COMPANY’S INTERNAL RULES

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Faculty of Business and Law
Curtin Law School
Fundamental of Business and Corporations Law BLAW5016
Semester 1, 2023 Copyright Curtin Universit
COMPANY’S INTERNAL RULES, MANAGEMENT AND CONTRACTING
QUESTION 1
Which of the following statements is incorrect?
a. Every company must have internal rules
b. Some replaceable rules cannot be displaced by a company’s constitution
c. Since 1 July 1998, all companies have a choice of a constitution, replaceable rules or
combination of both, as their internal rules
d. If a company elects not to have its own constitution, the replaceable rules are
automatically given to that company
QUESTION 2
The internal rules cover such matters as:
a. Rights and duties of members
b. The appointment and remuneration of members
c. The conduct of directors and members meetings
d. All of the above matters are covered by the internal rules
QUESTION 3
Which of the following statements is correct?
a. An objects clause deals with what activities an employee can undertake
b. A no-liability company must have an objects clause
c. An act contrary to the objects clause is known an “intra vires”
b. A mining company must have an objects clause
QUESTION 4
Which of the following statements is correct?
a. A member is always contractually bound to the company through its constitution, no
matter how the constitution is changed
b. A member is only contractually bound to the company by the constitution that existed
at the time of becoming a member
c. A member is contractually bound to the company through a constitution that has been
amended, only if the member agrees in writing
d. A member is contractually bound to the company through the replaceable rules if the
company does not have a constitution

2 | P a g e
Faculty of Business and Law
Curtin Law School
QUESTION 5
Which of the following statement is incorrect about the company’s organs?
a) The organs of a company are the board of directors and the members in general
meeting
b) The organs are the mind and will of the company and therefore whatever the organs
think becomes the company’s thinking
c) The organic theory originated in the case of
Lennard’s Carrying Co Ltd v Asiatic
Petroleum Co Ltd.
d) A manager can never be an organ of the company as stated in Tesco Supermarket Ltd
v Nattras
and Brambles Holdings Ltd v Carey.
PROBLEM
Tipsy Ltd is an importer and distributor of French wines. The Managing Director is Marie
and the Company Secretary is Pierre. The company has no constitution and the Board of
Directors exercise tight control over the company. The Board has implemented an instruction
that their approval is required for any purchase of wine in excess of $50,000.
Last month Marie signed a contract to purchase wine to the value of $55,000. The other
directors do not like the wine and refuse to accept it on the grounds that Marie lacked
authority by breaching the purchasing limit set by the Board.
Read the facts and answer the following questions:
QUESTION 6
Which of the following is correct?
a) Marie an organ of Tipsy Ltd
b) Marie is an agent of Tipsy Ltd and has actual express authority to sign the wine
contract.
c) Marie is an agent of Tipsy Ltd and has actual implied authority to sign the wine
contract.

Faculty of Business and Law
Curtin Law School
Fundamental of Business and Corporations Law BLAW5016
Semester 1, 2023
Copyright Curtin University
QUESTION 7
The wine supplier for Marie’s contract is likely to argue that they can assume that Marie
obtained the board approval before signing the contract. Which section of the
Corporations Act supports the wine supplier’s argument?
QUESTION 8
If the wine supplier for Marie’s contract has had previous dealings with the company,
which of the following sections of the
Corporations Act can the directors of Tipsy Ltd use
to reject the $55,000 contract signed by Marie?
a) Section 128(1)
b) Section 128(4)
c) Section 129(1)
d) Section 129(2)
QUESTION 9
Pierre the company secretary is in France on holiday and visits one of Tipsy Ltd’s
suppliers. He tastes and likes a new wine and signs a contract for Tipsy Ltd to purchase
the wine for
$10,000. The board of directors wish to rescind the contract on the grounds that Pierre had
no authority to sign the contract.
Which of the following statement is incorrect?
a) Pierre as a company secretary has no authority to sign the contract
b) The board of directors of Tipsy Ltd will be able to rescind the contract because
of Section 129(2)
c) The board of directors of Tipsy Ltd will be able to rescind the contract because
of Section 128(4)
d) The board of directors of Tipsy Ltd will not be able to rescind the contract because
of Section 129(2)
QUESTION 10
The senior executives of Tipsy Ltd were absent at a management seminar and Renee, the
company’s Office Manager, was left to mind the whole office, including the sales

Faculty of Business and Law
Curtin Law School
Fundamental of Business and Corporations Law BLAW5016
Semester 1, 2023
Copyright Curtin University
department. When Smashed, a liquor store chain, phoned to place an order, Renee
negotiated a price and sold some wine. Edith, the company’s Sales Manager, had planned
to sell that same wine to another customer at a higher price. Tipsy Ltd advises Smashed
that they will not supply the wine as Renee lacked authority.
Which of the following statement is correct?
a) Tipsy does not have to supply wine to Smashed as Renee does not have any
authority to enter into the contract
b) Tipsy Ltd has to supply wine to Smashed as a contract has been entered into under
the Law of Contract
c) Smashed can rely on Section 129(3) of the
Corporations Act as Renee was held out
by Tipsy Ltd and force Tipsy Ltd to comply with the contract
d) Tipsy Ltd does not have to supply wine to Smashed Ltd because Smashed cannot
rely on Section 128(4) of the
Corporations Act
QUESTION 11
Which of the following statement is correct?
a) A managing director is a manager and has customary authority to enter into small
contracts
b) A managing director has no customary authority since only the board of directors
can bind the company in contract with outsiders
c) A managing director has apparent authority to enter into a contract on behalf of the
company even though there is an express prohibition to not enter into contracts in
excess of $1million without the board approval
d) Unless the board of directors give express authority to the managing director, the
managing director has no authority to bind the company in contract.
QUESTION 12
What is another name given to “Apparent authority”?