Contract Validity and Company Execution

This assignment examines a contractual dispute between Gerard, Sylvia (who may or may not be a director), and George regarding the sale of a cake shop. The focus is on determining the validity of the agreement based on the proper execution of the contract under ACT Corporate Law Section 17. The analysis considers scenarios where Sylvia is or isn't a director, outlining the legal implications for each situation and potential outcomes for George.

Introduction
Australian contract Law is governed by Australian common law. There are five categories evolve
around a contract law1.
 The formation of a contract
 Contents of contract
 Avoidance of contract
 Performances of a contract (including terminations)
 Remedies for the breach of contract
Issue
In the give case, Mechille and Tim run a Motor bike company. They sell and buy motor cycles and
also undertake repair works. Tim and Mechile signs a contract to b cycle from John for $5000. Later
on when they realized that the amount paid to John is higher, they want to get out the contract2.
Law
As per the Australian Contract Law (ACL), the promises which are legally enforced by law are made
to form a legal relationship for the purpose of doing legal business is termed as a Contract. The
contract should be supported by a consideration3.
Generally a contract starts with an agreement between the parties who get into the contract. The
content of Agreement will be about the terms and conditions that need to followed and agreed by
both the parties before enter into transactions. The Agreement is well documented and signed by
both the parties which are legally enforced by law. A contract with unsigned Agreed document is
void under ACL4.
The effect of the Signature in the documented agreement is a vital factor in any contract. In other
words the signature in the agreed document implies that the “offer” and the “acceptance” related to
the contract (or the main objective of a contract) are mutually agreed by the parties who sign such
agreements5.
Application
The case Toll (FGCT) v Alphapharm Pty Ltd can be referred to the given case. Finemores which was
taken over by Toll, entered into a contract with Richard Thomson (acting on behalf of Alphapharm)
to store and transport goods which were being imported for Alphapharm. The contract document
1 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
2 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
3 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury
Publishing, 2016.
4 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
5 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury
Publishing, 2016.

was signed by both the parties. During the process of contract, Finemores caused damages to
Alphapharm due its negligence. Alphapharm sued Finemores for damages6.
Finemores wanted to escape the liability by relying upon an exclusion clause in its contract with
Richard Thomson7.
The High court of Australia held this case in favour of Alphapharm stating that once the agreement
document is signed, the related parties should perform as per the agreed terms. The court of Law
will not consider the excuse saying that the document is signed without reading or understanding
the contents therein subject to the absent of fraud at any point during the performance of the
contract.
The court also referred the case Wilton Vs Farnworth and held the case citing the reason that “a man
cannot escape from the consequences of signing the document by saying that he did not understand
the content of such document”. If he signs the document, it is implied that he has agreed to the
terms and condition of the contract and need to fulfil the performance as agreed in the document.
In the given case, Tim and Mechile sign a contract with John saying that they will buy a motor cycle
from him for $ 5000. At this point of signature, it is implied by the law that Tim and Mechile need to
perform the contract as per the agreed terms.
Conclusion
Once Tim and Mechile signs the agreement with John, it implies that the following conditions are
agreed by them with full understanding of those terms.
 To buy the Motor cycle from John
 The condition of the Motor cycle at the time of buying
 The price of the Motor cycle (very vital in this case)
 The period of completion of such contract
Under such circumstances, Tim and Mechile cannot get out of the contract for reason saying that the
rate paid to John is too high. The reasonability of the rate should have been analysed by Tim and
Mechile before signing the contract with John. Moreover the contract was already performed as per
the terms and conditions of the agreement8.
If this case goes to the court, the court of law may dismiss this case under the following grounds.
 The contract is agreed and signed by both Tim and Mechile for performing the contract.
 The price of the motorcycle is completely agreed before signing the contract by Tim and
Mechile.
 Since no fraud is found in this case, the claim of Tim and Mechile will not at considered by
the court of Law.
6 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury
Publishing, 2016.
7 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
8 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014

