Contract Law: Validity of Contracts and Authority of Agents

This text discusses the validity of contracts and authority of agents in contract law. It covers pre-registration contracts, ratification of contracts, and the role of directors in representing a company. It also explains the assumptions that outsiders can make when dealing with a company's agents. The text provides relevant case laws and references for further reading.

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Contents
Solution 1....................................................................................................................................................2
Issues.......................................................................................................................................................2
Relevant Law...........................................................................................................................................2
Application..............................................................................................................................................3
Conclusion...............................................................................................................................................3
Reference List.............................................................................................................................................3
Solution 2....................................................................................................................................................5
Issues.......................................................................................................................................................5
Law..........................................................................................................................................................5
Application..............................................................................................................................................6
Conclusion...............................................................................................................................................6
Reference List.............................................................................................................................................8
Bibliography................................................................................................................................................9

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Solution 1
Issues
i. Whether Ming is having a valid contract with the 40 customers who are there when
the Notice is displayed by Ming?
ii. Whether the 10 customers who knew about the promotion but did not produce the
advertisement paper can get hair cut @ $10 by enforcing agreement?
iii. Can Ming deny the hair cut @ $10 by stating that the same is not adequate
consideration as for a haircut generally the charges are @ $60?
iv. Whether after displaying the notice at the window about revocation of offer is Ming
safeguarded?
Relevant Law
A Contract is an accord that has the force of rule an agreement is concluded between two parties
(offeror and offeree) when the proposal is sent by an offeror and the same is acknowledged by an
offeree. But an agreement is said to be a contract when there are other elements such as,
consideration, intention and capacity. (Latimer, 2016)
An offer is an intention of an offeror to enter into an agreement with an offeree. It must be simple
and clear and must be communicated to an offeree, it is then only said to be completed. An offer
can be to a precise being or generally. In the leading case of (Carlill v Carbolic Smoke Ball Co,
1893), a proposal to the general public can be made and is valid in law. An offer can be made
orally or it can also be in written mode and is analyzed in (Smith v Hughes , 1857).
Whenever an invitation is given to invite offer, then, the same is not termed as an offer, rather, it
is termed as a request. In this concept, the inviter invites offers from people and upon receipt of
an offer if he accepts the same then there is a concluded contract. In (Carlill v Carbolic Smoke
Ball Co, 1893)the concept of the public offer being accepted by acting upon it is explained.
Further, auction sale, advertisement etc are also considered as invitation to offers and are
analyzed in (Pharmaceutical Society Of Great Britain v Boots Cash Chemists (Southern) Ltd ,
1953). (Gibson & Fraser, 2014)
An Acceptance is said to occur when the offer is assented to by an offeree. An acceptance is
complete when the same is communicated to an offeree(RA Brierley Investments Ltd v
Landmark Corp Ltd , 1966).
An acceptance must be equal to an offer. If it is not same with the terms of an offer, then, a
counter offer is made and is not termed as an acceptance (Hyde v Wrench, 1840). The counter
offer cancels the initial offer so made. An acceptance must be in proper mode as stated in the
offer. If the acceptance is not in same manner then the said acceptance is not considered as an
acceptance. In case of general offers the acceptance can be made by the offeree by acting upon
the offer (Manchester Diocesan Counci, 1970).
Acceptance must be prior to expiry or revocation of an offer. Likewise, when any offer is made
by a person then such person is liable to revoke such offer provided there is no accepted (Byrne v
Van Tienhoven, 1880). But when an offer is made through an advertisement then its revocation
must also be made through advertisement to reach the public large.

