Business and Corporate Law: Contract, Agency, and Damages Analysis

This document presents a detailed analysis of a business and corporate law assignment, addressing key concepts such as contract formation, director's duties, and agency law. The assignment explores scenarios involving contract breaches, liabilities of company directors, and the scope of authority in agency relationships. The analysis includes relevant legal principles, case law references (e.g., Masters v Cameron, Mitor Investment Pty Ltd v General Accident Fire E Life Assurance Corp Ltd), and statutory provisions (e.g., CA 2001). The assignment covers topics like the formation of legally binding contracts, the implications of clauses like "subject to finance," the responsibilities and potential liabilities of company directors, and the consequences of an agent exceeding their authority. The document provides a comprehensive examination of these legal issues, offering insights into the application of legal principles to practical scenarios and demonstrating an understanding of corporate law.

Running head: BUSINESS AND CORPORATE LAW
Business and Corporate Law
Name of the Student
Name of the University
Author Note

1BUSINESS AND CORPORATE LAW
Question 1
Part A
Issue
Weather any legally binding contract has been formed between Tina and Jeff.
Rule
A contract that has been affected with the help of a formal document can have three
types as per the provisions established in the case of Masters v Cameron [1934] 2 KB 394.
The first category includes a contract to be concluded by way of negotiations and has been
agreed to be executed by the enumeration of each and every term in a written document. The
second category includes the contract to be created but certain terms to be agreed upon the
creation of the formal document. The third category includes the contract you have been
agreed upon and to be executed only upon the execution of the format document signed by
the parties.
Application
In the instant situation, Jeff and Tina has been negotiating the sale of the business
pertaining to Jeff. Both of them signed a head of agreements where all the terms that are
required to be incorporated in the contract for the sale of the business has been enumerated
expressly. Again, one of the clause included in the head of agreement requires the contract to
be executed in a written form. Moreover, certain terms relating to the contract were also
required to be finalized on the execution of the formal documents effecting the contract. This
implies the second category of the form of documents as has been provided under the
principles established in the case of Masters v Cameron [1934] 2 KB 394. The contract

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between Jeff and Tina has been appropriately instituted and the breach of the same would in
current liability on part of Tina.
Conclusion
A legally binding contract has been formed between Tina and Jeff.
Part B
Issue
Whether any legally binding contract has been formed between Tina and Jeff if the
heads of agreement contained a clause stating “ This agreement is subject to Tina obtaining
suitable finance”.
Rule
A contract that has been affected with the help of a formal document can have three
types as per the provisions established in the case of Masters v Cameron [1934] 2 KB 394.
The first category includes a contract to be concluded by way of negotiations and has been
agreed to be executed by the enumeration of each and every term in a written document. The
second category includes the contract to be created but certain terms to be agreed upon the
creation of the formal document. The third category includes the contract you have been
agreed upon and to be executed only upon the execution of the format document signed by
the parties.
Application
In the provided scenario, Tina has included a clause in the heads of agreement that
requires the execution of the contract to be affected only upon Tina being able to avail
finance for carrying out the contracts. This can be treated as an agreement of the third

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category where the contract has not been created but is contingent upon the creation of a
formal document as well as condition upon which the contract has been contingent.
Conclusion
Hence, a legally binding contract has been formed between Tina and Jeff.
Question 2
a) Issue
Whether any personal liability for the debt unpaid has been incurred by Phil being the
managing director of the company LightsBright.
Rule
As per the legal principle provided in s 180(1) of the CA 2001, any person who is
holding a position of a director in a company is required to show diligence and care in all his
endeavours under the scope of his position as a director. Again, the legal principles provided
in s 182 of the CA 2001, the persons who are engaged as a director of a company is required
to refrain from serving personal benefits by virtue of the position in the company.
Application
In the instant scenario, there has been a financial difficulty suffered by CheepCheep
and it has been known for a bad credit risk. Phil, the managing director of LightsBright has
the information of all these but however he has accepted a large offer from CheepCheep. This
can be treated as a breach of s 180(1) of the CA 2001. Moreover, it has been discovered that
Phil has been friends with Robert who has been the director of CheepCheep. This can be
treated as a breach of s 182 of the CA 2001.
Conclusion

