Corporate Contracts Part I
While being SLP and party to contract and enforce contract, reality is the company cannot conclude the
contract themselves, the contract needs to be signed and negotiated etc. We need to see who is entitled
to conclude the contract and enforce the contract
What types of authortiy they have, or is it limited in some way?
Dutch shell case;
Okpabi (Ogale Community) v Royasl Dutch Shell Plc (2021) UKSC 3
- Supreme Court allowed the Appeal from the COA
- Applies the Lungowe 7 step test – similar to COA but disagreed on whether the standard was
met
- Held that while the parent delegated certain safety measures to subsidiaries the parent still
excercised control over the structure of delegation
- Disagreed the COA suggestion that a parent setting out general principles and policies could not
give rise to a duty of care
- Simon LJ distinguished the issuing by parent of manditory
Nature of the Agreement
Pre-incorporation Contracts
Corporate Capacity
Authority
I. Nature
•Verbal or Written Contract
- Consideration is necessary
- Limitation Period 6 years
•Deed -
- Consideration is not necessary
- Limitation Period normally 12 years
- Signature and Seal is necessary
- Delivery is necessary
,Common Seals (s.43)
•A company must have a common seal(s) stating the company's name, engraved in legible characters.
•Unless provided otherwise by the Constitution or the Act:
– the seal must be used only by the authority of its directors, or of a committee of its directors
authorised by its directors in that behalf
– an instrument to which the shall be affixed shall be: (i) signed by a director or by some other person
appointed by directors/committee for that purpose and (ii) countersigned by the or by some other
person appointed by directors/committee for that purpose
Common Seals (s.43)
•A company must have a common seal(s) stating the company's name, engraved in legible characters.
•Unless provided otherwise by the Constitution or the Act:
– the seal must be used only by the authority of its directors, or of a committee of its directors
authorised by its directors in that behalf
– an instrument to which the shall be affixed shall be:
(i) signed by a director or by some other person appointed by directors/committee for that purpose and
(ii) countersigned by the or by some other person appointed by directors/committee for that purpose
, Company can deregate fro the companies' act, will set out default rule, if company wants to change that
they can state that in their constitution, they lay it out in their constitution
Signed by director and and counter signed by another party, director or committee to that purpose
Distinction in company law between directors as individuals and directors as a board, the collective
authority of directors. It is the board that holds all the control rights and authority, managerial control of
the company, not to say individual directors have that same power. Board derogates authority, has to
come from directors as a collective.
II. Pre-incorporation Contracts (s.45)
Unique issue”
•“Any contract purporting to be entered into by a company prior to its formation, or by any person on
behalf of the company prior to its formation, may be ratified by the company after its formation.
- Possible to create or conclude contract htat is intended to be for the company but they havent
gotten around to incorporating the company yet but once the company is incorporated it can
approve of the contract and it becomes party to it becoming its own contract.
•Once ratified, the company is bound by it/ can benefit from it
•Prior to ratification, the person(s) who purported to act in the name or on behalf of the company will,
in the absence of express agreement to the contrary, be personally bound by the contract and entitled
to the benefit of it.
- Precarious position to be in if you are the normal person signing up to the contract because the
company could decide to not rattify the contract, estoppel is used for the person who has been
told they will rattified the contract and then they back out
- If it’s a singular contract, gibbons and doherty agreement to buy piece of land pripr to
incorporation 2/3 contracts agreed to by one party intended to be on behalf of this company, by
the time the third contract is going through the company backs out and wants to renege on it,
court said theyre not going to view these as separate contracts were going to view it as one
singular chain of events all one composite contract, viwing collectively and compketion of the
purchase of the contested law was deemed to be pursuant to the same contract. Able to impose
specific performance forcing them to go through with the purchase that was the plaintiff
themselves are not going to be the person pn the line personally for the contract.
- Stopping opportunism and people from saying well get this person to start contract process and
tell them well get around to incorporating, see how the market goes if things go well well take
over the contracts were happy and if they don’t we wont rattfie them at all, theyre on the hook
and we escape a bar deal
III. Capacity to enter into a Contract – Ltd
While being SLP and party to contract and enforce contract, reality is the company cannot conclude the
contract themselves, the contract needs to be signed and negotiated etc. We need to see who is entitled
to conclude the contract and enforce the contract
What types of authortiy they have, or is it limited in some way?
