Legal Issues and Applicable Laws in Various Scenarios

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Contents
Solution 1.........................................................................................................................................2
Issue.............................................................................................................................................2
Applicable Law............................................................................................................................2
Application of law........................................................................................................................2
Conclusion...................................................................................................................................3
Solution 2.........................................................................................................................................3
Issue.............................................................................................................................................3
Applicable law.............................................................................................................................3
Application of law........................................................................................................................4
Conclusion...................................................................................................................................4
Solution 3.........................................................................................................................................4
Part A...............................................................................................................................................4
Issue.............................................................................................................................................4
Applicable law.............................................................................................................................5
Application of law........................................................................................................................5
Conclusion...................................................................................................................................6
Solution 4.........................................................................................................................................6
Issue.............................................................................................................................................6
Applicable law.............................................................................................................................6
Application of law........................................................................................................................7
Conclusion...................................................................................................................................8
Reference List..................................................................................................................................9

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Solution 1
Issue
i. Whether Tina is legally bound to buy the business?
ii. What is the status if the Head contains a ‘ subject to’ term?
Applicable Law
In an offer, an offeror conveys his intention to undertake any act/omission with the hope of
approval (Carlill v Carbolic Smoke Ball Company [1892]. An acceptance is the confirmation to
the offer terms (Gilbert J McCaul(AustPty Ltyv Pitt Club Ltd (1957). Any variations results in
invalidation of acceptance. (Carter, 2013)
At times, the contract terms contains a condition which requires establishing a formal contract
which is subject to the approval of their solicitors. Such a contract is a conditional and its
validation depends upon parties intention.
In Masters v Cameron (1954) any ‘subject to’ contract is enforceable provided (Bailey, 2014)
i. When the terms are agreed and only a formal contract is required;
ii. Oral terms exists and wish to text them at a later stage;
iii. An agreement is made which is later conveyed into a more formal contract
(HelmosEnterprises Pty Ltd v JaylorPty Ltd (2005).
But, when the parties wish to re-negotiate then the agreement is not enforceable.
As per Geebung Investments Pty Ltd v VorgaGroup Investments (No 8) Pty Ltd (1995) if there is
a concluded bargain then there is valid contract.
Application of law
i) Jeff wish to sell the business to Tina. An agreement is prepared. One of the terms is
that the agreement is subject to the preparation of a formal contract which is
acceptable by the solicitors. A formal contract is prepared by Jeff solicitor but Tina
refuses.
Now, both Jeff and Tina have entered into terms which are concluded bargain. They are just
seeking the approvals of the solicitor without affecting the sanctity of the heads and compliance
of solicitor approval will not hamper the sanctity of the contract.

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ii) If the Head contains the term ‘This agreement is subject to Tina obtaining suitable
finance”, then, the intention of Tina is contingent upon seeking finance and thus there
is no concluded bargain with Jeff. So, then the agreement is not binding.
Conclusion
A valid contract exists amid the parties and Tina has to comply with the terms. If Tina has to
seek finance in such case, there is no binding contract amid the parties.
Solution 2
Issue
i. Whether Phil be held personally liable for the unpaid debt?
ii. Could Robert be held personally liable for the unpaid debt?
iii. Will the ‘business judgment rule’ be relevant to either Phil or Robert?
Applicable law
As per section 198C, the managing director is obligated to comply with the duties delegated to
him (Deputy Federal Commissioner of Taxation v Austin (1998). Duties includes: (Lucy, 2006)
i. Section 181- The director must act in good faith with proper purpose and in the best
interest of the company (Kuwait Asia Bank EC v National Mutual Nominees Ltd
[1991].
ii. Section 180 – The acts must be carried with all skill and due and diligence (ASIC v
Rich & Ors (2003).
As per business judgment rule (section 180 (2), if the director can prove that he was
acting in good faith, with expert opinion, sound judgment, in the company’s best
interest, then there is no breach (Talbot v NRMA Ltd (2001).
iii. Section 182 and section 183 - A director must not misuse his position and information
for his own benefit at the cost of the company’s interest (Sitmar Transit Mixes Pty Ltd
v Baryczka (1998).
iv. Section 588G - When any director raises any debt when the company is in financial
difficulties or results in the insolvency, then, the director has indulged in insolvent
trading (Woodgate v Davis (2002).