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DEPARTMENT OF BUSINESS MANAGEMENT BUSINESS LAW ONE (BM 105) INTRODUCTION The following are summaries of cases that you may find useful in this module. However, the list is not exhaustive. Laws governing the business world are not static, they are dynamic hence changes and developments to such laws are reflected in current cases. The cases below however shows the standard and famous cases in our subject area. You are strongly advised to be familiar with them as this will make life easier for you in future as a practising manager and currently for your examination. Acknowledgement: When I joined MSU in March 2006 I taught BM 105 [Business Law 1] for one semester with Mr. Percy Saungweme who prepared the original set of cases for use on the module. I have relied heavily on his seminal contribution. I however took the opportunity to amend, add on and expand on the cases. I owe him a debt of gratitude for allowing me to use his original cases and for inducting me into this subject. In this task I also made use of E.C. MacColl: Case briefs in Contract and Sale for Zimbabwean Students. Students are referred to this rich and fuller text. I am also grateful to my son Rangarirai for typing the additional material as I created it during his brief post-graduation vacation in July/August 2007. However, I remain fully responsible for content and for presentation and typographical accuracy. The following approach is proposed in studying cases: Summarise the facts of the case. Be sure you understand the court ruling and the principles raised in the judgement. Read related cases and establish similarities and differences illustrated in each case. In the examination/assignment:give a brief description of the case [if necessary] and then the decision that the court arrived at together with the underlying principles ratio decidendi. Sometimes even a simple citation of the case may suffice. A lot depends on the argument you wish to make.
Case Citation Using Humphrey V Cassell 1923 TP 280 The first party cited to a case is the plaintiff i.e. the one who brings the case to the courts (in our example HUMPHREY) and the last party to be cited is the defendant (in our example CASSEL). 1923 is the year in which the case was tried TP stands for Transvaal Province. This will vary from case to case. 280 the number of the case that year that the court tried. From a Zimbabwean point of view, all the cases that are tried at the High court and the Supreme Court are recorded in the Zimbabwe Law Report (ZLR), which is published annually for subsequent use by stakeholders in law. For example in AG v Paweni Trading Corp (Pvt) Ltd 1990 ZLR 24. This means o o o o
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AG Attorney General is the plaintiff Paweni Trading Corp (Pvt) Ltd is the respondent/ defendant 1990 the year the case was tried ZLR the Zimbabwe Law Report
It is very helpful to remember the names of the parties in question. The year is far less important. CONTRACTS The offer must be clear and precise. It must not be equivocal or ambiguous. HUMPHREYS v CASSEL 1923 TP. Humphreys, a solicitor agreed not to demand any fees until such time as defendants mine was producing and he was on his feet again financially. When he was sued for fees, Cassell advanced this clause in defence. Held: the special agreement was too vague to enforce and... interpret. The agreement was set aside for uncertainty and Cassell was compelled to pay immediately. Where an offer is vague and imprecise any consequent agreement is void. BYRNE & Co. v LEON VAN TIENHOVEN, 1880 A letter was posted from Cardiff on 1 October offering to sell 1 000 boxes of tin-plates to a client in New York. The offer was accepted by telegram on 11 October. However a letter of withdrawal had been posted on 8 October. This did not arrive until 20th. The contract was upheld because revocation/withdrawal must be communicated to the offeree since a state of mind not notified cannot be regarded in dealings between man and man... an uncommunicated revocation is for all practical purposes and in point of law no revocation at all. Such revocation must actually have been received. EFROIKEN v SIMON 1921 CPD A Johannesburg broker sent a Cape Town broker a telegram to the effect that he had a seller of 3 000 bags of oats at 11 shillings a bag, adding the terms of delivery. The question before the Court was whether this telegram was an offer which could result in a valid contract if accepted. Gardiner J had this to say:There are certain offers, offers made to the whole world, acceptance of which before withdrawal constitutes a binding contract, but it is not every offer of this nature. One has to ascertain from the offer itself whether it is tentative, or whether it is meant to constitute upon acceptance a binding contract. This telegram starts: Have seller of 3 000 oats, and it goes on to give certain terms. To my mind it means this: I have a seller, can you find me a buyer and then we may do business? The telegram was not intended