Sue and Mike formed a company to acquire

Introduction

Question and Answer

Student’s Name

Institutional Affiliation

Date

Question and Answer

1

Issue: Can Seedle & Co sue the company and demand payment for the development plans despite being hired by Sue and not the board of directors?

Rule: In this case, the issue is founded on ostensible or apparent authority.

Ostensible or apparent authority comes about when a third party believes that the agent has the authority to transact for the principal. As a result, the principal will become bound to the contract with the third party through the agent.

Application: Agency is an association where one party, the principal, gives another one, the agent, the legal authority to act on their behalf. The agent is thus, legally bound to the actions of the agent. In this case, Sue is the agent; the board of directors is the principal and, Seedel & Co is the third party.

Agents have the legal authority to act for the benefit of the principal. They also should act in person and follow the principal’s instructions (Gibson, 2018). Agents should also act within the extent of their authority and avoid any conflict between their interests and those of the principal. In this case, Sue followed the principal instructors to develop the land by contracting an architect company, Seedle & Co, to draw the development plans.

In the Australian law of agency, an agent’s authority comes from the principal. In this case, the question arises as to whether the company granted Sue the authority to act for them. Authority in the law of agency could be implied, actual or apparent.

Implied: implied authority shows the power given to the agent to conduct acts reasonably essential for him to perform his duties. In the case, it is mentioned that Sue was the company managing director. As a result, one can argue that she had the legal authority to act in any way necessary to fulfill her duties. However, it is mentioned that she was not officially appointed to the position.

Actual: This is the power that the principal gives the agent to act on their behalf either by writing or saying. In the case, the company refused to pay the architectural firm, Seedle & Co, by claiming that they had not authorized Sue to employ them. This suggests that Sue had no actual authority from the company.

Apparent: is the power that the agent has to act on behalf of the principal despite not being expressly or impliedly given to them. To ascertain whether or not Sue had authority, the court will do an objective test. Seedle & Co may argue that they assumed that Sue was acting on behalf of the company because she is a member of the board of directors.

They will be required to provide evidence that; they were unaware of Sue’s lack of authority, the transaction between them and Sue was usual, and that Sue acted within the business’s limits. In Panorama Developments (Guildford) Ltd v Fidelis Furnishings Fabrics [1971]2 QB 711, the court maintained that since the secretary’s actions were within the business’s limits, the absence of implied or expressed authority doesn’t matter. Similarly, Sue’s contract, the architectural firm, is within her power as the company’s agent.

Conclusion:

The company would pay Seedle & Co for their services.

2

Issue:  Is Fred personally liable for the unpaid invoice due to his role as the managing director and sole shareholder of the company?

Rule: The problem, in this case, is based on the classification of companies as a “single legal entity” and the concept of the corporate veil.

Section 124(1) of the Corporations Act gives registered companies the legal capacities of a legal person (Gibson, 2018). A company is thus a single entity that can agree and be sued or litigate in case of breach of the agreement. Further, the corporate veil is an idea in law that protects the shareholders from an organization by detaching them from the company.

Application:  Fred’s company’s, Fred Flubber Pty Ltd, thus had the legal power to contract with the rubber manufacturer and could be sued for in case of a breach on the agreement. In Salmon v Salmon & Co Ltd [1897] AC 22, the court held that Mr. Solomon was detached from the company, which he managed and was the sole shareholder. Thus, it can be argued that Fred is separate from his company and is not liable for its debts to the rubber manufacturer. He enjoys protection from the corporate unless it is proven in court that there is a need to pierce it.

The corporate veil may be pierced in court when it discovers that the owners created it to commit fraud, avoid their legal duties, or take part in the breach of the agreement. One could argue that there are no grounds to pierce the corporate veil because there is no evidence of the above, unlike Gilford Motor Co Ltd v Horne [1933] Ch 935. The corporation act allows for the piercing of the corporate veil if evidence suggests insolvent trading. However, the case’s facts only claim that the one million dollars invoice was not paid, and there is no suggestion of insolvent trading. In there was proof of insolvent trading, Fred could have been personally liable.

