Corporation Act

RUNNING HEAD: CORPORATION ACT
Corporation Act
Name of the student
Name of the university
Author Note

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CORPORATION ACT
Reply to Question 1-
Issue:
The issue regarding the case of Michelle and Tim is about the legitimacy of Michelle as
he disagreed to continue the contract made with John that concerns about purchasing his
motorbike in the company’s name united by Tim and Michelle.
Rule:
The case of Salomon v Salomon and Co Ltd,1 the judge concluded and said a
organisation is a reflection of an fake person containing a distinct existence distinguishing its
identification of its proprietor through a process of corporate veil.
The methods in which an organization can do a lot of things inclusive seal attaching
through the agent of the organization. The presence of two separate sections under the provisions
of the Corporation Act 2001 that specifies the method through which any contract can easily be
accomplished by the organization. Section 126 and section 127 are the two sections mentioned
above. Section 126 declares that an individual where the company has given the authority for
acting as the agent can easily bind an organization to his deed. Therefore u/s 126 if any file is
signed on behalf and for the organization or a company it is considered that the company has
executed the document or the file.2
Under the provisions of section 127(1) explains that a company or an organization can
implement any contract validly. It is well explained in this particular section that if any one of
1 AC [1897]
2 Corporation Act 2001 (Cth) s 126

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CORPORATION ACT
the directors of a company signs any document or an agreement, the company can execute that
particular agreement3.
The provision u/s 124 of the CA 2001(Cth) states that an organization or a company has
the capacity or the power like a natural individual4. It can perform deeds like entering into a
contract, owning a property and to be in a lawful suit. Therefore, in applying this section an
organization or a company may be held liable, or a lawful action can be taken relating to the
contract. Breaching the contract may hold the company directly liable. The provision of the
Corporation Act 2001 u/s 124(2) it is declared invalidation of contract does not take place merely
it does not stay in the top interest of the company5.
Further, it is stated that if there two directors unless it is not considered as a solitary
proprietor organization or one secretary of the company and one director can easily implement
any contract by way of witnessing the contractual file with the seal of an organization that is
commonly provided u/s 127(2)6 of CA.
Application:
Rule of contract execution and incorporation is essential in applying the facts of the provided
case for determining the issue related to the case. It is very evident from the fact that Michelle
and Tim were passionate regarding motorbikes due to which they established a company in the
name of Motorbikes Pty Ltd. When the organization has been established it forms a distinct legal
individual and can create any contract in the name of the company. It is clear and clarified that
Michelle and Tim are the company’s director. This clearly explains that both of them carries the
3 Corporation Act 2001 (Cth) s 127(1)
4 Corporation Act 2001 (Cth) s 124
5 Corporation Act 2001 (Cth) s 124(2)
6 Corporation Act 2001 (Cth) s 127(2)