QUESTION

1. Under the Consequences of Ultra Vires Acts, differentiate the Personal liability of directors and Liability of directors for breach of warranty of authority. DO NOT COPYRIGHT FROM THE ANSWER BELOW, PARAPHRASE IT AND ADD MORE IDEAS

INFORMATION:

Personal Liability of Directors

Directors are agent of company. Hence it is one of the duties of the directors to see that the shareholder's fund is used only for the legitimate business of the company. If any part of it has been diverted to purpose foreign to the company's memorandum, it will be ultra vires act and the directors will be personally liable to replace it.

Liability of Directors for Breach of Warranty of Authority

The Directors of a company are its agents. As such it s their duty to keep within the limits of company's powers. If they induce, however innocently, an outsider to contract with the company in a matter in which the company does not have the power to act, they will be personally liable to him for his loss.