federation-business-school-assignment-bulaw-2611-semester-2-2015

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Federation
Business School

Assignment
BULAW 2611

Semester 2
2015

Due date and
arrangements for submission: See details in Course Description

Length and
requirements: 1500 words (as a guide). For other requirements, see details in
Course Description

This assignment has two
questions. You should attempt both. The mark allocation (out of a maximum total
of 30) is indicated at the bottom of each question.

1. Business
can be conducted via a range of forms, including sole traderships, trusts,
partnerships and companies (or corporations). All of these have different
implications when it comes to management and governance, both in terms of who
is responsible and also to whom such governors/managers are accountable.

Required: For any two of
these organisational forms, discuss those implications.
(10 marks)

2. Sona
and Sam Kass run a successful boat hire company, Free Spirit Pty. Ltd. They are the only shareholders and executive
directors. Sona is also the Managing
Director. When they set the company up in February 2009 they invited an
accountant friend of theirs, Tim, to be the non-executive finance
director. Tim insisted that the Managing
Director have the capacity to bind the company to contracts worth less than
$50,000 only. This limitation was
written into the company’s Constitution.

Recently Sona saw a great
deal being advertised on a new sailing boat that would carry up to 10
people. She had been thinking lately
that the business would be more competitive if it had boats that could carry
more people so she decided to take the risk and buy the new sailing boat.

Sona cannot contact Sam
because he is in a remote location. Tim’s
phone is turned off. Sona went to the company’s bank and arranged a loan for
$180,000 to buy the boat. She knows the
bank staff as she always does the weekly banking. Sona signed the loan documents as ‘Director
of Free Spirit Pty. Ltd.’.

When the bank’s accountant
asked for another director to sign as well, Sona explained that this was not
possible as both Sam and Tim were unavailable and the deal was urgent.

The bank’s lending officer
was reluctant to approve the loan as it was a large sum for the business but
Sona convinced him it would be OK.

When Sam returns from his
trip he is horrified to find out what Sona has done as the business was
actually in financial difficulty. At a meeting with Tim, it is decided that the
company would argue that the contract was not valid as Sona had no authority to
make it.

Required:
Discuss whether or not Free Spirit is bound to the contract made by Sona. To
support your answer you should refer to relevant statutory and case law. Do not
discuss Directors’ Duties. (20 marks)

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