Law for Commerce

The study highlights several statutory provisions along with case law examples relating to the holding of shares by minors and collateral contracts in the context of the case study. While shares are covered in certain specific codifications, contractual arrangements are largely governed by the common law system prevalent within Australia along with precedents and principles based out of the precedents. Aspects of international law have also been covered, highlighting the UN Global Compact and the UNCRC in terms of child labour and its prohibition among the State Parties. Relevant case law examples have been included where applicable and the IRAC method has been followed for a greater degree of clarity and comprehension.

1.0 Executive Summary of Eva Case Study 

The case scenarios present Eva as a holder of shares while she is a minor. Based on the analysis, it was identified that since she could not be the legal owner and would be deemed as the beneficial owner, the legal owner would have to pay the call on the shares in accordance to the existent provisions within Australia. It would be applicable irrespective of whether dividends are received and meetings are attended as the rule of law considers shares as offering a number of benefits apart from dividends.

The second issue was identified as Eva suffering from the breach of a collateral contract violation by Dockland, who had promised to build wetlands adjacent to the property post purchase. Based on the incorporation of precedents, it was identifies that Eva would succeed in her claim for compensation as the pre contractual statement fulfilled all the necessary elements of a falsely promised pre contractual statement.

The third scenario presents Eva travelling to Simbui and finding government officials hiring minor girls aged 12 to do menial work without payment. The activities therein were identified as being in clear violation of the principles of the UN Global Compact and Article 32 of UNCRC.

2.0 Background Facts of Eva Case Study 

The facts enclosed within the case scenario start off depicting Eva as a minor who applied for and was eventually allocated shares in accompany. However, no dividends were received and she did not attend meetings. Eva receives a call on her shares by the company, asking her to pay the unpaid balance of the price ofthe shares owned by her. She was yet to run 18.

The next portion of facts within the case scenario depicts Eva receiving a large sum of money as inheritance from her grandmother. As she turned 21, she decided to purchase a townhouse from a company called Dockland for investment purposes. While making the purchase, Eva was promised that wetlands would be constructed adjacent to the property premises, which would increase the valuation due to the view. However, after the purchase was complete, Eva realized that the wetlands would not be constructed and decides to sue the company for the breach of a collateral contract.

The last portion presents Eva working as an international officer at Bushfield Education Pvt. Ltd. She works with the country of Simbui located in the Pacific and visits the region twice every year. When she was on one of her visits, she found that the government officers were using minor girls to undertake menial tasks for 10 hours a day. Furthermore, no payments were being made and the compensation was in the form of a promise to send the girls to Bushfield for education once they turned 16. Eva is aware that Bushfield is a member of Global Compact Network Australia and Article 32 of the United Nations Convention on the Rights of the Child or UNCRC.

3.0 Analysis of Eva Case Study 

3.1 Issue A

  • The first issue relates to whether Eva would have to pay the call on her shares despite her not being an adult, not receiving any dividends and not attending the meetings.
  • The rule of law is covered under Section 245M of the Corporations Act 2001 as part of the Commonwealth consolidated Acts.[1]
  • In terms of Eva owning the shares, the first area of contention relates to whether she would be the legal owner or the beneficial owner. Minors below the age of 18 under Australian Federal Law are not allowed to own any property per se.[2] Naturally Eva could not be held as the legal owner and would be considered as the beneficial owner. In this context, the legal owner of the shares would have to receive the dividends on behalf of Eva in good faith and attend the meetings on her behalf.[3] Considering receiving the call on the shares, Section 245M of the Corporations Act 2001 requires the shareholders liable to the pay the balance of the partly paid shares, albeit in accordance with the terms of the issue of the shares.[4] Additionally, it would be important to gauge if the company whose shares are held by Eva is a no liability company, as the Section 245 (1) does not apply to a no liability company.
  • The legal owner of the shares held by Eva would be liable to pay the amount unpaid on the shares when the call on shares is made. It would be applied irrespective of whether meetings were attended or dividends were received as the general rule of law is that shares provide a number of benefits apart from solely the dividends.

3.2 Issue B

  • The issue relates to whether Eva would be able to succeed in her claim for the breach of a collateral contract against Dockland.
  • Collateral contracts are covered under the common law system as followed within the territories of Australia and mostly rely on precedents. No specific statue or codification exists in this regard, albeit some elements find reference in the Competition and Consumer Act 2010.
  • Based on the application of the principle of collateral contracts, the promise of constructing wetlands adjacent to the property would manifest in the form of a pre contractual statement.[5] It is evident that the provision ofthe pre contractual statement was a deciding factor that encouraged Eva to go through with the purchase of the property seeking a rise in valuation as the purchase was meant for investment. Additionally, the promise was made orally alongside the written contract of purchase for the property. Considering the judgements in a number of precedents, the pre contractual statement comprised of all the necessary elements that would benefit Eva in claiming a breach. The statement was promissory by nature and was not intended to be a part of the main contract. Moreover, in accordance to the judgement passed in “Hoyt's Pty Ltd v Spencer(1919) 27 CLR 133)” the statement does not contradict the main contract but instead complements it.[6] Lastly, a consideration is also evident as it improved the promise’s chances of entering into the contract, which in this case is Eva. The case of Shepperd v The Council of the Municipality of Ryde(1952) 85 CLR 1, High Court of Australia” would also be relevant in this regard as it established the principles of a collateral contract as discussed above.[7]
  • Eva would certainly stand to be able to claim compensation and damages for the breach of the collateral contract as Dockland misled her into purchasing the property through a falsified promise.

3.3 Issue C

  • The issue relates to the application of four UN Global Compact principles and how the principles and Article 32 of the UNCRC would face violation in the context of Simbui employing minor girls.
  • The relevant principles that would be applicable to the scenario include Principle 1, Principle 2, Principle 4 and Principle 5. Article 32 ofthe UNCRC prevents economic exploitation of children and recognizes the right to implement the article by the State Parties.
  • Considering how the government officials in Simbui were engaging in unethical practises by employing minor girls aged 12 in menial tasks, the activity was in gross violation of human rights and rights o the children. It would be important to note whether Simbui was a signatory of the United Nations and whether the UN Global Compact would be applicable. In the case of non applicability, Bushfire could initiate the proceedings as it was a State Party. Principles 1 and 2 of the UN Global Compact establish that business should strive to protect the human rights that are proclaimed internationally and ensure that they are not complicit in the abuse of human rights respectively.[8] Furthermore, Principle 4 highlights the abolishment of all forms of compulsory labour and Principle 5 establishes that states must abolish any form of child labour.
  • Article 32 of the UNCRC is also in violation in the context of Simbui government employing minor girls. While the employment was not interfering with the education of the children, the article clearly mentions that economic exploitation is prohibited by all means.[9] Furthermore, it also mandates the State Parties to engage in legislative, administrative and social measures to prevent child labour and implement the article in full effect.
  • In conclusion, it could be identified that the activities of the government officials in Simbui were in violation of the 4 aforementioned principles and Article 32 of the UNCRC. Eva could certainly take up the case with the supervisor and initiate an international preceding.

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