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ARTICLE · 19 JUNE 2020

Invalid contract by director saved by shareholder approval

Cooper Grace Ward
Cooper Grace Ward
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Cooper Grace Ward

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The doctrine of shareholders' unanimous assent may validate a transaction entered into by a director without authority.

AustraliaCorporate/Commercial Law
Graham Roberts
Graham Roberts
Claudia Levings
Claudia Levings
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Where a director purports to enter into a contract on behalf of a company without authority or contrary to the company constitution, disputes can arise as to the enforceability of the contract.

The other party to the transaction or another shareholder or director of the company may seek to rely on the defect in the director's authority to argue that the agreement is invalid and unenforceable. If successful, this could expose the director to a claim for damages on the grounds that the director acted without authority.

However, the doctrine of shareholders' unanimous assent may be available to validate a purported transaction entered into by a director who lacked the necessary authority to enter into the agreement.

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Cooper Grace Ward is a leading Australian law firm based in Brisbane.

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.

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