Question 2

MAC Surveys Pty Ltd conducts feasibility studies and surveys for its customers, The shareholders of MAC Surveys Pty Ltd are Maddy, Alfonso and Sinan, each holding one-third of the company's share capital. Maddy is the managing director of the company and looks after the company's business whereas Alfonso is the executive director and looks after the company's finances. Sinan does not hold any office and is not involved in any aspect of MAC Surveys Pty Ltd's business. Alfonso and Maddy never hold any board meetings and always make spontaneous decisions about the company's business and finances, even though the company's constitution states that all business decisions must be made jointly by the directors of the company.

While Maddy was on vacation, the managing director of Electric Motor Ltd called Alfonso to negotiate a one-year contract for MAC Surveys Pty Ltd to conduct a market survey of their new electric motor car. Alfonso said that he could grant a fifty per cent discount on its standard price if Electric Car Ltd entered a three-year contract. The managing director of Electric Motor Ltd agreed and Alfonso signed a three-year contract as Alfonso, Managing Director of MAC Surveys Pty Ltd, although Alfonso has never been appointed to Managing Director of MAC Surveys Pty Ltd.

When Maddy returned from her vacation, she was most displeased with the contract that Alfonso had signed with Electric Motor Ltd, especially with the fifty-per cent discount. She pointed out to Alfonso the clause in the company's constitution that business decisions had to be made jointly by both the directors and wants to revoke the contract with Electric Motor Ltd.

REQUIRED: With reference to how companies are bound in contracts, discuss whether Maddy will succeed in cancelling the three-year contract with Electric Motor Ltd. Please refer to the Corporations Act 2001 (Cth), case law and MAC Surveys Pty Ltd's constitution in answering this question.

NOTE: You are required to use the 4-steps process in answering this question. The marks allocated for the steps are as follows: Steps 1 and 2: 8 Marks. Steps 3 and 4: 7 Marks. [15 Marks] Please answer Question 2 below: