1) Introductory Topics Flashcards
What does it mean to have “Legal Status”?
Legal status refers to a person who can hold rights and duties and has the legal capacity to perform juristic acts.
What is a juristic person?
A juristic person is non-living and given the capacity to acquire rights and duties in terms on enabling legislation.
The life of a juristic personality starts when the company is registered and ends when it is deregistered.
Natural persons act on behalf of a juristic person.
What is a natural person?
Natural persons are human beings who acquire rights from birth until death.
“Born” refers to as soon as it is separate from the body of the mother and lived after the separation.
What are the principles of agency?
Because a juristic person has no physical body/presence it relies on human agents to do its bidding.
Agency is a contract in terms of which one person (the agent) is authorised and usually required by another (the principal) to contract or to negotiate a contract on the latter’s behalf with a third party.
What is a fiduciary?
A person or business who has the power and obligation to act for another (the beneficiary) under circumstances which require total trust, good faith, and honesty.
What are fiduciary duties?
When someone (the agent) has a fiduciary duty to someone else (the principal), the person with the duty must act in a way that will benefit the principal financially.
The person who has a fiduciary duty is called the fiduciary, and the person to whom the duty is owed is called the principal or the beneficiary.
Examples of fiduciaries include partners in an partnership, trustees of a trust, directors of a company, and members of close corporation
What are the key characteristics of a company?
Limited liabilities of members.
Assets are the exclusive property of the company.
The company must seek redress where a wrong was committed against it (Foss v Harbottle: the ‘proper plaintiff rule’)
A company can contract with its members.
A company can acquire rights and duties separate from its members.
The owners/shareholders have no automatic right to manage.
Profits belong to the company.
What is a contract of agency?
The principal and agent enter into an agency contract»_space; creates obligations between P and A»_space; A concludes another contract with 3rd party.
Therefore there is a contract between the principal and agent ( usually of mandate) and the agent can be empowered or unempowered
What are the implied terms of a contract of agency for the agent?
Duties of the agent:
Perform the mandate.
Be honest and show good faith.
- No secret profits.
- No conflict of interests.
- No delegation of authority.
- No disclosure of information.
To exercise due care.
To act in accordance with the P’s instructions.
To allow inspection of books and to render an account to P.
What are the implied terms of a contract if agency for the principal?
Duties of the principal:
To pay the agent the agreed remuneration if the mandate is performed.
To reimburse the agent for expenses properly incurred.
To indemnify the agent for all losses he or she has suffered as a result of the execution of the mandate.
What are the requirements for a person to act as an agent?
The principal must:
Be in existence.
Have contractual capacity to enter a 3rd party contract.
The agent must:
Have (at least) limited contractual capacity.
Have authority to perform.
Make it clear to the 3rd party that s/he acts for a principal but does not need to disclose the name.
Remember that the agent may incur liability on the contract where s/he fails to disclose the existence of a principal.
What is authority in the context of agency?
If the agent acted with authority, the parties to the contract will be the principal and the third party, the contract is not between the agent and the third party.
The agent incurs no rights or obligations based on the contract with the third party.
BUT if the agent does not have authority, he cannot bind the principal and he might himself be liable.
How does an agent acquire authority?
Express authority
Implied authority
Ratification
Ostensible authority/ apparent authority
Authorisation by operation of law
What are the consequences for an agent acting without authority or beyond their mandate?
Agent could be liable based on warranty of authority.
If the principal liable based on estoppel the agent may in turn be liable to the principal.
How can the authority of an agent be terminated?
Mutual consent of the P and A.
Revocation by P (even if agency described as irrevocable).
Renunciation by A (but may be liable for damages).
Due performance of respective obligations.
Expiry of period for which the authority was granted.
Death of either the principal or agent.
Insanity of the principal.
Insolvency of the principal.
