Corporation and Enterprise Law

This document provides study material and solved assignments for Corporation and Enterprise Law. It covers topics such as partnership law, contract law, and exclusion clauses. The document includes answers to specific questions, explanations of relevant rules and laws, and applications of these rules to real-life scenarios. It also discusses the consequences of breaching certain terms in a contract.

Corporation and Enterprise Law
12/27/2018
Student’s Name

Corporation and Enterprise Law 1
Contents
Question 1........................................................................................................................................2
Issue.............................................................................................................................................2
Rules.............................................................................................................................................2
Application...................................................................................................................................3
Conclusion...................................................................................................................................4
Question 2........................................................................................................................................4
Issue.............................................................................................................................................4
Rules.............................................................................................................................................4
Application...................................................................................................................................5
Conclusion...................................................................................................................................7
Question 3........................................................................................................................................7
Clause 4........................................................................................................................................7
Clause 19......................................................................................................................................7
Clause 26......................................................................................................................................8
References........................................................................................................................................9

Corporation and Enterprise Law 2
Question 1
Issue
The issue of the case is to check that whether Daniel is a partner in the partnership firm named
Rolling Hill Bikes and owe a liability to make the payment of invoice raised by fast bikes.
Rules
The partnership is a business structure where two or more people perform commercial activities
together in order to earn profits. One, more, or all the partners must carry business on behalf of
each other. In Australia, every state has different legislation on the subject of partnership. The
New South Wales, Partnership Act 1892 (NSW) (hereinafter referred as an act for this question),
is there to provide provisions related to partnership businesses in this state and to regulate the
same. Some basic elements are mentioned in section 1 of the act, which must exist in every
partnership firm. The same are as below:-
At least two people must be there.
There must be a contract between them
They must be agree to conduct some business activities
Purpose of the contract must be earning and sharing profits
A document decides the mutual powers and liabilities of the partners of the firm, which is known
as a partnership agreement. This is to state that a partnership agreement can be in written as well
as well in oral format. Rest of the dealings of a partnership venture is regulated by applicable
partnership Act. According to section 5(1) of Partnership Act 1892, a partner of a partnership
firm has implied authority to act on behalf of the firm and in such a manner the same acts as an

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agent of the firm (New South Wales Government, 2018). Applying the provisions of agency law,
a partnership firm is liable for the acts of partners. On the other side, partners are also liable for
the acts of a firm as not similar to a corporation; a partnership firm does not have a separate legal
entity. According to the case of Birtchnell v Equity Trustee, Executors & Agency Co Ltd (1929)
42 CLR 384, Partners in mutual have a fiduciary relationship with each other and therefore are
liable for the acts of each other.
Section 24(5) of the act says that each partner of the firm performs managerial activities and a
third party has reason to believe that a partner who is acting on behalf of the firm has required
authority. Law in such a manner protects the interest of third parties.
Application
In the given case, two people named as Madison and Daniel were doing their separate business
as sole proprietors. Later on, as on 1st September 2018, they both have decided to work together
and started a new venture named as Rolling Hill Bikes. They have developed a contract to carry
a business activity. The purpose of the contract was to earn and share the profits out of such
activity as they have also decided the profit sharing ration. As all the essentials of a partnership
were there, this is to state, that Daniel was a partner of the firm.
Further, Madison ordered 250 tyres from a third party named Fast Bikes for the firm and left for
the south of Chile. According to the provisions of section 5(1) of the act, being a partner of the
firm she was entitled to do so. About the authorities of partners, nothing is mentioned. The issue
of the case arose when another partner of the firm i.e. Daniel received an invoice and letter from
Fast bikes in which the same has asked Daniel to make the payment of bill worth $5,000.00 in
against of sale of 250 Tyres. Applying the provisions of Section 24(5) of the act Fast Bikes had

