Business and Corporate Laws

Question 1

Part A:

Issue: Whether Tina is legally bound to buy Jeff’s business as a result of signing the heads of the agreement.

Rule: The existence of an agreement is analyzed through the rules of offer and acceptance. As the offer was communicated to the buyer and she accepted it before it is withdrawn, she can be made liable.

Application: As there is a right on part of the buyer to make the agreement to be reviewed by the licensed attorney before buying the land and the jeff’s business. It can be cited through a case study, R v. Clarke(1927) HCA 47,Brambles Holdings Limited v Bathurst City Council (2001) NSWCA 61, Court of Appeal(NSW), it was held in this case that the court will identify the offerer’s intention objectively.

Conclusion: The buyer will be liable to the offer and to buy the business as a result of signing the terms of the agreement Gooley et al. (2013).

Part B:

Issue: If the agreement had a clause that Tina obtaining suitable finance.

Rule: If the subject to finance clause is added in the agreement it means that the transaction will be pending until the buyer’s home loan or finance has been approved by the lender.

Application:  The subject to finance clause will not make the purchaser liable to buy the business until the sale becomes unconditional. So, a careful vendor will always wait until their sale has become unconditional.

Conclusion: The subject to finance clause thus can be rendered to be beneficial to the seller and not the buyer as it will make the buyer liable. Asic v Healey & ors (2001) deals with directors duty and subject to finance clause on REIWA Contract.

Question 2

a)Issue: Whether the director is personally liable for unpaid debt.

Rule: Generally the directors are not personally liable for Business Debts, but if the business is struggling, you might be considered liable.

Application: There are various reasons why the company directors can be made liable:

*Claims against the director for insolvent trading.

*Personal guarantee be made as here in this case made between Jeff and Phil.

*Claims for loss of employee entitlements.

*Unreasonable director-related transactions, here the directors of both the companies did not acted in a prudent manner for the benefit of the company. Hardie and Centro decision was related to the present situation. Hardie emphasized importance of directors for yhe company statements to the market. Centro specified the director’s duty towards financial reports of the company. Both the cases need the requirement of directors to understand company documents and representation s they make even if the financial structure is very complex to understand.


As both the directors were aware of the financial risks they are taking by entering into an agreement, so they will be made liable to pay debts. Percival v Wright is a case law dealing with the directors liability Schultz, J. (1993).

b)Issue: Whether the managing director of CheepCheep Pvt. Ltd. Personally liable 

Rule: The rule in the corporations act 2001 says:…if it may be expected that a reasonable person in the company’s circumstances would not have entered into the transaction having regard to the benefits (if any) and detriment to the company entering into the transaction and also the benefits to the other party to the transaction.”

Application: The protection is provided to the directors by limited liability, but they need to pay amount when company goes into insolvency.

Conclusion: If the company can’t afford to repay loan or meet the terms of a lease then the director will be responsible for the repayments personally Brocherie (2016).

c)Issue: Will the Business Judgement rule be relevant to Phil or Robert.

Rule: The business judgement rule is a legal principle which grants an immunity to the directors, officers or agents of the company related to corporate transactions if it’s found that they have acted in good faith.

Application: The business judgement rule will not apply to Phil or Robert as there need to be enough evidence to show that the business judgements were done with a prudent mind and for the benefit of the whole business. The Business Judgement rule requires the director to perform various duties: The director should act in good faith,he should act with a prudent mind and he should act in the best interest of the corporation Miranda, (2016).

Conclusion: The Business Judgement rule will not apply here as both the directors were not fulfilling the basic essentials required for them to get immune from any liabilities. While, court will interfere if there is a breach of fiduciary duty. The case related to this rule is Australian Securities and Investments Commission v Rich (2009) 236 FLR 1 has resurrected the business judgement rule in Australian corporate law, as it can be a defence in few cases which otherwise be a breach of director’s duty Keller (2001).

Question 3

Part A

a)Issue: Allan can enforce the contract for the three Kiss items with Francis

Rule: The ability to make the contract enforced is fundamental, contract law provides the enforcement is not only necessary but the cost of various enforcement must not be more than the gains to be achieved.

Application: The contract law provides these enforcement necessary by law but also the implementation of the law.

