Act in which the statute is concerned with the
fact that there may be inherent inequalities of bargaining power in favour of the employer. The
employment Act acts as a check on the inequality by requiring that certain provisions be included in the
contract, by providing minimum rights such as maternity leave.
A contract of agency is not governed by any statute but depends on various ways by which agency
relationship can arise such as agency by estoppels (Prevented from).
In the contract of employment, there is a way of determining the agent relationship between the
employer and the employee. Persons working under a contract of service are employers and those
working under a contract from services are independent contractors.
b) Define the term Mandate
Mandate: a mandate is a duty to perform a particular task. There can be an agreement to perform which is
contractually binding at law. Failure to perform the mandate may result in the other party suing for breach
of a contract.
If the mandate is warranty such as in Bettin v Gye (1876) a singer agreed to attend for rehearsals 6 days
before the first performance, this was held only to be a breach of a warranty, which entitled management to
nearer damages but not be terminate the contract.
But if the mandate is a condition a such as in Poussard V Spiers Pond (1876) where the singer failed to
turn up for the first few performances, this was held to be a breach of a condition , which entitled
management to end the contract.
c) Giving examples, differentiate a special power of attorney and general power of attorney
Special Power of attorney: is an important legal document that allows or authorizes an Agent, to perform a

particular transaction. Special Power of Attorney would restrict the authority of the Agent to a specific
situation,
limited
time
period
or
type
of
legal
action.
Generally a Special Power of Attorney is used for the sale of real or personal property, but it can cover any
specific situation or need that may exist. If someone has moved out of state and wants to sell their house
without returning to the state they left just to sign the real estate documents to close a transaction, they may
grant a Special Power of Attorney only for that purpose.
The following are just a few examples of powers you can grant to your agent:
to borrow money at an agreeable interest rate, to add and remove from a bank vault or a deposit box
to put and move the money from/to your accounts and to make other bank transactions on your behalf
to buy, sell, enlarge, reduce, and terminate a business interest
to buy or sell real estate
to make transactions with your tangible property, like household items, boats or cars
to sign your paychecks
to make any legal claims

to perform custodial duties for your children, including housing and schooling decisions
to make decisions regarding childrens emergency care

General Power of Attorney

A general power of attorney is one that permits the agent to conduct practically every kind of business or
financial transaction with the principal's assets without any restraints. Because of the great harm to the
principal's financial well-being that an incompetent or untrustworthy agent can cause with a general power of
attorney, the principal should be extremely careful in choosing an agent. Additionally, the principal should
maintain vigilance over the agent's transactions in the principal's behalf.
d) Justify the fairness of the doctrine of estoppel (ostensible authority) in the law of agency
An agency relationship may be formed when the principal holds out to third parties that a person is his agent,
even if the principal and the agent do not agree to form such a relationship. In such a case, the principal is
stopped from denying the agents apparent/ostensible authority.
The fairness is that there must have been a representation by words of conduct by the principal, which then
mislead the third party. The doctrine may not be fair because the third party may not have acted had he/she
known correct facts on the representation. Its problem is that it misleads the third party into entering contracts
they would not have entered had they know all the facts correctly
Ostensible authority usually arise either
a) where the principal has represented the agent as having authority even though he has not actually been
appointed
b) where the principal revoked the agents authority but he third party has not had notice of this: (Willis
Faber & Co v Joyce) and (Monzali v Smith)
e) Negotiorum gestio. Negotiorum gestio is a doctrine whereby one person (the gestor or manager) may manage the
affairs of another who is absent or incapacitated, without there being any official appointment or contract of mandate. It is
based on a sort of legally presumed mandate. Negotiorum gestio does not arise from a contract. The person for whom the
gestor is acting is also called the principal. The principal must be absent. The gestio is not entitled to any profit
whatsoever for the work performed.

Question 2
The liability of the surety: the consequences of a contract of surety is that, the surety is liable to the creditor
for payment of his/ her debt by the principal debtor, or for a lessor amount if the surety has only bound himself
in respect of the lessor amount.
Because the suretys obligation is accessory to the principal debt, it becomes enforceable only if the principal
defaults in the performance of the principal obligation. If the principal debtor is granted an extension of time,
the surety may not be held liable in the meantime. If the debt is for an unliquidated or uncertain amount, the
surety is not liable until amount of the debt has been established by judgment.
Marking on a cheque: if the payee or bearer, to whom the cheque has been issued, can transfer the cheque
to someone else, to pay a debt. The payee may not do so if words have been or indicate an intention that it
should not be transferable. If a cheque is marked not transferable, then it may not be transferred. A cheque
marked not negotiable may still be transferred from one person to another. The only effect of the marking is
that no one can become a holder is due course of it.

Liens: A lien is a charge. So let's say you live in a community where the real estate taxes are paid once a year. If
you do not pay the taxes, the debt can become a lien on your property. If your property is in a subdivision with a
home loan association and you pay them P200 a year to the homeowners association, they can start to foreclose
your property in their name.

Uberrimae fidei: Latin for, utmost good faith. Class of agreements (such as insurance contracts) in which one
party (the promisee, such as an applicant) is under a fundamental duty to disclose all material facts and
surrounding circumstances that could influence the decision of the other party (the promisor, such as an
insurance company) to enter the agreement. Non-disclosure or a partial-disclosure makes such agreements
voidable.

References
Business Law, 5th ed., D Kelly A Holmes & R Hayward, Routledge Cavendish, 2005
Smith and Keenans Law for Business , Denis Keenan, 13th ed., Pearson Education, 2006
BPP ACCA F4 Study text 4th Ed. June 2009

www.opentuion.com: Introduction to Business Law