John and Vera operated a partnership that was in the business of manufacturing furniture. They decided to register a company named Urban Pty Ltd and to sell their business to it.

In January 2021, John enters into a contract to supply office furniture to Curtin University for $75,000 and signs the contract as "agent of Urban Pty Ltd."

In July 2021, Urban Pty Ltd wasformed.John becomes the managing director and Vera becomes a director and the sales manager of the company. The following clauses are contained in Urban Pty Ltd's constitution:

1. the company will only manufacturefurniture.
2. anyborrowingbythecompanyexceeding$50,000istobeapprovedbythemembersingeneralmeeting.

Vera,theSalesManagerofUrbanPtyLtd,wassoimpressedbyamachineusedtoproducecolourfulmobilephonecasesthatshepurchasedamachineforUrbanPtyLtdatacostof$100,000fromWowLtd.AsUrbanPtyLtddidnothavethenecessaryfunds,Veraarrangedaloanfrom DistrustfulBankLtd

Beforethesalewasenteredintohowever,WowLtdhadtelephonedUrban PtyLtd, and askedtospeaktothemanagingdirector.AsJohnwasabsentthephone callhadbeentakenbyaclerkwhohappenedtobepassingJohn'sofficewhenthephonerang.TheclerkdidnotdescribehimselftothecallerandtoldWowLtdthatVerawasaseniorexecutiveofthecompany,andthepurchase wouldnodoubtbeinorder.

UrbanPtyLtddecides thatthephonecasemachinewillnotbeprofitable.TheyadviseWowLtd that the contract is to be terminated on the grounds that it is invalid and unenforceableandbecause the company's constitution does not permit the company to engageinanyactivitiesotherthanfurnituremanufacturing;thatundertheCorporations Act 2001(Cth),Wow Ltd is assumed to know this fromthe company's constitution; and,asthe companyhadnocapacitytoenterintosuchacontract,Veracouldnothavehadauthority to act on its behalf.

UrbanPtyLtdadvisesDistrustfulBankLtdthattheloanagreementisterminatedonthegroundsthatthecompany'sconstitutiondoesnotpermitanyborrowingover $50,000withoutapprovalfromthemembersingeneralmeeting;thatDistrustfulBankLtdshouldhavebeenawareofthisrequirementandhadtheresponsibilitytochecktoensuresuchapprovalhadbeenfirstobtained;and,thatVerahadnoauthoritytoenterintosuchanagreement.

REQUIRED:

With reference to the Corporations Act 2001 (Cth) and case law, you are required to answer the following questions:

1. Discuss three advantages and disadvantages of incorporating Urban Pty Ltd compared with the type of business they were operating before registering Urban Pty Ltd.You are NOT required to use the 4-step process in answering this question.

[3 Marks]

1. Discuss the procedure that John and Vera would have had to follow under the Corporations Act 2001 (Cth) to register Urban Pty Ltd, including the creation of the company's internal management rules.

[4 Marks]

1. Identify and discuss the sections of the Corporations Act 2001 (Cth) that will make John liable if Urban Pty Ltd does not want to supply office furniture to Curtin University.In answering this question, note that the contract was entered into in January 2022 and the company was registered in July 2022.

[3 Marks]

1. With reference to the purchase of the machine usedtoproducecolourfulmobilephonecases, discuss the following:

1. Whether the contract with Wow Ltd can be terminated as Urban Pty Ltd's constitution only permits the company to manufacture furniture and the company had no power to produce colourful mobile phone cases. (4 Marks)

1. Whether the contracts with Wow Ltd and Distrustful Bank can be terminated on the grounds that Verahadnoauthoritytoenterintosuchagreements. (8 Marks)

[12 Marks]