Jennifer is the president and chief executive officer of Starburst Co, a corporation incorporated under the Canada Business Corporations Act carrying on a television production business.She has been discussing a new show with Stein.She enters into an agreement to buy Stein's idea for a new show.The by-laws of the corporation state that the president cannot agree to buy new story ideas without the approval of the board of directors.Jennifer did not obtain the approval of the board to buy Stein's idea.The contract is binding on Starburst nevertheless.

Question

Quizplus · Accepted Answer

The by-laws of a corporation are internal rules that govern the conduct of the corporation and its directors, officers, and shareholders. They are not binding on third parties who have no knowledge of them. In this case, Stein is a third party who had no knowledge of the by-laws of Starburst Co. Therefore, the contract between Jennifer and Stein is binding on Starburst Co. even though Jennifer did not obtain the approval of the board of directors to buy Stein's idea.

Jennifer Is the President and Chief Executive Officer of Starburst