Business Law Assignment - Course Name, Semester 1, University Name

This document presents a comprehensive solution to a business law assignment, addressing two key problem questions. The first question examines a case involving a restraint of trade clause, analyzing the legal position of an individual who potentially breached the clause, with detailed discussion on the relevant laws, application of the law to the facts, and a final conclusion on liability and potential damages. The second question delves into partnership law, advising partners on their obligations, liabilities, and the consequences of actions such as misuse of funds and breaches of partnership agreements. This section explores issues of joint and several liability, breach of contract, and potential remedies such as expulsion of partners or dissolution of the partnership, providing a thorough understanding of the legal framework governing partnerships. The solution is structured using the ILAC (Issue, Law, Application, Conclusion) format, providing a clear and organized analysis of the legal issues.

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

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Table of Contents
Question 1......................................................................................................................2
Question 2......................................................................................................................5
References......................................................................................................................8

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Question 1
Issue
The issue of the given case is to determine the legal position of David against whom
legal actions could be brought for breaching the restraint of trade clause.
Law
Restraint of trade clause prevents a person from working in the similar trade or getting
engaged in similar occupation for such person becomes a threat to the business of his last
employer as he has an insight of the internal governance of his last company along with many
other things that an employee should and an outsider or competitor should not know (Dent,
2013). It is a usual scenario that a person would want to start his own venture in the similar
field once he resigns or is terminated from one particular industry as he hold years of
experience and client contacts in that field, therefore it would easier for him to flourish in that
industry. Thus, it is similarly natural for an organisation to refrain its ex-employees from
engaging into a similar industry as otherwise there are chances that such organisation may
experience challenges from such ex-employees engaging themselves in the industry (Dent,
2013).
In Australia, the Restraint of Trade Act 1976 deals with matters relating to restraint of
trade clauses with the help of Competition and Consumer Act 2010. The legislations
empowers a company to incorporate restraint of trade clause in its agreement for service that
the employees are supposed to sign while the join the company by agreeing to be restraint
from working in the same field after they resign from the company or if they are terminated,
where the clause may vary from one situation to the other (Dent, 2013). However, the
legislations direct the companies to incorporate such restraint clauses by paying attention to
its necessity and reasonableness pertaining to its imposition as held in the case of Petrofina
(Great Britain) Ltd v Martin [1996] Ch 146, 180. It is argues that the restraint clause so

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imposed must be reasonable and necessary for the best interest of the company that is
applying it.
While enforcing the restraint clause, it shall be observed by the court as to whether the
company was reasonable enough to impose such restraint clause and that it was necessary to
achieve the best interest of the company. Thus it must be established that the action taken by
the company has been just and reasonable for its own good and that it was not detrimental to
any public policy for that matter (Dent, 2013). Therefore, a person violating such restraint
clause shall be held responsible for breach of contract that he had agreed to while joining the
company. The court may direct such breaching party to refrain from carrying out such trade
or occupation with immediate effect and may also award damages to the aggrieved party who
may have sustained certain financial injury by the violation of such restraint clause. The
damages are usually calculated as per the profit made by such breaching party and also the
loss sustained by the aggrieved party at times.
Application
In this case, David was barred from entering into the hair-care industry for having
worked with Nu Shampoo for several years. It was usual for him to have an insight of the
internal governance of Nu Shampoo along with many other things that he as an employee
should have known while it was not possible for an outsider or competitor to not know. It is a
usual scenario for David to want to start his own venture in the similar field once he resigned
from the same industry as he hold years of experience and client contacts in that field,
therefore it would easier for him to flourish in that industry. Similarly it is natural for Nu
shampoo to restrict David from engaging into a similar industry as there are chances that Nu
Shampoo may experience challenges from David for engaging himself in the industry.

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Therefore, it would be just and reasonable to restrict David from engaging in the same
industry as he was ought to give severe challenges to Nu Shampoo and the company could
easily establish that in the court of law. David being the major shareholder in his company,
Hair-Glo would give every opportunity to Nu shampoo to bring an injunction order against
Hair-Glo for affect Nu shampoo’s business by operating in the same area as well. David was
supposed to refrain from engaging in hair-care industry for a time frame of 5 years which he
violated, would attract legal actions, by which Nu shampoo could also claim for damages
from David. Thus it can be easily established that the action taken by Nu shampoo is just and
reasonable for its own good and that it was not detrimental to any public policy. Therefore,
David shall be held responsible for violating the restraint clause, thereby breaching his
contract that he had agreed to while joining the company. The court may direct David to
refrain from operating Hair-Glo with immediate effect and may also award damages to Nu
shampoo who may have sustained certain financial injury by the violation of such restraint
clause
In addition, the minority shareholder of Hair-Glo, Monica holding 1% share entered
into an agreement with Standard Bank on behalf of Hair-Glo for receiving a start-up loan of
$1 million for the business without a security. The company failed to pay an instalment
amount of $1000 to the Bank for having a poor performance in 2019, which would attract
legal action against Hair-Glo for non-payment of the instalment amount.
Conclusion
Therefore, David shall be liable to stop the operations of Hair-Glo with immediate
effect for breaching his restraint clause with Nu shampoo. He might be made to pay damages
as well by giving unnecessary challenges to Nu shampoo and for the losses that the company
may have sustained due to such breach. On the other hand, David is liable to pay the
defaulted instalment amount of $10000 to standard bank for the start-up loan taken by

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Monica on behalf of Hair-Glo along with the payment of the whole of the loan amount even
if Hair-Glo is shut down.

