Summary notes for business and corporate law PDF

Preview

Summary

It is a summary note about lectures of the business and corporate law....

Description

WEEK 1 AUSTRALIAN LEGAL SYSTEM Separation of powers: legislators make laws but cannot judge or carry out, judiciary decides the law and should not make or enforce, executive carries out the law but not decide or create; but courts in fact do make law, parliament does have an executive role, executive does make regulations. Common law and precedent: binding precedent; ratio decidendi (the reason for the decision) used as a main principle, obiter dicta (comments and observations made when reaching a conclusion) may be important as steps of reasoning; persuasive precedent; reversing, overruling, disapproving, distinguishing. Adversarial system: a combative or argumentative style of contest in order to bring out the points of contention between the parties; judge keeps order and ensures rules of court are met. Tribunals: a forum for determining a resolution to dispute, as an alternative to a court; less formal, less adversarial and more inquisitorial; more specialised and expert on a restricted range of matters; cannot enforce a decision like a court; much cheaper to access; not encourage legal representation; numerous at federal and state level. Alternative dispute resolution: a matter can be resolved without the use of lawyers, lengthy legal processes or adversarial-style hearings, and in a much cheaper manner; may be done through private arrangements within a contract, or with the use of professional arbitrators or mediators; advantages – shorter time period, few costs than litigation, preserves confidentiality, allows parties to have greater control over the selection of the individual(s) who will decide their dispute; at least 4 types – negotiation, mediation, collaborative law and arbitration. WEEK 2 BUSINESSS STRUCTURE Partnerships: the relation which subsists between persons carrying on a business in common with a view of profit; carrying on business – some continuity or repetition of activity, may be a one-off and isolated transaction (determined by facts); in common – acting together, existence of mutual rights and obligations between; a view of profit – parties expect that business they intend to carry on will be profitable; not need to be registered. Rules for determining existence: common law – intention (by words, actions, written agreements, etc.), agency (may indicate), sharing of profits and losses (may indicate); statutory – co-ownership (not automatically determine), sharing of gross returns (not indicate), sharing of profits and losses (prima facie evidence, but not a partnership if profits shared for non-partnership reasons, such as sale of business). General partnerships: unlimited liability, not a separate entity; 1-20 members (s 115 of CA); partners with the greatest assets will pay more than others; bankrupts no longer liable for debts. Law of agency: partnership are agents for each other; outsider must be aware that they are dealing with an agent. Power of a partner: each partner is an agent and a principal (mutual and reciprocal agency); may be specifically appointed under contract; actual authority may come from written agreement or implied from partner’s dealings with others; may be assumed to be an agent by apparent or ostensible authority excising on behalf of principal. Liability to persons outside the firm: liable for each other’s actions to a third party where partner conducts business in the usual way within the usual business (Mercantile Credit Co Ltd v Garrod [1962]); exception – principal partners not liable for the actions for agent partner where outsider knew of the agent partner lacked authority or did not believe that person to be a partner; extent – jointly liable for debts and obligations and can be sued only jointly and not individually in contract, whereas jointly and severally (can be sued individually and jointly) liable in tort. Holding out (liability by estoppel of apparent partners): any person holding some out as a partner, or allows themselves to appear as a partner, will be estopped from denying liability for that person’s actions; arises when a representation made by the apparent partner or with knowledge of that person, reliance on the representation, and the third party provide credit and suffer detriment as a result (Tower Cabinet Co Ltd v Ingram [1949]). Liability of incoming and outgoing partners: only liable when members; not liable before joining, but remain liable after leaving; may accept liability for existing obligations when joining, or receive an indemnity when leaving. Fiduciary duty of utmost good faith – must act under trust; duty to render accounts – must render true accounts and full information of all things affecting the partnership when requested (Law v Law [1905]); accountability for private profits – all incomes and profits related to partnership must be given to partnership; duty not to compete with firm – must not use property of the firm to the detriment of the partnership. 1

