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QUESTION 4
Rodenrid Sdn Bhd is a company involved in pest control. In 2008 Ratty was appointed as
managing director of the company by a board resolution, which gave him exclusive power to
manage the company, subject only to a requirement to get the approval of the board for all
contracts in excess of RM 100,000.
On behalf of the company, Ratty began negotiating for the purchase of insecticides from
Pesty, who had supplied the company with similar products for a number of years. Before
these negotiations were concluded, Pesty accepted an invitation to become a member of the
board of Rodenrid Sdn Bhd, and thenceforth duly attended its board meetings. Some months
after this, Ratty without getting the approval of the board, signed a contract with Pesty for the
supply of RM200,000 worth of insecticides.
Preliminary examinations of these insecticides have revealed that they are not as effective as
the company had been hoping. The board, with the exception of Ratty and Pesty, is now
seeking some way in which the company can claim that it is not bound by its obligations
under the contract.
Advise the board.