Original Research

Making sense of the disclosure of latent defects in financial statements and company acquisition contracts

Cornelius Killian
South African Journal of Economic and Management Sciences | Vol 13, No 1 | a199 | DOI: https://doi.org/10.4102/sajems.v13i1.199 | © 2011 Cornelius Killian | This work is licensed under CC Attribution 4.0
Submitted: 26 April 2011 | Published: 04 May 2011

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Abstract

This paper analyses the statement made by the South African Appeal Court Judge Holmes in the Phame v Paizes (1973) case and, using economic and unique South African legal principles, it examines the true legal nature of a contract to regulate company acquisitions.1 Two solutions are offered for financial managers in South Africa: (1) the contract to regulate company acquisitions is a forward contract and (2) the difficulty in identifying latent defects should not be grounds for reducing the price paid for a company or enterprise in the South African legal system.

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