Law for Business Managers: Contract Law and Companies Act 2006
Verified
Added on 2023/06/10
|12
|3711
|294
AI Summary
This report discusses the contract law and companies act 2006, and how they relate to protecting the rights of parties and resolving disputes. It covers topics such as the validity of contracts, the principle of separate legal entity, and derivative actions.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Law for Business Managers
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
Table of Contents INTRODUCTION...........................................................................................................................3 MAIN BODY...................................................................................................................................3 PART-1............................................................................................................................................3 PART-2............................................................................................................................................5 PART-3............................................................................................................................................7 CONCLUSION..............................................................................................................................10 REFERENCES................................................................................................................................1
INTRODUCTION The term law refers to various rules and principles and it is and instruments that regulates the human behaviour. It is based on general principles of justice enacted by the government bodies in order to regulate the human activities. The English law is defined as the common law of England and Wales which is classified into civil law and criminal law and every branch has its set of rules, regulation and procedure in order to provide justice to the victim and punish the person committed the crime(Babanina, 2018). The laws related to the business law mainly deals in protecting the rights of the parties and resolving the disputes between the parties. Various laws have been enacted by the government which mainly deal in protecting rights and provide justice by way of compensation to the affected party(Sandberg,2018). The present report is based on the case studies related to the contract law and companies act 2006 which specifies the rights of the parties to sue the other party and shareholder litigation rights which the helps of case study. MAIN BODY PART-1 A contract law can be defined as the set of promises for the breach of nay of the terms and conditionsand also provide the remedy. Contract is the legal obligation that binds the parties into the terms and condition of the agreement. The contract is legally enforceable by the court of law. Issue of the case:Beauty and Health Ltd is a manufacture of vitamin pillsand it is one of the popular products of the company which aimed at boosting the hair growth. Karen one of the customer bought the product but did not see any effects on the growth of the hair as it was said by the company in one of its commercial ads(Medway,Roper, and Gillooly,2018). The issue is whether Karen can sue the company for the breach of contract of not complying with the terms and conditions of the contract and is the company liable to pay the damages to the party(Karen). Rule: According to the contract act, it is the agreement that takes place between the parties to the contract i.e. one party makes the offer and the other party gives their acceptance. The offer and acceptance should be communicated to both the parties to the contract(Poole, and et.al., 2021). In order to make a valid contract , all the terms andconditions should be complied with such as
there should be two parties , offer by one party and acceptance by the other and there should proper and complete communication from both the sides of the parties entering into the contract. If there is no offer it dies not constitute a valid contract . On the other hand, there is difference between offer and invitation to offer and this does not imply that the parties have entered into the contract. It essential of the contract should be mentioned in order to constitute a valid contract and claim forcompensation(Klee,2018). Apart from this the contract also imposes certain liabilities on the parties when they do not perform their part of promise which is known as breach of contract. This situation occurs when the party has entered into the contract and one party perform its part of promise and the pother fails to perform its part then it is said that the party has breached the terms of the contract. In this circumstances the affected party can take legal action against the the party who has failed to perform their part and and after considering theevidencesthecourtcangivetheirjudgmentandthefailingpartyisliabletopay compensation for the damages suffered by the party who has performed their part of promise. According to the present case study, it has been observed that no terms and conditions of a valid contract is present in the given case study. The product of the company was just an invitation to offer rather than the offer(FBA, and et.al., 2020). In order to enter into the contract , there should be proper agreement between the parties which specifies the terms and condition which is not present in the given case study. There was no contract that was taken place between the company and Karen as there was no offer by the company and neither Karen gave the acceptance. On the other hand no communication of offer and acceptance was taken place between the parties. According to the law if there there is no offer and acceptance clause it does not constitute a contract. So in the given case study Karen has no right to sue the company for the breach of contract as there was no such contract that took place between the parties and no provisions of the contract law will be applied. Karen can neither sue nor claim damages from the companyand in order to file the suit against the company , the party is required to shoe the proper cause and evidence that the parties have entered into the contract and merely invitation to offer is not considered as to enter into the contract. The terms of the contract act states that in order to enter into the contract there should be proper communication of offer and acceptance between the parties which results into formation of the contract. in the absence of offer and acceptance will not constitute a valid contract(Allam, 2018). Therefore Karen cannot sue the company for the breach of contract as no contract existed
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
