Corporation Laws

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LAWS7023-Business and Corporate Law1/2013
Week commencing: Monday, 20.05.13

Tutorial 4: Corporate Finance and Liability
Note: Focus in this tutorial is on corporate contracting

Problem Set 12: Read Chapter 23.

1. FWPL has traditionally transported its wine using a fleet of trucks that it owns. It is considering selling the fleet of trucks, which should sell for approximately $3 million. FWPL’s Board of Directors has not yet made a final decision to sell the trucks. Would a contract of sale be enforceable by the purchaser if the contract was executed: (a) By being signed by Nick Galli for and on behalf of FWPL

(b) By being signed by Mario Galli for and on behalf of FWPL (c) By the FWPL common seal being fixed in the presence of, and witnessed by, Nick Galli and Pia Galli (d) By being signed by Nick Galli and Pia Galli

(e) By being signed by Mario Galli and his friend Ryan Booker (Ryan does not work for FWPL).

See 23-200 – 23-400, 25-390 and ss127 and 129 Corporations Act

Overview:
* Contracting with a company requires both formal authority and substantive authority.

* Section 127(1) Corporations Act,

* Section 127 gives formal authority to sign documents.

* To establish substantive authority (in the absence of a board resolution) the party to the contract would need to show that the officers or agents have enough actual or apparent authority to bind the company.

* There are two types of authority that an agent of a company might have:

* actual authority;
* apparent authority.

(a) By being signed by Nick Galli for and on behalf of FWPL Is Nick a director of FWPL? Yes/No

Does he have formal authority to sign by himself under s127? Yes/No Why?

Does he have substantive authority? Yes/No Why?

Actual authority means:

Has the board made a decision? Yes/No

Does Nick have express actual authority to sign the contract? Yes/No Why?

Implied authority: Powers that attach to a particular office/position/customary/ acquiescence.

Customary authority: Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd.

Acquiescence means:

Acquiescence: Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992).

Nick would/would not have customary authority as a single director.

There are/are not circumstances of acquiescence.

(b) By being signed by Mario Galli for and on behalf of FWPL Who is Mario?

Does Mario have formal authority to sign under s127? Yes/No Why?

Does he have substantive authority? Yes/No Why?

* Hely-Hutchinson v Brayhead Ltd.

* Entwells Pty Ltd v National and General Insurance Co Ltd)

* Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd)

The transaction of selling the trucks would/would not be within a MD’s authority.

(c) By the FWPL common seal being fixed in the presence of, and witnessed by, Nick Galli and Pia Galli

* Does this contract comply with s127? Yes/No How?

* Is substantive authority assisted by the statutory assumptions in the indoor management rule? Yes/No How?

* Section 129(6): Note ‘appears’

* If s129(6) applies, then any purchaser can assume that the contract has been validly signed.

* Section 129(2): what can any purchaser assume?

* Effect of s 128(4) ‘knew or suspected’

Conclusion: Would an ordinary purchaser in this situation actually have knowledge or suspicion about the conduct of FWPL’s affairs? Yes/No Possibly?

(d) By being signed by Nick Galli and Pia Galli
Would the position be altered? Consider s 127. Yes/No Why?

Does s 129(5) apply? Yes/No Why? ‘Appears’

Additionally, what assumption can be made using s 129(2)?

(e) By being signed by Mario Galli and his friend Ryan Booker (Ryan does not work for FWPL). Who is Mario?

Does he have formal authority to sign by himself under s127? Yes/No Why?

Who is Ryan? Do we have any...
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