• Internal Code :
  • Subject Code : HI6027
  • University : Holmes Institute
  • Subject Name : Business and Corporate Law

Case Studies of Business Law and Corporations Law

Table of Contents

PART A

Issue 

Rule 

Analysis 

Conclusion 

PART B 

Issue 

Rules 

Analysis 

Conclusion 

References 

PART A 

Issue 

SOO Burgers is a restaurant chain of restaurantoperating their business in Australia and New Zealand. In the last financial year, SOO Burgers faced a significant loss in their business. Due to the loss, they decided to announce a promotional program on behalf of SOO Burgers. The promotional event mentioned circulating some golden tickets. On the collection of fifty tokens, one token with one burger, one will get a golden ticket. Only one golden ticket will contain a golden car winning opportunity.The announcement mentioned giving a brand new Mazda CX-9 to the winner of the competition. Due to some printing mistakes, SOO Burgers circulated more than one golden tickets in the market. Now there is more than one winner of the competition due to that mistake. After realizing the mistake, SOO Burgers made a second announcement for cancellation of the promotional event and withdrawal of the prior announcement. The issue arises about the validity of the next announcement about the cancellation of the promotional event. Problem is further accompanied by the fact that whether the company is bound to provide cars to other winners.  

Rule 

The announcement regarding the promotional event was made to the public in general on behalf of the SOO Burgers. On the execution of the announcement, SOO Burgers agreed with the people in general. This relationship between the SOO Burgers and the public in general sets a relationship of two parties in a contract. This particular type of contract can be defined as a unilateral contract under common law contracts. Since Australian contract law is based on the English common law, the governing legislations will be the same. The English Common law specifies a different number of contracts. The type of contact established in this case is a type of unilateral contract. In this type of contracts, one party makes an offer, and the other party accepts the same with action. The agreement is open for the public in general, and any person over the completion of such terms and conditions may be mentioned in the offer can accept the same. The fulfillment of the procedures agrees to turn into a contract. In this particular case, the SOO Burgers made a promise to the public in general at the announcement of the promotional event. The terms for the acceptance of the offer was mentioned in that same announcement. Hence, anyone on the accurate completion of the conditions could claim the prize. The conditions will be followed according to the announcement as well as offer.

Analysis 

The case in issue raises a question against the validity of the announcement made by SOO Burgers for the termination of an offer made by them. As discussed above the rule guiding this case is the rule of common law contracts. According to the common law contracts, an offer is made by a party and the other party can accept the same through an action. In this case, the action for acceptance was presenting the scratched golden ticket containing an image of a golden car to the authority if SOO Burgers. Due to a printing mistake, more than one golden card found to contain the image of a golden car. The problem was, SOO Burger planned to give only one car to the winner. Due to the mistake, more than one winner claimed the winning prize. On the awareness of the error, SOO Burgers made another announcement for the termination of the previously announced offer.

According to common law contracts, the validity of the termination of the offer depends on the time of acceptance. As a general rule, an offer can be terminated any time before the acceptance of the offer by the other party. In this case, SOO Burgers terminated the offer after an acceptance made by Brett Vulture at the head office located in Melbourne. It is thus clear that the acceptance made by Brett Vulture was a valid ad he can successfully claim the prize. In the latter case, Michael “Mickey” Morrow, who was admitted in the hospital, found that his golden card contained a golden car. He had prior knowledge about the announcement been made about the termination of the offer. Hence, after the offer has been terminated, he cannot claim the prize. This makes SOO Burgers out of the obligation for providing the award to anyone who claims the same. The withdrawn of responsibility takes place after the termination has been done. Therefore, the claim made by any person after a valid termination is not acceptable. In the case of “Blackpool & Flyde Aero Club v. Blackpool Borough Council," the invitation to offer was explained as the invitation to tender. The judgment served for this case analyzed the matter regarding the contractual obligation of the parties in a contract. This case relates to the situation in issue on the matter of the invitation to offer. It further refers to the acceptance of the same.

Conclusion

The issue as raised in the case has been analyzed in the previous part of the paper. This can be observed that there is a difference of situation in the case of Brett and Mickey. Brett accepted the offer before the revocation so made by the SOO Burgers for the previous announcement. Afterward, the decision regarding cancellation was made. In case of Mickey, until he has reached the head office for claiming the prize, the offer was terminated. It thus makes the acceptance in Brett’s case valid, but invalid in Micky’s case. With relation to the above-explained analysis of the case, it can be said that SOO Burgers is not bound to provide any prize to Mickey. It further sets an obligation on the part of SOO Burger to provide the prize to Brett on his valid acceptance of the offer. 

PART B

Issue 

The Sparkling Pty Ltd. (Sparkling) appointed Sarah as their managing director on 8th August 2007 for two years. The appointment was lodged with ASIC on that date. By 2009 on the completion of two years as the managing director of the company, Sarah wanted to continue with the position. The latter appointment by 2009 was not lodged with ASIC, neither any formal appointment was made. According to the contract made between Sarah and the Sparkling Pty. Ltd. contained some restrictions. One of the restrictions mentioned that Sarah would not commit the company on borrowing any transaction exceeding $20,000. The issue thus arises regarding the consequences of the loan amount borrowed by Sarah on behalf of the Sparkling Pty. Ltd. The loan so borrowed by Sarah from the Costello Bank was of $30,000. Examining the issue, the validity of Sarah’s appointment as the managing Director raises a question.

