Business Law Assignment - Corporation Act 2001
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Added on 2020-03-16
Business Law Assignment - Corporation Act 2001
Added on 2020-03-16
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Running head: BUSINESS LAWBusiness lawName of the StudentName of the UniversityAuthor Note
BUSINESS LAW1Question 1 Contractual capacity of a Company In this section of the assignment the powers of an agent in relation to binding a company to itsacts would be discussed in the light of the Corporation Act 2001 (Cth) (CA). This part also dealswhat happens if a person gets into a contract in the name of the organization with a third partybefore the organization has been registered or incorporated. The first question is related to theissue that Sunshine Scooter Art Pty Ltd (SSA) has a binding contract with CS and PP as enteredupon by Bob one of its directors or not. The facts of the case In this case it has been provided that a company has been planned to be incorporated by Bob,Adrian and Jana for the purpose of making scooters. Bob has got into a contract with CS for thepurpose of providing SSA computers worth $8000 before the company has been incorporated.Bob has also got into contract with PP worth $50000 for supply of goods for mass production ofscooter after the company has been incorporated. The constitution of company provides thattransition above $10000 are not valid unless the approval of board is taken. The rules as provided by the CASection 124 of the CA provides power to an organization to get into contract in the same way anatural person can do with a third party. In addition even if such contract is not in the interest ofthe company the capacity of the organization would not be disturbed1. 1 Corporation Act 2001 (Cth) at section 124.
BUSINESS LAW2Section 125 of the CA provides power to the directors of an organization to restrict the powerwhich can be exercised by the organization with respect to dealings with a third party through itsconstitution or replaceable rules. However it has been further provided by the section that merelybecause the constitution restricts the power of the company to get into a transaction the dealingcannot be declared as void2. Section 126 of the CA provides powers to a person who is working on behalf of the companyand has been provided by implied or express authority in relation to agency law to ratify,discharge, make or vary a contract between the company and a third party even if the commonseal which the company has is not used by such person in relation to the dealing3. In order to execute a document with respect to dealing between a company and a third party it isnecessary that such document is signed by one director and one company secretory of thecompany or two directors mandatorily according to section 127 of the CA. If the seal of thecompany is used in the document, also has to be witnessed by the same persons mentionedabove4.Section 131 of the CA provides remedies to the third party who has got into a contract with acompany before the company has been registered. As per the rule of the subsection (1) anyperson who gets into a dealing with a third party on behalf of the company before it has beenregistered has the right to the benefits of the dealing if after registration the contract has beenratified by the company within reasonable or agreed time. Subsection (2) states that a third partyis entitled to damages in case the contract has not been ratified by the company according to theprovisions of subsection (1) after registration or the company is not been able to get registered.2 Corporation Act 2001 (Cth) at section 125.3 Corporation Act 2001 (Cth) at section 126.4 Corporation Act 2001 (Cth) at section 127.
BUSINESS LAW3The damages would be paid by the person who got into the contract on behalf of the companyand the amount would be the same which the company had to pay to the third party. As persubsection (3) in case a third party commences legal action as the company is not ratifying thecontract the court may allow any order it deems appropriate which may also include ordering thecompany to pay damages to the party totally or in part, give back the property received by thethird party or pay damages to the third party5. Under section 128 a person has the power to make assumptions provided through section 129and such assumption cannot be declared as incorrect by the company in legal proceedings.Section 128 (3) states even when the agent acted in a fraudulent manner the power of assumptionexist. Section 128 (4) states that the rule of assumption is not applicable if during theassumptions there was knowledge or doubt of the assumption being incorrect6. As per section 129(1) a person has been given the power to assume that an act entered upon withthe agent of the company is in compliance with the rules of the constitution and replaceablerules7. Cases In the case of Lion Nathan Australia Pty Ltd v Coopers Brewery Limited8it was providedby the court that only because the constitution of the company does not allow a dealing it cannotbe declared invalid. 5 Corporation Act 2001 (Cth) at section 131. 6 Corporation Act 2001 (Cth) at section 128. 7 Corporation Act 2001 (Cth) at section 129(1)8(2006) 59 ACSR 444
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