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Contract Law Assignment: Critical Analysis Of Law Suites

Question

Task:
Question 1 Matilda opened an accounting business and contracted with Quick Computers Ltd to supply her with the latest computer system by no later than April in the year. Quick Computers Ltd was two months late in delivering and installing the system. As a result, Matilda lost $25,000 in ordinary revenue. However, she also lost a lucrative contract to do a one-off urgent auditing job for a busy new client. Matilda bought the computer system expecting that it would be available to help with these contracts.

Required With reference to relevant legal principles use the IRAC legal problem-solving approach to advise Matilda as to the damages that she may recover. Please explain fully, using relevant legal authority.

 Question 2 Albert runs a business which has a turnover of more than $1m. It is profitable and definitely has good long term prospects as an accounting software distributor. Albert decides to register a company, ‘MoneyBags Pty Ltd’, and to transfer the business into that company, which he then plans to sell. MoneyBags Pty Ltd is sold to an investor who asks that Albert stay on as the director and manager of the company. The investor organises a contract that requires Albert, as part of the purchase of his company, to promise not to compete against the company in any capacity within a 25 kilometre radius of the company’s location. Albert is also required to promise that he will not use any of the intellectual property or trade secrets of the company in any other enterprise. Albert signs the agreement. Albert leaves the company after only 6 months employment due to a dispute over his working hours. Albert’s wife registers a new company, ‘MyBags Pty Ltd’ to run an accounting software business, similar to the one that Albert previously established. Albert is employed within the company but is neither a shareholder nor director. The investor in Albert’s original company is concerned and threatens to take legal action against both Albert and MyBags Pty Ltd.

Required: With reference to relevant legal principles use the IRAC legal problem-solving approach to advise Albert whether he can rightfully work for MyBags Pty Ltd and what rights the new owner of MoneyBags Pty Ltd may have against Albert? (20 marks) LAW6000_Assessment 2_Case Study Page 4 of 9

Question 3 Rounder Tyres Pty Ltd was a company that conducted a tyre wholesale business. The Racer family held all the shares in the company and Tom Racer and his wife Sally were directors. The company had not been doing very well for some months as there was fierce competition in the tyre market. In spite of this the board of directors kept on allowing the purchase of more tyres to store in the warehouse. It was clear that the last few orders could not be paid when the time for payment was due. At the time when the company was in a financially precarious position, the company granted a 5 year lease of the premises it owned at a fixed rent substantially below current market value to two of its directors. The lease contract included an option in favour of the tenants (directors) to buy the premises again at a fixed price substantially lower than the market value. The granting of the lease together with the option was authorised at a general meeting of the shareholders of the company. Five months after the lease was granted the company went into liquidation. The creditors are very upset as they believe the lease should not have been granted and they want to take action against Rounder Tyres Pty Ltd.

Required: With reference to relevant legal principles use the IRAC legal problem-solving approach to advise Explain whether the directors breached any of their duties owed to the company? If so discuss the defences (if any) that may be available to them.

 Question 4 (Morris has become very interested in painting and sculpture. He works on his art hobbies after work and on weekends when he has plenty of free time. Recently he became interested in the idea of cement and concrete sculpture and decided to experiment in this field. Last week he purchased a small cement mixer for $6,500 from Stony Building Supplies. The cement mixer was manufactured by Concrete Bond Ltd. After work on Friday, he set the machine up and used it as directed. As soon as he switched the machine on he was horrified by the sound of a large internal explosion in the machine caused by a faulty machine part.The machine is now in a state of disrepair. Additionally, fragments from the machine shattered Judy’s windows. Judy is Morris’ next-door neighbour. Part of the shattered glass hit Judy in the face and eye. She is now hospitalised and will be unable to look after her elderly parents for the next few months. They rely on her for assistance with cooking, shopping and cleaning of their home.

REQUIRED: With reference to relevant legal principles use the IRAC legal problem-solving approach to advise Judy whether she would be successful in negligence to recover compensation from Concrete Bond Ltd Please explain fully, using relevant legal authority.

 Question 5 (Sarah recently sold Prakash 1000 hectares of what was verbally described as “prime agricultural land” for $ 850,000. During negotiations Sarah, knowing it to be untrue, told Prakash that the land was appropriate for all agricultural purposes. Prakash signed a written agreement which made no mention of the purposes for which such land might be employed (other than describing the parcel of land as “agricultural land”). After settlement Prakash took possession of the land and it now appears that much of it is not cleared, and without spending close to $1 million, it is probably only suitable as grazing land for animals and unsuitable for most crops. Prakash had intended using the land to grow wheat.

