Question 1 Please note that the word limit of 1 000 words is a total for the que

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Question 1 Please note that the word limit of 1 000 words is a total for the questions  

Kruger is Heavy Machinery Sales Manager of JCI Ltd. He has frequently negotiated and signed contracts on behalf of JCI Ltd with Oppenheimer, Managing Director of Anglo-American Corporation Ltd. Kruger and Oppenheimer have been in negotiations over the supply of an ore smelter by JCI to Anglo-American. On Friday 5 July at 10.00 am Kruger phones Oppenheimer and says “We will offer to sell you the ore smelter for $ 3.5 million. I’ll be at your office at 3pm to sign a contract.”

At 1 pm, Oppenheimer is having lunch at the Rand Club with Rhodes, who is another executive of JCI. During the lunch Rhodes says “Things are awful at JCI. Kruger has been making too many mistakes this year, his department hasn’t been trading profitably, and I heard he was going to get a nasty surprise at our lunchtime Board meeting. Frankly, I can’t see him surviving”. Oppenheimer goes back to his office and mentions the lunchtime conversation to Jameson, a fellow Anglo-American executive, saying that he (Oppenheimer) thinks that Kruger may have been ousted. Jameson says "Look, we're getting a good deal here, don't worry about what is going on at JCI". At 3pm Kruger arrives and signs the deal to sell the machinery to Anglo American for $ 3.5 million.

However on Monday the Financial News carries an article headed “JCI Heavy Machinery Sales Manager Fired at Board Meeting Last Friday”. Anglo American has tendered a cheque to JCI for $ 3.5 million, and has demanded delivery of the smelter, but JCI refuses to deliver it, saying that Kruger had no authority to sell the smelter because he had been fired at 1.30pm. Advise JCI as to their legal position, citing statutory and case law authority.

Explanation / Answer

Oppenheimer, being aware of Kruger misconduct and actions to be taken against him during lunch at 1 pm with Rhodes should not have gone ahead with the deal of $3.5 million at 3 pm. The first thing Oppenheimer would have enquired about the decision taken against Kruger. It is also the fault of Kruger who did the contract with Anglo-American Company as the sales manager of JCI Ltd when he has lost his job. Without the authenticity check and verification from JCI ltd, the Anglo-American company should not have signed the contract and would not have released the cheque to JCI. In this situation, Oppenheimer can ask for the return cheque of $3.5 million but cannot ask for the smelter. JCI has all the rights to deny delivery of smelter as it was done by an unauthorized person who misrepresented JCI. The JCI can also claim for fraud in the name of the company against Kruger. As Kruger’s action shows a deliberate and a purposeful misrepresentation so that the Anglo-American company signs the contract to purchase the smelter. A contract is only valid if the two parties agree and when Kruger is no more representing JCI, he has no rights to go ahead with the contract. In this case, it is a fraudulent misrepresentation as

The representation was false and was made recklessly without knowledge of Kruger’s truth at the time it was made;

The representation was made with the intention that the plaintiff Oppenheimer (representative of the Anglo-American company) relied on it;

The plaintiff, in fact, did rely on the misrepresentation and

The Anglo-American company suffered damages i.e. a cheque of $3.5 million was issued with no machinery in return as a result.    

According to the Companies Act, 2013 and Misrepresentation Act, 1967, JCI can sue Kruger and falsify the claim of the Anglo-American Company.

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