Legal Issues in Business Law and Company Structure in Australia

This article discusses legal issues in business law, including contractual obligations and company structure in Australia. It also covers the types of companies and words/phrases that are unacceptable for registration.

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Business Law Assignment

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Part-A
Issue
There are different legal issues raised in this case. Firstly, whether the advertisement
formed a contractual liability of Ming? Whether a contractual obligation exists towards the
forty customers, who have brought the advertisement with them? Whether the contractual
relationship is formed between other ten customers based on the advertisement? Is it
possible to form a contract by posting an advertisement? If yes, then whether such
advertisement is revoked based on the sign which is put in the shop?
Rule
The contractual obligations are constructed between parties if the sign a valid contract. The
valid contract is defined based on certain elements which are necessary to be present. One
of such element is related to the offer for compliance with the contractual terms. However,
not all offers which are made to a party constitutes as valid (Fitzpatrick et al., 2017). A valid
offer must have the authority to bind the party. This concept is defined under a landmark
judgement of Harvey v Facey (1893) UKPC 1 case. To form a contractual obligation, the offer
to do or not do something must bind the offer into its terms after acceptance is received by
the offeree. While determining the elements of a valid offer, the court differentiates it from
the concept of an invitation to treat (Obioha, 2018). A request which is made regarding the
information or details of the products or services is not considered as a valid offer rather it is
defined as an invitation to treat. The parties who receive this invitation can further make an
offer to form a valid contract. Generally, the promotional offers or advertisement which are
displayed or posted by companies to boost their sales are considered as an invitation rather
than an offer.
This concept was established by the court in the landmark judgement of Partridge v
Crittenden (1968) 2 All ER 425 case. However, this is not an absolute rule when it comes to
determining whether an offer is made or not. The concept of the unilateral offer is an
exception to this rule. The court further explained this concept in Carlill v Carbolic Smoke
Ball Co (1893) 1 QB 256 case. This is a leading case in which the court defined how an advert
can be considered as an offer. A product was developed by Carbolic Smoke Ball Co which

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was promoted by the company in a newspaper. The company guaranteed in the advert that
this product will fix the issue of influenza and not body will suffer from it again after using
the product while complying with given instructions (Stuff, 2013). The corporation was
persistent regarding its product; therefore, £1000 was deposited by it in a bank. This
amount was deposited to in a bank account, and a promise was made to give a sum of £100
to anyone who suffered from influenza even after this product is used as per instruction.
Mrs Carlill did the same but caught influenza nevertheless based on which she claimed
£100.
However, the company rejected the claim after which a lawsuit was instituted against the
corporation. In the defence, the company provided that the advert was a mere sales puff
and it is not possible for a party to make an offer to the entire world. The consideration was
not available, and acceptance was not communicated. It was held that a unilateral offer was
made in the advert which can be made to entire world. The company was sincere since it
deposited the money due to which it cannot be considered a mere sales puff. The
acceptance is not necessary to be communicated as long as parties are complying with the
instructions given in the advert (Bender and Do, 2014). Thus, contractual obligations
imposed by the court on the company based on which the claim of Mrs Carlill is accepted.
Moreover, if a unilateral offer is made, then the party cannot simply terminate it whenever
it decides. It can only be terminated if the performance for the offer is not begun by the
parties to whom such offer is made. Moreover, it can also be terminated if the performance
which is started is not completed within a reasonable time (Fitzpatrick et al., 2017).
Application
The provisions discussed above are applicable in this case. A promotional offer is posted by
Ming for his shop. The offer provides that customers will get a chance to get a haircut of $60
for just $10. This chance is available to them if they bring the copy of the advert with them.
This advert was a unilateral offer as discussed in the case of Carlill v Carbolic Smoke Ball Co.
The parties which comply with its instructions give their acceptance to the offer. Thus, Ming
has contractual obligation towards forty customers since they have given their acceptance.
However, no contractual obligation is present in the case of other ten customers since they
have failed to give a valid acceptance by complying with terms. Since contractual obligations
are formed, liability is imposed on Ming under which the contract can be enforced by the

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forty customers. They can bind him to give a haircut for $10 which is not the case with other
ten customers. The sign is not enough to terminate the offer. Since it is a unilateral offer,
Ming cannot terminate it by putting the sign. It can only be terminated if the performance is
not started or completed with reasonable time.
Conclusion
The forty customers can legally enforce Ming to get their $10 haircut. Other ten customers
have no legal authority to do the same. The offer is not terminated by the sign which is put
on the shop by Ming.

