Unauthorised transaction in business law.

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Introduction

Unauthorised Transaction In Business Law This question is related to unauthorised transactions more specifically those relating to express authority of an officer dealing with a 3rd party. Firstly statutory protection can be examined as this provides some important points through S35A of the Companies Act 1985. The main point is that the section is in favour of a person dealing with a company in good faith and more importantly that a 3rd party is still considered as acting in good faith if they are aware that the officer did not have authority to carry out a transaction. In this case it seems the 3rd party need not concern himself with issues relating to express authority however common law may prevail.

Middle

In this case the 3rd party must ensure they enquire into size and nature of transaction. This seems to be the main proviso. Overall the 3rd party is protected through statute and common law. This question is related to Ultra Vires contracts more specifically their validity in relation to the objects of the company. The contract between Hewitts Ltd and Toytown Council can be examined using the Companies Act 1989. The initial contract was Ultra Vires because there was no specific reference to the activity it undertook in its memorandum of association however if the memorandum contained a subjectively worded clause giving the directors the power to direct the companies activities then the contract could be Intra Vires.

Conclusion

and again the directors are liable for breach of fiduciary duty in this case. One point to consider however is that Easy Finance was provided with a lot of information regarding the loan including a board resolution approving the loan. If it can be shown that Easy Finance did not consider the "size or nature" of the loan when granting it to the company then Hewitts Ltd may be able to escape its contractual duty to take the loan (Houghton & Co V Nothard, Lowe & Wills Ltd 1927) It does seem that considering the amount of information the finance company was given they should have realised that the contract would have been Ultra Vires.

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