Corporations Law - Contract Breach, Company Resolutions, and Liability

This corporations law assignment analyzes a case study involving Michael Danvers, an inventor, and his company, Ozzie E-Vehicles Pty Ltd. The assignment examines issues related to contract breach with WA Lithium Refiners Pty Ltd before the company's incorporation, focusing on the application of Section 131(1) of the Corporations Act 2001 (Cth) and the subsequent liabilities of the company. The first part of the assignment explores whether WA Lithium Refiners can sue Michael Danvers for breach of contract and if AES Limited can sue for $250,000. The second part assesses the validity of two resolutions passed by the company, considering the requirements of Section 249J and Section 1322(3) of the Corporations Act regarding the notice of meetings and accidental failures in providing notices. The analysis follows the ILAC (Issue, Law, Application, Conclusion) format, referencing relevant case law and statutory provisions to support the conclusions regarding contractual obligations and the validity of company resolutions.

Running head: CORPORATIONS LAW
Corporations Law
Name of the Student
Name of the University
Author Note

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Part 1:
Issue:
The issue here is whether the WA Lithium Refinery is entitled to sue Michael
Danvers for the contract breach and whether the AES Limited can sue for 250000 $.
Law:
Any individual who entered into contract in the company’s name with the authority of
such company has the potential to bind the company by that contract. However, section
131(1) given in the Corporations Act 2001 (Cth), referred as the CA, states that when any
individual person has entered into a contract in the company’s name but prior to its
incorporation and registration, in that case, the contract will bind the company after its
registration and incorporation too. This principle was entrenched in the decision of
Commonwealth Bank of Australia v Australian Solar Information Pty Ltd (1986) 11 ACLR
380. However, to enforce such contract, the company shall ratify the contract after the
company is incorporated and registered within a reasonable period of time. However, if any
company fails to ratify the contract, it bears a duty to compensate the party who was the party
to that particular contract. This was given in section 131(2) of the Act. Further, this principle
was supported by the decision of the case of ASIC v Westpac Banking Corporation (Liability
Trial) [2019] FCA.
Application:
In the instant case study, it is seen that Michael Danvers, who is an inventor had
devised a new type of lithium battery to be used in electric cars which is more efficient. He
made all the endeavours to form Ozzie E-Vehicles Pty Ltd, a company and register it with

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ASIC. Prior to the incorporation of the said company and also prior to its registration that was
made on March 1st, a contract was entered by him with another company named as WA
Lithium Refiners Pty Ltd with the intention of supplying 100 kg of lithium at the cost of $
50000. The product was scheduled to be delivered on April 15th. This said contract made by
Michael binds both the party, WA Lithium Refiners Pty Ltd and also the company, Ozzie E-
Vehicles Pty Ltd. This is due to the provisions enumerated in s. 131 (1), CA.
However, it is seen that position of Michael Danvers was taken by Sarah who became
the new Managing Director of the company in his place. But 100 number shares were
retained by Michael. After this the company did not accept the contract made with WA
Lithium Refiners and refused its execution. Due to this, the Ozzie E-Vehicles Pty Ltd,
company is liable to compensate for the breach of contract to WA Lithium Refiners. This was
construed in decision held in Aztech Science v Atlanta Aerospace (Woy Woy) [2005]
NSWCA 319. Additionally, the Ozzie E-Vehicles Pty Ltd did not execute the contract made
after it was incorporated with AES Ltd. As a result, this particular contract with AES Ltd was
binding on the company and not on Michael because such contract was executed in the name
of the company.
Conclusion:
Thus it can be inferred that WA Lithium Refinery is not entitled to sue Michael
Danvers for the contract breach and the AES Limited also cannot sue for 250000 $.
Part 2:
Issue:
The issue concerned in this part of the assignment is whether the two resolutions
passed by the Company have any validity as per Corporations Act 2001 (Cth), CA.

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Law:
The notice of meeting to be held by any company must be provided to each and every
member of the company. This is given under s. 249J of the CA. this section provides that
when a meeting is scheduled by any company, its notice in writing must be provided to the
member who has the right to vote in an individual manner. The notice must be sent
personally to these members and such communication can include either postal delivery or
emails. Again, it is provided that a meeting cannot be held as invalid and ineffective merely
because the notice was failed to be served to any of the member eligible to vote of the
company due to accidental failure. This was given in section 1322(3) of the said Act.
However, in case of an irregular act of intentional failure of service of such notice to any
particular member, then the meeting can be considered invalid. But it has to be decided by the
court considering the facts and situations of the case.
Application:
It is seen in the case scenario that a Notice related to Extraordinary General Meeting
was sent by the Board of the company to the shareholders. But it was not sent to Michael due
to oversight. The notice has two other resolution notices included with the papers of the main
notice. Resolution 1 states that company’s head office is going to be shifted to Melbourne and
Resolution 2 is about changing company’s present name. Explaining documents were too
given. Michael and another member were absent in the meeting. Other member though
received it, Michael did not. The failure to send notice to Michael was accidental and not
intentional. Hence, the meeting was valid as per section 1322. Only the court can decide its
validity depending on case facts.
Conclusion:

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It can inferred that the two resolutions passed by the Company are valid.

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References:
Aztech Science v Atlanta Aerospace (Woy Woy) [2005] NSWCA 319
Australian Securities and Investments Commission v Westpac Banking Corporation
(Liability Trial) [2019] FCA
Commonwealth Bank of Australia v Australian Solar Information Pty Ltd (1986) 11
ACLR380
The Corporations Act 2001 (Cth)