Legal Principles in Business Structures and Contractual Obligations LAW2023

Question One: Business Entities: Beautiful Black Beans

Issue: The issue in the given case is figuring out what kind of business structure Andi & Amos started together & understanding their legal rights & duties as partners. Who is responsible for Amos buying those expensive roses without permission, who is responsible for what Scarlett did as an employee, & legality of Andi opening up a rival business behind Amos's back?

Rule: Section 1 of the Partnership Act 1892 (NSW) defines partnership as where two or more persons join together in carrying out a business venture with intention of making a profit. The partnership is not a legal entity; it means that partners are liable for the debts & obligations of the partnership in joint & several. There are three elements of a Partnership: Carrying on a business, In common & With a view of profit

Agency & Authority: As per Section 5 of Partnership Act 1892 (NSW), In the course of partnership business each of the partners is an agent of the other and therefore anything that is done by any of the partners which is within the scope of partnership business does bind the other partners. Even where one partner transacts outside the firms course of business, such a partner may still bind the partnership, where the third party had no knowledge of the limitation of authority.

Joint & several liability: As per Section 9 (1) of Partnership Act 1892 (NSW) A partnership's obligations created during its activities might be held equally or jointly responsible by its partners. After that, the partner who has to make payments may head after the other partners to recover their share of the cost.
Fiduciary Duties: Partners owe some fiduciary duties to each other, which include acting in good faith, avoiding conflicts of interest, & not profiting at the expense of the partnership. This is supported by the case Hospital Products Ltd v United States Surgical Corp [1984], where it was held that a fiduciary must act with loyalty & in the best interests of the partnership.

Liability for Employees: A partnership is vicariously liable for the actions of its employees if the actions occur within the scope of their employment. This principle is upheld in Taxicab Co Ltd v Stone [1930], where an employer was held liable for the negligence of an employee during the course of employment.

Application: a) Amos's Purchase of Rare Roses: This involves buying products from wholesalers which is a general business activity of any business & in this case Amos is buying roses from Rosie roses hence this is business of the partnership. Although Andi was never willing for this purchase to be made, it must pay $5,000 invoice since Amos acted as a partner had the authority to do so. This is well supported by the decision made in Degiorgio v Dunn [2004] NSWSC 767 whereby the court affirmed that a partner who acts within the line of the partners business acts for & on behalf of the partnership thus making all partners in the partnership answerable for such action or decision.

b) Scarletts Accident: Scarlett who works for a florist delivering flowers to addresses as her work injury a motorcycle that costs $10,000. The other claim for damages stated in the complaint is for was due to Scarlett acting in the course and scope of her employment as a partner of Applicant, making the partnership liable. This is in relation with a case of Taxicab Co Ltd v Stone [1930], the court put that the partnership is responsible for any actions of an employee that were negligent while performing his/her duties. Thus, both Andi & Amos were personally liable for the damages under the principle of joint and several liabilities.

c) Andis Separate Wedding Flower Business: It may also be noted that Andis decision to open a new store selling flowers especially for weddings without informing Amos may be in violation of her fiduciary responsibilities. Opening another similar business which is in breach of Section 30 of Partnership Act 1892 (NSW) Duty of partner not to compete with firm, Andi gets to the opposite side where her self-serving motives are rather detrimental to the partnership. This is so because of conflict of interest which goes against the common law rule for avoiding conflict of interest that was upheld by The High Court of Australia in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64. Amos could approach court & obtain an injunction restraining Andi from carrying on the separate business or recover all profits which Andi made from the competing business.

Conclusion: In consequence of their partnership, Andi &Amos are liable jointly &severally for debts arose while managing businesstogether. Both the $5,000 that Rosie Roses has to pay & the $10,000 in damages that Scarlett imposed are the partnership's obligations. Andi might have to deal with internal ramifications for violating her fiduciary obligation by forming a rival company without Amos's approval, but the partnership continues to be liable to 3rd parties.

Question Two: Contract Law: Malli and her accommodation

Issue: Whether Malli has formed Contracts with: Willow, Terry, & Surya

Rule: The term "legally enforceable agreement" refers to a contract. Three things are necessary for a contract to be enforceable: an offer, an acceptance, consideration, & the desire to form legal ties. The Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256 case offers additional evidence that a contract exists when each of these conditions is satisfied (Western Sydney University (2022) Lecture slides: Topic 3).

An Offer is a clear intention to be legally liable as against an offeror, who makes an offer that is open for acceptance by offeree (Western Sydney University (2022) Lecture slides: Topic 3). Reliably acceptance must be clear & the acceptance communicated to the offeror. Harvey v Facey [1893] AC 552 show that an assertion can only serve as a desire for the other partys actions & is thus not an offer but an invitation to treat. Likewise, in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401, it was decided that an invitation to treat does not constitute an offer.

Consideration comprises of something of value given by one party as a tool of enforcing the contract by the other party (Western Sydney University (2022) Lecture slides: Topic 3). Regarding the Simple contracts it is stated Simple contracts, are enforceable only if it contains consideration (Western Sydney University (2022). The case of Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 supports the view that for a trade to be considered valid & enforceable there must be something given in return for one to receive something.

