Holmes Institute HI6027 Business and Corporate Law Group Assignment

This assignment presents a comprehensive analysis of two case studies in business law. Part A examines contract law, focusing on the formation of a valid contract, including offer, acceptance, and the intention to create legal relations. It analyzes a scenario involving a writer, publishers, and film companies, evaluating the validity of various agreements and counteroffers. Part B delves into corporate law, specifically addressing the duties of company directors. It explores issues of care and diligence, the business judgment rule, and insolvent trading, applying these concepts to the actions of directors in a company facing financial distress. The assignment assesses the directors' potential liabilities under the Corporations Act 2001 (Cth) and evaluates the application of relevant legal principles and case law to determine the outcomes of each case.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Part A
Issue
The issues that can be pointed out from the present instance are firstly, whether any valid
contract has been entered into by Forthryt. Secondly, with whom such a contract has been
created. Thirdly, at what point of time the contract has been concluded with that person.
Rule
A valid contract can only be formed if there is an offer expressing the willingness of the
offeror to bind himself and the offeree to the terms of the same as well as the acceptance of
the offeree to such an offer. Such an agreement created by a valid offer and the acceptance of
the same needs to contain all the requisites of a valid contract to attain the status of the same.
This can be supported with the case of Rose & Frank Co. v JR Crompton & Bros Ltd. [1923]
2 K.B. 261.
The requisites that makes a contract valid are an agreement created with a valid offer
being validly accepted, the objective of the parties to bind themselves legally to the contract,
a consideration moving for both the parties, the capacity of the parties to form contract and
the legality of the subject matter of the contract. This can be supported with the case of Jones
v Vernons Pools 1938.
Any contract that has been created validly and has been instituted with all the
requirements of a valid contract being present is binding upon all the parties to the contract
and the parties are required discharge their obligation with respect to the same. Any
discrepancy in their discharging of their duties under the contract infringing the right of the
other party would amount to a legal liability to have been incurred by the party in violation.
This can be best explained with the case of Appleson v Littlewoods 1939.

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The offer and the acceptance that has been creating the subject matter of the contract is to
be made with a clear intention of the parties to create a legal proximity and the terms upon
which the contract has been created needs to have a reasonable clarity and certainty. This
needs to be elucidated with the case of Simpkins v Pays [1955] 1 WLR 975. While accepting
an offer validly all the terms of the offer needs to be agreed upon and no deviations from any
of the terms can be made to render the acceptance as valid. This come in lines with the case
of Smith v Hughes (1871) LR 6 QB 597.
When a person while accepting an offer alters any of the conditions contained in the offer
or has failed to make acceptance with respect to any of the terms, it would amount to a
counter offer and not a valid acceptance, which can be best explained with the case of Hyde
v. Wrench (1840) 3 Beav 334. Such an offer needs to be accepted to for creating a valid
contract. Again, in case of postal rule, acceptance needs to be considered as effective as soon
as the letter containing the same is posted giving rise to a valid contract as has evolved from
the case of Adams v Lindsell (1818) B & Ald 681.
Contract, to attain the status of enforceability for the obligations raised under it, would
require the objective of the parties to be bound in a legal relationship prior to the institution
of the contract. An agreement with an essence of social arrangement cannot be treated as a
contract as per the principle established in the case of Merritt v Merritt [1970] EWCA Civ 6.
Application
It can be seen from the facts of the case that the experience of Forthryt with the Metro
Publishers during the success of the first book he has written was not good, which has made
him to approach Boswold whom he met in a party in the month of February. Forthryt also
wanted the price for the same to be above 40 grand and Boswold thought this price to be fair.
This needs to be seen as an informal agreement which is incapable of being in forced owing

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to the lack of the parties to create legal relationship. As can be explain with the case of
Merritt v Merritt [1970] EWCA Civ 6. However, it could have been negotiated to form a
contract.
Subsequently, Forthryt has also been approached by Metro Publishers on 3rd March for
publishing his second book. In response to that Forthryt has expressed his wish to sell it to the
person bidding the highest. Metro Publishers made an offer amounting to $50,000 and
Forthryt replied to consider it. This conversation between Forthryt and Metro Publishers
cannot be conceived as a valid acceptance as can be supported with the judgement in Smith v
Hughes (1871) LR 6 QB 597.
Later on, an offer has been received by Forthryt from the Havoc Films to sell his right of
the book for the adaptation of the same in a film. Forthryt was in agreement to that offer but
desired to decide the lead role for the same. This was an alteration being made to the offer
that has been originally made by Havoc Films and has resulted in counter offer. Hence, as per
the principles of the judgements of Hyde v. Wrench (1840) 3 Beav 334, this was supposed to
be accepted by Havoc Films for being a contract.
The formal document for the contract with an offer amounting to $40,000 has been sent by
Boswold for his book. On being pursued by Forthryt to hike the price Boswold clearly stated
his limit of 45000 dollars. Forthryt signed the contract form and was supposed to post the
same. He handed that form to the postal clerk and subsequently met Pickwick. Pikwik offered
him to purchase the book with an amount of 45000 dollars and there has been an agreement
between them to execute the contract. However as per the rules of Postal services as can be
explained with the case of Adams v Lindsell (1818) B & Ald 681, this contract is only
possible if the letter has not been posted. As the posting of the letter was a valid acceptance

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of the offer made by Boswold and the formation of a valid contract. However, Forthryt took
the letter back and contracted with Pickwick.
Conclusion
Hence, the contract has been concluded with Pickwick.
Part B
a) Issue
The issues that can be pointed out from the present instance are:
i. Whether Mercedes has violated any of her duties under the common law or as
provided by the statute a being director of Joytronics.
ii. Whether the decision of making the purchase as has been suggested by Felix was
an action protected under the defence of business judgement rule on the part of
Mercedes.
iii. Whether she can be held liable for her involvement in insolvent trading.
Rule
A person who is the director of a company is conferred with the obligation to perform his
duties of a director with care and diligence that is expected from him being designated as a
director by virtue of the provisions contained in s 180(1) of the Corporations Act 2001 (Cth).
The care and diligence in this provision implies the degree to which the care and diligence
will be ensured by a person of reasonable conscience in identical circumstances. The
principles of the case of Australian Securities and Investments Commission v Cassimatis (No
9) [2018] FCA 385 can also be applied to explain this provision.

