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HI6027 Business and Corporate Law Assignment Help

Part A: Contracts Law Questions 

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 knew. Outside the post office, Forthryrt met Pickwick, a well-established publisher who had a reputation for treating his authors well. Pickwick said he wanted to publish The Fourth Pretzel and, when Forthryrt replied that Boswold Books had said it would pay $45,000, said:

‘Oh that mob. They’re about to go belly up.’ Forthryrt immediately returned to the post office and persuaded the postal worker to give back the

envelope containing the contract. Pickwick then wrote a cheque for $45,000 and he and Forthryrt shook hands on the deal. Advise Forthryrt fully with respect to the contracts that now bind him (if any), indicating when such contracts were concluded.

Part B: Corporations Law questions 

Sparkling Pty Ltd (Sparkling) operates three children’s clothing shops in Tasmania. On 8 August 2007, Sarah was appointed to the position of Managing Director of Sparkling for a period of two years. A return was lodged with ASIC indicating her appointment as a director on that date. Sarah was not formally reappointed after 8 August 2009, but she has continued to act as Managing Director. No return was lodged following the expiration of her period of office. The terms of Sarah’s appointment, which were set out in a contract between her and Sparkling, included a restriction to the effect that she was not to commit the company to borrowing transactions in excess of $20,000. Any such transaction was to remain subject to the approval of the board of directors. On 20 December 2010 Sarah, purportedly acting on behalf of Sparkling, signed a loan contract with Costello Bank, pursuant to which the Bank agreed to lend the company $30,000 in order to establish a eucalypt plantation. The transaction was not referred to the Board.

The Bank was not aware of either:

- the contents of Sarah’s contract; or

- the return lodged by Sparkling at the time of Sarah’s appointment.

The Board has since discovered the loan contract and has stopped all repayments on the loan. The Bank has called in the loan and is suing Sparkling for the principal together with all outstanding interest.

(a) What do you think the outcome of this case will be?

(b) What do you think the outcome of this case should be?

(c) Would the outcome of this case be different if:

(i) the loan was for refurbishment of two of Sparkling’ clothing shops; and

(ii) the bank’s loan officer knew Sarah had fallen out of favour with the Board and was negotiating a new job?

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Part A: 

Material facts

The case study indicates that the first book, The Day of the Yokel was initially published with the Metro publishers. However, for the second book, the author Frederick contemplated engaging a second publisher. According to such decision, the author mentioned to Boswold books that he would require $40000 for publication of the second book Boswold ascended to the price. After that, the previous publisher, Metro, offered to pay $50000 for the second book. The author withheld his decision and communicated that he would deliberate on the proposal. With respect to the conversation that the author had with the Boswold publication, the latter had despatched standard form of contract which affirmed $40000 assigning money. The standard form of the contract also included a provision that the rights of the serialization of the book would vest with the publisher. The price for such rights is also included within $40000. On receiving the standard form of contract, the author mentioned the publishers that he had received a proposal of $50000 for the books. However, the publisher suggested that the final that they would be able to pay is $40000. The author altered the sum payable under the contract from $40000 to $45000 and signed the contract. The author posted the standard form of contract in the local post office. Subsequently, the author changed his decision after gaining knowledge about the imminent bankruptcy of the publisher and decided on not posting the contract. The author took back the contract from the post office and ascended to deal; with a third publisher, Pickwick. The deal was closed for an amount of $45000.

Issue

The chief issue regarding the contract binding between the author and the publisher about book publishing is whether there is an existing contract between Frederick Forthryrt and the Metro publishers, whether there is an existing contract between the author and Boswold publishers and whether there is an existing contract between the author and the Pickwick publishers.

Rule

A contract is fundamentally an agreement encompassing legal obligations between two parties where both parties have to correspond with specific acts. There is a legal obligation for each party to perform particular duties, such as providing payment or delivering goods and services. The rules of a contract include Mutual Assent, Offer and Acceptance and Consideration.

Mutual Assent

According to this rule, every party should have a coherent and shared understanding of the subject with which the contract deal. Both parties should be aware of the particulars of the contract.

