Business Law Report: Contractual Agreements and Corporate Law Analysis

This report analyzes two business law scenarios. The first case involves a contract dispute between a company (Motorbikes Pty Ltd) and a seller, focusing on the roles of the secretary and director and the validity of the contract under the Corporations Act 2001. It examines whether the company is bound by the contract and if rescission is an option. The second case explores a contract between Cakes Pty Ltd and a seller, examining the proper execution of a contract, the roles of directors and secretaries, and the implications of the company's seal, citing relevant sections of the Corporations Act and case law. The report concludes that the first contract is binding, while the second is not legally valid due to improper execution.

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
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Author Note

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Primary issue
In the given case the issue is to analyze the situation of Tim and Michelle who are the secretary
and the director of the company Motorbikes Pty Ltd respectively, in relation with the contract
that they have signed with John for buying his motorcycle.
Secondary issue
 There is the question of having a valid or legal contract among the parties.
 If the contract is valid then do Tim and Michelle have an option to rescind the contract?
Law
Section 126 of Corporation Act 2001 (Cth) explains that if any person has an implied or
expressed authority and work on company’s behalf, then he or she carries the power to
discharge, make or rectify the contract that is binding upon the company. There is no need of the
common seal of the organization to exercise the power to work on it. There are no other laws that
come in this section that is required to get the process completed for getting into the contract1.
If there is no permission provided by the state or territory then the company cannot get into the
contract or another thing is that if there are certain rights of the contract which is forbidden by
the state laws is provided to the company then also the company cannot get into the contract.
An individual who is working with the organization as per the section 129 of the Corporation Act
2001, has the right to accept the individual who is chosen as the director by the organization and
1 Corporation Act 2001 (Cth) s 126

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they have been employed by the organization and theseassumptions cannot be mentioned by the
organization as incorrect2.
According to the section 127 of the Corporation Act it has been mentioned that the document
might be accomplished by the organisation if the Common seal of the companyis not used and
the contract needs approval by the signatures of both the directors, a company secretary or a
director of the organisation and the only secretary or director of the organisation3.
As per the section 129 (5) of CA, it has been said that an individual can assume that the contract
has been properly implemented by the organization if they have contracted in relation to the
subsection of 127 (1)4. As given in the subsection 129 (5) in relation to dealing with the company
if the document has been implemented as the way it has been discussed, the other party has the
right to depend on the assumptions. An individual carries the right to assume that execution of
the documenthave been done with the Common seal of the company and the individual is
assumed to be sole secretary and director of the organization who must carry the right.
The court has stated, that an individual who is dealing with the organization and making a
contract with them must be bonafide and they must assume that contract is consistent and is in
the powers of the company’s constitution as per the case Royal British Bank v Turquand (1856) 6
El & Bl 325.
It has been stated according to the case of Northside Developments Pty Ltd v Registrar-General
(NSW)(1990) 170 CLR 1466, that authority should be represented by an individual who is
working on the company’s behalf and it must be done by the organization.
2 Corporation Act 2001 (Cth) s 129
3 Corporation Act 2001 (Cth) s 127
4 Corporation Act 2001 (Cth) s 129 (5)
5 Royal British Bank v Turquand (1856) 6 El & Bl 32
6 Northside Developments Pty Ltd v Registrar-General (NSW)(1990) 170 CLR 146

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According to the section 124(2) of the Corporation Act 2001, company’s legal capacity to get in
the contract is not harmed by the information that the contract might not give the best interest of
the organization7.
Application
In the above situation, Tim and Michelle are the secretary and directors respectively of the
above-mentioned organization. The company's work is to sell, buy and repair the motorcycles.
Tim and Michelle are very much in love with motorcycles.
The case states that a person named John wants to trade with his motorcycle and a contract was
made to buy the motorcycle. The contract was signed by Michelle and Tim. Later on, it was
realized that they want to get out of the contract as they have paid too much to buy that
motorcycle.
Tim and Michelle, the secretary and director of the company respectively have signed a contract
with the seller named Johnto buy the motorcycle and the company is bound by the contract.It has
been said in section 127 of the act, the organization can make a document to put into effect that
has been contracted by the company's directors even after the document does not have the
common seal of the organization. In this case, the assent is given by the company’s secretary and
the director to the contract of another party as per the section 129(5) of the CA. The company
might assume that the allowance has been given by the organization for the deal.
Tim and Michelle, cannot get out of the contract as it has been stated that the contract will not be
mentioned as invalid as it does not serve the best concern of the organization as per the section
124(2).
7 Corporation Act 2001 (Cth) s 124(2)

