Ultra Vires Doctrine Four Step Approach

1. Authority
- Object Clause
MA
- Beyond Authority
a. Object clause in the MA

2. Common Law
Eng Law Aberdeen Rly v Riche / AG v Great Eastern Rly
Acts / Contracts Ultra Vires VOID

3. Malaysian Position
S 20 (2) acts / contracts outside object clause / MA NOT invalidated
a. Refrain (if act not completed)
b. Recover damages (if act completed)
c. Petition Minister

4. Indoor Mgt Rule (AA)
Rule in Turquands case
- RBB v Turquand
- Breach internal rules affecting other party to the contract
- Company cannot rely on internal breach to invalidate contract
- See: EXCEPTIONS (in chart)
Ultra Vires Latin word for beyond authority
When you say someone acts beyond the authority give to you, it means that
there was an object clause in MA, means that there was ultra vires and all
contracts are void.
People started creating something called subjectively phrased object clause.
Case mentioned: Bellhouse v (profit) Linked to general business Means
that as long as the business is advantageously profitable, the doctrine of ultra
vires does not apply.
But S 20 (2) A is used to stop the act.
S 20 (2) B allows the people to be able to sue for damages
Usually S 20 (C) is not used at all. (But just include it in)
Step 1, 2 and 3 are under MA
Step 4 is under AA
AA internal rules.
RBB v Turquand Breach of internal procedure, supposed to get BOD
resolution to continue action, but did not do so and went out to take the loan.
Bank tried to sue to claim damages. But court says its unfair that the other
contracting party has to pay for what one person did not follow the procedure,
unless the contracting party was aware on what was going on. legal
principle