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Corporation Act, 2001- Case Studies

   

Added on  2019-11-26

10 Pages2387 Words212 Views
Running Head: Law 1Law
Corporation Act, 2001- Case Studies_1
Law2Answer 1Issue: Whether SSA is bound to the contract entered with:Part a- computer Supplies Pty Ltd.Part b- Plastica Pty Ltd. Law: It is a general rule that company is bound by contract which is signed by an authorizedagent of the company on company’s behalf. Usually, companies denied the authority of the agentfor the purpose of escaping its liability under the contract. Therefore, it is necessary for outsidersto check whether agent has actual or ostensible authority to enter into transaction on behalf of thecompany. In number of cases, companies with multi directors provide powers related to managing theaffairs of the company to the directors collectively as board through their constitution orreplaceable rules. Generally, company does not grant the management power which binds thecompany to the single director. Board collectively has power to enter into any contract bypassing the resolution which binds the company, but this authority is not vested in the individualdirector for entering into contract with outsider for the purpose of binding the company. This general rule is not fair because it is not possible for outsiders to check whether agent hasactual authority or whether all the internal rules are compiled by the company. For this purpose,exception to this general rule was introduced by the common law that is Doctrine of IndoorManagement (Krawitz, 2002).
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Law3IMR states, if any outsider dealing with the company in god faith, and such outsider does nothave any reasonable ground to suspect any irregularity or impropriety which affect the internalrules and regulation of the company. In other words, outsider of the company is not bound tocheck whether agent compiled with the internal rules and regulations of the company or not.Outsider has power to assume that agent compiled with all the internal steps of the company.This assumption is known as rule of indoor management, because it deals with all the internalmatters of the company. Therefore, for taking the defense of IMR it is necessary that matter mustbe related to the internal management of the company (ILO, 2014). Outsider has power to assume following things:Company does not made any procedural defect while appointing the director.Board meeting of directors has been called and held as per the norms of the Act.Approval required under board or general meeting or under constitution of the companyhas been obtained. Usually, IMR is applied when outsider is contracting with the company, and it mainly use for thepurpose of assisting the person having any other dealings relating to the company. It must benoted that IMR is not applied on companies only; it is applicable on private corporations also(Morrison, n.d.). This rule was established by common law in case law Royal British Bank v. Turquand. In thiscase, Court stated that outsiders has right to assume that management of the company and itsofficers has complied with the rules of the company. In this directors of the company provideguarantee to the bank for borrowing the money and they fail to compile with the internal
Corporation Act, 2001- Case Studies_3

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