Corporations Law Assignment

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CLAW 2201Corporations Law Assignment

Introduction

The Corporations Act[1] neither codifies nor excludes rulings at common law in relation to a company’s dealings with outsiders.[2] This means that in advising TV Treats of their contractual obligations, consideration need be paid to both common law and statutory positions. While there is some overlap between the two, inconsistencies between sources of law can result, leaving legislation to take precedence.

A. Authority of a Company Secretary

In considering whether or not TV Treats is bound to pay for both the cocktail party and sponsorship of the soccer team, the key concerns for the company are whether they can rely on constructive notice, whether or not Jennifer has authority to enter into contracts on the company’s behalf, and whether she satisfied her duties as an agent.

Common Law:
At common law, contracting parties are assumed to have constructive notice of publically available documents. However, while EventsRUs could be held as being aware of the company’s constitution, according to Turquand’s Case[3] they need not go further to ensure that the internal proceedings of the company have been properly carried out[4]. For that reason, TV Treats is unable to rely on the doctrine of constructive notice in order to free themselves from contractual obligations.

Where an agent enters into a contract on behalf of a principal, the principal is bound insofar as the agent acts within the scope of their authority, whether real or ostensible[5]. The real authority possessed by Jennifer is that customarily exercised by others in her position, and is not on its own sufficient to render TV Treats liable. However, as was recognised in Panorama Developments,[6] a company secretary also has an apparent authority to enter into contracts of an administrative nature. Whether or not the arrangement of marketing events falls within this definition, TV Treats will be liable for the cocktail party, to the extent that the directors have allowed Jennifer to arrange contracts of a similar nature in the past. Such a representation by the directors satisfies two of the three requirements for authority by estoppel.[7] Reliance on the part of EventsRUs, satisfies the third. To that end TV Treats is bound to pay for the cocktail party, insofar as they are unable to deny that Jennifer has the authority to bind the company to contracts, after allowing it to appear that she did.

As far as the soccer sponsorship is concerned, the key issue for TV Treats is whether or not sponsorship of a sports team amounts to an administrative contract. As was established in Panorama Developments, [8] secretaries are entitled to enter into contracts which “come within the day-to-day running of the company business”. Applying this definition, Jennifer did not have the authority to arrange sponsorship of the soccer team, and without a representation from someone on the board, TV Treats cannot be held liable.

Statute:
Following developments at common law,[9] s 130(1) was introduced to provide that there is no presumption of constructive knowledge for publically available documents. This means that TV Treats cannot assume that EventsRUs are aware of their constitutional requirements, leaving them unable to escape liability on these grounds.

Under s 129, EventsRUs are entitled to make a number of assumptions with regard to contracts made with TV Treats. Firstly, they are entitled to assume under s 129(1) that the company’s constitution was complied with, and secondly, under s 129(3), that those held out as agents and officers were validly appointed and had the customary authority of those in their position. Following on from that decided at common law, TV Treats would be bound to pay for the cocktail party to the extent that Jennifer was held out as an agent with the authority to enter into contracts on the company’s behalf, and to the extent that EventsRUs could assume that Jennifer had the...
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