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A Consideration is the value which is paid for the performance of promise under the contract. A
consideration must be sufficient even if it is not adequate, then; also it is a valid consideration
and is analyses in (Biotechnology Australia Pty Ltd v Pace , 1988).
The Intention to be in legal relation means that the parties must have legal intention to be in
contract with each other.
A Capacity of parties must be present, that is, parties must be major and of sound mind.
Application
Ming gave an advertisement in paper which stated that the person who will bring the paper will
be given the haircut @ $10.
Hence the advertisement is not an offer but invitation (Pharmaceutical Society Of Great Britain v
Boots Cash Chemists (Southern) Ltd , 1953). But, this is a unilateral offer and Ming had given an
offer by which the customer can avail the haircut @$10. If a person brings an advertisement then
he had acted upon the advertisement so there is deemed acceptance by the person (Carlill v
Carbolic Smoke Ball Co, 1893).
Now, the issue are resolved:
a) There exists a contract between the forty customers who had bought the advertisement as
they had acted upon the same and followed the mode which was described in the paper.
Hence Ming is bound to them (Carlill v Carbolic Smoke Ball Co, 1893).
b) No advertisement is bought by the ten customers who cannot be termed as an acceptance.
As the mode of acceptance was not followed by them as prescribed by Ming. Hence
Ming is not bound to them (Manchester Diocesan Counci, 1970).
c) A consideration is valid even if it is not adequate and hence on this principal Ming will
not be able to back out from his commitment that the consideration of $10 is insufficient
(Biotechnology Australia Pty Ltd v Pace , 1988).
d) In case of display notice, Ming is not safeguarded as he will have to advertise the
revocation of his advertisement and then only he can be safeguarded. As he had
advertised it to general public so he must inform general public by the same mode and
then only take back his promotion.
Conclusion
Ming is thus bound to forty customers and get away with ten customers who did not carry the
advertisement. Moreover consideration of $10 is sufficient and valid as per law and Ming cannot
back out from his commitment on this basis.
Reference List
Articles/Journals/Case laws
Gibson, A., & Fraser, D. (2014). Business Law. 8th ed. Sydney: Pearson Publications.

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Latimer, P. (2016). Australian Business Law 2016. Oxford University Press.
Case laws
Biotechnology Australia Pty Ltd v Pace (1988).
Byrne v Van Tienhoven (1880).
Carlill v Carbolic Smoke Ball Co (1893).
Hyde v Wrench (1840).
Manchester Diocesan Counci (1970).
Smith v Hughes (1857).
Pharmaceutical Society Of Great Britain v Boots Cash Chemists (Southern) Ltd (1953).
RA Brierley Investments Ltd v Landmark Corp Ltd (1966).

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Solution 2
Issues
i. Whether Irish Liner Ltd can sue Master Plate for the enforceability of contract made
by Adam on behalf of Master Plate?
ii. What assumptions are carvers Pty Ltd are entitled to make?
Law
A company is one form of business that is generally selected by any person. In (Salomon v.
Saloman & Co. Ltd. , 1897), it was held that once a company is formulated then one of the
significant features that can be attributed to such a company is that it has a separate legal
personality in the eyes of law. A company has the power to enter into contract on its own behalf.
But, there are times when the promoters of the company can make contract with outsiders before
the registration of the company and are called pre registration contracts. As per (Kener v Baxter ,
1866), such contracts have no value and are not enforceable. (Latimer, 2016)
But, as per section 131 of the Act, if the company upon its incorporation ratifies the contract then
it is enforceable and is held in (Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty
Limited , 2004).
Now, as submitted in (Salomon v. Saloman & Co. Ltd. , 1897) that a company has the capacity
to make contracts on its own behalf. However, since a company is an artificial personal, thus, it
requires its representative who must act on behalf of the company to establish contractual
relationship with the outsider and is held in section 126 of the Act. One of the most important
agents who represent a company is the director who holds his pose under section 9 of the Act. As
per section 198A of the Act, a company director is empowered to act for the company. The acts
that are carried by the directors will make the company bound and has an obligation to honor the
same ( Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd., 2014). (Austin & Ramsay,
2013)
But, when any agent of the company establishes a contract without authority then the outsider
can face hardship as the company can deny the contract on the basis that the same is outside the
range of the agent’s ability. In order to protect the position of the outsider section 127 -129 of the
Act are established.
Section 128 (4) of the Act submits that whenever any outsider is dealing with the company
agents on the pretext and good faith that they are authorized to bind the company by their acts
then such an outsider is allowed to make postulation under section 129 of the Act. As per section
129 (1), an outsider can suppose that all the in-house rules of the company are comply with. As
per section 129 (2-3) an assumption can be made the company officers are duly appointed.
As per section 127 (2) of the Act, if the documents are signed by the officers with common seal,
then, such document is valid if it is signed by two directors or a secretary and director. If Section
127 (2) is comply with then the outsider under section 128 (5) can assume that such documents
are valid.

