Problem

Question Four

Tipsy Ltd is an importer and distributor of French wines. The Managing Director is Marie and the Company Secretary is Pierre. The company has no constitution and the Board of Directors exercise tight control over the company. The Board has implemented an instruction that their approval is required for any purchase of wine in excess of $50,000.

During the last month the following three transactions and developments occurred:

Marie signed a contract to purchase $55,000 of wine. The other directors do not like the wine and refuse to accept it on the grounds that Marie lacked authority by breaching the purchasing limit set by the Board.

Pierre, in France on holiday, visits one of Tipsy Ltd's suppliers. He tastes and likes a new wine and signs a contract for Tipsy Ltd to purchase the wine for $10,000. The board of directors wishes to rescind the contract on the grounds that Pierre had no authority to sign the contract.

The senior executives of Tipsy Ltd were absent at a management seminar and Renee, the company's Office Manager, was left to mind the whole office, including the sales department. When Smashed, a liquor store chain, phoned to place an order, Renee negotiated a price and sold some wine. Edith, the company's Sales Manager, had planned to sell that same wine to another customer at a higher price. Tipsy Ltd advises Smashed that they will not supply the wine as Renee lacked authority.

REQUIRED:

Analysis each transaction, advising on Tipsy Ltd's contractual obligations, if any.