Beth, a fashion designer, wished to transfer her clothing business to a private limited company that she intended to incorporate, to be called AFL Ltd. Beth delivered all the necessary documents to the Registrar of Companies and received a Certificate of Incorporation (dated 24th February) on 1st March. On 14th February Beth agreed, in a letter which she signed “for and on behalf of AFL Ltd, Beth, Director”, to purchase, from Kempstons Ltd, a quantity of materials that she would need for her new collection. At the first board meeting of AFL Ltd, the contract with Kempstons Ltd was approved and AFL Ltd received delivery of the first consignment of materials. However, the board has now decided to cancel the contract. Beth also transferred some land to AFL Ltd for £250,000. It was later discovered by the board of AFL Ltd that she made a profit of £25,000 from that sale.
REQUIRED:
(a) Advise Beth with regard to her liability, if any, to Kempstons Ltd.
(b) How would your answer differ if, in the letter of 14th February, Beth expressly excluded her personal liability?
(c) Advise AFL Ltd as to any remedies it may have against Beth in respect of the profit she received on the sale of the land.