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Conclusion
It can be concluded that the contract that has been signed with John is bound on his company
named Motorbikes Pty Ltd and they cannot move out.
Answer 2
Issue
The issue that has been stated in this case is that whether George is legally bound by a contract
that he has signed with Cakes Pty Ltd.
Rule
The word contract is an agreement that is legally bound by both the parties who has signed the
contract. A contract cannot be withdrawn once formed until there is a breach of contract,
frustration, fraud or misrepresentation by another party.
A judgement was stated by the court that if the contract has been signed by the directors of the
organization without any problems then the organization is legally bound and if the contract has
not been signed properly then it cannot be enforced by the organizationin the case of Knight
Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 1038.
An individual has been provided with the right to assumption in a contract that is executed by the
organization as per the Section 129(6) of the CA if the file is fixed with the company's common
seal in relation to the section 127(2).
8 Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 103.

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Further, it has been observed that common seal is in relation to the section 127(2) of the
Corporation Act. An individual has the authority to assume any such person observing the
common seal and must state that they are the only secretary and the director of the organizationin
relation to make assumptions and they are holding both the offices.In addition, the officer has
been provided with the authority to authorize the document as the true copy.
A contract cannot be merely invalid if the company's constitution does not permit the company
to sign a contract as it is forbidden by the company's constitution as per the section 125 of the
CA9.
As per the section 127(2) of the Act, it has been said that an organization that carries a common
seal might execute the contract by fixing document’s seal and it must be seen by both the
directors of the organization10. According to the section 127(2) of the act, a contract can only be
put into effect by the organization if the parties who have signed the contract may depend on
assumptions that have been provided by the section 129(6) to deal with the organization.
Application
The situation is Gerard and Sylvia have taken a decision to purchase a cake shop as they are very
much fond of cakes. Both of them have named their company as “Cakes Pty Ltd”. The company
has been registered. The company was formed recently and the director of the organization was
9 Corporation Act 2001 (Cth) s 125
10 Corporation Act 2001 (Cth) s 127(2)

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Gerard. There was no position that was given to Sylvia in her company. Gerard’s mother was
made the other secretary of the company.
Another decision was to buy the cake shop from the owner named George through the
organization. In order to buy that cake shop, they had to get contracted with George. Gerard
stamped the contract and then George signed the contract as the witness. Sylvia was another
witness of the company and she did not have any authority in the organization.
The provisions that have been provided in section 127(2) of the act, the seal must be witnessed
by the secretary and the director of the organization to make the contract valid. In the given case
it has been said that Gerard and Sylvia have only witnessed the contract and though Gerard is the
only director of the company, he does not have the authority to alone give approval to the
contract as stated in section 127(2). In the contract, it has been also stated that Sylvia has also
witnessed the contract but there is no such importance of this because Sylvia does not hold any
authority or position in the company. Moreover, the company has not presented Sylvia as the
representative of this organization. The requirement of the case was Sarita and Gerard must
witness the company seal as they hold the position of secretary and the director of the
organization. Therefore, in the above-mentioned case, it has been mentioned that contract which
was made between the company and George was not made properly. Such thing has been
mentioned in the s. 127(2). According to the case Knight Frank Australia Pty Ltd v Paley
Properties Pty Ltd. such contracts are not permitted
Conclusion
This contract is not valid that has been formed between Cakes Pty Ltd and George and he is not
legally bound.

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Bibliography
Corporation Act 2001 (Cth) s 126
Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 103.
Northside Developments Pty Ltd v Registrar-General (NSW)(1990) 170 CLR 146
Royal British Bank v Turquand (1856) 6 El & Bl 32