Commonwealth Bank of Australia

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

CORPORATIONS LAW1
Issue a
Whether WA Lithium Refineries is entitled to sue Michael for the contravention of
contract and by AES Ltd for $250000.
Rule
Any individual who has been instituting a contract under the name and authorisation of the
company has the effect of binding the company by the terms of the same. However, as per s
131(1) of the Corporations Act 2001 (Cth) (CA), any contract that an individual has instituted
under the name of the company but prior to the incorporation of the company would be
applicable upon the company even after the incorporation of the company. this come in lines
with the case of Commonwealth Bank of Australia v Australian Solar Information Pty Ltd
(1986) 11 ACLR 380. However, for the purpose of enforcing the contract, the company is
under an obligation to effect a ratification of the contract that has been made prior to such
incorporation within an agreed or reasonable time. Any company who fails to ratify such a
contract needs to compensate the other party as per s 131(2) of the CA. This comes in lines
with the case of Aztech Science v Atlanta Aerospace (Woy Woy) [2005] NSWCA 319.
Application
In the instant scenario, Michael Danver has invented a new, more efficient lithium battery
for electric cars and he resolved has established a company named Ozzie E-Vehicles Pty Ltd,
with ASIC. Prior to the incorporation of the company which has been effected on 1 March,
Michael has entered into a contract with WA Lithium Refiners Pty Ltd, with ASIC for the
supply of 100kg of Lithium for a price of $50,000. The delivery of the same has been due in
15th April. This required the contract to be binding upon the company as well as the other