HI6027 Business and Corporate Law: Final Assessment T3 2021

This document presents the solution to a final assessment for the HI6027 Business and Corporate Law course, Trimester 3, 2021. The assessment consists of six questions covering topics such as contract law (implied contracts, consideration, parol evidence rule), business structures (sole trader, partnership, company, franchise), directors' duties, and insider trading under the Corporations Act. The solutions provide detailed explanations and examples related to each question, including discussions of sufficient vs. adequate consideration, exceptions to the parol evidence rule, advantages and disadvantages of different business structures, breach of statutory duty by a director, and potential outcomes for insider trading violations. The document concludes by referencing relevant sections of the Corporations Act (Cth) 2001.

Student Number: (enter on the line below)
Student Name: (enter on the line below)
HI6027
BUSINESS AND CORPORATE LAW
FINAL ASSESSMENT
TRIMESTER 3, 2021
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Please ensure you follow the submission instructions at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of
knowledge of the key topics covered in this unit.
HI6027 Final Assessment T3 2021

Question 1 (7 marks)
It is said that we all make a variety of contracts every day. How can this be? How do we make
agreements without actually necessarily saying anything to another party or even determining
the terms of these agreements?
ANSWER: ** Answer box will enlarge as you type
An agreement become contract when it is implied on both the parties to perform such act which
is rational and just on part of parties. Terms of agreement are such that it cannot be omitted by
law where imutually agreed and understandable by both parties in same sense. It shall not
dispense any of the condition provided. The parties are under obligation to perform their duty
without expressly referring to another for example when you are travelling in train or bus it will
be assumed by the conductor that the person is carrying ticket so it comes under implied
contract. Implied contract can be on documents, bond or where it is expected that other person
will fulfil all the condition without omitting the same.
Question 2 (7 marks)
a) Consideration must be sufficient but does not have to be adequate. What does this
mean?
(3 marks)
ANSWER a):
Under Australian Contract Law consideration must be sufficient but does not have to be
adequate explains that to enter into a valid contract the law requires both the parties to enter
into a state of bargain where both of them can mutually negotiate with each other and offer
something of value to each other that the courts can see. The difference between the adequate
consideration and sufficient consideration says that adequate consideration demands that a
contract should constitute a fair value but on the other hand sufficient consideration says that it
is not necessary to agree upon a fair value, what's more important is just the value as a factor
irrespective of being fair or not. Both the parties should offer something of sufficient value to
each other.
b) Can you give examples of consideration which are:
• Sufficient but not adequate; (2 marks) and
• Not sufficient nor adequate. (2 marks)
ANSWER b):
The example of consideration which is sufficient but is not adequate is; Take for instance , If Mr.
A promises to sell his golden watch to Mr. B for $1, the price of $1 is of some value to Mr. A and is
therefore sufficient too. It is a valid consideration for Mr. A to sell his golden watch but in this
case the price of $1 is evidently inadequate to buy a golden watch.
 The example of consideration which is not sufficient nor adequate is; Take for instance, If
Mr. X promises to sell his Bike at the price of a yacht to Mr. Y. The monetary value of

yacht in return of a bike which is generally of less value than a yacht is not a sufficient
consideration for Mr. Y as Mr. X demands huge value which is less in comparison to a
yacht. Here the consideration is not adequate as the value is not fair.
Question 3 (7 marks)
Answer the following questions:
a) What is the parol evidence rule, and what is the court's reasoning in applying the rule?
(3 marks)
ANSWER a):
Parole Evidence is a contract where parties are avoided from entering in oral agreement it is
more inclined to agreement which are in written form. It prevents party from performing pre
extrinsic evidence. It mainly avoid parties to enter in oral agreement, so that neither of the
parties have to fulfil condition which are vague , void or not agreed upon by parties. It mainly
classified under two factors construction and identification. Identifying is the process which
prevent oral evidence to vary and contrast from the written agreement terns and condition.
While construction is based on usage of oral evidence to comprehend terms of contract specified
and mentioned in the document .Parole evidence deals in identification where at initial level
contract is in written form specifying condition on which parties have mutual consent. There non
applicability on collateral contract and estoppel.
b) List and explain the exceptions to the parol evidence rule. (4 marks)
ANSWER b):
Exception of parole evidence are as follow-
 Where interpretation of contract is required to be resolved due to some error in terms of
contract.
 Mistake is shown in the condition of contract
 Where any fraud, illegal activities has been committed in the contract.
 When there was no legal consideration in an agreement.
 In case where there is need to recognise the parties and their subject matter
 To make any amendments in contract which has already been signed by parties and
agreement allows to make changes.
 Where any condition has occurred when contract was due on part of party where there
was no consideration.