REQUIRED With reference to relevant legal principles use the IRAC legal problem-solving approach to advise Prakash of all alternative possible legal actions in common law against Sarah. Please explain fully, using relevant legal authority. (20 marks) LAW6000 Assessment 2 Case study Page 7 of 9 Learning Rubric: Assessment 2 Assessment Criteria Fail (Unacceptable) 0-49% Pass (Functional) 50-64% Credit (Proficient) 65-74% Distinction (Advanced) 75 -84% High Distinction (Exceptional) 85-100% Evaluation of information selected to support the case study Percentage or marks for this criterion 30% Limited understanding of key concepts required to support the case study. Confuses logic and emotion. Information taken from reliable sources but without a coherent analysis or synthesis. Viewpoints of experts are taken as fact with little questioning. Resembles a recall or summary of key ideas. Often conflates/confuses assertion of personal opinion with information substantiated by evidence from the research/course materials. Analysis and evaluation do not reflect expert judgement, intellectual independence, rigor and adaptability. Supports personal opinion and information substantiated by evidence from the research/course materials. Demonstrates a capacity to explain and apply relevant concepts. Identify logical flaws.

Answer

Question 1
Issue
Issue outlined in the present case of Contract law assignment is:

  • What are the damages that can be recovered by injured party in case of breach of contract?

Relevant legal principles
There are several types of damages which can be received by party in case of breach of contract. In relation to this, the main types of damages are ordinary damages, liquidation damages, punitive damages, compensatory damages, and nominal damages (Mullen, 2015). Compensatory damages are in the nature of monetary damages that are provided with the intention of compensating to injured person for any losses and it occurred because of breach of contract. Further, these types of damages are not created for punishment to breaching party (Ganglmair, 2017). There are two types of compensatory damages, which are prescribed as below –

Expectation Damages

In this type of damages, non-breaching party is entitled to recover the expected amount which can be acquired from the contract (Axelrod, 2017).

Consequential damages

These damages are designed for providing compensation to the injured party for any indirect damages that are separate to what was included in the contract. These damages can include loss of profit in the business because of non-delivery of particular equipment. For ascertainment of consequential damages, injured party must identify the direct outcome of the breach of contract. Further, it may be reasonably ascertained by both parties at the time of initiation of contract (Golden, 2016). In the legal case of Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd, damages were allowed to party because of breach of contract (Australian Contract Law 2019).

Application of legal rules and regulations in the given case
In the present case of Contract law assignment, Matilda and Quick Computer Ltd entered into a contract. In this contract, Quick Computers ltd was not able to deliver the computer system within prescribed time limit. As a breach of contract, there was a loss of $ 25000 in ordinary revenue to Matilda. In other words, it can be said that Matilda suffered from loss because of non-delivery of computer system by Quick Computers Ltd.

Conclusion
By considering the above provision discussed in the context of this Contract law assignment, it has been concluded that Matilda can recover the compensatory damages in the form of consequential damages from Quick Computer Ltd because it is indirect damages that taken place due to breach of contract.

Question 2
Issue
In the present case of Contract law assignment, issue is related to –

  • Whether Albert can work for MyBags Pty Ltd in rightful manner?
  • What are the rights possess by new owner of MoneyBags Pty Ltd against Albert?

Relevant legal principles
In case of breach of contract punitive damages can be claimed by injured party (Wilkinson-Ryan, 2015). With this aspect, in case of breach of contract injured party can claim for damages to cover the losses, which can be computed by considering real and potential injuries. Further, he/she can also file claim and judge may order restraining order or injunction to end damaging activities (Bilchitz, & Ausserladscheider Jonas, 2016). In the legal case of Shevill v Builders Licensing Board [1982] illustrated in the Contract law assignment, due to breach of contract damages are provided (Australian Contract Law 2019).

Application of rules and regulations in the given case
In the present case of Contract law assignment, as a part of the contract term investor is required from Albert that he should not compete against the company (Moneybags Pty Ltd) within an area of 25 kilometers from the location of company. Along with this, terms of contract also states that Albert cannot share trade secret with any other person. Further, he also stays as a director of company (Moneybags Pty Ltd) but due to some dispute he left company within 6 months of employment. In relation to this, wife of Albert established new company similarly to the one that is registered by Albert previously. It can be said that it is considered as breach of contract by Albert as it is probable that he may definitely share trade secret with his wife and business would be controlled by him as he developed idea.

Conclusion
By considering above analysis of Contract law assignment, it has been concluded that Albert cannot rightfully work for MyBags Lty Ltd. Further, new owner of the MoneyBags Pty Ltd can claim compensatory damages or compensation of damages to cover pecuniary losses, and restraining order and injunctions to end damaging action. However, if it is provided by Albert that his wife possess equal knowledge and experience with this field and business is carried by her only, then in such case Albert can rightfully work for MyBags Pty Ltd.

