Day 53 Commercial Law Summary Chapter 8-14

Commercial Law

Summary Chapter 8-14

Chapter 8

The sale of goods legislation adequately protects counsumers.THus, where there is a sale of goods, it is necessary to determine whether the Trade Practice Act governs the contract(consumer contracts), or it is governed by the state sale of goods legislation( non-consumer contract). The TPA covers not only a sale of goods but also the lease or hire of goods. It provides some protection to consumer by implying into consumer contracts for the supply of goods certain conditions, which cannot be excluded. By the way, the sale must be made in the course of business instead of at auction. The good cannot be bought as merchandise, which on the purpose to resale. There are several terms are implied by the TPA, such as, the seller has a right to sell, the buyer shall have and enjoy quiet possession, and the goods should be free from encumbrance not disclosed before the contract was made, which means the good is mont mortgaged or changed in any way. In addition, the goods should correspond with the description, have merchantable quality, and fit for a particular purpose. If there is a breach of these implied terms, a remedy may be applicable. This includes calculation of damages and returning the goods. Although the seller can use reasonable limitation clauses to restrict the obligations, the implied terms can not be excluded. On the other hand, the TPA dose not apply to non-consumer contracts. Therefore the sale of goods legislation takes place. Similarity, it consists implied terms same with the TPA. Sale of goods legislation has provisioned covering price, delivery and payment, acceptance, passing of property and risk. In all cases, the parties are free to decide their own terms.

Chapter 9 

A contract may be terminated or discharged in a variety of ways. To illustrate, it can be discharged when the parties wholly or substantially perform their obligations in the contract; it can be discharged where both parties have reached an agreement; the contract can be conditional corresponding to specific terms, and if that term is terminated, the contract will automatically discharged an intervening event, not contemplated by the contract nor the fault of either party, makes performance of the contract impossible or radically different to that originally contemplated, the contract is discharged for frustration. In addition, the contract will be terminated for breach of a condition in it. Some intermediate terms may be treated as either a condition or a warranty, depending on the seriousness of the consequences flowing from the breach.Hence serious breach of an intermediate term will give the innocent party the same rights as if a condition was breached. It is due to the breach will substantially deprive the innocent party of the whole benefit for which he or she entered into the contract in the first place. Furthermore, repudiation occurs where on party to the contract indicated that he or she will not perform the contractual obligations. It can be either the party is unwilling to perform or unable to perform. Moreover, the anticipatory breach may occur where one party indicates to the other party before the due time for performing the contract, that they will not be able to perform their side of the contract. If the innocent party elected to terminate the contract, they must do so without doing anything that can be regarded as affirming the contract. The election to terminate must be unequivocal and generally speaking must be communicated to the other party. Once the election is made, the contract is ended.

Chapter 10

Agency is a term used in commercial circles. An agency exists wherever the agent has the power to affect the legal rights and obligations of the principal. In determining whether a relationship is an agency, the court must have regard to all the circumstances, including the agent is more likely to pay the profit across to the principal, the agent is likely to be paid a commission, and the agent has an obligation to account for the principal for sales. The most common function of an agent is to bring about a contractual relationship between the principal and a third party. They also have authority pay/receive money and make/receive representations on behalf of the principal. The most important task of an agent is to make contracts on behalf of the principal. This is an exception to the rule of privity of contract. There are numerous varieties of special agents, such as mercantile agents, stock brokers and solicitors. The powers of the agent in each case will depend on the facts of the case. Realationship of principal and agent may be created by deed, by agreement in writing or orally, or by operation of law. Hence there are no formal requirements. In addition , an agency may be created through by express agreement, implied agreement or estoppel. A principal will be bound by the actions of his or her agent where the agent acts within actual authority( express and implied) or apparent or ostensible authority. However, if the agent acts outside these authority, the principal will not be liable unless the principal subsequently ratifies the agent’s actions. The principal can be only sued by third parties when the agent acted within actual or ostensible authority, plus the principal has ratified agent’s action. On the other hand, the principal may sue the third party when agents acted within actual authority or the action is ratified. Generally, the agent cannot sue or be sued unless the third party did not exist at the time of making the contract; the agent executed a deed or bill of exchange in his or her own name; customer or trade usage makes the agent liable; alternatively, the terms of the contract specified the agent is liable.