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reason to believe that Madison is acting on behalf of the firm and therefore firm will be liable to
make the payment. Being the principal of Madison, a partnership firm is liable to make the
payment of the bill. Further, as Daniel is a partner of the firm and has a fiduciary relationship
with Madison, the same will be held liable to make the payment of bill if the firm would fail to
do so.
Conclusion
To conclude the issue involved in the case, this is to mention that yes, Daniel will be considered
as a partner of the firm. Further, in respect of the payment of the bill, first liability is of firm but
if the firm does not have enough sources to make the payment, then Daniel will be personally
liable.
Question 2
Issue
The issue of the case is to check whether Bruce is entitled to ask for the balanced money from
Rupert or not?
Rules
A contract is a set of promises under which both the parties are liable to perform the acts that
have been decided in the contracts (Collins, 2008). Further, a contract can be in oral as well as in
written form. Once a valid contract is developed all the parties are liable to act in the manner
prescribed under the various terms of that contract. However, another concept is also there which
is well known as the Doctrine of promissory estoppel”. It is a legal principle, which states that a
promise is foreseeable by law even in the absence of formal consideration. In other words, this is

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to mention that according to the principle of promissory estoppel, some promises are there which
are not a part of the contract yet, parties are bound with the same.
The doctrine provides a safeguard to a party who relies on the promise made by another party
and act accordingly. The case of Central London Property Trust Ltd v High Trees House
Ltd [1947] KB 130 is necessary to discuss here. In this case, the Central London Property Trust
Ltd. (landlord) reduced the rent amount for the tenant because of the war situation most of the
flats were vacant. As soon as the situation became normal and flats started being occupied, the
landlord asked for the difference of original rent amount and reduced one from the tenant. Justice
Denning J held the statement made by the landlord as promissory estoppel. He further stated that
the tenant relied on the promise made by the landlord in respect of a reduction in rent amount
and now the landlord asked the original rent with effect from a future date only. Even no
consideration was there, yet being promissory estoppel, the statement of landlord prevent the
same going back on the promise to accept the reduced amount as rent (Swarb.co.uk, 2018).
Therefore, it is clear that the promissory estoppel is a binding promise, according to which the
party who made the same needs to act. Some pre-requisites are there which needs to be fulfilled
for applicability of promissory estoppel. These requirements are mentioned below:-
A pre-existing legal obligation must be there which is required to be modified later on
The promise must be clear and unambiguous
Change of position
Allowing promisor to go back on the promise must be an inequitable situation for the
other party (E-lawresources.co.uk, 2018).

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Application
In the given case, Rupert was the owner of a house and was willing to have the front yard of his
house landscaped. To get the same done, he entered into a contract with a contractor named
Bruce. As per the contract developed between Rupert and Bruce, Rupert was expected to
purchase the materials required for the subjective work at his own expenditure, Bruce had to
supply the equipment, machinery, and labour which were required to perform the work. It was a
valid contract as all the essentials were there. It has been noted that Rupert made an order of raw
material more than the requirement. Later on the same stated to Bruce that he can keep the
balanced material with him.
The issue in the case has been started when Rupert found himself unable to make the payment of
total consideration i.e. $40,000. To make the payment he was required to ask for a bank loan as
fencing work was also pending. As Rupert was facing the issue in making the payment, he
requested Bruce to accept the $25,000 as full and final payment. Bruce became ready and made a
promise to take $25,000 as final payment. Later on, after 5 days, Bruce received a bottle of
champagne from the side of Rupert and came to know that Rupert won $500,000 in a game.
Now, he wants to recover the balanced money i.e. the difference of $40,000 and $25,000 from
Rupert. Applying the provisions of Central London Property Trust Ltd v High Trees House Ltd ,
Bruce will not be able to do the same as made a promise to accept the lower amount as final
payment and Rupert relied on the same. Irrespective of the later situation, it was promissory
estoppel and therefore the law does not seem to allow Bruce to go back on his promise.
Further, all the pre-requisites of valid promissory estoppel, such as the existence of a valid
contract, modification in terms and others were there, Bruce is not allowed to go back on his
promise.