among the parties. Furthermore if Karen file a suit against the company and the party proved wrong as there was no contract with the company then in that case the company can reach to the court and claim compensation for damaging the reputation of the company from the party who bought the suit in the court for the breach of contract. From the above case study it can be said that the terms of contract is binding on the parties if they fulfil all the valid essential of the contract and in the absence of the essential elements will not constitute any contract between the parties. The provisions of the breach of contract is applicable in case the parties have entered into the contract but in the present case study , there was no such contract took place between the parties so Karen is not liable to sue the company for the breach of contract as there was no contract entered between the parties and no provisions of the contract law was applied. PART-2 According to the company act 2006, company is defined as the business organisation that is formed by group of person in order to achieve and undertake the activities in the interest and for achieving goals and objectives of the company. The company consist of various features i.e. it is voluntary association, it is considered as artificial person created by law , company is not a citizen , separate legal entity and also it has limited liability. The present report lays emphasis on the core area that is a company is considered as the separate legal entity distinct from its shareholders but in what circumstances court can go beyond and take decisions(Banoo,2018). According to the companies act, company has a legal entityand it is independent from its members of the company. The creditors of the company can only recover from the property of the company and the creditors is not liable to sue any other members of the company. On the other hand the members cannot claim any ownership right from the assets of the company(Tjio, and Tung,2018). Apart from this the members of the company can enter into the contract with the company. It can be said that company is separate legal entity distinct from its shareholder. The principle was discussed in the case of Salmon v. Salmon and Co. Ltd and this case clearly established the rule and states that when the company is incorporated it becomes a legal person and has its own separate legal entity. In this case Salmon incorporated the company and consisted of shareholders who was his wife, daughter and four sons. Salmon was the director with his sons who was also the directors in the same company. The company suffered from difficultiesand the debenture holders appointed the receiver and the company went into
liquidation. It was also observed that Salmon was the principle beneficiary and is liable to pay the debts of the company(Gelter, 2019). This case was the landmark case which led to corporate veiland stated that shareholders cannot be personally held liable for the debts of the company. The corporate veil that is well-advised and isone of the exception of the principle of separate legal entitystated from the judgement of Salmoncase study which separates the rights and duties of the company with their directors , shareholders and members of the company. As per the principle of corporate veil is applied in those circumstances by the court in which the illegal act is conducted by the directors and shareholders and in that case the companies assets will not used to pay for the loss suffered but on the other hand directors are held liable to pay the damages and legal action can be taken against those person(Gerner-Beuerle, and Schillig, 2019). Furthermore, many time it happens that membersand directors use the corporate personality in order to commit the fraud and improper acts. Since the company is artificial person and cannot conduct fraud and illegal acts on its own then it can be state that the directors and shareholder can be held responsible for these acts that has resulted the company into debts. The court can use the corporate veil in to situation that are statutory and judicial provisions. The statutory provisions includes the default if the officer, reduction of membership , improper use of the name of the company, fraudulent conduct of the member of the company and judicial grounds includes fraud or improper conduct in which any fraudulent act committed by the members of the company i.e. directors. This can be proved with the help of the case law of VTB Capital v. Nutritekthat wasconnected with the fraudulent misrepresentation of the loan agreement . Proper investigation was carrier our and considering the relevant facts and evidences the court stated thatVTB failed to prove its part that England was the appropriate forum for the related matter. In this case the court pierced the corporate veil and directors of the company was held liable in the involvement in the fraudulent matter. The other example in which the court pierced the principle of corporate veil that isJones v. Lipman, (1962)I. W.L.R. 832 it is a UK company law case in which the corporate veil was pierced when the company is used as mere facade concealing the true facts that indicated that is formed to avoid the pre- existing obligations. From the above observation it can be concluded that according to the companies act 2006 , company is artificial person and have separate legal entity distinct form its members and the company will be liable for the debts of the company but in various judgments(Witting,2019) .
The court held that in various and severe circumstance and after proper inquiry if the court found that due to various grounds such as fraudulent act of the directors or shareholders or any other member of the company, the principle of lifting up of corporate veil will be applied and the directors and shareholders due to which the company suffered loss or damage then they will be held liable for the fraudulent act conducted by the directors. PART-3 The difference between the case law ofFoss v Harbottleand the statutory derivative action introduced by the Companies Act 2006 can be explained by considering the facts of the case. Foss v. Harbottle is one of the leading cases of company law. The facts of the case were that there where two minority shareholder of the Victoria Park Company that was incorporated for the purpose of laying out and maintaining the ornamental park. The shareholders claim that the property was wasted inappropriate mannerand the mortgagees were also given in improper way. By considering this both the minority shareholder decided to take legal action against the directors and other members of the company. The shareholders claimed that firstly, fraudulent transactions are being done by the directors of the company and the property of the company is used inappropriately. Secondly, the directors of the company are nor well qualified to operate the companyand thirdly, it dos not have clerk or office(Hamadziripi, and Osode, 2021). According to the judgement of the court, it was observed that an individual shareholder or any outsider of the company has no right to take any legal action against the person who have committed wrong doers as according to the companies act 2006 both the company as well as shareholders are considered as separate legal entity and it is also said that the company may sue or can be sued by its own name. The reason behind that shareholders cannot take any legal action as the damage has been caused to the company and not the members and it is on the discretion of the company and its owners to take legal action against the directors or any members who have committed the illegal activity and fraudulent actions against the company. While taking into consideration the precedent cases the minorities have no right to take any legal action againstand also stated that courts will not interfere in those matters of the company where the majority of the shareholders can handle these cases without going to the court. The former provisions mentioned under the companies act 2006 stated that shareholders can bring derivative actions only in severe circumstances as according to the provisions company
