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Mr and Mrs Book operate a small newsagency in their local neighbourhood. For tax planning purposes the business is conducted through a corporate structure called Books for Life Pty Ltd. Mr Book is a director of the company and Mrs Book is the director and company secretary. Mr Book goes to the bank where Books for Life Pty Ltd has its accounts and he says the company needs to borrow $90,000 for a new delivery van to make home deliveries of newspapers to customers. The bank agrees to lend so long as it can take security over the major asset of the company which is a building which houses the newsagency premises on the ground floor and a second floor where Mr and Mrs Book live.

Mr Book intends to use the money to fund his gambling addiction. Mrs Book has no knowledge of his activity. Mr Book obtains the loan documents and mortgage documents from the bank. He affixes the common seal of Books for Life Pty Ltd, signs the documents in his capacity as a director and then forges his wifes signature as company secretary. The Bank advances the money. Mr Book wins a large sum of money in the high roller rooms of Jupiters Casino. He takes off overseas with his winnings leaving his wife Mrs Book behind.

Is Books for Life Pty Ltd liable under the loan contract and mortgage?

	a.	Yes, because the bank is entitled to make an assumption about the common seal being witnessed under the Corporations Act
	b.	No as the loan contract and mortgage have not been signed by Mrs Book, her signature is a forgery
	c.	No as it is no longer possible for a company to execute a contract using a company seal
	d.	Yes, because the documents have been affixed with the common seal and signed by Mr Book, a director who is acting on behalf of the company

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