Contract Law And Corporation Law: Analysis Of Cases

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Contract Law

Case 1:

Introduction:

A contract is an agreement that is undertaken between two or more parties under the protection of the law. The law requires the parties involved in the contract to have the same consent, bear a sound mind, be of legal age and must be qualified by the law [1]. Similarly, a proposal gets signifies when the offer is accepted by the concerned party – this requires the acceptance to be absolute and present in the prescribed mode along with the proper communication concerning the acceptance to the relevant party. From the perspective of the proposer, however, the acceptance of the proposal signifies the transmission of the accepted course along with the power of withdrawal and revocation [2]. [1: Poole, J.. Textbook on contract law. Oxford University Press. (2016)] [2: Mehren, V, T.. Contract Law (2019) [Online] Available at: https://www.britannica.com/topic/contract-law [Accessed 23rd September 2019]]

Background of the Case:

The given case study is associated with the advertisement and promotion offers made by SOO Burgers, which stated that the customers with 50 tokens could be eligible for a golden scratch ticket which in turn could make the lucky winners win a brand-new Mazda CX-9. However, the offer was for a limited period of time. The situation got complicated due to an error from the SOO Burgers, which led to multiple tickets in the market with the potentiality for the customers to claim for the prize. The company recalled the offer citing the error that occurred during the printing all the while offering the car to one of the lucky winners who redeemed the golden scratch ticket before Brett and Mickey – both Brett and Mickey had the golden scratch ticket which made them potential winners of the Mazda as well.

There are two main protagonists to the case who were eligible to win the car, but there was one more complication that made the case interesting. There was an error in the system which led to multiple tickets with the car making a number of people eligible for the offer. However, it was within the power of SOO Burger to call off the offer as it was not announced for any specific time period. Interestingly, another customer was the first to unveil his ticket to the company, while Brett and Mickey made it the office just when the company called off its offer. Both Mickey and Brett were eligible for the prize as they had the golden scratch ticket with the car, but the company had already recalled the offer and is not sure if it needs to compensate Brett and Mickey for their tokens.

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Analysis of the Case:

Analysing the situation as a legal advisor positioning myself within the boundary of contract law, SOO Burgers needs to provide Brett and Mickey with the car despite their announcement of the error in the system leading to problems in the ticket. SOO Burgers fulfilled their contract by awarding one of the clients with the car as he unveiled his ticket the first. However, Brett and Mickey went to redeem the tickets which they had acquired before the cancellation of the offer. Based on the contract law, both Brett and Mickey became a part of the contract right after acquiring the ticket, and SOO Burgers needs to respect the parties who have agreed to the terms of the contract and acted accordingly [3]. Additionally, SOO Burgers did not allocate any fixed time frame for the offer, and both Brett and Mickey had the rightful tickets with them before admitting and publishing the error. [3: Utz, C. Australian Contract Law (2015) [Online] Available at: https://www.acc.com/resource-library/australian-contract-law [Accessed 23rd September 2019]]

The SOO burgers brought forth the contract of offering the car to the people who had the golden car sticker. Brett and Mickey both acquired the golden car sticker through different routes; however, the SOO Burgers cannot discriminate among any clients as all of them were legally bound to the contract the instant they started collecting the stickers and redeemed the tokens for the golden scratch ticket. Carlil v Carbolic Smoke Ball Co. [4] had a similar legal scenario concerning the prize money where the judges ruled in the favour of Carlil as the company had advertised to award the customer a certain monetary prize for fulfilling certain criteria. Similarly, Ellul and Ellul v Oakes [5] case deals with similar scenario of the breach of the contractual agreement where the ruling was done in the favor of the customer. It has been clearly stated that if any advertisement or claims induce any purchases, the contractual terms are valid and need to be addressed. [4: Carlil v Carbolic Smoke Ball Co.] [5: Ellul and Ellul v Oakes 1972]

Additionally, mistakes incurred by any party does not simply provide with the excuse to circumvent the previously agreed terms of the contract. The occurrence of mistakes is a complex area of contract law. In the given case, SOO Burgers admitted their mistake in printing the golden scratch tickets; however, this does not exempt them from honouring the contract terms of providing the customers with the prize as all the customers with the golden scratch ticket agreed to the contract and acted accordingly.

Conclusion:

It is evident that contract laws need to be taken seriously as violating the terms of the contracts could lead to legal repercussions. Admittance of mistakes cannot be cited as the excuse to break free from the contract made. As the parties are bound by the contract agreeing on the terms, it is necessary to respect the contract and deliver accordingly. Therefore, both Mickey and Brett are eligible for the prize, and SOO Burgers need to abide by the contract terms previously made.

Corporation Law

Introduction:

A corporation is a legal entity which is established with the purpose of undertaking businesses and is protected by the law and hence, is subjected to legalities of the scope and boundaries that it holds [6]. The law treats a corporation as an individual, and it bears the legal rights to sue and is subjected to be sued, but it is different from the other stakeholders in the sense that the acts of suing and being sued are within the territory of the corporation, not other individuals who are associated with it. There are various laws associated with the corporation concerning the employees, liability management, contracts, taxations, and so forth [7]. [6: Kay, J.. The concept of the corporation. Business History (2019) pp.1-17.] [7: Hansmann, H. and Kraakman, R.. The end of history for corporate law. In Corporate Governance (2017) (pp. 49-78). Gower.]

