CORPORATE CONTRACTUAL LIABILITY
 S 124(1): A company has the legal capacity & power to enter
into contracts – even if the company’s interests aren’t served.
EXECUTION OF DOCUMENTS BY THE
COMPANY ITSELF
 S 126(1): A company may contract through an agent without
using a common seal.
 S 127(1): A company may execute a document without using
a common seal, if the document is signed by:
 (a) 2 directors; or
 (b) a director and a company secretary; or
 (c) for a proprietary company that has a sole director
who is also the sole company secretary – that director.
 S 127(2): A company with a common seal may execute a
document, if the seal is fixed to the document & the affixing
is witnessed by:
 (a) 2 directors; or
 (b) a director and a company secretary; or
 (c) for a proprietary company that has a sole director
who is also the sole company secretary – that director.
A person ‘witnesses’ the fixing by signing the document as a
witness [s 129(6)].
 S 127(3): A company may execute a document as a deed, if
the document is expressed to be executed as a deed & is
executed in accordance with ss 127(1) or 127(2).
 S 127(4): s 127 does not limit the ways that a company may
execute documents or deeds [constitution may provide
alternative means of execution].
Note: If the signatories have no authority to sign, an executed
contract will still bind the company unless the outsider was
aware/suspected that they had no authority (s 129(6) & s 128(4)).
AGENT’S POWER TO CONTRACTUALLY
BIND A COMPANY
 S 126(1): A company’s power to make, vary, ratify or
discharge a contract may be exercised by an individual acting
with the company’s express or implied authority & on behalf
of the company. The power may be exercised without using a
common seal.
 S 127(2): A company’s legal capacity to do something is
unaffected by the fact that the company’s interests are not, or
would not be, served by doing it.
 A company is bound by contracts entered into on its behalf
by agents acting within the scope of their:
 Express actual authority
 Implied actual authority
 Apparent authority
Express actual authority
 Express actual authority arises where the company grants
authority to perform tasks on its behalf through:
 Replaceable rules;
 Its constitution;
 Powers delegated by board of directors; or
 Ratification of an unauthorised act.
Implied actual authority
 Implied actual authority arises where the company:
 Appoints a person to a company position; or
 Acquiesces an unauthorised act.
 Wilson v Gilbert: In the absence of contrary agreement, a
properly appointed agent or officer has implied authority to
do anything customary/usual for such an agent or officer to
do, in a business of the kind carried on by the company.
 Freeman & Lockyer v Buckhurst: The board confers implied
actual authority by acquiescence only if:
 the directors acquiesce individually; and
 the directors communicate to each other and the agent,
by words/conduct, their consents.
Single director’s usual authority
 Perkins v NAB: Single directors usually have no authority to
bind the company to contracts, unless authorised by
resolution of the board or members in general meeting.
Managing director’s usual authority
 Northside Developments v Registrar-General: A managing
director usually has the power to conduct the company’s day-
to-day business.
Company secretary’s usual authority
 Northside Developments v Registrar-General: A company
secretary has no authority to enter into commercial decisions,
except transactions of an administrative kind required for the
day-to-day running of the company’s affairs.
Apparent authority
 Freeman & Lockyer v Buckhurst Park Properties: A
contractor may enforce against a company a contract entered
into on behalf of the company by an agent who had no actual
authority to do so, if:
 A representation was made to the contractor that the
agent had authority to enter, on behalf of the company,
into the contract;
 The representor had actual authority to manage either the
company’s business, or matters related to the contract;
and
 The contractor entered into the contract in reliance on
the representation.
 Armagas v Mundogas: If a company permits a person to
occupy a position, it represents that person to have the usual
authority associated with that position in such a company.
 Crabtree-Vickers v Australian Direct Mail: If a person
represents another to have authority, but himself doesn’t have
actual authority to manage the relevant aspect of the
company’s business, then the company cannot be bound.
 But Northside Developments v Registrar-General
(Brennan J): Representations by an officer/agent with
actual or ostensible authority to make those
representations, will bind the company.
Indoor Management Rule
 Indoor Management Rule: Outsiders dealing with a company
in good faith may assume regularity in the conduct of the
company’s internal affairs.
 So contractors in good faith may assume:
 Due appointment of officers & agents;
 Proper conferral of authority that the constitution
permits & that such an officer or agent would
ordinarily be expected to have.
 Satisfaction of constitutional conditions governing
the exercise of authority.
 Northside Developments v Registrar-General: A person
cannot rely on the rule if he should have suspected in the
 CORPORATE CONTRACTUAL LIABILITY
circumstances that there might be an irregularity, & failed to
make adequate & reasonable enquiries to ascertain whether
there was in fact an irregularity.
