Business Law: Incorporation, Execution of Contracts and Liability

This article discusses the incorporation of a company, execution of contracts, and liability under Business Law. It covers the rules and regulations under the Corporations Act 2001 (Cth) and common law. The article also provides case law examples to support the discussion.

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

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Answer 1
Issue
Whether Jenny would be bound to the exclusion clause which the bus services have
attempted to incorporate into the contract
Law
An express term is a term of the contract which has been contemplated by the parties and
can be added in a contract via a notice or signature.
In the case of L'Estrange V Graucob [1934] 2 KB 394 a rule had been made by the
judges according to which any person who has got into a contract through signature would be
bound by all its clauses even if he claims that he has not read the terms of the document. This
rule is however not absolute and can be challenged in a few specific situations. For instance, in
the case of Curtis v Chemical Cleaning Co [1951] 1 KB 805 the plaintiff had went to dry
cleaners to get her dress cleaned. She had been asked to sign a document which had an exclusion
clause but she was told that the document was a regular receipt. The court in this case held that
the plaintiff was not bound to the clause even if she had signed as the staff had misrepresented
the real nature of the document from the plaintiff.
There is a requirement that any express term would become a contractual term generally
if it has been brought to the attention of the other party before contract is created via prior notice.
The rule had been discussed in the case of Oceanic Sun v Fay [1988] HCA 32. In this case, the
plaintiff had booked for a ship journey which was in Queensland but she was notified that she
would be provided with a ticket in Greece. She was provided the ticket which had an exclusion

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clause limiting the liability of the defendant. The court stated in this case that the clause can only
be added to the contract if the plaintiff had been given prior notice with respect to the terms. This
means that the notice is to be provided before or at the time when the contract is formed. The
rule had been further asserted in the case of Olley v Marlborough Court Ltd [1949] 1 KB 532 the
court stated that the attempt of the defendant to add a term in contract by hanging a notice behind
the door inside a hotel room is not valid. The cause of the decision is that the agreement between
the parties was concluded at the desk when the plaintiff was legally obliged to make payment for
the room hire. In Thornton v Shoe Lane Parking [1970] EWCA Civ 2 also it had been concluded
that the plaintiff was not provided with any form of prior notice about an exclusion clause as it
was inside the parking and the contract had been created when the person entered the parking
and paid for it. Further the court was of a view that where the terms are of an unusual nature they
party who seek to enforce it must provide special notice in relation to its existence.
Application
Whether Jenny would be bound to the exclusion clause which the bus services have
attempted to incorporate into the contract depends upon the incorporation of the clause into the
contract between her and the bus service. An express term is a term of the contract which has
been contemplated by the parties and can be added in a contract via a notice or signature. The
term in context is an express term. This can be added by signature and notice. Jenny has signed
the paper on which this term was present. The application of L'Estrange V Graucob denotes that
any person who has got into a contract through signature would be bound by all its clauses even
if he claims that he has not read the terms of the document. Jenny would be bound to the terms as
well. This rule is however not absolute and can be challenged in a few specific situations. Thus
in the situation of Jenny the application of the case of Curtis v Chemical Cleaning Co can be

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done. The application would mean that Jenny is not bound to the term. This is because when she
had been asked to sign the term the staff had misrepresented the true nature of the document by
stating that it only confirm her personal information. Further, there is a requirement that any
express term would become a contractual term generally if it has been brought to the attention of
the other party before contract is created via prior notice. This rule would mean that the
exclusion clause is not a part of the contract. This is because Jenny had purchased the ticket form
a local travel agent and the contract was formed between the parties when the purchase was
made and not when the ticket had been before Jenny entered the bus. There was no prior notice
provided to Jenny. This argument is supported by the cases of Parker v South Eastern Railway
Co and Olley v Marlborough Court Ltd as here also the court denied the inclusion of the
exclusion clause without prior notice being provided to the other party. Further, the exclusion
clause in an unusual term according to Thornton v Shoe Lane Parking as for adding the term in
the contract there is requirement of providing a special notice such as highlighting the term. In
this situation no such special notice have been provided with respect to the exclusion clause to
Jenny. The application of the rules regarding the inclusion of exclusion clause into the contract
suggest that even if the document was signed by Jenny the cause has not been incorporated
legally.
Conclusion
Jenny would not be bound to the exclusion clause which the bus services have attempted
to incorporate into the contract even if she has signed it because there was no prior notice
provided to her and the signature was obtained by misrepresentation.

