Chapter 4 - Legally Binding the Company Flashcards
(14 cards)
What are the three ways a company can enter into a contact under CA 2006?
- By affixing it’s common seal
- Through an authorised person
- By execution under 2.44 CA 2006
What is the role of the company’s constitution in contact formation?
The constitution (especially the articles) defines the powers of the company and its directors, including limits on authority to enter into contracts.
What is the significance of s.40 CA 2006?
It protect third parties dealing in good faith with a company by deeming directors’ powers to be free of constitutional limitations.
What is the indoor management rule?
A common law principle allowing third parties to assume internal company procedures have been properly followed (Royal British Bank v Turquand).
What is the difference between actual and apparent authority?
Actual authority is granted by the company (express or implied), while apparent authority arises when a third party reasonably believes the agent has authority due to the company’s conduct.
What is the legal effect of the company’s constitution under s.33 CA 2006?
It forms a contract between the company and it’s members, and among the members themselves, enforceable only in their capacity as member.
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Common Seal
A stamp used to execute documents on behalf of a company.
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s.44 CA 2006
Governs execution of documents by authorised signatories.
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s.40 CA 2006
Protects third parties dealing in good faith with a company.
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Indoor Management Rule
Assumes internal company rules are followed.
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Actual Authority
Authority explicitly or implicitly given by the company.
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Apparent Authority
Authority a third party reasonably believes exists.
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Shareholders’ Agreement
A private contract between shareholders (and sometimes the company) setting out rights and obligations.
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Ultra Vires
Acts beyond a company’s capacity; generally unenforceable internally but protected externally under s.39 CA 2006.
