BUSINESS LAW 1B

(BSL1B11/BUS11B1/BUL41B1)
MOCK EXAMINATION
BLOCK WEEK

_________________________________________________________
_________

Page 1 of 12
 QUESTION 1:
THE LAW OF PURCHASE AND SALE

1.1 Sally sells a rare skateboard to Anne for R50 000 on 14 January
2015. Anne is out of town for business and they agree that Sally
will deliver the skateboard on 5 February 2015. In the meantime
Sally’s friend, Max, pays a visit to Sally and falls in love with the
skateboard. Max, who does not know that Sally already sold the
skateboard to Anne, makes an offer of R65 000 and Sally
immediately accepts the Max’s offer.

Assume that the skateboard has not been delivered to either of the
parties despite the fact that both parties have concluded a contract
of sale to acquire the skateboard. Discuss the legal position of the
parties in this case. (3)

Assuming that Max took delivery of the skateboard upon

conclusion of the contract of sale and was unaware of the contract
of sale concluded previously between Sally and Anne. Discuss the
legal position of the parties in this case.
(3)

Assuming that Max took delivery of the skateboard despite knowing

of the contract of sale which was previously concluded between
Sally and Anne. Discuss the legal position of the parties in this
case.
(4)

1.2. Discuss whether or not it is a requirement for a valid contract of

sale, that the seller be the owner of the goods sold.
(2)

1.3. Identify the method of delivery in each of the following cases.

1.3.1 Fanuel and Calvin conclude a contract of sale in terms of which

Fanuel will sell his house to Calvin for R500 000. Fanuel physically
hands the keys of the house to Calvin. (1)

Page 2 of 12
1.3.2 Fanuel and Calvin conclude a contract of lease in terms of which
Calvin will rent Fred’s apartment for 12 months. After 3 months,
Calvin decides to purchase the apartment and the parties conclude
a contract of sale. Calvin stays in the apartment the entire time.
(1)

1.3.3 Fanuel takes his car in to be serviced. While the car is being
repaired at the mechanic, Fanuel sells his car to Calvin. Fanuel
notifies the mechanic that he sold the vehicle to Bobby and that
Bobby will come collect the vehicle when it is repaired. (1)

1.3.4 Fanuel and Calvin conclude a contract of sale in terms of which

Fanuel will sell his wristwatch to Calvin for R500. Fanuel physically
hands the watch to Calvin. (1)

1.3.5 Fanuel sells his oil tanker to Calvin. The oil tanker is currently
docked in the Durban Harbour, so Fanuel simply points out which
oil tanker it is that he has sold to Calvin. (1)

1.4. Stuart enters into a contract of purchase and sale on 17 November

2015 with Nigel. In terms of the contract, Stuart buys Nigel’s
lounge suite for R5 000. As Stuart walked to Nigel’s house, he
requested that Nigel store it for a week or so until such a time that
he could come fetch the lounge suite his bakkie. Accordingly Nigel
stored the lounge suite in his garage. In the meantime there was a
massive thunderstorm and the garage burnt down destroying the
lounge suite purchased by Stuart. Stuart wants to know from you
who bears the risk of accidental damage and why?
(6)

Page 3 of 12
 QUESTION 2:
THE LAW OF CONSUMER CREDIT AGREEMENTS

2.1 Provide three (3) examples of credit agreements where the

consumer and the credit provider are not dealing with each other
at arm’s length. (3)

2.2 Distinguish between small, intermediate and large credit

agreements. (6)

2.3 List at least two (2) unlawful credit agreements and state what
the effect of unlawful credit agreements are. (4)

Page 4 of 12
 QUESTION 3:
THE LAW OF LEASE

3.1 Indicate whether a valid contract of lease exists in the following

instances. Provide a reason for your answer.

3.1.1 Jimmy and Jeffrey conclude a contract whereby Jeffrey

obtains the use and enjoyment of a determined vehicle
together with the right to sell the vehicle to any third party in
exchange for R1000 amount of compensation. (2)

3.1.2 Jimmy and Jeffrey agree that Jimmy will lease one of his six
vehicles for R1000 per month. (2)

3.1.3 Jimmy and Jeffrey conclude a lease agreement whereby

Jimmy will lease his flat, no 16, 272 Peace Lane, Alberton,
to Jeffrey in exchange for an amount of compensation to be
determined by the body corporate. (2)

3.2 Nigel leases Fanuel’s one bedroom flat. The contract of lease
stipulates that the term of the lease is from 1 January 2015 until
31 December 2015. In May 2015 Fanuel sells the flat to Rameez
who was aware of the fact that Nigel was leasing the flat when he
concluded the contract of sale with Fanuel. Rameez decides that
she actually wants to stay in the flat herself. She is of the opinion
that since she is the new owner and not a party to the original
lease agreement, she can give Nigel 30 days’ notice to vacate the
property. Advise Rameez on whether she will be able to do this.
(5)

Page 5 of 12
 QUESTION 4:
THE LAW OF REAL AND PERSONAL SECURITY

4.1 Nigel applied for a loan from SOS Bank in order to buy a house.
The loan was granted on the condition that a family member of
Nigel’s, father Calvin, signs as surety for the repayment of the
loan. Nigel defaults on the repayment of the loan and institutes
action against Calvin.