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
is the only claimant and can take legal actions against the person who has committed illegal act against the company(Greco, 2018).Derivative action is claim which are commitment against the company. In that action company have right to peruse and refuse the claim against the minorities shareholders. A derivative action is that claim which is brought by the shareholders agianst the directors third party.It is described in the complaint on the director of the company form other minorities shareholders and other members outside from the companies. This claim regime under the section 11 of the United Companies Act 2006 which helps in identify the problematic areas as well as providing the suggestion reforms. This article objective is not only to identify the current provisions but also analysis the omission which comes under the section 11. this article is focus on the issues which are merit great attention as well as there are several objectives which are reform in the article to remove the complexity and balance the derivative claim. In further illustration, this article also aims to ensure that all the legal framework on derivative claims regarding the risk of companies are addressed the claims. It can be commenced under the common law by the minorities shareholders and other members. The shareholders case prima facie on the company and the case relief in the expectation to the rule which is Foss V. Harbottle. According to the law , the company is the only claimant and court will not interfere in the internal management of the company(Zouridakis,2019). If the majority of the shareholders of the company in the meeting agrees not to bring claim than it is on the discretion of the company and its members to bring claim against the company or not Whereas according to the new statutory provisions states that more wide and complex provisions regarding the situations related to derivative claimthat can be bought by the shareholders. The provisions states that in severe cases such as negligence, fraudulent conduct , breach of duty and trust by the directors or any other member of the company registered under Companies Act 2006. In this case if the directors commits any illegal act which affects the company , then they are liable for that particular act. The court after considering various circumstances and in the interest of the company laid down certain exceptions where litigation by the shareholders are allowed i.e. where the act committed is illegal and ultra vires to provisions of the act then in that case litigation is allowed and shareholders can take legal action against the directors or other members. The other circumstances where the alleged act could have been done in legal manner but there has been violation of the articles of the company and the third circumstances where the act committed has resulted into invasion of the claimant personal and individual rightsas a
member of the company and having interest in the company. The last one is the where the company is controlled by the majority of the shareholders and fraudulent act has been committed against the minority shareholder than in that case this gives the right to the minority shareholders to bring claim against the shareholders who have committee the act that also caused loss to the company.
CONCLUSION From the above report it can concluded that laws are considered important to regulate the human behaviour. It is also observed that every country has its own laws and regulations and it is the responsibility of the citizen and organisation to comply with those acts. The report has summarized the validity of the contract law and states that in order to enter into valid contract it is necessary to have valid offer by the party and acceptance by the other. According to the case study Karen has no right to file suit against the company for the breach of contract as no contract was entered between the parties. The report also reflects on the situations where the principle of corporate veil can be applied by the court where director can be held liable for their acts which affected the company. The case study ofFoss v Harbottleisalso discussed where there is change in the derivative actions under the company act 2006 has been amended and gives right to the minority shareholders to take legal action against the directors of the company.
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
REFERENCES Books and journals Allam, Z., 2018. On smart contracts and organisational performance: A review of smart contractsthroughtheblockchaintechnology.ReviewofEconomicandBusiness Studies.11(2). pp.137-156. Babanina, V., 2018. Definition of the Criminal Legislation and its Correlation with Criminal Law.Науковий вісник Національної академії внутрішніх справ.(4). pp.133-145. Banoo, S., 2018. Lifting of the Corporate Veil: Decoding the Doctrine of Separate Legal Personality.Available at SSRN 3609245. FBA, and et.al., 2020.Anson's law of contract. Oxford University Press. Gelter, M., 2019. Centros and defensive regulatory competition: some thoughts and a glimpse at the data.European Business Organization Law Review.20(3). pp.467-492. Gerner-Beuerle, C. and Schillig, M.A., 2019.Comparative company law. Oxford University Press. Greco, E., 2018. Shareholders' remedies: the derivative action in the UK, the USA and Italy. Hamadziripi, F. and Osode, P.C., 2021. The Leave of Court Requirement for Instituting Derivative Actions in the UK: A Ten-Year Jurisprudential Excursion.Potchefstroom Electronic Law Journal (PELJ).24(1). pp.1-25. Klee, L., 2018.International construction contract law. John Wiley & Sons. Medway, D., Roper, S. and Gillooly, L., 2018. Contract cheating in UK higher education: A covert investigation of essay mills.British Educational Research Journal.44(3). pp.393- 418. Poole,andet.al.,2021.Contractlawconcentrate:lawrevisionandstudyguide.Oxford University Press. Sandberg, R., 2018. Clarifying the definition of religion under English law: the need for a universal definition.Ecclesiastical Law Journal.20(2). pp.132-157. Tjio, H. and Tung, C., 2018. Reverse veil-piercing in Singapore and its consequences.SacLJ.30. p.1133. 1
Witting, C.A., 2019. The basis of shareholder liability for corporate wrongs. InEnforcing Shareholders’ Duties. Edward Elgar Publishing. Zouridakis, G., 2019.Shareholder Protection Reconsidered: Derivative Action in the UK, Germany and Greece. Routledge. Online references Foss v Harbottle., 2020. [Online]. Available through <https://lawlex.org/lex-bulletin/case- summary-foss-vs-harbottle-1843/24620 > 2