Australian Corporation Law - Builders Ltd - Math Problem Example

Australian Corporation Law According to Corporate Law Overview (2006), basically, a corporation is a legal entity. It is created under the laws of the state it's incorporated within. The laws of each state vary, some more favourable than others. Federal law, under the Securities Act of 1933 - regulates how corporate securities (stocks, bonds, etc.) are issued and sold. This article on Corporate Law Overview (2006), also mentioned that a corporation creates an "artificial person" or entity that can sue or be sued, enter into contracts, and perform other duties necessary to maintain a business. The major advantage of a corporation is that the entity shields the individual owners or shareholders from personal liability for the liabilities and debts of the corporation, with some limited exceptions (such as unpaid taxes). The legal "person" status of a corporation also gives it an indefinite life; the termination or death of certain individuals does not alter the corporate structure. Persons trained in corporate law are responsible for bringing corporations into being. Corporate lawyers structure the stock and bond offerings and the bank and insurance loans that provide enterprises with capital. They bring about the joint ventures, licensing arrangements, mergers, acquisitions, and the myriad of other transactions entered into by the corporation. Areas include business formations, securities law, venture capital financing, business agreements, internal forms, and business tax consultation. The Corporations Act 2001 or sometimes referred to as the Corporations Act (or informally as the 'Corps' Act), is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level. It focuses primarily on companies, although it also covers some laws relating to other entities such as partnerships and managed investment schemes. It is presently the largest corporations statute in the world. The CLERP reforms (currently at CLERP 9) are simplifying the statute. At several thousand pages long, the statute dwarfs those of other nations such as Sweden, whose corporations statute, comparatively, is less than 200 pages long. The Corporations Act is the principal legislation regulating companies in Australia. It regulates matters such as the formation and operation of companies (in conjunction with a constitution that may be adopted by a company), duties of officers, takeovers and fundraising (Corporations Act 2001 based on Wikipedia, 2006). In Australia corporations are registered and regulated by the Commonwealth Government through the Australian Securities and Investments Commission. Corporations law has been largely codified in the Corporations Act 2001 (Corporation, 2006). The duty to disclose doctrine provides that people generally are liable for omissions only if they have a duty to disclose the withheld information. The doctrine has been applied in several contexts. For instance, it requires corrective disclosures from those who have made statements that are rendered misleading by subsequent events. It also protects from liability those who come into possession of material information but remain silent, unless they also have disclosure obligations. Those who choose to speak, however, must speak honestly (Duty to Disclose) . This is the advise of the legal rights and liabilities for the Builders Ltd. that will be given to them based on the Australian corporation law. The constitution of the Builders Ltd. includes the following clauses: a) to build office building within the city of Sydney local government area and b) to do all such things as are necessary to achieve. Based on the constitution of that the Builders Ltd., the managing director may enter into contracts on behalf of the company to the value of $100,000 and provided that the Board of Directors especially authorizes him or her. He or she may enter onto contract on behalf of the company to the value of $950,000, provided, the Board of Directors especially authorizes him or her. The three separate contracts which Mary purportedly entered with Allneeds Co. Ltd. on behalf of the Builders Ltd. are void. The first contract is for the purchase of a timeshare at Surfers Paradise, where, it is intended, the senior executive of Builders Ltd. will be able to go for a holiday. The cost is $95,000. The second contract is for the purchase of land within the city of Sydney local government area. The cost of the land is $900.000. The third contract is for obtaining a ten year licence granting the company the right to use certain innovative building techniques and the right to buy special building materials relating to those building techniques. The contract price is $1.2 million. The first contract is for the purchase of a timeshare at Surfers Paradise amounting to $95,000, where, it is intended, the senior executive of Builders Ltd. will be able to go for a holiday and the second contract which is for the purchase of land amounting to $900.000, within the city of Sydney local government area will fall within the contract cost ceiling of the company, Builders Ltd. However, even if this is the case, it is still not