Question

Q1- Ali, Betty, Carmel, Devaki and Eli are enthusiast stamp collectors and want to start an
online business that buys and sells historical collector-item stamps from around the world.
They decide to set up a company to do this. All four agree to put in $5,000 each to buy
shares in the company. Ali and Betty are assigned to put in an application to ASIC to register
a company called ‘Stamps R Us Pty Ltd’. Carmel is to look into getting a web design company
to design a website and get a quote. She visits Software Designs Pty Ltd in Parramatta CBD
and the salesman spends some time showing her various web design packages. Carmel is
very impressed with the ‘Super Delux’ package but is a little concerned about the $15,000
cost. The salesman informs her, however, that they currently have a 30 per cent sale on that
package, but that it finishes at 5 pm that day. Carmel excitedly calls Ali from the store, who
has been the driving force behind creating the business, to get his thoughts. He says ‘Yes.
Let’s do it’. Carmel signs the contract on behalf of both Stamps R Us and Ali, then and there.
Eli is assigned to investigate buying some stamps that the new company can have as stock
when it first launches. He visits his local stamp dealer, Charlie, of Charlie’s Stamps Pty Ltd,
who is very keen to get Eli’s business. Charlie tells Eli that if the new business buys stamps
from him worth over $10,000, he will give Eli a rare 1901 Australian Federation stamp, now
worth around $2,000 as a personal gift to show his appreciation. Eli is excited about this. He
contacts the group at their next meeting and they agree to buy $11,000 worth of stamps.
However, he doesn’t mention the personal gift. He goes ahead and buys the stamps and
receives the Federation stamp.
The following week, Ali and Betty’s application is successful and the company is registered.
All five become directors. However, at their first board meeting, Betty, Devaki and Eli are
unhappy about the cost of the website package and refuse to accept the contract, saying
the basic package would have been more than sufficient.
Advise the parties of their respective legal rights and liabilities.

Answer 1

In the initial stage when new company is going to be formed as in the given cash these four person give a thought to start a new comapany and later on new member joined the others. Intilally when the application was under processed by ASIC which by made Ali and Batty on the behalf of all other members .

Roles and responsibilties are also bifurcated amoung the members of company. so contract entered by carmel with software design pty ltd would consider as pre - incorporation Contract since company ia an artifical person which cannot on its entered in nay contract so member would always be needed for its function.

If we talked about the validation of contract per - incorporation contract will be considered valid on when it is in interest of the company and with in its power . To the pre incorpoartion contarct valid it has to be accepted through meeting . in the given case contract has entered earlier and company get registered later as a result meeting was held and conclusion arrived at company as whole is not iin favour to accept the  contract . so in this case promoter and the contarctor is liable for each other it means the promoter who is second party in contract is liable for the damage in his personal capacity in the given case Ali was the second party except the company which was not formed yet . so Ali was held responsible towards software design pty ltd in its persinal capacity.

contary Ali and camary can convinced the Software design to some how drop down the price of cntarct or provide additional benefit under same cost and execute another contract on mutual basis . otherwise Ali will be held responsible in its personal capacity.