1. David and Mark, two young entrepreneurs wish to form a small proprietary limited company operate a restaurant Master Plate Pty Ltd. On 22 January, David entered a contract with Irish Linen Ltd to purchase 18 monogrammed tablecloths and he executed the contract in the name of Master Plate Pty Ltd (Master Plate).

On 24 January, the company was registered. The company did not adopt a constitution and each of them took 50% share, and both were appointed as directors. Due to dispute between David and Mark regarding the contract with Irish Linen Ltd, that contract was not ratified by Master Plate until 31 January. On February 1, tablecloths were supplied by Irish Linen Ltd but not paid.