Corporate Law Assignment: Agency, Partnership, and Incorporation

This corporate law assignment solution addresses two key sections: Section A examines the principles of agency, specifically focusing on the concepts of actual and apparent authority within the context of a purchase exceeding a pre-agreed limit. It analyzes whether an agent, Meng, acted within the scope of his authority, and whether the principal, Greg, is bound by Meng's actions. Section B delves into the distinctions between a traditional partnership with unlimited liability and the incorporation of a private limited company. It explores the implications of incorporating a company for partners John and Peter, including the issuance of shares, the appointment of directors, and the protection afforded by the concept of limited liability. The solution references relevant case law, including Panorama Developments (Guildford) Limited v Fidelis Furnishing Fabrics Limited, Freeman and Lockyer v Buchurst Park Properties (Mangal) Limited, and Salomon v A Salomon and Company Limited, to support its arguments and conclusions.

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Corporate Law

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Section A
Answer to Question 3
As it was originally agreed that the limit for the purchase was stipulated at eighty thousand
dollars, Meng is therefore bound by the limit set by Greg. In the case of Panorama
Developments (Guildford) Limited v Fidelis Furnishing Fabrics Limited, it was held by the
Civil Division of the Court of Appeal of England and Wales that Mr. Bayne was bound by
contractual obligations since he had an authority being a company secretary of Fidelis with
regard to entering into agreements related to hiring as far as the contract with Panorama is
concerned (Burrows, 2016). As a result, it is to be seen whether the email or letter head used
by Meng in order to make the purchase of the machines in the capacity of Greg’s agent. It is
observed that Meng had acted beyond the purview of his actual authority by purchasing the
machines and the equipment for ninety thousand dollars. If Meng has apparent authority, then
only Greg would be bound the purchase made by Meng even though the facts of the case
imply that Meng has not acted within the ambit of his actual authority since apparent
authority can arise even if the agent had no actual authority. In the case of Freeman and
Lockyer v Buchurst Park Properties (Mangal) Limited, it was held by the Civil Division of
the Court of Appeal of England and Wales that in order to comprehend upon the apparent
authority of an agent when such an agent has no actual authority at all, there must be
prevalence of four factors (Skelton, 2017). These four factors include a representation which
must imply that the agent was authorized to enter into a contract on behalf of the company,
the representation was made by those people who had an actual authority with regard to the
management of the business activities undertaken by the company either in general or by the
matters of the contract, the contractor was convinced to enter into such a contract and the
company was not restricted to enter into contract or delegate authority to an agent to enter
into contract as enshrined in the memorandum of articles of the company. It has to be seen
whether such factors are met by Greg or not as far as the criteria are concerned. It is
imperative that the apparent authority of the agent must be held out by someone with actual
authority since the agent cannot hold itself as far as the exercising of apparent authority is
concerned. The facts of the scenario imply that Meng is the agent of Greg with reference to
the exercising of actual or apparent authority (DeMott, 2017). As a result, it has to be
identified and concluded whether Meng has apparent authority or not. If he has actual
authority then it has been breached by him already as aforesaid with regard to the expenditure
of ninety thousand dollars instead of the eighty thousand dollars stipulated by Greg. It is
thereby inferred that Greg would be bound by Meng only if Meng has apparent authority.
Answer to Section B
In a normal partnership firm, the liabilities of a partner are unlimited. On account of the
failure of their business, the partners would be under an obligation to pay off the debts and
the creditors can go for assets (McLaughlin, 2018). Such a scenario is only applicable when
the partner is not under the financial capacity to pay the creditors. The incorporation of a

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company implies that it has a distinct legal personality. It means that a company once
incorporated can do what legal person can do. This implies that a company after its
incorporation would assume status in a legal form which would be separate from its owners.
The facts of the case imply that if both John and Peter incorporate a private limited company
with regard to the carrying out their business in partnership, they would be the shareholders
of the company. It is thereby imperative that if they invest fifty thousand dollars each in the
company and the price of one share is capped at one dollar, then one hundred thousand shares
would be issued to both John and Peter (Talbot, 2015). In such a scenario, both John and
Peter would be holding fifty thousand shares each. The capital of the company would amount
to one hundred thousand dollars. In order to effectively and efficiently run the company, a
managing director may be appointed by John and Peter along with the appointment of other
directors depending upon the size of the company and the departments of the company. The
doctrine related to corporate personality was upheld in the case of Salomon v A Salomon and
Company Limited as per the relevant provisions enshrined and envisaged in the Companies
Act of 1862. In this case, it was held by the House of Lords that the creditors belonging to an
insolvent company cannot file a suit against the shareholders as far as the paying of
remaining debts is concerned. As a result it is imperative that it would be beneficial for Peter
and John to incorporate their company so that they can be prevented from the hassles related
to unlimited liability in a partnership firm (Rubin, Whiteway and Finkelstein, 2015). It would
imply the floating of a company which would have the status of Limited Liability
Partnership. In such an aspect, John and Peter would not be held for the negligence or
wrongdoing of one another. After the company has been incorporated, the features of both
partnership firms and corporations would be exhibited by such a company however there
would be a massive transition with regard to the reduction of liabilities on part of both John
and Peter as far as partnership is concerned. It is imperative that there is a huge difference
between the concept of traditional partnership as per the Partnership Act of 1890 and the
concept of Limited Liability Partnership. It can be concluded that both would be protected
from unlimited liability by the virtue of incorporating a company.

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Reference List
Burrows, A., 2016. A restatement of the English Law of Contract. 4th ed. Oxford : Oxford
University Press.
DeMott, D.A., 2017. Corporate Officers as Agents. Wash. & Lee L. Rev., 74, p.847.
McLaughlin, S., 2018. Unlocking company law. 6th ed. Abingdon: Routledge.
Rubin, B.D., Whiteway, A.M. and Finkelstein, J.G., 2015. Is Your Transaction a Partnership
Merger or Liquidation and Why You Should Care. J. Passthrough Entities, 18, p.23.
Skelton, A., 2017. Restitution and contract. 3rd ed. Abingdon: Informa Law from Routledge.
Talbot, L., 2015. Critical company law. 5th ed. Abingdon: Routledge.