Corporation Law Assignment Sample
Question
Task: You must answer the two problem-type questions below, using the ILAC (Issues, Law, Application, Conclusion) format, a worked example of which is in the Resources folder.
Question 1: Terence studies jewellery design at Charles Sturt University. After he graduates, he sets up a business called ‘Terry’s Terrific Designs’. He employs Peter and Sara, who are also CSU graduates to work for him. Peter is appointed as Supplies Purchaser and Sara as a Designer. Sara shares the design work with Terence himself.
Give Terence advice in relation to the following situations, citing relevant legal authority:
Sara visits Gabby, who wants a brooch designed for her. Sara shows Gabby photos of a number of designs that she (Sara) has executed. Sara forgets to tell Gabby that she works for Terence. Gabby is impressed by Sara’s work and asks her to design a $ 1 000 brooch in the shape of an elephant. On the next day, Terence phones Gabby and says ‘I have received your order, and will finish the brooch within two weeks’. Gabby says ‘Who are you? I have a contract with Sara’.
Terence tells Peter that the business is over-supplied with gold, and that he should buy only silver. However, Peter is having a drink with Mary, a gold dealer who he has often dealt with before on behalf of Terry’s Terrific Designs, who offers to sell 50 grams of gold for $ 1 500, which is a very good price. Peter agrees to buy the gold on behalf of Terence, but when Mary arrives at Terence’s shop with the gold asking for the $ 1 500, Terence refuses to accept the gold or pay her.
Because Peter disobeyed his instruction not to buy gold, Terence fires him on Monday. However, Terence does not shut off Peter’s access to the business’ email system until Thursday. On Friday Terence is contacted by Gordon, a diamond seller who Peter had regularly dealt with on behalf of Terence. Gordon says that saying that on Tuesday Peter sent him an email ordering a $ 5 000 diamond on behalf of the jewelry business, which he (Peter) picked up on Wednesday. Peter has disappeared to South America and is untraceable. Gordon is demanding to be paid.
Question 2: Roger Smith owns 92 of the 100 shares in United Chemicals Pty Ltd, a company he registered in 2009. The Company Secretary is his wife, Mary, who owns the remaining 8 shares. They elect Timothy Smith, Roger’s brother, as Managing Director of United Chemicals Ltd. In 2015 the company bought a phosphate processing machine from Industrial Machines Ltd for $ 600 000, payable in three equal installments in 2015, 2016 and 2017. The contract was in writing and signed by Roger as follows:
Timothy Smith
Managing Director
For and on behalf of United Chemicals Pty Ltd
Business goes well in 2015 and 2016, and the company is easily able to pay the instalments, but in 2017 a sudden downturn in the agricultural sector causes sales of fertiliser to drop off, and United Chemicals finds that it cannot pay the final $ 200 000 instalment. Roger has received a letter from Industrial Machines suing him personally for the $ 200 000, as the board of Industrial Machines knows that he is wealthy.
One of the steps Roger took in early 2016 to try to improve his business fortunes was to see if he could expand into the area of making explosives. However, Commonwealth legislation prohibits the granting of an explosive manufacturing licence to ‘any person who has a criminal conviction’. Roger was convicted of theft in 2005. Roger establishes another company, Explosive Industries Pty Ltd, of which he owns 99 shares and his wife 1 share, with himself as Managing Director and his wife as Company Secretary. He asks Mary to lodge an application for a licence on behalf of Explosive Industries Pty Ltd with the Commonwealth Department of Industry. The Department has sent a letter declining the application, citing the legislation regarding prior criminal convictions as its reason.
Advise Roger in relation to the claim made by Industrial Machines Ltd and the decision by the Department of Industry, citing relevant law.
