Commonwealth Bank of Australia

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

1CORPORATIONS LAW
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

2CORPORATIONS LAW
party. However, for the purpose of enforcing the contract the same needs to be ratified by the
company after being incorporated. This can be supported by the provisions contained u/s
131(1) of the CA. However, Michael has been removed from the office of the managing
director and has been a shareholder with 10% of the total shareholding. Consequent to that
the company refused to perform the contract with WA Lithium Refiners Pty Ltd. This will
require the company to compensate the WA Lithium Refiners Pty Ltd for the breach of the
contract. This can be supported with the case of Aztech Science v Atlanta Aerospace (Woy
Woy) [2005] NSWCA 319. Moreover, they also failed to carry out the contract with AES
Ltd. subsequent to the incorporation. This would require the contract to be binding upon the
company and not on Michael as the same has been instituted by Michael under the name of
the company.
Conclusion
Both WA Lithium Refineries and AES Ltd. are not entitled to sue Michael for the
contravention of contract.
Issue b
Whether the two resolutions that have been passed by the company are valid.
Rule
The notice of the meeting of a company needs to be provided to each of the members of a
company as per the provisions contained u/s 249J of the CA. Such a notice of the meeting
needs to be extended to the members personally and such a communication may include post
or any other electronic method. As per the provisions contained u/s 1322 of the CA, a
meeting cannot be held as invalid because of the accidental failure of the serving of the notice

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to any of the members. However, if such an irregular act of not serving the notice seems to be
unjust to the court, it may render the meeting to be invalid.
Application
In the present situation, a notice for an Extraordinary General Meeting of shareholders has
been sent by the board. The notice of that meeting has not been sent to Michael for an
accidental oversight. Consequently, Notice of two resolutions were included among the
paperwork attached to the notice of the meeting: Resolution 1 to relocate the company’s
head office from Sydney to Melbourne and Resolution 2 to change the name of the company
to Electro-Vehicles Pty Ltd. Both resolutions were accompanied by full explanatory
documents from the board. Apart from Michael, one other shareholder was not present.
Although, the notice needs to be given to the shareholder as per the provisions in s 131 of the
CA, but as per the provisions contained in s 1322 of the CA, a meeting cannot be held as
invalid because of the accidental failure of the serving of the notice to any of the members.
However, if such an irregular act of not serving the notice seems to be unjust to the court, it
may render the meeting to be invalid. Hence, it can be stated that the meeting will not be
regarded as invalid as the accidental failure to provide a notice of the meeting to a member
would not render the proceeding to be invalid. However, if the court can be made satisfied
about the fact that such an accidental breach to provide notice is not just, it can render the
meeting and the resolutions invalid.
Conclusion
The two resolutions that have been passed by the company are valid. However, if the court
can be made satisfied about the fact that such an accidental breach to provide notice is not
just, it can render the meeting and the resolutions invalid.

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Reference
Aztech Science v Atlanta Aerospace (Woy Woy) [2005] NSWCA 319
Commonwealth Bank of Australia v Australian Solar Information Pty Ltd (1986) 11 ACLR
380
The Corporations Act 2001 (Cth)