Freno owns land leased to its subsidiary company Frenz. Frenz manufactures liquorice that is sold to retail customers. Mr Fraz is a director of Frenz and also actively involved with the directorship of Freno. To build the business, the board of Frenz (comprising 4 directors) sought to develop a state-of-the- art packaging facility near their existing manufacturing facility to enhance production and reduce costs. Frenz appoints an architecture firm called Berkshire, to develop the detailed architectural drawings for the new packaging facility. The constitution of Frenz states that all directors of the company (of which there are four) must approve contracts with third parties exceeding $200,000 dollars. Given the complexity of the works, the total price for the architectural drawings exceeds this amount at $250,000. While originally the company planned to build the facility to enhance their production and reduce costs, with recently changed economic conditions, this plan]fell through. At the time of signing the contract, only Fraz was available to sign the contract with Berkshire. With Berkshire having completed the work, they now expect payment from Frenz. However, the board argue that the company is not liable as the contract was formed without proper authority. Required: 

Consider the legal issues that arise in corporate law (under the provisions of the Corporations Act 2001 (Cth)). To assist, you may wish to consider whether Berkshire is entitled to rely on any assumptions in s129 of the Corporations Act 2001 (Cth). In your response you need to refer to relevant sections of legislation and case law.

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In this scenario there are legal issues related to corporate law specifically regarding the authority to enter into contracts and whether Berkshire ca... View the full answer