Case Study Analysis Report for LAW6000 Business and Corporate Law

This document presents a detailed case study analysis addressing various aspects of business and corporate law, as required for the LAW6000 assessment. The analysis covers several legal issues arising from different scenarios, including contract formation and breach, agency law, and negligence. The assignment meticulously identifies the legal issues, relevant legal rules, and their application to the given facts, providing a thorough understanding of each case. The analysis includes discussions on contract enforceability, the duties and liabilities of company directors, the concept of agency and its implications, and the elements of negligence. It also incorporates relevant case laws such as *Masters v Cameron*, *Tabcorp Holdings Limited v The State of Victoria*, and *Donoghue v Stevenson*, among others, to support the arguments and conclusions. The assignment provides practical advice to clients based on the legal principles and the application of those principles to the presented facts.

1
Title page
Name of the student
Student Id

2
Contents
Question 1........................................................................................................................................3
Part A...........................................................................................................................................3
Issue..........................................................................................................................................3
Law...........................................................................................................................................3
Application...............................................................................................................................3
Conclusion................................................................................................................................3
Part B............................................................................................................................................3
Question 2........................................................................................................................................3
Issues............................................................................................................................................3
Law...............................................................................................................................................3
Application...................................................................................................................................4
Conclusion...................................................................................................................................4
Question 3........................................................................................................................................4
Part A...........................................................................................................................................4
Issues........................................................................................................................................4
Law...........................................................................................................................................4
Application...............................................................................................................................5
Conclusion................................................................................................................................5
Part B............................................................................................................................................5
Question 4........................................................................................................................................6
Issues............................................................................................................................................6
Law...............................................................................................................................................6
Application...................................................................................................................................6
Conclusion...................................................................................................................................6
Reference List..................................................................................................................................7

3
Question 1
Part A
Issue
Is the signing of the Head of the agreement brings an obligation on Tina to purchase the
business?
Law
An agreement which has the enforceability of law is called a contract. The statement made by an
offeror showing his intention to comply with the term is called an offer (Smith v Hughes [1871]).
The approval which is given to the terms of the offer by the offeree is an acceptance and is
declared under (Gilbert J McCaul(AustPty Ltyv Pitt Club Ltd (1957). (Chitty 2012)
The offer and acceptance bring enforceability to the contract and the parties should fulfill the
terms at any cost. But, if the parties agree that the contract is subject to the assent given by the
solicitor, then, the sanctity of the contract depends upon the circumstances and intention of the
parties. The law in Masters v Cameron (1954) submits that when the parties have decided that
the contract is binding and only its formal execution is required, then, the contract is enforceable
even if there is a need of solicitors approval. Court considers that if the party’s negotiation is a
concluding one, then, the contract is enforceable (Geebung Investments Pty Ltd v VorgaGroup
Investments (No 8) Pty Ltd (1995) and Tabcorp Holdings Limited v The State of Victoria [2014].
(O'Donovan 2014)
Application
A business is operated by Jeff. He offered to sell the same to Tina and she agreed. They
negotiated and a deal is finalized @ $2.5 million. A document is prepared by Jeff and is signed
by both. The agreement contain terms that submits that a formal contract should be made which
requires solicitors approval. It is stated that the parties do not want any kind of future bargain and
are willing to abide by the pre-stated terms. So, as per Tabcorp Holdings Limited v The State of
Victoria the contract is binding.
Conclusion
The negotiation was binding and is not affected by any solicitors approval and thus Tina must
buy the business of Jeff at an agreed price.
Part B
If one of the terms in the Heads submits that it is necessary to seek finance by Tina and this is a
condition to the agreement, then, the parties wishes to have further negotiation. Thus, as per
Masters v Cameron, the contract cannot be said to be enforceable.
Question 2
Issues
i. Is Phil obligated for the unpaid debt?
ii. Is Robert obligated for the unpaid debt?
iii. Is ‘business judgment rule’ applicable on Phil or Robert?
Law
The Corporation Act 2001 guides the acts of the officers and employees of the company. Section
198 C defines a managing director who commands the acts of the company (Howard Smith Ltd v
Ampol Petroleum Ltd (1974). The duties imposed on director’s includes: (Fitzpatrick et al, 2014)

4
i. The acts of the directors must be carried with care, diligence and with proper purpose
and in company’s interest (Statewide Tobacco Services Ltd v Morley (1990) (section
180 (1). The director can protect himself from the breach if the acts are carried out in
good faith, expert recommendation and sound judgment (section 180 (2) - business
judgment rule) (ASIC v Hellicar [2012]).
ii. The acts should be supported in good faith, in the best of company’s interest and for
proper purpose (section 181) (Charterbridge Corporation Ltd v Lloyds Bank Ltd
(1969).
iii. No misuse of information and position must be carried out by the director (section
182-183) (Sitmar Transit Mixes Pty Ltd v Baryczka (1998).
iv. No act of insolvent trading must be initated, that is, no financial transaction should be
carried out that results in company’s insolvency (section 588G) (Morley v. Statewide
Tobacco Services Ltd [1993]). (Fitzpatrick et al, 2014)
Application
A contract amid Lights Bright Pty Ltd (MD-Phil) and CheepCheep Pty Ltd is made (MD-
Robert). Phil and Robert are friends and Lights has delivered order to Cheep and raise bill of
$75,000 which is not paid by Cheep. The issues are now resolved:
i. Phil is liable for the debt that is faced by Light as $75,000 was not paid by Cheep.
Phil is the friend of Robert and he is aware that Cheep condition is not such that they
can take up the financial obligation of $75,000. This fact was known in the industry
and he still uses his position for the benefit of his friend. So, he acted without care,
good faith and misused his position and thus violated section 180-183 of the Act;
ii. Cheep financial position was very bad and this was in the knowledge of Robert. He
being the MD of the company must have not indulged himself into any kind of
financial transaction that brings burden on the company. However he still contracted
for $75,000 and thus raised liability which results in the winding up of Cheep. So,
there is breach of section 588G. He also, acted without care and not in good faith and
thus there is breach of section 180-181 of the Act;
iii. Phil and Robert can rescue himself under section 180 (2) if the acts are proved to be
carried with care, honesty and based on sound expert advice. But, Robert cannot
escape from the liability of section 588G.
Conclusion
Both Robert and Phil are in breach of several statutory duties and thus must be held liable.
Question 3
Part A
Issues
i. Is the contract for 3 kiss items is valid between Francis and Allan?
ii. Is the contract for status Quo Albums is valid between Francis and Allan? If Francis
is not bound to purchase then what are the repercussion to Rick?
Law
In common law, one of the significant principal that prevails is the law of agency. In agency, the
master (principal) appoints a servant (agent) to conduct the acts on his behalf and such acts are
imposed on the principal. The acts of the agent are only binding when the same are conducted as
per the authority provided which is normally of two kinds: (Gibson and Fraser, 2003)

