You have been asked by Bob, the Managing Director of an Irish limited company operating a chain: Company Law Assignment, UCD, Ireland

Question 1

(a) You have been asked by Bob, the Managing Director of an Irish limited company operating a chain of coffee shops in Ireland to prepare a memorandum

“(i) explaining the distinction between actual and ostensible authority;

(ii) describing how actual authority typically flows down through the chain of command from our board to the most junior member of staff selling coffee to retail customers;

(iii) identifying the circumstances in which the company might find itself bound by contracts with  third parties entered into by a director or a senior manager of the company acting with only ostensible authority to act on behalf of the company and the steps the company should take to protect itself from being subject to any such unwanted contracts; and

(iv) advising me as to whether my wife’s nephew, whose job it is to deliver take-away coffees for the company but who is constantly referring to this familial connection, could ever be considered to be acting with ostensible authority to contract on behalf of the company.”  Cite relevant case law in your memorandum.

And 

(b) Money Makers Ltd. (MM Ltd) is a private company limited by shares which provides data piracy protection services to clients. Its constitution requires that its Managing Director must be appointed by the board at a meeting with all directors present. Pauline is described as “Managing Director” in the company’s notepaper and she is allowed by the board to act as Managing Director without such an appointment having taken place. Pauline enters into a contract to rent office space for MM Ltd promising to pay a very generous annual rent of €160,000 to the owner.

MM Ltd’s constitution provides that neither Gordon nor Jill, two of its directors, can enter into a contract valued at more than €100,000. Gordon is the “Operations Director” and he enters into a contract to buy a consignment of computers for the company from a new supplier for €150,000.

Jill is the “Human Resources Director” and she enters into a contract to buy computer software for the company at a cost of €175,000. This software will allow the company to automatically request Facebook to take down copyrighted content belonging to MMM Ltd’s clients. The software vendor has not dealt with Jill before, but has sold software previously to Gordon, and Gordon has introduced Jill to the vendor as someone “with authority to act for the company”.

MM Ltd’s constitution provides that Charles, its “Finance Director”, cannot enter into a contract valued at more than €500,000 unless its shareholders provide their prior approval. Charles enters into a financing contract at a value of €1 million without seeking such approval.

Advise MM Ltd, with reference to relevant case law, as to whether any of the aforementioned four contracts are binding on the company.