R: Rule
A contract creates a legal obligation between parties based on which they have to adhere to the terms given under the contract or else they could face legal consequences. The parties to a contract have the right to enforce other contracting parties to comply with the terms given under the contract. However, in order to enforce another party, it is important that a valid contract must be formed between the parties (Fitzpatrick et al., 2017). There are different elements which parties have to comply with in order to form a valid contract.
Firstly, an offer is given by a party to another regarding performance of a specific act. Harvey v Facey (1893) UKPC 1 case is relevant to evaluate at this point. A principle was established by the court which provides that a valid offer create a contractual obligation of the offeror after its acceptance. However, it is important for parties to differentiate offer from an invitation to treat since an invitation to treat cannot form an agreement between parties after acceptance. This point can be understood by Partridge v Crittenden (1968) 2 All ER 425 case. A leading judgement was given in this case by the court. It was held that contractual obligations did not form between parties based on an invitation to treat due to lack of intention (Bender and Do, 2014).
However, this is not an absolute rule. Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256 case is relevant in this matter since an exception is given in this case. In this case, an advertisement is posted in the newspaper regarding the smoke ball and the company guaranteed that it has the ability to cure influenza of people if used as per given instructions. The company said it would pay a sum of £100 to people who get influenza after using this product. The company deposited £1000 in bank. The purpose for that was to show the sincerity to people. Mrs Carlill caught influenza ever after using the ball; however, the company rejected the payment.
The corporation provided the advertisement was a mere sales puff because an offer cannot be made to the entire world (Monaghan and Monaghan, 2013). The element of consideration was unavailable in the scenario and acceptance was not communicated by the party. All these arguments were rejected in the court. The court defined the element of unilateral offer. It is an offer which is available for the whole world, thus, it is valid.5 Furthermore, it was held that communication of acceptance is not an essential element of a unilateral offer and parties can accept the offer by complying with its terms (Fitzpatrick et al., 2017).
The company was serious about the contract since it deposited £1000 in the account. The wordings suggested the same as well. The advertisement cannot be considered as a mere sales puff. Thus, a valid contract has formed based on which Mrs Carlill can enforce the company to pay her £100. Moreover, the parties did not have the right to revoke a unilateral offer if the performance for such contract has started by the parties. There are two ways to revoke it. Firstly, the performance is not begun by the party.
Secondly the performance is not finished within appropriate period of time. The acceptance for the contract must be communicated by the party before the contract becomes ineffective as given in Entores v Miles Far East (1955) 2 QB 327 case (Chen-Wishart, 2012). Another essential element is consideration. It must be present in the contract since it refers to the bargain of the contract. Lastly, the parties must have the intention to bind themselves by the terms of the contract, therefore, the court provided in Jones v Padavatton (1969) 1 WLR 328 case that the agreement formed in social settings cannot create legal obligations of parties.
A: Application
The advertisement posted by Ming is a unilateral offer rather than a mere sales puff. This offer can be accepted if the customers comply with the instruction which is to bring the newspaper with them to the shop. The first forty customers have adhered to this element based on which they have entered into a valid contract with Ming. In the case of ten customers, the instructions are not met. They have not brought the advertisement with them. They cannot legally enforce Ming to get a haircut for $10. As discussed in Carlill v Carbolic Smoke Ball Co case, Ming is bound by the advertisement which he posted in the newspaper.
He is liable towards those customers who comply with the instruction given in the advertisement based on which he will have to give them a haircut worth of $60 for $10. Moreover, Ming cannot revoke the unilateral offer just be putting a sign in his shop. The offer cannot be revoked unless the performance has started or did not complete within a reasonable time. Therefore, Ming has to ensure that he posted another advertisement in the newspaper to declare the end limit of this offer in order to revoke it.
