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Company Law questions! Pre-incorporation contracts and agency watch

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    Beal, Dol and Ray are the directors of Tuzo Ltd. The company’s articles provide that all contracts made on behalf of the company to a value in excess of £50,000 must be approved by a special resolution. They also provide for the board to appoint a managing director. The company has no objects clause. In practice Albert often acts as the managing director but he has never been formally appointed as such.

    Later that year, Beal contracted, ostensibly on behalf of the company but without any approval, to purchase a rare classic car from Okra Ltd for £75,000. When Okra Ltd queried whether Beal had the authority to do this, Beal forged a letter, purporting to be signed by Dol, stating that Beal did have the authority. Beal took possession of the car and has since sold it abroad. Beal is now outside the jurisdiction. Okra Ltdhas not been paid for the car.

    Ray has decided to set up another venture to develop a country hotel and estate. She intended to form a company, to be known as Manup Ltd, to carry out the venture. Prior to the company’s formation, Ray signed an agreement with Big Boy Ltd to purchase the relevant land. The agreement was expressed to be “for the benefit of Manup Ltd only”. In fact, that company was never formed but Ray still wishes to enforce the contract.

    Advise Big Boy Ltd and Okra Ltd.
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