LAW6000 Business and Corporate Law: Case Study Analysis - Module 10

This document presents a detailed analysis of four case studies related to business and corporate law, addressing key legal concepts and their practical application. The first case study examines contract law, specifically focusing on the formation of contracts, the impact of conditional terms, and the enforceability of agreements. The second case study delves into corporate law, analyzing the duties and liabilities of company directors, including adherence to sections 180-183 and 588G of the Corporations Act. The third case study explores agency law, examining the scope of an agent's authority, both actual and ostensible, and the consequences of breaching duties. The fourth case study focuses on the law of negligence, determining the elements of a negligence claim and assessing liability for damages. Each case study includes identification of the legal issues, applicable laws, application of the law to the facts, and a final conclusion providing advice to the client.

1
Contents
Solution 1.........................................................................................................................................2
Issue.............................................................................................................................................2
Applicable Law............................................................................................................................2
Application of law........................................................................................................................2
Conclusion...................................................................................................................................3
Solution 2.........................................................................................................................................3
Issue.............................................................................................................................................3
Applicable law.............................................................................................................................3
Application of law........................................................................................................................4
Conclusion...................................................................................................................................4
Solution 3.........................................................................................................................................4
Part A...............................................................................................................................................4
Issue.............................................................................................................................................4
Applicable law.............................................................................................................................5
Application of law........................................................................................................................5
Conclusion...................................................................................................................................6
Solution 4.........................................................................................................................................6
Issue.............................................................................................................................................6
Applicable law.............................................................................................................................6
Application of law........................................................................................................................7
Conclusion...................................................................................................................................8
Reference List..................................................................................................................................9

2
Solution 1
Issue
i. Whether Tina is legally bound to buy the business?
ii. What is the status if the Head contains a ‘ subject to’ term?
Applicable Law
In an offer, an offeror conveys his intention to undertake any act/omission with the hope of
approval (Carlill v Carbolic Smoke Ball Company [1892]. An acceptance is the confirmation to
the offer terms (Gilbert J McCaul(AustPty Ltyv Pitt Club Ltd (1957). Any variations results in
invalidation of acceptance. (Carter, 2013)
At times, the contract terms contains a condition which requires establishing a formal contract
which is subject to the approval of their solicitors. Such a contract is a conditional and its
validation depends upon parties intention.
In Masters v Cameron (1954) any ‘subject to’ contract is enforceable provided (Bailey, 2014)
i. When the terms are agreed and only a formal contract is required;
ii. Oral terms exists and wish to text them at a later stage;
iii. An agreement is made which is later conveyed into a more formal contract
(HelmosEnterprises Pty Ltd v JaylorPty Ltd (2005).
But, when the parties wish to re-negotiate then the agreement is not enforceable.
As per Geebung Investments Pty Ltd v VorgaGroup Investments (No 8) Pty Ltd (1995) if there is
a concluded bargain then there is valid contract.
Application of law
i) Jeff wish to sell the business to Tina. An agreement is prepared. One of the terms is
that the agreement is subject to the preparation of a formal contract which is
acceptable by the solicitors. A formal contract is prepared by Jeff solicitor but Tina
refuses.
Now, both Jeff and Tina have entered into terms which are concluded bargain. They are just
seeking the approvals of the solicitor without affecting the sanctity of the heads and compliance
of solicitor approval will not hamper the sanctity of the contract.

3
ii) If the Head contains the term ‘This agreement is subject to Tina obtaining suitable
finance”, then, the intention of Tina is contingent upon seeking finance and thus there
is no concluded bargain with Jeff. So, then the agreement is not binding.
Conclusion
A valid contract exists amid the parties and Tina has to comply with the terms. If Tina has to
seek finance in such case, there is no binding contract amid the parties.
Solution 2
Issue
i. Whether Phil be held personally liable for the unpaid debt?
ii. Could Robert be held personally liable for the unpaid debt?
iii. Will the ‘business judgment rule’ be relevant to either Phil or Robert?
Applicable law
As per section 198C, the managing director is obligated to comply with the duties delegated to
him (Deputy Federal Commissioner of Taxation v Austin (1998). Duties includes: (Lucy, 2006)
i. Section 181- The director must act in good faith with proper purpose and in the best
interest of the company (Kuwait Asia Bank EC v National Mutual Nominees Ltd
[1991].
ii. Section 180 – The acts must be carried with all skill and due and diligence (ASIC v
Rich & Ors (2003).
As per business judgment rule (section 180 (2), if the director can prove that he was
acting in good faith, with expert opinion, sound judgment, in the company’s best
interest, then there is no breach (Talbot v NRMA Ltd (2001).
iii. Section 182 and section 183 - A director must not misuse his position and information
for his own benefit at the cost of the company’s interest (Sitmar Transit Mixes Pty Ltd
v Baryczka (1998).
iv. Section 588G - When any director raises any debt when the company is in financial
difficulties or results in the insolvency, then, the director has indulged in insolvent
trading (Woodgate v Davis (2002).

