QUESTION 1

Kate and Mr Sam operate a partnership that provides a variety of services and sells various products. They have become aware of an offer by a local restaurant for the provision of 99 bottles of Chinese beer. Unfortunately, the offer is open to companies only, and they do not have a company.

Kate and Sam would like to incorporate a company, but the deadline for accepting the offer is fast approaching, and they fear that they will not have enough time to incorporate a company and submit their application before the deadline.

Advise Kate and Mr Sam whether it is possible to contract on behalf of a company that does not exist yet, and if so, comprehensively explain the differences between the available methods to achieve the purpose, with particular emphasis on the risks and benefits of each method.

QUESTION 2

Racing Pulse (Pty) Ltd is in the business of selling running shoes. The company has two retail outlets in the Western Cape. The company has two directors, Indiana and Montana. The company's Memorandum of Incorporation (MOI) provides that the agents of the company may conclude any type of contract, but contracts to the value of R100 000 and above must be signed by both directors.

Dakota is the company's longest-serving senior employee and agent, and is well-known in the running shoe industry. She is responsible for placing orders for new shoes from their suppliers on a regular basis. One day, Dakota learns of a new supplier entering the market, Supplier X, who promises Dakota that he can beat the price of any running shoe supplier in South Africa, provided that Dakota places substantially larger bulk orders than she is used to making.

Without conferring with the board, Dakota places an order with Supplier X for several pairs of running shoes; the value of the contract is R102 000. The contract is signed by Supplier X and Dakota. Payment is made, and delivery of the shoes takes place.

When the shareholders learn of this contract, they immediately commence proceedings to remove both directors and claim damages from them due to fiduciary duty violations; they also pass a resolution rejecting this contract, and compel the new board to demand that Supplier X returns the money and collects the shoes delivered in terms of what they refer to as "an ultra vires contract".

Supplier X approaches you for advice. He explains that before the contract was concluded, he had made enquiries with other shoe suppliers regarding Dakota and her relationship with Racing Pulse. At the time, Supplier Y advised him "Don't worry about Dakota, she has full contractual authority to place orders for shoes". Furthermore, neither Dakota nor Supplier X had any knowledge about any provisions in the company's MOI. Therefore, Supplier X feels that he acted in good faith and should be able to enforce the contract against the company.

Write an legal opinion in which you comprehensively analyse the validity and enforceability of this contract.