1) The constitution of Worldwide Trading Pty Ltd requires every transaction over $10 000 to be approved by the board of directors. While his co-directors are on leave during the Christmas break, Michael, the managing director, orders goods valued at $50 000 from his friend Mark. Mark is also the secretary of Worldwide. On their return, the other directors refuse to pay for the goods. Select the correct statement from following:

Select one:

a. The contract is valid and enforceable as Mark is entitled to assume that the company's constitution has been complied with.

b. The contract is not enforceable as Mark knew that the assumption that the company's constitution had been complied with was not correct.

c. Worldwide must pay for the goods as third parties can always enforce every contract entered into on behalf of a company.

d. Worldwide need not pay for the goods as a company cannot enter into contracts with its officers.

2) The directors of Summit Ltd are fearful that Scrooge, who has been steadily acquiring shares in the company, is planning to wrest control from them. To maintain their control of the company, they issue extra shares to their cohort, Placido. On what basis can Scrooge challenge this action?

Select one:

a. That the company now has too much money.

b. That the directors have no power to issue more shares.

c. That Placido is not a fit person to be a member of Summit.

d. That the extra shares have been issued for an improper purpose.

3) The directors of Summit Ltd are fearful that Scrooge, who has been steadily acquiring shares in the company, is planning to wrest control from them. To maintain their control of the company, they issue extra shares to their cohort, Placido. On what basis can Scrooge challenge this action?

Select one:

a. That the company now has too much money.

b. That the directors have no power to issue more shares.

c. That Placido is not a fit person to be a member of Summit.

d. That the extra shares have been issued for an improper purpose.

4) At a meeting of the board of directors of Worldwide Trading Pty Ltd, some discussion took place about appointing Michael as its managing director. However, no decision was made and no further step was taken in relation to this matter. Subsequently, describing himself as the managing director of Worldwide Trading Pty Ltd, one of the directors, Michael, ordered office equipment valued at $15,000 from Jack. Which of the following statements accurately describes Jack's legal position?

Select one:

a. Jack can enforce the contract because as a director, Michael had authority to enter into it.

b. Jack can enforce the contract because Worldwide Trading represented that Michael had authority to enter into it.

c. Jack can enforce the contract because of Michael's own representation that he is the managing director of Worldwide Trading Pty Ltd.

d. Jack will have difficulty enforcing the contract because Michael had no authority and Worldwide Trading never held out him out as having authority to enter into it.

5) Michael has been appointed managing director of Worldwide Trading Pty Ltd. He is authorised to undertake purchases up to a maximum value of $10,000 without reference to the board of directors. Michael orders office equipment valued at $15,000 from Jack. Which of the following statements is correct?

Select one:

a. Worldwide Trading is not bound by the contract because Michael has no actual authority to enter into this transaction.

b. Worldwide Trading is bound by the contract because, by appointing him managing director, the board has represented to innocent third parties that Michael has authority to exercise all the management powers ordinarily vested in the holder of that office.

c. Worldwide Trading is bound by the contract because a company is always bound by the acts of any of its officers.

d. Worldwide Trading is not bound by the contract because a managing director can never bind a company.