5
The authority which is attributed to the agent directly (by words, conduct, actions) by the
principal is actual authority (Hely-Hutchinson v Brayhead [1968]. But, when the third person is
of the view that the agent has the power to bind the principal because of some representation that
is made by the principal himself, then, the authority is apparent and is held in Rama Corporation
Ltd v Proved Tin and General Investments Ltd [1952] provided there is good faith on the part of
the third person.
Application
Francis and Rick are in the relationship of an agency and Francis is the principal of Rick. He
gave an actual authority to Rick that he can purchase 3 kiss items for worth $25,000 from Allan.
Now,
i. The power that is given to Rick was an actual authority but is restricted to $25,000.
But, this power was exceeded by Rick as he purchased items for $32,000. Now, by
giving power to Rick to purchase the kiss items in front of Allan, a representation is
made by Francis that Rick is authorized to purchase the Kiss items. The transaction is
valid provided Allan is not aware of the limitation on the amount that is imposed on
Rick.
ii. Now, no power is given to Rick for the purchase of Status Quo albums. But, this
restriction is not made in front of Allan. If Allan is acting with honesty and is of the
view that Rick is also permitted to buy Status Quo albums, then, the transaction is
valid and Francis can personally sue Rick for the loss so suffered.
Conclusion
Francis is liable for the transactions that are entered by Rick as the same are supported with
actual and apparent authority respectively, though Rick can be held liable for the loss caused to
Francis for the transaction dealing with Status Quo albums
Part B
Rick is the agent of Francis. In common law every agent is liable for the duties which comprise
of:
i. To act as honesty;
ii. To report to principal;
iii. To follow principal instruction;
iv. To avoid any hidden profits;
v. Not to enter into transactions without authority.
vi. To maintain secrecy.
If the duties are not comply with, then, personal actions can be imposed on the agent who
includes indemnification of any loss caused to the principal, return of any secret profits, the loss
caused because of breach etc.
Now, Rick has told his friends of the transaction which was prohibited by Francis. Also, the
power to transact is also exceeded by Rick and thus he must be held personally liable for all the
losses.

6
Question 4
Issues
i. Is Gladrags or hotel negligent for the loss of Prue?
ii. What loss can be received by Prue?
Law
To prove negligence the main elements are: (Plunkett 2018)
i. That the defendant owns duty of care towards the plaintiff who is his neighbor and is
foreseeable (Donoghue v Stevenson (1932);
ii. The duty must be breached by not complying the level of care (Mutual Life and
Citizens Assurance Co Ltd v Evatt (1968);
iii. That loss is caused to plaintiff which is direct and not remote and which is reasonably
foreseeable.
Application
i. Prue can sue Glad rag for negligence as:
a. A gown is provided by Gladrag which is to be worn by Prue and Gladrag is aware
of the same. Thus, there is proximity and forseeability.
b. The gown so provided was not washed and the chemical remains which might
cause harm to Prue, so the level of duty is breached;
c. Because of breach Prue suffered bodily injury, loss if movie and medical expense.
So, there is negligence on Gladrag.
ii. Prue can claim damage for bodily injury, loss if movie and medical expense as the
same are direct and foreseeable.
Conclusion
Thus, Prue has every right to bring actions against RuPeter and claim for her losses except the
loss of movie.

7
Reference List
Books/Articles/Journals
Chitty, J . (2012). Chitty on Contracts, Volume 1. Sweet & Maxwell.
Fitzpatrick, J., Symes, C., Veljanovski, A. & Parker, D. (2014). Business and Corporations Law.
(2nd ed.) Australia: LexisNexis Butterworths
Gibson, A and Fraser, D. (2013). Business Law 2014, Pearson Higher Education AU.
O'Donovan, J . (2005). Lender Liability. Sweet & Maxwell.
Legislation
Corporation Act 2001
Case laws
ASIC v Hellicar [2012].
Charterbridge Corporation Ltd v Lloyds Bank Ltd (1969).
Donoghue v Stevenson (1932)
Gilbert J McCaul(AustPty Ltyv Pitt Club Ltd (1957).
Geebung Investments Pty Ltd v VorgaGroup Investments (No 8) Pty Ltd (1995).
Howard Smith Ltd v Ampol Petroleum Ltd (1974).
Hely-Hutchinson v Brayhead [1968].
Masters v Cameron (1954).
Morley v. Statewide Tobacco Services Ltd [1993].
Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952].
Smith v Hughes [1871].
Sitmar Transit Mixes Pty Ltd v Baryczka (1998).
Statewide Tobacco Services Ltd v Morley (1990).
Tabcorp Holdings Limited v The State of Victoria [2014].