Legal Regulation of Business Structures Hypothetical Assignment
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Added on 2020-04-07
Legal Regulation of Business Structures Hypothetical Assignment
Added on 2020-04-07
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Running Head: LEGAL REGULATION OF BUSINESS STRUCTURESLegal Regulation of Business StructuresHypothetical AssignmentName of StudentName of University
LEGAL REGULATION OF BUSINESS STRUCTURES 2Answer 1: Sunshine Scooter Art Pty Ltd is a proprietary company of Australia duly registered with ASIC and has three directors, viz., Jana Jones, Adrian Allport and Bob Golding. (a)The contract that has been entered into by Bob on behalf of the company with Computer Supplies Pty Ltd for $8,000 for the delivery of ten computers is a binding contract. The general rule which is laid down in the Corporations Act 2001 (Cth) is that, except otherwise contracted between the parties, where a company has more than one directors, any contract with such company can be executed only if the contract has been signed by at least two directors of the company1. Further it has also been held by the courts in various cases that where there are more than one directors in a company, a director of such company who is acting individually is not authorized to bind the company by virtue of his position2. A director cannot bind the company by his acts on behalf of the companyunless he is expressly given the authority by the board to do so. But in the instant case theconstitution of the company lays down that a contract of an amount more than $10,000, which has received approval of the board by a resolution passed and has been executed by at least two directors, will be binding on the company. Here, the contract which was entered into by Bob on behalf of the company with Computer Supplies Pty Ltd for delivery of ten computers was a contract for $8,000, an amount which is less than $10,000 as was required by the constitution of the company. The constitution of the company does not makes any provision regarding the contracts of amount smaller than $10,000, therefore, it is presumed that the directors had authority to act on behalf of the company for cases otherwise. Further the Corporations Act also lays down that if a third party enters into a contract with the company where there are more than one directors, the former has right to make an assumption that the latter has been authorized to act on behalf of the companyand that all the requirements of the constitution and the law has been complied with3. Also the third party has the right to make an assumption that the director who is 1Corporations Act 2001 (Cth) s 127(1)(a).2Northside Developments v Registrar General (1990) HCA 32; Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253.3Corporations Act 2001 (Cth) s 129(1).
LEGAL REGULATION OF BUSINESS STRUCTURES 3representing the company is duly appointed and authorized by the members of the company to make such appearance on behalf of the company4. In the instant case also the company is registered with the ASIC and therefore the Computer Supplies Pty Ltd has right to make an assumption that Bob was duly authorized to enter into contracts on behalf of the company.As per the observations made above it can be concluded that for the contract that was entered into by Bob on behalf of the company was a valid contract as under Section 129 he is presumed to be authorized by the company to enter into contracts with third parties and therefore, the Sunshine Scooter Art Pty Ltd is bound by the contract and the directors are advised to make payment of $8,000 on behalf of the company to the Computer Supplies Pty Ltd for the supply of ten computers made by the latter to the former.(b)The contract that has been entered into by Bob on behalf of the company with Plastica Pty Ltd for $50,000 is not a binding contract. The reason that can be given for the conclusion is that firstly, according to the law that has been laid down in the CorporationsAct 2001 (Cth) except in cases where a contrary contract has been entered into by the parties, a company which has more directors than one and any contract has been entered into on behalf of such company, such contract can be enforced only if it has been signed by at least two directors of such company5. Further as per the rules laid down by differentcourts if there are more than one director in a company and a director is acting independently, he has no authority to bind the company by virtue of his position6. A director can bind the company by his acts only if he has been given an express authority by the board to do so. Also according to the constitution of the company in the instant case a contract of an amount more than $10,000 will be executable and binding on the company only if such contract has received approval of the board by a resolution passed for the purpose and has been signed by at least two directors of the company. Here, the contract which was entered into by Bob on behalf of the company with Plastica Pty Ltd for an amount of $50,000 was not made in accordance with the requirement of the 4Corporations Act 2001 (Cth) s 129(2).5Corporations Act 2001 (Cth) s 127(1)(a).6Northside Developments v Registrar General (1990) HCA 32; Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253.
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