Question 5

You must answer BOTH A and B

George Green was appointed by the Board of Directors of Nature Now Pty Ltd to be the company's Managing Director.Nature Now arranges camping holidays.Green arranged a $15,000 supply contract on the company's behalf, with Canvas Tents Ltd.

However, Nature Now's constitution contains the following provision:

CLAUSE 1.The Managing Director may make contracts up to $10,000, but above that amount, Board approval is required.

Green had not obtained the Board's approval for this contract. Later, the Board refused to recognise the contract and to pay Canvas Tents Ltd.

Required A

Advise whether the contract is enforceable. (10 marks)

In response you must give reasons and refer to sections of the Corporations Act 2001 (Cth) and cases where relevant.

ANDAssume a person's name appears on ASIC records as a director of a company, and that person thought he was validly appointed as Managing Director. The company, and those who had dealings with the company, also thought that person was appointed as Managing Director.

However, the notice requirements for convening the board of directors' meeting (to vote on the appointment) had not been met and therefore the appointment was NOT valid.

Required B

Does the fact that the appointment was not valid necessarily mean a contract signed by him in the capacity of director is invalid? (10 marks)

In response you must give reasons and refer to sections of the Corporations Act 2001 (Cth) and cases where relevant.