Conclusion:

Fred is not personally liable for the unpaid invoice

3

Issue: What is Hui’s rights, if any, against Ashmore Office Equipment for selling him a stolen laptop?

Rule: Section 52 of the Australian Commercial law maintains that if the buyer lacks ownership or title to the bought property, there is a consideration failure.

Section 52 Australian Commercial law also states that buyers should have and enjoy undisturbed possession of the bought products (Gibson, 2018).

Application:

The Australian Commercial law requires the seller to have the right to sell a product at the transaction time. Section 52 of the Australian Commercial law maintains that if the seller lacks a title for the product or does not own it, then there is a failure in consideration. Section 51 of the Australian Commercial Law maintains that the seller is entitled to a refund from the seller despite using the product in case the seller lacked title to the goods.

In this case, Hui lost his laptop ownership because the Ashmore Office Equipment lacked title to the laptop as it was stolen. The consideration from Hui to the Ashmore Office Equipment was a $500 payment in exchange for the laptop. The transaction implied that Hui received a guarantee to enjoy the laptop undisturbed, which means no third party should have arisen and claimed title to the laptop.

In Rowland v Divall [1923], the court declared that there was a failure in consideration because Divall had sold Rowland a stolen car. The court, thus, ordered a full refund despite Rowland’s use of the car for some time. Similarly, in this case, Ashmore Office Equipment has no right to sell Hui a stolen laptop and, thus, a failure in consideration on their part. Hui is thus entitled to a refund.

Conclusion

Hui has rights against Ashmore Office Equipment as provided in section 51 and 52 of the Australian Commercial Law.

4

Issue: Could having a similar name result in an issue under Australian Consumer Law?

Rule: Section 18 of the Australian Consumer Law forbids engaging in actions that mislead or deceive or likely to mislead.

Application: Passing off arising when a company uses a name that sounds similar to the name of another company (Gibson, 2018, p 443). As a result, the competitor creates intentionally or unintentionally creates confusion among consumers. Gibson maintains that section 18 has alternatively been utilized to common law when looking at the use of similar laws (2018).

Section 18 entails three aspects; the conduct of the person, commercial activity, and misleading actions. In this case, the person can be seen as the Chile Con Carne of Australia Pty Ltd, the activity is opening a restaurant and, misleading action is employing a similar name (Gibson, 2018, p 441).

When examining whether the actions are deceptive or not, the court should conduct an objective test. In Taco Company of Australia v Taco Bell Australia [1982] ATPR 40-303, the court followed the following guidelines;

1. pinpoint a section of the people that the defendant targeted.
2. Ascertain how the conduct affected several members of the public.
3. Decide if the action can mislead.
4. Ascertain if the defendant’s action misled the public (Gibson, 2018, p 444-445).

Chile Con Carne would prove that Chile Con Carne of Australia Pty Ltd has engaged in misleading conduct by showing that their revenues have reduced. One could also argue that since Chile Con Carne has an established character of providing fine food, Chile Con Carne of Australia Pty Ltd’s name is likely to confuse consumers.

Conclusion:

Chile Con Carne of Australia Pty Ltd breached section 18 of the Australian Consumer Law.

5

Issue: Can Kowaiski and Smith be relived from their contractual duties due to the war declaration between Russia and England?

Rule: The problem is based on the elements of frustration.

For a contract to be declared as frustrated, the following aspects have to be first determined;

• An unpredictable event beyond the control of the parties
• None of the parties caused the “frustrating event.”
• None of the parties contemplated the “frustrating event.”
• The new situation would make it unjust to hold the parties responsible for the contract (Gibson, 2018, p.375).

Application:

Termination of an agreement ends it legally before either party has done its part as required by the contract. Most contracts end after all parties have performed their contractual duties, which is called termination by performance. Nevertheless, in this case, the declared war between England and Russia frustrates the agreement and makes it difficult for beyond Kowaiski and Smith to perform their contractual duties.

