Company Law 2 Short Theory Questions

Posted: May 7th, 2022

Company Law 2 Short Theory Questions
QUESTION THREE- chapter 5
Jack is the managing director of Beanstalk Ltd. The company has a constitution which states that the company may only sell agricultural products grown in Queensland. The board of directors have implemented a company policy that all transactions over $100,000 require board approval.
Jack attends a trade fair in Victoria and is so impressed with the quality of the beans grown on a Victorian farm by Giant Ltd that he signs a $150,000 purchase agreement.
The board of directors of Beanstalk Ltd decide that this purchase will undermine the company’s marketing campaign promoting Queensland products. They advise Giant Ltd that the company will not make payment under the purchase agreement as:
1. Jack did not have authority to sign the contract and in any event it is above $100,000; (3 marks)
1. Beanstalk Ltd had no legal capacity under its constitution to buy any produce from outside Queensland so the agreement cannot be enforced against it; (3 marks)
1. The constitution of Beanstalk Ltd was available in the public record and Giant Ltd had a responsibility to know its contents and comply with it. (1 mark)
REQUIRED:
Advise Giant Ltd on the issues above. To support your answers, you must not only reference your textbook but you must also refer to the Corporations Act and cases where appropriate.
Hint: The best practice question to use from workshops is one of the parts from the question from workshop Two Question 4 about “Tipsy Ltd”. Only write maximum ¾ page to answer this question
QUESTION FOUR- chapter 6
Simon has decided he will register a company Cosec Pty Ltd and offer company secretarial services. Before he is ready to register the company he searches for a suitable office and finds a perfect location. Simon signs on behalf of the proposed company, a 2 year lease on the office and a 2 year rental agreement with a telephone company.
Before Cosec Pty Ltd is registered, Simon gets offered an attractive sum of money to assign the office lease over to another party. Simon takes the money and transfers the lease.
Cosec Pty Ltd is finally registered and at the first directors’ meeting the ratification of Simon’s telephone agreement is considered. The directors opt for another telephone system that they consider better suited to the company’s needs.
REQUIRED:
1. Discuss whether Simon breached any obligations by transferring the office lease.
(2 marks)
1. Will the telephone company have any right of action against Simon?
(2 marks)
No hints for this problem question
Only write maximum 1/2 page to answer this question
Question 4 (tipsy pty ltd)
Tipsy Ltd is an importer and distributor of French wines. The Managing Director is Marie and the Company Secretary is Pierre. The company has no constitution and the Board of Directors exercise tight control over the company. The Board has implemented an instruction that their approval is required for any purchase of wine in excess of $50,000.
During the last month the following three transactions and developments occurred:
(a) Marie signed a contract to purchase $55,000 of wine. The other directors do not like the wine and refuse to accept it on the grounds that Marie lacked authority by breaching the purchasing limit set by the Board.
– MD has actual authority
– outsider can imply that she has customary authority:Turquand’s case/northside case.
– directors cannot refuse to accept this contract
(b) Pierre, in France on holiday, visits one of Tipsy Ltd’s suppliers. He tastes and likes a new wine and signs a contract for Tipsy Ltd to purchase the wine for $10,000. The board of directors wishes to rescind the contract on the grounds that Pierre had no authority to sign the contract.
– company secretary has no actual authority or implied authority to make business contracts
– Co. secretary is an administrative role:paranoma’s case
– directors can refuse to accept this contrast
(c) The senior executives of Tipsy Ltd were absent at a management seminar and Renee, the company’s Office Manager, was left to mind the whole office, including the sales department. When Smashed, a liquor store chain, phoned to place an , Renee negotiated a price and sold some wine. Edith, the company’s Sales Manager, had planned to sell that same wine to another customer at a higher price. Tipsy Ltd advises Smashed that they will not supply the wine as Renee lacked authority.
– co.left her in charge = holding her out as having authority
-outsider may assume Renne’s authority: freeman’s case
– Doctrine of estoppel: company not allowed deny authority of the person it holds out as having authority
– there is nothing in the facts to suggest that smashes ltd knew or suspected that Renee did not have authority s128(4)
– directors cannot ignore the contract