Question - Jennifer and David (brother and sister) have formed a company called Restpad Pte Ltd. Jennifer is the managing director. David works full time but is a director because he invested money into the company. The company makes soft furnishings and requires substantial materials from various suppliers.
The business started off in the family home but has now expanded and the company is looking for a warehouse to run the business.
David through his work contacts finds a suitable warehouse. He rings the agent and signs a contract on behalf of the company to lease the premises for 5 years. The agreement has a clause whereby the rent increases each year by 5%.
Jennifer finds out about the contract and is not happy. She rings you as the accountants and you point out that the constitution of Restpad Pte Ltd states that any contract for the lease of premises must be signed by two directors.
Required: Advise Jennifer does David have the authority to sign the contract and is the company liable to lease the building?