Introduction to the situations
Terence studies jewellery design at Charles Sturt University. After he graduates, he sets up a business called ‘Terry’s Terrific Designs’. He employs Peter and Sara, who are also CSU graduates to work for him. Peter is appointed as Supplies Purchaser and Sara as a Designer. Sara shares the design work with Terence himself.
Give Terence advice in relation to the following situations, citing relevant legal authority:
Sara visits Gabby, who wants a brooch designed for her. Sara shows Gabby photos of a number of designs that she (Sara) has executed. Sara forgets to tell Gabby that she works for Terence. Gabby is impressed by Sara’s work, and asks her to design a $ 1 000 brooch in the shape of an elephant. On the next day, Terence phones Gabby and says ‘I have received your order, and will finish the brooch within two weeks’. Gabby says ‘Who are you? I have a contract with Sara’.
Terence tells Peter that the business is over-supplied with gold, and that he should buy only silver. However Peter is having a drink with Mary, a gold dealer who he has often dealt with before on behalf of Terry’s Terrific Designs, who offers to sell 50 grams of gold for $ 1 500, which is a very good price. Peter agrees to buy the gold on behalf of Terence, but when Mary arrives at Terence’s shop with the gold asking for the $ 1 500, Terence refuses to accept the gold or pay her.
Because Peter disobeyed his instruction not to buy gold, Terence fires him on Monday. However Terence does not shut off Peter’s access to the business’ email system until Thursday. On Friday Terence is contacted by Gordon, a diamond seller who Peter had regularly dealt with on behalf of Terence. Gordon says that saying that on Tuesday Peter sent him an email ordering a $ 5 000 diamond on behalf of the jewellery business, which he (Peter) picked up on Wednesday. Peter has disappeared to South America and is untraceable. Gordon is demanding to be paid.
2.Roger Smith owns 92 of the 100 shares in United Chemicals Pty Ltd, a company he registered in 2009. The Company Secretary is his wife, Mary, who owns the remaining 8 shares. They elect Timothy Smith, Roger’s brother, as Managing Director of United Chemicals Ltd. In 2015 the company bought a phosphate processing machine from Industrial Machines Ltd for $ 600 000, payable in three equal instalments in 2015, 2016 and 2017. The contract was in writing and signed by Roger as follows:
For and on behalf of United Chemicals Pty Ltd
Business goes well in 2015 and 2016, and the company is easily able to pay the instalments, but in 2017 a sudden downturn in the agricultural sector causes sales of fertiliser to drop off, and United Chemicals finds that it cannot pay the final $ 200 000 instalment. Roger has received a letter from Industrial Machines suing him personally for the $ 200 000, as the board of Industrial Machines knows that he is wealthy.
One of the steps Roger took in early 2016 to try to improve his business fortunes was to see if he could expand into the area of making explosives. However, Commonwealth legislation prohibits the granting of an explosive manufacturing licence to ‘any person who has a criminal conviction’. Roger was convicted of theft in 2005. Roger establishes another company, Explosive Industries Pty Ltd, of which he owns 99 shares and his wife 1 share, with himself as Managing Director and his wife as Company Secretary. He asks Mary to lodge an application for a licence on behalf of Explosive Industries Pty Ltd with the Commonwealth Department of Industry. The Department has sent a letter declining the application, citing the legislation regarding prior criminal convictions as its reason.
Advise Roger in relation to the claim made by Industrial Machines Ltd and the decision by the Department of Industry, citing relevant law.
Issue 1: Did Sara purposefully avoid telling Gabby regarding her employment under Terrence? If so can it be considered as an honest mistake or breaching the employment terms with her employer Terrence?
Issue 2: As Peter works as the supplier under Terrence, he owes him certain duties of an employee. Therefore, having the knowledge of the fact that Terry’s terrific Designs does not requires any gold but only silver, his approach to Mary of buying 50 grams gold be considered as the tort of negligence against Terrence? Does Marry have the right to sue Terrence for not buying the gold given the fact Peter who is associated with Terrence’s company ordered the gold? Is the remedy of the breach of contract available in this case?
Issue 3: As Peter has been terminated from his employment with a cause of disobedience of the business rule applied by Terrence without notice does Peter owe a duty of fidelity to the company? As after termination he has used the business details and confidential information of the company with the intention of damaging Terrence, can he be sued under the charge of tort of misstatement to a supplier? As Terrence is the owner of the company, due to the obligation of duty towards the supplier of the company, can he be sued for the damages? Is there any remedy available for Terrence?