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References
Fitzpatrick J, Symes C, Veljanovski A & Parker D, Business and Corporations Law 3rd ed.
(2017), LexisNexis Butterworths Australia.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and
materials. Wolters Kluwer Law & Business.

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Answer 2
Issue
The initial issue is in relation to whether Cavers Pty Ltd are entitled to make any assumption
under the Corporations Act 2001 (Cth) or common law with respect to the contract.
The issues is also to find out who is liable to pay Irish Linen Ltd under the rules of the CA.
Law
Under 112 of the CA a company becomes a separate legal entity once it has been brought
to existence through incorporation procedures.
Powers have been provided to a company registered in Australia to function as a natural
person like owing property, getting into contract and being a party to a court case. These powers
are expressed under s 124 of CA.
As a company is not a natural person the CA expresses two ways which can be used
execute contracts on behalf of corporations. These ways have been mentioned in s 126 and 127
respectively. A contract under 126 is entitled to be executed by a person who is acting as an
agent of the company under the authority provided by it even without a common seal. A contract
can also be executed if the company has attached its common seal to it and it has been witnessed
by either two directors or a director and a secretary. This is allowed under s 127 (2). Even if
either two directors or a director and a secretary sign the contract it is deemed to be executed
without the seal under s 127(1). In the case of Knight Frank Australia Pty Ltd v Paley Properties
Pty Ltd [2014] the provisions of s 127 have been interpreted by the court by stating that the

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reliance on assumptions under s 129 is only possible if the execution of the document is under s
127.
In Royal British Bank v Turquand (1856) 6 E&B 327 the court made a rule that a third
person who is a party to the contract with a company can assume that the people to whom the
company has provided authority have complied with all its internal rules and regulations.
However, the third party must act in good faith to be able to rely on these provisions.
Section 131 of CA expresses rules regarding contract which are formed between a
company and a third party before the company has been formed. These are called pre-registration
contracts. Under s 131(1) a contract entered for the benefit of the company before registration
the company will be bound in case the contract is ratified in a time agreed or within a reasonable
time.
In case the contract is not ratified in the time discussed above the person who acted on
behalf of the company would be made liable. This is provided under s 131(2). The third party
can make a claim against the person. In s 131(3) it is stated that if the company has not ratified
the contract the court has the right to do anything such as order the person to pay all damages in
relation to the contract or tell the company to transfer the property which it has received under
the contract to the third party. The company may also be ruled to compensate the third party in
relation to the breach of contract. In case the contract is ratified by the company it is liable to pay
all cost in relation to the contract. In addition, the person can also be order to pay for the contract
in case the company does not pay.
Application

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Adam and Poh have formed a company called Master Plate Pty Ltd. This means that
Powers have been provided to a company registered in Australia to function as a natural person
like owing property, getting into contract and being a party to a court case. These powers are
expressed under s 124 of CA. it has been further provided that Adam has gone into a contract
with Irish Linen Ltd before the company is formed. This means that it is a pre-registration
contract and the provisions of s 131 will be applicable. It has been provided that the contract had
been formed on 22 February and the company was registered on 24 February and the contract
was ratified on 30 March. This can be considered as a reasonable time. In s 131(3) it is stated
that if the company has not ratified the contract the court has the right order the person to pay all
damages in relation to the contract or tell the company to transfer the property which it has
received under the contract to the third party. In case the contract is ratified by the company it is
liable to pay all cost in relation to the contract. In addition, the person can also be order to pay
for the contract in case the company does not pay. Thus here if the either the company will have
to pay because of the ratification or Adam needs to pay under s 131(4).
It has been further stated that Adam has signed a contract with Cavers Pty Ltd and affixed
the common seal. A contract can also be executed if the company has attached its common seal
to it and it has been witnessed by either two directors or a director and a secretary. This is
allowed under s 127 (2). Thus means that the contract is not executed according to s 127. The
application of Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd signifies that the
reliance on assumptions under s 129 is only possible if the execution of the document is under s
127. However under the application of the Turquand case the other company can assume that the
people to whom the company has provided authority have complied with all its internal rules and
regulations. However, the third party must act in good faith to be able to rely on these provisions.

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Conclusion
Either Master Plate or Adam may be required to pay Irish
Cavers can rely on the assumptions provided by the Turquand case.

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References
Fitzpatrick et al. 2017 Business and Corporations Law 3rd edition
Milman, D., 2017. A review of developments in partnership law 2017. Sweet and Maxwell's
Company Law Newsletter, (399), pp.1-5.
Talbot, L., 2015. Critical company law. Routledge.