| Assessment Details and Submission Guidelines | |
| Trimester | T2 2019 |
| Unit Code | HI6027 |
| Unit Title | Business and Corporate Law |
| Assessment Type | Group Assignment |
| Assessment Title | Case Studies of Business Law and Corporations Law |
| Purpose of the assessment (with ULO Mapping) | The purpose of the Group Assignment is to provide students with an opportunity to work in a collaborative environment in solving two case problems by citing the relevant legal rules and cases and applying these to the facts of the case. In this Group Assignments, students are required to:
|
The Group Assignment aims to provide students with an opportunity to work in a collaborative environment in solving two case problems by citing the relevant legal rules and cases and applying these to the facts of the case.
Students are to form groups, with a minimum of 3 and a maximum of 5 students per group. The assignment consists of 2 parts: a 2,000-word written report and a 10 minute (average) in-class or video presentation.
Instructions: Please read and re-read carefully to avoid mistakes.
Part A: Contract Law Question
Part B: Corporations Law Question
Important Reminders:
SOO Burgers is a chain of hamburger restaurants operating in Australia and New Zealand. Sales across the restaurant chain were slow in the last financial year. In order to sell more hamburgers, SOO Burgers ran a competition Australia-wide, which was extensively promoted on radio, newspapers and online. The promotion is called “the Fair Dinkum deal”. According to promotion rules, a token would be attached to the wrapper of every “Double Decker Emu Burger”. If a customer collects 50 of these tokens, they could be redeemed at the counter for a golden scratch ticket. The promotion rules also stated:
“Fair dinkum! Scratch the golden ticket. If it reveals a golden car, present your ticket to the SOO Burgers head office and win the grand prize of a brand new Mazda CX-9.
Hurry! This promotion doesn’t last forever!”
Michael “Mickey” Morrow was extremely keen to join the promotion and win the car. It also helped that he loves SOO Burgers, particularly the Double Decker Emu Burger. The very next morning after he heard the promotion announced on radio, he rushed to his favourite SOO Burgers branch in Fitzroy. He ordered 50 Double Decker Emu Burgers. Mickey was a man on a mission, and he ate as he had never done before in his life. He passed out from exhaustion and had to be rushed to the emergency room of his local hospital to get his stomach pumped. Luckily though, before passing out, he made sure to redeem his 50 tokens at the counter for a golden scratch ticket.
As would be expected, not all customers were thrilled about going to SOO Burgers and buying a Double Decker Emu Burger just for the chance to win a car. Consequently, many burger wrappers that contained tokens were thrown away in the rubbish bins. Brett Vulture scavenged through the rubbish bins of the SOO Burgers branch at Altona. To collect the discarded wrappers for their tokens. He quickly collected 100 tokens. He went inside the restaurant and redeemed the tokens for two golden scratch tickets. He was ecstatic when he scratched them and found, not one, but two golden cars! He then rushed to SOO Burgers head office in Melbourne, where he presented his winning tickets. The receptionist told him to wait at the reception waiting area. While waiting, an employee came from inside the office and posted a sign on the front door of the office. Curious, Brett approached the sign and read:
“SOO Burgers apologises that because of a printing error, incorrect golden scratch tickets were included in the Fair Dinkum deal. Management is sorry to advise that these faulty tickets are void and will not be honoured.
SOO Burgers thanks its customers for their patience and invite all of them to join its next exciting promotion.”
As Brett looked at the posted in dismay, he spotted another customer who emerged from office accompanied by a SOO Burgers employee. The customer was smiling from ear to ear as he shook the employee’s hand, and said, “I’m so happy to win the car!” It turned out that that customer came in before Brett and presented a winning golden scratch ticket. SOO Burgers honoured his ticket since it had already purchased the only Mazda CX-9 that it was going to give away as the big prize.
In the meantime, while Mickey was at the hospital, SOO Burgers’ announced on radio, newspapers and online that there had been a printing error in the golden scratch tickets. As a result, instead of only one winning golden scratch ticket in the promotion to win the Mazda CX-9, every one in five tickets were winning tickets! SOO Burgers announced that it was immediately declaring that their Fair Dinkum promotion was void and would not honour any prize claims. Mickey did not actually
read or hear this announcement. But he overheard some nurses talking as they passed his room about SOO Burgers promotional fiasco and the cancellation of the entire promotion.