Conclusion: The effectiveness of a country’s contract enforcement are how the contract enforcement takes place, also the effectiveness of the alternative dispute resolution.

b)Issue: Francis is bound to go ahead with the contract to purchase the status quo albums from Allan, and the consequences for Rick if Francis is not bound to the purchase.

Rule: Doctrine of Contract law provides that according to the privity of contract, to the effect that the parties to the contract have legal obligations and benefits arising out of the contract.

Application: The Contract will be held binding in these following conditions:



*Intention to enter into legal agreement


*Terms and Conditions 

*The Agent will be bound when the agent contracts for a named principle and exceeds his authority.

*The agent personally liable when he agrees with the concerned parties (Sec. 230)

Conclusion: Thus, as there are various circumstances where agent can be made personally liable so here Rick can be made liable if he exceeded his authority. Castillo v. Case Farms of Ohio deals with the liability of the principle and agent Motto and Schuck (2012).

Part B

Issue: Whether Rick is in breach of his common law duties as an agent and consequences of such breach.

Rule: General rule says that agent cannot be made personally liable for the Acts of his Principle.

Application: The various rules where the agent can be made personally liable are:

*Named Principle

*Breach of Contract

If the court finds that the contract needs to be enforced and can deny its enforcement on various grounds like capacity to the contract, Public Policy or a Mistake Worthington (2015).

Conclusion: When the court finds that the necessary requirements of the contract are meeting then it can be enforced and if it is violate of the terms of the contract it will not be enforced. In Masters v Cameron, agreement was made through a memorandum that, this agreement is based on formal contract acceptable to solicitors. The court had to determine whether it was a binding contract or purchaser was bound or not. Also, which party needs to pay the deposit amount Chapple and Lipton (2002).

Question 4

a) Issue: Whether model.can take any legal action against Glad rags, RuPeter’s business or the Bilton Hotel

Rule: Product liability refers to a manufacturer or seller is made liable for placing defective product to the consumer, they fall under negligence, strict liability or breach of warranty and are jurisdictional.

Application: As in case of product liability there arises a contractual liability between the manufacturer and the consumer automatically and known as privity of contract. This existed between Glad rags, RuPeters and the model. Any person injured will claim compensation. The liability is divided between:

  1. The Manufacturer

  2. The one who assembles the products parts

  3. The wholesaler

  4. The retail store

Conclusion: The main doctrine which may be followed here is “res ipsa liquitur” meaning which can shift the burden of proof on part of the defendant. The other liability is strict liability, where plaintiff need not prove the manufacturer negligence.

b)Issue: If the model is successful in action then what damage can she seek.

Rule: The strict liability rule mentions clearly that in case of product defects occurring during the manufacturing process, regardless of how much care the manufacture has taken he will still be considered liable to pay damages to the party injured.

Application: According to consumer laws, the consumer can claim damages which are equal to the cost of repair or replacement of the goods. Donogue v Stevenson (1932) A.C. 562 is a case on negligence where manufacturers were held liable.

Conclusion: As the consumer faced an injury which has done harm to her body and also to her career she can claim damages to a great extent while the court will direct the amount of compensation.


Brocherie, B. 2016. The law handbook Sydney: Thomson Reuters.

Chapple, L. and Lipton, P. 2002. Corporate Authority and dealing with officers and agents. Melbourne:Centre for corporate law and securities regulation and cch Australian limited.

Gooley et al. 2013. Principles of Australian contract law. Australia: LexisNexis. 

Keller, B. 2001. Australia’s statutory business judgement rule: a reversal of a rising standard in corporate governance? Law Institute Journal , pp. 60-64.

Miranda, M. 2016. Analysis of the ethics of the business judgement rule under section 180(2) of the Australian corporation law. David Publishing, 15(6), pp. 294-303.

Motto and Schuck 2012. Australian contract law. Sydney: Consult Australia. 

Schultz, J. 1993. Liability of directors for corporate insolvency-the new reforms. Bond Law Review 5(2), pp. 191-195.

Worthington, S. 2015. Agents behaving badly, Queensland Supreme Court. (Online).  Available at (accessed on: 15 August 2019).

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