Khudu Ltd is a company that renovates dwelling houses. The board of directors of Khudu Ltd consists of fi ve members. Thato, one of the directors, takes care of the actual day-to-day running of the business. Thato then simply reports back to the board on the business he has transacted. Thato refers to himself as the managing director of Khudu Ltd, although he has never been offi cially appointed as such. Thato is assisted in the running of the business by Pinkie, Khudu Ltd’s company secretary.Six months ago Thato entered into a contract on Khudu Ltd’s behalf with Dudu to produce plans for the renovation of a house that it hoped to acquire. However, Khudu Ltd did not acquire the house and due to its current precarious financial position, the board of directors has refused to pay Dudu, claiming that Thato did not have the necessary authority to enter into the contract with him.The board is also refusing to complete a contract with Ayanda for the supply of a new cement mixer Pinkie had ordered on Khudu Ltd’s behalf. They have also learned that Pinkie has entered into a contract on Khudu Ltd’s behalf to have an extension built onto her own house.Required:Analyse the situation with regard to the authority of both Thato and Pinkie to enter into contracts on behalf of Khudu Ltd and in particular advise the board of directors if the company is liable for each of the contracts. (10 marks)
