Question 1

It is possible that a contract may be binding on a company even if entered into by someone who has no actual authority to act on the company's behalf.

Accepted Answer

This can occur under the principle of apparent or ostensible authority, where the company, through its actions or representations, leads a third party to reasonably believe that the person has the authority to act on its behalf, thereby binding the company to the contract.

Question 2

A company can only enter into SIGNIFICANT contracts if the company's seal is affixed to the contract.

Accepted Answer

Many jurisdictions allow companies to enter into contracts without the need for a company seal, relying instead on the signatures of authorized representatives.

Question 3

Long Grain Pty Ltd is in the business of selling rice. Its constitution has an objects clause which provides that it can ONLY engage in the business of selling rice. Long Grain Pty Ltd buys a block of land in Surfers Paradise to develop into residential units. This contract is outside of the company's objects clause and is therefore ultra vires and unenforceable.

False

Accepted Answer

The doctrine of ultra vires, which traditionally held that actions beyond the scope of a company's objects clause were unenforceable, has largely been abolished or significantly modified in many jurisdictions. Modern corporate law, particularly after the introduction of the 'model articles' in various jurisdictions, often allows companies more flexibility in their operations, not strictly limiting them to the activities described in their objects clause. Additionally, third parties dealing with the company are usually protected under the principle that they are not expected to know the detailed contents of the company's constitution.

Question 4

Pursuant to section 129(5), a person may always assume, in relation to dealings with a company, that a document has been duly executed by the company if a document appears to have been signed in accordance with section 127(1).

Accepted Answer

The answer of Pursuant to section 129(5), a person may...

Question 5

Vicarious liability means a company is responsible for the acts of its agents and its employees within the scope of their employment.

Accepted Answer

Vicarious liability is a legal principle that holds a company or an individual responsible for the actions of another person, typically an employee or agent, when those actions are performed within the scope of their employment or agency.

Question 6

Tony enters into a contract to purchase a car from Rip-off Motors Pty Ltd for $150 000 (it is a Porsche once owned by Prince William). The contract is signed by Peter on behalf of Rip-off Motors Pty Ltd. Peter is a salesperson employed by Rip-off Motors Pty Ltd. Rip-off Motors Pty Ltd's constitution provides that any contract in excess of $100,000 must be in writing, signed by two directors with the company seal affixed thereto. Julia, who is a Prince William fan, has approached Rip-off Motors Pty Ltd and has offered more than Tony to purchase the car. Can Tony enforce the contract against Rip-off Motors Pty Ltd?

A) No, because the contract was not signed by two directors and the seal was not affixed therefore the contract is invalid.
B) Yes, because it doesn't matter that two directors didn't sign the contract and the seal was not affixed as provided in the constitution. Tony can always assume that Rip-off Motors Pty Ltd's constitution has been complied with.
C) Yes, provided Tony was not aware of the limitations set forth in Rip-off Motors Pty Ltd's constitution, he can assume that Rip-off Motors Pty Ltd's constitution has been complied with.
D) No, because an employee cannot enter into a contract on behalf of a company.

Accepted Answer

Pursuant to the Corporations Act section 129 (1) people dealing with a company are entitled to assume that the company's constitution and the replaceable rules have been complied with. Corporations Law section 128(4) adds a proviso that the assumption cannot be made if the person dealing with the company knew or suspected the assumption was incorrect.

Question 7

Alex enters into a contract to purchase a large piece of machinery from Kestrel Pty Ltd. The contract is negotiated and agreed to by James on behalf of Kestrel Pty Ltd. James is Kestrel Pty Ltd's managing director. When James was appointed as Managing Director, Kestrel Pty Ltd's board of directors did not pass a resolution as required by Kestrel Pty Ltd's constitution. Accordingly, James' appointment is defective. Is the contract binding by and against Kestrel Pty Ltd?

A) No, because James was not duly appointed and therefore did not have authority to act on behalf of Kestrel Pty Ltd.
B) Yes, because it doesn't matter that James was not duly appointed. Alex can always assume that a person held out by the company as an officer of the company has been duly appointed and has the authority customarily exercised by such officer.
C) Yes, provided Alex was not aware of the defects in James' appointment, she can assume he has been duly appointed and has the authority customarily exercised by a Managing Director.
D) No, because major contracts such as this need to be signed by at least two directors in accordance with section 127 of the Corporations Act 2001 (Cth).
E) None of the above are correct.

Accepted Answer

Pursuant to the Corporations Act section 129 (1) people dealing with a company are entitled to assume that the company's constitution and the replaceable rules have been complied with. Corporations Law section 128(4) adds a proviso that the assumption cannot be made if the person dealing with the company knew or suspected the assumption was incorrect.

