Business and Corporation Law - PDF

Added on - 31 May 2021

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Running head: BUSINESS AND CORPORATION LAWBusiness and Corporation LawName of the StudentName of the UniversityAuthor Note
BUSINESS AND CORPORATION LAW1Answer to Question No 1IssuesThe issue which was involved in this case is what the legal position of Steve is in thiscase and whether Steve is personally liable for acting on behalf of the company.Relevant lawsThe issues can be solved by discussing the relevant business and corporation lawsregarding this issue. The law related to contract entered into before registration in Australia,The Corporation Act 2001 decides the liability of a person who has entered into a contract onbehalf of a company. It is provided under Section 131 of the Corporations Act 2001 that acontract made before the registration of the company shall be enforceable against thecompany if it ratifies the contract within a reasonable time1. It further provides that if thecompany is not registered or the contract is not ratified after its registration, the person willbe liable to pay damages for breach of a contract. Whereas, the Section 1.5.1 of theCorporations Act 2001 provides that, a company is a separate legal entity. A contract enteredinto by a company can be enforceable by or against them. If they do not perform their part ofthe contract they can be sued for causing breach of contract. It was decided that uponincorporation, a company shall be considered as a new legal entity in the case of Salomon vSalomon& Co [1897] AC 22.21Legislation.gov.au, , 2018, <https://www.legislation.gov.au/Details/C2018C00031>[accessed 7 September 2018].2Goulding, S. (2018).Principles of Company Law. 3rd ed. Cavendish Publishing Limited.
BUSINESS AND CORPORATION LAW2ApplicationIn this case, there is two transaction. One is by Steve Jones with Thor MiningMachinery Ltd and another is by the board with Volvo Trucks (Australia) Ltd. When SteveJones entered into the contract to buy drill from Thor Mining Machinery Ltd, the companywas not registered. According to Section 131 of the Corporations Act 2001, Steve shall not bebound to pay any damages if WA Gold exploration Ltd ratifies the contract within areasonable time after its registration. As the company did not ratify the pre-registrationcontract, Steve shall be liable to pay damages for causing breach of the contract. While, thecontract with Volvo Trucks (Australia) Ltd, was entered into by the board of the WA GoldExploration Ltd. According to the Corporations Act 2001 a company is liable to pay out themoney for its contract. As the company is a separate legal entity, Steve cannot be personallyliable to pay the money which was promised to be paid to Volvo Trucks (Australia) ltd by thecompany. The liability to pay the $500000 belongs to the WA Gold Exploration Ltd, Stevecannot be sued for causing breach of contract and his personal assets are not exposed to anyliability. It has been provided under the Section 1.5.1 of the Corporations Act 2001 thedirector of a company can be held liable for the debts incurred by the company, when thecompany is unable to pay those debts. As Steve was not a director of the company, hispersonal assets are not the liability of the company.ConclusionFrom the above discussion it can be concluded that, Steve is liable only for causingbreach of contract to Thor Mining Machinery Ltd. He cannot be held liable for paying thecost to Volvo Trucks (Australia) Ltd.
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