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LEARNING UNIT 6 CONTRACTING ON BEHALF OF AN ENTERPRISE

LEARNING UNIT 6 CONTRACTING ON BEHALF OF AN ENTERPRISE. FORMS OF BUSINESS ENTERPRISES. Sole Proprietor Partnership Company Close Corporation. SOLE PROPRIETOR. Not a separate entity Owner of business concludes contracts Rights & duties of contract is owners responsibility

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LEARNING UNIT 6 CONTRACTING ON BEHALF OF AN ENTERPRISE

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  1. LEARNING UNIT 6CONTRACTING ON BEHALF OF AN ENTERPRISE

  2. FORMS OF BUSINESS ENTERPRISES Sole Proprietor Partnership Company Close Corporation

  3. SOLE PROPRIETOR Not a separate entity Owner of business concludes contracts Rights & duties of contract is owners responsibility Owner can use an Agent to act on their behalf

  4. PARTNERSHIP Exists independently of partners Partners conclude contracts Partners can have separate estates therefore special rules apply

  5. MUTUAL MANDATE • Each partner can perform any act • This falls within the partnership business • Such act binds all partners • Each partner representing co-partners = MUTUAL MANDATE • Can be excluded between partners • Then such partners will not conclude other contracts

  6. JOINT & SEVERAL LIABILITY A partner concludes a contract on behalf of partners All partners are jointly responsible Third party can sue all partners & recover debt from partnership assets If partnership assets do not cover debt, then can be claimed from partners personally Partners can then claim their portion from the partner that concluded contract

  7. COMPANY Company exists separately from its members Members = Shareholders + Owners Own assets Shareholders not responsible for debt Limited liability – they will only lose what they invested in company

  8. THE CAPACITY OF A COMPANY Legal acts a natural person can do but a company cannot Capacity of company = founding documents

  9. THE ULTRA VIRES DOCTRINE Acts that fall outside the company were invalid in the past This resulted in ULTRA VIRES DOCTRINE Outside companies not assured of contract validity

  10. THE DOCTRINE OF CONSTRUCTIVE NOTICE Courts used this doctrine for the above Contract with a company, you should know the company constitution (founding documents) Memorandum of Association & Articles of Association of a company are available for public view

  11. SECTION 36 OF THE COMPANIES ACT No company act can be invalid If a company’s main object is to buy & sell shoes & they contract to buy clothes, the contract is still valid even though they exceeded their main objective Ultra Vires contract becomes valid

  12. THE TURQUAND RULE Famous rule from Royal British Bank Before directors could borrow money from company When lender sued company for money, company said that it was not bound to a contract Court said company bound because the lender did not know internal company rules Outsiders expected to know content of public documents & not internal rules

  13. CLOSE CORPORATION Exists separately from members Has its own assets & liabilities Members not responsible for debt Ultra Vires Doctrine does not apply Each member has power to bind corporation to contractMember’s power is limited

  14. HOMEWORK Revision Exercise Page 85 Questions 1 – 9 We will check on Friday, 19 October 2012

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