4.1.1 Can Calvin refuse to make payment on that basis that SOS
Bank should hold Nigel liable for repayment? (6)

4.1.2. Would it make a difference to your answer in 7.1 if Calvin

signed as “surety and co-principal debtor”? Explain. (4)

4.2 Ebrahim signs as surety and co-principal debtor for the debt of his
friend Rameez. Rameez defaults on repayment of his debt and
the creditor sues Ebrahim for the amount. Suppose Ebrahim
decides to pay the outstanding amount to the creditor, will
Ebrahim have a claim against Rameez for repayment of the
money? Explain. (5)

4.3. Farmer Fanuel is a farmer in the North West district. He owes an

amount of R100 000 to Bonus Bank. He pledges one of his
tractors to Bonus Bank, but retains possession over the tractor
since he still needs to use it on the farm.

4.3.1. Explain why/why not a valid pledge has come into

existence? (8)

Page 6 of 12
 4.3.2. Suppose Farmer Fanuel delivers the tractor to Bonus
Bank. The tractor is kept in Bonus Banks’ warehouse.
However, two weeks later, the tractor accidently ends up on
the auction floor, where movables owned by debtors who
are not able to repay their debt, is auctioned to the public.
The tractor was auctioned to Sendelani whose bid of
R80 000 was the highest bid. Sendelani then drove the
tractor home after the auction. What are Bonus Bank’s
rights under these circumstances?
(2)

4.4. Stuart rents a house from Fanuel for a fixed period of one year.
However, on the fifth month, Stuart falls in arrears with the
payment of his rent. He makes an arrangement with Fanuel to
pay the following month, but this also does not happen. The
amount of arrear rent now amounts to R20 000. Fanuel suspects
that Stuart may disappear without paying his rent in arrears. What
would you advise Fanuel to do under these circumstances?
(5)
.

Page 7 of 12
 QUESTION 5:
THE LAW OF INSURANCE

5.1 Stuart insures his 2014 Volkswagen Polo 1.4 for an amount
of R60 000 with First for Men Insurance. The actual value
of the car is R120 000. The insurance contract contains an
average clause. Stuart is involved in an accident on his
way to his tutorial on 1 October 2015. The estimated cost
of repairs will be R40 000.

5.1.1 State whether or not you think Stuart is under-insured and

state the definition of under-insurance. (3)

5.1.2. Show the formula used to calculate the extent of the

insurer’s liability to Stuart in the case of under-insurance where
there is an average clause. (4)

5.1.3. Calculate the extent that Stuart can hold First for Men
liable. (4)

5.2. Rameez takes out a policy with Tiger Insurance Company

insuring his expensive Porsche against theft and damage for the
amount of R500 000. To be sure that he is fully covered he takes
out a second insurance policy with Prince Insurance Company for
the amount of R350 000. Ebrahim reverses into Rameez’s
Porsche in a parking garage causing damage in the sum of R200
000. Rameez claims payment of his full loss under each policy.
Will Rameez be able to recover R200 000 under each policy?
Explain the position to him. (2)

5.3 Jimmy insures his 2014 Volkswagen Polo 1.4 for an amount of
R60 000 with First for Men Insurance. The actual value of the car
is R120 000. The insurance contract contains an average clause.
Jimmy is involved in an accident on the 4th of November 2014.
The estimated cost of repairs will be R40 000.

Page 8 of 12
5.3.1 State whether or not you think Jimmy is under-insured and
state the definition of under-insurance. (3)

5.3.2 In the block below show the formula used to calculate the
extent of the insurer’s liability to Jimmy in the case of under-
insurance where there is an average clause. (4)

6.3.3 In the block below calculate the extent that Jimmy can hold
First for Men liable. (4)

Page 9 of 12
 QUESTION 6:
THE LAW OF NEGOTIABLE INSTRUMENTS
Study the following drawing and answer questions 1 to 4:
BEST BANK Date
1 November 2013
PAY: Chung Xi OR ORDER

THE SUM OF: Five thousand rand only___________

____________________________________________________ R5000.00

R
Candle

1. The payee is:

(a) Chung Xi,
(b) R Candle,
(c) Best Bank,
(d) there is no payee,
(e) (a) and (b) are correct.

2. The drawee is:

(f)Chung Xi,
(g) R Candle,
(h) Best Bank
(i) there is no payee
(j) (a) and (b) are correct.

3. The drawer is:

(k) Ching Xi,
(l) R Candle,
(m) Best Bank,
(n) There is no payee,
(o) (a) and (b) are correct.

Page 10 of 12
4. This instrument is:
(p) a bearer instrument,
(q) an order instrument,
(r) a cheque,
(s) (a) and (c) are correct,
(t)(b) and (c) are correct.

5. If Chung Xi is in possession of the instrument, he is

a/an:
(u) Holder,
(v) holder in due course,
(w) holder for value,
(x) accommodation party,
(y) possessor.

6. A holder in due course must have taken the bill of

exchange:
(z) that is complete and regular on the face of it,
(aa) in good faith,
(bb) for value,
(cc) when it was negotiated to him,
(dd) more than one statement is correct.

7. Choose the correct option with regards to negotiable

instruments:
(ee) a bearer is a person in possession of a bearer
instrument,
(ff) a holder in due course becomes the true owner with
indisputable title to the instrument,
(gg) negotiation is when the drawer or maker hands the
instrument to the payee,
(hh) negotiation may be prohibited by writing the word “only”
after the named payee,
(ii) more than one statement is correct.

Page 11 of 12
 QUESTION 7:
THE LAW OF INSOLVENCY

7.1 List any four (4) acts of insolvency.

(4)

7.2 Distinguish between factual and commercial insolvency.

(2)

7.3 List at least two (2) effects that a sequestration order has on a
person’s status and capacity.
(2)

Page 12 of 12