Business and Corporate Law: Case Study on Contract and Company Law

This case study analyzes two scenarios in business and corporate law. Part A examines a contract involving a minor, addressing issues of liability and enforceability related to the purchase of tools and the right to proceeds from sales, considering the concepts of necessaries and beneficial contracts of service. Part B explores the liability of a company and its promoters under the Corporations Act 2001 (Cth), focusing on pre-incorporation contracts, ratification, and the rights of third parties. The analysis covers relevant sections of the Act, including those concerning promoters' liability, the authority of company representatives, and the assumptions third parties can make about a company's internal processes. The solution provides legal arguments and conclusions based on relevant case law and statutory provisions, offering a comprehensive understanding of the legal principles involved.

Business and Corporate
Law

Part A
In issue presented in the first case is whether
John can be held liable to purchase tools and
whether he can enforce the contract to
receive proceeds of sales?
Another issue is whether the liquidator can
enforce John under the contract?
A minor cannot form a contractual
relationship except for two circumstances
which include contract for ‘necessaries’ and
beneficial contract of service (Turner, 2013).

Part A
In Roberts v Gray [1913] 1 KB 520, the court
provided that education and related services
come within the scope of necessaries.
In Chappie v Cooper (1844) 153 ER 105 the
court provided that necessaries include food,
clothing, transportation and tools for proper
cultivation of mind.
The purpose of beneficial contract of service is
to make the minor capable to earn a living an
ply profession or trade (Fitzpatrick et al.,
2017).

Part A
In this case, John is minor; thus, he can only
form a contractual relationship for necessaries
and beneficial contract of service.
When John made a contract for tools, he
required them for his apprenticeship; thus, they
come within the scope of necessaries.
The contract made between the broker and
John is voidable on the discretion of John and
he has the right to enforce the contract to claim
the proceeds of sale of shares of AppTools.

Part A
In the case of the liquidator, the contract
formed between BuzzTools and John is
voidable.
John has the right to terminate the contract
or he can decide to bind himself under its
terms.
Thus, the ability of the liquidator to enforce
John under the contractual terms is depend
upon the discretion of John.

Part B
In the second case, the issue is presented whether
Irish Linen Ltd can held Master Plate liable and
the assumptions which can be made by Carvers Pty
Ltd?
The Corporations Act 2001 (Cth) provides that
promoters can form a contract on behalf of a
company that is not incorporated under section
131 (1).
After its incorporation, the company can bound by
the contractual terms or it can ratify the terms
within a reasonable time (Legislation, 2019).

Part B
In Commonwealth Bank of Australia v Australian
Solar Information Pty Ltd (1987) 5 ACLC 124, the
court provided that this provisions this not apply on
a corporation that is already registered and decided
to change its name.
Section 131 (2) provides that promoters can be held
liable by third parties if the company is not
incorporated or the contract is not ratified within a
reasonable time (Fitzpatrick et al., 2017).
Under section 131 (3) the court can protect the
interest of third parties by holding the company or
promoters liable for payment of compensation.

Part B
Section 126 provides that a person implied or
expressed authority an form a contract on
behalf of the company within using a common
seal.
Section 127 provides that a contract can be
formed by a common seal and two directors as
witnesses or signature of two directors (Austlii,
2019).
Section 128 (1) provides that third party can
assume that a person acting on behalf of the
company has complied with its constitution.

Part B
A third party can assume that a document is duty
executed under section 129 (6) and the common
seal used under section 127 (2) is witnessed.
Irish Linen can hold the company liable for the
contract or it can file a suit against Adam and
Poh under section 131 (1) and (2) respectively.
Carvers Pty Ltd can assume that requirements
given under section 127 are meet under section
128 and 129 and documents are duly executed.

References
Austlii. (2019) Corporations Act 2001. [Online] Available at:
http://www.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/ca20
01172/ [Accessed 20/04/2019].
Chappie v Cooper (1844) 153 ER 105
Commonwealth Bank of Australia v Australian Solar Information Pty
Ltd (1987) 5 ACLC 124
Corporations Act 2001 (Cth)
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017)
Business and Corporations Law. 3rd ed. Chatswood, NSW:
LexisNexis Butterworths Australia.
Legislation. (2019) Corporations Act 2001. [Online] Available at:
https://www.legislation.gov.au/Details/C2018C00424 [Accessed
20/04/2019].
Roberts v Gray [1913] 1 KB 520
Turner, C. (2013) Contract law. Abingdon: Routledge.