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Application
As per the facts, Adam and Poh intend to initiate a company to operate a restaurant. The
company was to be operating as Master Plate Pty Ltd. The said company was registered on 24th
February.
Now, there are two issue that are raised and are now resolved:
i. It is submitted that the company, Master Plate Pty Ltd, was formulated on 24th
February. However, on 22nd February, that is, before the formation of the company,
Adam on behalf of Master Plate Pty Ltd (an unregistered company) establishes a
contract with Irish Linen Limited to purchase 18 gramgrammed tablecloth.
Now, the contract that was made amid Adam and Irish Linen Limited was not ratified
by Master Plate Pty Ltd upon its incorporation till 30th March.
It is submitted that the contract with Irish Linen Limited is a pre registration contract
that was made by Adam on behalf of Master Plate Pty Ltd as the contract was made
on 22nd February and Master Plate Pty Ltd was registered on 24th February. In
common law as per (Kener v Baxter , 1866) such kind of contracts has no value.
But by applying the law under section 131 of the Corporation Act 2001, it is
submitted that the contract amid Adam and Irish Linen Limited can be made binding
upon Master Plate Pty Ltd provided Master Plate Pty Ltd rectify the said contract.
However, there was no rectification that was done by Master Plate Pty Ltd after its
incorporation, that is, 24th February. The Master Plate Pty Ltd has no ratified the
contract till 30 March.
Thus, Irish Linen Limited has no right to sue Master Plate Pty Ltd for the
enforceability of the contract.
ii. It is submitted that Adam and Poh are the directors and shareholders of the company.
On 1st April, a contract is made by the company with Carvers Pty Ltd. the document
is signed by Adam and affixed with common seal. Now, Carvers Pty Ltd by relying
under section 128 (4) can submits that he is dealing with Adam in good faith that he
is authorized to bind the company by his acts and thus he can make assumption under
section 129.
But, as per section 127 (2) of the Act, if the documents are signed by the officers with
common seal, then, such document is valid if it is signed by two directors. But, the
document is signed only by Adam. Thus, Carvers Pty Ltd cannot rely on the
assumptions of section 129 of the Act.
But, As per section 129 (2-3) an assumption can be made the company officers are
duly appointed and thus as per ( Knight Frank Australia Pty Ltd v Paley Properties
Pty Ltd., 2014), Carvers Pty Ltd can assume that Adam is authorized to bind the
company by his actions.
Conclusion
It is thus concluded that there is no valid contract that is made amid Master Plate Pty Ltd and
Irish Linen Limited as the contract is not ratified by Master Plate Pty Ltd upon its incorporation.

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Also, Carvers Pty Ltd can rely on ( Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd.,
2014) can assume that Adam is authored to make a contract on behalf of the company.

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Reference List
Books/Articles/Journals
Austin, V., & Ramsay, I. (2013). Ford's Principles of Corporations Law. LexisNexis
Butterworths.
Case laws
Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Limited (2004).
Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd. (2014).
Kener v Baxter (1866).
Salomon v. Saloman & Co. Ltd. (1897).
Thornton v Shoe Lane Parking (1970).

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Bibliography
Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd. (2014).
Austin, V., & Ramsay, I. (2013). Ford's Principles of Corporations Law. LexisNexis
Butterworths.
Aztech Science Pty Ltd v Atlanta Aerospace (Woy Woy) Pty Limited (2004).
Biotechnology Australia Pty Ltd v Pace (1988).
Byrne v Van Tienhoven (1880).
Carlill v Carbolic Smoke Ball Co (1893).
Gibson, A., & Fraser, D. (2014). Business Law. 8th ed. Sydney: Pearson Publications.
Hyde v Wrench (1840).
Kener v Baxter (1866).
Latimer, P. (2016). Australian Business Law 2016. Oxford University Press.
Manchester Diocesan Counci (1970).
Pharmaceutical Society Of Great Britain v Boots Cash Chemists (Southern) Ltd (1953).
RA Brierley Investments Ltd v Landmark Corp Ltd (1966).
Salomon v. Saloman & Co. Ltd. (1897).
Smith v Hughes (1857).
Thornton v Shoe Lane Parking (1970).