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Question 2
Issue
In the given scenario, the issue is to advise Anne and Mary on their obligation
towards their partnership business sharing along with Jane and Sarah, and also regarding the
liabilities arising out of it.
Law
The structure of a Partnership business requires two or more people to come forward
to form a binding contract among themselves in order to execute a similar purpose and for
making profit out of such agreement. The element of partnership, that is: a) two or more
partners, b) intention to form a legally binding agreement, c) common purpose, and d) to
make profit, never changes, even though the structure and regulations of it may vary from
place to place (Fair Trading NSW, 2019). Even though partnership is a less complicated form
of business, it is quite strict for the partners as they are usually held liable jointly as well as
severally for the actions of each other (CHARLES, 1983).
In Australia, the Partnership Act 1892 (NSW) governs the provisions related to
partnership form of business and the disputes arising out of it. The Partnership Act 1892
(NSW) states that the partners shall be held jointly liable for the liability of all the other
partners, as held in Section 9. However, in times of clearing the debts of the firm, the partners
are eligible to pay out their own debts first before paying the debt of the firm. Under section
10 of the Partnership Act 1892 (NSW), the partners are to be held liable for any wrongful act
that may have been brought up by any other partners of the firm, which includes an act of
omission to do one’s duty as well. The obligation shall be divided with the partners equally or
as according to the share of the partners as agreed between them (CHARLES, 1983). .
The partners shall be held liable for the misuse of the finance of the firm, jointly as
held under Section 11 of the Partnership Act 1892 (NSW). It is immaterial for such liability

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as to whether all the partners were liable for such misuse or not. All the partners shall be
liable for one’s mistake and therefore, they would be required to reimburse a third party
whose money has been so misused by one or all the partners. Section 12 of the Act wraps up
the entire matter of liability of the partners and clearly mentions that the partners shall be
jointly as well as severally liable for each other’s mistakes as well as the obligations of the
firm as mentioned under section 10 and 11 (Fair Trading NSW, 2019).
The Partnership Act 1892 (NSW) also renders remedial provision as to the dispute of
the firm where it may require to expel a partner who has been guilty of misconduct, on a
condition that such expulsion clause has to be incorporated in the partnership agreement, as
directed by Section 25 of the Partnership Act 1892 (NSW). The partners may appeal before
the court to enforce such expulsion clause. On a similar note, section 35 of the Partnership
Act 1892 (NSW) states that the partners may appeal before the court to dissolve the
partnership under certain conditions, like misconduct of partners, breach of agreement,
insolvency of the partnership firm, unsoundness of mind of a partner, et cetera (Fair Trading
NSW, 2019).
Application
In this case, the partners of ‘Your Local Doctor’, Anne, Mary, Jane and Sarah
established a clinic in partnership with equal contribution in order to share equal obligation
arising out of their partnership business. They had also mentioned not to invest more than
$10,000 in any venture individually in their partnership agreement. Therefore, any agreement
that involved an investment over $10000 could be held as a breach of the contractual terms of
the agreement.
Jane spent $2000 to buy printer paper which was more than the usual cost, from her
boyfriend’s company is to be considered as a misuse of company fund. This would make the
partnership firm along with the partners bear the cost, yet could be held as a misconduct

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under the Partnership Act 1892 (NSW). Similarly the expenditure of $2000 made by Sarah to
hire driver for motor training, that was once discussed among the partners yet unapproved by
any of them could also be considered as mishandling of fund of the partnership firm.
Although, the partners shall be liable to clear the payments and bear the burden of
expenditure, however, Anne and Mary shall be eligible to ask Jane and Sarah to reimburse
them for the unnecessary and unaccounted expenditure.
On the other hand, the expenditure made by Jane for buying medical instruments for
$13000 would be held as a breach of contract as it exceeded the agreed amount of $10000 as
held in the partnership agreement.
Therefore, in such situation, Anne and Mary shall be left with two options: a) issue an
expulsion of Jane and Sarah for misusing firm’s money, if such expulsion clause was added
to the partnership agreement; b) ask the court for dissolving the partnership firm for such
gross violation of conduct by Jane and Sarah and also for Jane breaching the provision of the
partnership agreement by signing an agreement to pay $13000 for purchasing medical
instrument.
Conclusion
Thus, Anne and Mary shall be primarily held liable to bear the outstanding cost of the
partnership firm’s debt due with the third parties. On a later stage, they would be eligible to
either enforce the expulsion clause against Jane and Sarah or ask the court to dissolve the
partnership firm.

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References
CHARLES, D. (1983). Law of partnership. London, Sweet and Maxwell.
Competition and Consumer Act 2010
Dent, C. (2013). (Potential) Regulatory Function of Contractual Clauses: Restraints of Trade
and Confidential Information in Employment Contracts. Australian Journal of
Labour Law, 26(1), 1-19.
Fair Trading NSW. (2019). Business structures. Retrieved from
https://www.fairtrading.nsw.gov.au/trades-and-businesses/business-essentials/
starting-a-business/business-structures
Partnership Act 1892 (NSW)
Petrofina (Great Britain) Ltd v Martin [1996] Ch 146, 180