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Law Notes Company Law Notes

Company Contracts Notes

Updated Company Contracts Notes

Company Law Notes

Company Law

Approximately 805 pages

Company law notes fully updated for recent exams in the UK. These notes cover all the major LLB company law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Canada, Hong Kong or Malaysia (University of London). These notes were formed directly from a reading of the cases and main texts and are vigorous, concise and very well written.

Everything is conveniently split up by topic as you can see by the list o...

The following is a more accessible plain text extract of the PDF sample above, taken from our Company Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Company Contracts

There are two separate issues in company contracts, both must be satisfied for the action to be valid and binding on the company. There must be capacity for the company to do the action, and the person being dealt with must have authority to bind the company.

There is a simple 5 step process that will answer any problem question.

  1. Capacity of the Company

Unless stated otherwise in the articles, a companies objects are unrestricted (Companies Act s.31(1))

Just because a company is able to do something does not mean that it should be done by the director. If the company has capacity and the director abuses his authority then the company can sue the director personally for any loss, but the contract may only be rescinded if it is possible to restore third parties to their pre-contractual positions (Rolled Steel)

This is a very permissive general position and means that there will almost always be the capacity for the company to do something.

  1. CA 2006 s.40 and Turquand’s rule

These two steps can be used if there is a restriction in the company’s articles to still find capacity for the purposes of the contract.

A person dealing with the company in good faith may assume that the power of the board to bind the company is free from any limitation (CA 2006 s.40)

Turquand’s rule, described by Lord Simmonds in Morris v. Kansen as: a person who believes that they are dealing with the company in good faith is entitled to presume that the company deals free from restrictions in the articles.

  1. Is there actual authority?

This means that the board has power to run the company, and so has actual authority (Model Articles, Article 3)

The board can delegate functions, this gives the recipient of delegated powers actual authority within that sphere (Model Articles, Article 5)

It is possible to have either express or implied actual authority. Implied actual authority relates to when a person holds a company office, they are impliedly able to do everything usually party of that office. A managing director has implied actual authority to do everything. (Brayhead)

If a document is put forward as a decision of the board, in circumstances where there is no reason to doubt its authenticity, then...

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