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Firstly affixing the company seal is evidence that

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Firstly affixing the company seal is evidence that the Company has decided to enter into the contract, and the Outsider can use the indoor management rule to rely on the validity of the document HOWEVER this is subject to the Outsider being put on enquiry o Ask: Is the nature of the transaction such as to excite reasonable apprehension that the transaction is entered into for purposes unrelated to the company’s business? o Outsider must have actual or constructive knowledge that the party did not have actual authority If so then the IMR will not apply – however Mason’s test is more lenient towards the Outsider (2) Dawson J’s Approach {Northside} Firstly for the indoor management rule to apply, then the Outsider must show that the person he dealt with had apparent authority o Ie. (show holding out, actual authority and reliance) o If this is the case, then the IMR will apply to enforce the contract HOWEVER where there is forgery there are two types of forgery: o (1) Counterfeit of the Company Seal where the person counterfeits the Company Seal or forges signatures then the IMR will not operate to enforce the contract o (2) Signatures are not forged but representation about position is: where a director signs his own name but signs it as company secretary and he is not the company secretary here the signature itself is not a forgery but the document is – if the Outsider can establish this person had apparent authority then the IMR will apply to enforce the contract F. Effect of No Authority The exercise of a power contrary to such a restriction does not invalidate the exercise of that power {s 125 Corporations Act} however it may amount to breach of a duty by the Director or officer Could be an unreasonable delegation of powers or delegation without supervision which leads to a breach of the duty of care {Daniels v Anderson} STS Corporations Law Hadi Mazloum: [email protected] 6
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