logo

Principle of Corporation Law: Assignment

   

Added on  2020-03-23

12 Pages2589 Words42 Views
Running Head: Law 1Law

Law2Answer 1Issue: Part a- whether any contract exists between the Sunshine Scooter Art Pty Ltd (SSA) andComputer Supplies Pty Ltd?Part b- whether any contract exists between the Sunshine Scooter Art Pty Ltd (SSA) and PlasticaPty Ltd?Law:It is necessary for owners of the company to file Memorandum of Association with thecompany’s Registrar at the time of the incorporation of the company. It is necessary to file MOAfor the purpose of making the public free to check the documents of the company before enteringinto any contract with the company. In other words, outsiders entering in contract with thecompany can check whether there is any limitation of power on the company or nature ofbusiness. Because of the above provision it becomes easy for outsiders to know the actualposition of the company and limitation imposed on directors. The main aim behind this rule istoo aware the outsiders about any limitation of power imposed on directors or authorized personand irregularities in the company. This provision of the corporation Act is known as doctrine ofconstructive notice. This principle of corporation law create problem for outsiders who does not have any knowledgeregarding the defect in the internal procedure of the company. For solving this issue, Commonlaw introduced doctrine of Indoor Management. Generally, company imposed power to manage the affairs of the company in the board ofdirectors of the company and board can access this power by passing board resolution in the duly

Law3held meeting. However, these powers are imposed by company with some restrictions, such assome decisions of the company can only be taken by the board after the approval of thecompany’s members (Krawitz, 2002). This concept of law is not considered as fair because it imposed unnecessary burden on theoutsiders of the company to check whether person is authorized by the company to enter intotransaction and whether all the internal rules and regulations of the company are compiled. Thesefactors raise the requirement to protect the interest of third parties dealing with the company. In Australia, common law develops the doctrine of indoor management and indulges the conceptof this doctrine in Corporation law through section 128 and 129 of the Corporation Act 201.These provisions protect the outsider’s interest while entering into transactions with thecompany. Section 128 of the Corporation Act 2001 states, person has right to make assumptions undersection 129 of the Act while dealing with the company, and company cannot rely on the groundthat assumptions made by the outsiders are not correct. Person has right to make the assumption under section 129 of the Act related to the dealingsconducted with another person who directly or indirectly connected with the company.Therefore, company and any other person cannot rely on the ground that assumptions made bythe person are not relevant. This assumption can be made by the person even though officer and agent of the company act infraudulent manner related to the dealings. It must be noted that assumption under section 129cannot be made if outsider at the time of dealing suspects or knew that assumption made by himis incorrect in nature (Corporation Act, 2001).

Law4This rule of Indoor management was approved by High Court of Australia in case law AlbertGardens (Manly) Ltd v. Mercantile Credits Ltd. It must be noted that this case was consideredas important case for understanding the doctrine of Indoor management. Section 129 of the Act states that outsider can make following assumptions while dealing withthe company:Person has right to assume that company complied with the constitution of the company and anyprovision of the Corporation Act which is applied on company as replaceable rule while enteringinto contract with the outsiders. Person also has right to assume that any director or company secretary who appears before thepublic as the representative of the company has been duly appointed by the company, and suchperson is authorized to perform the duties and exercise the power as the director or secretary ofthe company which can be performed by any reasonable person acting as director or officer ofthe similar company. Person also has right to assume that officer or agent of the company who appears before thepublic as the representative of the company has been duly appointed by the company, and suchperson is authorized to perform the duties and exercise the power as the officer or agent of thecompany which can be performed by any reasonable person acting as agent or officer of thesimilar company. Person can make assumption that person appointed as officer and agent of the company isproperly performing their duties to the company (Corporation Act, 2001). It must be noted that this rule is applied on those outsiders only who are working with companyand entered into transaction with good faith, and they does not have any reason to believe thatany irregularity exists in the company and internal rules and regulations are not compiled by the

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Common Law Case Study Contracts
|11
|2709
|36

Corporation Act, 2001- Case Studies
|10
|2387
|212

Question 1 (a) Sunshine Scooter Art Pty Limited
|6
|2025
|434

Application of Section 125, Section 140 and Authority of Representative of Company
|7
|1766
|86

TMA 01 - Assignment on Contract Law
|10
|2723
|57

Business Law
|9
|2334
|449