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A personal liability for the debt unpaid has been increased by feel being the managing
director of the company LightsBright.
b) Issue
Whether any personal liability for the debt unpaid has been incurred by Robert being
the managing director of the company CheepCheep.
Rule
As per the legal principle provided in s 180(1) of the CA 2001, any person who is
holding a position of a director in a company is required to show diligence and care in all his
endeavours under the scope of his position as a director. Any individual holding the position
of a director in a company is required to refrain from encouraging any debt that will
aggravate the process leading to insolvency of a company, which has already been under
financial distress and is being posed with the verge of insolvency as per s 588G of the CA
2001.
Application
In the instant scenario, there has been a financial difficulty suffered by CheepCheep
and it has been known for a bad credit r2001.Robert, the managing director of CheepCheep
has the information of all these but however he has placed a large offer to BrightLight. This
can be treated as a breach of s 180(1) of the CA 2001. Moreover, being aware of the probable
insolvency Robert has incurred a debt by placing an order to CheepCheep. This can be treated
as a breach of s 588G of the CA 2001.
Conclusion

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A personal liability for the debt unpaid has been incurred by Robert being the
managing director of the company CheepCheep.
c) Issue
Whether the contravention of the directors duties by Phil and Robert can be brought
under the purview of business judgement rule providing a defence to them.
Rule
As per the provisions that has been provided in s 180(2) of the CA 2001, any director
who is alleged of having breached their duties of a director can exclaim that there alleged
breach has been made as a decision which seemed appropriate and best suited for the
situation in question.
Application
This defence cannot be extended to the actions taken by Phil and Robert being aware
of the conditions of the company and causing detriment to the company. Hence, their actions
cannot be brought under the category of best judgement rule.
Conclusion
The contravention of the directors duties by Phil and Robert cannot be brought under
the purview of business judgement rule providing a defence to them.
Question 3
a) Issue
Whether the contract for the sale of three items belonging to Kiss entered into
between Alan and Francis can be treated as enforceable.

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Rule
As per the principles established in the case of Mitor Investment Pty Ltd v General
Accident Fire E Life Assurance Corp Ltd [1984] WAR 365, the agent is under an obligation
to act within the scope of the authority provided to him by the principal and in no
circumstances he is supposed to exceed the same for the purpose of binding the principle
towards his acts. Any failure to follow the instructions provided by the principles in acting on
behalf of the principal. In case the acts of the agent has been beyond the scope of the
authority extended by the principal, the agent will be liable to compensate for the excess that
has committed injury to third party. This can be illustrated with the case of Leggo v Brown
and Dureau Limited [1923] HCA 19.
Application
In the instant scenario, Rick has been authorised by Francis to make a purchase of 3
Kiss items within the limit of $25,000 from Allan. However, Rick has made a purchase
amounting to $32,000. This can be treated as a contravention of the instructions given by
Francis. As to the contract between Allan and Francis, Francis is supposed to pay that much
of the amount towards the contract that has been set by him as a limit to Rick. The rest of the
amount needs to be recovered from Rick as per the principles established in the case of Leggo
v Brown and Dureau Limited [1923] HCA 19.
b) Issue
Whether Francis has any liability to career of the contractual obligations with Allan,
in case he is not obligated for the same what will be the consequences accruing to Rick.
Rule

