Corporations Law | Assignment-1

Running head: CORPORATIONS LAW
Corporations Law
Name of the Student
Name of the University
Author Note

CORPORATIONS LAW1
Part 1:
Issue:
The issue here is whether the WA Lithium Refinery is entitled to sue Michael
Danvers for the contract breach and whether the AES Limited can sue for 250000 $.
Law:
Any individual who entered into contract in the company’s name with the authority of
such company has the potential to bind the company by that contract. However, section
131(1) given in the Corporations Act 2001 (Cth), referred as the CA, states that when any
individual person has entered into a contract in the company’s name but prior to its
incorporation and registration, in that case, the contract will bind the company after its
registration and incorporation too. This principle was entrenched in the decision of
Commonwealth Bank of Australia v Australian Solar Information Pty Ltd (1986) 11 ACLR
380. However, to enforce such contract, the company shall ratify the contract after the
company is incorporated and registered within a reasonable period of time. However, if any
company fails to ratify the contract, it bears a duty to compensate the party who was the party
to that particular contract. This was given in section 131(2) of the Act. Further, this principle
was supported by the decision of the case of ASIC v Westpac Banking Corporation (Liability
Trial) [2019] FCA.
Application:
In the instant case study, it is seen that Michael Danvers, who is an inventor had
devised a new type of lithium battery to be used in electric cars which is more efficient. He
made all the endeavours to form Ozzie E-Vehicles Pty Ltd, a company and register it with

CORPORATIONS LAW2
ASIC. Prior to the incorporation of the said company and also prior to its registration that was
made on March 1st, a contract was entered by him with another company named as WA
Lithium Refiners Pty Ltd with the intention of supplying 100 kg of lithium at the cost of $
50000. The product was scheduled to be delivered on April 15th. This said contract made by
Michael binds both the party, WA Lithium Refiners Pty Ltd and also the company, Ozzie E-
Vehicles Pty Ltd. This is due to the provisions enumerated in s. 131 (1), CA.
However, it is seen that position of Michael Danvers was taken by Sarah who became
the new Managing Director of the company in his place. But 100 number shares were
retained by Michael. After this the company did not accept the contract made with WA
Lithium Refiners and refused its execution. Due to this, the Ozzie E-Vehicles Pty Ltd,
company is liable to compensate for the breach of contract to WA Lithium Refiners. This was
construed in decision held in Aztech Science v Atlanta Aerospace (Woy Woy) [2005]
NSWCA 319. Additionally, the Ozzie E-Vehicles Pty Ltd did not execute the contract made
after it was incorporated with AES Ltd. As a result, this particular contract with AES Ltd was
binding on the company and not on Michael because such contract was executed in the name
of the company.
Conclusion:
Thus it can be inferred that WA Lithium Refinery is not entitled to sue Michael
Danvers for the contract breach and the AES Limited also cannot sue for 250000 $.
Part 2:
Issue:
The issue concerned in this part of the assignment is whether the two resolutions
passed by the Company have any validity as per Corporations Act 2001 (Cth), CA.