Application Of The Motorcycle Purchase Contract By Motorbikes Pty Ltd (Case Study Sample)

LAW OF BUSINESS ASSOCIATION Author Professor University City, State TIME \@ "MMMM d, y" October 8, 18 Law of Business Association Question 1 Issue Is the contract between Motorbikes Pty Ltd and John, regarding the sale of the motorcycle, binding according to the Australian case law and the Corporations Act 2001 (Cth)? Rule In accordance with section 124, clause 1of the Corporations Act 2001(s.124 [1]), a company is a separate legal entity and therefore, able to enact contracts. Company agents are required to execute act contacts on behalf of the company in accordance with section 126. Company contracts can be enacted by the either of the following:[Pathinayake Athula Commercial and Corporations Law (Thomson-Reuters, 2nd edition, 2014)] * Either the director or the secretary of the company or both as specified in the company’s constitution. * Agents who have been authorized to enact company contracts on behalf of the company by the company directors. Section 127 (s.127) of the Corporations Act 2001 prescribes the enactment of contracts by companies. Executing a contract without the use of the common seal, a company needs to apply the specific and relevant rule as per section 127 clause 1 of the Corporations Act 2001 [s.127 (1)]. To comply with s.127 (1), a contract is deemed bidding and enforceable if it has been signed by either of the following:[Marc Hertz & Maddocks Lawyers ‘ Importance of execution of contracts by companies’. [online] Cleardocs.com. < /clearlaw/company-registration/execution-of-contracts.html >] [Amanda Seaton & Jarrod Wilksch ‘Putting pen to paper – execution under section 127’. [online] Johnson o Winter & Slattery < http://www-staging.webhosting.jws.com.au/ja-JP/acumen/item/660-putting-pen-to-paper-execution-under-section-127 >] * A company secretary and one of the directors of the company * Two company directors involved in the execution of the contract on behalf of the company. In accordance with section 198A of the Corporations Act 2001 (s.198A), a director of a company has the authority to run the company and conduct business. A contract enacted in accordance with s.127 (1) of the Corporations Act 2001 allows the other party of the contract to postulate regarding the execution of that contract as prescribed under section 129 (s.129) of the Corporations Act 2001. If there is no violation of this internal assumption or sufficient evidence to prove a violation of the inherent assumption, the other party in the contract is right also to assume that the execution and enactment of the contract document in question have complied with all the requirements.[Andy, Gibson & Douglas, Fraser, Business Law (Pearson Publications., 8th edition, 2014)] A case worth mentioning is the Knight Frank v Paley case. In Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 103 (Paley) case, only one director of the company executed the contract in the absence of another company director (s) and company secretary. The court concluded that in the signing of the s.127 execution clause was not bidding and that the director was not acting as an agent of the company. Therefore, the provision was incomplete without the countersigning of the company secretary or another company director. The contract document was, therefore, not legally binding and the other party has the legal right to revoke their offer.[Ibid. 3] [Ibid. 3] Application As per the available information, John approaches Motorbikes Pty Ltd who deals with buying, repairing and selling motorbikes. John expresses his interest in selling his motorcycle. Michelle, the company director, and Tim, the company secretary, both sign the contract to purchase John’s motorbike. Therefore, execution of the contract has been carried out in accordance with section 127 execution clause [s.127 (1)]. The enactment of the motorcycle purchase contract by both Michele, as the company director, and Tim, as the company secretary, without the use of the common seal fulfills the requirements section 127 contract execution clause of the Corporations Act 2001. Conclusion The application of the motorcycle purchase contract by Motorbikes Pty Ltd and John confirms that the contract execution satisfies the requirements of section 127 execution clause [s.127 (1)]. As such, withdrawal of Motorbikes Pty Ltd would amount to a breach of contract since the contract is legally binding. Question 2 Issue The case interrogates the enforceability of a contract between the company, (Cakes Pty Ltd), and the other party, George. Is the contract between George and Cakes Pty Ltd legally binding? Rule In accordance with section 124, clause 1of the Corporations Act 2001(s.124 [1]), a company is a separate legal entity and therefore, able to enact contracts. Company agents are required to enact contacts on behalf of the company in accordance with section 126. Company contracts can be enacted by the either of the following:[Ibid. 1] * Either the director or the secretary of the company or both as specified in the company’s constitution. * Agents who have been authorized to enact company contracts on behalf of the company by the company directors. To comply with s.127 (1), a contract is deemed bidding and enforceable if it has been signed by either of the following:[Ibid. 3] * A company secretary and one of the directors of the company * Two company directors involved in the execution of the contract on behalf of the company. In accordance with section 198A of the Corporations Act 2001 (s.198A), a director of a company has the authority to run the company and conduct business. A contract enacted in accordance with s.127 (1) of the Corporations Act 2001 allows the other party of the contract to postulate regarding the execution of that contract as prescribed under section 129 (s.129) of the Corporations Act 2001. If there is no violation of this internal assumption or sufficient evidence to prove a violation of the internal assumption, the other party in the contract is right also to assume that the execution and enactment of the contract document in question have complied with all the requirements.[Ibid. 4] A contract is enforceable and legally binding if s.127 (1) of the Corporations Act 2001 is executed as prescribed. Failure to fulfill these requirements, the contract is deemed unenforceable. The decision by the judge in the Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] SASCFC 103 (Paley) case that the contract was unenforceable and that the seller had a legal right to withdrawal the offer, came as a result of non-compliance to the section 127 executable clause. A case worth noting is the Bank of New Zealand v Fiberi Pty Ltd [1993] Supreme Court of South Wales. Fiberi Pty Ltd had two directors Doyle and his wife with equal shareholding. They had a son, who was neither a director nor a secretary to the company. Doyle and his son secured loans to their companies, where the other director of Fiberi Pty Ltd was neither a director nor a company secretary, from the Bank of New Zealand and guaranteed by Fiberi Pty Ltd. The other director of Fiberi Pty Ltd challenged the legality of the contract between Bank of New Zealand and Fiberi Pty Ltd. The ruling stated that the contract between was not enacted legally and thus was not enforceable since it was held that as per s.127 (2):[ Harris, Jason, Hargovan, Anil & Adams, Michael, Australian Corporate Law (LexisNexis Butterworths, 6th edition, 2018)] * The purported secretary was not an agent of Fiberi Pty Ltd * Only one director of Fiberi Pty Ltd was present to...