As mentioned above, the doctrine of frustration requires the elements for the contract to be viewed as frustrated. In this case, the war declared between Russia and England is unpredictable. Neither Kowaiski and Smith’s caused or contemplated it and, it makes it illegal for them to transact.

Gibson claimed that the doctrine of frustration could be applied if the government interferes or change a law (2018 p 376). In Horlock v Beal [1916] A.C. 486, it was declared that the seamen’s capture made it impossible for them to perform their contractual duties and, thus, the contract was discharged due to frustration. In this case, the war between their countries makes it impossible for Kowaiski and Smith to continue with the contract.

Conclusion:

Kowaiski and Smith should be relieved from the contractual obligations due to frustration.

6

Issue

Does the sum of $3000 set by Stellar Motor Company constitute liquidated damages or a penalty?

Rule:

Liquidated damages are a pre-established estimate of the loss that a company will endure in case of breach of the agreement (Gibson, 2018, p 400).

Application:

Damages refer to the amount that a party is paid to reimburse them for the legal wrong that the other party caused. Damages could be fixed within the contract (liquidated) or not pre-estimated(unliquidated).

The law requires that damages be only liquidities in the case;

• It is difficult to quantify the damages.
• The amount is reasonable and takes into account the harm caused by the breach of the agreement.
• The damages are made to function as damages, not a penalty.

In this case, Stellar Motor Company has declared payment of $3000 for any product sold below the listed price. However, the compensation is not reasonable because the breach may be minor or major, resulting in different Stellar Motor Company losses. Therefore, the $3000 for each breach of the agreement is excessive relative to the loss that arises from selling below the listing price.

The law is clear that the amount should be made to act as damages and not a penalty. In Dunlop Pneumatic Tyre Co V New Garage and Motor Co Ltd [1915] AC 79, the latter was required to pay the former $5000 for selling tires and other products below the established price. The court agreed that the sum was excessive and not a genuine approximation of losses but an intent to punish. Similarly, the $3000 for every breach is more than the loss suffered and is regarded as a punishment rather than damages (Gibson, 2018, p 401). The amount is thus unenforceable.

Conclusion

The $3000 is a punishment rather than a genuine pre-estimate of the loss.

7

Issue:

Is Steven’s acceptance letter posted on the 8^th via post instead of express courier, valid?

Rule:

The law requires that if the offeror mentions the mode of acceptance, it has to be respected.

The postal rule claims that acceptance becomes operative as soon as it is posted (Gibson, 2018, p 216).

Application:

An offer is an invitation by the offeror to the offeror to the offeree to enter into a bargain. An offer needs to be communicated and should have definite terms (Gibson, 2018). In this case, Brendan communicated his willingness to buy fabric from Steven by sending a letter via express courier services.

Acceptance refers to the declaration of offeree of their willingness to accept the offeror’s promise. Contract law requires that acceptance be communicated to the offeror, be done within a reasonable time, and be legal. In this case, Steven communicated his acceptance by sending a letter on the 8^th via post, the next day after receiving the offer.

In Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1954) 76 WN (NSW) 72 (354) (228), the court declared that terms of an offer have to be adhered to and, thus, the tenant was not entitled to renewal of the lease due to breach of the punctual payment term on the contract. In this case, one can argue that Steven’s failure to send the letter via express courier was a breach of the acceptance terms. However, the footnote Brendan placed can be seen as a suggestion because he did not specify that he only wanted the letter to be returned via expressed courier services.

In Adams v Lindsell (1818) 106 ER 250, the court declared a valid acceptance was created as soon as the claimant placed the letter in the mailbox. Similarly, Steven’s letter of acceptance was valid as soon as he posted it on 8^th April.

Contract law declares that an offer can only be revoked after it has arrived at the offeree but before it is accepted. In this case, Steven accepted the offer on the 8^th while Brendan revoked his offer on 15^th April. In Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344, the court declared that revocation could only apply to the postal rule if the revocation were communicated to the offeree before accepting. As a result, there is Brendan breached the contract.

Conclusion

Brendan is legally bound to the agreement from 8^th April.

References

Gibson, A. (2018). Business Law (10th ed.).