Business Education Ltd is a Perth based company that retails textbook worldwide. Maria is their Purchasing Manager and Charles is their Chief Accountant.
Business Education Ltd has a constitution with only the following two clauses:
(i) An objects clause restricting its activities to the “international sales and distribution of written textbooks used for educational purposes”.
(ii) A clause requiring “purchases exceeding $1million must be approved by the Board of Directors of the company”.
Maria visits publishers in Sydney. She enters into discussion with Asia Books Pty Ltd, a company based in Sydney that has exclusive distribution rights in the Asia and Pacific region for a very popular series of fiction books that can be downloaded on iPads. Maria signs an agreement for Business Education Ltd to be the Australian distributor of fiction books for the next 5 years.
When the Managing Director of Business Education Ltd learns of this transaction, he corresponds with Asia Books Pty Ltd rejecting the agreement on the grounds that Business Education Ltd has no legal capacity to enter into such a contract and the company is bound to follow its constitution through the statutory contract under the Corporations Act.
Charles attends an accountant’s conference in Tasmania when he happens to become aware of a warehouse, suitable for storing the company’s educational textbooks. He visits the warehouse owner, introduces himself as chief accountant and signs a contract on behalf of Business Education Ltd to lease the warehouse for 3 years for 1,200,000.
Upon learning of Charles’s actions, the Managing Director of Business Education Ltd refuses to accept the lease. He corresponds with the warehouse owner denying any liability under the lease on behalf of Business Education Ltd, pointing out:
(i) That Charles did not have the authority to sign an agreement of that type; and
(ii) That Charles exceeded his spending limit.

Answer all questions. Each of the three parts must be answered separately. Refer to the Corporations Act and case law where possible in answering the questions.
a) With reference to the Corporations Act state five legal differences between Business Education Ltd and Asia Books Pty Ltd.

b) Taking into consideration the Managing Directors correspondence with Asia Books Pty Ltd, advice Asia Books Pty Ltd of its rights.

c) Advise the Tasmanian warehouse owner of his rights. Your answer should include consideration of items (i) and (ii) of the Managing Director’s correspondence to the warehouse owner.
Note: You are not required to discuss legal issues arising under the Law of Contract. You also do not have to consider whether the directors have breached their duties when answering this question.

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