4
Application of law
Phil is the MD of Lights Bright Pty Ltd. Phil establishes a contractual relationship with
CheepCheep Pty Ltd (Robert- Managing Director) and an invoice of $75,000 is sent but is not
paid.
CheepCheep is facing financial crunch and the facts was known when the contract was made.
Phil entered into the contract as Robert is his good friend. Now, CheepCheep is into liquidation
and is not able to pay the debt.
i. Phil can be held personally liable for the unpaid debt because he breached section 182
ad section 183 as he misused his position and entered into contract with Robert
knowing that CheepCheep is in financial difficulties. Thus, he is also in violation of
section 180-81.
ii. Robert be held personally liable for the unpaid debt as he violated section 588G. He is
aware that his company is not financially sound and still raised debt which resulted in
the insolvency of the company.
iii. The ‘business judgment rule’ be relevant to Phil if he can prove that he acted in good
faith and with expert opinion, then, he can protect himself from the liabilities.
Conclusion
Thus, both Robert and Phil are in breach of their directorial duties and must face penalties for the
same.
Solution 3
Part A
Issue
i. Whether Allan can enforce the contract for the 3 Kiss items with Francis.
ii. Whether Francis is bound to honor the contract to purchase the Status Quo albums
from Allan and what are the consequences for Rick if Francis is not bound to the
purchase.

5
Applicable law
An agent is duty bound to comply with the directions of the principal within the authority that is
designated to him. The authorities can be: (Tarr, 2001)
i. Actual – The authority which is either expressly or implied delegated to an agent by
the principal;
ii. Ostensible – When the principal in front of an outsider depicts that the agent is
authorized to represent the principal which in reality he is not, then, any acts carried
out within such authority is binding, provided, the outsider is not aware of the lack of
the authority (Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd, (1973).
Application of law
Francis is a big fan of Kiss and Status Quo. He appoints Rick and authorizes him to buy 3 Kiss
items from Allan. He gives a limit of $25,000 to spend and was instructed to keep the purchase
confidential. However, Rick tell 3 of his friend and 2 friends immediately tell their employers.
Rick approaches Allan and bought the 3 items @ $32,000. He also enters into an agreement with
Allan to buy albums for Francis @ $45,000. However, Francis refused to pay on account of lack
of authority on the part of Rick.
i. Rick authority is only to enter into contract upto $25,000 (actual authority). But, Rick
buys the items for $32,000 and he is not authorized to enter into such transactions. If
Allan in good faith believes that Rick is permitted to buy items and is not aware of
the financial limit, then, the transaction with respect to $32,000 is valid under
ostensible authority and Francis must honor transaction.
ii. Since Rick is not authorized to undertake any transaction with respect to Status Quo
albums, thus, any acts by Rick are without authority. Thus Francis is not bound to
honor the contract.
However, Francis can personally sue Rick for exceeding his authority and can make
him personally liable for the same.
Part B

6
Whether Rick is in breach of his common law duties as an agent and consequences of the
breaches?
Rick is the agent of Francis and there are common law duties that must be comply with by an
agent. For instance an agent:
i. is required to comply with the directions/ commands of his principal.
ii. must act be within the authority which is delegated to him;
iii. must comply his acts with confidentiality;
iv. must carry out tasks in good faith and honesty;
v. must not undertake any contractual obligations on behalf of the principal unless he is
permitted to do so.
However, Rick was specifically told that he must maintain the confidentiality of the transactions
with Allan. However, the confidentiality was breached when he tell about the transaction to 3 of
his friends. Also, was only allowed to seek transactions up to $25,000. However he enters into
transactions which are worth $ 32,000. Thus, there is clear breach of duties on the part of Rick
and thus he must be held personally liable for the losses.
Conclusion
Francis must honor the contract with Allan for the kiss items, but, is not liable for Status Quo
transaction. Francis can held Rick liable for breach of his duties.
Solution 4
Issue
(a) Whether Prue can take any legal action against Gladrags (RuPeter’s) and/or the Bilton Hotel?
(b) Assuming she is successful in an action, what damages she is able to claim and why
Applicable law
Every defendant is obligated to carry out his actions in such a manner so that no action of his
results in causing loss to the plaintiff who is considered to be his neighbor Donoghue v Stevenson
(1932). To prove any defendant negligent, the main elements include: (Plunkett 2018)

