Can Michael, the managing director of WA Lithium Refiners Ltd have the legal grounds to pursue a legal action against Ozzie E-Vehicles Pty Ltd for breach of contract due to failure to honor their agreement to deliver payment due by 15th April?
Can Michael, in their capacity as de jure directors of directors of Ozzie E-Vehicles Pty Ltd seek legal termination of their contract with Australian Engineering Supplies Ltd (AES), without risking breach of contract arising AES Ltd in four installments of $ 250 000 even after the machine was delivered, and battery production began?
The elements of the contract law formation include:
Formation of the Contractual agreement between Michael, at the time when he was the majority shareholder of the company and WA Lithium Refiners Pty Ltd,
The pre-incorporation agreement scope of the contract between Ozzie E-vehicles and AES
Conceptual agreements clauses in the contract validating the claims of plaintiffs
Post-incorporation Breach of contract by Michael
Existing available breach of contract legal retribution for the plaintiffs and defendants
Rules: A contract under Australian Law is formed on the basis of its validity (Existence of an offer) and fulfillment of the terms of expressed and implied. Australian Corporate law statutes and Common law principles relevant to the above issues apply the following rules:
The principle of Pre-Incorporation Corporate Veil formation in the contract agreement – Michael, before the incorporation leading to the new shareholders sign agreement with WA Lithium Refiners to provide 100 kg lithium within a specific timeframe estimated to be valued at $ 50,000. As per the agreement, “expressed inference” of these terms is that the company agrees to honor the contract with WA Lithium Refinery Pty Ltd in those terms. “Implied meaning” in the context of company law clauses is that the company will provide sufficient amounts of Lithium that meets the needs of the plaintiff without failure.
Conceptual agreements clauses in the contract validating the claims of plaintiffs – The two issues emerging from this case scenario incorporate two key aspects. First, Ozzie E-Vehicles Pty Ltd, through their de jure director and a majority shareholders at the time of entering into contract with the defendant promises to provide a consistent supply of Lithium to their premises. Thus, in contractual terms agree to help the plaintiff fulfill their obligations to the clients. On the second aspect, Ozzie E-Vehicles commits to paying the second plaintiff payables owed within a timeframe of 5 months.
Conceptual agreements clauses in the contract validating the claims of plaintiffs- Ozzie E-Vehicles agree to supply Lithium worth $ 50000 exclusively as per the agreement clause mentioned therein. In contextual terms, this means that the quantities that the defendant promises to deliver are prescribed under the contract. On the second issue, the payables of $ 25,000 in four installments expressively help to ensure that AES Ltd fulfills its functional obligations to its organization in every possible way.
The Post-incorporation Breach of contract by Michael – Under the Section 124 of the CA, Australian law provides for the separation of liability of an individual and a limited company and the role of their leaders(CSU LAW 504 Modules, 2019, Topic 12). Under this provision, an individual acting as an employee of an organization represents the entity as a limited company not themselves as individuals. Therefore, upholding the sufficiency of the promise in the post-incorporation period is essential to ensure non-breach of contract. The Incorporation Act protects the organization from any form of liability arising from individual actions. However, in this case scenario, both agreements are validly entered in the best interests of the company. The issuer of the promissory commitment contained in the contract agreement commit both the issuer and the receiver towards fulfilling the agreement clauses otherwise any action contrary sets the ground for the breach of contract. In case of any breach of the contact agreement, Australian law provides the following condition where the defendant becomes liable to damage and compensation. These include:
Liability for the Breach of Contract Terms citing inadequacy of product or service- The aggrieved parties, WA Lithium Refiners Pty Ltd and AES Ltd are legally entitled to pursuit of a legal retribution against Ozzie E-Vehicles on the grounds of a breach of contract. Five months after signing the agreement, the Ozzie E-Vehicle limited is yet to honor their agreement of payment to AES limited. In addition, they are still yet supply WA Lithium Refiners with adequate amounts of lithium that meet their agreed quotas. The promisee, by signing the contract agrees to help fulfill the obligations of the company consistently per the provisional clauses of the contractual agreement.
Liability for breach of contract due to “Contingent Conditional Failure” – Under this rule, WA Lithium Refiners Pty Ltd is entitled to legal retribution of the contract because of the occurrence of such events that amount to the failure to deliver the quantities to meet the aforesaid quantities. The failure to deliver the agreed quantities of Lithium amount to a violation of the contract and therefore from a legal perspective allows the plaintiff grounds for legal retribution.
Application/Argument for both Parties
The interpretative meaning of the rule and legal principles indicate that Ozzie E-Vehicles Pty Ltd, even after the entry of new shareholders, still are bound by the contracts of agreements entered at early stages and therefore liable to contractual agreements with AES and WA Lithium Refiners Pty Ltd.
Australian law, mainly dependent on the common law principles accords the plaintiff, AES and WA Lithium Refineries a strong legal ground that supports his argument justifying the claims of breach of the contract due to violation of the provisions of their agreements. Therefore, these forms of violations give the plaintiff the legal authority to invoke a legal suit due to a breach of contract.
