Master Plate Pty Ltd Contractual Obligations: A Legal Report

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BUSINESS AND CORPORATE LAW
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Table of Contents
Part A Contract Law...................................................................................................................3
Issue........................................................................................................................................3
Rule........................................................................................................................................3
Applicability...........................................................................................................................3
Conclusion..............................................................................................................................5
References..................................................................................................................................6
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PART A CONTRACT LAW
Issue:
Whether the proprietary limited company under the name Master Plate Pty Ltd liable to pay
for the table cloths purchased from Irish Linen Ltd?
Rule:
Under the Australian contract law in force in the country, the contracts made under good faith
have been based on the common law. But in the interpretation done by the court in the case of
Cordon Investments Pty Ltd v. Lesdor Properties Pty Ltd [2012] NSWCA 184 at [145] held
that the parties contracting under good faith are under an obligation to cooperate in fulfilling
the terms of the contract and also comply with the honest standard of conduct. Further, it was
also held that the parties shall act in a reasonable manner having respect for the interest of
other parties (Reinhold, 2013).
In the second contract entered by the Cravers company and the directors Adam and Poh, the
company is entitled to get the payment for the cutlery ordered by the directors as the
formation of the contract is legal. Further, all the essentials of the valid contract are being
fulfilled under the Australian Contract Law and hence the contract is legally binding on both
the parties.
Applicability:
Under some doctrines, good faith is treated as an obligation to ensure the achievement of the
outcome mentioned in the contract. Whereas in other doctrines it is regarded as a point of
fairness while considering the interests of other parties. The contract between the directors of
Master Plate Pty Ltd and the Irish Linen Ltd was entered before the company was registered
under its name. Hence, it can be assumed that the contracting parties entered the contract on
the basis of acting in good faith (Reinhold, 2013).
The other contract is done between the same directors with another company Carvers Pty Ltd
for the delivery of restaurant cutlery. This contract is done after proper documentation
between the companies as the directors of the restaurant company have signed the contract.
Hence, the expectations of the Carvers company are that the directors are willing to fulfil
their part in the contract.
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In furtherance of the contract entered by the directors and the Irish Linen Ltd, the latter
delivered the tablecloths as ordered by the directors. Hence, the contract was made on the
basis of good faith and thus, the directors are under an obligation to fulfil their part of the
contract and make the payment for the order.
The Australian courts have recognised express as well as implied good faith that is if the
good faith clause is mentioned in the contract the parties are liable to act accordingly. But if
the clause is missing it shall be the discretion of the court to determine the obligations of the
parties. The court of appeal in the case of Masters Home Improvement Pty Ltd v North East
Solutions Pty Ltd [2017] VSCA 88 at [99] held that to rely solely on the express clause of
good faith shall be a risk of limiting the scope for the protection of the interest of the parties
(Brodie, 2014).
But, the court has also provided the requirement to construe the applicability of good faith in
the case of BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of
the Shire of Hastings (1977) 180 CLR 266 at [40]. The court held that it shall be a difficult
task to determine the good faith within the meaning of the contract as thus the court has laid
down the following points to interpret good faith:
 The implied term of good faith shall be reasonable and equitable.
 It shall be necessary to provide business efficiency as per the contract.
 It shall be an obvious term without description required.
 It shall be clear and certain.
 It shall not be contradictory to the express terms (Brodie, 2014).
In the given context the second contract being entered by the directors and the Cravers
company is an express contract with proper fulfilment of formalities. Hence, the Cravers
company is entitled to the payment of the cutlery it has contracted to provide. The company
has entered in a valid contract with the restaurant directors and as the directors have fixed the
seal on the contract and have also signed it. The court in the case of Australian Woollen
Mills Pty Ltd v The Commonwealth [1954] HCA 20, (1954) 92 CLR 424, High Court held
that consideration in any contract is the giving of a promise in return of a promise received.
Hence this principle is also applicable on the instant case where the contract is being entered
by the directors and the Cravers company and the company is entitled to get the payment as a
consideration in return (Marshall, 2012).
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In the instant case, the contract of the directors with the Irish Linen Ltd is entered upon
before the company is registered and thus the contract is assumed to have been entered in
good faith and thus the directors are under an obligation to make the due payment of the Irish
Company. The formation of the contract requires the essential of the contract being fulfilled
and consideration is considered as one of the essentials of the contract. The payment on the
part of the directors of the restaurant company is required to pay the consideration prescribed
in the contract.
Further, the directors are also liable to pay the consideration for the purchase made under the
contract as they have not ratified the contract during the reasonable course of time and thus
have defaulted in their obligation.
Conclusion:
The first contract entered by the directors Adam and Poh in the name of the restaurant
company was with Irish Linen Company for the tablecloths and thus it was a contract entered
on the basis of acting in good faith. Hence, under the Australian law, the directors are liable
to act in accordance with the rules laid down for good faith by the court and administration.
And thus, the directors are liable to pay for the purchase of cloth they have made with the
company.
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References
 Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20, (1954) 92
CLR 424, High Court.
 BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the
Shire of Hastings (1977) 180 CLR 266 at [40].
 Brodie, D., 2014. Fair dealing and the world of work. Industrial Law Journal, Vol.
43(1). Pp.29-51.
 Cordon Investments Pty Ltd v. Lesdor Properties Pty Ltd [2012] NSWCA 184 at
[145].
 Marshall, B.A., 2012. Reconsidering the proper law of the contract. Melb. J. Int'l L.,
Vol. 13 Pp.505.
 Masters Home Improvement Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88
at [99].
 Reinhold, S., 2013. Good Faith in International Law. UCL Journal of Law and
Jurisprudence, Vol. 2. Pp.40.
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