With reference to Xiao v ACT Commercial Builders Pty Ltd [2023] ACTSC 44
It depends on the way they execute the contract. In case of court proceedings, the court will
decide it objectively (NOT subjectively), considering the contract document as a
whole and on the basis of admissible surrounding circumstances known to the
parties
(Objectively??? Subjectively??; ask me the difference if you
don’t know as a comment)
Recently (2023), Mr. Xiao was to be liable for a debit to a builder personally but not by the Company he performed as a director.
Let’s understand the way someone should execute a contract to avoid getting into trouble like Mr. Xiao.
·
Make clear under what capacity you sign the
contract (on a personal level or for the Company)
·
Details of your capacity must be clearly and consistently
mentioned in the contract
If the contract is executed in the capacity of Director, make it clear with reference to the Corporation Act. See the below example with reference to the Corporation Act in Australia.
Executed as an Agreement
|
Executed by ABC Pty Ltd
pursuant
to Section 127 of the Corporations Act
2001 (Cth):
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} } } |
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. . . . . . . . . . . . .
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. . . . . . . . . . . . .. . . . . . . . . . . .
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. . . . . . . . . . . . . Date |
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(Executed as an Agreement??? Executed as a Deed??? What is
the difference, let’s ask as a comment so, we can discuss)
Now, let’s have a look at how Mr Xiao getting into much trouble.
In the first court, it was held that Mr. Xiao was personally liable for the builder. So, he appealed to the appellate court.
In the subject contract, following were identified and
considered by the court when taking the decision:
· Mr Xiao did not write that he was authorised to
sign on behalf of another or invoke section 127 of the Corporations Act 2001
(Cth)
·
None of the other directors of the company added
their signature to the contract,
·
Even though he wrote down the company address, it was
also his personal address.
·
Even though he wrote down the company ABN, he did not
identify that number as the company's ABN.
·
He did not even name the company anywhere on the
contract,
Case: https://courts.act.gov.au/supreme/judgments/xiao-v-act-commercial-builders-pty-ltd
Note: The article was also published on www.aact.lk