A critical analysis of the case scenario of Fine China, Hard Clay and Strong Box reveal that there are two dominant issues that arise on the context of contractual law. Of importance to note is the role of Dennis, in their capacity as a company director and also as a de jure representative of the company.
Can Fine China be liable to a breach of contract by refuting any legal obligation to accept the delivery or commit to make payments for the agreement made by Dennis on behalf of the company at a time when they had formally terminated their employment contract with the aforementioned individual?
Can Fine China legally sue Strong Box and be entitled to compensatory packages for losses arising from the release of products secured in their custody to a non-employee of the company using forged documents?
The issues arising from this case scenario primarily cover the extent of the liability for Hardy Clay Ltd for:
Entering into contractual agreement with an individual who, in light of the evidence presented does possess the legal power to represent the company as at the moment of the agreement.
Seeking compensatory retribution and compensation for deliveries revoked by the plaintiff
On the second issue emerging from this case scenario, Strong Box’s extent of liability to wrongful release of property to “Unknown” persons in the pretext of using forged documents exposes the company to liability.
The Principle of Ultra Vire Rules – “ Parties that sign a contract commit to the fulfillment of particular obligations, usually in the contracts referred to promises , composed of consensual agreement from all parties” -Australian Contract Law. Denis decides to enter into a contract with contrary to Section 127 with the notion inflicting damage on the reputation of Fine China. The company on its part does not violate the agreement of the contract. It is therefore accurate to ascertain Strong Box is not liable to the deceitful acts of Denis but is a victim.
Exclusive obligations mentioned therein in the Section 127 outlining the Executing Document Principle – The principle of legal requirement of originality stipulates that the documents in a contract should incorporate valid documents to validate transaction otherwise its absence makes any contract therein illegal. Evidence in the case indicate that Fine China is a victim of wrongdoing by a former employee like the defendant.
Concept of Corporate Veil – Australian law provides for the statutory protection from liability for a limited company for wrongful actions by employees.
Denis : As per the facts of the case, Denis at the time of entering into a contract with Hardy Clay Ltd is not an employee of Fine China and therefore does not possess any legal authority to represent the company. However, the absence of the any form of formal communication from the company regarding the employment status of Denis exposes the company to a liability for any wrongful actions committed in their full knowledge. Evidently, the actions of Denis were independent of any input from the Fine China thus the contractual agreement was null and void. Hardy Clay lacks the basis legally suing Fine China for breach of Contract without sufficient proof of their knowledge of Denis’s actions. On the other hand, Strong Box Ltd , though lacks any sufficient evidence to show their actions were informed by their assumptions of Denis being an employee of Fine China, legally do not bear liability for any loss from act of deceit by Denis. In retrospective, there were victims of malicious actions of individual purporting to be an active employee of the company. The Ultra Vire Rule and executing document principle does bestow liability to companies actions emerging from any wrongful actions. In both cases, Denis acts as an imposter with malicious intent to defraud both business entities and thus in the view of this paper both companies should bear any losses independently with option to pursue legal retribution from Denis as a defendant.
According to the doctrine of corporate veil, Hardy Clay Ltd “unknowingly” entering into an agreement automatically discharges the company from form any form of civil liability. In retrospective, the absence of evidence proving active role in the breach of contract by either parties invalidate claims on them but rather are victims of an intentional violation by an individual without de jure authority to transact any business on behalf of the two parties. Oris Fund Management Ltd V National Bank of Australia concludes that any contracts containing elements of deceit without prior knowledge of any of the two parties exempts either party from any liability(CSU LAW 504 Modules, 2019, Topic 13). The statutory clauses as per Ultra Veil Rule do not accord either party responsibility burden of actions by individuals acting out of malicious intent. On the contrary, it mandates them to takes such measures to minimize the damage caused by the wrongful deceit and subsequently pursuing retribution by suing individuals involved in the malice.
Contracts containing elements of deceit are subject to termination even in the absence of any form of liability and therefore both parties are the sole bearers of the adverse effects that arise thereof. From a legal perspective, the conclusive evidence indicate the silence of law on the extent of liability arising from wrongful deceitful makes the realization of a positive outcome complex (CSU LAW 504 Modules, 2019, Topic 13). In light of these facts, it accurate to conclude per se evidence on the matter the above statement accurately highlights the adverse impacts of the acts of wrongful deceit by Denis. Albeit, this observation, the Ultra vire Rules act as a reprieve to contain possible damages that arise from these transactions. The Ultra vire rule in its interpretative form has high levels of ambiguity Oris Fund Management Ltd V National Bank of Australia case. While it may be advisable for Fine China to sue Strong Box, the presumption that there was no formal notification of any termination of employment contract with Denis insulates the later from, any form of liability. However, applying jurisprudence of common law tort of the principle of authenticity, Strong Box Ltd failed to verify the originality of the documents as required by Section 127 of the CA (CSU LAW 504 Modules, 2019). Consequentially, it is accurate to assert that, if Fine China is confident that it can fulfill the burden of proof to substantiate the claims of negligence on the part of Strong Box or collusion by its representatives, then the case would potentially yield positive outcomes in favor of the plaintiff.
CSU LAW 504 Modules, 2019, Topic 13
CSU LAW 504 Modules, 2019, Topic 14
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