TNAG-1645-FCO40-2292-Company-law-reform-in-Hong-Kong-Companies-(Amendment)-(No.-2-1987 — Page 129

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2.8

(c)

(a)

the other party should not be deprived of his

right to enforce the contract on the ground that

he had actual knowledge of the contents of the

memorandum and articles at the time of entering

into the contract if he honestly and reasonably

failed to appreciate that they had the effect

of precluding the company (or any director or

other person on its behalf) from entering into

the contract in question;

there should be no change in the position of a

company in relation to ultra vires contracts

entered into by it.'

No action was taken on this recommendation in the Companies

Act 1967, but section 9(1) of the European Communities Act 1972 has

since been enacted providing:-

"In favour of a person dealing with a company in good

faith, any transaction decided on by the directors

shall be deemed to be one which it is within the

capacity of the company to enter into, and the

power of the directors to bind the company shall be

deemed to be free of any limitation under the memorandum

or articles of association; and a party to a transaction

so decided on shall not be bound to enquire as to the

capacity of the company to enter into it or as to any

such limitation on the powers of the directors, and shall

be presumed to have acted in good faith unless the

contrary is proved.".

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