Rules as to interests and duties: share equally in capital and profits; receive an indemnity during; can receive interest for monies lent to business, can participate equally in management; not entitled to remuneration; variation – a mutual rights and duties under statute may be varied within own agreement (Public Trustee v Schultz (1964)). WEEK 3 CONTRACT LAW, AND OFFER AND ACCEPTANCE Expressly excluding intention to be legally bound: by inserting a clause in the contract that there be no legal relationship (Jones v Vernon’s Pools Ltd [1938]). Offer: a promise to do or refrain from doing something in exchange for something of value from another party. An invitation to treat: an invitation to receive an offer; distinguished from an offer (Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953]); can be conventional non-self-service shopping situation (Fisher v Bell [1961]), brochures and advertisement (Grainger & Son v Gough (Surveyor of Taxer) [1896]), vending machines and self-service petrol, tenders, auctions. Acceptance: a definite and unqualified assent to an offer, which complies with the terms of the offer. Rules: must be clear – conditional acceptance (accept an offer subject to certain conditions, Masters v Cameron (1954)); offeror’s requirements must be met – offeror’s exclusive method of acceptance must be used, offeree may accept by an alternative efficient method (Eliason v Henshaw (1819)), offeree can use same communication method as offeror, acceptance is communicated only when received by offeror (Entores Ltd v Miles Far East Corporation [1955]), postal rule of acceptance and electronic communications; must be given in reliance on offer (R v Clarke (1927)); must be communicated – silence and inactivity cannot produce a contract (Felthouse v Bindly (1862)), implied acceptance (from the conduct of the offeree such as words and actions, Brogden v Metropolitan Railway Company (1987)). Communication of acceptance by agent (Powell v Lee (1908)). Cross offers: identical offers made by 2 parties at the same time (Tinn v Hoffman (1873)); battle of forms – both sent their printed standard form of offer at the same time (Butler Machine Tool Co Ltd v Ex-Cell-O (England) Ltd [1979]). Counter offers: has legal effect of destroying the original offer (Hyde v Wrench (1840)); distinguished from a mere request for information, which does not destroy the original offer (Stevenson, Jaques & Co v McLean (1880)). Revocation: can occur by offeror withdrawing the offer before acceptance, the notice from offeror must actually be received (Byrne v Van Tienhoven (1880)); must come from a reliable source (Dickson v Dodds (1876)). Lapse of offer: the passing of time may mean the offer has lapsed (Ramsgate Victoria Hotel Co v Montefiore (1866)), the reasonable passing of time much depends on industry standards and expectations. WEEK 4 CONSIDERATION, SPECILIZED COMMERCIAL CONTRACTS AND CAPACITY Consideration: the agreed price of the promise (an act in exchange for another act or promise, or vice versa); peculiar to common law system; there must be something for somethings, a ‘quid pro quo’ (that for which). Rules: must exist for a simple contract to be enforceable; past consideration is not good consideration (Eastwood v Kenyon (1840), Anderson v Glass (1868), Lampleigh v Braithwait (1615)); must come from the promisee (privity of contract, Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]); can be nominal – not have to be adequate or commercially realistic (equivalent, Thomas v Thomas (1842)); must be tangible – should not be vague or illusory (White v Bluett (1853)); must be legally sufficient (something of value, Wigan v Edwards (1973)). Others: must be definite and certain; supplied must be legal; can involve giving up the right to sue (forbearance). Existing legal or contractual duty: not good consideration if obliged by law or contract to perform a certain duty and does no more than promise (Collins v Godefroy (1831), Stilk v Myrick (1809)); extra work exceeds duties may be good consideration (Glasbrook Bros Ltd v Glamorgan County Council [1925] , Hartley v Ponsonby (1857)). Consideration and discharge of obligation: rule in Pinnel’s case – the payment of a lesser sum cannot satisfaction for the whole debt (Foakes v Beer (1884)); exceptions – prepayment, fraud on a third party (Hirachand Punamchand v Temple [1911]), composition with creditors and settlement of claim (where a debtor enters into an agreement with creditors under a bankruptcy arrangement will be binding), promissory estoppel. Promissory estoppel: an equitable rule that the party creating deception or allowing deception to be created is prevented or estopped from reverting to and relying upon the true state of the facts (Central London Property Trust 2