Question 3
Issue
In the present case issue is related to –

  • Whether the directors breached any of their responsibilities allocated to them?
  • If yes, what are the defenses that may be available to them?

Relevant legal principles
Corporation Act 2001 described several duties of board of director of company, which is required to be complied by them. With this aspect, According to Section 180(1) of the Corporation Act 2001, it is the duty of director to carry their activities with due care and diligence that is expected to exercise by a reasonable person (General Duties of Directors 2019). According to Section 181, director should act in the good faith for the best interest of the company and for a proper purpose. Along with this, Section 182 states that they should also not improperly use their position to obtain benefits for themselves or someone else. In case of breach of duty only company has right to claim against board of directors (Tills, & Wills, 2016).

Company and its members are separated from each other. In relation to this, corporate veil means company is separate from its shareholders and it safeguards from being personally liable for the debt of the company as well as other obligations of company (Gelter, & Helleringer, 2015). Therefore, if the company incur any debt or violates any rules and regulations then in such case members of the company would not be liable (Mishra, 2019). However, corporate veil can be lifted by court in some cases such as unavailability of corporate records, manipulation of assets or liabilities, utilization of fund for some particular members and others.

Application of rules and regulations in the given case
In the present case scenario of Contract law assignment, Rounder Tyre Pty Ltd was not performing in the good manner from last few months because of the intense competition in the market. Despite of this, company is purchasing Tyre to store in the warehouse even board of directors were aware about that company would not able to pay the payment of creditor in the timely manner. Further, company also granted five year lease of the premises at significantly lower price as compared with market price, which also included an option in favor of the directors to purchase the premises at a fixed price that is significantly less than market value. It assists in benefits to directors.

Conclusion
By considering the above provision it has been concluded that Board of director of Rounder Tyre Pvt ltd breaches their duties as it is the duty of director to carry out their activities by exercising reasonable care and due diligence. Company purchased tyre without any requirement and unable to payment due to creditor. Further, they enter into a contract of lease at very low price as compare with market price which is in favor of them, which assists that they use their position in an improper manner for providing advantages to themselves. Therefore, there is breach of duty by director and it can be said that by application of lifting of corporate veil Board of directors of company would be personally liable for the debt of company.

Question 4
Issue
In the present case issue us related to –

  • Whether Judy would be successful in negligence to recover compensation from Concrete Bond Ltd?

Relevant legal principles
Business torts are the wrongful activities that assist in damages to business. It may be initiated intentionally or may be due to reckless or negligence behavior by the individuals or business. With this aspect, business tort included negligence. In this case, plaintiff can file suit against defendant in a court of law (Wright, 2017). In order to establishment of negligence, it is required by plaintiff to prove some elements, which are described as below –

  • It is the obligation of defendant to carry out some activities in a prescribed manner. The responsibility is either defined by statute or otherwise.
  • This responsibility did not hold by defendant.
  • Due to the activities of defendant, plaintiff suffered from losses (Sharkey, 2018).

Along with above aspects provided in this Contract law assignment, plaintiff is required to prove that activities of defendant either intentional or negligent or in reckless manner, which can be identified by a particular rules or regulations, contractual obligations, or manner of behavior that was violated by defendant. At last, plaintiff has to prove that activities of defendant caused a quantified damages or loss. This loss can be due to several sorts of misconduct, consisting of negligence, malpractice, misrepresentation, and others.

In the legal case of Shaddock (L) & Associates Pty Ltd v City of Parramatta [1981], High Court held that damages should be provided for negligent misstatement (Australian Contract Law 2019).

Application of rules and regulations in the given case
In the present case, Morris purchased a cement mixer from Stony Building Supplies that was manufactured by Concrete Bond Ltd. As he switched the mixer he was shocked because of sound of significant internal blast in the machine. This blast occurred because of faulty machine part. In addition to this, fragment of machines shattered to the window of Judy (next door neighbor of Morris). Further, it is also discussed in this Contract law assignment that she was injured because of shattered glass pieces and therefore she was hospitalized. By considering the above case, it can be said that because of negligence of Concrete Bond Ltd, Judy injured. Further, it is the responsibility of manufacturer to use all goods in manufacturing process without any defect. However, Concrete Bond Ltd used faulty machine and therefore internal blast occurred. This activity assists loss to the Judy.

Conclusion
By considering above analysis done in this Contract law assignment, it has been concluded that Judy would be successful in negligence to recover compensation from Concrete Bond Ltd, as all three elements for establishment of negligence is satisfied.

