Cassoulet Ltd runs a business which supplies commercial cookware to restaurants.Shares in Cassoulet Ltd are held equally by two cousins, Simon and Rebecca, who are also the company's directors.Neither holds the title of managing director although in practice, day-to-day decisions on running the business are left to Simon.Simon's ex-wife, Debra, was appointed as the company's accountant.

Recently, Simon saw an acrylic painting by a well-known New Zealand artist for sale for $150,000.He thought the painting was particularly suitable for the board room and that the price being asked was a bargain.There was no time to contact Rebecca, so Simon decided to go ahead with the purchase without informing her.The vendor insisted that Simon sign a written agreement.Rebecca, on learning of the purchase, is upset and seeks your legal advice.

a)Advise Rebecca whether Cassoulet Ltd can refuse go ahead with the purchase IF

Simon signed the agreement as 'director of Cassoulet Ltd' with Cassoulet Ltd stated to be the purchaser; and

Cassoulet Ltd.'s constitution contains no special provisions dealing with corporate capacity.

b)Now assume that Cassoulet Ltd.'s constitution has a provision in it requiring all contracts over $100,000 to have board approval and to be executed by both directors.If Simon and Debra both signed the purchase agreement, as directors of Cassoulet Ltd, but did not tell Rebecca of the purchase, would the company be bound by the agreement? Explain why or why not.

c)What difference, if any, would it make to your answer to (b) if, prior to entering into the contract, the vendor overheard Simon telling Debra that Rebecca was unaware of the purchase?