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Business Law Case Study

            This entire case is about the legality of transactions between an outsider and a company. In the case There are two oral contracts which should cost the company a total of $800 but Earl ends up gaining nothing due to the fact that they are illegal according to the constitutes of business law which I will explain below. According to company law, illegal transactions are premafacie void before the law and cannot be enforced. A contract between an outsider and a company should have evidence signed by the outsider and the company's Agent. This is signed by the outsider after conforming with the Articles of Association and Memorandum of association. This is known as the Doctrine of Constructive notice which states that Memorandum of Association and Articles of Association should be kept at public places where they can be easily accessed. It is assumed that after a person reads the two company document he understands the content and can tell whether a transaction with the company is either ultra-vires or not. A company is bound by it's the objects in the objects clause and cannot exceed beyond those powers. The person who enters into those transactions beyond the powers of a company is at his own risk.
             Company Law also states that an outsider dealing with the company is protected by the indoor management rule. An outsider does not have to confirm themselves with whether proper procedure which need to be followed when transactions between them and the company. It states that the transaction between an outsider and the company is a clear picture of the indoor management. However they cannot be protectected by this rule for instance if they actual knowledge of irregularity and with this knowledge proceeds to execute a transaction. Another exemption to this rule is the negligence on the part of the outsider which states that if upon suspicious circumstances which are likely to propose an inquiry into the execution of the transactions the outsider proceeds to execute it with taking precaution he cannot claim protection under this doctrine.

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