QUESTION 1 (25 marks) Mega Ltd recently developed a shopping mall, Mega Mall, consisting of seven floors. Due to the novelty of the mall, much of the mall is still empty with mainly the first and second floors containing fully operating shops as well as activity on the third floor. The majority of the third floor is being rented out by Fun \& Food Ltd who created a fully functional food court on the floor. Mega Ltd expects that the mall will attract more business owners over time as it becomes more popular. PART A Hello Balloons (Pty) Ltd recently decided to enter into a contract with Mega Ltd to use space in the mall to sell its balloons. Terms of the contract state that: - Hello Balloons (Pty) Ltd may use one shop, Shop \#12, with a floor size of 40m on the second floor for a period of 5 years at R10 000 per month. - Mega Ltd has the right to, at any time, relocate Hello Balloons (Pty) Ltd's shop to any other shop and on any other floor of the mall as long as it is not less than the existing floor space. This may be done to accommodate other business owners who may be interested in the currently allocated space on the second floor (i.e., Shop \#12) and are willing to pay a higher amount for the use thereof. - Mega Ltd believes the selling of inflated, helium balloons will attract customers to the mall because Mega Ltd perceives children to enjoy the floating aspect of balloons. Hello Balloons (Pty) Ltd may therefore only sell inflated, helium balloons in the shop. PART B Fun \& Food Ltd has been leasing the majority of the third floor of Mega Mall for six months of a 5-year lease agreement. Fun \& Food Ltd also operates an amusement arcade which it intends to relocate to the remaining part of the third floor of Mega Mall next to the food court. The amusement arcade usually generates a profit of R1 200000 per year. Fun \& Food Ltd has therefore contacted Mega Ltd to change the lease to include the remaining portion of the third floor for the remaining duration of the existing lease. The remaining portion of the third floor was advertised as vacant and available to lease for R90 000 per month. 59 HFAC334-1-Jul-Dec2023-FA1-SK-V4-13072023 ANNEXURE F: FORMATIVE ASSESSMENT 1 REQUIRED: 1.1 Discuss whether or not the contract between Hello Balloons (Pty) Ltd and Mega Ltd constitutes a lease. (15 marks) 1.2 Discuss whether the lease agreement with Fun \& Food Ltd should be modified or reassessed if Mega Ltd agrees to lease out the remainder of the third floor to Fun \& Food Ltd (in Part B). Briefly mention how the modification or reassessment would be done. (10 marks) Competencv Framework Reference