Ltd v High Trees House Ltd [1947]); used as a defence to a claim (Waltons Stores (Interstate) Ltd v Maher (1988)) and a weapon to create a new cause of action (Austotel Pty Ltd v Franklins Self-Serve Pty Ltd (1989)) in Australian law. WEEK 5 GENUINE CONSENT OF PARTIES IN CONTRACT LAW Mistake: may void contract; the party claiming mistake must be able to prove they were mistaken as to some important fact (Gallie [1971]); mistake as to law not void the contract, but to fact might void the contract ( David Securities Pty Ltd v Commonwealth Bank of Australia (1992)). Common: made by both parties, usually as to the existence or ownership of the subject matter; mistake as to the quality, nature or value of the subject matter not sufficient to void (Scott v Coulson [1903]); mistake as to ownership may be grounds for voiding (Leaf v International Galleries [1950]); careless is not sufficient to claim mistake as sufficient to void (Bell v Lever Brothers Ltd [1932]); equity – more flexible, and may set aside the contract on grounds of unfairness or for unconscionability (Solle v Butcher [1950]), remedies available. Mutual: if the parties are at cross purposes, and the terms not reflect either party’s understanding of what was to be agreed upon (Raffles v Wichelhaus (1864)); an objective test used. Unilateral: only 1 contracting party is mistaken, the other not mistaken but knows or ought reasonably to know, that the other side is acting under a mistaken view as to identity (Cundy & Bevington v Lindsay (1878)); equity – may set aside a transaction if it would be unconscionable to allow a party to take advantage of the unilateral mistake (Taylor v Johnson (1983)), may grant relief in exceptional situations where genuine mistake and involving fairness (rescission, restitution or specific performance, rectification, and statutory remedies). Misrepresentation: an untrue representation; if made in negotiations which induced party to contract. Relevant statement must be one of fact: must have the effect of inducing an individual to enter the contract, distinction between a statement of fact or opinion (Bisset v Wilkinson [1927]); may be a misrepresentation when an opinion is given by a party with a greater knowledge of the facts (Smith v Land and House Property Corporation (1884)); silence is not misrepresentation except for the doctrine of utmost good faith applies in insurance contracts (R v Kylsant [1932]), distorting truth (Jones v Dumbrell [1981]), a fiduciary relationship, and statutory obligation of disclosure (ACL, Insurance Contracts Act 1984). Statement must induce a party to contract: no misrepresentation if not influenced or not believe (Attwood v Small (1836)); a remedy may be sought if the statement is relied on and induces entry (Redgrave v Hurd (1881)). Innocent: made when the representor makes a false statement, but genuinely believed the statement to be true, and thus had no intention to deceive the representee; may void the contract. Fraudulent: where the make of the statement knows that the statement is not true, and makes the statement with the intention of deceiving the person; a party shows a reckless or careless statement was untrue and induces the other into the contract (Derry v Peek (1889)). Negligent: when a false statement is made innocently but carelessly or negligently (L Shaddock (1981)); fiduciary duties (Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]), expert gives an opinion (auditors). Remedies: rescission and damages are possible; innocent one only allows for rescission; others – try and prove that the relevant statement formed part of the contract (Oscar Chess [1957]), contend that the statement that constitutes the misrepresentation formed a collateral promise (De Lassalle [1901]), endeavour to prove that the statement amounted to a fraudulent one, pursue remedies for statutory misrepresentation under ACL; right to rescind may be lost where the contract has been completed (Seddon v North Eastern Salt Co Ltd [1905]). Statutory misrepresentation under ACL: misleading or deceptive conduct (s 18); particular subject matters related to misleading behaviour (ss 30-35); unfair practices (s 29); statutory remedies (ss 218-239). Contractual illegality under statute: Re Mahmound and Ispahani [1921]; formation and performance illegality (Fitzgerald v F J Leonhardt Pty Ltd (1997)); a valid contract may be illegal if performed illegally. Contracts made void by statute: any contract entered in to in contravention of the statutory provisions is void; some contracts are void, some parts may be void (attempts to exclude implied terms are ineffectual). Common law illegality: commit an unlawful act (such as a crime, a tort or a fraud), sexually immoral, prejudicial to public safety, defeat or prejudice the administration of justice, would lead to corruption in public life (Public Service Employees Credit Union Co-operative Ltd v Campion (1984)), defraud the revenue. 3