to be an offer. Statements of lowest price are not offers. CRAWLEY v REX 1909 A shopkeeper advertised tobacco at a special price. He had a placard outside his shop. One evening, Crawley (a customer) entered the shop and bought a pound of tobacco. He left the shop and within five minutes came back for some more tobacco. This time, the shopkeeper refused to sell him the tobacco. Crawley refused to leave the shop without the tobacco and the shopkeeper had to call a constable to remove him. Crawley was then charged with trespassing. His contention was that the shopkeeper had made an offer which he accepted. The Court had this to say in that case: In the present case it seems to me there is no contract. The mere fact that a tradesman advertises the price at which he sells goods does not appear to me to be an offer to any member of the public to enter the shop and purchase goods, nor do I think that a contract is constituted when any member of the public comes in and tenders the price mentioned in the advertisement. It would lead to most extraordinary results There is nothing as far as I know which obliges a tradesman to sell to any customer who chooses to present himself in his shop FINESTONE v HAMBURG 1907 Hamburg undertook to let a hotel to Finestone on certain conditions, stating that if these conditions were agreed to then the further general clauses can be discussed. The court ruled that the contract was void for uncertainty since the terms had not been finalised: if the terms of an agreement are incomplete the offer inherent in those terms is indefinite and such agreement therefore void.
HYDE v WRENCH, 1840 The defendants offered to sell land to the plaintiff for 1000. The plaintiff said he would pay 950 only. The defendant rejected this. Plaintiff then agreed to pay 1000 after all. But by now the defendant no longer wished to sell. The court ruled that a counter-offer had been made which amounted to rejection of the original offer. BOERNE v HARRIS 1949 SA (AD) A lessee had an option to renew a lease for five years from 15 April 1947 provided such option was exercised by 15 October 1946. On 5 October 1946, lessee wrote that he intended to renew the lease for a further period of five years from 15 October 1946. It was held that there was no acceptance. There were contradictory dates and an acceptance of an offer must be unequivocal i.e. positive and unambiguous. An offeror is entitled to know in clear terms whether the offeree accepts his proposal An offeror is entitled to know in clear terms whether the offeree accepts his proposal. It is not enough that the words of a reply justify a probable inference of assent It must leave no room for doubt. SHEPHERD v FARRELS ESTATE AGENCY, 1921. The agencys advertisement read: Business wanted. Our motto: no sale, no charge. All advertisements at our expense. Shepherd responded and signed a document which, contrary to the advert, gave the
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CSAR v McLAREN, 1903 TS. McLaren deposited a parcel at the Pretoria station cloakroom and received a ticket which contained a statement [partly obscured by a clerks writing] wavering responsibility for any articles over 5 in value. McLaren was aware there was writing on the ticket but he did not realise it contained a condition and this was not pointed out to him and there was no notice. The parcel was lost and McLaren sued for its value. The court ruled for McLaren the ticket was a mere voucher and the railways had not drawn his attention to the condition. A left luggage receipt is not a ticket. DYER v MELROSE STEAM LAUNDRY, 1912. Laundry lists stated that articles were washed subject to conditions on the back. These limited liability for articles lost. Dyer never read the conditions. His clothes were subsequently lost. At the hearing it emerged that Dyer had used the lists several times. The company was nevertheless found liable: Dyer was not bound. CSAR v MCLAREN 1903 TS Mclaren deposited his luggage at a railway station. He was given a ticket, which had a clause stating that the railways would not be liable for loss of articles exceeding five pounds in value. This clause was partially obscured by the clerk who wrote on the face of the ticket. When the package was stolen and the railways refused to make good the loss, Mclaren sued and the court held that the railways had not done what was sufficiently necessary to bring the attention of the customer to the conditions. In any event, the ticket was a mere voucher where one could not reasonably expect to find such a clause PARKER v SOUTH AFRICAN RAILWAY Co. 1877 Parker left a parcel at a railway cloakroom and was given a ticket with the words see back. At the back was an indemnity clause exempting the railways from liability for loss of packages deposited. Parkers parcel was lost and he sued. The Court said that where a condition is reasonably expected to be on a document, the customer will be bound. There are documents such as bills of lading and railway tickets, which invariably contain conditions. DYER v