Company Law for Business 100

Company Law for Business: Assignment 1

(i): Is the cat contract with Feline Fertility Pty Ltd enforceable? Your answer should include an analysis of the reason put forward by Lassie Ltd for terminating the contract.

The area of law relating to this particular question is the Corporations Act 2001 section 124, which mentions the legal capacity and powers of a company, and section 125 (2), which refers to a company's objects within its constitution.

As Lassie Ltd is a company, it is a separate legal entity, meaning it can enter into contracts in the same legal way a normal human being could. Lassie Ltd's constitution includes the objects clause stating that the company's activities are to be restricted to the breeding and selling of dogs and goods and services associated with dogs, this is why Lassie Ltd wants to terminate the contract. This objects clause does not prevent the company from entering into any contracts as the company can enter into any contract that it wants to as it is a separate legal entity.

Despite the fact that Lassie Ltd broke its company constitution, the contract is still enforceable with Feline Fertility Pty Ltd due to the abolishment of doctrine of ultra vires. The abolishment of doctrine of ultra vires means a company cannot enter into contracts beyond their power and then later avoid their legal obligations on the grounds that they had no legal capacity to enter into the contract. Lassie Ltd knowingly entered into the contract to purchase 300 cats per year, despite the constitutions object clause provision. When entering into a contract, it is not the outsider's duty to know a company's constitution, the outsider simply sees the company as a separate legal entity and will therefore enter into contracts with the company under the assumption that the contract is within the company's constitutional boundaries. The breach of objects clause by Lassie Ltd is an internal matter; however the breach of objects clause will not affect the...