7
i. Every defendant is under a duty to undertake his acts and omissions in a manner
which is not causing any harm to the plaintiff;
The plaintiff is the neighbor when the actions of the defendant will impact the
plaintiff directly. Further, the duty only exits when the plaintiff is reasonably
foreseeable.
ii. When the acts or omissions results in causing harm to the plaintiff, then, there is
breach;
iii. Because of the breach, there must be some loss caused to the plaintiff. The loss so
caused must be because of the acts or omission of the defendant (causation) and the
loss must be anticipated by the defendant (remoteness)
Application of law
Prue is a spokes model for Slapiton Ltd. she needs to attend a public event and thus orders a
gown from RuPeter (Gladrags).
RuPeter (Gladrags) is negligent and Prue can sue them as:
i. Prue ordered gown which was stitched immediately. It is the duty of RuPeter that
they must make sure that the gown delivered must not caused loss to prue. The duty
exists as Prue is in proximate relationship with RuPeter and any problem with the
gown will directly harm Prue;
ii. However, the duty is violated as the fabric contained residue of a toxic chemical
which was not removed before release to Prue. The chemical is not visible from
normal visual inspection and the breach incurred.
iii. After an hour of wearing the gown Prue was in pain, had red rash of large boils and
fever. She is not able to complete her event and fall from stage and breaks her legs.
The injury resulted from chemical reaction can be reasonably anticipated. Thus, the
loss that so caused is because of the breach on the part of RuPeter.
However, the fall is not because of the acts of RuPeter and cannot be reasonably
anticipated. Thus, this loss is not borne by RuPeter.
Because of the pain, Prue suffered injuries and thus faced medical treatment of 6
weeks was given but scars were left. She is not able to work as a model and suffered
loss of $10million. She losses a movie worth $5million. Medical bills were worth $15

8
000. It is submitted that Prue is able to sue RuPeter for medical expenses, the scars
that are left and the loss of $10million as these losses can be reasonably anticipated
by Rupeter. But, the loss of movie cannot be availed by Prue as such loss is too
remote to predict.
Conclusion
Thus, Prue can sue Rupeter under the law of negligence. But, Prue cannot sue Rupeter for the
loss of movie.

9
Reference List
Books/Articles/Journals
Bailey, J. (2014). Construction Law. CRC Press.
Carter, J. (2013). Contract Law in Australia, LexisNexis Butterworths, 2013.
Tarr, J. A. (2001)). Information Disclosure: Consumers, Insurers and the Insurance Contracting
Process. iUniverse.
Case laws
ASIC v Rich & Ors (2003).
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1.
Deputy Commissioner of Taxation v Austin, Leslie Raymond - [1998] FCA 1034.
Donoghue v Stevenson (1932)
Geebung Investments Pty Ltd v VorgaGroup Investments (No 8) Pty Ltd (1995).
Gilbert J McCaul(AustPty Ltyv Pitt Club Ltd (1957) 59 SR(NSW) 122.
HelmosEnterprises Pty Ltd v JaylorPty Ltd (2005).
Kuwait Asia Bank EC v National Mutual Nominees Ltd [1991] AC 187.
Masters v Cameron (1954) 91 CLR 353.
Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd, (1973)
Sitmar Transit Mixes Pty Ltd v Baryczka (1998).
Toll (FGCT) Pty Ltd v AlphapharmPty Ltd (2004) 219 CLR 165;
Talbot v NRMA Ltd (2001).
Woodgate v Davis (2002) 20 ACLC 1314)

10
Online Material
Lucy, J. (2006). “Directors Responsibilities: the Reality v the Myths” Retrieved on <
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Directors_responsibilities_August20
06.pdf/$file/Directors_responsibilities_August2006.pdf>;