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Fundamentals Level – Skills Module

Time allowed

Reading and planning: 15 minutes

Writing: 3 hours

ALL TEN questions are compulsory and MUST be attempted.

Do NOT open this paper until instructed by the supervisor.

During reading and planning time only the question paper may

be annotated. You must NOT write in your answer booklet until

instructed by the supervisor.

This question paper must not be removed from the examination hall.

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Corporate and

Business Law

(South Africa)

Tuesday 2 December 2008

The Association of Chartered Certified Accountants

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ALL TEN questions are compulsory and MUST be attempted

1 In relation to the legal system, explain the impact of human rights law on statutory interpretation.

(10 marks)

2 In relation to the contents of a contract, explain the following:

(a) suspensive conditions; (5 marks)

(b) resolutive conditions. (5 marks)

(10 marks)

3 In relation to partnership law, explain the requirement that the business of the partnership must be carried on for

the joint benefit of all the partners.

(10 marks)

4 Explain how ‘ratification’ can validate the acts of an unauthorised agent.

(10 marks)

5 In relation to close corporation law, discuss a member’s power to bind the close corporation in contract.

(10 marks)

6 In company law, indicate the nature of, and legal control over, insider dealing.

(10 marks)

7 In company law:

(a) explain and distinguish between shares and debentures; (6 marks)

(b) explain the procedure for altering class rights. (4 marks)

(10 marks)

8 Andrew is the owner of a coffee bar in Pretoria. He agreed to purchase a food vending machine from Ben and signed

the contract without reading its terms. The contract contained an exemption clause excluding liability for all kinds of 

defects in the machine. The machine proved to be totally defective. Andrew purported to terminate the contract and

also maintains that the contract is in conflict with what he and Ben orally had agreed on.

Required:

Advise Andrew as to whether or not he would succeed.

(10 marks)

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9 The memorandum of association of Continental (Pty) Ltd states that the main object of the company is to construct

buildings in Gauteng. Article 5 of the company’s articles authorises the managing director to enter into all contracts

on behalf of the company. Article 6 provides that any contract involving an amount in excess of R400,000 requires

the prior consent of the shareholders in a general meeting. The managing director buys a truck in the name of the

company at a price of R600,000, without the prior consent of the shareholders in a general meeting as required by

Article 6. The seller of the truck admits that she has never read the articles of association of the company.

Required:

Discuss whether the contract is binding on the company.

(10 marks)

10 X & Co acts as the statutory auditors of Easy Ltd, a company that provides bridging finance in the building sector. The

directors of Easy Ltd appointed Frank as the company’s financial manager. It subsequently came to light that Frank

had previously served a prison sentence for theft and embezzlement. During the past financial year Frank forged the

signature of one of the company’s directors on several of the company’s cheques and managed to steal a substantial

amount of the company’s money. Although X & Co conducted its usual audit of Easy Ltd’s financial records, it failed

to discover the theft and forgery. The directors of Easy Ltd maintain that X & Co did not conduct the audit with

reasonable care.

Required:

Advise Easy Ltd on the feasibility of a claim against the company’s auditors.

(10 marks)

End of Question Paper

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