Background of the Study:

Joytronics Pty Ltd. is a retail store which deals with electronic components, such as electronics kits, semiconductors, speakers, car audio, and so on. This particular retail store has only three shareholders Felix, Gregg and Mercedes. Felix undertakes the responsibilities of reporting to Joytronics main store along with the management of the store’s daily operations. Mercedes, on the other hand, is the non-executive director who does not play any important role in the management and operation of the Joytronics store. Gregg does not bear any academic qualifications, but he is a knowledgeable guy who also happens to be the in-charge of the warehouse. Felix undertakes the task of shifting the store to another part in order to capture a better market area and to avoid competition from another local retailer – for this he scouts new places and makes up a plan without consulting any of the other stakeholders. He, later, calls a board meeting and shares the plan for relocating the store for which he had already looked for another warehouse. He does not honestly express the fact that he has not looked for any other locations apart from this specific one location. Despite the concerns of Mercedes and her suggestions relating to further study for the purpose of relocation, Gregg and Felix finalise the move to relocate the store. After the relocation of the store, due to various factors, the store does not perform good and seems not to be profitable.

Analysis of the Case:

As a non-executive director of the store, Mercedes is supposed to abide by the General Law or statutory duty of care and diligence. Any business judgements that are made in any corporation need to be made honestly and with good faith for the betterment of the company. Additionally, no personal interests should be attached with the judgements and decisions that are being made. It is equally critical to be well-informed and aware of the background and the overall framework of the decision that is being made and executed, i.e. there needs to be a rational belief that the decisions being undertaken are in the best interest of the company [8]. Considering these facets of care and diligence, Mercedes had no mal-intentions and selfishness concerning the relocation of the store; she was in fact in the opinion that further discussions and research are required to get the right things done in the right way. However, being a non-executive director, she was carried away by the excitement of the relocation of the store and did not bother diving deep into the claims of Felix – this is irresponsible of her, and she was not well-informed concerning the decision that was being implemented. As such, she did not fulfil her duties as a responsible director of the corporation. [8: Australian Communications and Media Authority. Principals for decision making (2018) [Online] Available at: https://www.acma.gov.au/theACMA/principles-for-decision-making [Accessed 23rd September, 2019]]

Corporations Act 2001 s 180 [9] deals explicitly with the issues associated with care and diligence. Section 1 of the act urges the responsible authority such as the director or any other personnel with the equivalent responsibilities needs to exercise the powers to fulfil their duties with the utmost inclination towards care and diligence. Additionally, section 2 mentions that the director or the responsible personnel needs to abide by the statutory directives concerning care and diligence while undertaking any corporal decisions and judgements. As alluded above, Mercedes does not have any ill intentions, and there are no personal aspects of her associated with the decision of purchasing the new warehouse. However, she has overlooked the aspect of being well-informed about the decisions being made, which makes her on the wrong footing for the violation of the care and diligence provisions under the Act. [9: s 180 Corporations Act 2001 (Cth)]

Section 588G of the Corporation Act 2001 [10] is applicable if the company is insolvent under the directorship or responsibility of the authorised personnel through various undertakings, which in the given case is entering into an uncommercial transaction. Joytronics Ltd. is not already insolvent; however, if a similar trend of unprofitability continues, the corporation might be insolvent in which case Mercedes will be liable of reaching s 588G of the Corporations Act 2001. Mercedes will be liable as she is in a responsible position to make decisions and implement them, and her lack of competence in getting well-informed and collecting relevant information led the store to be unprofitable. [10: Section 588G of the Corporation Act 2001 (Cth)]

Concerning Gregg, who is in charge of the warehouse, is equally liable for the breach of the care and diligence provisions under the Corporation Act. All the attributes applicable to Mercedes are applicable to him as well. Regarding the liabilities associated with the breach of s 588G of the Corporation Act 2001, breaching of directorial duties can result to civil penalties, disqualification from the post being held, compensation of the incurred damages and losses along with criminal charges in some serious cases.

Conclusion:

Corporation Law needs to be properly considered before undertaking any corporal decision to avoid the risks of getting caught into troubles and legal penalties. Mercedes and Gregg both did not abide by the care and diligence provisions of the Corporation Act which makes them liable for the incurring damages and losses.

References

  1. Australian Communications and Media Authority. Principals for decision making (2018) [Online] Available at: https://www.acma.gov.au/theACMA/principles-for-decision-making [Accessed 23rd September 2019]
  2. Hansmann, H. and Kraakman, R.. The end of history for corporate law. In Corporate Governance (2017) (pp. 49-78). Gower.
  3. Kay, J.. The concept of the corporation. Business History (2019) pp.1-17.
  4. Mehren, V, T.. Contract Law (2019) [Online] Available at: https://www.britannica.com/topic/contract-law [Accessed 23rd September 2019]
  5. Poole, J.. Textbook on contract law. Oxford University Press. (2016)
  6. Utz, C. Australian Contract Law (2015) [Online] Available at: https://www.acc.com/resource-library/australian-contract-law [Accessed 23rd September 2019]

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