Company Law: Contract Enforcement and Directors' Liabilities

This company law assignment analyzes a case involving Events R Us Ltd, focusing on the enforcement of contracts against the company by Ultimate Computer Programs and the City of Sydney. The analysis applies the IRAC method, examining key legal principles from the Corporations Act 2001, including sections 125(2), 126, and 140, along with relevant case law such as News Ltd v Australian Rugby Football League Ltd [1996] and ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd [1990]. The assignment addresses the validity of contracts in light of the company's object clauses, the authority of individuals to enter into contracts, and the potential liabilities of directors for breaching the company's constitution. The conclusion states that the contracts can be enforced, but the directors may be held liable for their actions.

Running head: COMPANY LAW
COMPANY LAW
Name of Student
Name of University
Author Note

1COMPANY LAW
Table of Contents
Issue.................................................................................................................................................2
Rule..................................................................................................................................................2
Application......................................................................................................................................3

2COMPANY LAW
Issue
The main issue in the case is whether Ultimate Computer Programs and the City of
Sydney can enforce contracts against Events R Us Ltd.
Rule
As per the provisions of the section 125 (2) of the Corporations Act 2001 the objects of a
company might be set up by the constitution of a company, however the act of the company
could not be held invalid just because the act is in contradiction to any of the objects set in the
constitution of the company.
As per section 126 of the Corporations Act 2001 under the express or implied authority
of the company or on behalf of the company and individual can be exercising the company’s
power for making, varying, ratifying or discharging any contract.
As per the provisions of section 140 of the Corporations Act 2001the constitution of the
company and any other replaceable rules applying to the company would be effective as a
contract to all the members, directors and the company secretary.
By the judgment of the case News Ltd v Australian Rugby Football League Ltd [1996] it
is seen that any act in contradiction to any prohibition, restriction or statement of object included
in the constitution of the company would not be invalidated.
However in the judgment of the case ANZ Executors & Trustee Co Ltd v Qintex Australia
Ltd [1990] it was held by the judges that the any breach of the constitution of the company would
affect the powers of the director and the shareholders in the company.

3COMPANY LAW
Application
In the current case it was seen that the company’s constitution had two object clauses
present. The first object clause was seen to be stating the company would only organize events in
Western Australia only and the second object clause was seen as stating that for any transaction
over the amount of $40,000 the approval of the boards is needed.
Applying the provisions of the section 125 (2) of the Corporations Act 2001in the current
scenario it be seen that although Michael’s action of purchasing a computer program that would
be saving both time and money and would be delivering a better and more professional services
than the competitors of the company for $50,000 and Jenny’s action of entering into a contract
with the Mayor of Sydney for the company to organize a fashion week in Sydney are in
contradiction to the object clause yet both these actions could not be held as invalid.
Applying section 126 of the Corporations Act 2001Sarah has the complete authority as a
managing director to discharge of the contract made by Jenny and Michael. According to this
section under the express or implied authority of the company or on behalf of the company and
individual can be exercising the company’s power for making, varying, ratifying or discharging
any contract
Applying the provisions of section 140 of the Corporations Act 2001in the current
scenario it can be said that the constitution of the company and the objective clause would be
effective as a contract to Sarah, Michael and Jenny.
Applying the judgment of the case News Ltd v Australian Rugby Football League Ltd
[1996] in the current scenario it can be observed although both Michael and Jenny’s actions were
in contradiction to the objects clauses of the constitution of the, it would not however be
invalidated.

4COMPANY LAW
Applying the judgment of the case ANZ Executors & Trustee Co Ltd v Qintex Australia
Ltd [1990], where it was held by the judges that the any breach of the constitution of the
company would affect the powers of the director and the shareholders in the company, it can be
held in the current case that for the breach of the objects clause of the constitution of the
company Michael and Jenny would be held liable.
Thus from the above discussions it can be concluded that Ultimate Computer Programs
and the City of Sydney can enforce contracts against Events R Us Ltd, however Sarah as the
managing director of the company can discharge those contracts. In furtherance Michael and
Sarah would be held liable for their breach of the objects clause present in the constitution of the
company.
Conclusion
Thus from the above discussions it can be concluded that Ultimate Computer Programs
and the City of Sydney can enforce contracts against Events R Us Ltd.

5COMPANY LAW
Reference
Corporations Act 2001
News Ltd v Australian Rugby Football League Ltd [1996]
ANZ Executors & Trustee Co Ltd v Qintex Australia Ltd [1990]