As per the contract of Employment act in Canada, the employees are obligated to certain duties to their employer. Employees’ obligations to their employers are limited to certain fiduciary duties and avoiding the conflict of interest with their employers as well (Ahmed & Hussein, 2017).
In regard to the first issue, it is important to note that as per the ownership rights employees obligation to the employers indicates that the duty of the employee prohibits the employees from canvassing the customers of the business for the own business of the employee (Fudge & Tucker, 2000). Sara however, has not reflected a conflict of interest as she has informed Terrence of the order, thus she has not breached the obligation of employment duties to the employer.
One of the most important duties that an employee owns to his or her employer is the Duty of Fidelity. Duty of Fidelity indicates that an employee owes a duty of honesty, loyalty and care to his or her employer (Walsh, 2015). The elements that are included in the duty of fidelity are:
- The duty of the employee to avoid conflict of interest and not to compete with the work of the employer
- Employees are obligated to maintain the confidentiality of the proprietary information of the employer
Legal issues with Terence's Terrific Designs
Conflict of interest on the other hand suggests that the employee is competing with the employer directly; the employee is not involved in a direct competition with the employer but has a side business. Along with that the employee uses the resources of the employer in order to advance his or her individual interest (Bodie, 2016).
As it is evident from issue 1 Sara has informed her employer regarding the offer of contract that she got from Gabby. Conflict of Interest is not the issue, as Sara did not try to seek orders out of her employee duties (Johnson & Sohi, 2016). She has maintained her duty of fidelity and good faith to her employer. However, as she did not mention Gabby regarding her employment and Gabby thinks that he has a contract with Sara can not be considered as the misstatement. Here Sara is not trying to set up her own business that would have indicated a conflict of interest with her employer. Sara informed Terrence regarding the order that she got from Gabby and hence, Sara’s negligence in informing Gabby that she is under the contract of employment with Terrence can be considered as a mistake. Therefore, in this case Terrence can simply clarify that Sara is an employee working for her and therefore, any contract with Sara regarding a jewelry is automatically a contract with the organization. In this case, the employer’s remedy for this particular breach is available. As this can not be considered as the termination of the employment contract, it is important to note that as a less serious circumstance Terrence can suffice Sara with a disciplinary warning (Taylor & Emir, 2015).
In regards to issue 2 it can be stated that Peter has breached the duty of fidelity and the fiduciary duties as well. It needs to be considered that whether his misstatement to the supplier regarding the order to the gold on the behalf of the company is a sheer negligence or purposive. As Terrence clearly informed Peter that he does not require any further supply of gold, it can be considered thus, as the tort of negligence that caused damage to the company (Dent, 2015). In this regards, it is important to note that as the acceptance of the offer is clear in the case, the company owes the duty of care to the supplier Mary and Mary can sue the company for the damage as Peter here serves as the representative of the company. However, the remedy that is available for Terrence is that he can seek an injunction in order to stop the violation as well as request Mary to bring charges against Peter personally as Mary as a supplier has the right to sue Peter as well.
Legal issues with United Chemicals Pty Ltd
As per issue 3 suggests Peter has not only violated the fiduciary duty, duty of fidelity and duty of avoiding conflict of interest to the owner, he has misused the confidential information of the company with the intention to damage the company both tangibly and intangibly (Baker & Geddes, 2015). In this regards, it is important to note that, the diamond supplier can sue Terrence in charge of negating to receive the order. However, as Terrence himself did not make the order and it was a malpractice of the former employee, it is important for Terrence to convince him with conviction. In this regards, it is important to note that the employer also has the right to sue the former employee Peter for the damages that he has suffered due to the misuse of information and breaching the duty of loyalty and good faith (Jefferson, 2016).
In the light of the above study, it is important to note that Sara’s action can be compensated with the remedy of disciplinary warning. But as Peter has not only displayed criminal intention by fleeing away from the country, it is important for Terrance to bring reasonable charges of damage and causing damage to the reputation of company with the help of law.