a legal contract since Mary, who entered into these contract is not a duly appointed and recognized managing director. All these three transactions of Mary as managing director is, in effect, not valid since she is not a duly recognized managing director. Mary does not have the legal authority to transact business since she is not yet officially appointed to the position. When its former managing director, Peter, retired it has been moved at a meeting of the Board that Mary be appointed the Managing Director of the company. However, the said appointment is void since there is no seconder to that motion nor any discussion. In fact, the Builders Ltd. company secretary recorded in the minutes of that Board meeting that the motion lapsed for want of a seconder. Mary is not an appointed managing director. Even if in case she was officially appointed as managing director, the third contract with Allneeds Co. Ltd. is obviously not valid since it is clear in their, Builders Ltd.’s, constitution that the managing director may enter into contracts on behalf of the company to the value of $950,000. Since the contract price of this third contract is beyond the said ceiling amount, the third contract is obviously void. The supposed special authorization of the Board relating to the Managing Director's contractual capacity, referred to in the company's constitution, has never been passed. Builders Ltd. may refuse to honour all three separate contracts, and claim, amongst other things, that Mary had no authority to bind the company and that in any case, the three contracts were ultra vires and void. Ultra vires is a Latin phrase literally means "beyond the power." The three contracts entered into by Mary were ultra vires, since in the corporate law, ultra vires describes acts attempted by a corporation that are beyond the scope of powers granted by the corporation's charter, the laws authorizing its formation, or similar founding documents. Acts done by Mary in entering these three contracts are beyond the scope of powers granted by the corporation's charter, the laws authorizing its formation, or similar founding documents. These contracts are void or voidable. To go outside those powers would be ultra vires. In administrative law, an act may be judicially reviewable ultra vires in a narrow or broad sense. Narrow ultra vires applies if an administrator did not have the substantive power to make a decision or it was wrought with procedural defects. Broad ultra vires applies if there is an abuse of power (Ultra Vires, 2006). On the other hand, this is the advise of the legal rights and liabilities for the Allneeds Co. Ltd. according to the Australian corporation law. Take legal action if you need to, but do it the right way. If you can’t avoid a lawsuit, learn more about statute of limitations and grounds for suing — from non-payment to breach of contract (Litigation, 2006). The Allneeds Co. Ltd will be informed that based on the constitution of the Builders Ltd, a building construction company, it includes the following clauses: a) to build office building within the city of Sydney local government area and b) to do all such things as are necessary to achieve. The managing director may enter into contracts on behalf of the company to the value of $100,000 and provided, the Board of Directors especially authorizes him or her, he or she may enter onto contract on behalf of the company to the value of $950.000, provided, the Board of Directors especially authorizes him or her. When its managing director, Peter, retired it has been moved at a meeting of the Board that Mary be appointed the Managing Director of the company. However, the said appointment is void since there is no seconder to that motion nor any discussion. In fact, the Builders Ltd. company Secretary recorded in the minutes of that Board meeting that the motion lapsed for want of a seconder. The three separate contracts which Mary purportedly entered with Allneeds Co. Ltd. on behalf of the Builders Ltd. are void. The first contract is for the purchase of a timeshare at Surfers Paradise, where, it is intended, the senior executive of Builders Ltd. will be able to go for a holiday. The cost is $95,000. The second contract is for the purchase of land within the city of Sydney local government area. The cost of the land is $900.000. The third contract is for obtaining a ten year licence granting the company the right to use certain innovative building techniques and the right to buy special building materials relating to those building techniques. The contract price is $1.2 million. This third contract is obviously not valid since it is clear in the constitution of the Builders Ltd. that the managing director, in this case, Mary, may enter into contracts on behalf of the company to the value of $950,000. Since the contract price of this third contract is beyond the said ceiling amount, the third contract is obviously void. The fact of the case is that the supposed special authorization of the Board relating to the Managing Director's contractual capacity, referred to in the company's constitution, has never been passed. Builders Ltd. may refuse to honour