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As per the principles established in the case of Mitor Investment Pty Ltd v General
Accident Fire E Life Assurance Corp Ltd [1984] WAR 365, the agent is under an obligation
to act within the scope of the authority provided to him by the principal and in no
circumstances he is supposed to exceed the same for the purpose of binding the principle
towards his acts. Any failure to follow the instructions provided by the principles in acting on
behalf of the principal. In case the acts of the agent has been beyond the scope of the
authority extended by the principal, the agent will be liable to compensate for the excess that
has committed injury to third party. This can be illustrated with the case of Leggo v Brown
and Dureau Limited [1923] HCA 19.
Application
The authority that has been given to Rick for making the said purchase was $25,000.
However, Rick has exceeded the limit and made a purchase for $32000. This can be stated as
a breach of his duty as an agent as he has exceeded his authority as an agent and has failed to
follow the instruction of his principal. Hence, any additional amount that would be e payable
by the principal under the contract would be compensated by Rick.
Conclusion
Francis has an obligation to carry out the contractual obligations that has been
restricted to the limit he has set and the rest of the amount would be recoverable by Allan
from Rick.
Part B
Issue
Whether Rick is in breach of any of his duty as an agent under the common law.

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Rule
As per the principles established in the case of Mitor Investment Pty Ltd v General
Accident Fire E Life Assurance Corp Ltd [1984] WAR 365, the agent is under an obligation
to act within the scope of the authority provided to him by the principal and in no
circumstances he is supposed to exceed the same for the purpose of binding the principle
towards his acts. Any failure to follow the instructions provided by the principles in acting on
behalf of the principal. In case the acts of the agent has been beyond the scope of the
authority extended by the principal, the agent will be liable to compensate for the excess that
has committed injury to third party. This can be illustrated with the case of Leggo v Brown
and Dureau Limited [1923] HCA 19.
Application
The authority that has been given to Rick for making the said purchase was $25,000.
However, Rick has exceeded the limit and made a purchase for $32000. This can be stated as
a breach of his duty as an agent as he has exceeded his authority as an agent and has failed to
follow the instruction of his principal. Hence, any additional amount that would be e payable
by the principal under the contract would be compensated by Rick.
Conclusion
Rick is in breach of his duty as an agent under the common law.
Question 4
a) Issue
Whether Prue is in a position to claim damages from Gladrags, RuPeter's or the hotel.
Rule

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As per the principles established in the case of Donoghue v Stevenson [1932] UKHL
100, a person is said to have incurred the liability under the tort of negligence if he had a duty
to exhibit care and diligence in relation to his actions and failed to do the same causing injury
to another person who was probable to have incurred injury from the breach of care. In
awarding damages for the injuries incurred by a person for the negligent act of another, the
court will strive to restore the position of the injured that would have existed in the absence
of the negligent act and not any further.
Application
In the present case, no action can be brought against the hotel as the hotel was not
involved in the toxic material be present in the dress. However, Prue has the claim against
Gladrags and RuPeter for the negligent act of not removing toxic material from the dress
which has caused Prue.
Conclusion
Prue is in a position to claim damages from Gladrags, RuPeter's but not the hotel.
b) Issue
Whether any damages will be recoverable by Prue.
Rule
As per the principles established in the case of Donoghue v Stevenson [1932] UKHL
100, a person is said to have incurred the liability under the tort of negligence if he had a duty
to exhibit care and diligence in relation to his actions and failed to do the same causing injury
to another person who was probable to have incurred injury from the breach of care. In
awarding damages for the injuries incurred by a person for the negligent act of another, the

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court will strive to restore the position of the injured that would have existed in the absence
of the negligent act and not any further.
Application
The loss of income that she has been suffering for the permanent disability to pursue
modelling career can be treated as a valid loss that can be claimed and recoverable as
damages from the manufacturer of the dress. However, the damages regarding her inability to
pursue acting career is remote to the negligent act of the wrongdoers. Hence, she will be
liable for her loss of income out of modelling career as well as out of medical expenses and
no further.
Conclusion
Hence, she will be liable for her loss of income out of modelling career as well as out
of medical expenses and no further.

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Reference
Donoghue v Stevenson [1932] UKHL 100
Leggo v Brown and Dureau Limited [1923] HCA 19
Masters v Cameron (1954) 91 CLR 353
Mitor Investments Pty Ltd v General Accident Fire E Life Assurance Corp Ltd [1984] WAR
365
The Corporations Act 2001 (Cth)