Law of Business Association Assignment

Question 1 – 15 Marks
William is bankrupt and therefore cannot act as a director of a company. Nevertheless, he does so. Harry is the managing director of the same company. Harry gives William a letter
addressed to the other party to the contract saying that that William has authority to enter into a contract. Harry, however, privately tells William that he is only to negotiate the contract, but is not to enter into it. Nevertheless, William signs the contract as agent of the company.

a. Is the company bound by the Contract? Provide reasons for your answer.
b. Would it make any difference to your answer if Harry were only acting as managing
director, never having been appointed to the position?

Question 2 – 10 Marks
Maria is one of two directors and shareholders of a company. David is the other director and shareholder. Maria wants to borrow $100,000 for both the company and for private purposes from a bank. She borrows the money in her own name, but the bank wants a guarantee from the company. She knows David will refuse to do so, so she signs the guarantee ‘Maria,director’ and writes ‘David, director’ in writing that is dissimilar to her own. If Maria fails to meet payments under the loan agreement, can the bank enforce the guarantee against the company?