Chapter 6 - Dealings Between Company & Third Parties

Question 1

1) Kelner vs Baxter (1866)

Answer 1

Baxter was not in existence at the time, thus, could not give authority. Directors held liable.

Question 2

2) Newborne vs Sensolid (Great Britain) Ltd (1954)

Answer 2

Promoter could not be held liable where he signs the contract merely to confirm the signature of the company. Thus, directors not held liable.

Question 3

3) Phonogram Ltd vs Lane (1981)

Answer 3

A contract can purportedly be made on behalf of a company even though it is known by both parties to be made on behalf of a company not yet in existence. Even if the actual process of formation has not yet begun. Thus, directors not held liable.

Question 4

4) Cotronic (UK) Ltd vs Dezonie (1991)

Answer 4

There must be clear intention to form the company as there was in Phonogram. Thus, directors held liable.

Question 5

5) Oshkosh B’Gosh Inc vs Dan Marbel Inc Ltd (1989)

Answer 5

An off-the-shelf company was acquired and its name change to Dan Marbel by resolution, but no certificate of incorporation was obtained under that name - S.51(1) was inapplicable. Thus, directors not held liable.

Question 6

6) Badgerhill Properties Ltd vs Cottrell (1991)

Answer 6

S.51 did not apply as the company was already in existence although it’s name was wrongly stated. The company will be able to enforce the contract on the other party. Directors not held liable.

Question 7

7) Rover International Ltd vs Cannon Film Sales Ltd (1987)

Answer 7

Held that S.51(1) did not apply to non-registered UK companies. Directors not held liable.

Question 8

8) Turquand’s case (1856)

Answer 8

It was established that if one deals with a company through persons who purport to act as directors even though they have not been properly appointed, one may assume that they are indeed directors and hold the company bound by their acts. Thus, company held liable.

Question 9

9) Freeman and Lockyer vs Buckhurst Park Properties (Mangel) Ltd (1964)

Answer 9

Held that one cannot use their authority to enter into contacts which are not for the purpose of, or reasonably incidental to, attaining or pursuing the company’s objects.

Question 10

10) Rolled Steel Products (Holdings) Ltd vs British Steel Corporation (1984)

Answer 10

Held that one cannot use their authority to enter into contacts which are not for the purpose of, or reasonably incidental to, attaining or pursuing the company’s objects. Thus, a trading company must always have implied power to borrow money for the purpose of its trading business.

Question 11

11) AG vs Great Eastern Railway Company (1879)

Answer 11

Thus, a trading company must always have implied power to borrow money for the purpose of its trading business. Reaffirmed by Rolled Steel.

Question 12

12) Armages Ltd vs Mundogus SA (1986)

Answer 12

Having represented that the agent has the requisite authority, the principal is stopped from claiming lack of authority.

Question 13

13) Hely-Hutchinson vs Brayhead Ltd (1968)

Answer 13

In order for action to be taken based upon ostensible authority, it must be shown that there is some communication purporting to represent that agent has authority (Said communication must come direct from the board of directors).

Question 14

14) Ruben vs Great Fingall Comsolidated (1906)

Answer 14

Stockbrokers issued forged share certificates, it was held that they were ineffective in imposing any obligations or conferring any rights.