You are on page 1of 2

Corporate Contracting

Is the Company bound by the contract?


S25(1) An act done through company is not invalid
by reason only of the fact the co. was without
1. Does the company have the capacity to enter into the contract? capacity or power to do such act
1. Ultra Vires doctrine S25(2) But, lack of capacity may still be asserted by:
- Coy against officers for breach of duty
S23(1)CA: a company has full capacity to carry on any business activity
- Member to restrain coy from doing the ultra vires
S23(1B)CA: UNLESS it retains its object clause or has express restrictions
act
2. The effect of legislation

Whether coy has capacity or not is irrelevant

How was the contract made?

Direct corporate contracting Contracting through an agent

2. Was the Agent authorised?

Coy bound by contract


Yes Did the Agent have Actual Authority?

Express Actual Authority


Express authority can be written (MoA & AoA, statute, contract, resolution by the general meeting or
board) or verbal (delegation by agents to sub-agents).
In cases of actual authority, the principle
Implied Actual Authority
actually authorises his agent to act on his
is subject to express restrictions in the memorandum or articles of association. There are three types of
behalf. The relationship is based on consent
between the principle and agent and can be implied authority - usual authority, implied authority by acquiescence and incidental authority.
given, express or implied from their words or 1. Usual authority
conduct. (Garnac Grain Co Inc v Faure & Is the agent in that position is reasonably expected to have authority?
Fairclough)
2. Acquiescence
Actual authority can be implied from the conduct of the principal. If the principal acquiesced to the agent
acting in excess of his authority over a period of time, then the agent has actual implied authority
Even if a contract was entered into by an agent
(Hely-Hutchinson v Brayhead, applied by the SGCA in SPP Ltd v Chew Beng Gim).
who did not have the actual authority to do so at
the time, the coy may later choose to adopt or 3. Incidental authority
ratify the transaction. Once ratified, agency r/s If the agent has been conferred express authority do something, anything that the agent can do to
arises retrospectively and the coy assumes full achieve the goal is incidental authority.
contractual obligations and rights with respect to
Need to prove (1) expressed authority to do the task and (2) what he did was reasonably incidental to the
agents earlier act.
doing of the task

Yes
Was the contract ratified by the principal?
Occurs when the coy led the counterpart to
believe, through some representation, whether
Was there Ostensible/Apparent Authority?
by words or conduct, that the agent was duly
authorised to act on principals behalf Although the agent does not have actual authority, the principal may still be bound by the agents acts if
the agent had apparent authority. As per Freeman & Lockyer v Buckhurst Park Properties Ltd, for
apparent authority to arise, the third party must show that he relied on a representation (that the agent
Coy NOT bound by contract has authority) made by a person with actual authority.

Test to prove Ostensible Authority:


Actual Notice:
Actual knowledge of agents lack of authority; encompasses
wilful blindness
No 1. Was there a representation by the coy that the agent had the authority to enter into
Constructive Notice: contract/transaction with 3P?
Means that although a person does not know a fact, the law
No
considers that he ought to know, and therefore treats him as
2. Was the representation made by an authorised person?
knowing it
- Where the circumstance of contract/transaction raises a
suspicion as to the adequacy of the agents authority, and thus
No
3. Did 3P entered into the contract in reliance on the representation?
the 3P reasonably ought to have made further inquiries about it
but did not do so (put on inquiry), then 3P is deemed to know
of the lack of authority No
4. Did 3P know or ought to have know the agents lack of authority?
- No more constructive notice of constitution. The new S25A
CA states that A person is not deemed to have notice of the
If Yes to all 4
contents of a coys constitution or other documents merely
because - (a) The consti is registered with ACRA (b) The consti Can 3P rely on the curing rules?
is available for inspection at coys office
Can 3P rely on the curing rules?

It prevents a 3P from being put on notice: Even where the 3P does have notice of the restriction, he will often still be able to enforce
(1) Where there is a constitutional limit on the the contract against the coy via the application of either 25N or the IMR.
agents power subject to compliance with an
[CA] S25B 25D
internal procedure and the agent was aware
S25B: Power of directors to bind coy
of it
[Common law] Indoor Management Rule (IMR)
(e.g. coy requires 2 directors to sign a
contact) The rule provides that Counterparties dealing with coy is entitled to assume that all
OR matters of internal management procedures required by the constitution have been
(2) That the 3P was entitled to presume that complied with in absence of facts putting in on inquiry (Royal British Bank v Turquand)
the persons had been duly appointed to office
in conformity with the constitution.
The third party is not deemed to have notice of the restrictions on the agents authority in
the M&A since s 25A states that there is no constructive notice of the contents of the
M&A.

Yes
Coy bound by contract

IMR does not apply where the 3P has constructive /actual knowledge of the
irregularity
(1) Where the contracting party is an insider
(2) Constitution simply excludes the authority to enter that cannot be cured by any
No, 3P cannot rely on IMR
internal process
(3) Contracting part put on inquiry as to agents lack of authority and not restriction
of internal procee

Coy bound by contract

You might also like