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Hello,
In the video Company names and name change, when talking about objects it is said that 3rd parties can sue to enforce an ultra vires transaction, which makes sense to me, but it also says that the company cannot sue to enforce such a contract.
Does this mean that the company enters into an ultra vires contract with a 3rd party, the 3rd party fails to meet its obligations, and the company cannot sue? This is what I understood from the video, but I’m not sure my understanding it’s correct. Maybe the point was another and I don’t get it.
Thank you,
CristiHi Christi,
You are right. The Companies Act s.39 and s.40 serves to protect Third Parties in these commercial contracts and not the members of the company. However, in the event a contract is entered into Ultra Vires, the members can take c=action against the director for breach of the articles.
I hope this clarifies the postion.
Kind regards,
Vijay
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