Liability of Master Plate Pty Ltd and SwimmingPool Co Ltd: Analysis of Agency Law

Question 1
Issue: The issue in this question is related with the liability regarding the contract created by
Adam with Irish Linen Ltd. Similarly, it needs to be seen if Master Plate Ltd can be held liable
for the contract that was created by Adam with Carvers Pty Ltd.
Rule: The first issue is concerned with the enforceability of pre-incorporation contract. The
Corporations Act, 2001 deals with the issue of pre-registration contracts in Part 2B.3. The
relevant sections in this regard section 131, 132 and 133. It has been clearly mentioned in section
133 that the purpose of part 2B.3 is to replace any rights or liabilities that any person may
otherwise have regarding pre-registration contracts (Burnett, 2001). Consequently the earlier
statutory provisions as well as the common law provisions in this regard are no longer available
to the parties for establishing rights and liabilities (Cassidy, 2001).
Therefore it has been provided by the Corporations Act that a company is to be considered as
being bound by the contract if the company that can be reasonably identified with the contract,
has been registered and ratified the contract within the agreed time or if no such time has been
agreed by the parties, within reasonable time of creating the contract (Aztech Science v Atlanta
Aerospace, 2005). In case the company has not been registered or if the company has registered
but it fails to ratify the contract or enters a substitute of the contract, in such a case the agent who
was entered into the contract on the off of the unregistered company may be held responsible for
the damage that may be suffered by the other party (Commonwealth Bank of Australia v
Australian Solar Information Pty Ltd., 1986).
Application: In this case, Adam had entered into a contract with Irish linen Ltd. The contract was
for the purchase of 18 monogrammed tablecloths. This contract was executed by Adam in the

name of Master Plate Pty Ltd. However, this contract was created by Adam on 22 February,
while the proposed company has registered on 24 February. As there was a dispute between
Adam and Poh, Master Plate failed to ratify the contract. Under these circumstances, as
mentioned above, it has been provided by the law that if the company fails to ratify the contract
within a reasonable time or within the time agreed, the contract cannot be enforced against the
company. However, in such a case, the agent or the promoter was entered into the contract on
behalf of the company can be held personally liable for the loss that may be suffered by the third-
party.
Therefore in the present case, Irish Linen, Ltd. had supplied the table cloths, but the company
was not paid for. Under these circumstances, due to the reason that Master Plate failed to ratify
the contract, Adam can be personally held responsible to pay Irish Linen Ltd.
Regarding the second issue, the contract has been created by Adam, using the company seal. In
this context, it has been provided by the law that did this several days in which a document may
be signed by the company (Fisher, 2001). There provides executing a document, it is necessary
that either the company should execute them according to the Corporations Act, 2001 or the
provisions mentioned in the Constitution of the company regarding the execution of documents
(Ford, 2001).
Section 127 provides the ways in which the document may be exhibited by a corporation.
Therefore, the Act provides that a document may be exhibited by the company by fixing its
common seal, where it has been witnessed by:
 Two directors;
 A director and company secretary;

 In case of proprietary company having sole director, who is also the sole secretary by
such director.
On the other hand, if the company still has not been used for executing a document, such
document may be executed by two directors, director and company secretary, and sole director in
case of propriety company having sole director and sole secretary (ANZ Banking Group Ltd v
Australian Glass and Mirrors Pty Ltd., 1991).
It is also been provided by the Corporations Act that certain assumptions can be made by the
people while dealing with corporations that a particular document has been duly exhibited by the
corporation if it appears that the document has been signed according to section 127. In this
regard, it has been mentioned in section 128 that a person dealing with a corporation is entitled to
make the assumptions that have been mentioned in section 129 (Barclays Finance Holdings Ltd v
Sturgess, 1985).
In this case, after the incorporation of the company, Adam decided to order restaurant quality
cutlery. This order was given to Carvers Pty Ltd. While entering into the contract on behalf of
Master Plate, Adam affixed the company seal and signed the contract. But in this case it needs to
be noted that Master Plate has two directors, Adam and Poh. On the other hand, the law requires
that in order to be valid, in the present is the document should have been signed by two directors
of the company or by a director and company secretary. The result is that in the present case,
Carvers cannot rely on the statutory launches that have been mentioned in the corporations act in
s. 129. As a result, in this case the contract created by Adam with Carvers cannot be enforced
against Master Plate Pty Ltd.