 Barclays Finance Holdings v Sturgess: The appropriate
time for determining whether a person knew of, or
suspected, an irregularity, is at the time of the dealing.
STATUTORY ASSUMPTIONS
Entitlement to make assumptions
 S 128(1): An outsider is entitled to make s 129 assumptions
in relation to dealings with a company.
 S 128(4): The outsider cannot make the assumptions if, at the
time of the dealing, he knew/suspected that the assumption
was incorrect.
 Brick & Pipe Industries v Occidental Life Nominees:
The company has the burden of showing the person’s
subjective knowledge/suspicion.
 Queensland Bacon v Rees (Kitto J): A suspicion is a
positive feeling of actual apprehension or mistrust, not a
mere wondering.
 S 128(3): S 129 assumptions may be made even if an officer
or agent of the company acts fraudulently, or forges a
document, in connection with the dealings.
 S 129(8): S 129 assumptions may be relied on for the
purposes of other s 129 assumptions.
“Dealings”
 Advance Bank v Fleetwood Star: “Dealings” includes a
single transaction.
 Story v Advance Bank: “Dealings” includes purported
dealings.
 Barclays Finance Holdings v Sturgess: An act done
unilaterally pursuant to an agreed transaction is not a
“dealing”.
 Story v Advance Bank: “Dealing” may not include a dealing
with a fraudster, who purports to act for a company but
actually has no relationship with it.
S 129(1): Compliance with internal governance rules
 S 129(1): An outsider may assume that the company’s
constitution (if any), and any applicable replaceable rules,
have been complied with.
 Northside Developments v Registrar-General: An outsider is
not entitled to assume conferral of authority that would be
unusual for the officer or agent to have, unless:
 The person was actually aware of the power to delegate
the unusual authority; and
 The company represented that the unusual authority was
in fact delegated.
S 129(2): Defective appointment & Usual authority of
directors & secretaries
 S 129(2): An outsider may assume that anyone who appears,
from publicly available information provided by a company
to ASIC, to be a director or company secretary:
 (a) has been duly appointed; and
 (b) has authority to exercise the powers and perform the S 129(7): Officer/agent with authority to warrant that a
duties customarily exercised or performed by a director document is genuine or a true copy
or secretary of a similar company.  S 129(7): An outsider may assume that an officer or agent of
 “information” is the information available to the public at the
time of the dealing [Ford].
 Ford & Lipton think that the outsider making the assumption
need not be actually aware of the information, because a
direct representation to the outsider is not required for the
IMR to apply.
 Presumably, the information must be given to ASIC by an
authorised person.
 Information supplied to ASIC is that in the annual return [ss
345 & 348] and that required by s 205B (notice of personal
details of directors and secretaries, & notice of changes to
those details).
Note: s 129(2) applies where the company made no direct
representation to the outsider about X’s position as officer/agent.
S 129(3): Defective appointment & Usual authority of
officers & agents
 S 129(3): An outsider may assume that anyone who is held
out by a company to be an officer or agent of the company:
 (a) has been duly appointed; and
 (b) has authority to exercise the powers and perform the
duties customarily exercised or performed by that kind
of officer or agent of a similar company.
“held out by a company”
 Bank of NZ v Fiberi: Common law principles determine
when a company has held out a person to be an officer or
agent.
 Crabtree-Vickers v Australian Direct Mail: Holding out by a
company can only be made by a person with actual authority
to manage the company’s business, either generally or in
respect of those matters to which the contract relates.
 Directors have no actual authority to represent
themselves as having authority to bind the company.
 Northside Developments v Registrar-General: The company
holds out a person to be an officer or agent by merely
allowing him to act in that position.
Note: s 129(3) applies where the company made a direct
representation to the outsider about X’s position as officer/agent.
S 129(4): Proper performance of duties
 S 129(4): An outsider may assume that the officers and
agents of the company properly perform their duties to the
company.
S 129(5)-(6): Document duly executed
 S 129(5): An outsider may assume that a document has been
duly executed by the company, if the document appears to
have been signed in accordance with s 127(1).
 S 129(6): An outsider may assume that a document has been
duly executed by the company, if the common seal appears to
have been fixed to the document & witnessed in accordance
with s 127(2).
 Ss 129(5)-(6): An outsider may also assume that anyone who
signs the document, or witnesses the fixing of the common
seal, and states next to their signature that they are the sole
director and sole company secretary of the company,
occupies both offices.
the company, who has authority to issue a document or a
certified copy of a document on its behalf, also has authority
to warrant that the document is genuine or is a true copy.