Offer and Acceptance

One party amongst the two parties should propose an offer by clearly stating their intention for binding the contract. And the other party must state its Acceptance in transparent terms (Duxbury, 2015).

Consideration

According to this rule, both parties must mutually agree to exchange values to make the contract binding. It is part of a formality.
The elements of a contract are Offer, Acceptance, Consideration, Mutual obligations, Competency and capacity and Written agreements. Offer and Acceptance are the most significant parts of a contract. Offer is when an individual expresses a willingness to sign a contract by accepting certain terms. While Acceptance of a contract is when someone agrees to all terms and conditions of the offer proposed to him, a party's interest in entering a contract should be accepted by another party to make a binding contract (Turner and Trone, 2013).

Application

Existence of contract between Frederick and the publishers

Under contract law the contract amongst two an intentional and voluntary agreement which is legally binding between two or more parties, the parties will have to be competent, and there has to be explicit offer and Acceptance between the parties. The consideration underneath such an agreement will have to be legal as well as valid. It is in such instance that an agreement between the specific parties coming into existence. Uncertainty in the contract will render the agreement to be invalid and the mere existence of a contractual relationship, will not amount to the enforceability of the contract. It is mainly dependent on the factor of whether the parties who are involved retain the intention of entering into a contract. In Winter v. Nemeth (2018), the court affirmed that there should have to be ‘rebuttable presumption with respect to contract formation'. It means that it will be held that the contract is not in existence in specific cases if any one party to the agreement falls short in establishing that relevant legal principles should not apply. The principle inherent to 'rebuttable presumption' indicated that there would be no legal contracts that would be binding on the basis of mere verbal affirmations among social relationships. If there is no intention to form a binding agreement, the contract will itself not come into existence (Australiancontractlaw, 2019). Based on a case study, the proposal put forward by metro publishers were only deliberated upon by the author and not followed through subsequently. The author subsequently rescinded the standard form of contract that was signed by the author for Boswold publishers. When he took back the standard form of contract from the post office, Frederick entered into an agreement with Pickwick in selling the rights of his second book, and it could be seen that the parties intended to enter into a legal agreement.

Validity of the contract between Frederick and the publishers

There was no agreement existing between Frederick and metro publishers; hence, the determination of the validity of such contract becomes redundant. With respect to the agreement between Frederick and Pickwick, both the parties intended to agree, and it was evident from the case study that there was offered and Acceptance on the case study. It is only with the standard form of contract which was signed by the author made out to Boswold publisher that the offer was rescinded. The two elements of revocation of the offer include the aspect of Acceptance by offering and the mode of communication. For revocation to be valid, the offer will have to be revoked before the offeree accepts it. Such revocation will stand to be valid before Acceptance. In Routledge v. Grant (1828), the court mentions that an offer stands to be withdrawn at any given point of time before the offeree accepts it. It affirmed that no party is bound by such contact which is not accepted (Caserevision, 2019). Hence, there is no valid contract between Frederick and Boswold publishers as the revocation had happened long before Acceptance.

Conclusion

From the above study, it can be concluded that there is no binding contract between the Metro publishers and the author Frederick Forthryrth. However, the contract signed between the author and the Boswold Publication company was eventually revoked by the author, and thus, it is not legally valid. While the contract between Forthryrth and Pickwick publishers is legally valid as is was signed by the mutual agreement between both parties.

Part B:

Material facts

In accordance with the case scenario of Sparkling, the company is running three clothing stores of children. Sarah is working as the managing director (MD) of the company for two years. There is a contractual scenario between the organisation and the MD, and according to this, $20,000 cannot be exceeded in case of dealing. MD is liable for undertaking transactional approval from the board of directors. Hence, after the end of the 2-year contractual scenario, for reappointing Sarah as the MD, Sparkling has not lodged the return to the Australian Securities and Investment Commission (ASIC). However, the organisation has allowed Sarah to continue her work without fulfilment of any official activities. Therefore, the key observing area is that Sarah is continuing her work without professional authentication, and she has borrowed the loan of $30,000 from the Costello bank without notifying the board of director.

