Legal Issues in Hairlines Advertisement

This article discusses the legal issues surrounding the advertisement posted by Hairlines, including the validity of the offer, the rights of customers, and the obligations of the business. It also explores the concept of oppressive conduct in corporate law.

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Business and Corporate Law

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PART A
ISSUE
The legal issues presented in this scenario are a result of the advertisement posted by
Hairlines. The first issue is whether forty customers can claim a haircut for $10 and
whether similar rights are available for other ten customers that have not brought the
advertisement with them? Can Ming claim that he is not liable to give a haircut worth $60
for $10 since the payment is insufficient and the business has no obligations towards
those customers? Whether the advertisement has been cancelled when Ming put up the
sign on his shop?
RULE
While forming a contractual relationship, it is important that the parties of the contract must
fulfil certain elements. In case these elements are not present, then a contractual
relationship cannot be formed (Fitzpatrick et al., 2017). These elements include an offer,
acceptance, consideration, intention and capacity of parties. In Harvey v Facey (1893)
UKPC 1, the court provided relevant provisions regarding a valid offer. It was held that the
offer must have the intention to bind the offeror into a legal relationship. It is significant the
parties must differentiate an offer from an invitation to treat since a contractual relationship
cannot be constituted through an invitation to treat. Advertisements posted in newspapers
are generally considered as an invitation to treat since the parties lack the intention to
create a legal relationship as provided in the case of Grainger & Son v Gough (Surveyor of
Taxes) [1896] AC 325.
However, advertisements can come within the scope of a valid offer as provided by the
court in Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256. The court provided in this case
that an offer that is not made to a specific person or a group of people rather than which is
open for the world is considered as valid. This offer is closely related to an invitation to
treat; however, the key difference between them is related to the wording. In Carlill v
Carbolic Smoke Ball Co, an advert for medication was made by a company to treat
influenza, and it claimed a reward of £100 to anyone who caught the disease after using
the medication (Charman, 2013). Mrs Carlill purchased and used the medication; however,
she still caught the disease, and she claimed her reward. The leading judgement was
given by the Queen’s Bench in which it was held that the wording of the advert was
specific and people can give their acceptance by complying with the instructions based on

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which a valid contract was formed, and the company owes £100 to Mrs Carlill (Fitzpatrick
et al., 2017). Similarly, principles were recognised by the court in Mildura Office Equipment
& Supplies Pty Ltd v Canon Finance Australia Ltd [2006] VSC 42 in which the claim of the
plaintiff was rejected by the Supreme Court by stating that the instructions in the video
were not specific due to which a contract has not formed. The offer that is open for the
world is also called unilateral offer which can be revoked only by two ways: the
performance of the contract is not begun, or the performance is not finished within a
reasonable time (McKendrick, 2014). The acceptance is another crucial element to create
a contractual relationship which must be clear and communicated to the offeror as given in
Masters v Cameron (1954) 91 CLR 353. Consideration must be present in the contract
that defines the bargain of the contract; the rule of consideration provides that it can be
nominal and it did not have to be adequate as provided in the case of Thomas v Thomas
(1842) 2 QB 851. The parties of the contract must have the intention to create a legally
binding relationship.
APPLICATION
In order to give advice to Ming, it is important to understand the application of relevant
laws in the scenario. In order to determine the legal rights of the customers, it is important
to determine whether a contract is formed. Although advertisements did not consider as a
valid offer (Grainger & Son v Gough (Surveyor of Taxes)); however, this advertisement
comes within the scope of a unilateral offer since the wordings are specific. It is clearly
mentioned that a haircut of $10 will be given to those that bring a copy of the
advertisement with them. Thus, forty customers that followed the instructions can claim a
haircut based on the judgement of Carlill v Carbolic Smoke Ball Co. They give their
acceptance by complying with the instructions of the advert. The consideration in this
scenario was referred to the amount they pay for the hair ($10).
It cannot be claimed by Ming that $10 is not sufficient for a haircut of $60 since nominal
consideration is considered as valid, and it did not have to be adequate as provided in
Thomas v Thomas. The element of intention is also present in the case. Other ten
customers that did not bring the copy of the advert with them did not have the right to
legally enforce Ming for the haircut since a contract is not constructed with them (Mildura
Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd). Ming cannot cancel
the contract solely by putting a sign because a unilateral contract cannot only be revoked if
the performance has not started or if it is not finished within a reasonable timeframe. Thus,

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another advert should be posted in which time limit should be included by Ming to
terminate the first unilateral offer.
CONCLUSION
Conclusively, a legal relationship can be constructed through the advertisement of
Hairlines based on which a legal obligation can be imposed on Ming to give a haircut for
$10 since a valid contract is constructed with forty customers. Other ten customers cannot
claim that haircut since they did not comply with the instructions. The advertisement was a
unilateral offer which has the power to create a legal obligation on the business. Lastly, the
offer cannot be rejected simply by putting up a sign.

