Business Law Answer 2022

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note:

BUSINESS LAW1
ANSWER 1:
ISSUE:
The issue to be decided in this part of the assignment is whether Motorbikes Pty Lts is
bound by the any contract under the Corporations Act 2001(Cth)1.
Rules:
In the case of Salomon v A Salomon & Co Ltd2, the doctrine of corporate personality was
established such that creditors of a company that has turned insolvent cannot sue the
shareholders of the company for the payment of the unpaid debts.
Section 124 of the Corporations Act 2001(Cth) provides the capacity as well as
the powers of the company in the eyes of law3. Subsection 1 of the said section states that a
company has the power and capacity to act as a natural person4. By the virtue of such power the
company can issue as well as cancel shares after company issue debentures distribute the
company’s property among its members cause the company to be registered and to do anything
that has been recognized by the law. In that respect the company has the power to enter into a
contract holder property as an owner and can even take part in legal proceedings. The company
even has the power to institute legal proceedings against other. Thus in brief it can be said that
the company has the power to do anything which is recognized by the law of the country or even
by the law of any foreign country. Subsection 2 of the said section provides that if any contract
1 Corporations Act 2001(Cth).
2 [1896] UKHL 1, [1897] AC 22.
3 Corporation Act 2001 (Cth) s 124.
4 Ibid.

BUSINESS LAW2
entered by the company is not regarding its best interest then such contract does not become
invalid5.
A company can perform its applications and exercise its powers by various methods and
procedures. Sections 126 and 127 provide various manners by which company can execute a
contract. Under Section 126 it is said that an individual can be empowered and authorized by the
company to act as his agent and the act performed or committed by such agent is binding on it6.
Hence if the agent executes any document by his signature then it will be regarded as that
document is executed by the company itself.
Subsection 1 of section 127 provides that a contract can be executed in a valid manner by
the company7. This section states that the company has the authority to execute any agreement
provided at least one director together with Company Secretary or two directors have signed it.
However this is not required in a sole company.
Moreover sub section 2 of the section 127 enumerates that two directors or one company
secretary along with one director have the authority to get a contract executed by the use of a
common seal of such company which will act as the witness to the document8.
Application
The facts of the present case must be analyzed in the light of the incorporation rules and
the rules of executing the contract discussed in the rules part. From the facts of the case it
appears that Michael and Tim both are very much passionate about motorcycles and by virtue of
each day is published a company in the name of a company in the name of Motorbikes Pty Ltd.
5 Corporation Act 2001 (Cth) s 124(2).
6 Corporation Act 2001 (Cth) s 126.
7 Corporation Act 2001 (Cth) s 127(1).
8 Corporation Act 2001 (Cth) s 127(2).