Question

Assume that the corporate constitution of Masks R Us Pty Ltd authorises the directors to purchase up to $50,000 of stock per month.  Last month, Tom purchased company stock for the month to the value of $100,000 – twice the usual purchase amount.  When the invoice arrived at the company, the chief financial officer refused to pay the supplier or allow the company to take delivery of the stock.  

Explain who is liable for payment of the $100,000 invoice? Use a relevant precedent to support your answer.

Answer 1

Masks R Us Pty Ltd will be liable to pay $50,000 while Tom will be liable for the remaining $50,000

The director is the agent of the company. As an agent he is authorized to act on behalf of the company.

The company is the principal and is vicariously liable for the acts of the agent done in the ordinary course and within the authority given to him. But the company is not liable for the acts of agent beyond his authority.

In this case the company will be liable to pay for $50,000. The amount payable in excess of his authority will have to be personally borne by the director. So, Tom will be personally liable to pay for the balance sum of $50,000.