As it is given in the case, Roger, who owns maximum share of United Chemicals Pty Ltd, is unable to pay the third installment of $200000 for the phosphate processing machine that they have bought from Industrial Machines Ltd. Industrial Machines Ltd appears to sue Roger personal being aware about his wealth. On the other hand, Roger has made a vain attempt to expand his business in the market of explosives due to his record of conviction of theft.
Is this can be considered as a breach of the installment contract? Is the criminal record of Roger is going to influence the verdict if the case is dragged into the legal corridors?
In order to refer to the relevant case laws, the case of Universal Builders Inc VS Moon Motor lodge Inc (1968) in order to embark on the discourse of suggesting Roger (Collins, 2015). Furthermore, the verdict of the Cf. Plotnick VS Pennsylvania Smelting and Refining Co. (1952) can also be considered in the course of advising Roger. In the course of analyzing the current case in order to evaluate that whether it is a breach of installment contract, the stances of the plaintiff and the aggrieved party needs to be evaluated in the legal grounds. It is explicitly mentioned in the Unifor5m Commercial Code (UCC) of Canadian legislation, especially Section2-106, that the terms ‘contract’ and ‘agreement’ are constrained to the sales of commodities in the present and foreseeable future. It is very evident from the essence of the statement the aggrieved party who have suffered from a material breach of an installment contract have the right to terminate the contract (Sage, 2016). In this regard, it appears imperative to mention over here that, in the Canadian legislation, the material has been considered and typically characterized through its financial analogues. Thus, a financial breach of any installment contract is equivalent in the legal court of any material breach. The Section 2-612(3) to terminate the installment contract any time the party wants has preserved the right for the aggrieved party.
In this regard, it needs to be mentioned that the part I (A) of the mentioned section of 2-612 is supposed to explore the conditions, which is going to be considered in the court if any litigation has been filed against Roger. In this regard, the Part II can be referred in order have a glimpse of the jurisprudential foundation of the breach of any installment contract. In this regard, it is a relative exaggeration to mention that the section 612 of the UCC can be considered as the foundation to evaluate and provide legal advice in such cases of installment breach.
The conclusion of the article appears to be relevant as it talks about the recession that endow the traditional notion of “off the contract” with requisite transparency which is required to be discussed in the course of advising Roger.
Concerning the next issue, there is no valid reference or verdict of legislation has not been found that might shed light on the enquiry that whether the criminal record of theft prior to Roger potential enough to influence the verdict of his litigation (Baker & Geddes, 2015). It has been observed that the Commonwealth legislation have refused to issue Roger and his newly found unit with the permit of expanding their business in the domain of marketable explosives. This, it is true that this decision of the regional commonwealth legislation is supposed to intensify the verdict of the current case.
As it is mentioned earlier that the apprehensions of the Universal Builders Inc VS Moon Motor lodge Inc (1968) case needs to be executed here in order to embark on the underlying notions of the case of Roger and simultaneously evaluate the aspects associated with the case. As the verdict of the above mentioned case in the Canadian legislation is supposed to deal with the aspects of a breach of a installment contract, Roger is required to advice that he is in a plight. Furthermore, part (I) and part (II) of the section 612 of the Uniform Commercial Code (UCC) appears to lie against the favor of Roger as, in the Canadian legislation, the breach of any material act has been considered analogous of any sort of financial breach (Bak, 2017). Thus, in the current case, Industrial Machines Ltd enjoys the legal allowance of terminating the installment contract and asks for damage. In this regard, a interest phenomena which is known as Hobson’s choice embedded within the Article 2 of UCC can be wielded where the aggrieved party is legally obliged to state the intent of termination in order to seek any assistance from the legal authority (Johnson & Sohi, 2016).
Concerning the next issue where the consideration is focused on the fact whether the criminal record of Roger is going to affect the verdict of the current litigation. It needs to be mentioned that the legislative measures of Commonwealth have exhibited the legal mindset as they refuses to provide permit for Roger’s unit to expand in the market of the explosives. In this regard, it can be added as a footnote to the current discussion that Canadian legislation is quite strict about the cases of petty theft and the citizens with criminal record face difficulties to get any permit from the legislation
In the light of the above study, it is very evident that Roger is legally obliged to pay the requisite amount of money that has been documented in the installment contract that he have entered into with Industrial Machines Ltd. As the latter owns a legal advantage regarding the installment contract, as he has been unable to generate revenue regarding simply by making a vain attempt to expand in the explosive market.
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