Question 8

Wheelie Ltd runs a business selling car tyres. A prosecution was recently commenced by the Queensland government against Wheelie Ltd under a consumer protection statute alleging Wheelie Ltd sold defective tyres. The legislation has a provision which states that it is a defence to a prosecution if the seller was not aware of the defects. Which of the following is the best answer?

A) Wheelie Ltd could only rely on the defence if only some, but not all, of the directors were aware of the defects.
B) Wheelie Ltd may be precluded from relying on the defence if a low level employee whose job it was to sell the tires was aware of the defects.
C) Wheelie Ltd cannot be prosecuted because companies are abstract entities and cannot be liable for criminal acts. It is the people managing the company who should be prosecuted.
D) Wheelie Ltd could never rely on the defence because a company is an abstract entity and could never "be aware" of the defects.
E) If the directors were aware of the defects and had a discussion at a board meeting about them but continued to sell the defective products the defence would, most likely, not be available.

Accepted Answer

The Criminal Code Section 12.2 provides that if a physical element of an offence is committed by an employee of a company with the actual or apparent scope of their employment then the physical element must be attributed to the company. The employee in this case is acting within the scope of their actual authority selling tires and has knowledge of the defect.

Question 9

Magnus is a salesperson employed by Jaxx Pty Ltd. ("Jaxx"). Jaxx is in the business of retailing birthday cakes. Magnus entered into a contract on behalf of Jaxx with Alex for the sale of a birthday cake. Which of the following is the best answer based solely on the information provided:

A) There is no contract between Alex and Jaxx because employees cannot enter into contracts on behalf of the company which employs them.
B) Alex cannot enforce the contract with Jaxx because she was aware Magnus was an employee and since she was aware of the true facts, she cannot rely on the assumptions in section 129 of the Corporations Act 2001 (Cth).
C) Jaxx is a small proprietary company.
D) Based on the facts presented, there is nothing to suggest the contract between Alex and Jaxx is not binding.
E) The contract is not binding because Jaxx did not affix its seal to the contract.

Accepted Answer

We do not know if Magnus has actual substantial authority to sell birthday cakes however at the least it would seem that as a salesperson of a birthday cake retailer Magnus would have apparent substantial authority to make a contract to sell birthday cakes.

Question 10

Lionel is the managing director of Train Pty Ltd, a company that makes diesel locomotive engines. Thomas enters into a contract with Train Pty Ltd for the purchase of a locomotive engine. The contract is signed by Lionel on behalf of Train Pty Ltd. After entering into the contract Thomas discovers that Lionel was not properly appointed as the managing director of Train Pty Ltd by the board of Train Pty Ltd as was required by its constitution. The contract is:

A) Not binding because Lionel had no authority to act on behalf of Train Pty Ltd.
B) Would only be binding if it was signed by two directors of Train Pty Ltd in accordance with section 127(1) of the Corporations Act (Cth) 2001.
C) Binding because Thomas can assume that Lionel had been validly appointed as managing director.
D) Binding only if the company ratifies the contract.
E) Both (b) and (c).

Accepted Answer

Pursuant to the Corporations Act section 129 (1) people dealing with a company are entitled to assume that the company's constitution and the replaceable rules have been complied with. Corporations Law section 128(4) adds a proviso that the assumption cannot be made if the person dealing with the company knew or suspected the assumption was incorrect. At the time Thomas entered into the contract he did not know that Lionel was not validly appointed and as such was entitled assume under Corporations Act section 129 (1) that Lionel was validly appointed.

Question 11

How do companies exercise their legal capacity and powers?

Accepted Answer

The answer of How do companies exercise their legal capacity...

Question 12

What is the organic theory?

Accepted Answer

The answer of What is the organic theory?...

Question 13

When is a contract binding on a company?

Accepted Answer

The answer of When is a contract binding on a...

Question 14

What is a &#34;common seal&#34;?

Accepted Answer

The answer of What is a &#34;common seal&#34;?...

Question 15

6. What is (a) substantive authority; and (b) formal authority for a company to enter into a contract?

Accepted Answer

The answer of 6. What is (a) substantive authority; and...

Question 16

What is a person entitled to assume about a company under the indoor management rule?

Accepted Answer

The answer of What is a person entitled to assume...

Question 17

What is the difference between s 128(4) and the common law exceptions to the indoor management rule?

Accepted Answer

The answer of What is the difference between s 128(4)...

Question 18

How can a company be liable for (a) a tort; and (b) a crime?

Accepted Answer

The answer of How can a company be liable for...

Deck 3: Companies, Outsiders and Corporate Liability