Holmes Institute HI6027: Business and Corporate Law Group Assignment

This document presents a comprehensive analysis of two case studies related to contract and corporations law. Part A focuses on contract law, examining the formation of a legally binding contract between Forthryt and various parties, including Metro Publishers, Havoc Films, and Boswold Books. It ...Read More

Running head: CONTRACT AND CORPORATIONS LAW
Contract and Corporations Law
Name of the Student
Name of the University
Author Note

1CONTRACT LAW AND CORPORATIONS LAW
Part A
Issue
The issue arising from the given situation is whether Forthryt has entered into any legally
binding contract and the time at which such a contract has been concluded.
Rule
A legally enforceable contract is said to have been created when the offeror has obtained the
assent of the offeree towards the offer and all the other elements of a valid contract has been
adhered to by both the parties while concluding the contract. For a contract to be rendered as
valid and legally enforceable, all the elements of a contract needs to be present. This can be
illustrated with the case of Jones v Vernons Pools 1938. These elements include offer and
acceptance that has resulted in an agreement, the intentions of the parties to create legal
relationship, a consideration for both the parties to the contract, capacity of the party to
institute of contract and the contract to be created with respect to a lawful object. Any
contract, which has been created lawfully confers the party to the contract with an obligation
as well as right to be bound by the terms of the contract and any breach of the same would
render them liable to the aggrieved party. This can be illustrated with the case of Powell v Lee
(1908) 99 L.T. 284.
A contract is required to have created by a valid offer which has been duly accepted by the
other party. An offer is required to be made with a view to initiate a legal relationship and the
terms of the same is required to be certain, clear and unambiguous. This can be illustrated
with the case of Felthouse v Bindley [1862] EWHC J35. Again, for the purpose of creating a
valid contract, the offer is required to be accepted validly and all the terms contained in the

2CONTRACT LAW AND CORPORATIONS LAW
offer needs to be accepted without any alterations being made in the terms of the offer. This
can be illustrated with the case of Smith v Hughes (1871) LR 6 QB 597.
In case the offeree fails to accept the offer by accepting all the terms of the offer, and has
made an alteration in the terms of the offer while accepting the same, such an acceptance
would be treated as a counter offer. The counter offer needs to be accepted for the purpose of
creating valid contract. A counter offer cannot be treated as accepted for the purpose of
concluding a contract. This can be illustrated with the case of Hyde v. Wrench (1840) 3 Beav
334. As per the postal rule, an acceptance will be valid if the same has been posted by the
offeree and the same would create a valid contract as soon as the acceptance has been posted.
This can be illustrated with the case of Adams v Lindsell (1818) B & Ald 681.
Any contract that has been instituted by two parties are required to be carried out with an
intention to create legal obligations and to have a binding legal relationship. A mere social
agreement will not be treated as a legally binding contract. This can be illustrated with the
case of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8.
Application
In the first case, Forthryt after the success of his first book was not willing to continue
with metro publishers. In the month of February, he met Boswold the chief editor of Boswold
Books. At that party, he asked Boswold whether he will be interested in in publishing the
second book written by Forthryt. He also added that he wanted a price of 40 grand or above
for the same. Boswold has agreed to the same and in his opinion it was a fair price. However,
this implies more of an agreement of casual nature and the parties never had the intention of
forming legal relations readily. This needs to be treated as a negotiation that may result in a
contract. This can further be supported with the case of Ermogenous v Greek Orthodox
Community of SA Inc [2002] HCA 8.

3CONTRACT LAW AND CORPORATIONS LAW
Again, on the 3rd of March, Metro Publishers make a phone call to Forthryt to confirm the
completion of his second book. Forthryt confirm the completion and inform them his wish to
sell the book to the highest bidder. This needs to be treated as an invitation to make an offer.
Metro Publishers made in offer for $50,000 and in response to that fourth right has replied by
saying that he will think about it. This cannot be stated as a valid acceptance of the offer
made by Metro Publishers. This can further be supported with the case of Smith v Hughes
(1871) LR 6 QB 597.
There has been an offer received from Havoc Films who agreed to buy the rights to the
book for a price of 45000 dollars to make a film on the same. As a response to this, Forthryt
has accepted the same but demanded a discretion over the decision of the lead role. This
cannot be treated as a valid acceptance as the same has been made with certain alterations to
the original offer. Hence applying the principles established in the case of Hyde v. Wrench
(1840) 3 Beav 334, it needs to be treated as a counter offer which is required to be accepted
by the other party to form a contract.
Again, on 10th of March, he has been sent with formal contract by Boswold for the sale of
his book for a price of $40000. He asked them to hike the price but the agreed to go as high
as $45,000. This can be treated as an offer and Forthryt signed the same and went to the local
post office for posting the document. He handed over the contract postal worker and
coincidentally met Pickwick. Pickwick offer to buy the book for $45000 and they agreed
upon the same. However he immediately returned to the post office for taking back the
contract. In this case applying the principles established in the case of Adams v Lindsell
(1818) B & Ald 681 it can be said that if the documents of the contract has been posted it
would be treated as a valid institution of contract and the same cannot be repudiated.
However, if it has been found that the documents has not been posted yet it would not be e
treated as a contract. In such a case the contract with Pickwick would be considered as valid.

