Mr and Mrs Emery operate a small tourism business for students. The main activities of the business are to take small groups of students on educational tours through the Australian outback. The business is conducted through a company called Educational Tours Pty Ltd. Mrs Emery is a director of the company and Mr Emery is a director and secretary of the company. Mrs Emery goes to the EastPac Finance Ltd where Educational Tours Pty Ltd has its accounts and she asks EastPac Finance Ltd for a loan of $500,000 to purchase five new off-road vehicles. EastPac Finance Ltd agrees to lend her the money as long as the major asset of the company, which is the building from which Educational Tours Pty Ltd operates, and where Mr and Mrs Emery reside, is used as security. Mrs Emery agrees, as her intent is to use the money to book an expensive holiday with her neighbour John. Mr Emery has no knowledge of her activity.

Mrs Emery receives the loan and mortgage documents from EastPac Finance Ltd. She affixes the common seal of Educational Tours Pty Ltd and forges her husband’s signature as secretary. The bank advances the money and Mrs Emery escapes with the money and her neighbour.

REQUIRED:

With reference to, the Corporations Act 2001 (Cth) and relevant case law advise whether EastPac Finance can enforce the contract against Educational Tours Pty Ltd.

Answer rating: 100% (QA)

The main issue in this case is whether the contract made between Educational Tours Pty Ltd and EastPac Finance is enforceable taking into account the fact that Mrs Emery a director of the company exec... View the full answer