Mickey quickly found his golden ticket, scratched it and found a golden car. Thinking that he had not heard anything official from SOO Burgers itself, he discharged himself from the hospital and went straight to the company’s head office with the aim of redeeming his winning ticket. When he arrived, there was a mob of angry customers outside the notice on the front door. As the crowed covered the notice, Mickey did not read it; instead, he approached the receptionist and presented his winning ticket.
SOO Burgers now seeks your legal advice on whether they have to provide (a) Mickey and (b) Brett with the Mazda CX-9s they are claiming. Please advise on Mickey’s and Brett’s positions separately.
Frederick Forthryrt is the author of the bestselling novel The Day of the Yokel, which was published by Metro Publishers last year. Forthryt has just completed his second book, The Fourth Pretzel.
Forthryrt does not believe that Metro treated him well, considering the success of his first book. At a party in late February, Forthryrt met Boswold, who was the chief editor at Boswold Books, and asked whether Boswold would be interested in publishing his second book.
Forthryrt said:
‘Mind you, I wouldn’t settle for anything under 40 grand.’ Boswold said he thought that was a fair price.
On 3 March, the editor at Metro Publishers telephoned Forthryt and asked whether he had competed his second book. Forthryrt answered:
‘Yes, and I’m going to sell it to the highest bidder. And I’m dead serious about that.”
The editor at Metro said his company was prepared to pay him $50,000. Forthryrt said he would ‘think about it’.
On 4 March, Forthryrt received a letter from Havoc Films in which Havoc said I would pay him $45,000 for the rights to make The Day of the Yokel into a film. That afternoon Forthryrt wrote back saying:
‘I accept your offer, but must have final say in who plays the lead role.’
On 10 March, Forthryrt received a letter from Boswold enclosing a Boswold standard form contact. In the letter, Boswold said:
‘Further to our agreement re publication of your second book The Fourth Pretzel,
please find enclosed formal contract for $40,000 for your signing.’
The contract included a clause specifying the sale included ‘all rights to newspaper and/or magazine serialisation of the said book’ as a non-severable part of the package Boswold was prepared to pay for. Forthryrt did not read the clause. He telephoned Boswold and told him that Metro was willing to pay $50,000 for the book. Boswold said:
‘Well, we can go as high as $45,000.’
Thinking that Boswold Books would give him better treatment than he had received from Metro, Forthryrt substituted $45,000 for $40,000 as the sum payable under the contract and signed the contract. He then put the contract in an envelope and took the envelope to the local post office where he handed it across the counter to a postal worker he
Legal Law
Option-2
In which contract Forthryrt will be fully legally binding while entering into the contracts?
Contract is agreement which is enforceable by law and entered between two and more parties. However, in order to formulate legal contract, following elements of the contract needs to be full flied.
Offer- There needs to be an offer given by one party to another party. In this case, various publishers gave the offer to Frederick forthryrt for publishing his book. Therefore, first element of contract offer has been seen as offer is being made by publisher to Frederick forthryrt (Cartwright, 2016).
Acceptance- As per the contract law, acceptance must be given by offeree against the offer made by the Offeror. In the given case, there are several situations which could be found as acceptance given by Frederick. However, condition of the acceptance should be given by both parties to the contract (Andrews, 2015).
Consideration- It is the imperative part of the contract. The contract needs to be supported by the consideration or exchange of thing in the undertaken agreement. Therefore, for the legal contract, there needs to be the consideration in the contract among the parties to the contract.
Legal relation-As per the contract law, both parties to the contract should be legally capable to enter into the contract and they should also have intention to enter into the contract (Poole, 2016).
Certainty- This element of the contract, reveals that all the set conditions and terms should be certain, precise and accurate for entering into the contract. The enforceability of the contract is based on the certain conditions drawn in the contract (Draper, and Newton, 2017).
