Essay: Legal Analysis Of Two Business Contract Cases In Australia." (62 Characters)

Case 1: The Purchase of a Motorbike by Motorbikes Pty Ltd

1.Michelle and Tim are passionate about motorbikes.  In fact, they own a company called Motorbikes Pty Ltd.  Michelle is a Director and Tim is the company secretary.  They buy and sell motorbikes and repair them.

John wishes to sell his motorbike.  John approaches Tim and Tim agrees to purchase John’s motorbike for $5,000.  Tim and Michelle both sign the contract to purchase John’s motorbike. 

Two days later, Michelle thinks they have paid too much for John’s motorbike and wants to get out of the contract.

Is Motorbikes Pty Ltd bound by the contract?  Provide reasons for your answer.  You must cite relevant Australian case law and the Corporations Act 2001 (Cth).  Do not discuss contract law.

2.Gerard and Sylvia love cakes and have recently decided to buy a cake shop from George. 

Gerard and Sylvia register a company “Cakes Pty Ltd” with the Australian Securities and Investments Commission.  Gerard is listed as a Director and his mum, Sarita, is listed as the company secretary.

On the day of signing the contract to buy the cake shop from George, Gerard stamps the contract with the Cakes Pty Ltd company seal and signs as a witness.  The other witness is Sylvia.

A few days pass and George thinks he should have not sold his cake shop.  He now wants it back.

Is George bound by the contract?  Provide reasons for your answer.  You must cite relevant Australian case law and the Corporations Act 2001 (Cth).  Do not discuss contract law.

1.Michelle and Tim are passionate about the acquisition of the motorbikes and Michelle is the director and Tim is the secretary of the company Motorbikes Pty Ltd that mis operating in the Australia. Therefore Tim is the employee of the company and from the perspective the party to the contract it can be defined that Tim is the agent of the company who has made the contract of buying a Motorbike from John for a payment of $5,000.

Now as per the corporation Act 2001, part 2B.2[Agent exercising a company's power to make contracts] the agent is capable to make a contract on behalf of the company and the contract becomes a binding contract if the contract is doe o ne of the following ways[1].

While doing the contract, the contract document is signed by the agent in his own name for and on behalf of the company.

The contract document is signed by at least two directors of the company provided the company is having multiple decision making directors

Binding Contract under Corporation Act 2001

The contract document is signed by both the directors and the secretary of the company

In case of the sole proprietorship the contract will be binding if the contract is signed by the single director of the organization

While making the contract, if the common seal of the company is stamped on the contract document and the presence of the two directors of the company who can be considered as the witness then the contract will be considered as binding with respect to the organization that is making the contract.

At the time of making the contract, if the common seal of the company is stamped on the contract document and the presence of the directors and secretary of the company who can be considered as the witness then the contract will be considered as binding with respect to the organization that is making the contract.

In case of a company with sole director if the at the time of making the contract, if the common seal of the company is stamped on the contract document in the presence of the sole director then the contract will be binding on behalf of the company.

In the present case the secretary of the organization Tim has made a contract with the Josh and the  contract document have been signed by both the director of the company Michelle and the secretary of the company Tim. Therefore the contract is a valid contract and d bin ding with respect to the organization.

Now in this situation if the director of the company Michelle and the secretary of the company Tim think that they have paid more for acquiring the motorcycle as per the contract and want a revision with respect to the contract for reducing the payment amount then it will be not possible for them because, a legally binding contract cannot be altered or reviewed for changing the terms of the contract. Now if Michelle and Tim want to alter the contract then it will be an illegal act and John can look for legal protection as per the Australian Consumer Law (ACL)[2]. The act sates that the misleading and deceptive conduct under a business contract by any of the parties to the contract is prohibited. In the present case scenario if Michelle and Tim trying to review a binding contract, then they will b e accused of making misleading and deceptive conduct as they are trying to alter the terms of a binding contract. Therefore there is very strong possibility that Michelle and Tim who mtogether has signed in the contract paper may face legal actions on behalf of John , the other party to the contract. So even if Michelle and Tim in reality have paid more than the justified amount for the acquired motorbike but  still they have to pay the same amount as per the contract and there is  no scope of altering the terms of a binding contract.

Legal Implications for Michelle and Tim

2.In the present case scenario the Gerard and Sylvia are looking to open a cake selling company. In order to fulfill their requirement they have decided to purchase a cake shop from a person named as George. Gerard and Sylvia purchased the cake shop by making a contract and then registered the business as the “Cakes Pty Ltd” which is listed in the security exchange of Australia. The company has listed Gerard as the director of the company and Sarita who is the mother of Gerard as the secretary of the company.

On the day of signing the contract for purchasing the cake shop, the contract document was stamped by the common seal of the company and the as a witness Sylvia was present along with Gerard at the time of signing the contract. Here it is to be mentioned that Sylvia is just working as partner of Gerard but has not given any kind of official recognition while registering the company in the stock exchange of Australia. In such a situation it can be seen that while stamping the contract by the common seal o f the company only one designated director of the company was present and the designated secretary of the company Sarita was not present at the time of forming the contract. Therefore the contract cannot be considered as the formation of a valid contract between the parties to the contract. In other words the contract cannot be considered as a binding contract over the parties of the contract. In such a situation, if the parties to the contract are capable to later the terms and conditions of the contract[3]. Now if George is thinking that he wants to change his decision of selling the cake shop and he wants to get back the sold cake shop then he can approach to Gerard and Sarita for the alteration or revision of the contract. In other words the way the contract document has been signed is not making the contract a valid contract. A valid contract never become binding to the party to the contract.

For the contract to be binding, at the time of signing the contract when the seal of the company was put on the document of contract then as witness both the director of the company Gerard  and the secretary of the company Sarita would have been present. But in the present case it can be seen that at the time of putting the company seal on the document of contract only the director of the company Gerard and another person who is just concerned about the business deal and not holding any official position in the company (Sylvia) was present as witness of signing the contract between the two parties namely Gerard and George. Therefore as the contract done between Gerard and George is not a valid contact so that contract in not binding on George. So if George goes to Gerard then Gerard and Sarita have to review the contract and George has the power to alter the terms of the contract for getting back the sold shop. In other words the contract  is not binding over George.

As per the interpretation of the statutory contract in Australia the development of a company leads to the creation of law. The existence of a company is recognized by the process of registration of the company after signing the legal documents.  Every company when comes in to being has given the status of a separate entity and the individual characteristics of that entity or company is defined by the constitution of the company. The constitution of the company is a nature of the commercial contract and the constitution of the contract will be prepared in such a way so that it can offer the required business efficacy for managing the operations of the business[4]. The constitution of the company is like a commercial document which must describe the purpose of existence of the company as an entity and the objectives that the company wants to achieve. In the present case scenario it can be seen that the contract document that not only defining the party to the contract also defines the purpose of the existence of the company as well as the objective of existence of the company. A company that is formed on the basis of void contract leads to the violation of law and therefore the company will never be able to exist as a legally created specific entity that has some specific objective to fulfill. Therefore even if Georg e is not looking for the alteration of the terms and conditions of the contract, but still it is difficult for Gerard to develop a legal company as the proper process of signing the contract document has not been followed and therefore the parties to the contract are not bound by the terms and conditions of the contract.

https://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/notes.html

https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Australian-business-and-environment-laws

https://www.australiancontractlaw.com/

https://www.mondaq.com/australia/x/221404/Contract+Law/The+Statutory+Contract

https://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/notes.html

https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Australian-business-and-environment-laws

https://www.australiancontractlaw.com/

https://www.mondaq.com/australia/x/221404/Contract+Law/The+Statutory+Contract