Answer
Solution 1:
Brief Facts: This Corporation Law Assignment will review Terrance an entrepreneur who studied Jewellery designs from Charles Sturt University and started his business under the name and style of "Terry's Terrific Designs." To smoothly run the business, he employed Peter and Sara on the post of Supplies Purchaser and Designer respectively. Sara once visits Gabby and showed him some designs which were executed by Sara and Gabby who got impressed from the designs of Sara, asked her to design a brooch in the shape of an elephant for $ 1,000. But Sara forgot to specify that she works for Terrance. After receiving of order, Terrance called Gabby and asked him that his order will be ready in two weeks but Gabby in return asked him that he has the contract with Sara and not with Terrance.
On the other hand, Terrance told Peter that the business is oversupplied by gold and he should buy silver only. As Peter had a drink with Mary, a gold dealer, who offered Peter a 50 gms of Gold for $1,500. Peter thinks as it was very good price, agrees to buy the gold but when Mary reaches with Terrance, then he refuses to pay or receive gold. As Peter has not followed the instruction of Terrance of not to buy gold, he fired Peter on Monday but did not closed his business access till Thursday. On Friday, Terrance was contacted by the Gordan, the diamond seller and asked him that on Tuesday, Peter sent him an email whereby he ordered diamond worth $ 5,000 on behalf of the Jewellery business which was picked up by Peter on Wednesday. From then Peter disappeared to South America and was not traceable and Gordan is demanding his money from Terrance.
Issues: In the present case, following issues were raised:
- As per the Corporation Law Assignment, whether the contract made by Sara with Gabby is valid as Gabby is under the impression that he had made the contract with Sara and not with Terry’s Terrific Designs?
- Whether Terrance is liable to pay $ 1500 to Mary on account of the deal finalized by Peter to purchase 50gms of gold in spite of the special instructions by the Terrance to not to buy gold?
- Whether Terrance is liable to pay $ 5,000 to Gordan on account of the diamond taken by the Peter specially when Peter was fired from the job before the order?
Issue No.i: In the present given case Sara visited Gabby and shown him some designs from which he got impressed by the designs of Sara and asked her to design a brooch of the shape of an elephant for $ 1,000 to which Sara agrees(Carter, 2014). It is relevant to mention here that the deal between Sara and Gabby forms the contract between both the parties as Sara offered Gabby and in pursuance of the same Gabby agreed and asked her to design a brooch for him for a consideration of $1,000. After that Terrance called Gabby and confirmed him that his order will be ready within two weeks. In the present given situation, the only issue arises whether the contract made by Sara under the capacity of Terry's Terrific Designs, which was not disclosed at the time of conversation is legally valid. From the bare reading of the contract law, it is prima facie established that the prior conditions of the legally binding agreement between two people is fulfilled. As per the law, the contract can be spoken or written. In the present case, the agreement is by words("Tort Law, Corporate Groups and Supply Chain Liability for Workers Injuries - The Concept of Vicarious Liability," 2017). The essential conditions to be highlight on the Corporation Law Assignment and validate the contract are that the people entering into the contract should have the intention to enter into the contract(Doris, 2014). The second condition is an offer made by one person and accepted by another person without any pressure or anything. And the third one is the consideration in return. In the present given situation, all the three conditions are fulfilled, and furthermore it is relevant to mention here that Gabby agrees to enter into contract after seeing the designs of the Sara, so it makes no illegality if agreement is with Terry's Terrific Designs or Sara as the designs have to provided by the Sara herself(Wright, Ellinghaus& Kelly, 2014).
Issue No.ii: According to this Corporation Law Assignment, Terrance had specifically instructed Peter not to purchase more gold as they have the much stock but in spite of the instructions, Peter made a deal with the Mary for the purchase of 50 gms of gold for $1500, to which Terrance refused to make the payment. In the present case, the only question arises is whether the Terrance is liable to make payment to Mary for the agreement made by Peter on his behalf for the purchase of 50gms of gold. It is pertinent to mention here that it is the settled preposition of law that the employer is vicariously liable for the negligent act or omissions did by his employee during the course of his employment(Cherednychenko, 2006). It is further relevant to mention here that it does not matter whether the said act was permitted by the employer or not. So, as per the settled preposition of law, Terrance is liable to pay the amount to Mary as he is vicariously liable for the act done by Peter during his employment(Rutgers, 2008).