4CONTRACT LAW AND CORPORATIONS LAW

5CONTRACT LAW AND CORPORATIONS LAW
Part A
Issue (a)
The issue arising from the given situation are:
i. The legal position of Mercedes with regard to breaches of her general law or
statutory duty of care and diligence as a director.
ii. Whether her decision to agree to the purchase of the new premises protected by s
180 (2) of the Corporations Act 2001 (Cth).
iii. Whether she is liable for breaching s 588G of the Corporations Act 2001 (Cth) if
Joytronics becomes insolvent.
Rule
As per the provisions contained in u/s 180(1) of the Corporations Act 2001(Cth), any
person who has been appointed as a director is required to maintain a standard of care or
diligence to be inflicted through his action with respect to his powers as a director in the
company. The extent of care and diligence needs to be assessed in comparison to the care or
diligence any reasonable person put under the similar situation would exercise. This can be
best explained with the principles established in the case of Australian Securities and
Investments Commission v Cassimatis (No 9) [2018] FCA 385.
As per the provisions contained u/s 180(2) of the Corporations Act 2001(Cth), the director
of a company who has been alleged to have breached his duty as a director u/s 180(1) has the
option of denying liability on the basis of the decision taken as a business judgement. This
requires him to prove that the decision has been taken in good faith and ensuring the best
interest of the company and for a proper purpose.

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As per the provisions contained u/s 588G of the Corporations Act 2001(Cth), the directors
of a company are prohibited from being indulged in any transaction that has the probability of
rendering the company insolvent. Any director who has failed to prevent the company from
indulging into any transaction that has the probability of rendering the company insolvent, he
would be liable under this section. However, a director alleged to have indulged into
insolvent trading has the option of seeking resort u/s 588H of the Corporations Act
2001(Cth), if he can prove that he has reasonable belief that the information that the company
would be solvent in the event of such a transaction and he has a reasonable belief on that
information, he will not be held liable. This can be illustrated with the case of The Bell Group
Ltd (in liq) v Westpac Banking Corporation & Ors [No 9] [2008] WASC 239
Application
In the present situation, although Felix has failed to disclose the fact that the store was the
only one he has inspected, Mercedes has failed to act upon his doubt that they might look for
other options before making a decision in relation to the moving into a new store. And being
the director of the company, he has the liability to ensure the wellbeing of the company by
inspecting into the matter before coming to a conclusion. Hence, Mercedes has breached her
duties as a director u/s 180(1) and owing to his failure to exercise the business judgement rule
he will not be able seek resort u/s 180(2). Moreover, he had the contention that the company
has been suffering from financial distress and has suspected that such an abrupt decision
might aggravate the same leading to insolvency. Hence, he had also been in contravention of
the provisions u/s 588G and does not have the option of seeking resort u/s 588H.
Conclusion
Hence, it can be concluded that:

7CONTRACT LAW AND CORPORATIONS LAW
i. Mercedes has breached both her general law or statutory duty of care and diligence
as a director.
ii. Her decision to agree to the purchase of the new premises protected by s 180 (2) of
the Corporations Act 2001 (Cth).
iii. She is liable for breaching s 588G of the Corporations Act 2001 (Cth) if Joytronics
becomes insolvent.
Issue (b)
The issues arising from the given situation is the legal position of Gregg with respect to
any breaches to his duty of care as well as any liabilities arising out of insolvent trading.
Rule
As per the provisions contained in u/s 180(1) of the Corporations Act 2001(Cth), any
person who has been appointed as a director is required to maintain a standard of care or
diligence to be inflicted through his action with respect to his powers as a director in the
company. The extent of care and diligence needs to be assessed in comparison to the care or
diligence any reasonable person put under the similar situation would exercise. This can be
best explained with the principles established in the case of Australian Securities and
Investments Commission v Cassimatis (No 9) [2018] FCA 385.
As per the provisions contained u/s 588G of the Corporations Act 2001(Cth), the directors
of a company are prohibited from being indulged in any transaction that has the probability of
rendering the company insolvent. Any director who has failed to prevent the company from
indulging into any transaction that has the probability of rendering the company insolvent, he
would be liable under this section. However, a director alleged to have indulged into
insolvent trading has the option of seeking resort u/s 588H of the Corporations Act
2001(Cth), if he can prove that he has reasonable belief that the information that the company

8CONTRACT LAW AND CORPORATIONS LAW
would be solvent in the event of such a transaction and he has a reasonable belief on that
information, he will not be held liable. This can be illustrated with the case of The Bell Group
Ltd (in liq) v Westpac Banking Corporation & Ors [No 9] [2008] WASC 239.
Application
In the given situation, Greg has been ignorant regarding the financial matters owing to his
lack of formal education. Hence, on the matter of purchasing the warehouse, he has the only
option of relying on the decision and recommendations of Felix and Mercedes. Hence he
cannot be said to have breached any of his duties as a director u/s 180(1) or u/s 588G.
Conclusion
Hence, it can be concluded that Greg has no liability.

9CONTRACT LAW AND CORPORATIONS LAW
Reference
Adams v Lindsell (1818) B & Ald 681
Australian Securities and Investments Commission v Cassimatis (No 9) [2018] FCA 385
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
Felthouse v Bindley [1862] EWHC J35
Jones v Vernons Pools 1938
Powell v Lee (1908) 99 L.T. 284
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 Corporations Act 2001(Cth)