LAW6000 Business And Corporate Law Questions Assessment 2 Answer
a) Issue: The legal issue occurred in the given scenario is whether Paul will be held personally liable for the unpaid debts by the Motor Solutions or not.
Rule: According to the Corporation law, a company is a separate legal entity which is created by the legislation. It is an artificial person with separate identity which can sue or be sued by another. The liabilities, assets and debts of the company are different from the personal assets and liabilities of members and directors of the company. A separate legal identity of company provides it similar rights and powers under the law as a person. With that separate legal identity, a company can enter into a contract with another party or may acquire a property on its name. However, the activities and functions of business in the company are performed by the directors of the company because it cannot perform them at its own as a natural person. For the purpose of aiming an adequate performance, there are some duties and regulations described in the corporate law which govern the performances of the directors. Breach of any of these duties may result into occurrence of liability on the defaulting directors. in contrary to such rule, the directors may present a defense against the liability occurred on them by arguing that they have taken the steps in the interest of company but due to some uncertain circumstances the things went wrong (CARNEIRO, 2018).
Application: In the given case, Paul, the managing Dynamight Pty Ltd, has entered into a deal with Motor Solutions for providing 300 electric dynamos. The order has been completed on the agreed terms but a due invoice of $90,000 was remained unpaid by the Motor solutions. At the time of making the deal, Motor solution was suffering from some financial crisis and Paul was aware with the situation but he agreed to perform the deal because Bob, the managing director of Motor solution was his friend. In that case, Paul has not performed the deal with the Motor solution for taking any personal advantage hence he cannot be held liable for the unpaid debts by the Motor solutions. However, he may be held liable for the breach of duty of care and diligence because he was known with the poor financial conditions of Motor solution but did not conduct a proper diligence process before initiating the deal.
Conclusion: Hence, Paul cannot be held personally liable for the unpaid amount as he has performed the deal on the behalf of company and the separate legal identity of company protects the directors from personal liability of business’s debts and liabilities.
b) Bob, the managing director of Motor Solutions can also not be held personally liable for the unpaid amount of $90,000 because he has also performed on the behalf of company and no director can be held personally liable for paying the debts occurred in the business (Bodu, 2018). Therefore, only Motor Solutions can be held liable for paying the unpaid amount to Dynamight Pty Ltd.
c) In the given scenario, Paul can be held liable for the breach of duty of care and diligence for not taking an appropriate diligence action while making the deal with Motor solutions. However, he may use the defense of business judgment rule to escape such liability. By using such rule, he may argue that he has performed the deal in the interest of business but due to some uncertain events the deal went wrong and caused adverse outcomes for the company.
Issue: The issue of law occurred here is whether Michael owes a contractual liability to Lorraine and to Colleen.
Rule: A contract is initiated with a legal offer which must be accepted by the offeree by affirming all the terms of offer. In an offer, the offeror has the right to revoke the offer at any time before receiving the acceptance on it but once the acceptance is given by the offeree, it becomes a legal promise which cannot be revoked or cancelled by the merely taking action of offeror. However, if a specific period of time has been provided to the offeree for providing his acceptance then before the expiry of such time period, the offeror cannot revoke or cancel the offer. In addition to that if a postal acceptance is given then the date of postal delivery by the offeree shall be considered as the date of acceptance (Djigsa, 2016). Hence, it does not matter in case of postal acceptance that on which date the acceptance is received by the offeror.
Application: In the given scenario, Michael owes the contractual liability towards Lorraine because she has provided her acceptance on the offer within the specific time offered to her for giving her acceptance. However, the letter containing the acceptance of Lorraine was not delivered to Michael until 19 November but as per the postal rule of acceptance, the acceptance shall have considered to be given on the day when the letter was posted by Lorraine. In between of the period given to Lorraine for accepting the offer, Michael accepted the offer of Colleen who offered $5,000 for purchasing his car. Therefore, he also entered into a contractual relationship with Colleen (Defossez, 2019).
Conclusion: Hence, Michael owes the contractual liability towards both Lorraine and Colleen and Lorraine can present a claim against him for the breach of offer.
Issue: Here, the issue is that the agreement formed between Entertainment Concepts and Alternative Sounds was a partnership or joint venture.
