Analysis of Legal Contracts in Case Studies

Contents
Question 1..................................................................................................................................2
Issue:......................................................................................................................................2
Rule:......................................................................................................................................2
Application:..........................................................................................................................3
Conclusion:...........................................................................................................................3
Question 2..................................................................................................................................4
Application:..........................................................................................................................4
Conclusion:...........................................................................................................................5

Question 1
Issue:
The issue in the given case study is to analyse whether the company Motorbikes Pty Ltd is
bound by the legal contract as signed by Tim, the company secretary of the company,
Michelle, the director of the company, and John, the seller of the vehicle.
Rule:
The Corporations Act 2001, (Cth) governs the matters related to the companies. As denoted
in the section 124 (1) of the act, a company is regarded as a separate legal entity in the eyes
of the law, independent of its owners1. Hence, a company registered under the act has the
capacity to enter into the contracts with the other persons in its own identity, through the
managerial body. Section 126 of the act further confers the duty on the agents of the company
to enact the said contracts on behalf of the company2. Thus, the contracts on behalf can be
entered into by the following two persons, firstly the company secretary or the directors of
the company in the capacity of agents, and been rendered the power as per the constitution.
Secondly, the contracts can be entered into by an agent who is specifically authorised by the
directors of the company to do so. It is further significant to note that as mandated by the
section 127 of the act, such contracts on behalf of the company must be in accordance with
the use of the common seal of the company. The section 127 (1) is also worth noting for the
contracts in the name of the company which states the manner in which the contracts must be
entered3. According to the said section, the contracts must be signed in the following two
manner. Firstly, the company secretary of the company and one of the directors can sign it;
and secondly the two of the directors of the company on whose behalf the said contract has
been executed can sign it. It is also imperative to note that the third parties can believe the
enactment of the contract and may make assumptions when the manner of signing the
contract as laid down in the section 127 is fulfilled. Section 129 of the act specifies the
condition of the third party assumptions4. This implies, that a third party can make an
assumption that the applicable statutory requirement has been complied with in terms of the
internal conditions of the company for contract execution, if they are no significant reasons to
not to believe the same. The principle case of Knight Frank Australia Pty Ltd and Paley
1 Corporations Act, 2001, sec 124(1)
2 Corporations Act, 2001, sec 126
3 Corporations Act, 2001, sec 127
4 Corporations Act, 2001, sec 129