Chapter 11

Partnerships are not as important as they once were. Nevertheless, many small businesses are still owned in partnership, as are many professional businesses ought to have a working knowledge of partnerships. The partnership is not a separate legal entity. There is a Partnership Act in each state, but fortunately, the Acts are essentially the same. Unlike the creation of a company, the creation of a partnership requires no formalities whatsoever. It is the relation which subsists between persons carrying on business in common with a view of profit. So for a partnership to exist, the business must be carried on in common. Every partner acts as agent therefore they have mutual rights and obligations. It is not easy to determine whether a business is being carried on in common, thus it should regard to the prima facie evidence which receipt by a person of a share of the profits from a business makes him partner in the business. A partnership must aim to make a profit, this part of the definition emphasises that a partnership is a commercial relation ship and does not include non-profit associations and clubs. Although the definition of a partnership does not refer to contract, it is clear that the relationship is contractual. Contracting parties cannot avoid being partners just by agreeing not to be partners. The rights and liabilities of the partners with respect to each other are determined by three factors: the contract creating the partnership, the Partnership Act, and the law relating to fiduciary relationships. As a partnership is not a separate legal entity, individual partners are responsible for the debts and liabilities of the partnership. However, the limited partnerships can be used to against that. Thereby, in most partnership, every partner is liable jointly with other partners for all debts and obligations of the firm incurred while he or she is a partner. At last, last, the partnership can be terminated by the partners themselves, by operation of law, by supervening illegality or by the courts.

Chapter 12

Companies are popular business structures because it is an independent legal entity with rights and powers of its own. A company may be broadly classified as either a proprietary company or a public company, and the Corporations Acts provides for the registration of proprietary and public companies. Normally, there are four types of companies that may be registered. For instance, the companies limited by shares, companies limited by guarantee,unlimited companies and no liability companies.The company is created through the registration process, which lead to its incorporation. This process involves the lodgment of an Application to Register:s 117. The Corporations Act contains a series of replaceable rules that will apply unless the company’s members have voted to exclude or modify those rules in the company’s constitution. Furthermore, The Certificate of Registration operates as the birth certificate of an company. It also contains the company’s Australian Company Number(ACN), which serves as a unique identifier for the company. The management within a company is in the hands of the directors, who are elected according to the rules of the company or nominated in the constitution. When a company has shareholders, the shareholders will normally elect the directors. A company is liable in tort for the action of its employees where they are acting in the course of their employment. Nonetheless, the company is mainly concerned with a company’s contractual liabilities. Section 127 provides the manner in which a company may execute a document including a contract. It states a company may execute a document with or without the common seal if the document is signed/witnessed by two directors, a director and a company secretary or the sole director who is also a secretary.

Chapter 13

The Corporate Social Responsibility(CSR) has been a hot topic both locally and internationally. It involves an ongoing commitment to transparent and ethical business behavior and to sustainable economic development. While at the same time improving the quality of life of the workforce, community and society generally. It is relied upon the decisions of directors. Directors and other officers ow certain duties to the company. These duties are owed to the company and not to the members as individuals. Sections 180-184 of the Corporations Act impose certain duties up on directors. To illustrate, section 180 sets of the duty of company directors and officers to exercise their powers and discharge their duties with a reasonable degree of care and diligence. In addition, a director ought to be capable of understanding the affairs of the company, at least to the extent of being able to reach a reasonably informed opinion of its financial capacity. Because of the rules and decisions with respect to insolvent trading, directors cannot expect to escape liability by staying away. Hence the director is expected to attend board meeting and take an active interest in the company’s affairs. Section 181 set out the duties of directors and officers to act in good faith an for the proper purpose. It means that directors must act honestly in the interests of the company as a whole. There are a number of possible consequences for a breach of statutory duty, some having civil consequences and others having criminal sanctions. The directors also owe further statutory obligations, which are arisen under the Corporations Act and other legislative provisions.

Chapter 14

A trust is essentially a relationship pursuant to which a person is obliged by the rules of equity to deal with certain property of other persons, or for a particular purpose. The courts of equity have recognized a strong fiduciary relationship between the trustee and the beneficiary. There are three crucial element of a trust: the trustee, the trust property and the beneficiary. All trust must have a trustee, and many trusts have two or more joint trustees. The law recognizes the trustee as the legal owner of the trust company. If the trustee becomes incapable or unwilling to carry through the trust, the trust will not fail, but a new trustee will be appointed under the terms of the trust. The trust property may be real property, personal property or intellectual property. Besides that, the trust property may also include business stock and goodwill. The person for whom benefit the trust was created is the beneficiary. The beneficiary can either be a specific person, a defined group of people or a charitable purpose. They can take action against the trustee to enforce the equitable obligation to properly administer the trust, and to properly use or apply the trust property. The power of a trustee may be divided into three categories: express powers, implied powers and statutory powers. However, there are also obligations associated with the power. A trustee has the duty of prudence, diligence and honesty. Moreover, without being a separate legal entity means that a trustee enters into contracts in his/her own name. Hence the trustee is personally liable for the business debts. Even through the trustee is unlimited with business debt, it doses have a right of indemnity for these debts out of the trust property where the transactions that give rise to the liabilities were authorised by the trust deed.