In the given case law consist the question of contract law between Frederick Forthryrt is an author of bestselling novel named “The day of Yokel”. This book was published by Metro Publishers. Frederick Forthryrt was not happy with the treatment provided to him by Metro Publishers and was looking for some genuine publisher for the publication of his second book “The Forth Pretzel”. Later Frederick met Boswold at a party, who is the chief editor at Boswold Books and proposed him to publish his next book. They had the conversation regarding the fair price for the publication of such book and Boswold given his consent for such publication. In between the time contract took place between Frederick and the Boswold Books, On 4 March, Frederick has received another offer from Havoc Films, in which they want to make a film on the storyline of his book and for that they would pay him $45000. After having further conversation with Boswold, Frederick decided to go with the offer of Boswold and signed the contract with Boswold. After signing the contract, he put the contract into an envelope and went to the post office to post the envelope. Frederick handed over the envelope to the postal worker and came out from the post office. Outside the post office he met Pickwick who is a famous publisher and well-known for his good behaviors towards the authors. Pickwick said him that he wanted to publish his book and after having a small conversation both Pickwick and Frederick had decided to enter into a contract for the publication of book “The Fourth Pretzel”. Frederick returned to the post office to get back the envelope of contract and also took the drawn cheque of $45000 from Pickwick for the contract of publication of book. Now Frederick has the query regarding the legality and validity of the several contracts he had with different parties. He wanted to know that which contract is binding on him and in which circumstances.
Here in the given case Frederick had entered into the contract with Havoc films but with a condition. The contract is legally binding on the parties if it is enforceable by the law. As in the case of Shaddock and Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59, (1981) 150 CLR 225, it was held that for making a contract legal, it is necessary to consider the entire requirements for establishing a contract. There must be an offer and it should be accepted by the offeree. The offer should contain a consideration and consent of the parties must be free, final and clear. In case of any conditional contract, the condition should be mentioned into the written contract. As held in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13, (1977) 180 CLR 266, Privy Council it was stated that the legality of any contract defines the validity and binding of conditions of contract on the parties. The contract of Havoc Films cannot bind Frederick to perform his part because he has not given his final consent and his consent is associated with a condition which is not fulfilled yet. Here in this contract the consent or acceptance of offeree has not been granted fairly and completely. Hence it cannot be considered as a valid and binding contract. This is kind of contract which is conditional and based on the conditional consent of the party. However, Frederick can be held liable by the Havoc Films for entering into another contract without informing them about the circumstances and also can held him responsible because he didn’t wait for the fulfillment of the condition to the contract (Poole, 2016). On the other hand the contract with Boswold will be binding if it is received by Boswold but as mentioned in the case, Frederick get back the envelope of the contract from the postal person i.e. it had not been posted to the Boswold. Here also the acceptance of party could not be received by another party which makes the contract incomplete and void. In the contract with Pickwick, Frederick has accepted the offer and consideration both from the Pickwick. However, it is an oral contract but it fulfills all the requirements of a valid contract. As per the case of Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 it was held that in order to have legal binding of the contract, there needs to be offer, acceptance and consideration. Therefore, this will be contract a legal binding contract. Also the acceptance is free and final and there is no condition is attached with the consent of Frederick. Hence the contract is binding to both the parties i.e. Frederick as well as Pickwick.
In the end of the discussion of such case law, we can state that the contract formed between Frederick and Pickwick is valid and binding to the parties of contract. A contract is not only an agreement between the parties but also a legal transaction between people which includes the fulfillment of several requirements for the legal contract. The Contract entered between Frederick and Pickwick will be legally binding contract and any of the party breaching the contract will be liable to compensate other party to the contract.
Option-2
What is Mercedes legal position with regard to breaches of her duty of care and director’s diligence?
Was her decision to ready to purchase new assets being protected by 180(2) of the corporation act 2001?
Would she be liable for breaching 588G of the Corporations Act 2001 if Joytronics is found to insolvent?
How Gregg would be liable of any breaches of his duty of care and any liabilities for the insolvent trading if Joytronics is found to insolvent?
There are several duties of the directors which a director of the company needs to perform to discharge his legal liabilities and duties.
Acting for the purpose—the director of the company will act in the company for the certain purpose. The executive directors lead the organization and have an active role in the company (Walton, 2019). It is a civil obligation of any director or officer to make all decisions or judgments in good faith of the stakeholders and company by having no personal interest.
