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Law Notes Business Associations Notes

Contracts With Outsiders Notes

Updated Contracts With Outsiders Notes

Business Associations Notes

Business Associations

Approximately 289 pages

These are comprehensive yet succinct notes. They set out the relevant legal principles, and material facts from a range of cases in order to demonstrate how those legal principles have been applied.

At the beginning of each document on each topic, there is a table of contents (hyperlinked so you can navigate easily through the document), and also an 'exam checklist', which you can use during revisions or exams to remind yourself of the key issues you have to address.

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The following is a more accessible plain text extract of the PDF sample above, taken from our Business Associations Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

7 contracts with outsiders 1

1. How does a company make contracts? Agent: s 126, or company itself: s 127. 2

2. Do the statutory assumptions apply? ss 128 - 130 3

Req 1#: Did the person have ‘dealings’ with a company? S 128(1) 5

Req 2#: What is the assumption that the person can make? S 129 5

Req 3#: Not excluded under s 128(4)? 6

3. Authority under the general law? 11

A. Actual authority 11

(a) Express authority 11

(b) Implied actual authority (from (i) position and (ii) acquiescence) 14

(i) Implied actual authority attached to a position 14

(ii) Implied actual authority from acquiescence 19

B. Apparent authority (note – consider ss 128 and 129 in addition) 23

REq 1#: A representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor. 24

Req 2#: Representation made by a person(s) who had actual authority to manage business of company either generally or in respect of those matters to which the contract relates 24

Req 3#: The contractor was induced by such representation to enter into the contract, that is, that he in fact relied upon it 26

Req 4#: Under its constitution the company was not deprived of capacity to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent – although note position in Australia 26

C. Indoor management rule : northside etc 26

Exception 1#: Constructive notice after being put on inquiry 28

Exception 2#: Acts beyond corporate power 31

Exception 3#: Subjective knowledge of irregularity 32

Exception 4#: Rule cannot benefit company 32

Exception 5#: Can the rule benefit an insider? 32

7 contracts with outsiders

Checklist for exam:

  1. Note how a company can make contracts.

  2. Do the statutory assumptions apply?

    1. S 128

    2. S 129 assumptions

    3. Disqualified under s 128(4)?

  3. Agency rules?

    1. Actual authority

      1. Express?

      2. Implied?

        1. From position?

        2. From circumstances or acquiescence?

  4. Indoor management rules?

1. How does a company make contracts? Agent: s 126, or company itself: s 127.

Company’s powers to make contracts:

  • Legal capacity and powers of a company = individual: Company has the legal capacity and powers of an individual both in and outside jurisdiction: s 124(1).

    1. issue and cancel shares in the company

    2. issue debentures

    3. grant options over unissued shares

    4. distribute any of company’s property among members

    5. grant a security in uncalled capital

    6. grant a circulating security interest over company’s property

    7. arrange for a company to be registered

    8. do anything authorized to do by any other law.

  • Constitution may limit powers and set out objects: s 125. But exercise of power by company not invalid merely because contrary to an express restriction or prohibition in company’s constitution: S 125(1) or contrary to objects: s 125(2).

By agent

  • Agent can exercise a co’s power to make, vary, ratify or discharge contracts – when acting with express or implied authority and on behalf of co: s 126(1) Doesn’t need common seal (2). Doesn’t affect any requirements of law for particular proc reqs for contracts: 126(2).

By company itself

  • Execution of documents (including deeds) by company itself: s 127

    • Company can execute document without using common seal if document is signed by: (a) 2 directors of company; or (b) a director and company secretary of company or (c) for a proprietary company that has a sole director who is also the sole company secretary – that director. – see s 129(5) assumptions: 127(1)

    • Company with common seal can execute document if seal is fixed to document and fixing of seal is witnessed by: (a) 2 directors (b) director + company secretary (c) sole director of prop company who is sole company secretary under s 127(2)

      • If company executed doc in this way – people can rely on assumptions in s 129(6).

    • Company can execute document as deed if expressed to be executed as a deed and is executed in accordance with s 127(1) or (2): s 127(3)

    • Does not limit ways in which company can execute a document: S 127(4)

2. Do the statutory assumptions apply? ss 128 - 130

Overview of ss 124 - 130
Checklist:

Issues:

1. Did the person have ‘dealings’ with the company such that they might be able to rely on the s 129 assumptions? As a person, in relation to dealings with company. (Even extends to dealings with another person who has or purported to have acquired title to property from a company (s 128(2) – or when there was fraud by person acting for company (s 128(3)) – but not when person knew or suspected assumption was incorrect).

2. What are the s 129 assumptions? See below list.

3. Not excluded under s 128(4)?

  • Information available to public from ASIC does not constitute constructive notice: s 130 Person not taken to have information about a company merely because information available to public form ASIC.

4. What is the effect of the assumption? Company not entitled to assert in proceedings in relation to dealings that any of assumptions are incorrect: s 128(1).

Differences between statutory assumptions and indoor management rule?

  • S 128(4) is different – as to state of mind of person dealing with company which will disqualify their entitlement to make assumptions.

  • For the most part ss 128-9 operate less widely than the common law rule. Sections 128-129 are not a code and the common law rule can still operate: Australian Capital Television

  • Sections 128-129 apply only in relation to corporations that are companies. The common law rule is not confined to dealings with companies: it can apply to dealings with corporations generally.1.

  • Sections 128-129 do not apply where some person other than the company asserts that there was an irregularity in an earlier dealing with a company. It seems that the common law rule can apply in that case. An example that has been suggested is where A sues B for damages in tort for inducing company X to break its contract with A,...

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