Question 5
Issue
In the present case issues is related to –

  • What are the alternative probable actions in common law can be taken by Prakash against Sarah?

What are the relevant legal principles for this case of Contract law assignment?
Business torts are wrongful activities performed against business that assists damages to business. Some of the common types of business torts are Tortious Interference, Restraint of Trade, fraudulent misrepresentation, theft of trade secret and some others. With this aspect, fraudulent representation is the irresponsible or deliberate statement of a lie with the intention to encourage a party to enter into a contract (Deng, & Zanjani, 2018). In other words, it can be said that it is a trick which is used by person to enter into an agreement that harm that person. Further, misrepresentation can be in the form of oral, written, made by silence, gestured and others. It creates a contract invalid. In the legal case of Marks v GIO Australia Holdings Limited [1998], court held that due to misleading or deceptive conduct, damages should be provided to the injured party (Australian Contract Law 2019).

There are two ways which can be used by person for addressing fraudulent misrepresentation-

Rescind the contract

If the contracts are made on the basis of false claims, then in such case it is voidable. The simplest manner to resolve the fraudulent misrepresentation is to void the contract. In order to rescind the contract, both parties have to return everything that is received from each other. The injured party should ask to withdraw the contract right away. The advantages from the contract should not obtained by both parties (Types of Damages for Breach of Contract 2019).

Sue for damages

In case of fraudulent misrepresentation discussed in this segment of Contract law assignment, one party can sue other party as it is considered as civil offence. However, mislead party is not entitled to sue for more than its damages or injuries. In some cases, mislead party can also sue for punitive damages.

Application of rules and regulations in the given case
In the present case of Contract law assignment, Sarah sold land to Prakash which is verbally termed as prime agriculture land. However, at the time of negotiation process Sarah told to Prakash that land was suitable for all purpose even if it was known to Sarah that the land was not appropriate for agriculture. Therefore, it can be said that for the purpose of entering into an agreement Sarah lied to Prakash that is considered as fraudulent misrepresentation.

Conclusion
By considering the above provisions provided in this Contract law assignment, it has been asserted that in case of fraudulent misrepresentation, Prakash has right to rescind the contract. Further, he can also sue Sarah as it is civil offense. Along with this, Prakash can also recover punitive damages.

References
Books and Journals

Axelrod, E. (2017). Contract law assignment Mitigation of Damages in Breach of Entertainment and Other Service Contracts. Rutgers JL & Pub. Pol'y, 15, 1.

Bilchitz, D., & Ausserladscheider Jonas, L. (2016). Proportionality, Fundamental Rights and the Duties of Directors. Oxford Journal of Legal Studies, 36(4), 828-854.

Deng, Y., & Zanjani, G. (2018). What drives tort reform legislation? An analysis of state decisions to restrict liability torts. Journal of Risk and Insurance, 85(4), 959-991.

Ganglmair, B. (2017). Efficient material breach of contract. The Journal of Law, Economics, and Organization, 33(3), 507-540.

Gelter, M., & Helleringer, G. (2015). Contract law assignment Lift Not the Painted Veil: To Whom Are Directors Duties Really Owed. U. Ill. L. Rev., 1069.

Golden, J. M. (2016). Reasonable Certainty in Contract and Patent Damages. Harv. JL & Tech., 30, 257.

Mishra, N. (2019). Economic Torts. Journal of Law of Torts and Consumer Protection Law, 1(1), 8-14.

Mullen, S. (2015). Damages for breach of contract: quantifying the lost consumer surplus. Contract law assignment Oxford Journal of Legal Studies, 36(1), 83-109.

Sharkey, C. M. (2018). Institutional Liability for Employees' Intentional Torts: Vicarious Liability as a Quasi-Substitute for Punitive Damages. Contract law assignment Val. UL Rev., 53, 1.

Tills, M., & Wills, C. (2016). Corporate law: Directors found guilty of breaching duties following corporation's breaches. Governance Directions, 68(10), 624.

Wilkinson-Ryan, T. (2015). Incentives to breach. American Law and Economics Review, 17(1), 290-311.

Wright, G. (2017). Risky Business: Enterprise Liability, Corporate Groups and Torts. Journal Of European Tort Law, 8(1), 54-77.

Online

Australian Contract Law. Contract law assignment (2019). Retrieved from <https://www.australiancontractlaw.com/cases.html>

General Duties of Directors (2019). Retrieved from<https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director-tools/pdf/05446-6-2-duties-directors_general-duties-directors_a4-web.ashx>

Types of Damages for Breach of Contract. (2019). Contract law assignment Retrieved from <https://www.upcounsel.com/types-of-damages-for-breach-of-contract>

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