The common law view of pre-registration contracts was that the company did not exist for legal purposes until it had been formally incorporated (registered). This common law view resulted in company’s being unable to enter a binding contract until they had been registered.
However “given the delays which can be encountered in the registration process, the promoter of a company may wish to enter into contracts `for’ the company prior to its incorporation” . An example of this may be a promoter wanting to ensure a company will have stock on hand so it will be ready to operate when its registered. He might order stock and sign the contract in the unregistered company’s name. Since a company did not exist before registration it could not sign a contract itself or appoint an agent to sign on its behalf. Therefore promoters could not be seen as the company’s agent. Circumstances such as this are problematic and raise difficult questions as to the enforceability of the contract and the availability of damages for its breech.
At common law, a company was also incapable of ratifying a pre-registration contract after it was registered. “This was because under the law of agency , ratification has a retrospective effect and the contract was regarded as being made at the time it was entered into by the agent when the company was not in existence” .
A company could only be held liable for a pre-registration contract if it entered into a new contract with the same terms as the pre-registration contract after it was registered. This is called ‘novation’.
Seeing as though a company would not be held liable on a pre-registered contract, the courts recognised that innocent third parties could be prejudiced. Accordingly “the courts were prepared on occasions to infer an intension by the promoter to assume personal liability on the contract”
An important case is Kelner v Baxter (1866) where the promoters who had signed the contract on behalf of an unformed company were held to be personally liable. In this particular case the promoters of an unformed company agreed to purchase stock and signed an agreement, which stated ‘on behalf of the Gravesend Royal Hotel Alexandra Hotel Company Limited’. A difficultly had arisen as since the company had not yet been for...
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...is case an accountant who was one of the companies four promoters entered into a contract on behalf of a unformed company. The company failed to ratify the contract and the supplier attempted to sue all four promoters. The Supreme Court of New South Wales found that only the account was liable since he was the only person who had signed the contract. The court also made it aware that the accountant has a separate right to claim against the other promoters if he acted as their agent in regards to the contract.
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While the promoter is primarily liable in these circumstances, the company does have a potential secondary liability. Hence “where the company is registered but does not ratify the pre-registration contract within the prescribed time, the court may ‘do anything it considers appropriate in the circumstances’. The courts powers include the option of ordering the company to rectify the unfairness” . The courts are able to this by ordering the company to pay for part or all of the damages for which the promoter is liable, transferring property received under the contract to a party to the contract or paying an amount to a party to the contract.
There is one appellant and three respondents involved in these proceedings. Equuscorp Pty Ltd (referred to as “Equuscorp”) is the appellant. Ian Haxton, Robert Bassat and Cunningham’s Warehouse Sales Pty Ltd (referred to as “the respondents”) are the respondents. This matter was heard in the High Court of Australia in front of Chief Justice French and Judges Gummow, Heydon, Crennan, Kiefel and Bell.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
...me a director of the third company within five years after the liquidation of the two companies. The third company was funded by a creditor, Mr. Silverleaf. When the third company was wound up, Mr. Silverleaf then had knowledge of the previous two companies’ failures and claimed a debt of close to ₤135,000 . Mr. Silverleaf was successful in bringing proceedings under sections 216 and 217 of Insolvency Act 1986 even there’s no evidence of any asset transfer between the companies.
A pre-marriage contract, also referred to as a prenuptial agreement or “ pre-nup,” is a legal contract
What occurred in this case was that in a new build factory there had been inoperative flooring set and the claimants in this case lost money due to the flooring having to be reset again. In this case the claimants were in contract with the builders who laid the floor but decided not to sue them but to sue the sub contractors for their negligence because they were present when the builders and claimants were at meetings when discussing the flooring. Similarly, to the case Anns v Merton London Borough Council [1978] the court allowed the claimants to sue the defendants for their financial
Based on common law and precedent, the English law of contract has been formulated and developed over a number of years with it’s primary purpose to provide a regulated framework within which individuals can contract freely. In order to ensure a contract is enforceable there are certain elements which must be satisfied, one of which is the doctrine of consideration. Lord Denning famously professed; “the doctrine of consideration is too firmly fixed to be overthrown by a side wind” . This is a crucial indication that consideration has long been regarded as the cardinal ‘badge of enforceability’ in the formulation and variation of contracts in English common law.
The Act allows negligence as the sole ground unlike common law which required the claimant to establish ‘fraud’ even if negligence existed. It is believed that the ‘d...
Explain why it is important to have an intention to create legal relations when making a contract and why is consideration of the parties to the agreement necessary-:
However, companies may have several agreements and may forget that they are due for automatic renewal and fail to provide sufficient notice to terminate the agreement if they plan on ending their contract with the
But even after Fibrosa certain problems, such as the expenses incurred before the frustration remained. Therefore seeing that the common law was too rigid, The Law Reform (Frustrated Contracts) Act (1943) was introduced.
Even though the principal does not authorize, ratify, participate in, or know of the misconduct, he/she may be held for an agent’s tort committed in the course and scope of the agent’s employment. As noted in Case Study 1, an agent is to comply with all lawful instructions received from the principal and persons designated by the principal concerning agent’s actions on behalf of the principal. A principal who is under a duty to provide protection is subject to liability to such others for harm caused to them by the failure of such agent to perform the duty. A principal is not relieved from the separable part of a contract which he/she authorized the agent to make by the fact that the agent under took. Even where the agent’s unauthorized act constitutes a fraud on both the principal and the third person, the partial validity rule is applicable.
The first category of entrant is that of a contractual entrant. This class of entrant is defined by McMahon and Binchy as someone who enters “premises in pursuance of a contract between himself or herself and the occupier” . The classic examples of this category include sports spectators and concert goers. The duty owed to this type of entrant was found in the terms of the contract. If no such terms existed, as stated in the Law Reform Commission, “there is an implied term on the part of the occupier that he has taken reasonable care to make the premises safe for the contemplated purposes” . An example of implying terms can be found in the case of Callaghan v Killarney Race Course . The case centred around an injury suffered by a spectator at the races and whether the occupiers had acted with reasonable care. Maguire CJ noted that “There were no terms of contract between him and the defendant Company and the contract between them is to be implied from the circumstances of the case.” The Supreme Court dismissed the case as it was felt...
A contract actually starts when the other party makes an offer (offeror), and then it is accepted by
“The case of Carlill V carbolic Smokeball Company is considered a land mark in the English Law of contracts.”
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.