Corporation Act Case Study: Pre-Registration Contracts and Liability

This document presents an analysis of two case studies related to the Australian Corporation Act 2001. The first case study involves Michael Danvers, who, before registering Ozzie E-Vehicles Pty Ltd, entered into a contract with WA Lithium Refiners Pty Ltd. Following the company's registration, and a change in the board of directors, the contract was repudiated, leading to questions of Michael's liability under the Act, particularly concerning pre-registration contracts. The analysis applies the ILAC method (Issue, Law, Application, Conclusion) to determine if Michael will be held liable. The second case study explores issues of contract law, agency and corporate liability, involving Fine China, Hard Clay, and Strong Box. The analysis examines the application of the Corporation Act, specifically Section 126 and 128, to determine the outcomes of breach of contract claims, assessing the liability of the involved parties based on the actions of company agents and their authority.

RUNNING HEAD: CORPORATION ACT
Corporation Act
Name of the student
Name of the University
Author Note

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Response to case study 1
Issue:
The issue regarding this case is whether Michael will be held liable for breaching the contract as
he failed to pay the installment.
Rule:
(1) If an individual purports or enters in the contract on the behalf or for the advantage or
benefit of an organization or a company before the registration the organization or the
company becomes entitled to the benefit of bounds by the contract if the organization or
the company that is identifiable reasonably with it, is ratified and registers the contract-
 Within the agreed time by the contractual parties
 If the agreed time is not present, there should be a presence of a reasonable time after
entering into the contract.
1. The individual those who can be held liable for paying the number of damages to
the opposite party if ratification of the contract is done by the company the
performance is not done at all.
2. If the proceedings are brought for recovering the damages or the injuries under
the provision of the subsection 2 because of the registration of the company, but
the pre-registration contract is not ratified or entering into the substitution for it,
the court may perform any task considering the appropriate circumstance that
includes the ordering of the company for doing the following:
 Paying everything or part of the injuries or the damages that an individual
has the liability to pay

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 Transferring the property that is being received by the organization due to
the contract to the parties of the contract
 Paying an amount to the contractual parties.
3. If the organization approves the pre-registered contract but miscarries all the
performance or the part of the performance, an order may be passed by the court
to an individual for playing the part of the damages or the whole part that is being
ordered by the company.
Application:
Michael Danvers invented a new efficient lithium battery for the purpose of serving
electric cars. He has performed every essential method for registering the company. The name of
the company for which he was interested in registering was Ozzie E-Vehicles Pty Ltd along with
ASIC. The registration of the company was done on March 1st with Michael as the solitary
stockholder and the Managing Director. The refinement of lithium takes a huge time. On the date
of 1st February in the early year in preparing the production of the first battery car, Michael had
signed in a contract with the company WA Lithium Refiners Pty Ltd for supplying lithium of
100 kg in exchange of $50000, with payment and delivery scheduled for April 15th. He entered
into the contract in the name of ‘Michael Danvers’ as the Director of the company of Ozzie E-
Vehicles Pty Ltd. According to the provisions of the Corporation Act it is clearly stated that If an
individual purports or enters in the contract on the behalf or for the advantage or benefit of an
organization or a company before the registration the organization or the company becomes
entitled to the benefit of bounds by the contract if the organization or the company that is
identifiable reasonably with it, is ratified and registers the contract-

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a) Within the agreed time by the contractual parties
b) If the agreed time is not present, there should be a presence of a reasonable time after
entering into the contract
On 3rd March, Michael entered into a contract for purchasing a huge machine of battery
assembly that costs $1 million from the company Australian Engineering Supplies Ltd (AES).
This contract was also signed in the name of ‘Michael Danvers’ as the Director of the company
of Ozzie E-Vehicles Pty Ltd. Under the provisions of the contract it was stated of Ozzie E-
Vehicles Pty Ltd was supposed to pay $250 000 in favor of AES Ltd in four installments. As
soon as the machine was delivered the production of the battery began. The organization needed
additional or extra capital; in this situation, Michael requested his friends for investing money in
his company. The outcome of this case held as Michael had no longer was a majority in the
matter of stockholding. The provisions of the Corporation Act declares that If the proceedings
are brought for recovering the damages or the injuries under the provision of the subsection 2
because of the registration of the company, but the pre-registration contract is not ratified or
entering into the substitution for it, the court may perform any task considering the appropriate
circumstance that includes the ordering of the company for doing the following:
a) Paying everything or partly of the injuries or the damages that an individual has the
liability to pay
b) Transferring the property that is being received by the organization due to the contract to
the parties of the contract
c) Paying an amount to the contractual parties.