Issue

In order to discover the loan amount of $30,000 from the company account, the board of directors has stopped repaying the loan for Sarah. Thus, the organisation has started receiving calls from the bank in case of paying the principals with the interest amount. The organisation does not want to make the payment on behalf of Sarah as the amount has not been borrowed from the organisation's side, and not even they have any idea of such a transaction.

Rule

In this case of Sarah, according to the Australian Federal Register act (Section 236), if an individual borrows a loan on behalf of the organisation without making any notification, then that individual is solely responsible for the repayment. Hence, Sarah will be charged for this. Apart from that, the Australian parliament Act (Section 246F), the organisation needs to lodge the document to ASIC in order to appoint the tenure of an employee. Thus, the organisation liable for not adopting such official responsibilities (Legislation, 2019).
As per the Australian Parliament Act (Section 206L), the recommendation of remuneration takes place by the disclosure of the entity without any permission of the board of members. Thus, Sarah is responsible as she has not disclosed the matter of fact to the board of members. In addition, based on the Australian parliament Act (Section 206M), there is a requirement of declaring the actions in order to make justification for the matter. Hence, Sarah can be charged for paying both principal and interest amounts to the bank and Sparkling can terminate the employment of Sarah as the MD of the company (Fleck, 2018).

Application

In the case of Sparkling Pt. Ltd, the Managing Director is not allowed to borrow transaction of more than $20,000 on behalf of the company. In this context, the Managing Director, Sarah, required to take the approval of the company's board of directors. Sarah was working in Sparkling in the post of MD even after expiring her period of appointment on 8th August 2009. She signed for a loan of $30,000 based on a contract with Costello Bank on behalf of the company without informing the Board of Directors. Sarah borrowed the loan for the refurbishment of two clothing shops of Sparkling from the bank.

In Tasmania, the owner of a company, who operates a business firm from private property in needs to entitle the name of that company into Government Register of the country under the "Section 18" in Local Government Act (1993) established by Tasmania Council (Legislation, 2019). It is also necessary for the applicant to demonstrate the project in order to enhance their establishment profit and service quality.

Bank did not have any information about the transaction of money or the loan, signed by Sarah for the renovation of two clothing stores of Sparkling Pt. Ltd. Therefore, the bank has the rights to take legal action against Sparkling as the organisation has not followed the eligibility criteria of bank loan as per the regulation of the Local Government Act (1993) in Tasmania.

Sarah was appointed in the managing director of Sparkling Pt. Ltd. on 8 August 2007 for the period of two years, but she was not reappointed in the position on 8th August 2009. She signed for the loan of $30,000 with Costello Bank on behalf of the company after the expiry of her post in Sparkling. First of all, she was appointed as the managing director of the company was not commit to borrowing transactions more than $20,000, but she violated the rule. Moreover, when she signed the loan, then she did not have any legal approval from the directors of the company. The bank loan officer also gave her the permission of that loan even after knowing all these facts.
As per the provisions under Banking Act 52E subsection 52A, the auditor or the team supervising the transactions of a business enterprise are not allowed to perform the transaction practices without informing the corporate body and also the bank (Lohrey et al., 2019). If the auditor helps any particular person of that enterprise after knowing that he/she is offender, then the auditor is also considered as an offender.

Conclusion

In this current case of Sparkling Pt. Ltd., the bank officer has violated the rules of Tasmania Banking Act. First, he helped Sarah knowing that she is no more in the position of managing director in Sparking Pt. Ltd. Still that employee has helped Sarah in the transaction of the loan without getting any approval from the directors of that company. Therefore, Costello Bank has the right of terminating that employee, who has approved the loan of $30,000.

It can be concluded that the study has been focused on moulding two case studies into the IRAC format. In order to present the study, Australian contractual laws have been utilised throughout. In addition, the study has involved the aspects of the Australian Securities and Investments Commission (ASIC). With the help of the relevant legislation, the study has presented the ways, in which, the two case scenarios can be recommended with justified resolutions. Throughout, the study has been involved in indicating the contractual claims in order to continue a healthy relationship among the parties.

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