Company Law Assignment: Corporations Act and Contractual Issues

This assignment analyzes a company law scenario involving Events R Us Ltd, exploring the enforceability of contracts with Ultimate Computer Programs and the City of Sydney under the Corporations Act 2001 (Cth). The analysis focuses on sections 125 and 126, addressing limitations in the company's constitution and the authority of individuals acting on behalf of the company. The assignment applies the IRAC method, examining the issues of law, relevant legislation, and the application of the law to the facts, ultimately concluding on the enforceability of the contracts. The assignment also references the Turquand’s rule, which allows outsiders to make assumptions about a company's internal compliance. The conclusion states that both contracts are enforceable under the mentioned provisions of the act.

Running head: COMPANY LAW
Company Law
Name of the Student
Name of the University
Author Note

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Issue
Whether Ultimate Computer Programs can enforce the contract against Events R Us Ltd
under the provisions u/s 125 and 126 of the Corporations Act 2001 (Cth). Whether the City of
Sydney can enforce the contract against Events R Us Ltd as per the provisions u/s 125 and
126 of the Corporations Act 2001 (Cth).
Rule
U/s 125 of the Corporations Act 2001 (Cth), a company is allowed to include express
limitations as well as restraints regarding any powers that a company might exercise in course
of its dealings. However, any venture that a company indulges into will not be rendered
invalid only because of any restrains or limitations provided in the constitution.
U/s 126 of the Corporations Act 2001 (Cth) a person authorised by the company to act on
its behalf has the authority to effect contract or make any alterations to it or even discharge
the same when backed by an express as well as implied authority from the company. The
usage of the common seal while effecting such contract is irrelevant.
It has been held in the case of Royal British Bank v Turquand (1856) 6 E&B 327, that an
outsider entering into transactions with the company is conferred with the authority to make
assumption regarding the compliance of the action of the company with that of their internal
rules. This is known as the Turquand’s rule and the non-compliance of the company to that
of their internal rules will not have any effect in such an assumption.
Application
In the present instance, Events R Us Ltd is a company that engages in events organisation.
The constitution of the company contains two object clause, one of which requires the

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company to organise events in Western Australia only and the other requires an approval of
the board to be taken prior to effecting any transaction that exceeds the threshold of $40,000.
Michael, the Information Technology director entered into a contract with the Ultimate
Computer Programs for purchasing a new events organisation computer program that would
save time, money and deliver a more professional service than the company’s competitors for
a price of $50,000. However, Sarah denies the liability of the company to make payment of
the transaction as the program is not compatible with the system of the company as well as
the lack of authority of Michael to make such transactions. This will not be a valid contention
as u/s 125 of the Act any restrictions in the object clause of the constitution would not render
any venture that a company indulges into to be invalid.
Again, Jenny, the Finance Director has also entered into a contract for Events R Us Ltd to
be the major organiser for next year’s City of Sydney “Fashion Week”. But Sarah denied the
performance of the same stating the contract to be in excess of the authority of making such
agreements as the company has no legal capacity to enter into such a contract. This denying
of liability to perform the contract will not hold good u/s 125 of the Act.
Moreover both the contract will be enforceable u/s 126 of the Act as the prohibition in the
constitution will not render a contract to be invalid. Moreover, under the Turquand’s rule the
Ultimate Computer Programs and the City of Sydney has the entitlement to make assumption
regarding the actions of the directors to be compliant with the constitution of the company.
Conclusion
Hence, it can be concluded that Ultimate Computer Programs can enforce the contract
against Events R Us Ltd under the provisions u/s 125 and 126 of the Corporations Act 2001

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(Cth). The City of Sydney can enforce the contract against Events R Us Ltd as per the
provisions u/s 125 and 126 of the Corporations Act 2001 (Cth).

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Reference
The Corporations Act 2001 (Cth)
Royal British Bank v Turquand (1856) 6 E&B 327