Rules

Two primary rules guide the matter in issue. Australian Securities and Investment Commission (ASIC) and the Corporations Act, 2001 governs the issues related to the case. Appointment of Sarah as the managing director of Sparkling Pty Ltd. was lodged with ASIC in 2007. The previously set contract was valid for two years for that appointment. No formal appointment was made for the continuation of her position. Not only was that on the continuation of her position, but the only contact she had with the company was also the former one. The contract bound her not to make any transaction that exceeds $2,000. Any such transaction will need the board’s approval. Despite the restrictions, Sarah made a transaction of $30,000 as a loan on behalf of the company without any approval from the board.This particular matter is followed by the corporation’s act 2001. Section 232(2) and 232(3) of the act explains the liability of the board members of a company regarding the misuse of their power. This legislation makes it obligatory on the part of the members to a company, to use their powers in a fairway. It further mentions the penalties regarding fraud by any member of the company. Due to the expiration of the same contract, by law Sarah no more holds the same position, but yet she continued as the same. The obligation regarding fraud remains the same. 

Analysis

The case thus raises two closely related issues. One regarding the continuation of Sarah's position for managing director, other-regarding fraud about the loan. About the issue regarding Sarah's appointment, it is stated that no formal appointment was made on the expiration of the prior contract period. She continued with the same position in the same company. The guidelines, as well as restrictions, stated in the contract, limits Sarah from making any transactions exceeding $20,000. Making any transaction that exceeds this amount will require the board’s approval. Sarah not only made a transaction of a sum that exceeds $20,000, but she also did not even take permission for the same from the board. This makes her liable, according to the Corporation Act, 2001. The applicability of the act mentioned above depends on the validity of Sarah's relationship with Sparkling Pty Ltd. With the current situation, the bank sued Sparkling Pty Ltd. regarding non-payment of the loan amount. The company now can either prove Sarah liable for committing fraud to the company or use the expiration of the contract for withdrawn of liability. The expiration of the contract and the absence of any formal appointment letter is evidence of the fact that Sarah is no more a part of the company. Sparkling Pty Ltd. did not lodge the return of Sarah’s position in that company. The liability regarding the loan amount to the bank should remain on Sarah and not the Sparkling Pty Ltd. It should be noted that if the loan amount were granted for the refurbishment of two of Sparkling’s’ clothing stores, the company would be liable in that case. In that case, the benefit would've been of the Sparkling's'.

In such a situation, the approval of the board would've been included. And with the approval of the board, the loan agreement binds the company. In another hypothetical situation, if the loan officer knew about the expiration of the contract, the situation would’ve been different. The loan officer could avoid granting the loan on the ground of Sarah's official position complications. Since despite knowing the scenario he granted the loan, Sparkling should not be held liable in here. It is to be mentioned that no board member of the company knew of the transaction, which decreases the possibility of liability on the part of the company. All these situations may have taken place keeping the issue in mind. The circumstances of all these situations could’ve been different based on the situation. In the current situation, the bank has sued the company for non-payment of the loan amount. In that case, the company can withdraw their liability by proving fraud at Sarah’s part. They could do the same by proving Sarah as a non-member of the company. The proof could be brought concerning the expiration of the appointment contract.

Conclusion 

The matter in the issue raised two closely related questions. Explanation of one issue requires the explanation of the other. The loan amount was granted to Sarah on behalf of the company. As discussed above, the board members of the company did not know the loan so granted. Hence, the unawareness of the board members helps the company to prove itself innocent. On the other hand, the expiration of the former and primary contract between the company and Sarah makes company free of any liability for Sarah’s mistake. This scenario makes the fact clear that whether it proves to be a fraud or mistake of fact, Sarah is to be liable. The Sparkle Pty Ltd. could withdraw their liability either over the expiration of the contract or the fraud committed by Sarah. Hence, on the side of the Sparkle Pty Ltd. No liability arises. The evidence regarding the issue should be presented for the withdrawal of liability. The said evidence includes the expired contact paper mentioning the date of joining and date of expiration. As the other fact, the fraud on the part of Sarah could be established. 

References 

"Australian Securities And Investments Commission V Ingleby" (2013) 39 VR

"Fooled In Blackpool" (2009) 201(2691)

Arnow-Richman, Rachel S., "Mainstreaming Employment Contract Law: The Common Law Case For Reasonable Notice Of Termination" [2013] SSRN Electronic Journal

Australian Corporations & Securities Legislation 2012 (CCH Australia, 2012)

Bertino, Lorenzo, "Breach Of Contract: Automatic And Unilateral Price Reduction" (2018) 14(1) European Review of Contract Law

Choi, Nellie Eunsoo, "Contracts With Open Or Missing Terms Under The Uniform Commercial Code And The Common Law: A Proposal For Unification" (2003) 103(1) Columbia Law Review

Fisher, James C, "Contract Variation In The Common Law" (2018) 47(3) Common Law World Review

Jiang, Hao, "The Fictitious Freedom To Contract Around Fraud Under Delaware Law" [2016] SSRN Electronic Journal

Miller, Andrew, "Situational Awareness – From The Battlefield To The Corporation" (2006) 2006(9) Computer Fraud & Security

O'Gorman, Daniel P., "Redefining Offer In Contract Law" [2012] SSRN Electronic Journal

Phung, Duc Nam and Anil V. Mishra, "Corporation Diversification And Firm Performance: Evidence From Vietnamese Listed Firms" (2016) 55(4) Australian Economic Papers

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