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Conclusion
In conclusion, this is to be stated that Bruce is not entitled to recover $15,000 from Rupert in
respect to the landscape contract.
Question 3
In the given case study, three types of terms are there. Nature, scope, and consequences of the
breach of these terms are required to know. In the following part, all the three terms are defined
and discussed.
Clause 4
Contracts which consist time frame comes to an end when such time lapses. When according to a
clause of a contract, some acts need to be done within the prescribed time frame or given a limit,
then such clause becomes an important term of the contract and therefore need to be fulfilled
accordingly (Andrews, 2015). Non performance of any such term can lead an issue of breach of
contract.
The subjective clause i.e. clause 4 is a term of a contract and according to the same, each aspect
of payment and construction is required to be performed within the prescribed time limit. If
either the client or contractor will not perform their obligations according to the requirement of
this term, they can be held liable for the breach of contract. In other words, this can be stated that
if parties would do the work and make the payment but would not follow the construction and
payment schedule then this term will be deemed as breached and parties will, therefore, be liable.
Clause 19
Conditions are an important part of a contract, which decides the core of a contract. Breach of
any condition gives a right to another party to cancel out the contract and to demand the

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damages. As per the decision was given in the case of Poussard v Spiers and Pond [1876] 1
QBD 410, breach of any condition termed as a breach of contract (Slideshare.net, 2018). Many
times people misunderstood a condition with another term named warranty. According to the
decision of the case Bettini v Gye 1876 QBD 183, warranties are minor terms.
Clause 19 has a nature of the condition. If the contractor would fail to perform the work
according to the condition mentioned under clause 19, then the client will be able to rescind the
contract and the same can also ask for the damages.
Clause 26
An exclusion clause in a contract can be defined as a clause where one or both the parties states
the things and aspects about which they will not be responsible (Schwenzer, Hachem and Kee,
2012). Such a clause gives addition securities to the parties of the contract. For the validity of an
exclusion clause, certain factors are nee to be present there. Firstly, an exclusion clause needs to
mention at the time of preparing the contract (Hough and Kirk, 2018). Secondly, the same must
come into the knowledge of the party against which the same has been prepared. It was given in
the case of L'Estrange v Graucob [1934] 2 KB 394 that if the parties signed an exclusion clause,
then it is treated as valid irrespective of the fact that whether such parties have read the clause or
not (Gibson and Fraser, 2014). Further, as per the decision of case of Curtis v Chemical
Cleaning [1951] 1 KB 805, no misrepresentation of the term must be there in an exclusion
clause.
The presented clause 26 is an exclusion clause as the same limits the liability of a contractor in
respect of the acts of its employees, sub-contractors and actions of negligence except some of
them provided under the statute. Here in order to check the validity of this clause, this is to

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mention that the same is a valid one as all the essentials of a legal and valid exclusion clause was
presented there. The consequences of a breach of this clause are nothing as no penalties will be
there.
References
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press
Birtchnell v Equity Trustee, Executors & Agency Co Ltd (1929) 42 CLR 384
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
Collins, H. (2008) Standard Contract Terms in Europe: A Basis for and a Challenge to
European Contract Law. The Netherlands: Kluwer Law International B.V.
Curtis v Chemical Cleaning [1951] 1 KB 805
E-lawresources.co.uk. (2018) Promissory estoppel. [online] Available from: http://www.e-
lawresources.co.uk/Promissory-estoppel.php [Accessed on 28/12/2018]
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education
Australia.
Hough, T and Kirk, E.. (2018) Contract Law. Oxon: Routledge.
L'Estrange v Graucob [1934] 2 KB 394
New South Wales Government. (2018) Partnership Act 1892 No 12. [online] Available from:
https://www.legislation.nsw.gov.au/#/view/act/1892/12/historical2004-04-05/full [Accessed on
29/12/2018]

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Partnership Act 1892 (NSW)
Poussard v Spiers and Pond [1876] 1 QBD 410
Schwenzer, I., Hachem, P. and Kee, C., (2012) Global sales and contract law. New York:
Oxford University Press.
Slideshare.net. (2018) Cases on the terms of the contract. [online] Available from:
https://www.slideshare.net/ramonavansluytman/terms-of-the-contract-cases [Accessed on
28/12/2018]
Swarb.co.uk. (2018) Central London Property Trust Ltd V High Trees House Ltd: Kbd 1947.
[online] Available from: https://swarb.co.uk/central-london-property-trust-ltd-v-high-trees-
house-ltd-kbd-1947/ [Accessed on 28/12/2018]