Intention to Create Legal Relations: Both parties must possess an intention of legal relations, to form the contract. In commercial agreements this intention is usually implied as can be seen in Edwards v Skyways Ltd [1964] 1 WLR 349 (Western Sydney University (2022) Lecture slides: Topic 3). However, in case of domestic arrangements the intention to create legal relations is not inferred as clearly depicted in the case of Balfour v Balfour [1919] 2 KB 571, therefore agreements with relatives are non-commercial agreements generally.

Revocation of Offer: An offer can be rescinded at anytime before the offeree accepts it so long as the rescission has been communicated to the offeree as it was seen in Dickinson and Dodds case 1876 2 Ch.D 463 (Western Sydney University (2022) Lecture slides: Topic 3).

Application:

(a) Contract with Surya: Malli received an offer from Surya about the house, he indeed, spoke to her on the phone and agreed for $200 each month for rent. The relationship between Malli and Surya is that they are cousins, which can be termed as domestic & social relation. As stated by Balfour v Balfour [1919] 2 KB 571 these are often understood to be non-binding unless there is evidence of the intention to create legal relations (Western Sydney University (2022) Lecture slides: Topic 3).
While rent was involved in the contract and if taken literarily would depict a commercial relationship, the fact that the parties were a cousins, & the general circumstances surrounding the finding of the rent, favours a non-commercial relationship. In this case, there is no evidence of either party to give an express indication that the bargain was a legal one especially because the settlement appears to be casual.

(b) Contract with Willow: First, when Willow says that a room may be available this is the invitation to treat not an offer, according to the Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 (Western Sydney University (2022) Lecture slides: Topic 3). It happened when Willow agreed to give the room by finding that it was free and Malli accepted the offer by transferring the bond, indicating and constituting a genuine offer and acceptance hence a legal contract. There is also consideration; Malli offered the bond payment in order to be given accommodation, which she was given. This commercial agreement has the purpose of making legal relations or, providing such is a contract that has been created, has the meaning given by Edwards v Skyways Ltd [1964] 1 WLR 349 (Western Sydney University (2022) Lecture slides: Topic 3).

(c) Contract with Terry: The case presented here shows that Terry had presented his proposal to Malli with an ultimatum that it has to be accepted within a given period. Malli did not take the offer before the deadline expired, instead, she turned it down after getting an accommodation from Willow. To prior point, Hyde v Wrench case [1840] 49 ER 132 shows that any counter-offer or rejection withdraws the original offer and thus Terrys offer has been withdrawn as soon as the deadline expired by the evening of Wednesday. The explanation given arises out of the fact that Malli did not agree to it before the set time elapsed, no contractual relationship was formed.

Conclusion: Malli & Willow have a legally enforceable contract that is backed by a legitimate offer, acceptance, & consideration. Considering the familial foundation of the relationship & the generally accepted principle that non-commercial (domestic) agreements are not enforceable by law, it is unlikely that Malli & Surya's deal would be regarded as a legally binding contract. Additionally, Terry & Mallididn't get into a contract because her offer expired since it hadn't been accepted by the date. Malli has no obligation by law to reside in the house ofTerry.

Question Three: Contracts short answer questions

(a) This is important as it would help to verify that the seller has a valid title and this would reduce the incidence of legal risks or even loss of the bought goods. In relation to this, the doctrine of caveat emptor held that the buyer cannot rely on the title of the seller; the principle of nemo dat quod non habet or no one can pass a title which they do not possess applies. Cole v North Western Bank[1875] made this clear by holding that a seller cannot pass a better title than the one, which he or she holds (Western Sydney University (2022) Lecture slides: Topic 3). When the seller has a defective title, the buyer becomes liable to buy items that are stolen or charged and this puts him or her in a vulnerable state whereby the rightful owner may take legal action against him and repossess the item without providing any compensation (Khoury, D & Yamouni, YS, 2010). Therefore, it is significant to check on the conformity of the sellers title with the legal requirements in order to avoid various claims to the property.

(c) In Krell v Henry [1903] 2 KB 740, there is main purpose for the contract where the room was hired for the coronation procession, which never happened due to its cancellation. The court dismissed the cancellation given the fact that it caused a change in the intended purpose of the contract and, therefore, frustrating the contract under the doctrine of frustration. This case shows that there is a difference between an event which triggers the parties to perform a contractual obligation and an event on which the contract is built: in the latter case, if the event does not happen the parties will be discharged from their obligations because the contract has ceased to serve its purpose. Regarding the English contract law notion of frustration, this case is a landmark judgment. The court decided that since the procession's existence was important to the contract, its cancelation constituted the agreement's goal unfulfillable. This idea received further backing in Taylor v. Caldwell (1863) 3 B & S 826, where the contract was terminated due to the music hall's demolition because it was no longer attainable for it to be completed.

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