Legal Analysis of Contracts, Corporation Law and Related Issues

This report provides a detailed analysis of contracts and corporation law, specifically focusing on the Australian Corporation Act 2001. The report examines two key issues: the validity of contracts formed by authorized representatives of a company (Michell and Tim) and the requirements for a binding agreement when selling a business (George, Gerard, and Sylvia). It explores sections 124, 125, 126, and 127 of the Act, highlighting the powers of corporations to enter contracts, the role of agents, and the necessary consents for agreements. The report concludes that the contracts are binding and should be performed. This assignment is designed to enhance understanding of corporate law principles and the application of the Australian Corporation Act 2001. It uses references from legal literature to support its analysis.

CONTRACTS WHEN BINDING AND WHEN NOT
University- KIIT University

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Issue 1:
The Australian Corporation Act, 2001 states, under section 124 that a corporation is
given the same legal capacity as that of an individual which is inclusive of the power
to form a valid contract.
Section 125 provides that such agreement which has been entered into by any such
corporation must perform the promised act even if it is beyond the companies
constitution.
Since both Michell and Tim are authorized authorities under the company they can form
a valid contract which has to be performed on behalf of the company being an
obligation under the aforesaid sections of the act.
Section 126 of the act states, since a company cannot act on its own it has to take
decision through an agent. The agent on its behalf is authorized to ‘make, ratify or
discharge a contract’.
Here, Michell and Tim are the authorized authorities who are supposed to act as agents
on behalf of the company.
Issue 2:
Under the Corportation Act, 2001, section 126 states, that a company cannot take
decisions on its own and thus should acts through agents or representatives. The agents/
representatives are empowered on behalf of the company to make, ratify or discharge the
contract in which they have entered or about to enter.
Here, George intends to sell out his cake shop to Gerard and Sylvia. Under the
provisions of section 127, the agreement to sell the shop will satisfy only if one director
and one secretary provides consent to such agreement. Though Gerard is the nominated
director he can consent, Sylvia is just a shareholder of the company. She is not the
secretary to provide consent which is necessary to satisfy the requirements under section
127. Again, section 126 tells us that if any authorized agent provides consent on behalf
of the company to any such document to form an agreement, then such agreement shall

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be binding upon both the parties to a contract and should be treated the same way if
one director and one secretary would have given consent. Though Sylvia is not the
secretary, she is authorized under the company as an agent/ representative to undertake
contracts. Thus her consent to such document will satisfy the requirement under section
127 and makes the contract binding.

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REFERENCE
1. Nexis, L, (2016), Australian Corporations Legislation.
2. Bevan, C. (2016). Corporation Law 8th Edition. Thomson Reuters.