South African Journal of Economic and Management Sciences
On-line version ISSN 2222-3436
Print version ISSN 1015-8812
KILIAN, Cornelius. Making sense of the disclosure of latent defects in financial statements and company acquisition contracts. S. Afr. j. econ. manag. sci. [online]. 2010, vol.13, n.1, pp.76-84. ISSN 2222-3436.
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.