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:

Question

Quizplus · 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.

Lionel Is the Managing Director of Train Pty Ltd, a Company