Commercial and Corporation Law (Semester 2): Contract Law Q&A Analysis

This report provides a comprehensive analysis of three key legal issues within commercial and corporation law. The first section examines the application of exclusion clauses in contract law, specifically addressing whether a garage owner, Mike, can rely on such a clause to avoid liability for damage to a customer's car, John's car, and considers cases such as Curtis v Chemical Cleaning and L'Estrange v Graucob. The second part delves into the business judgment rule under section 180(2) of the Corporation Act 2001, evaluating whether company directors can defend their decisions based on this rule, referencing the case of ASIC v Rich and Daniels vs Anderson. The final section assesses whether a director, Paul, breached section 181 of the Corporation Act 2001 by acting in his own interest rather than the company's interest, analyzing his actions in allocating special shares to his wife and considering cases like ASIC v Adler and Mills vs. Mills. The report uses case law and statutory provisions to support its conclusions, providing a detailed examination of the legal principles involved in each scenario.

Running head: COMMERCIAL AND CORPORATION LAW
Q & A on Contract Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to question 1...................................................................................................................2
Issue:....................................................................................................................................... 2
Rules:...................................................................................................................................... 2
Application:.............................................................................................................................. 3
Conclusion:.............................................................................................................................. 3
Answer to question 2...................................................................................................................3
Issue:....................................................................................................................................... 3
Rules:...................................................................................................................................... 4
Application:.............................................................................................................................. 5
Conclusion:.............................................................................................................................. 5
Answer to question 3...................................................................................................................5
Issue:....................................................................................................................................... 5
Rules:...................................................................................................................................... 5
Application:.............................................................................................................................. 6
Conclusion:.............................................................................................................................. 7
Reference:................................................................................................................................... 8

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Answer to question 1
Issue:
The main issue of the case is to decide whether Mike would be protected by the clauses
in the invoice if John were to take action against Mike’s Auto or not.
Rules:
The subject matter of the case is based on the theory of exclusion clause. According to
this theory, the liability of the contracted parties could be limited or restricted to certain extend.
However, there are certain exceptions to this rule. It has been pointed out in Curtis v Chemical
Cleaning1 that in case of any facts related to the subject matter of the contract should be
mentioned to the contracted parties and in case the party has failed to see the same, the other
party should have to mention the facts to him. in this case, certain exclusion clauses had been
mentioned at the backside of the bill, which the party could not observed. It has been held by
the court that the cleaning authority had misrepresented the effect of the clause and therefore,
exclusion clause will not be applied in this case. In another case named Hollier v Rambler
Motors2, it has been observed that signed documents were provided to the claimant regarding
the liability of the garage regarding any damage. However, the garage authority had failed to
provide slip for one day and the car of the claimant is damaged. On claiming compensation, the
authority mentioned about the exclusion clause. According to the court, the garage authority
could not take the plea, as there was lack of regularity on their part and they are required to
compensate the claimant. On the other hand, certain rules have been mentioned by the court
regarding the applicability of the invoice sheet. In L'Estrange v Graucob3, it has been held by
the court that where an invoice has been signed by the parties, the terms of the invoice will be
applied on the parties and in that situation, it is not necessary that whether the parties had read
over the terms mentioned in the invoice. It has been held in Balmain new ferry co ltd v
Robertson4 that no person will able to file a case against other if there was a pre-existing
contract.
1 [1951] 1 KB 805
2 [1972] 2 WLR 401
3 [1934] 2 KB 394
4 (1906) 4 CLR 379

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Application:
In the current case, it has been observed that John had parked his car in Mike’s garage
and there was a notice hanged in the wall along with other notice where it has been mentioned
that the garage will not be responsible for any damage caused to the car. The provision of
exception clause can be applied in this case, as the notice was hanged along with other notices
and it is reasonable that John might not observe the same. However, it has been mentioned in
the case that John had to sign an invoice every time while parking his car. Therefore, it can be
stated that John is bound by the terms mentioned in the invoice. It can further be stated that a
contract is already been made between John and Mike and therefore, no further claim regarding
the same could take by John.
Conclusion:
Therefore, Mike can take the plea under exclusion clause.
Answer to question 2
Issue:
The main issue of this case is to determine whether the directors of the company could
defend their position under section 180 (2) of the Corporation Act 2001 or not.
Rules:
The subject matter of the case is based on the provision on business judgment rule that
has been mentioned under section 180 (2) of the Corporation Act 2001. The Corporation Act
2001 is regulating the acts of the director of a company and there are certain provisions that
help the director to keep discipline in their daily activities. According to section 180(1) of the Act,
every director of the company is required to take maximum care and diligence while performing
their job. Further, they should have to take all the decisions prudently, as the directors are
treated as the mind of the company. Every director is required to act for securing the interest of
the company and the shareholders and the scope of their acts are quite wide and vast. Certain
defenses have been provided to the directors so that they can defend their post against any
complaint made for breaching the provision of the duty of the directors. One of the main defense
is business judgment rule that has been mentioned under section 180(2) of the Act. To attract
this provision, directors are required to show that they had done all the acts for the best interest
of the company. They have to prove that they had taken all the decisions in good faith. The