Dutch shell case;
Okpabi (Ogale Community) v Royasl Dutch Shell Plc (2021) UKSC 3
- Supreme Court allowed the Appeal from the COA
- Applies the Lungowe 7 step test – similar to COA but disagreed on whether the standard was
met
- Held that while the parent delegated certain safety measures to subsidiaries the parent still
excercised control over the structure of delegation
- Disagreed the COA suggestion that a parent setting out general principles and policies could not
give rise to a duty of care
- Simon LJ distinguished the issuing by parent of manditory
Nature of the Agreement
Pre-incorporation Contracts
Corporate Capacity
Authority
I. Nature
•Verbal or Written Contract
- Consideration is necessary
- Limitation Period 6 years
•Deed -
- Consideration is not necessary
- Limitation Period normally 12 years
- Signature and Seal is necessary
- Delivery is necessary
,Common Seals (s.43)
•A company must have a common seal(s) stating the company's name, engraved in legible characters.
•Unless provided otherwise by the Constitution or the Act:
– the seal must be used only by the authority of its directors, or of a committee of its directors
authorised by its directors in that behalf
– an instrument to which the shall be affixed shall be: (i) signed by a director or by some other person
appointed by directors/committee for that purpose and (ii) countersigned by the or by some other
person appointed by directors/committee for that purpose
Common Seals (s.43)
•A company must have a common seal(s) stating the company's name, engraved in legible characters.
•Unless provided otherwise by the Constitution or the Act:
– the seal must be used only by the authority of its directors, or of a committee of its directors
authorised by its directors in that behalf
– an instrument to which the shall be affixed shall be:
(i) signed by a director or by some other person appointed by directors/committee for that purpose and
(ii) countersigned by the or by some other person appointed by directors/committee for that purpose
, Company can deregate fro the companies' act, will set out default rule, if company wants to change that
they can state that in their constitution, they lay it out in their constitution
Signed by director and and counter signed by another party, director or committee to that purpose
Distinction in company law between directors as individuals and directors as a board, the collective
authority of directors. It is the board that holds all the control rights and authority, managerial control of
the company, not to say individual directors have that same power. Board derogates authority, has to
come from directors as a collective.
II. Pre-incorporation Contracts (s.45)
Unique issue”
•“Any contract purporting to be entered into by a company prior to its formation, or by any person on
behalf of the company prior to its formation, may be ratified by the company after its formation.
- Possible to create or conclude contract htat is intended to be for the company but they havent
gotten around to incorporating the company yet but once the company is incorporated it can
approve of the contract and it becomes party to it becoming its own contract.
•Once ratified, the company is bound by it/ can benefit from it
•Prior to ratification, the person(s) who purported to act in the name or on behalf of the company will,
in the absence of express agreement to the contrary, be personally bound by the contract and entitled
to the benefit of it.
- Precarious position to be in if you are the normal person signing up to the contract because the
company could decide to not rattify the contract, estoppel is used for the person who has been
told they will rattified the contract and then they back out
- If it’s a singular contract, gibbons and doherty agreement to buy piece of land pripr to
incorporation 2/3 contracts agreed to by one party intended to be on behalf of this company, by
the time the third contract is going through the company backs out and wants to renege on it,
court said theyre not going to view these as separate contracts were going to view it as one
singular chain of events all one composite contract, viwing collectively and compketion of the
purchase of the contested law was deemed to be pursuant to the same contract. Able to impose
specific performance forcing them to go through with the purchase that was the plaintiff
themselves are not going to be the person pn the line personally for the contract.
- Stopping opportunism and people from saying well get this person to start contract process and
tell them well get around to incorporating, see how the market goes if things go well well take
over the contracts were happy and if they don’t we wont rattfie them at all, theyre on the hook
and we escape a bar deal
III. Capacity to enter into a Contract – Ltd
