Contracts and Company Law

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Company Law The nature of a company: While there are many types of associations of persons, companies that are formed under the Companies Act have a fictitious personality and are 'persons' in the eyes of law. Thus the company is a separate entity from the members who constitute it. The affairs of the company are actually a contract between the members and the fictitious entity that is created by the contract called the 'memorandum of association'. It is from this the legal distinction between the member and the outsider originates. Subscribing to the memorandum creates a contract and the birth of the company and the members have righst and obligations. From the view point of the European Court of Jusice in Powell Duffryn Pic Vs Peteriet (1992) and the oldest law in Welton V Saffery (1897) show that there exists a contractual obligation between company and members. There is confusion still about the section 14 and the type of contract it creates. The articles of association is a contract between the company and its members. The contract is binding between the comppany and the members in so far as the acts that are done affects one or both the parties. Members contracting with the company can do so as members only if they are permitted to contract within the provisions of the articles. The articles govern the action of the company and it forms its constitution and any deviation from this is ultravires to the objects of forming the company. Pender Vs Lushington [1877}
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