Rule: There are several differences between the business structure of joint venture and partnership. An agreement of partnership can only be held between the individuals whereas the joint venture agreement can be formed either between individuals or entities. A joint venture arrangement does not need to have a trade name and usually created for a specific purpose. While the partnership arrangement is needed to contain a trade name under which the partnership firm will perform. The co-venturers in the joint venture business have a specific agreement for determining the ratio of profit, joint liabilities and several liabilities. The joint venture agreement is not regulated by a specific act and the terms of agreement determined between co-venturers is governed by the rules of contract law. It was held in the case of “Brian Pty. Ltd. v. United Dominion Corporation Ltd (1985) 157 CLR1” that joint venture is an association of natural persons or corporates, who agree to operate for a common goal by combining their resources by forming a contract (Bamel, Dhir, & Sushil, 2019). These features of a joint venture agreement make it different from the partnership business arrangement.
Application: As per the given scenario, Alternative Sounds and Entertainment Concepts Pty. Ltd has a written joint-venture agreement to finance the musical tours for Jay Loh. They agreed to divide the profits of performance contract between them at the end of year. However, they also agreed that the losses occurred will not be shared between them in the ratio of profits. The finance issued by Entertainment Concepts was considered as a loan to the joint venture and it was decided that after the repayment of loan, the profits will be equally shared between the companies. Later, a dispute has been occurred on which Meshak is worried about the structure of their partnership. Here, the business relation followed by the Entertainment Concepts and Alternative Sounds is a joint venture agreement as it comprises all the features of joint venture business (Wong, Wei, Wang, & Tjosvold, 2018).
Conclusion: Therefore, the dispute occurred between co-venturers shall be dealt by using the remedial measures provided for the joint venture business such as mediation and arbitration.
Issue: The question of law arise in the given case is whether the Reliable Truckies Pty Ltd. Shall be liable for the injury of Satwant under the law of agency or not.
Rule: According to the law of agency an agent is a person who is being authorized by the principal for performing on his behalf by an expressed or implied authority. However, an agent is different from an independent contractor. An independent contractor works independently for the employer and he does not carry an agent-principal relationship with the employer. The principal employer has both direct as well as vicarious liability for the acts of his servant which are done on the behalf of him but he is not liable for the acts of independent director because they do not have any direct relationship. An independent director is a person who is contracted for the services while an agent is contracted for the contract of services (Oppenheimer, 2019). It varies the liability of principal towards an agent and independent contractor.
Application: In the given case, Satwant’s company “Kwic transport Ltd” was working independently for the Reliable Truckies Pty Ltd. However, his company voluntarily follows the work system of Reliable Truckies Pty Ltd. But there is no direct control of Reliable Truckies on the working of Kwic transports. Hence, there is no direct relationship between the Reliable Truckies and kwic transports which makes the Reliable Truckies liable for the injury of Satwant. Satwant was performing for the Reliable truckies as an independent contractor which entitled to him to enjoying the right and facilities of an independent contractor only which includes the right to fair wages, to get restrooms, drinking water and first aid facilities (Swartz, & Ozoo, 2016). In this case, there no event has occurred for attracting the vicarious liability of Reliable Truckies against the injury caused to Satwant.
Conclusion: Hence, Satwant cannot present his claim against Reliable Truckies for compensation for injury.
Issue: The issue is related to the grounds on which Jennifer can enforce the judgment against the new company, Antique Collections Pty Ltd.
Rule: As per the Corporation Act, 2001, the option of restructuring is used by the companies to modify its operational efficiency or capital structure. While the process of restructuring a priority waterfall is to be followed by the company for making the payments to existing creditors. In such order, after the secured creditors, the employees are being paid. The outstanding amounts of employees are paid before the claims of unsecured creditors. In case of whole restructuring of the company, the outstanding entitled amount to employees can be recovered from the resulting company. Also, if any legal claims or proceedings are pending before the Court then on the award issued by the Court, the ordered amount can be recovered by the resulting company because along with the assets of Target Company, the liabilities are also transferred to the target company (Garcia, Junior, & Lucena, 2020).
Application: In the given case law Jennifer was unfairly terminated by the Wayward Sales Pty Ltd on which she has filed a legal suit against the company. The Court awarded an order for paying the substantial damages against the Wayward Sales Pty Ltd. However, before the issue of award by the Court, the Wayward Sales Pty Ltd has restructured the company by transferring its assets to a new company and named it Designer Collections Pty Ltd. In that case, Jennifer may force the Designer Collections Pty Ltd for compensating the damages to her on the basis of award issues by the Court. Also, she may argue on the grounds of Corporation Act, 2001 that restructuring of company also transferred the liabilities of Target Company along with the assets of the company (Hansen, 2016). In addition to that a pending legal order which makes a party enable for getting the compensation from the Target Company can be recovered from the resulting company.
Conclusion: Hence, Jennifer has the right to enforce the Court’s award for getting the substantial damages from the Designer Collections Pty Ltd.