“Acceptance” will be considered as “Willingness” to perform a contract. Once accepted, the further
withdrawal from such acceptance will not be entertained by the court of Law subject to the
condition that the fraudulent is not involved in the context of such acceptance9.
Introduction
The given case will be covered under Australian Contract Law. The case relates to the withdrawal of
contracts after the completion of contract as per the terms and conditions agreed. The contract is
documented in the form of Agreement deed10.
Issue
Gerard and Sylvia have registered a company under Australian Securities and Investments
commission under the name “Cakes Pty Ltd”. Gerard and Sylvia purchased a cake shop from George.
On the day of purchase Gerard stamps the contract with the Cakes Pty Ltd company seal and signs as
witness. Sylvia also signs the contract as witness. After performance of the contract, George feels
bad about selling the cake shop and wishes to get it back.11
Law
As per the Australian Contract Law and Companies act 2001, Section 127 states that a contract
document can be executed with or without using a company’s common seal. But the following
conditions are inevitable for executing an agreement document in order to perform a contract12.
 Signing by two directors of the company
 Signing by one director and a company secretary of the company
 Affixing the common seal of the company to the document and the fixing of such seal is
witnessed by two directors of the company or a director and a company secretary of the
company.
If the document is not prepared as per the above said norms, the agreement becomes void and the
agreement deed cannot be enforced by Law. The document will not have any value.
Application
9 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
10 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing, 2016.
11 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing, 2016.
12 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.

The case of Knight Frank Australia Pty Ltd Vs Paley Properties Pty (2014) can be referred with the
given case. The background of the case is that the $ 1.5 million purchase contract was signed by only
one director on behalf of the purchaser.
The purchaser had not correctly signed the contract and, as a result, the contract was not
enforceable against the purchaser13.
The issue was whether there was an enforceable contract with the purchaser and, if the contract
had not been correctly signed by the purchaser, whether the director who purported to sign the
contract on behalf of the purchaser was personally liable to pay damages to the vendor for breach of
warranty of authority14.
In the given case, the executive of the document on the part of Gerard and Sylvia need to be verified
for the validity under the court of Law. In case of improper documentation Gorge will have the
opportunity to get back the cake shop as the contract or agreement becomes void in case the
documentation is not properly executed15.
Conclusion
The case can be explained in two scenarios (assumed). The problem is silent on the directorship of
Sylvia16.
If Sylvia is a director (1st Scenario)
In the given case, if Sylvia is also a director like Gerard then the contract is well executed as per the
requirement of ACT under Corporate Act Section 17. The Law says that if all the directors’ signs as
witness for affixing the Company’s common seal in a document, then the document is enforced by
law and has legal value.
Under this context, the contract signed and agreed by Gerard, Sylvia and George becomes a legally
valid document and enforced by law. In such circumstances George cannot proceed legally to get the
cake shop17.
Before signing the agreement, George should have taken a right decision, after performing the
contract, George cannot reverse his decision. The court of law will not be in favour of Geroge’s
wishes18.
A contract once performed as per the well executed document, and if the contract does not consists
of any fraudulent activity, the contract is considered to be complete in all aspects..
If Sylvia is not a director (2st Scenario) – (not mentioned in the given problem)
13 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
14 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
15 Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing, 2016.
16 Pearson, Gail. "Further challenges for Australian consumer law." Consumer Law and Socioeconomic
Development. Springer, Cham, 2017. 287-305.
17 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
18 Pearson, Gail. "Further challenges for Australian consumer law." Consumer Law and Socioeconomic
Development. Springer, Cham, 2017. 287-305.

If Sylvia is not a director then the agreement deed is not properly executed for the reason that the
affix of the company seal in the document is witnessed by only one of the Director. The signature of
Sylvia is just a common witness. In such case, the agreement deed will not e valid and not enforced
by Law19.
Under this condition, George can very well approach the court for getting back the cake shop citing
the reason that the agreement deed is not valid and it was not properly executed20.
19 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
20 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

Reference
Andrews, Neil. Contract law. Cambridge University Press, 2015.
Carter, John, and Elisabeth Peden. "Good faith in Australian contract law." (2003).
Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing, 2016.
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
Pearson, Gail. "Further challenges for Australian consumer law." Consumer Law and Socioeconomic
Development. Springer, Cham, 2017. 287-305.
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Treitel, Guenter Heinz. The law of contract. Sweet & maxwell, 2003.