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Company Law, Liquidated Company – Case Study

Liability of an agent of undisclosed agent and recover Marchamages under restitution

Akum will be personally liable if he had not disclosed the principal he was working for. When entering into an agreement with the banks where such terms as Bids ltd are used, it is assumed that they carried enough investigation on the public documents. When the bank agreed to lend money to Bids ltd they were aware of its existence and the mistake of identity may not arise since information relating to the existence of corporations is available in the public domain. On those grounds the bank cannot recover money from Akum, this is in line with the case of Oshkosh B’Gosh v Dan Marbel it was held that a person doing a business in the name of a company that is not registered can not be held responsible. At the same time, Akum knew that the company did not exist at the time of contract and no person/ agent will enter into transactions for a principal who does not exist. What Akum did is that he purported to enter into a transaction for a company that he knew by facts that did not exist. Through this fact alone will make Akum personally liable for the debt he took from the bank. this fact is similar to the fact in the case of Commissioner of State Revenue v Viewbank Properties Pty Ltd 2004 where the evidence was not sorted for in the judgment (Low and Tabalujan, 1999).

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Akum is a promoter of the company as it was held on Twycross v Grant (1877) and promoters can not enter into contracts on behalf of a company that they are promoting as it was held in the case of Kelner v Baxter where it was decided that pre-incorporation contracts are not binding.

When contracts are entered into, they are entered into by persons who have the contractual capacity and any person without contractual capacity who enters into a contract will enter into avoidable contracts. The bank will have taken necessary steps to discover whether the organizations existed, however they did not thus they will recover through restitution. It is an oversight from the side of the bank, therefore, the contract into the bank the nonexistence company was avoidable that is the company they dealt with is nonexistence. In this case, Akum was aware that the company never existed but the bank wasn’t aware, although in law it is assumed that any information that is in the eyes of the public is known by all at times exceptions do arise. The court cannot close their eyes and assume that the bank was aware therefore they lose, that is why there is restitution, the agent who sighed on behalf of a non-existence company will be held accountable (Phang A., 2000).

Another issue is that by the time he was receiving the money, the purpose for incorporating the company has elapsed by cancellation but went ahead toreceived the money. Whether the purpose for borrowing the money was disclosed to the bank remains unclear from this case, however, if the bank was aware, I will state that the bank will not recover the money because they did not take necessary steps to cushion themselves against fraudulent individuals since the cancellation was public. They should have also noted that the purpose of taking the loan had been cancelled. Unfortunately they did not take these necessary steps. In a case of mistake, where there was a mistake of unilateral (Lum K. and Yeo V. , 2005 and Keenan, D. Smith and Keenan’s , 2006). The following case had similar facts

Pleas of non Est Facturn

A person can avail himself the plea of non est factum (this not my act) where he signed a document under a mistake induced by fraudulent misinterpretation as to the nature of the document. It is immaterial whether the mistake party is negligent or not in giving his signature to a contract into which he did not intend to enter, except when the document signed is a negotiable instrument i.e. a cheque, bill of exchange or note (Lum K. and Yeo V., 2005).

From the above discussions Akum will be held responsible personally for misrepresenting the fact the company was existing at the time of borrowing while it was not. He was working for non-existence principal therefore he will liable. He will also be held liable because he owed the bank a duty of disclosure of the principal (Sealy L.C. ,2000).

In this case the money will recovered fully from Akum because in a similar case of Ingram and Little of 1961.

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The plaintiff advertised a car for sale, a swindler visited her home, and asked if he could buy the car and offered a cheque. The lady refused to accept the cheque, so the swindler said he was “Mr. P.G. Hutchinson” and gave the real Mr. Hutchinson’s address and telephone. After checking the name and address in the directory, the lady accepted the cheque, and parted with the car. The cheque was dishonored. Meanwhile, the swindler had sold the car to little. The Plaintiff sought to recover the car from little, who bought in good faith and paid cash for it. It was held that the contract between the swindler and the plaintiff was void for mistake since the plaintiff intended to contract with Hutchinson and not the person who was at her premises. She succeeded in recovering the car (Chandran R, 2001).

In the case of Ingram, the swindler had a cheque and the lady took the trouble to check the true identity of the person before him in the two cases, they lead to arrive to two types of contracts. A voidable contract is binding and enforceable but it is not valid and the aggrieved party has an option of avoiding the contract. If he fails to avoid the contract within a reasonable time or a third party is involved, then the contract becomes binding. From the case I will advice Mr. sharp to recover the money from Akum (Tabalujan B & Du Toit-Low V.,1994).

In the first instances, we can say that there is contract between bank and Akum but in the case of a company once existed there is a contract between bank and Bids ltd, which is enforceable. I will advice Mr. sharp to take legal action and but in the first case he should forget about the contract since there was no one in the first place. However I will advice him to deliver recover the money as the director of the company used the money for the unintended purpose (Gower, L.C.B. and Davies, P.L. 2006 and Slorach, J.S. and Ellis, J., 2006).

References

  1. Card R. & James J. (2000); law for Accountancy Students, Butterworths
  2. Chandran R, (2001); Introduction to Business Law in Singapore, McGraw Hill
  3. Gower, L.C.B. and Davies, P.L. (2006) Principles of Modern Company Law Sweet and Maxwell
  4. Keenan, D. Smith and Keenan’s (2006) Company Law, Longman
  5. Koh P. & Yeo P., (2001); company law, Butterworths
  6. Low and Tabalujan (1999); Executive’s Guide to Business and the law,
  7. Lowry, J., Dignam, A. and Padfield, (2004) Company Law, Butterworths
  8. Lum K. and Yeo V. (2005); Contract law, Butterworths
  9. Phang A. (2000); Basic Principles of Singapore Business law, Thomson
  10. Sealy L.C. (2000);Jordans Cases and materials in Company law, Butterworths Heinemann
  11. Slorach, J.S. and Ellis, J. (2006); Business Law LPC Guide ; Oxford OUP
  12. Tan C.H. (1998); Walter Woon on company law, Thomson – Sweet & Maxwell
  13. Tabalujan B & Du Toit-Low V. (1994); Singapore Business law, Business law Asia

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