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Company Law > Contracting with the company > Flashcards

Contracting with the company Flashcards

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1
Q

What is an agent?

A

An agent is someone given authority by a principal to make contracts on their behalf

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2
Q

1st kind of Authority: actual. Definition?

A

Authority actually given to agent by agreement with the principal. Any contract formed here will be binding

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3
Q

Actual authority can be…

A

Implied from circumstances (e.g. appointing agent to role that usually carries a certain authority)

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4
Q

Actual authority in companies

A
  • Derived from const.
  • Articles give board authority to make contract on company’s behalf
  • Articles allow board to delegate authority, as part of general powers
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5
Q
  • No actual authority where contract is contrary to company const.
  • No actual authority where contract is bound to be contrary to company interests
A

Re Capitol films

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6
Q

Individual directors have no acc. authority. Board has acc. authority

A

Re Marseilles extension railway co.

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7
Q

Exec. directors…

A

usually have actual authority in specified area

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8
Q

contract binding due to apparent authority?

A

Agent liable for breach of contractual/fiduciary duty

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9
Q

Contract not binding, agent liable to 3rd party for…

A

Warranty of authority

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10
Q

Apparent authority, criteria

A

freeman & lockyer v Buckhurst park properties

  • rep of authority to 3rd party
  • reliance by 3rd party/Put on iinquiry?
  • rep by individual with authority
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11
Q

App authority: REPRESENTATION occurs where…

A

An agent was appointed to a position that carries usual authority. If principal limits their authority, there is no actual authority regardless of what’s apparent

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12
Q

App authority: represntation. ‘no need for…

A

explicit rep.

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13
Q

case for when representation occurs

A

Panorama development

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14
Q

define representation by acquiescence (clue, architects and managing director).

A

FREEMAN & LOCKYER

Almost as if company reluctantly plays along, allowing the agent to assume position and claim possession of authority

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15
Q

Who can make representation (plus case)

A

Someone with authority (sun Life)

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16
Q

making rep: someone with authority doing what? (with case?)

A

Confirming or ratifying the excercise of authority

Kelly v Fraser

17
Q

RELIANCE: contract is not binding if… (plus case)

A

the 3rd party’s reliance is unreasonable (includes knowing the limit put on agents authority)

Criterion Properties

18
Q

What puts the 3rd party on inquiry

A

Unusual circumstances.

19
Q

What unusual circumstances put a 3rd party on inquiry? (with 2 cases)

A

IF NO INQUIRY MADE, CONTRACT ISN’T BINDING

  1. Where the 3rd party knew/suspected that the director was acting for improper purposes/contrary to the interest of the company (Re capitol films)
  2. Where the 3rd party knew/suspected a conflict of interest (Wrexham AFC)
20
Q

What is the doctrine of constructive notice

A

the assumption that the third party would have consulted the company constitution, which is a public document. Hence apparent authority cant override limitations in articles

21
Q

What is the indoor management rule

A

(mitigates effect of constructive notice doctirne) Unless put on inquiry, 3rd party can assume that any procedural requirement in constitution has been fulfilled

22
Q

S.40 CA 2006 replaces?

A

Indoor management rule in mitigating effect of constructive notice doctrine

23
Q

s40 ‘Dealing with company’ cases to do with shareholders

A
  1. EIC services: shareholders cant rely on s40 in relation to bonus issue by the company
  2. Cottrell v King: shareholders cant rely on s40 against other shareholder (transfer of shares)
24
Q

s40 3rd party presumed to be in good faith unless…

A
  1. Proved otherwise

2. Put on inquiry

25
Q

s40 3rd party Not assumed to be in bad faith simply because…

A

they knew about limitations on authority

26
Q

Can directors rely on s40?

A

No. s41 applies for directors and connected persons

27
Q

Shareholders can take action in advance…

A

to stop contracts contrary to articles. But once contract is entered into, they can’t do anything

28
Q

If director has made a contract contrary to articles, company can…

A

claim compensation for breach of s171 (duty to act in accordance with constitution)

29
Q

How do companies execute contracts themselves (plus case)

A
  1. Common seal
  2. 2 authorised signatures
  3. Director in the presence of a witness
    case: Hilmi and associates ltd
    companies aren’t obliged to have common seal
30
Q

Objects clause

A

Limits the authority that can be given to an agent.

31
Q

If contract is binding in favour of 3rd party…

A

company must ratify it so they can enforce it.

32
Q

case: ‘Board can ratify if it has authority to make the contract’

A

Macari

33
Q

case: ‘If beyond the authority of the board, general meeting ratifies’

A

Grant

34
Q

S.239 CA 2006

A

If making the contract involved a breach by director, it must be ratified by a general meeting

35
Q

Long term trend

A
  • The reform of Ultra vires and constructive notice
  • more protection for outsider. less protection for company (risk of binding contract)
  • Has the protection for the outsider gone too far?

Company Law (3 decks)

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