Friends Owning the Company - Essay Example

The machine was to cost the company $500 thousand. When James returned, and spoke with his other partners, James explained about the machine, and the price of the machine. The other directors think the machine will cost the company too much money at this time, and the other partners are concerned that the company will be obligated to fulfill the contract. However, if a company enters into a contract of such there are certain limitations to how a company can enter into the contract, and make the contract a binding contract.

As it is written with only James’ signature on the contract, and that the signature was not witnessed by anyone else the contract is not binding, and is considered null and void. There are only three ways a company can enter into a legal and binding contract. The contract can be signed with the seal of the company, or it can be signed without the official seal of the company. When the contract is signed without the official seal of the company the contract must be signed in the presence of two directors.

The contract can be signed in the presence of one director, and a secretary of the company. In this case the contract was signed without the official seal of the company. The contract was signed while James was on vacation. The contract was not witnessed by any other director of the company. . James should have consulted the other partners prior to signing the contract. Because all partners have managed the company together, and have until this time made decisions together. James thought because the machine offered a way of increasing productivity by 20% that the machine will increase the company’s profits.

The remaining partners are not convinced that the machine will increase productivity, and increase profits. If the machine does not increase productivity, and profits, then the company might become bankrupt over the obligation of paying for the machine. The other partners do not want this to occur. When James did not consult the other partners in the decision making, he did not follow company procedures. Because the partners of the company have always discussed important decisions like this, and made decisions together, internal procedures at the company were not followed.

James should have discussed with the other partners his intentions to purchase the machine. However, James did not discuss his intentions of purchasing the machine with the other partners. The four partners have always discussed important expenditures like this, because James did not discuss with the other partners the machine, and this large purchase the company procedure was not being properly followed. Company procedure is that all partners must discuss important expenditures with one another, and make a decision about the purchase together.

Because, company procedure was not followed the company will not be held responsible for the purchase. James was the principle in the agency principle method of signing a contract for a corporation. James was considered to be doing business with the agent of the machines