Directors' Duties and Company Law
Added on 2020-04-07
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Running head: BUSINESS LAWBusiness lawName of the StudentName of the UniversityAuthor Note
1BUSINESS LAWIntroduction This part of the paper is to determine the contractual capacity of organizations and itsagent. The section also analyzes when an organization is bound to a contract entered upon by itsagent. The paper also highlights the provisions related to pre-registration contracts entered uponby an organization. The first issue in the case is to determine the liability of Sunshine Scooter ArtPty Ltd (SSA) in relation to the contract with Computer Supplies Pty Ltd. The second issue inthis case is to find out that whether can be held liable in relation to the contract with Plastica PtyLtd. Relevant lawAccording to Section 124 of the CA a company has the power and legal capacity, like anindividual to get into a contract with another person. This capacity of the company is not affectedeven it is found that the contract is not in the best interest of the company1. As per Section 125 of the CA the constitution of the company may limit the powers ofcompany to get into a transaction. The provision clearly provides the even if it is expresslymentioned in the constitution that a power of a company is limited in relation to a transaction, thetransaction does not merely become void if it is committed by the company2. Section 126 of the CA states that any individual who acts with the implied or expressedauthority of the company has the right to enter into an act of making, discharging, ratifying orvarying a contract on behalf of the company. This power of the agent can be carried out evenwithout the use of the common seal of the company3. 1 Corporation Act 2001 (Cth) at Section 1242 Corporation Act 2001 (Cth) at Section 1253 Corporation Act 2001 (Cth) at Section 126
2BUSINESS LAWIt has been expressly provided by section 127 of the CA that the a company is allowed toexecute a document without the use of the common seal of the company if such contract issigned by at least two directors of the company when the company has more than one director. Inaddition where the common seal is fixed to a contract it would only be executed if it is witnessedby at least two directors of the company4. According to section 231 of the CA in case an individual gets into a contract or proposes to getinto a contract acting as an agent of the company on behalf of it, or for the interest of thecompany before the company has been registered, the organization is has a legally binding rightto the contract if the company when registered ratifies the contract within the provided timewhich has been agreed by the parties of the contract and where the time has not been agreed thanwithin a reasonable time5. In addition the section provides that it is the liability of an individual to be held liable for anydamages to another party who entered into the pre-registration contract if the company does notget registered or the company does not ratify the contract in accordance to subpart 1 of thesection. The amount which such person may be held liable for is the same amount which thecompany would have been liable to pay under the contract6. Moreover any legal proceeding is initiated to recover the damages which can be claimedunder subpart 2 of the section as the company has become registered and is not willing to ratifythe contract or enter into a substitute contract, the court has the power to do anything in relationto the circumstances of the case including the orders which would direct the company to pay all4 Corporation Act 2001 (Cth) at Section 1275 Corporation Act 2001 (Cth) at Section 2316 Corporation Act 2001 (Cth) at Section 231(1)
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