Issue No.iii: That in the instant issue, the question to be addressed on the Corporation Law Assignment is whether Terrance is liable to make payment to Gordan on account of diamond purchased by the Peter. In reply to the said issue, it is submitted that the under the terms of the contract act, the legally enforceable agreement is when two parties are agreed to perform their part. In the present case, it is prima facie established that Terrance had fired Peter on account of misconduct on Monday, and the order received by Gordan on Tuesday, which established the fact that the there is no legally binding contract between the Terrance and Gordan. Furthermore, from the definition of vicarious liability, it is clear that Terrance is not liable to pay any money to Gordan as the order made by Peter which was not during his employment. For the kind perusal, the definition of Vicarious liability is stated as "the employer is vicariously liable for the negligent act or omissions did by his employee during his employment"("Vicarious Liability or Liability for the Acts of Others in Tort: A Comparative Perspective," 2011). From the definition of the vicarious liability, it is prima facie clear that the employer is only liable for the act done by the employee only during the employment and from the given facts it is prima facie clear that the employment of Peter has been terminated on Monday. So agreements made after Monday are not the liability of the Terrance(Morgan, 2011).
SOLUTION 2:
Brief Facts: Corporation Law Assignment must highlight brief facts of the present case are that Rogers who registered a company namely United Chemicals Pty Ltd in 2009. That Rogers owned 92 shares of the company out of total 100 shares and the rest of the eight shares were owned by Mary, who is the wife of Rogers and company secretary in United Chemicals. Timothy Smith, the brother of Rogers, was elected as the Managing Director of the company. That in the year 2015, the United Chemicals purchased the Phosphate processing machine from the Industrial Machines Limited for the consideration of $6,00,000, which is to be payable in three equal installments i.e., in the year 2015, 2016 and 2017. It is further submitted that the contract was signed on behalf of the Company, i.e., United Chemicals Pty Ltd. It is further pertinent to mention here that the business of the company goes well in 2015 and 2016 but suffers a downfall in the year 2017 due to which the company could not pay the last and final installment. After that Roger received the letter from the Industries Machines Limited making him personally liable for $2,00,000("Master and Servant. Vicarious Liability. Liability to Unauthorized Invitee of Servant", 1932).
That in the meantime in 2016, Rogers took steps to improve his business as he wanted to expand the area of manufacturing of explosives. After creating a new company namely Explosives Industries Pty Ltd, Mary made an application for a license before the Commonwealth Department of Industry, but the department had rejected their application on the ground of previous conviction records of Rogers.
Issues: In the present case, following issues were raised:
- Whether Roger personally is liable for the final and last installment of $2,00,000 to Industries Machines Limited?
- Whether the commonwealth department of industries is legally justified in not granting the license to the company namely Explosives Industries Pty Ltd?
Issue No.i: On the present Corporation Law Assignment case, it is clear from the above-stated facts that the machinery was purchased for the company and the contract was signed by Roger for and on behalf of the United Chemicals which shows that the contract was between the Industries Machines Limited and United Chemicals and not with the Rogers. Under the Corporations Act, 2001, it is specifically specified that the company is the separate legal entity and can sue and can be sue on its name(McCarthy, 2004). It is furthermore relevant to mention here that the company has its property, rights, and obligations which should be used for the company. In the present given case, the Industries Machines Limited had sent a letter to Rogers keeping him personally liable for the debt only on the ground that he is wealthy is not legally justified under the provisions of the Corporations Act. It is furthermore relevant to mention her that there are some certain conditions under which the shareholder or director of the company can be held personally liable which are not present in the given case("CORPORATION.—Contract not under Seal-Executed Consideration—Work was done at Request of Corporation-Housing Scheme-Public Health Act, 1875 (38 & 39 Vict. c. 55), s. 174—Housing of the Working Classes Act, 1890 (53 & 54 Vict. c. 70) Part III., s. 56—Housing Town Planning, &c., Act, 1919 (9 & 10 Geo. 5, c. 35), s. 1", 1924). So, it can be said that the letter sent by the Industries Machines Limited keeping Rogers personally liable for the debts of the company is not legally justified("Editorial Board," 2015).