all three contracts, and claim, amongst other things, that Mary had no authority to bind the company and that in any case, the three contracts were ultra vires and void. Based on the law, the extent and scope of the Builders Ltd.’s status and capacity is determined by the law of the place of incorporation (Wikipedia, 2006). Under the Australian law, basic common law contract addresses four sets of issues: (1) when and how is a contract formed?; (2) when may a party escape obligations of a contract (such as a contract formed under duress or because of a misrepresentation)?; (3) what is the meaning and effect to be given to the terms of a contract? and (4) what is the remedy to be given for breach of a contract? Subject to the sine qua non of Contract Formation, other ingredients that make up a contract include: (a) Form - In some cases, certain formalities (that is, writing) must be observed; (b) Capacity - The parties must be legally capable of entering into a contract. In this case, Mary does not have the legal capacity to represent Builders Ltd. and (c) Consent - The agreement must have been entered into freely. A contract which has all of the above ingredients is said to be valid. The absence of any of these elements renders the contract either void, voidable or unenforceable. Based on the law, contract disputes involve privity. That is, only parties to a contract may sue for the breach of a contract. Therefore, the Allneeds Co. Ltd. may only sue Mary, not the Builders Ltd., since Mary is not a duly recognized managing director of the Builders Ltd. And Mary does not have the legal authority to represent the company. In Australia, for contracts subject to legislation equivalent to the Statute of Frauds, there is no requirement for the entire contract to be in writing, although there must be a note or memorandum evidencing the contract, which may come into existence after the contract has been formed. The note or memorandum must be signed in some way, and a series of documents may be used in place of a single note or memorandum. It must contain all material terms of the contract, the subject matter and the parties to the contract. These have been followed by Mary and the Allneeds Co. Ltd. The only issue here is that the Builders Ltd., is not accountable for the contract entered by Mary in behalf of the company since Mary has no authority to represent the company as managing director. Based on the law, since the contract is in a written form, then generally, Mary is bound by its terms regardless of whether you have read it or not (L'Estrange v. F Graucob Ltd [1934] 2 KB 394). But these terms does not apply to Builders Ltd. since this company did not give Mary the authority to enter into contract with the Allneeds Co. Ltd. (United Nations Convention on Contracts for the International Sale of Goods, 1980). This dispute regarding the contract entered into by Mary may enter an alternative dispute resolution. For example, through arbitration, the parties submit their dispute to a neutral party who renders a legally enforceable decision. Other possible dispute resolution can be arrived at through facilitation. It is a process in which a neutral third party uses his or her skills to promote communication between parties to a dispute. The focus of facilitation is communication. Fact-finding may also be employ. This process involves an impartial third party used to analyze the issue(s) and to present findings of fact and make recommendations for a resolution. Fact-finding can be used by the parties to continue their own negotiations for settlement. Mediation, is another very popular form of alternative dispute resolution. It is an informal process geared to the settlement of disputes between parties by the action of an intermediary, or neutral party. Participation in mediation is typically voluntary. The mediator does not render a decision at the end of mediation; instead, mediation leaves the control of the outcome (i.e., the actual settlement of the dispute) to the parties. A mediator does not render a formal decision as to which party is correct or to blame, although he may provide his opinion as to the strengths and weaknesses of a case. Another possible resolution is through neutral/case evaluation. It is a non-binding process where an experienced neutral case evaluator is brought in to evaluate the facts and offer an evaluation of likely outcome of the case. Works Cited Alternative Dispute Resolution. 2006. All Business: Champions of Small Businesses, 2006. http://www.allbusiness.com/business_advice/articles/4132.html Contract Law. 2006. http://en.wikipedia.org/wiki/Contract. Contract. June 18, 2006. http://en.wikipedia.org/wiki/Main_Page. Corporate Law Overview. 2006/ http://www.legal-database.com/corporate-law-overview.htm Duty to disclose/ (2006). http://www.legal-database.com/duty-to-disclose.htm Litigation. 1999. http://www.allbusiness.com/business_advice/Legal/35-1814.html. Organization. June 16, 2006. Wikimedia Foundation, inc. http://en.wikipedia.org/wiki/Organization. 6/16/2006. United Nations Convention on Contracts for the International Sale of Goods, Vienna, 11 April 1980. Read More