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ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company

Delta Co was validly incorporated under a companies act that, like most modern Global-variant jurisdictions, gives a company unrestricted objects unless its constitution says otherwise. Delta's constitution contains no restriction on its objects. Delta enters into a contract to buy a fleet of delivery vans from Vanco. Which statement is correct?

The contract is enforceable. A company with unrestricted objects has the capacity of a natural person, so buying vehicles is within its capacity even though the constitution does not list it. The old ultra vires approach, which would have made it void, no longer applies here.

  1. AThe contract is enforceable because Delta has the capacity of a natural person and no objects restriction appliesCorrect
  2. BThe contract is void because Delta did not list vehicle purchases as an object
  3. CThe contract is voidable at Vanco's option because a company has limited capacity

Explanation

Where the constitution does not restrict objects, a company has the capacity to do anything a natural person can do, including buying vans. The second option reflects the old ultra vires doctrine, which no longer applies in this situation. The third is wrong because capacity is not limited here.

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