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business judgment rule has been established in the case of ASIC v Rich5. Further, in Daneils
vs Anderson6, it has been held that all the directors should have to maintain standard duty of
care and should not make any unrealistic approach. On the other hand, according to section
189 (a) (i), it has been mentioned that the directors could depend on the advise provided by the
employees or experts.
Application:
In the present case, it has been observed that the alleged directors of the company had
made certain financial disclosure without verifying the financial statement of the company and
made certain assessments and resolutions to that effect. This act had made a false framework
regarding the solvency of the company and allegation has been made by ASIC against the
directors of the company to this effect. However, it has been mentioned in the case that the
directors were relied on the advice of the financial experts of the company. According to the
provision of section 189 (a) (i) of the Corporation Act, the directors are allowed to make such
attempt and this act could be termed as good faith.
Conclusion:
Therefore, it can be started that the directors are allowed to defend their position under
section 180 (2) of the Act.
Answer to question 3
Issue:
The main issue of the case is to identify whether Paul has breached the provision of
section 181 of the Corporation Act or not.
Rules:
There are certain provisions mentioned under the Corporation Act 2001 that defines the
duties of the directors. Considering the importance of their position, it has been mentioned
under section 181 of the Corporation Act 2001 that the directors should act in good faith and
always try to act for the benefit of the company. It has further been stated in ASIC v Adler that
no directors are allowed to act for securing their personal interest. Further, the directors are
required to disclose their material personal interest. Further, it has been mentioned in section
182 of the Act, no directors are permitted to use their post inappropriately. It has been
5 (2005) 23 ACLC 430
6 (1995) 13 ACLC 614

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mentioned in Mills vs. Mills7 that any act of the director that are not according to the proper use
of director’s power will be treated as against the provision of the section 182 of the Act. In this
case, the director will be held liable for breaching the provision of section 181 of the Act 2001.
Similar principle has been observed in Permanent Building Society(in liq) vs. Wheeler8,
where the court has held that the directors should not use their fiduciary duties for improper
purpose. Therefore, it can be stated that every director should have to think about the interest
and benefit of the company. Otherwise, the director will be held liable for non-performance of
duties mentioned in the Corporation Act 2001.
Application:
In the present case, it has been observed that Paul was the director of the company and
had some shares in it. According to the constitution of the company, Paul had all the powers
and it has been observed that he had secured certain special share for his wife. The main
intention for allocating the special share is to confer all the power to his wife after his death.
Further, he wanted to dilute the power of Peter, Clive and Don. This acts proved that he wanted
to secure his personal interest and as a director, he is supposed to act for the best interest of
the company and the other shareholders. However, he had failed to do the same. He had
deprived other shareholders of the company and denied the interest of Peter, Clive and Don
who are engaged with the company’s affairs on full time basis. It has been observed that he had
done all the company related things for his wife who are quite novice for the business.
According to the judgment mentioned in Mill’s case, Paul had failed to use his position
appropriately and violated the provision of section `182 of the Corporation Act 2001. Further,
according to the thesis of Permanent Building’s case, it can be stated that Paul had used all his
fiduciary duties for his personal purpose and he did not think about the betterment of the
company.
Conclusion:
Therefore, it can be stated that Paul had made a breach regarding his duties and failed
to act in good faith as mentioned in section 181 of the Corporation act 2001.
7 (1983) 60 CLR 150
8 (1994) 12 ACLC 674

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Reference:
ASIC v Rich (2005) 23 ACLC 430
Balmain new ferry co ltd v Robertson (1906) 4 CLR 379
Corporation Act 2001 (Cth)
Curtis v Chemical Cleaning [1951] 1 KB 805
Daneils vs Anderson (1995) 13 ACLC 614
Hollier v Rambler Motors [1972] 2 WLR 401
L'Estrange v Graucob [1934] 2 KB 394
Mills vs. Mills(1983) 60 CLR 150
Permanent Building Society(in liq) vs. Wheeler (1994) 12 ACLC 674

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