Company Law and Contractual Binding
Added on 2020-03-16
7 Pages1939 Words56 Views
|
|
|
1Topic:Student Name:University:
2Explain whether the car finance company can argue that it has a valid mortgage over theoffice?Issue: In the present case, the first issue is related with the purchase of sports car by John worth$80,000. For this purpose he has obtained a finance lease in the name of the company and he alsogave a guarantee in the form of a mortgage over the office building belonging to KakaduTourism Services Pty Ltd.In the present case, it needs to be noted that the loan has been taken by John for his personal use,to purchase a sports car worth $80,000. In this way, Kakadu Tourism Services Pty Ltd (KTS)was not going to be benefited or derive any commercial advantage from the loan. Due to thereason that a corporation is a fictitious legal entity, it has to act through its agents. These agentscan be the directors or the other officers, employees or official agents of the company. Rule: It has been mentioned in section 126, Corporations Act the seal of the company is notrequired for the purpose of creating a binding contract. If the agent of the company or itsemployee or some other person has been authorized for this purpose, and the person has actedwithin the authority provided by the company. Therefore, the law provides that if an individual isacting within the scope of express or implied authority provided by the company, may enter intoa legally enforceable contract on behalf of the company (Baxt, Fletcher and Fridman, 2008). Inthis regard, it also needs to be stated that the directors or the other officers of the corporationenjoyed all the powers that have been given to them under the constitution of the corporation orthe replaceable rules. It is also worth mentioning that the principle of ultra vires has been doneaway with. As a result, any of the company cannot be treated as invalid only on account of thereason that the act of the company is contrary to or beyond the limitations of the prohibitions thathave been mentioned in the Constitution of the company. These include the contracts or the
3promises that are against the provisions of the Constitution of the company (Cassidy, 2013). Thisprovision has been mentioned in section 125(2) of the Corporations Act. In this regard, anotherprovision is present in section 129 of the Act. It provides that, generally, it is permissible for anoutsider to assume that the person, acting on behalf of the corporation does have the necessaryauthority and the person is acting within the scope of the company's constitution. Application: In this regard, section 127 of the Act prescribes the ways in which a document maybe validly exhibited by a company. Therefore, briefly speaking, a document may be executed bya company in accordance with the provisions of section 127 with or without the seal of thecompany. The law provides that in case the company has received, it is not necessary to use it(Ciro and Symes, 2013). Hence, usually the execution of document according to section 127 takesplace without the seal of the company. In such a case, a document may be validly executed if thedocument is signed by (i) to directors of the company; (ii) , a director and company secretary (iii)or in case of provides the company, having sole director, who is also the sole secretary by suchdirector. Conclusion: In the present case, this requirement has not been fulfilled. As a result, it can beconcluded that the mortgage over the office building of KTS, executed by John for purchasingthe sports car was not validly executed.Hence, it cannot be argued by the car finance company that it has a valid mortgage over theoffice belonging to KTS.
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents