Business Structure - Partnership Vs Company Essay.

Whether the brothers should opt for a partnership form of business, or whether they should incorporate a company form of business structure. Trust form of business structure is opted majorly for taxation benefit purpose and so, the focus of this discussion is not on it.

In Australia, broadly there are four business forms in which the person can run their business. These four are partnership, sole trader, trust and company. Every business structure is coupled with its own advantages and disadvantages and the choice of selecting a particular business structure depends on these features only. A sole trader has the option of converting their trade into partnership or company (Gibson and Fraser, 2013).

In a partnership form of business structure, two or more individuals, come together for carrying on a business with common objectives, with the aim of sharing profits equally. Every Australian state has its own Partnership Act and on the basis of the state in which the partnership is, the relevant partnership act applies. For instance, in the Partnership Act, 1895 is applied in WA and Partnership Act, 1891 is applicable in SA (Department of Industry, Innovation and Science, 2017). The advantages and disadvantages of partnership form of business structure have been properly covered in the below mentioned table.

Advantages	Disadvantages
The partnership form of business structure has very low starting costs in comparison to other form of business structures, particularly company.	The biggest drawback of a partnership is that it has an unlimited liability. This means that when the debts of the partnership are not fulfilled through the partnership, the personal property of the partners can be attached to discharge the debts of the partnership. This is because, unless the partnership deed states otherwise, the partners of the firm are severally and jointly liable for the debts of the firm.
When there are high number partners in a firm, the skill set of the firm is widened as each partner brings a unique skill with them.	When there is a disagreement in between the partners, it can result in the dissolution of the partnership, particularly when the same is not resolved.
When a partnership is compared to sole trader, higher capital can be brought in the business.	The partners are deemed as the agent of the firm, and the acts of partners bound each other.
The partners have separate borrowing capacity and the same increases the borrowing capacity of the partnership firm.	The partnership comes to an end, with the partner’s death.
The employees, who have proved themselves, can easily be made a part of the firm, by including them as partners in the firm.	Each time a partner is added or removed from the firm; there is a need to revalue the firm and this result in additional costs for the firm.
The income and the losses can be split between the partners, and this is not present in sole trader form, and this allows tax savings.
There are limited external regulations over partnership firms.
The partnership firm’s affairs always remain private.
The firm’s structure can be changed by a mutual decision between the partners (Tasmanian Government, 2017a).

Apart from partnership, there is also an option of incorporating a company. The Corporations Act, 2001 (Cth) governs the companies in the nation in terms of its formation, winding up, charges, director duties, and other different aspects of a company. Further, the Australian Securities and Investments Commission, i.e., ASIC, regulates the conduct of the company and its related personnel (Australian Taxation Office, 2017). The company form of business structure enjoys the separate legal entity status, as a result of which, it is deemed as a separate artificial person from the ones who run the operations of the company (Gibson and Fraser, 2013). This form also has a number of advantages and disadvantages which have been properly covered in the below mentioned table.

Advantages	Disadvantages
The liability of the shareholders is limited in company, as against that of partners in partnership firm.	The company form of business structure is a costly choice, as the costs of its formation and winding up are quite high.
The ownership can be transferred easily by simply selling the shares to another.	The company form has to abide by a range of compliances.
The employees can be the shareholder of the company.	The affairs of any company are deemed as a public matter.
There is a uniform piece of legislation which applies on company form of business structure, unlike the state based partnership acts.	There is also an applicability of tax on the distributable profit.
The rates of taxation are favourable for companies.	Where there is a failure of directors in fulfilling their duties covered under the governing act, they can be held liable in a personal manner.
The company form of business structure can raise funds from general public.
There is both a high capital base and a wider skill set in company set of business structure (Tasmanian Government, 2017b).

In this case, the business which was established by the grandfather of Clayton and Cameron, i.e., of Stuart was already well established and there is a lot of capital in the business already. This was being run as a sole trader by Stuart but with his death, Clayton and Cameron need to choose from partnership and company form. It is advisable to opt for partnership, as the brothers do not need capital, which could be raised from the general public. Also, this would allow them to have a control over the affairs of the company. This would also mean that the business would not have to follow strict regulations and the high cost of forming a company. Even though it would mean that they would have unlimited liability but their business is in a good enough position to stay away from such a condition.

Rule

Conclusion

Hence, it is recommended to Clayton and Cameron to opt for a partnership form of business structure instead of a company form of business structure.

Whether Ben and Vanessa are legally entitled to insist the store to comply with the advertised price or not?

A contract is a promise, where one party agrees to pay the other party consideration, for which the other party does something for the first party. In order to form a contract, certain essential elements have to be present. The very first element is offer (Mau, 2010). It is important that an offer is made, which can be accepted by the other party. It is also important to differentiate between an offer and an invitation to treat. An offer shows the intention of the party to create legal relations and the invitation to treat shows that the parties simply want to negotiate upon the possible terms of a contract (Clarke and Clarke, 2016).

Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 is a case in which the court held that the goods which are kept on the shelf of a shop are an invitation to treat. An offer is made only when the customer takes the good to the shop assistant for buying. And it is the option of the shop assistant to accept, decline or modify the offer (Miller and Cross, 2015).

In this case, based on Pharmaceutical Society of Great Britain v Boots, an invitation to treat was made by the shop by displayed the table at a particular price. The offer was made when Ben and Vanessa went to the salesperson for the purchase of the table. And this offer could be changed or rejected by salesperson. So, by declining to sell the table at $3,500, the offer was declined and the store cannot be forced to accept this offer.  

Conclusion

Hence, Jake and Vanessa cannot insist the store to comply with the advertised price.

Whether Jake and Sarah owned the bed legally, or not?

In order to create a contract, an offer has to be made, it has to be accepted and it also needs to have a consideration (McKendrick and Liu, 2015). An offer, once made, can be revoked by the party making the offer, before the same is accepted. And this is true even for a time based offer. When an offer is made, the offering party is not under an obligation to make the sale, till the same is accepted by the other party (Stone and Devenney, 2017). In Dickinson v Dodds (1876) 2 Ch D 463, the defendant had offered that he would sell his home to the claimant and this offer was open till Friday. However, the home was sold off by the defendant on Thursday to another party. The court held that the offer had been revoked as the defendant was not under an obligation to keep the offer open till Friday as no consideration had been provided in exchange for the promise (E-Law Resources, 2017).

Application

Applying Dickinson v Dodds to the facts of this case, Cameron was not under the obligation of selling the bed to Jake and Sarah as they paid no consideration for the promise and so, the legal owner continues to be Cameron.

Conclusion

Hence, Jake and Sarah did now own the bed legally.

Whether Cameron can successfully sue Jones for breach of contract or not?

In order to state that an offer had been made, it is crucial that it is made clearly and that there is an intention to create legal relations. If the same is not present, a contract cannot be deemed to have been formed (Blum, 2007). In Harvey v Facey [1893] AC 552, Harvey enquired the price of the pen from Facey through a telegram. The reply of this was that the lowest price for pen is £900. On this, Harvey replied that they agreed to purchase the pen at £900. The court held that the contract was not concluded between the parties as a direct answer was not given by Facey. The lack of intention led to this ruling (Marson and Ferris, 2015).

In the given case study also, there was a lack of intention. This can be established by applying the case of Harvey v Facey to the facts of the case. The reply of Jones was not a direct answer to the offer and the reply showed a lack of intention on part of Jones. Thus, based on this a contract was never formed, which could have led to a breach of contract.

Conclusion

Hence, Cameron cannot bring a successful action against Jones for breach of contract owing to the lack of intention.

Whether the contract was breached with the death of Paul Elliot or not? Whether the contract would be deemed to have been breached, in case Paul Elliot had been mentally ill when the contract was created, or not?

A company is deemed as a separate legal entity and when a contract is formed with the company, it continues to run even when the people running the company die. This is due to the company being deemed as a separate artificial person. Hence, the contracts which the company enters into continue, despite the bankruptcy or death of its people (Lambiris and Griffin, 2016).

In order for a contract to be valid, it is important that the contracting parties to have the contractual capacity. In this regard, they need to be of legal age and of sound mind (Poole, 2016). 

Conclusion

In the given case study, the contract was drawn between Hardcastle and CyberCom. CyberCom was a company and so, it was different from its founder, i.e., Paul Elliot. And due to the separate legal entity concept, the death of Paul Eliot would not impact the contracts of CyberCom.

However, if Paul Elliot had been mentally ill, the contract would not have been valid, as he did not have the required contractual capacity to enter contracts on behalf of the company. Even though his condition was undetected, it would be deemed as a lack of contractual capacity.

Conclusion

Thus, contract was not breached with the death of Paul Elliot. And the contract would be deemed to have been breached, in case Paul Elliot had been mentally ill when the contract was created. 

What is the impact of each of these clauses?

When a contract is formed, each of the clauses under it has a different role to play. When a contract is created for a specific purpose, it comes to an end when the purpose of the contract is fulfilled. Or when the period of contract expires, the contract comes to an end (Elliot, 2011). When it is stated in a contract that the contract had to be carried on a timely way, it becomes a contractual term and has to be fulfilled properly. When the contractual terms are not fulfilled, a breach of contract takes place (Ayres and Klass, 2012). The contractual terms have to be clear and cannot be ambiguous. And the clarity of contractual terms is deemed as one of the essential elements of creating a contract (Andrews, 2015).

 In a contract, a condition is considered as a very important element and is deemed as a crucial foundation of the contract. Where a condition set under the contract is not upheld, the aggrieved party can repudiate the contract and claim damages from the other party (McKendrick, 2014). Poussard v Spiers and Pond [1876] 1 QBD 410 was a case in which the court was of the view that owing to the contravention of the condition, the breach of contract took place. This shows that condition of a contract is a vital element and same has to be properly adhered, or else it could allow the non breaching party to make a case of breach against the breaching party (Latimer, 2012).

An exclusion clause is such a clause in a contract through which the liabilities of parties is restricted for a breach of contract or for any other matter. In order for an exclusion clause to be valid, it is important that the same is properly included in the contract. Also, it has to be properly brought to the attention of the other party against which the same would apply. Apart from this, an exclusion clause cannot restrict the applicability of a statutory or a common law and where it does so, it would not be a valid exclusion clause (Mulcahy, 2008).

Task 2

Where the exclusion clause is contained within the contract, it is considered as a properly inserted and a valid exclusion clause, particularly where the contract is signed by the parties of the contract (Paterson, Robertson and Duke, 2012). In L'Estrange v Graucob [1934] 2 KB 394, it was held by the court that as the exclusion clause had been signed by the parties, the same would be valid; and it would not be affected by the fact that the parties had not read the exclusion clause, for the reason of same having being signed by the contracting parties (Treitel and Peel, 2015).

The Clause 4 under the given contract is a contractual term and provides that the construction, as well as, the payment has to be done in time based manner. Where this is not done, breach of contract would take place. And this clause would be deemed as valid, as it clear instead of being vague.

The Clause 19 of the contract given in the case study is a condition of this contract. And where this condition is not upheld in terms of failure of completion of formal exterior presentation of building with minimum four year old shrubs and trees, which belonged to Sydney basin, the condition would be contravened. And the breach of Clause 19 would give the option to the aggrieved party to repudiate the contract.

The Clause 26 under the given contract is an exclusion clause as the purpose of this clause is to limit, extinguish and restrict the liability of the contract in case of a breach of contract and this is not only for his own actions but also for the actions of the sub-contractors, and their employees. Further, this clause restricts the liability for a breach of contract, in addition to the liability arising from the negligence, whether it be his own or that of his staff. Also, the exclusion clause does not restrict the applicability of the statutory or common law, which would make this clause valid. The clause had been inserted properly in the contract, and even if the client fails to read it, it would be valid, so long as the client and the contractor sign the contract, based on L'Estrange v Graucob. And even when this clause is breached, the contractor would not be liable.

Conclusion

Thus, from the discussion, it becomes clear that Clause 4 of this contract is a contractual term, Clause 19 is the contract’s condition, and lastly, Clause 26 is an exclusion clause. 

References

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