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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Orion Corp's articles say the secretary may not sign any contract exceeding 10,000 dollars without board approval. The secretary, Dana, orders office furniture worth 4,000 dollars for the head office and signs the order. The supplier did not read the articles. Which statement is correct?

Orion is bound. Ordering office furniture is an administrative matter within the secretary's authority, and the 4,000 dollar value is below the 10,000 limit in the articles, so there is no breach and the supplier can enforce the contract.

  1. AThe company is bound, because the order is a routine administrative matter within the secretary's authority and below any limit in the articlesCorrect
  2. BThe company is not bound, because the supplier is deemed to have read the articles and the secretary lacked authority to order anything
  3. CThe company is bound only if the supplier proves Dana was also a director

Explanation

Office furniture is an administrative purchase and the amount is under the 10,000 limit, so Dana acted within even the actual restriction. The limit is therefore not breached. The suggestion that she needs to be a director is wrong, and the articles do not forbid such orders.

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