Business and Corporate Law Questions and Answers 2022

Running head: BUSINESS AND CORPORATE LAW
Business and Corporate Law
Name of the Student
Name of the University
Author Note

BUSINESS AND CORPORATE LAW1
Answer 1
Part A
Legal issue
Whether Tina is legally bound to buy the Business as a result of signing the Heads of
Agreement.
Rule
As held in the case of L'Estrange v F Graucob Ltd [1934] 2 KB 394, a contract can be
made legally enforceable if the same has been incorporated by formal documents signed by
the parties. It has been held in the case of Masters v Cameron (1954) 91 CLR 353 that such
formal documents can be of 3 kinds. The first one is an agreement between the parties which
has reached the concluding speech related to discussions and has agreed to execute the
contract bye enumerating all the terms in written form. The second form requires the parties
to have concluded the contract but kept certain conditions to be settled upon the formal
execution of the documents. The last one requires the parties to have agreed to form a
contract and search of formation solely depends upon the accomplishment of a formal
document which is signed. The first two forms evidences of valid contract but the last one
requires the contract to be formally enumerated for the purpose of gaining validity. It can be
stated from the principles of the case of Rose & Frank Co. v JR Crompton & Bros Ltd.
[1923] 2 K.B. 261 that a valid contract is required to be performed and is legally enforceable
upon the parties involved.
Application
In the given scenario, there has been negotiations between Jeff and Tina for the selling of
the business to Tina belonging to Jeff. The negotiations has resulted in the signing of head of

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agreement between Jeff and Tina. In that documents all the details relating to the terms of the
contract has been laid down. However, it has been provided in the heads of agreement that
the contract needs to be prepared effecting the sale in written form. However, certain
conditions contained in the contract that will be affected would depend upon the
accomplishment of formal documents. This comes under the second category of documents
affecting the contract as held in the case of Masters v Cameron (1954) 91 CLR 353. Hence,
this implies a contract being validly incorporated. The reputation by Tina in executing the
contract further needs to be treated as a breach of contract and Tina would be liable to
execute the same.
Conclusion
Tina is legally bound to buy the Business as a result of signing the Heads of Agreement.
Part B
Issue
Whether Tina is legally bound to buy the Business as a result of signing the Heads of Agreement
if she had included in the Heads of Agreement a term stating: “This agreement is subject to Tina
obtaining suitable finance”.
Rule
It has been held in the case of Masters v Cameron (1954) 91 CLR 353 that such formal
documents can be of 3 kinds. The first one is an agreement between the parties which has
reached the concluding speech related to discussions and has decided to execute the contract
by enumerating all the terms in written form. The second form requires the parties to have
concluded the contract but kept certain conditions to be settled upon the formal execution of
the documents. The last one requires the parties to have agreed to form a contract and such of
formation solely depends upon the accomplishment of a formal document which is signed.

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The first two forms evidences of valid contract but the last one requires the contract to be
formally enumerated for the purpose of gaining validity.
Application
In present situation, in case Tina has inserted a clause that needs the agreement to be
effected as a contract on Tina being capable of obtaining suitable finance will render the
agreement to come under the third category in which the formation of a contract is depending
upon the fulfilment of certain condition that is the meaning of the loan by Tina.
Conclusion
Tina is legally bound to buy the Business as a result of signing the Heads of Agreement on
availing the finance.
Question 2
Issue (a)
Whether Phil, the managing director belonging to LightsBright Pty Ltd, would be held
personally liable for the unpaid debt.
Rule
A director of a company needs to inflict due care as well as diligence through his actions
being a director as has been provided u/s 180(1) of the Corporations Act 2001 (Cth) (CA).
The directors pertaining to a company are required to different from serving their personal
benefits from the position day has been holding as a director u/s 182 of the CA.
Application
In the present case, being aware of the financial difficulties that CheepCheep has been
facing as well as the bad credit risk for which the company has been known for, Phil being