# Regulatory Compliance Category > National Credit Act Forum > [Question] Advise needed to cancel lease Agreement

## Clarence

hi there

We are a section 21 company (school), I have been recently going trough a contract that one of our directors have signed,
it is a lease contract for a samsung PABX system, from Samsung NAC directly.
Just some background on the situation...we have had a previous company install a PABX system and had endless problems with the system, so the director contacted samsung direct to fix the system, without explaining properly, made her sign the contract, which is a lease for 5years. we are a section 21 company and cannot afford it.
I contacted them and explained this to them, in turn they sent me an email with a settlement of R77 000, I don't understand why this is such a big amount, we are not even purchasing anything! The company they financed this trough is Grandeur Finance Corporation cc....what is the way forward for me??
What will be the most cost effective and right route to take?

the contract was entered into on the 01/04/2010 and is a 60month contract for the amount of R1248 per month at an escalation of 15% p/a!

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## Just Gone

Just a question, but if you a section 21 (a school) - how do you have directors - surely you have a governing body ?  I ask this because I served on a Governing Body for about 5 years - two of them as Chairman - never came across directors tho ?? Furthermore a Chairman does sometimes sign contracts on behalf of the school, but this is with the boards approval and yes the school is then liable for the contract.  Dont you have lawers that also work on behalf of the school ?

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## Martinco

I would think that the contract is nul and void if these is no letter of consent/approval by the governing body giving the "Director" authority to sign such a contract !

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## BuyNoEvil

My question is why did it take you so long to decide that the school had this obligation and cannot afford it? Individuals do not have authority to bind juristics generally. Juristics make decisions via resolutions. No resolution, no decision, no contract.

Problem though is that the "director" who had signed this might be held personally liable for exceeding his/her boundaries of authority.

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## Just Gone

Yes he might be liable if he did not get the boards approval.  If he did get the Governing Body's approval ie it was discussed and the go ahead was given to purchase then he signs on behalf of the school and the school is liable, but a Governing Body is one of the few "bodies" that a Chairman can commit to, and he personally is not normally liable - thats why it has to be monitored very closely.

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## Dave A

Yep, you have to be careful before you sign lease agreements for electronic goods like PABX's and printers with some of these finance companies. They can be pretty diabolical. 

May I assume turnover is over R1 million, so the National Credit Act doesn't apply?

It may help reading this printer rental thread, although I'm afraid the news isn't favorable.

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## BusFact

> ... they sent me an email with a settlement of R77 000, I don't understand why this is such a big amount, we are not even purchasing anything! The company they financed this trough is Grandeur Finance Corporation cc....the contract was entered into on the 01/04/2010 and is a 60month contract for the amount of R1248 per month at an escalation of 15% p/a!


The R77k is roughly what they would have earned from you over the next 3 and a half years. They're just giving you the option to pay it all upfront. Semantics aside, you have "purchased" the equipment. (I'm assuming they installed a new pabx to fix your problem). The pabx system has been installed at your premises and is now second hand and of very little value to them now.

I think you're going to battle to get out of that contract.

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## Just Gone

@ Clarence - you still havent answered any of the questions mentioned - was he a governing body member , did he get the GB's approval or did he sign on his own ?  etc etc

Cant really help anymore if you dont give us some more info.

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## mbsmit

Hi there,

Guess it was a company that was formed not a public school (in other words the company was a private school) and hence it has DIRECTORS not a GB. Well, the CPA does not apply to it at all, so guess the only way to cancel this is to either continue or pay upfront.

PS: In a company, any director may bind the company, unless the MoI states otherwise, but if he does so in anyway (enter into the agreement) he would be liable in his personal capacity.

Regards,
Mr Smit

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