Issue No ii: Under the second issue, the only question involves whether the Commonwealth department is legally justified in rejecting the application for licenses made by the company. In the present case as per Section 16 of the Security Industry Act, 1997, the commissioner shall refuse to grant the licence if the commissioner satisfied that the applicant has within the period of 10 years before the presentation of application been convicted in New South Wales or in anywhere else for the offence prescribed under the law(Ferran, 2016).In the present given situation, the application was made by Mary on behalf of the company, i.e., Explosives Industries Pty Ltd for grant of the license which has no previous criminal records. So, the application rejected by the Department of Industry is not legally justified. Furthermore for the sake of arguments if it is assumed that Roger is the majority shareholder of the company then also the action taken to reject the application is not legally justified(Lim, 2014). Because as per Section 16 of the act, within ten years before the presentation of application been convicted and in the present given case, Rogers was convicted in 2005 for theft then also the application rejected is not justified as the application presented in the year 2016. So, it can be submitted that the application rejected by the Department of Industries is not legally justified as per the selected prepositions of law(Naniwadekar, 2008).
Conclusion:
To conclude theCorporation Law Assignment the first preposition that the contract legality and enforceability and value need to be taken in to consideration. Furthermore, the employer is vicariously liable for the act done by his employee during his employment, and it does not matter whether the act was permitted by the employer or not.
Furthermore, it is concluded in the second preposition that the company is itself a separate legal entity and can sue and can be sued on his name. The shareholders or Directors can not be held personally liable for the debts of the company as the company has its assets.
References
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Cherednychenko, O. (2006). Fundamental Rights and Contract Law. European Review Of Contract Law, 2(4).
CORPORATION.—Contract not under Seal-Executed Consideration—Work was done at Request of Corporation-Housing Scheme-Public Health Act, 1875 (38 & 39 Vict. c. 55), s. 174—Housing of the Working Classes Act, 1890 (53 & 54 Vict. c. 70) Part III., s. 56—Housing Town Planning, &c., Act, 1919 (9 & 10 Geo. 5, c. 35), s. 1. (1924). Journal Of The Royal Sanitary Institute, 45(3), 116-116.
Doris, M. (2014). Promising options, dead ends and the reform of Australian contract law. Legal Studies, 34(01), 24-46.
Editorial Board. (2015). Endocrinology, 156(5), 2C-2C.
Ferran, E. (2016). Corporate Mobility and Company Law. The Modern Law Review, 79(5), 813-839.
Lim, E. (2014). Attribution in Company Law. The Modern Law Review, 77(5), 794-807.
Master and Servant. Vicarious Liability. Liability to Unauthorized Invitee of Servant. (1932). Columbia Law Review, 32(6), 1074.
McCarthy, L. (2004). Vicarious Liability in the Agency Context. QUT Law Review, 4(2).
Morgan, P. (2011). Distorting Vicarious Liability. The Modern Law Review, 74(6), 932-946.
Naniwadekar, M. (2008). The Law of Agency as applied in Company Transactions. European Company And Financial Law Review, 5(3).
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Tort Law, Corporate Groups, and Supply Chain Liability for Workers Injuries - The Concept of Vicarious Liability. (2017). SSRN Electronic Journal.
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Wright, T., Ellinghaus, M., & Kelly, D. (2014). A Draft Australian Law of Contract. SSRN Electronic Journal.