Question 4 (11 marks)
You have graduated from Holmes Institute with your Master of Professional Accounting degree.
You are working for an accounting firm, and a client has made an appointment to see you about
setting up a business.
The client tells you that he is thinking about opening his own computer support business and
running his business on his own from his house so that the customers can bring their laptop or
PC's to his premises and then repair it.
He also tells you that he is thinking about buying into a franchise called IT Support, and he asks
you for advice about what is a franchise and is it a good idea?
Your task is to give the client advice on what types of business structures, including franchises,
would be best suitable for him. In your answer, you must provide advantages and disadvantages
for each of the business structures you have suggested to him.
ANSWER:
The term franchise is a joint venture between the original company who is also known as
Franchisor and the person who is willing to purchase the rights of the company to use its name
and idea who is also known as Franchisee. The original company sells it rights to use the name
and idea to other person so that the franchisee can sell franchisor's goods and services under
existing business model and trademark. The other business structure suggestions are Sole trader,
Partnership and company. In sole trader business structure is designed in such a way where the
person is the only owner of the company and runs the administration all by his own. In
partnership there are few partners which brings up their part of the capital and invests in the
business, by sharing all the profits and losses in certain ratio. The company is a legal entity which
is formed by a group of individuals to run and operate the business. The merit of sole trader is
that he is the only one who will enjoy all the profits alone but on the same hand the demerit is
that he will have to bear unlimited liability and is very risky. The merits of partnership is that the
risk is less and the liabilities are limited and the demerit is that they will have to share the profits.
The merits of the company is that the liabilities are limited and the demerit is that the profit
distribution is more. I would like to suggest my client to go ahead with the Partnership business
structure so that he will have to bear less liability and will also earn revenue. This ensures that
the business structure is less risky and will even generate certain income for him. Going ahead
with franchise will be risky as there is unlimited liability. The safest option is partnership, with
low risk and less liabilities.
Question 5 (11 marks)
Freddy is a director of Ace Finance Ltd. The board of directors for Ace Finance Ltd have
unanimously agreed to have a marketing campaign to attract new clients to their financial
business. Freddy's nephew Frank – is a marketing executive who runs his own business. Freddy
informs his nephew of the possibility of obtaining the marketing contract with Ace Finance Ltd.

Explain your
Freddy also discloses to Frank the price range that the company will consider. Freddy attends the
board meeting where they consider who will get the marketing contract, but he does not disclose
his connection with his nephew. After looking at all the potential candidates, the board of
directors
have selected Frank's business to do the marketing campaign for Ace Finance Ltd.
Has Freddy breached his
answer.
ANSWER:
All the directors in the company will have certain duties to which they are obliged to fulfil. In this
case scenario as Freddy has not disclosed its personal interested in giving the contract to its
nephew, their has been the breach of statutory duty to remain loyal upwards the company and
disclose the personal interest in the business transaction.
Question 6 (7 marks)
Bill Johnson is a financial analyst working for a futures investment company. Bill's job involves
researching and profiling companies to determine if these companies are ideal to invest in on
behalf of their clients.
Bill discovers that IBN Ltd was about to undertake a $10billion takeover of a rival company called
IMF. Bill now knows the exact date that this takeover bid is about to take place, and he knows
that he can't disclose this to anyone. But the temptation of making a fortune if someone knew
this confidential takeover by IBN is too good to pass.
Bill tells Violet to buy shares in IMF right now! But don't tell anyone!!! Violet knows Bill very well,
and she knows that Bill is a financial analyst, and he's pretty cool, and he also likes koalas and fast
cars. So Violet trusts Bill and buys $5,000.00 worth of shares in the IMF.
Violet is happy, and in her excitement, she tells her friends Rupeet and Manjinder to buy shares
in IMF right now… but don't tell anyone!!! Rupeet and Manjinder trust Violet and they also buy
shares in IMF. Rupeet buys $2,000.00 worth, and so too does Manjinder.
A couple of days later, INB made their takeover bid on IMF, and the share prices for IMF on the
stock market went up from $10.00 per share to $1,000.00 a share! Violet, Rupeet and Manjinder
were all very excited that their investment went up 100 fold!
The three of them gave Bill some money as a thank you gift!
Bill was shocked when he asked Violet who are these two. Violet explained to Bill that they were
her best friends. Bill was feeling rather worried and told Violet not to tell anyone!!! Rupeet and
Manjinder couldn't help themselves with all the excitement of making lots of money on the stock
market that soon the Australian Federal Police (AFP) and the investigators from the Australian
Securities Investments Commission (ASIC) raided the futures investment company and arrested
Bill.
The AFP and ASIC also conducted a formal record of interviews with Violet, Rupeet and
Manjinder, who told them, they got a hot tip from Bill!
Explain what will be the likely outcome against Bill?
Your answer addresses the relevant section/s of the Corporations Act (Cth) 2001.
ANSWER:

Statutory obligation under Corporation Act of parties, is to maintain the information in
confidence and should not commit any breach by disclosing it to other person who is not in
contract. The obligation as such are applied in agencies, organisation, enterprise, companies ,
association and individuals. The information is available against third party which may arise
either in express or implied mode of contract. Remedies for such breach are damages and
injunction to the injured party or person who is subject to loss. The other obligation on party is in
equitable contract where formalities of confidence are not completed. In case of breach of such
information remedies availed by parties is compensation in account of profit for such act,
declaration and injunction is to be given. Some of the legislation discussed under this are
Freedom of Information Act, talks about government confidentiality where disclosure of such
document is exempted. Under part 8 of Privacy Act, where the organisation deem to protect
personal information of its employees. It has duty to protect information of its workers which
could lead to make person liable and prohibiting such act . Section 92 deals where person is
liable for disclosing such information to an outsider. Section 93 however deals with remedies
available against such breach against confider by whom information is disclosed to confer
damage to affected party.
END OF FINAL ASSESSMENT
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statutory obligations under the Corporations Act (Cth) 2001? Explain your