Read the scenario below then answer the questions that follow.

Contracts are of critical importance, especially in daily commercial and business transactions. Agreements are constantly being entered into for various purposes. A contract is binding in law and each party must deliver and perform according to their obligations as mutually agreed upon in the contract. Janice runs a bespoke luxury handbag boutique called La Bougee Boutique in an upmarket suburb of Durban. She buys and sells premium handbags. Janice has created a well-established name for herself in the fashion industry in South Africa. Janice has international clients who purchase handbags from her store. Her supplier Roderigo resides in Cape Town. Janice has a written contract in place with Roderigo which states that Roderigo will provide Janice with premium handbags that he imports from Italy. The contract shall span over a period of 2 years. One of Janice’s obligations is to ensure that a part payment of 50% is transferred to Roderigo prior to the delivery of the handbags. The remainder shall be paid upon the delivery of the goods to her store. One of Roderigo’s obligations is to ensure that all bags sold to Janice are authentic and suitable for sale.

Answer ALL the questions in this section.

Question 1

Janice seeks your assistance, as she wants to know whether the contract that she entered into with Roderigo is valid. Advise Janice as to what the requirements are for a valid contract.

(You are required to list the requirements and thereafter demonstrate an application of the essential elements by providing examples.) (20 marks)

Question 2

Roderigo offers Janice a ‘limited edition” crocodile vintage Mior bag at an extremely cheap price. Roderigo tells Janice that the handbag is authentic and that this offer is a rare one. Janice is excited about purchasing the bag as she has heard that only seven (7) of these bags exist. Janice purchases the bag from Roderigo, however, a month later an authenticator in Durban confirms that the bag is a replica of the original.

2.1 Based on the above a breach of contract between Janice and Roderigo has occurred. What defense can Janice use to cancel the contract entered into with Roderigo? Discuss this defense fully. 

(You are required to apply the defense to the scenario provided)

2.2 Discuss fully what Janice must prove for her defense to be regarded as successful? (8 marks)

2.3 Janice wishes to understand the term ‘breach” 

You are required to discuss FIVE (5) types of breach of contract that are recognized by South African Courts.

Question 3

Janice wishes to safeguard her business at all given times. She has heard from a friend that there are certain individuals who lack contractual capacity, and there are also individuals who have limited contractual capacity. Janice approaches you for advice. (20 marks)

Explain to Janice what the term ‘capacity to act’ refers to in law.

Furthermore, you are required to fully discuss the categories of persons who have LIMITED contractual capacity.

Question 4

Janice hires Mariam to assist her with the general store duties. Mariam describes herself as an employee at La Bougee Boutique. Mariam works from 8 am to 4:30 pm from Monday to Friday, and from 8 am to 12:30 pm on two Saturdays a month. Mariam reports to Janice. Janice allocates Mariam with her work schedule for the week, which includes driving the company vehicle to undertake deliveries to clients. Mariam also assists with the administrative work. Mariam requires a day of leave for personal reasons. She approaches Janice; however, Janice tells her that she is not entitled to paid leave as Mariam is an independent contractor.

4.1 Advise Mariam as to whether she is an employee or an independent contractor in terms of South African legislation. Justify your answer fully. 10 marks

4.2 Suppose Mariam has some free time during her working day. Mariam decides to visit her friend Maxene who works at a clothing boutique about 10 km away from La Bougee Boutique. Mariam takes the company vehicle, however en route to Maxene’s place of work, Mariam collides with a motor vehicle. Both cars are extensively damaged.

Is La Bougee boutique liable for the damage caused?

Discuss fully using the relevant doctrine. (You are required to apply the relevant doctrine to the scenario provided)

Question 5

Janice has recently renovated her shop, and she stores many premium handbags in a locked room at the back of the store. Janice is concerned as she has heard that criminal activity has drastically increased in the area. Janice is considering taking insurance to protect her shop and her belongings. She wishes to find out about the various kinds of insurance, which exist.

5.1 Discuss the TWO (2) types of insurance, which exist. 

5.2 Furthermore, you are required to advise Janice as to which type of insurance is more suitable for her needs.