WEEK 6 DISCHARGE AND REMEDIES Discharge or termination: where the rights and obligations are bought to an end; by performance, express agreement, reason of a term (condition subsequent), operation of law, breach, and operation of frustration. Discharge by performance: performance must be exact and complete – partial performance not discharge (Cutter v Powell (1795)); complete performance of obligation (Sumpter v Hedges [1898]); total performance rule modified if divisible into parts; substantial performance (Hoenig v Isaacs [1952]); time of performance. Discharge by agreement: by a term when activated will cause contract to come to an end; by the parties entering into a separate agreement, which requires consideration, offer and acceptance. Discharge by operation of law: by various legal situations (such as mergers, bankruptcy or illegality); by alternation of a document if a substantial or material and defeats the party relying on it (Croockewit v Fletcher (1857)). Discharge by breach: much depends on whether breach is major or not, and the other party chooses to repudiate it; operates prospectively, not retrospectively; must be a condition; test applied by court is whether or not the innocent party was deprived of substantially the whole benefit of the party; anticipatory breach; non-performance. Discharge by frustration: by operation of law when an event occurs outside the intentions of the parties; for a claim – there must be a supervening event, the event must not be the fault of either party, the contract not deal with the event, and the nature of the contractual rights and obligations must be significantly changed (Taylor v Caldwell (1863)); statutory frustration (Frustrated Contracts Acts); effect – ends a contract with no need to rescind, not retrospective and all pre-existing rights can be enforced, contract not void ab initio (monies paid can be recovered). Remedies for breach: rescission for condition, damages for warranty; others – return of property, order not to remove or destroy property, specific performance or injunction. Specific performance: a court order requires to carry out or perform their contractual obligations and promises. Injunction: an order prohibiting or restraining a party from performing or doing a particular action; a negative remedy; usually a restraining order (to stop further action); Lumley v Wagner (1852); Mareva injunction – freeze the assets to a dispute so as to prevent them from moving those assets. Others: Anton Piller order (gain access to important evidence about a contractual dispute or moving them); rectification (a court order to rectify the written document); accounting for profits (a court order requiring a party to hand back any profits relating to the breach, David Securities Pty Ltd v Commonwealth Bank of Australia (1992)). Damages: rationale – restoration and compensation; equitable damages where fairness requires compensation. Remoteness: whether the loss results from the activity complained of by plaintiff; rule in Hadley v Baxendale (1854) – 2 limbs are natural (damages must be a natural consequences of the breach) and nominated (predictable and foreseeable) losses, 3rd limb is losses will be foreseeable and recoverable as damages for breach; consider whether interest is a component of loss (Hungerfords v Walker [1989]). Measure: quantum of damages required; expectation loss – seeks to compensate for the loss of the anticipated or expected benefit now lost as result of breach; reliance loss – calculated to compensate for losses incurred as a result of them having relied on the other party performing their obligations and their failure to do so; expectation loss goes first and then reliance loss if expectation loss inappropriate; Commonwealth v Amann Aviation Pty Ltd (1991). Mitigation: the party suffering a breach has a duty to mitigate their losses (minimise them); failure to mitigate may lessen the possible damage, or court will make own assessment; a question of fact and a value judgement by court. Damages for disappointment and injured feelings: traditional approach is not award, but now a new trend began to emerge (Jarvis v Swan Tours Ltd [1972], Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) (1993)). WEEK 7 TERMS OF THE CONTRACT Implied terms: those are unspoken, unwritten or inferred into a contract by – industry convention or custom (Summers v Commonwealth (1918)), past dealings (Balmiain New Ferry (1906)), business efficacy (The Morcock [1886-90]); British Crane Hire Corporation Ltd v Ipswich Plain Hire Pty [1975]. Implied terms by statute: ACL – definitions of consumer and goods, consumer, guarantees not to be excluded by contract, limitation of liability for failure to comply, linked credit providers, remedies for breach; Sale of Goods Act. 4

Misleading or deceptive conduct prohibited by ACL (s 18); unconscionable conduct prohibited (s 20) and not apply to behaviour in ss 21-22; unfair terms (ss 23-25) only apply to standard form consumer contracts; unfair practices prohibited (s 29). WEEK 8 TORTS, AGENCY, AND ACCOUNT AND FINANCIAL REPORTING OF COMPANIES Negligence: imposes a duty on all person exercise reasonable care in their action, so that their daily activities will not foreseeably harm another; the neighbourhood principle; Donoghue v Stevenson [1932]. Proving negligence: a duty of care because of a relationship existing, foreseeability, a breach of duty of care on the balance of probabilities, proximity between and a consequent reasonable standard of care, vulnerability of plaintiff, causation arising from negligence and the consequential loss or injury is directly linked to the act of ne...