1. XYZ Co Ltd has a constitution, which prohibits a managing director from entering any contract worth more than $100,000, unless the directors have agreed to the contract. The company's constitution also contains an objects clause, which restricts the company's business activities to the manufacture of environmentally friendly foodstuffs. Jeff, the company's managing director, signs off on a contract worth $500,000 with a coal excavation company; the contract was not approved by the directors and is in contravention of the company's constitution.
3. The breach of the company constitution is so severe that the contracting parties should have been aware that it was a breach of the company constitution, and consequently the contract is invalid.
4. The company can invoke the objects clause and clearly decline to perform the contract.
5. The company itself will not be liable for the contract, but the managing director himself will be personally liable for the contract on the basis that the constitution has been breached
6. The contract is not invalidated by the company constitution; the company will be liable irrespective of the managing director's breach of the company constitution

1 points

QUESTION 2

1. What are the replaceable rules?
2. The replaceable rules are a company's internal rules and are binding on all companies, irrespective of whether a company has its own constitution
3. The replaceable rules are the new rules imposed by ASIC on all companies; they replace inappropriate provisions that a company may have historically developed in its constitution
4. The replaceable rules are found in s 141 of the Corporations Act; they cover all aspects of the company's internal rules and can be used instead of a company constitution
5. The replaceable rules refer to the fact that a company does not need either the replaceable rules set out in s 141 or even a company constitution

1 points

QUESTION 3

1. What did the case ofHickman v Kentemphasise about the nature of the company constitution and the replaceable rules as they apply to members?
2. InHickman v Kent, the court found that members, who were in dispute with a company, could not be denied the right to take a matter to court, as the constitution is always a contract between a company and its members
3. The case determined that it is the role of the court to interpret a company's constitution and internal rules
4. InHickman v Kent, the member was bound by the constitution to take a dispute to arbitration before going to court; this procedure could be enforced by a court as the constitution is a contract between a company and its members, when the rights in the constitution affect them in their capacity as a member
5. InHickman v Kent, a court determined that members were not bound by inappropriate rules, which have been set within a company constitution.

1 points

QUESTION 4

1. Nobby is an accountant; he assisted with the setting up and promotion of a company, and in the process received some shares in the new company. In the company constitution it states that Nobby is 'appointed accountant for life'. Nobby has been approached by the directors, who want him to retire, with the prospect of appointing a new and more qualified accountant for the growing company. Nobby points out that the directors are not permitted to remove him from the company under the company rules. Which of the following is correct?
2. Under Ely's case, the accountant cannot enforce a contractual right, which relates only to himself as a member, rather than a contractual right that applies to all members
3. The accountant can clearly enforce his employment contract since all parts of the company constitution are enforceable as a statutory contract
4. It is common practice in Australia to name a company's accountant or lawyer in the company's constitution; this gives employment security to those parties since they can sue for unfair dismissal
5. The company directorsunder s 140(1) must enforce the company's constitution, and as the accountant's employment contract is part of the company's overall statutory contract, it is enforceable in a court of law

1 points

QUESTION 5

1. How does the attribution of secondary liability to company differ to that of primary liability?
2. This is vicarious liability whereby the directing 'will and mind of the company' is placed in the hands of the directors whose actions make the company liable
3. There is no difference between primary and secondary liability; the company will always be liable for the actions of its agents
4. Secondary liability refers to a corporation's vicarious liability for the acts and omissions of a natural person, who is an employee or agent of the company, rather than the decisions of the people who are the mind and will of the company
5. If an employee does something wrong, it is considered secondary liability and the company itself cannot be liable for any civil or criminal wrong committed by that person

1 points

QUESTION 6

1. What was the issue inLennard'scase that made it such an important principle? Which is the best answer?
2. InLennard'scase the court determined that a company is a legal entity only; it cannot act like a natural person, since it has no intelligence to make decisions. Only natural persons can do that; therefore, only the individual decision makers can be liable
3. Lennard was a director of a company; under the separate entity doctrine he could not construe his own knowledge to that of the company
4. InLennard'scase the organic theory of the corporation was discredited, as a company director was considered to be a mere employee, no different to that of other employees
5. InLennard'scase the director's knowledge was held to be that of the company; Lennard was deemed as the directing mind and will of the company, and consequently his actions were those of the company itself

1 points

QUESTION 7

1. How might a company be liable for torts under the doctrine of vicarious liability?
2. Where the actions of employees and other agents are closely related to the company, the company may be liable for their actions through vicarious liability
3. Under the doctrine of vicarious liability an injured party must be able to prove that the company is at fault, not merely that a wrong has occurred
4. An employer company will be liable for every action of their employees, whether within their employment or outside; the company has a duty to supervise their employees in all their actions
5. To prove vicarious liability an injured party must be able to prove that the company had knowledge of the actions of their employee

1 points

QUESTION 8

1. InHollis vVabu:
2. the court found that the courier of the company was an employee of the company and not an independent contractor. Consequently, the company is liable for his conduct within the scope of the business
3. the workers were found to be independent contractors because they were not directly employed by the company, and hence the company could not be liable
4. each of the agents wore a company uniform but since the perpetrator of the injury could not be identified, the company could not be vicariously liable
5. The court found that whether a person was an employee or independent contractor is irrelevant when determining vicarious liability; any wrong makes the company liable

10 points

QUESTION 9

1. What is the definition of a promoter? Which of the following is correct?
2. Every single person, who assists with the promotion of a company, is defined as a promoter, and this would include any lawyer or accountant who advises on the promotion process
3. A promoter is the person who brings together the interested parties in order to achieve the registration of a company; they are not just a technical advisor and they do not always need to be directly involved in the formation of the company
4. A promoter is a person who is registered as a 'promoter' by ASIC under its registration system, which is open for public view
5. A promoter is the person defined within the Corporations Act as usually the first director of the newly formed company

1 points

QUESTION 10

1. What was the principle to be found in the case ofErlanger v New Sombrero?
2. A promoter only needs to disclose that they are transferring property into a company. They do not need to state any profits they make from the promotion process
3. A promoter is not considered a fiduciary. Only directors and officers of the company hold that duty once the company is formed
4. The promoter must disclose any profits they make from a transaction to an independent board of directors, who represents the interest of the company
5. Investors in the company are a separate legal entity and therefore are protected from potential risks of losing money; hence no duty of disclosure of profits exists on the promoter

1 points

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