Foundations of Company and Commercial Law: Case Studies

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FOUNDATIONS OF COMPANY AND COMMERCIAL LAW
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Table of Contents
Introduction.................................................................................................................................................3
Scenario: 1 Business Venture......................................................................................................................4
Scenario: 2 Laptop Disaster.........................................................................................................................5
Task: 3 Statutory Guarantees......................................................................................................................7
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9
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Introduction
Australian contract law is based on the English Common Law. The contract law provides the
freedom to the party’s to form the contract freely at their own conditions or terms. When an
agreement is legally formed by the mutual consent of the party’s after acceptance of some offer
is known as Contract. The contract must be formed with an intention to create legal relationship
between the party’s. While forming a contract it should be kept in mind that the contract so
formed is not for any illegal purpose and also the party’s must be competent to form a contract.
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Scenario: 1 Business Venture
Tom and Jerry were two brothers who planned to jointly form a company. Later they entered into
a contract and formed TJ & Partners, Melbourne. They had some disputes and Jerry wanted to
leave the company and asked Tom to purchase his part of 50% shares and pay him the
consideration of the shares. Tom needs to take advice in this regard from his lawyer.
The contract is a promise which legally bound the party’s to fulfill the terms of the contract. A
contract can be oral or written. The Contract to be valid must contain these:
 Offer;
 Acceptance;
 Mutual Consent;
 Legal purpose;
 Competency; etc.
The contract once entered cannot be put to an without the completion of the task for which that
contract is formed, but this can be done if both the Tom and Jerry give their consent on
termination of the contract. If one of the party to the contract shows his disinterest in relation to
the work the by the consent from the other the contract can be terminated. The terms of the
termination, if any in the initial then that must be followed otherwise a new contract must be
formed in this regard (Ellis, 2019).
Jerry cannot refuse to fulfill the terms of contract as with mutual consent he has signed the
contract. Tom is not liable to pay any consideration to Jerry and he can sue Jerry for the breach
of contract.
Case reference:
Cutter v Powell [1795]
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Scenario: 2 Laptop Disaster
Tom and Jerry entered a contract with StarShipping for the delivery of their laptops order. Due to
the negligence of the driver of StarShipping all the laptops got destroyed. Now Tom and Jerry
wants to sue the StarShipping for the loss caused to them because of its Driver’s carelessness.
The StarShipping is safe in this situation as in the contract which was signed by Tom and Jerry,
an exclusion clause was mentioned that it will not be held responsible for any loss caused by its
employees. Now Tom and Jerry being unaware about such clause is seeking to take advice from
their lawyer.
The breach of contract happens when one of the parties to the contract does not fulfill the
promises made to the other party. Breach of contract is a civil wrong and these kinds of matters
must be dealt in the civil court of the country. The party’s while signing a contract must go
through all the terms of the contract, as carelessness in reading the terms may lead the party into
serious situations (Buscombe , 2019).
The contract entered between the StarShipping and TJ & Partners was done after accepting the
terms of the contract. If the StarShipping would have failed to fulfill the obligation of the
contract then the TJ & Partners could held them liable for the breach of the terms of the contract.
But it is seen in the above mentioned issue that the TJ & Partners have not taken enough
precautions while signing the contract neither they have taken advice in this regard from their
lawyer (Smith, 2018). Some precautions must be taken by TJ & Partners before signing the
contract:
 The party’s must take the lawyer’s advice before signing any contract, so that an
assurance must be made that all the terms of the contract are legal and does not constitute
any fault. Some legal terms are also in the contracts which are not easy to understand
without the help of the lawyer, hence lawyer’s guidance is must before signing any
contract.
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 The party’s must see that the language of the contract is understandable and no fraudulent
clauses are mentioned in the contract. There should not be any miscommunication
between the parties’s as it may lead to some serious problems to any of the party’s.
 The party’s before signing the contract must see that the terms and conditions mentioned
in the contract are achievable. Nothing should be such that is not possible to achieve
(LegalVision, 2015).
The contract entered between Tom and Jerry and StarShipping is done by their mutual consent. It
can be assumed that if the contract is signed then the party must have seen and read all the term
of the contract and have given its acceptance on those by signing the contract. Hence, in this
case it can be concluded that the StarShipping will not be held liable for the loss caused by its
driver’s negligence and Tom and Jerry were negligent while signing the contract as they did not
see the exclusion clause (Upcounsel, 2018).
Case references:
ADAMS V LAW SOCIETY OF ENGLAND & WALES & ORS [2012] EWHC 980 (QB) - 17/4/12
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Task: 3 Statutory Guarantees
According to ACCC, 2013, Statutory guarantees are laid down to protect the buyers while
purchasing the goods from the sellers and are also called Consumer Guarantees. When a
consumer buys something then he has a right to get the correct thing without any defaults. The
various precautions that are laid down by the Australian Consumer Law for the protection of
buyers are:
 The goods must be according to its description,
 The goods must be in accordance with the purpose of its use,
 The goods must be purchased for personal or household purposes.
The two statutory that are applicable on consumer goods are:
 Product must be of good quality: It means a condition that is acceptable and is free from
all kinds of faults and damages. The goods purchased by the buyer must be safe, look
acceptable and have all the features as are demanded by the buyer.
 Product must be purchased for personal use: The goods when purchased for a buyer’s
own use or for household use then the consumer guarantees exists with those goods but if
the goods are purchased for someone else or to gift someone then the consumer
guarantee may not exist as the title of the ownership of goods is changed in this
situation .
Case references:
Carpet Call v Chan (page 363)
Teheran-Europe v Belton (tractors to Iran)
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Conclusion
The consumer law protects the interest of the consumers from being exploited by the producers.
The contract which is formed between the parties’s bound them with the terms. The party’s
cannot step back before the completion of the obligations of the contract as this may cause the
breach of the contract. In case of breach of the contract the party’s can be sued or can be made
liable to cover the loss or injury suffered to the other party.
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References
Ellis, L. (2019). Breach of contract law: legal claims for breach, termination, the
consequences & the remedies. Breach of Contract Agreement.
Buscombe, I. (2019). Insolvent Trading and Fraudulent Trading in Australia: Regulation and Context. The
Journal of New Business Ideas & Trends, 17(1), 44-46
LegalVision, (2015). What to do before sign a you legal contract. [Online]. LegalVision. Available at:
https://legalvision.com.au/what-to-do-before-you-sign-a-contract/. [Accessed on 21 September 2019].
Smith, J. (2018). Contract law in Australia [Book Review]. Ethos: Official Publication of the Law Society of
the Australian Capital Territory, (248), 60.
Upcounsel, (2018). Can I Sue for Breach of Contract and Negligence?. [Online]. Upcounsel. Available at:
https://www.upcounsel.com/can-i-sue-for-breach-of-contract-and-negligence. [Accessed on 21
September 2019].
Australian Competition and Consumer Commission, (2013). Consumer Guarantees: A guide for
consumers. Consumer Guarantees
Case Laws:-
ADAMS V LAW SOCIETY OF ENGLAND & WALES & ORS [2012] EWHC 980 (QB) - 17/4/12
Cutter v Powell [1795]
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