Question from past midterm exam The legal issue is whether ABC, an outsider can rely on statutory assumptions

to enforce the contract against LOT. Section 129(5) entitles a person to assume that for documents executed without a seal, a document is considered to be properly executed if it appears to have been signed in accordance with Corporations Act section 127(1). According to s127 (1), one of the way for a company to execute a document is signing of a contract by two directors, a director and secretary, or sole director/secretary. This protects outsiders if a person signs/ witnesses and contract and states next to their signature that they are a director or secretary, even if they are not the company is still bound Applying rule to the fact, the 2 directors signed the contract which is enough for the contract to be validly executed according to Corporation Act. Therefore, ABC can rely on this assumption and enforce the contract against LOT. Section 129(1) provides that a person may assume in dealing with a company, that its constitution and any applicable replaceable rules have been complied with. Apply to the fact, LOT has a constitution states that any contract has value higher than AUD 10000 must get acceptance from all three directors. However, the contract that 2 directors signed had value of AUD15000 which exceeds the allowed limit. Base on statute, an outsider like ABC can assume that when the two directors signed the contract, they complied with the constitution. Therefore, the contract is legally bound even two directors have made contract that contravened with companys constitution. Before section 129 was adopted, the similar rule came out from Turquands case. The rule is that is that outsiders can assume that company internal requirements were followed. However, where the outsiders have actual knowledge of the irregularity or reasonable ground to suspect that failure of internal proceedings and do not investigate further, they are still bound by the contract. In this case, managing director of ABC entered into the contract with 2 directors of ABC and the contract signed by 2 directors was valid according to statue. Hence, ABC was reasonable to believe any constitution or replaceable rules had been complied with. In conclusion, even the contract entered by 2 directors of LOT contravened with it constitution, outsider like ABC can depend on statutory assumption to make LOT company bound. 2) Ardvaark buys shares from BHP BHP sends bank form for Ardvaark to fill out the bank acct so that BHP could credit the dividend into bank acct

Anthony: Ardvaarks secretary signs the contract with his wife (she is not Ards director) 3) The first legal issue is whether FIC is bound by the contract with CC due to the requisite authority of its nonexecutive director, Abe An agents acts bind the principal to a contract with an outsider in many ways including: a. Actual authority b. Apparent authority Actual authority is authority based on agreement between company (principal) and agent. Actual authority can be expressed explicitly or implied. Express actual authority is power given to agent by board of directors while implied actual authority or customary authority is authority implied in the agents position in the company Applying above rules to the fact: Abe, non-executive director of the company, represents the agent of FIC; no fact indicates that he was given actual authority from the company to sign the contract. Therefore, he has no express actual power to enter into the contract. In addition, he has no customary authority which implied his position in the company as a non-executive director to sign the contract. In fact, he is not the managing director of the company to engage in contracts relating to day-to-day activities. Hence, the contract is not legally binding because Abe does not have actual authority sign the contract on behalf of the company Apparent authority is authority given to the agent when the company represent or give impression to outsider that the agent has authority to sign the contract and the outsider relies on this to enter into contract. In Freeman and Lockyer v Buckhurst Park Properties, for a contract with agent of the company to be valid, there must be (1) Representation that the agent had authority to contract must be (2) Made by a person or persons who had actual authority to manage the companys business either generally or in respect of those matters to which the contract relates. (3) This induces the outsider to enter into the contract Apply to the fact, Abe introduced to Michelle managing director of CC that he is a non-executive manager of the company. There was no representation from the person in the company who has actual authority to CC that Abe can sign contract on the companys behalf. Furthermore, as Abe made an impression that he is nonexecutive manager of the company, Abe made the contract with the company through him. Hence, Abe did not have apparent authority and the contract was unenforceable.

The second issue is whether CC can rely on statutory assumption to enforce the contract against FIC. Section 129(3) provides that persons held out by the company to be an officer (director, secretary, senior executive) or agent have been duly appointed and have the customary authority of their positions, but the holding out must come from a person with actual authority . In this case, there was no communication to CC that Abe has authority to sign contracts on the companys behalf. Abe simply handed his business card to Michelle and introduced himself as the companys nonexecutive officer to have her believe and contract with his company. Therefore, this assumption cannot be established In conclusion, FIC is not bound by the contract. In case Abe is the managing director of the company, he is supposed to have customary authority to enter into contracts regarding day-to-day activities. Therefore, the contract in this case in enforceable In case the contract is signed by Sheryl, the companys marketing manager. Her duty may not involve in purchasing the direct marketing system. Hence, she has no actual authority to enter the contract.