MELROSE STEAM LAUNDRY 1912 TPD Dyer took his clothes to the dry cleaners and they were lost. It was held that since there was no evidence to show that Dyer was aware of the conditions excluding liability, the dry-cleaners had not done what was reasonably necessary to bring the Dyers attention to those conditions. They were therefore liable. ROSEVEARE v AUCKLAND PARK SPORTING CLUB. 1907 Roseveare was mistaken for another and taken into custody and subsequently thrown out of the club race course. He sued for damages for wrongful arrest. The club claimed that on its printed programmes it reserved the right to refuse admission for anyone whose presence the did not desire without having to give any refund for money paid. They claimed that this right to eject and refuse admission was a term universally implied and understood in the case of entry tickets to races and that therefore it had become incorporated by custom. The court rejected this argument. While admission may be subject to good conduct/behaviour there was no right to to remove even a harmless and inoffensive spectator. The right claimed was not universal and notorious. The term was printed in small letters in an inconspicuous place at the end of
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DURESS BLACKBURN v MITCHELL (1897) SC A ship was in danger of sinking in bad weather. A tug came to the rescue and its captain demanded 2 000 from the captain of the ship in peril. When the latter said it was too much, the captain of the rescuing tug threatened to leave them to drown, whereupon the beleaguered captain agreed. The court said the contract was void for duress. The captain of the stricken ship had signed under protest. I will sign this bill, but you will never get paid. The sailors were however entitled to fair and reasonable recompense assessed at 1 000 instead of the original 2 000 demanded. In the case of duress of goods [as here] as opposed to duress of person, the court will require that in addition to the five points listed in Broodryk, there must have been a categoric protest at the time of the contract. BROODRYK v SMUTS NO 1942 TPD
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KELNER v BAXTER & OTHERS. 1866. Baxter, acting as an agent for a proposed company bought wine worth 900 from Kelner in January 1866. the wine was consumed. On 1 February the directors of the proposed company purported to ratify the agreement. However the company which was not incorporate until 20 February collapsed soon afterwards. Kelner sued Baxter for payment. The company again tried to ratify the agreement. It was held that Baxter was personally liable even though this was never intended and even in the face of attempted ratification. The company was considered a stranger to the agreement because one cannot contract as an agent for a no-existent 3rd party. McCULLOGH v FERNWOOD ESTATES, 1920. Aspey acting as a trustee for a proposed company contracted with McCullogh to buy land for the company for 10 000. The company, Fernwood Estates was duly formed and it adopted the contract. McCullogh sued the company for payment against transfer. Aspey had undertaken to adopt the contract if the company failed to ratify the agreement. [he was there acting personally and not as an agent] One may contract in an individual capacity [not as agent] for the benefit of a non-existent 3rd party who, on coming into existence may ratify the contract and assume liability. If the 3 rd party does not ratify, the original party is bound. Note: Section 32 of the Companies Act on pre-incorporation contracts: a party may contract for a company in the process of formation as an agent without incurring liability even if the contract is not ratified provided: Contract is in writing The person must profess to act as agent/trustee of the unformed company The memorandum on registration must allow for the adoption of the contract in one of its objects. The contract [or a certified copy] must be lodged with the memorandum The company after incorporation must adopt the contract. MISPRESENTATION DONNER MOTORS v KUFINYA 1968 SA The parties agreed to sell each other a car. The seller agreed to rectify the defects on the car and the buyer then signed a contract. The contract however, had a voetstoots clause, which the buyer had not seen. The seller relied on this clause in refusing to effect repairs. The court said the contract could be set because of misrepresentation by the seller. DIBLEY v FURTER 1951, SA The buyer of a farm sued the seller alleging that the seller had failed to disclose that the farm has a graveyard. It was held, the buyer could not seek relief but could rely on fraudulent misrepresentation by the seller because even though the farm could still be used for the purpose for which it was bought