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The directors who has been accused of breaching their duty as provided in the provision in
s 180(1) of the CA, ne basic for remedy under the defence of business judgement rule as per s
180(2) of the CA. Under this provision the director needs to prove that all his actions was
inflicted with good faith and the motive between all his actions was the benefits and
wellbeing of the company ensuring a proper purpose.
There is a restriction imposed upon the directors of a company u/s 588G of the CA to be
involved in any activity on behalf of the company that might put the company in the danger
of being declared insolvent. The directors not ensuring or abiding with this restriction would
be declared to be liable under this provision for being involved in insolvent trading. Again a
defence from this provision has also been conferred upon the directors in the provisions of s
588H of the CA. Under this rule, if the director has been reasonably believing that such a
transaction was necessary and has been ensuring the well being of the company and will not
push the company towards insolvency, he will not be held liable u/s 588H of the CA. The
best explanation of the same can be availed from the case of The Bell Group Ltd (in liq) v
Westpac Banking Corporation & Ors [No 9] [2008] WASC 239
Application
In the facts of the case it has been made everything that although Felix feel to make a
disclosure of the contention that he has inspected only one shop, Mercedes has also failed to
act upon his belief that other options can be resorted to prior to the moving into a new shop.
As Mercedes was a director of the company she was also liable to inspect all the aspects
which she thinks is not favouring the well being of the company prior to make a decision.
Therefore there was a breach of s 180(1) as committed by Mercedes and she does not have
the defence available under the business judgement rule. Moreover it has been clear to her
that the company has been suffering distress financially and any decision which is not

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properly planned main push the company to was insolvency. Hence she will also be held
liable for violation of s 588G and the defence under 588H will not be applicable to her.
Conclusion
i. Mercedes has violated her duties under the common law or as provided by the
statute a being director of Joytronics.
ii. The decision of making the purchase as has been suggested by Felix was not an
action protected under the defence of business judgement rule on the part of
Mercedes.
iii. She can be held liable for her involvement in insolvent trading.
b) Issue
The issues that can be pointed out from the present instance are firstly, whether Greg can
be imposed with a liability for the breach of his duty to inflict care in his action being a
director of the company. Secondly, whether he can be held liable for his involvement in
insolvent trading.
Rule
A person who is the director of a company is conferred with the obligation to perform his
duties of a director with care and diligence that is expected from him being designated as a
director by virtue of the provisions contained in s 180(1) of the Corporations Act 2001 (Cth).
The care and diligence in this provision implies the degree to which the care and diligence
will be ensured by a person of reasonable conscience in identical circumstances. The
principles of the case of Australian Securities and Investments Commission v Cassimatis (No
9) [2018] FCA 385 can also be applied to explain this provision.
The directors who has been accused of breaching their duty as provided in the provision in
s 180(1) of the CA, ne basic for remedy under the defence of business judgement rule as per s

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180(2) of the CA. Under this provision the director needs to prove that all his actions was
inflicted with good faith and the motive between all his actions was the benefits and
wellbeing of the company ensuring a proper purpose.
There is a restriction imposed upon the directors of a company u/s 588G of the CA to be
involved in any activity on behalf of the company that might put the company in the danger
of being declared insolvent. The directors not ensuring or abiding with this restriction would
be declared to be liable under this provision for being involved in insolvent trading. Again a
defence from this provision has also been conferred upon the directors in the provisions of s
588H of the CA. Under this rule, if the director has been reasonably believing that such a
transaction was necessary and has been ensuring the well being of the company and will not
push the company towards insolvency, he will not be held liable u/s 588H of the CA. The
best explanation of the same can be availed from the case of The Bell Group Ltd (in liq) v
Westpac Banking Corporation & Ors [No 9] [2008] WASC 239.
Application
It is clear from the facts of the case the great has not been formally educated and was
ignorant about the matters relating to finance. The purchase of a new store has been leaving
Greg with an option to rely on the contentions of Mercedes and Felix. Hence, he does not
have the probability of breaching any of his duties as a director.
Conclusion
Greg cannot be imposed with a liability for the breach of his duty to inflict care in his
action being a director of the company. He cannot can be held liable for his involvement in
insolvent trading.

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Bibliography
Adams v Lindsell (1818) B & Ald 681
Appleson v Littlewoods 1939
Australian Securities and Investments Commission v Cassimatis (No 9) [2018] FCA 385
Hyde v. Wrench (1840) 3 Beav 334
Jones v Vernons Pools 1938
Merritt v Merritt [1970] EWCA Civ 6
Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261
Simpkins v Pays [1955] 1 WLR 975
Smith v Hughes (1871) LR 6 QB 597
The Bell Group Ltd (in liq) v Westpac Banking Corporation & Ors [No 9] [2008] WASC 239
The Corporation Act 2001 (Cth)