Commercial Trust Law

Commercial Trust Law

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1. Explain the mechanics of creating express trust including rights of beneficiaries..............1
1.2. Distinguish different types of trust with analysis of nature of respective rights and
obligations of the parties to the trust...........................................................................................3
TASK 2............................................................................................................................................4
2.1. Explain the particular context of commercial transaction into contract with trusts law and
equity...........................................................................................................................................4
2.2. Demonstrate the interactions between contract law and trusts law and explain how trusts
are not bound up with contract....................................................................................................5
2.3. Critically analyse how trustees limit their liabilities including a provision in their contract
of appointment and exclude liability for a range of defaults......................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Trust is defined as a structure where business operations are carried out by trustees on
behalf of members of the trust. Trust do not enjoy advantages of being termed as a separate legal
entity. Establishment and dissolution of trust is effected through trustees. In a trust an individual
or a company both can enjoy status of trustee (Clarke and et. al., 2017). Trustee is legally liable
for debts of the trust and assets of trust are used to meet those debts. Trust hold properties and
performs operations for others so that benefits can be generated. Commercial trust is a legal
business through a legal contract in which properties are transferred to trustees. Laws and
regulations are applied on trust and trust law works to facilitate the principle that more then one
individual can enjoy right on same property. Property in the trust is supplied by third person and
in legal terms that person is termed as Settlor.
In this project report mechanics of creating express trust including rights and
beneficiaries is defined. Different types of trust with rights and responsibilities of the parties to
the trust is mentioned. Application of trust law and equity is mentioned in commercial
transaction. Relationship between contract law and trust law and process to limit trustees liability
is critically defined in the project report.
TASK 1
1.1. Explain the mechanics of creating express trust including rights of beneficiaries
Trusts which are created in express terms and usually in written form are termed as
express trusts. Express trusts are created for a particular purpose and formation of these type of
trust can not be imposed by a court (Luhmann, 2018). It is a direct trust and termed as a legal
arrangement in which different trustee controls finances or property for other individuals.
Express trusts are free and defined by the creator of the trust. These type of trust are governed on
the basis of three elements:
 Subject matter
 Intention
 The object
Formation of express trust is influenced through an intention for establishing an idea
prevailing in the settlor mind. In an express trust creator of the trust transfers property to trustee
who holds it for the benefit of third person to whom the property actually belongs. Formation of
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express trust is supported with legal documents so that requirements for establishing a valid trust
can be fulfilled. Express trust is created for various purposes such as charitable gifts and family
settlements. Formation process of express trust is mentioned as below:
Formation of express trust is initiated by Settlor when they possess a valid reason for
transferring property to a trustee. Distribution of property will take to beneficiary when all the
terms of the trust are meet in appropriate manner. Three requirements for formation of express
trust needs to be meet (Ausness, 2018).
 The three certainties must be present for an express trust to be valid. This requirement
was stated in Knight v Knight (1840) case by Lord Langdale MR. Their must be certainty
of intention i.e. intention must be available to create a trust. Certainties of subject mater
i.e. property which will form part of the trust funds must be identifiable and clear.
Certainty of objects i.e. beneficiaries of the property to whom trust will serve must be
present so that duty of trust can be fulfilled.
 Formation of trust must be followed with applicable legal formalities when related to
property or when beneficial interest in the property is served.
 Constitution of trust must be made properly so that property is duly vested in the intended
trustee.
After fulfilling all the requirements and making a trust deed registration can be made as a
express trust.
Their are certain rights available with beneficiary of a trust and some of them are as
follows-
 Copy of each document can be demanded by beneficiary for getting updated with the
current status of operations. This right enable beneficiaries to track the proceedings in the
entity (Lamprecht, 2019).
 There is a right to obtained information from the books of account maintained by the
trust. It is a contingent right which means that only when the extreme needs arise, this
right can be exercised. They possess all rights to access different documents of trust such
as trust deed, tax statements and balance sheet.
 Beneficiaries are entitled to receive income or or right in the assets specified in the trust
deed. If the assets are managed by the trustees, the rights to receive the benefits becomes
a vested right. Vested right to the trust income or capital until the trustee have exercised
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