Act in the best interest of the company- All the directors of the company will act in the best interest of the organization (Van Zwieten, 2018). If any of the decision taken by the director against the interest of the company will result to his personal liability.
Avoid the conflict of interest- The director of the company should not hold the situation of the conflict of interest in the company. A non-executive director is not an active director in the company and is not responsible for the daily operations of the company but is involved in all the management exercises. It is considered that directors owe duty of the care, diligence and work in the good faith. These directors are responsible for monitoring the activities of executive directors and acting in the interest of all stakeholders of the company (Keay, 2015). Therefore, executive director will hold the situation to avoid the conflict of interest in the company.
Retain discretion- It shows that director must hold freedom to make decisions on the behalf of the company and acts freely. They needs to act in the best interest of the organization by keeping the extent of their liability in the sustainability of the organization.
Act with care and diligence-Directors of company should follow all guidelines about the care and diligence which needs to be taken by an officer or director of the company.
Responsibility- the liabilities of all directors are different and based on their role in the company. Breach of law or regulations and management behaviors, all the directors are responsible. The Section 588G of such Act suggests that a director is liable for the insolvency of company if he is aware about the circumstances of company at the time of incurring debts (du Plessis, 2019).
In the case law of Joytronics Pty Ltd, the question of law is related to the legal position of the directors and their liability in case of breach of any law or regulation. Joytronics operates a retail store of electronic kits, components, semiconductors, batteries, chargers, tools, speakers and car audio, stereo and accessories. There are only three directors and shareholders in the company named Felix, Gregg and Mercedes. Joytronics opened its Sydney store seven years ago. The Sydney store of company has done very well and earned consistent profits until the end of year 2018. In last six months, Joytronics business suffered and its profits reduced due to opening of a rival business unit at the same business place. For making more profits and to establish a larger store of Joytronics, Felix decided to move the store in a different area of Sydney. He acted alone without asking to any other director and chose a place at Parramatta, where the store would be relocated. The selling price of the new warehouse is higher than the budget of Joytronics but Felix finalized the location and think that the future profits of Joytronics will meet the difference of budget. Felix calls a board meeting to discuss the issue of Joytronics and proposed the relocation option among the other directors of Joytronics. The other two directors gave their consent for the proposal of relocation and the Joytronics sets up its business in Parramatta. The Parramatta store does not perform well due to several factors and the new store is not profitable. Now both the other directors are stressed about their obligations and want to know about their liability under the concerned matter. In the given case Mercedes is a considered to be non-executive director and Gregg and Felix are executive directors.
(a) Being a non-executive director, Mercedes is not liable for the day to day operations of the business but she is equally liable for the management decisions and planning exercise. In case of any decision, planning or policymaking and breach of any law or regulation, Mercedes can also be held legally responsible. Also she could be held responsible under the section 180 (2) and 588 G of Corporation Act, 2001 (Cth). As in the case of Pilmer v Duke Group Ltd (in liq) [2001] HCA 31, (2001) 207 CLR 165 (31 May 2001), it was held that the directors and officers of the company are responsible for the care and diligence of the regulations of the company and also liable for the insolvency circumstances of the company. She could prevent the actions taken by Felix and could also consider some other options for the relocation of store.
(b) Any director is liable for the insolvency of the company if he or she is aware about the circumstances and decisions of the company which are in contravenes of the company. As in the case held of Carrier Australasia Ltd v Hunt [1939] HCA 21, (1939) 61 CLR 534, it was found that directors would be liable for the insolvency of the company if they were found to be hiding information regarding the insolvency of company. However, in the given case Gregg was not known with the financial situation of the company and also uninformed about the Felix’s actions but he could be liable under the care and diligence regulations if Joytronics becomes insolvent. He could have taken the knowledge about the finances of Joytronics and compare it with the budget of relocation of store.
After the entire analysis of the given case, it is considered that all the directors can be held liable for the insolvency of the Joytronics due to their equal involvement and ignorance of circumstances of the company. Felix has performed all the actions alone and other two directors gave their consent without reconsidering the matter. Also the directors did not even consider the budget factor for the opening of new store of Joytronics. If the circumstances become worst and results into the insolvency of Joytronics then all the directors would be held responsible for its insolvency.
Login
Pages: 4
Words: 890