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On April 1st the stockholders assigned and elected a fresh board that consists of Sarah, Jane and
Mary. Sarah was appointed the new Director of the company. At the meeting of the board which
was held on April 3rd, the other directors of the company took the decision not to continue to with
the contractual terms with WA Lithium Refineries Pty Ltd. They informed the company by
sending a letter to the company that they will no longer take any delivery or will not pay for
lithium. On April 10th there was a break down of the assembling machine of the battery, and
because of this case the organization was not able to sell any batteries to the customers. There
was a severe reduction in the income of the company, and the company failed to pay the second
installment of $250000 to AES Ltd. The Corporation Act 2001 says that If the organization
approves the pre-registered contract but miscarries all the performance or the part of the
performance, an order may be passed by the court to an individual for playing the part of the
damages or the whole part that is being ordered by the company.
Conclusion:
According to the above factors, it has been concluded that Michael Danvers will be held
liable according the Corporation Act 2001.

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Response to case study 2:
Issue:
The primary concern is regarding the outcome of the provided case where Fine China
was sued by Hard Clay for breach of contract. The secondary issue regarding this provided case
is that whether Fine China will be successful in suing Strong Box.
Rule:
Section 126 of the Corporation Act 2001 states that a power of the company to
discharge, ratify, vary and make a contract that can be utilized by a person acting on behalf of the
company either in the way of implied authority or express authority. This company’s power can
be utilized without the use of the common seal of the company. The provision of this section
does not even affect law operation that is needed for a specific method to be complied relating to
the contract.
Section 128 of the Corporation Act 2001 states that an individual has the power to make
any assumption u/s 129 concerning about the dealings with the organization. The company do
not have the power in asserting the proceedings relating to the dealings that any assumption can
be incorrect. An individual has the power to make any assumption u/s 129 relating to the
dealings with another party who purports indirectly or directly acquiring the title to the property
from the organization. The organization and the other individual do not have the power in
asserting the proceedings relating to the deal that any assumption can be incorrect. The
assumption can be created if an agent or an officer of the organization act in a fraudulent way or
makes a document forge in relation to the deal of the company. An individual does not have the

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power to make any assumption under the provision of section 129 if in the time of the deal they
suspect or knew that the assumed case is incorrect.
Royal British Bank v Turquand1 is the similar case that held the individuals relating to
the transactions with the organization or the company that has to power of assumption the
company rules that are internal comply in case if they do not comply. The court held that the
bond was valid so the bank can enforce the terms.
Application:
According to section 128, the company will not be liable as Dennis was the agent of the
company and can easily enter into a contract. It was not noticed by the company that Dennis
would terminate. According to the assumption made and declared in the above mentioned section
the company Hard Clay will not be liable in any aspect.
According to section 128 of the Corporation Act, 2001 Strong Box will not be liable as
the document was signed by both the parties and the company assumed it to be lawful and
therefore released the material. Sections 128 states that Section 128 of the Corporation Act 2001
states that an individual has the power to make any assumption u/s 129 concerning about the
dealings with the organization. The company do not have the power in asserting the proceedings
relating to the dealings that any assumption can be incorrect. An individual has the power to
make any assumption u/s 129 relating to the dealings with another party who purports indirectly
or directly acquiring the title to the property from the organization. The organization and the
other individual do not have the power in asserting the proceedings relating to the deal that any
assumption can be incorrect. The assumption can be created if an agent or an officer of the
1 (1856) 6 E&B 327

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organization act in a fraudulent way or makes a document forge in relation to the deal of the
company. An individual does not have the power to make any assumption under the provision of
section 129 if in the time of the deal they suspect or knew that the assumed case is incorrect.
Conclusion:
The probable outcome of the provided case is that Hard Clay will not be liable, and in the second
matter, Fine China will be held liable.