Corporate Act Law - Assignment Example

Corporate Act Law Student’s Name Course Professor’s Name University City (State) Date Question 1 I. Whether the contract binds the company or not boils down to whether William had the jurisdiction to enter into a contract. William is bankrupt and therefore means that he cannot act as a director of the company. Nevertheless, William acts a director regardless of his situation. Harry on the other hand who is the managing director of the company grants a letter to William stipulating his mandate to enter into a contract with the other parties to the agreement. However, Harry secretly hints William that he is only to hold negotiations of the contract but not necessarily enter into an agreement. Unfortunately, William does not heed to Harry’s heads up and goes ahead to sign the contract as the company’s agent. In the event that the company executed the document in a way mentioned above, then other parties will be in a position to rely on the assumptions as stipulated by section 129 of the Corporations Act 2001. However, it should be noted that this section of the Act does not limit the ways and methods in which the company has executed a document. In accordance with the section 129 of the Corporations Act 2001, an individual is entitled to make assumptions that a company is governed by a constitution that provides replaceable rules to its stakeholders including but not limited to company’s director or secretary. Drawing insights from section 129 of the Corporations Act 2001, an individual may assume any party that appears or is available to the public has been duly appointed by the company and has the power and authority to act and perform duties customarily designated for director or secretary on behalf of the company. In addition, provisions of agency substantiate on the question whether the agent acting on behalf of the company is personally liable to a party in a contract when he or she executes the contracts. With as much as William is bankrupt and should therefore not be allowed to transact or perform duties in the name of the company, Harry vested in him ostensible or apparent power and authority to preside over important events and transact on behalf of the company. The fact that she went back and privately told William only to negotiate but not execute any contract is immaterial. The party to the contract was susceptible to make conclusions and assumptions under section 128 and 129 that William was entitled to exercise authority and perform mandates that were customarily exerted by the company’s director or secretary. Harry should have made sure that the other party to the agreement as aware of William’s lack of authority to enter into a contract or acting on behalf of the company. In light of the provisions stipulated in sections 128 and 129 of the Corporations Act, the company is liable to fulfil the terms of the contract that was enforced by William and fully obliged to act in its best interests since the parties assumed that William had the authority to act on behalf of the company and enter into contracts as company’s managing director or company’s secretary would do. Whether Hurry would have been the acting managing director or not, there would be no changes in the nature of the conflict. The provisions of section 127 to 129 of the Corporations Act 2001 inform on the enforceability of a contract in that anyone who appears on behalf of a company is treated by other party as the director or secretary of the company. The company would still be liable and bound by the contract since it would not have made any difference by rendering Harry, the acting managing director. In this case, regardless of whether appointed or undertaking the duty in an acting capacity, Harry would still be deemed to manage the affairs of the company hence responsible for what goes on within the company. Question 2 Enforceability of guarantee against the company is based on the whether or not Maria was at jurisdiction to handle things the way she did. Maria who is one the two directors and shareholders of the company alongside David want to secure a loan of $100,000 from a bank for her own personal needs as well as those of the company. However, Maria decides to borrow the money in her own name; apparently, the bank from which she is borrowing demands for a guarantee from the company. Knowing very well that David will not agree with her mover, Maria decides not to inform David thus goes ahead and signs as the document on the ‘Maria, director section’ and writers ‘David director’ in is different handwriting from hers. The big question therefore remains that will the bank hold the company liable for the loan agreement or will the dues be left exclusivelyto Maria. In regard to section 127 of the Corporations Act 200,1 a company may complete a legal document without necessarily making use of a common seal as per the Corporations Act 2001. The Act sets out the manner in which a company may validly perform a document. In the event that the company anticipates executing a document without affixing the common seal, the following considerations must be met. One of such considerations is that two directors must sign the document, both the secretary and director of the company, or else a sole director who happens to act as sole secretary and director of the company. In addition, the section provides that a company possessing a common seal is in a position to execute the document if the seal is attached to the document and the fixing has been witnessed by two stakeholders mentioned above including two company directors, a company secretary, and a single/ sole secretary as well director in the event of a proprietary company. Looking at section 126 of the Act, it enables acting with the implied or express mandate of the company to enter into a contract on behalf of the company. Such individual regardless of implied or express authority may contract in the name of the company in a similar manner as the company itself. The sections note that if a company executes a document in the manner mentioned above, then individuals or groups may be in a position to depend on the presumptions as stipulated in section 129 of the Corporations Act 2001. Under the same section, it is noted that there are no limits in the manner in which a company executes the document or a deed. Instead, it considers whether the document has met the conditions above. It is necessary to understand that a company exists as a living entity under and encompasses rights and obligations that are distinct from its directors as well as stakeholders. For this reason, matters that are personal to the directors of the company are not liable to the company. From the case presented, it is clear that Maria misrepresented the company to the bank making them believe that David has signed the guarantee form as well. The company ought to have undertaken due to diligence to ascertain the authenticity of the information provided in the document prior advancing or processing the loan. In accordance with the section 127 of the Corporations Act 2001, it is of importance and mandatory that execution of company docs be done by two directors of the company anticipating to enter into a contract. In the case of Maria and David, Maria resolved to sign the bank document on behalf of David in a different handwriting. For this reason, the act can be regarded to be fraud making the company not liable for any contract formed between the bank and Maria using the signed documents. Maria forged David’s signature that purports execution of a document on his behalf which does not qualify to be legal. The bank is not liable and cannot enforce the contract of guarantee between it and Maria. The company cannot be bound by the contract which makes Maria, one of the directors, liable for the $100,000 loan since the contract did not meet the minimum requirements for a contract to exist which was the presence of two signatures. In addition, much of Maria’s interests were vested in pursuing her own personal needs, and that is why she did not inform David, the other director. Reference List Corporations Act 2001(Cth) Read More