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LAMB v WALTERS, 1926. Walters agreed to buy land but later argued that the agreement had been induced by Lambs assurance that the price was fair and reasonable whereas it was grossly excessive. The contract was upheld: a mere statement of opinion provided it is honestly held is not a misrepresentation. HERSMAN v SHAPIRO & Co.1926 TPD Hersman sold corn to Shapiro and Co. The corn was not yet in existence at the time. Moreover, there was a crop failure and Hersman failed to deliver. He argued impossibility of performance but the Court said even though impossibility might excuse performance, where a contract is of a speculative nature, one could not rely on impossibility: Possibility of loss was within the contemplation of the parties, hence Hersman was liable for damages. (But not for specific performance). VAN BREDA v JACOBS 1921 AD Custom will be enforceable by the courts where it is
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SCHIERHOUT v MINISTER OF JUSTICE. 1926. Schierhout was compulsorily retired from the public service. He disputed this action and continued to serve then he sued to recover salary due to him for services he rendered for three months after his compulsory retirement. It was ruled that the retirement was contrary to statute and hence a nullity. In its judgement the court the only remedy open to an ordinary servant who has been wrongfully dismissed is an action for damages. The court will not decree specific performance against the employer. this is due to the inadvisability of compelling one person to employ another whom he does not trust for nor court could by its order compel a servant to perform his work faithfully and diligently. In general, the courts will not order specific performance where a contract involve rendering continuous personal services. PETERS, FLAMMAN & CO. v KOKSTAD MUNICIPALITY 1919 AD Peters Flamman and Co. contracted to light the town with acetylene gas. While the contract still had 10 years to run, Peters and Flamman were interred as enemy subjects. Their business was then wound up. The Municipality claimed 20 000 damages and forfeiture of plant and equipment. Held: If a person is prevented from performing his contract by vis major or casus fortuitus including an act of State, he is discharged from liability. JUTA & CO. LTD v RORICH 1924 The publishing company delivered books to Rorich (a teacher) for sale to pupils. He was given lists of prices and had to return unsold books. No time limit was set for this. However, several unsold books were burnt in a fire and Juta sued for those books. The court held that Rorich was a mere agent and there was no agreement of sale. Thus risk had not passed and Rorich was not liable. In a contract of sale there must be an agreement by one party to sell and by another to buy. There was no such agreement in this case. WILMOT v SUTHERLAND 1914 Bundles of forage were placed beside a wagon loaded with more forage. The customer examined the bundles beside the wagon and then bought 200 bundles. These proved to be musty. Wilmot then sued arguing that the bulk did not correspond with the sample.
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Ruling: All interferences with individual liberty of action in trade and all restraints of trade are contrary to public policy and are therefore void. However restraint may be justified by the special circumstances of a particular case if it is reasonable. Thus Clause 2 was held to be wider than necessary and therefore unacceptable while Clause 1 was reasonable as it merely gave adequate protection. In Book v Davidson, 1988, Dumbutshena CJ held that the party in breach of such an agreement must justify his action. RHODESIAN MILLING CO. PVT LTD v SUPER BAKERY PVT LTD. 1973. Rhodesian Milling Company sublet bakery premises to Super Bakery. In the agreement Super Bakery was to buy all its flour for that bakery and any other it had or might have in future from Rhodesian Milling. Super Bakery violated the agreement for the purchase of flour except for the sublet premises. Ruling: The provisions which Rhodesian sought to enforce were reasonable. Many apparently restrictive contracts are acceptable and are treated as part of normal commercial practice not restraint of trade. PEST CONTROL[CENTRAL AFRICA] LTD v MARTIN & ANOTHER. 1955. Martin left the Pest Control Co and promptly set up a company identical to his previous employer. The company claimed breach of Martin's previous employment contract which prohibited him from engaging in any agricultural, horticultural or medical control within the existing Central African Federation for two years after termination of employment. It was held that the company had a proprietary interest in its clientle. This was a specialised asset which the company was entitled to protect. The restriction was not excessive and the restraint was reasonable.
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To my Students: I hope you derived some value from these selected cases. No doubt you will identify many imperfections of one kind or another. Please assist me improve on this for the benefit of future students. The cases selected focus on contract and sale only. In due course I hope to include cases on other topics covered in the module.
S. Mlambo.
July 2009