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Part-B
Type of companies
 Proprietary companies
These corporations are also called private companies. They have a limit on the number of
members which is fifty maximum. They cannot issue shares in the public for generating
capital (eCompanies, 2017).
 Public companies
There is a not restriction on them regarding the number of members. They can issue their
shares to raise capital. They have to comply with strict legal compliance.
 Proprietary companies limited by share
Members of these corporations have limited liability. This liability is restricted to the value
of their share capital.
 Unlimited proprietary companies
No restrictions on the liability of members. Members’ personal assets can be used by the
court for repaying the debts of the enterprise.
 Public companies limited by share
The liability of members is limited. The liability of members did not rise above the value of
their share which they hold.
 Unlimited public companies
No restrictions on members’ liabilities. Members’ personal assets can be utilised for
repayment of debts.
Most suited company as given requirements
In the given case, the most suited company is proprietary company. The members should
register it with the ASIC. It is suited above others because the legal framework of this

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company is flexible. Since all the members are from the same family, they have the option
to make unanimous changes to its constitution (Fitzpatrick et al., 2017). They are clearly
defined their rights and liabilities in the constitution along with responsibilities regarding
managing the operations. This option is not available in the case of other types of company
structures. Moreover, the control of the company will be limited to the family members as
well. They can vote regarding the operations of the enterprise. They did not have to comply
with various guidelines of the ASIC which are imposed on a public company. Some examples
include preparation, maintained and lodging of accounts, the appointment of auditor, and
continuous disclosure regulations. With all these benefits, the liability of the members will
be limited as well based on which their personal assets will be protected. Thus, it is a most
suitable type of company which should be registered with the ASIC in this case.
Structure of the company
The Corporations Act 2001 (Cth) provides provisions regarding structure of companies in
Australia. Under this act, section 162 defines how structure of a company can be changed.
This act provides that a proprietary company can be changed into an unlimited public
company, public limited and unlimited proprietary company. While making this change, an
application is lodged with the ASIC. Section 163 provides that this application goes with a
copy of statement of directors, constitution, special resolution and others documents
(Austlii, 2018). The change is made after ASIC is satisfied with the application of the
company as given under section 164.
 First year
Section 45A differentiates a proprietary company into two parts which include small and
large proprietary company. ASIC has given guidelines regarding both of these categories of
the proprietary company. In order to remain in the category of a small proprietary company,
compliance with any of the two out of three conditions is required within a single financial
year. The first condition provides that the revenue which is generated should be below $25
million. The second condition provides that the value of the assets should be below $12.5
million. The third condition provides that the number of employees should be below 50
(ASIC, 2014). While counting the number of workers, both full-time and part-time

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employees are considered. In the given scenario, all of these three conditions are fulfilled.
Thus, the company is in the category of a small proprietary company in the first year.
 Fifth year
A small proprietary company can be changed and comes under the category of a large
proprietary company if certain conditions are fulfilled. If the corporation fulfilled two of
three conditions given below, then it becomes a large proprietary company. It is important
that such two conditions are fulfilled in a specific financial year. The revenue of the
enterprise is $25 million or more. The value of total assets is $12.5 million or more. The
number of total employees is 50 or higher (ASIC, 2014). In the given scenario, all these terms
are fulfilled by the company in its fifth year. Based on these guidelines, the corporation
becomes a large proprietary company in the fifth year.
Words/phrases which are unacceptable
Not all words or phrases can be registered by the ASIC as the name of a company. There are
many words which cannot be selected as the name for the company. The names which
already exist or which are similar to other corporations are not valid (Fitzpatrick et al.,
2017). Any words which show any connection to ex-servicemen or Royal family is
unacceptable as well. These words are prohibited since they can confuse the customers. The
names related to banks or banking institutes are restricted as well. Parties have to get the
prior approval of APRA or Australian Prudential Regulation Authority while registering these
names. Royal family names can also mislead people based on which they are unacceptable.
Any names which show any connection to Australia or the government are unacceptable as
well. The parties can visit the website of ASIC before selecting their name to check it
availability (ASIC, 2018). The available names are displayed under green colour. The names
which are prohibited are shown in red colour. Lastly, the names which required prior
approval of ASIC are shown in amber colour. ‘Anzac Coffee’ is shown in amber colour due to
which prior permission of ASIC is necessary before selecting this structure. This name is
unavailable since a company with the similar name already exist and it shows a connection
to the government of Australia.

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References
ASIC. (2014) Are you a large or small proprietary company. [Online] Available from:
https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-
financial-reports/are-you-a-large-or-small-proprietary-company/ [Accessed 05/10/208].
ASIC. (2018) Company name availability. [Online] Available from: https://asic.gov.au/for-
business/registering-a-company/steps-to-register-a-company/company-name-availability/
[Accessed 05/10/208].
Austlii. (2018) Corporations Act 2001. [Online] Available from:
http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/ [Accessed 05/10/208].
Bender, M. and Do, C. (2014) How to Pass Business Law. North Ryde: CCH Australia Limited.
eCompanies. (2017) Australian companies by type. [Online] Available from:
https://www.ecompanies.com.au/company-registration/resources/different-types-of-
companies/ [Accessed 05/10/208].
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017) Business and Corporations
Law. 3rd ed. Chatswood, NSW: LexisNexis Butterworths Australia.
Obioha, O.O. (2018) Dilemma of a borrowed colonial system: Lesotho law of contract as a
fusion of Roman-Dutch principles and English law. Journal of Gender, Information and
Development in Africa (JGIDA), 7(1), pp.9-19.
Suff, M. (2013) Essential Contract Law. Abingdon: Routledge.