Management
Beanstalk Ltd is a public company and has a constitution. Therefore, the company will be governed by the constitution and the replaceable rules. A constitution is defined by S9 as a company’s constitution, which includes rules and consequential amendments that are part of the company’s constitution. A company policy means the terms of contract of employment that formed in the company. The case of Nikolich v Goldman Sachs JBWere Services Pty Ltd illustrates that the employer had breached its contract with Mr. Nikolich by failing to follow its policies on health and safety, harassment and grievance procedures.
Question One (i)
The issue here is that whether the contract is enforceable.
A managing director (Jack) has the customary authority to make contracts related to the day-to-day management of the company’s business: [Freeman and Lockyer v Buckhurst Park Properties]. Jack is considered having an apparent authority. The case of Tesco Supermarkets Ltd v Nattrass illustrates that senior managers are the directing mind and will of the company.
Under S126(1), a company reserves the right to authorize individual acting with the company’s express or implied authority on behalf of them to make a contract.
S140(1)(b) provides if a company has a constitution, it applies as a contract to the company and each director. The contractual nature of a constitution is also supported by the case of Hickman v Kent or Romney Marsh Sheep-Breeders’ Assoc. Directors are thus bound by both statute and case law to comply with the company constitution.
Under S134, a company’s operation is strictly based on either the company’s own constitution or replaceable rules. It can also be subjected to both of it. Any replaceable rule that is not displaced by a constitution will continue to operate. RR S198C provides that the directors of a company may confer on a managing director any of the powers that the directors can exercise.
S129 provides that the outsider has statutory right to assume that agent is complying with any restrictions or internal rules of the company. Furthermore, the rules in Royal British Bank v Turquand’s case allowed persons dealing with a company to assume that its internal proceedings were properly carried out. However, there are some exceptions to the rule in the Turquand’s case. If outsider is aware of any limitations to the agent’s authority, or is put on notice of such, protection of S129 as to assumptions is lost: [S128(4)]. This is something similar to the case of Northside Developments Pty Ltd v Registrar-General. This is to protect the outsiders when dealing in a transaction with a company.
The director has taken the company’s trading outside its constitution and thus have failed to comply with their contractual duty under the company’s constitution as required by S140(1)(b).
Although the director has bound to exercise this power in compliance with the company’s constitution and he has breached this contractual duty, under S129 together with the Turquand’s case, outside has statutory right to assume that the director is complying with any restrictions or internal rules of the company. Therefore, the contract between Giant Ltd and Beanstalk Ltd is still enforceable .
Question One (ii)
The issue here is that whether the contract is enforceable.
S140(1)(b) provides if a company has a constitution, it applies as a contract to the company and each director. The contractual nature of a constitution is also supported by the case of Hickman v Kent or Romney Marsh Sheep-Breeders’ Assoc.
Under S124, a company has the legal capacity and powers of an individual both in and outside the jurisdiction.
S125(2) provides that a company’s constitution may contain an objects clause that identifies and restricts the businesses and activities in which the company may engage. Under the past doctrine of ultra vires, (a company acting beyond its powers), a company was considered to lack legal capacity and any contract or transaction was voided and had no legal effect: [Ashbury Railway Carriage & Iron Co v Riche].
Today, the effect of S124 combined with S125(2) is to abolish the doctrine of ultra vires. A contract is now not void merely because it is contrary to or beyond any of the company’s object.
In conclusion, the contract between Giant Ltd and Beanstalk Ltd is enforceable.
Question One (iii)
The issue here is that whether the contract is enforceable.
The doctrine of constructive notice means that people dealing with a company are deemed to have knowledge of the company as it was lodged with the registering authority and hence available for inspection by the public. However, this is also abolished by S130(1). It provides that a person is not taken to have information about a company merely because the information is available to the public from the Australian Securities and Investments Commission (ASIC).
S129 provides that the outsider has statutory right to assume that agent is complying with any restrictions or internal rules of the company. Furthermore, the rule in Turquand’s case allowed persons dealing with a company to assume that its internal proceedings were properly carried out. However, there are some exceptions to the rule in the Turquand’s case. If outsider is aware of any limitations to the agent’
