Issue Is Motorbikes Pty Ltd
Added on 2021-06-15
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1QUESTION 1IssueIs Motorbikes Pty Ltd bound by the contract with John?LawA business when registered acquires the status of a company which is governed by CorporationAct 2001. A registered company is a legal person in law and acquires all the powers that of anormal person. One of the prime elements of a registered company is separate legal personality1.Now, in Saloman v saloman2, the House of Lords submitted that every company is distinct in itsown capacity and has the power to make contract, sue or be sued, hold property and thus has anexistence of a Separate legal Personality which is established in section 124 of the 2001 Act3.The acts of the company are considered to be its own and not that of the directors even when thesame are carried out by the directors. The officers can seek authority from the companyconstitution and replaceable rules as per section 134 of the 2001 Act4.Now, since a company is artificial person and thus it is the directors who are assigned with thetask of carrying out the functions of the company and this authority is defined under section198A of the 2001 Act which was also affirmed in Hely-Hutchinson v Brayhead Ltd5.6 When acompany has single director/shareholder then he can act on company’s behalf unless he isrestricted under the general meeting as per section 198E of the Act and is analyzed in ImperialHydropathic Hotel Company Blackpool v Hampson7.8 The authority of directors to bind thecompany is also highlighted under section 126 of the Act. Normally the authority that is possessed by any person are of several kinds9:1Roman Tomasic; Stephen Bottomley and Rob McQueen. 2002.Corporations Law in Australia, Federation Press.2Saloman v saloman (1896).3 Bourne N (2013) Bourne on Company Law, Routledge.4Maisto, G (2009). Residence of Companies Under Tax Treaties and EC Law. IBFD.5Hely-Hutchinson v Brayhead Ltd [1968].6John Mugambwa, Harrison Amankwah, ValHaynes. 2007. Commercial and Business Organizations Law in Papua New GuineaI. Routledge. 7Imperial Hydropathic Hotel Company Blackpool v Hampson (1882) 23 Ch D 1.8 Alan Krawitz. 2002. Protecting Outsiders to Corporate Contracts in Australia. Murdoch University School of Law. Volume 9,Number 3.9 Peter Gilliers. 2004. Business Law. Federation Press.
2i.When any agent acquires the power to bind the principal by an express undertakinggiven by the principal himself then it is an express authority. An express authority canbe granted by document, deed or orally and is analyzed in Freeman & Lockyer (AFirm) v Buckhurst Park Properties (Mangal) Ltd10;ii.Authorities gained by implication are implied authorities. iii.When any agent acquires the power to bind the principle when an overt representationis made by the principle which makes the third party believe that the agent does havethe power to bind the principal then it is an ostensible authority11.Now, when a company wants to make a contract then the power to do so lies with the board ofdirectors of the company. But, if the board delegates the power to an individual director then hehas the power to make contract which have the binding effect and is held in Brick and PipeIndustries Ltd v Occidental Life Nominees Pty Ltd12. In the same manner a secretary can alsobind the company by entering into contract that is established by him with in his authority and isanalyzed in Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd13. ApplicationMichelle and Tim have keen interest in motorbikes and they own a company called MotorbikesPty Ltd which deals in sell and repair of bikes. The director is Michelle and company secretary isTim.John meets Tim and shows his interest to sell his bike to them. Tim bought the bike for $5,000and the contract was signed by both Michelle and Tim. It is submitted that Motorbikes Pty Ltd is a company and as per section 125 of the act, it has itsown personality and can make contracts. But as per section 198A and E the power to makecontract lies with the directors, that is, Michelle as he is the only director of the company and hasper section 198E he can make contracts. So, Michelle has the express authority to bind Motorbikes Pty Ltd by his acts.10Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd [1964].11Construction Engineering(Aust) Pty Ltdv HexylPty Ltd (1985).12Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1991).13Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd (1971).
3Also, Tim is the secretary of Motorbikes Pty Ltd and by applying the law in PanoramaDevelopments (Guildford) Ltd he is also authored to make contracts.Thus, the contract that is made by Michelle and Tim with John is within their respectiveauthorities. ConclusionTo conclude, it can be thus submitted that the contract that is made by Michelle and Tim arewithin their respective authorities as the agents of the company and thus they cannot cancel thecontract with john as the same is binding on the company. QUESTION 2IssueCan George cancel the contract made by Gerard and Sylvia for Cakes Pty Ltd?LawWhen any person intends to initiate business in the form of company, then, in Australia, it isnecessary that the same must be registered under the provisions of the Corporation Act 2001. InSaloman v saloman14, the House of Lords submitted that every company is distinct in its owncapacity and has the power to make contract, sue or be sued, hold property and thus has anexistence of a Separate legal Personality which is established in section 124 of the 2001 Act15.But, the acts of the company are carried out by the directors of the company. In Hely-Hutchinsonv Brayhead Ltd16 it was held that the Corporation Act 2001 itself has granted power to thedirector to act on behalf of the company and enshrined this power under section 198A of the Act.the directors are the company agents which was also affirmed under section 126 of the Act. InKnight Frank Australia Pty Ltd v Paley Properties Pty Ltd17 it was held that an agent thus has thepower to make contract for company even without common seal.14Saloman v saloman (1896).15 Bourne N (2013) Bourne on Company Law, Routledge.16Hely-Hutchinson v Brayhead Ltd [1968].17Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd[2014].
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