Business Law Question Answers 2022

Running head: BUSINESS LAW 1
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BUSINESS LAW 2
Question 1
Part A
As Tina’s solicitor, give your conclusion as to whether Tina is legally bound to buy the
business using the IRAC method from Jeff
Issue (I)
The issue in this agreement is whether Tina is legally bound by any contract to buy the
business from Jeff due to her signing the Heads of Agreement between her and Jeff.
Rule (R)
Heads of Agreement is legally not binding in any contract. However, the general intention of
this document is that it is not binding in relation to some key terms of the agreement
proposed between the two parties that is Jeff and Tina (Landau, 2018).. In most cases, the
Heads of agreement is binding in relations to certain matters such as due diligence,
confidentiality, intellectual property and exclusivity. It is not the intention of the two parties
in the agreement to create a legally binding Heads of agreement terms. The terms are simply
skeletons of the ensuing negotiations to the contract and legally binding documents will
follow after the heads of agreements is signed. However, although heads of agreement are not
legally binding in some circumstances, they are enforceable by the law.
Application (A)
The heads of agreement are applied in the sale of goods and services where two parties are
involved in negotiations prior to the sale of the items. The application in this case is with the
negotiation of a business which is owned by Jeff and wants to be bought by Tina. In this case,
Tina has signed the heads of agreement but later negates to the business for lack of funding.

BUSINESS LAW 3
Jeff wants to sue Tina but the Heads of agreement is not legally binding document although
sometimes it is enforceable by the law.
Conclusion (C)
The conclusion of the case is that, Jeff cannot sue Tina for refusing to buy the business. This
is because, the Heads of agreement is not a legally binding document.
Part B
What would be the conclusion if Tina had included in the Heads of agreement that this
terms are subject to Tina obtaining requisite funding.
The general intention of heads of agreement is that it is not binding in relation to some key
terms of the agreement proposed between the two parties that is Jeff and Tina. In most cases,
the Heads of agreement is binding in relations to certain matters such as due diligence,
confidentiality, intellectual property and exclusivity (McDonald, 2019).. If Tina had included
the subject that the terms are subject to her finding requisite funding, then Tina is liable and
can be sued for failure to comply with the contractual terms of sale agreement.
Question 2
a) Will Phil, the managing director of Light bright Limited be held liable for the
unpaid debt by Cheep Cheep and if so why?
Issue(I)
The issue is based on the business judgment rule which is presumes that in decision making,
the managers or the directors of a company acted or should act on an informed basis, in
honest belief and in good faith that action that is taken are in the best interest of the company