Company Contracts

Presentation Topic

Lara Ltd is a manufacturer of custom-made jewellery. It also makes badges and pins for sports clubs and corporations. Its business is small, and is run from rented premises in Civic. The company has clients in Goulburn and Yass, and makes deliveries using a van hired from Canberra Van Rentals & Sales Ltd. Its directors are Peter, Paul and Mary. Mary is named as Managing Director in the company's constitution. This appointment is stated in the constitution to be subject to annual confirmation by the Board. The last time this occurred was in February 2015. Despite this, Mary has carried on performing her duties as Managing Director. Mary is of the view that the company should expand its business, and so approaches Mike Smith, Managing Director of Canberra Van Rentals & Sales. Mary says that Lara Ltd wants to purchase 3 armoured vans at a cost of $ 100 000 each, and signs a contract to this effect on behalf of Lara. Peter and Paul are shocked when they hear about the contract for the armoured vehicles, which they certainly do not approve of, and have now received a letter from Canberra Van Rentals & Sales stating that the armoured vans are ready for delivery and asking Lara to perform under the contract.

Assume Mary has authority to enter into contracts on behalf of Lara Ltd. However, the constitution of Lara Ltd states that any contract of over $ 50 000 in value requires the prior approval of the board. Mike Smith has previously visited Lara's premises and knows Mary well, having advised her over the past five years on the most economical way to spend Lara's transport budget which he knows is $ 15 000 per annum. Mike has not seen Lara's constitution. Is Lara Ltd bound by the contract for the purchase of three armoured vehicles entered into by Mary on its behalf? Advise Lara Ltd.

Question: Is Lara Ltd bound by the contract for the purchase of three armoured vehicles entered into by Mary on its behalf?

Contents to be covered:

1. Facts
2. Identification of Issues
3. Statement of Laws
4. Application to the Case
5. Conclusion