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Q) Chu, a suitably qualified person, was appointed as the company secretary of Do plc. Since his appointment, Chu has entered into the following contracts in the name of Do plc:
(a) an extremely expensive, long-term contract with Ex ple for the maintenance of Do pic’s photocopiers
(b) an agreement to hire taxis from Far pc which Chu used for his own, non-business related purposes
The directors of Do plc have only recently become aware of these contracts.Task) Which of the following statements is correct?
• Both the agreements are binding on Do plc
• Neither of the agreements are binding on Do plc
• Only the contract for the maintenance of the photocopiers is binding on Do plc
• Only the contract to hire taxis for personal use is binding on Do plcWhy is the answer 1? Please explain in a detail. I excluded taxi Bcz of personal use, but included photocopier maintenance. But can u explain both? Also Is photocopier maintenance related to administrative side of businesses?
Properly qualified public company secretaries (in fact, any company secretary!) has the apparent authority to enter into contracts on behalf of their employer company for administrative purposes. Matters that normally lie within the ambit of a company secretary’s duties are typically considered to be administrative.
Thus, the purchase and maintenance of office machinery is quite clearly within those duties.
Hiring taxis? Well, yes, that too is a normal administrative duty.
I always found it useful to consider a (typically) substantial public company and ask myself ‘Is it likely that a director of such a company would want to become involved in ordering office furniture or arranging taxis?
Unlikely, surely! So, delegate to the company secretary.
‘Also Is photocopier maintenance related to administrative side of businesses?’ Same reaction! Does the Finance Director / CEO / Production Director etc want to become involved in negotiating a maintenance contract for office machinery
The taxi element of the question is based on the case Eley v Positive Government Life Assurance
OK?
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