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PART B
ISSUE
The issue in this case is what remedies are available for Jacinta against her legal position
as a member in Sweet, Ness & Light Pty Ltd? What actions can Jacinta take to secure her
rights in the company?
RULE
The Corporations Act 2001 (Cth) provides a number of guidelines that recognises the right
of shareholders of a company. As per these guidelines, various personal rights are given
to shareholders that they can exercise in the company for their interest. Section 232 to 235
provides provisions regarding oppressive conduct of affairs in the company under which
protection is given to the minorities shareholders to provide them a remedy for ‘oppressive
conduct of affair’. Section 232 provides key provisions regarding setting out the grounds
for orders; under section 233, the orders that can be made are given (Fitzpatrick et al.,
2017). Section 234 provides the categories in which people can apply for orders, and
section 235 provides that parties must lodge a copy of the order with the Australia
Securities and Investments Commission (ASIC). Pursuant to section 232, courts have the
power to intervene in the operation of a company to stop those actions that are contrary to
the interest of members of the company as a whole or which can be constituted as
oppressive (Austlii, 2019). The definition of ‘oppressive’ is not given in the Act, and it can
be understood through a judicial interpretation which defines it as unfairly prejudice or
discrimination against a member or members. One of the key objectives of this section is
to protect minority shareholders from the actions of majority shareholders by prohibiting
them from using their voting powers to manipulate or coerce minority shareholders and
their interest.
However, this provision cannot be applied solely based on the fact that a shareholder is
dissatisfied by the actions or decision of the company. Members that wanted to rely on the
defence for oppressive conduct, the members have to meet the oppressive conduct
criteria. The first step is who is standing before the court in order to apply for the remedy
as given under section 234 which include shareholders, former members or a person
which is considered as appropriate by ASIC (Easton, 2013). The second step is to identify
whether the activity is complained within the grounds of section 232 which provides three
grounds: conduct of a company’s affairs, act or omission and resolution or proposed

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relations. The court tests these grounds objectively to determine whether they lead to
contrary affecting the interest of shareholders as a whole and whether they can be
constituted as oppressive or unfairly prejudicial or discriminatory. The provisions regarding
the use of the objective test are given under section 232 (e) which provides that the
actions must be interpreted as harsh, wrongful and burdensome. Under section 233 (1),
the court can grant appropriate remedy to the aggrieve party such as issue an order to
wind up the company, modify or repeal constitution of the company, regulate its affairs,
direct the company, purchase of its shares, appointing a receive or restraining a person
from engaging in specific conduct (Fitzpatrick et al., 2017).
In this regards, the court provided a relevant judgement in Shamsallah Holdings Pty Ltd v
CBD Refrigeration and Airconditioning Services Pty Ltd (2001) 19 ACLC 517. In this case,
the plaintiffs made a claim in the court under section 232 and 232 by stating that the
director is restricting the payment of dividend to members, retaining case surplus for
operational needs, preventing the parties from access information about the company. The
court provided its judgement in favour of the plaintiffs by stating that the director restricted
payment of dividend while giving themselves high salaries and he was restricting
shareholders to share the profits of the company (Wuth, 2014). Another relevant
judgement in this regards was given in the case of Re G Jeffrey (Mens Store) Pty Ltd
(1984) 2 ACLC 421 in which it was held by the court that dissatisfaction of a member did
not comes within the scope of oppressive conduct. Another relevant section in this regards
is 461 (1) in which a drastic remedy for oppressive conduct is given. Under this section,
the court can wind up a company on ‘other grounds’ and these grounds are the same as
section 232 which include unfairly discriminatory or prejudicial behaviour.
APPLICATION
In the given scenario, the rights which are available for Jacinta relating to access to the
book of accounts of the company is not violated based on which the most relevant action
which is available for her is to file a suit under section 232. She can claim that the actions
of Bill are constituted as oppressive since they are unfairly discriminatory and prejudicial
behaviour which leads to violation of the interest of shareholders of the company. Jacinta
can make an argument that the three grounds required to apply this section is present in
this case since the acts of the majority shareholders lead to creating an oppressive
environment in which the rights of minority shareholders were breached. Jacinta can rely
on the judgement of Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning
Services Pty Ltd by stating that even though the company was generating substantial

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profits for the past four years; still, the company was not distributing dividend to its
stakeholders. Jacinta can claim that she wants remedies under section 233 in which she
can claim compensation, or she can decide to leave the organisation by ensuring that
other shareholders buy her out. She can also demand the court to take action against the
company or majority shareholders. Moreover, Jacinta might also make a claim under
section 461 (1) by stating that the company should be wind up altogether by claiming that
the decision taken by the majority shareholders to not issue shares to Yvette and Jacinta
in the case of restructure of the company.
CONCLUSION
In conclusion, Jacinta can make a claim under section 232 and demand remedies under
section 233 by stating that she wants to leave or she wants compensation, or she can take
certain action against the company or other members. Furthermore, she can also ask the
court to wind up the company under section 461 (1) because she and Yvette was excluded
while restructure of shares.

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References
Austlii. (2019) Corporations Act 2001. [Online] Available at:
http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/ [Accessed 18/04/2019].
Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256
Charman, M. (2013) Contract law. London: Willan.
Corporations Act 2001 (Cth)
Easton, M. (2013) Don’t forget minority shareholders. [Online] Available at:
http://www.companydirectors.com.au/director-resource-centre/publications/company-
director-magazine/2013-back-editions/april/opinion-do-not-forget-minority-shareholders
[Accessed 18/04/2019].
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017) Business and
Corporations Law. 3rd ed. Chatswood, NSW: LexisNexis Butterworths Australia.
Grainger & Son v Gough (Surveyor of Taxes) [1896] AC 325
Harvey v Facey (1893) UKPC 1
Masters v Cameron (1954) 91 CLR 353
McKendrick, E. (2014) Contract law: text, cases, and materials. Oxford: Oxford University
Press.
Mildura Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd [2006] VSC 42
Re G Jeffrey (Mens Store) Pty Ltd (1984) 2 ACLC 421
Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd
(2001) 19 ACLC 517
Thomas v Thomas (1842) 2 QB 851
Wuth, N. (2014) More Say on Pay-Shareholder Rights and Remedies in Respect of
Excessive Director Remuneration. Canberra L. Rev., 12, p.30.