Business and Corporation Law: Contracts and Director's Duties

This presentation discusses the legal position of different parties in various transactions and the duties of directors under common law and statutory law. It also covers the liability of directors for insolvent trading.

Business and Corporation Law
HI6027

Part A
Question 2
Issue
 To advice Forthryrt regarding different transactions that
have been done by him with various parties in the
given scenario?
 Further to check whether any contract is binding to
him and if yes then when such contract has been
concluded.

Rules
 Firstly, the element named offer comes in a contract. It
is a proposal to do an act or not to do the same for the
exchange of a monetary value or something else.
 Invitation to treat is another concept which is different
from offer.
 Offer can be accepted but an invitation to treat does not
(Duhaime.org, 2019).

Application
 The very first party who contacted to Forthryrt was
Boswold, the chief editor of Boswold Books.
 Forthryrt replied him with his intention to sell the book
not less than for 40 grand which was an invitation to
treat.
 In reply to the invitation to treat Boswold sent an offer
to Forthryrt where he offered to publish the novel
written by Frederick Forthryrt in consideration of
$40,000.

Application cont.
 Another party Metro Publishers made an offer to
Forthryrt to publish his book in consideration of
$50,000 but no contract has been developed with this
party since Forthryrt did not provide any consent.
 Havoc Film contacted Forthryrt and $45,000 for the
rights of his book but made a counter offer stating that
final decision for selection of offer must be of him.
Therefore, no contact has developed between the
parties.

Conclusion
 In the transaction made with Petrick All the elements of
the contract presented there such as offer, consent,
intention of the parties to create legal relationship,
consideration and capacity
 as soon as Forthryrt shook hands of the deal, a contract
was formed between Forthryrt and Pickwick.

Part B
Question 2
(a) (i)
 Issue :- To check the legal position of Mercedes with
respect to a breach of duty of care under the statute and
common law
 Rules :-Being on such a significant position, directors
have certain duties/obligations, which are given under
Common law as well as statutory law.

Part B
Question 2
(a) (ii)
 Issue :-Can the decision of Mercedes to agree with
purchase of new store be protected under Section
180(2) of CA 2001.
 Rules:- Section 180 (2) says that any director or
officer, who makes a business judgment on behalf of
the company mast make it proper purposes considering
good faith of the company.

Part B
Question 2
(a) (iii)
Issue: If Joystick becomes insolvent, then whether
Mercedes can find liable for breach of section 588G of
CA 2001.
Rules :- As per section 588G of the act, if a company
incurs a debt where the same is insolvent or is likely to
become insolvent after incurring such debt then a director
held liable for insolvent trading.

Part B
Question 2
(a) (iii) cont.
 Application:- Mercedes was a non-executive director
of the company hence had liability under section 588G.
She was somewhere aware of the poor performance of
the company. While proposing the agenda of buying
new store, Felix stated that it is expected to be a
solution to all the problems of the company.

Part B
Question 2
(b)
 Issue:- Whether Gregg breached the duty of care?
Whether the same can be held liable for insolvent
trading.
 Rules:- section 180 (1) demands every director and
officer to behave in a caring and diligent manner. .
Further section 588G held each director liable if even
after having knowledge of reason of belief of
insolvency or prospected insolvency of the company,
he/she let the company incurring new debt
(Iknow.cch.com.au, 2019).

References
 Austlii.edu.au. (2019) CORPORATIONS ACT 2001 -
SECT 180. [online] Available from:
http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2
001172/s180.html [Accessed on 25/09/2019]
 Corporations Act 2001 (Cth)
 Duhaime.org. (2019) Duhaime's Law Dictionary.
[online] Available from:
http://www.duhaime.org/LegalDictionary/I/Invitationto
Treat.aspx [Accessed on 25/09/2019]

References cont.
 Esso Petroleum v Commissioners of Customs & Excise
[1976] 1 WLR 1
 Hyde v Wrench (1840) 49 ER 132
 Iknow.cch.com.au. (2019) Insolvent trading. [online]
Available from:
https://iknow.cch.com.au/topic/tlp1758/overview/insolvent-
trading [Accessed on 25/09/2019]
 Stone, R., and Devenney, J.(2014) Text, Cases and
Materials on Contract Law. Oxon: Routledge