C: Conclusion
To conclude, a valid contract has formed in the case. The forty customers have entered in a valid contract and they can get a haircut for $10. Other ten customers cannot since they did not comply with the instructions. Ming is obligated towards people to give them a haircut for $10 since a unilateral offer is made by him through the advertisement. The offer cannot be revoked by putting a sign in the shop.
Question 2
I: Issue
R: Rule
The Corporations Act 2001 (Cth) is a key legislation for companies in Australia. As per this act, there are two main types of corporations incorporated in Australia which include public and proprietary company. The public company is further categorised into a company limited by shares, unlimited liability, limited by guarantee and no liability company. The public company has the authority to issue its shares in the public for the purpose of raising capital for its operations. Proprietary corporations are categorised into two parts which include limited by shares and unlimited company (SLV, 2018). The proprietary company did not have the authority to raise capital by issuing its shares in the public.
The policies which a proprietary company has to comply with are relatively fewer than compared to public corporations which have to comply with regulations such as continuous disclosure, lodging of annual reports, reporting requirements, appointment of auditor and others. A proprietary corporation can be categorised into both small and large as given under section 45A (Fitzpatrick et al., 2017). Clause 1 of the act provides that the number of members is limited up to 50 non-employee shareholders. Clause 2 provides that in case two of the following conditions are fulfilled, then it will be a small proprietary company.
The corporation has revenue of less than $25 million in a financial year. Its gross assets are less than $12.5 million in a financial year. The number of employees hired by the company is less than 50. If a corporation satisfies any two of these conditions in a financial year, then it will be considered as a small proprietary corporation.
Clause 3 of this section provides that if two of the following conditions are fulfilled, then it will be a large proprietary company. In a financial year, the company reported revenue of $25 million or more. In the same financial year, the company reported gross assets of $12.5 million or more. The company also hired 50 or more employees in a financial year. In case two or these conditions are satisfied by a company, then it will be considered as a large proprietary company (ASIC, 2018a). As per clause 5 of this act, both full-time and part-time employees are included while determining the total number of employees in a proprietary company (Austlii, 2018).
While selecting a number of the company, it is important that parties did not select any name which is prohibited by the Australian Securities and Investment Commission (ASIC). Certain words and phrases require prior approval of ASIC because they might mislead people such as Royal Family, ex-servicemen’s organisations and others. Moreover, names which include words such as chamber of commerce, university, trust, building society and others are restricted by ASIC as well. The available of the name can be checked by visiting the website of ASIC (ASIC, 2018b).
The names are shown in green, amber or red colour. The names which are showing in green colour are available. The names showing in amber colour requires prior approval of ASIC. The names showing in red colours are restricted. The corporations cannot select a name which already exists which means they cannot select a name which is similar to other organisations (Fitzpatrick et al., 2017).
A: Application
In this case, a proprietary company should be registered with the ASIC during incorporation. This structure provides various advantages to parties than compared to public companies. The parties will be able to raise capital by issuing shares in the public, however, the legal complexities will increase the challenges and overall cost of operations. The legal regulations of a proprietary corporation are relatively fewer than compared, and parties did not have to incur heavy costs on its incorporation.
Since all parties belong to the same family, they can form a constitution in the company to define their rights and obligations which is not possible in other structures. Moreover, in the first year, the company will be in the category of a small proprietary corporation since it complies with all three conditions given in clause 2 of section 45A. The gross assets of the company will be below $12.5, and the number of hired employees will be less than 50 as well.
The revenue of the corporation will be less than $25 million, therefore, it will be considered as a small proprietary company. However, after five years, the corporation will not be in the same category since it will comply with the conditions given under clause 3 of section 45A. The number of employees will be 66 in total. The assets will be around $13 million. The revenue will be $26 million. Therefore, the legal regulations of the company will increase as well since it had to comply with disclosure and reporting requirements along with lodging of annual accounts and appointment of an auditor. While choosing the name of the company, prior permission of ASIC is required. The reason for that being a company exist with similar name and it shows the relationship of the company with the government of Australia and New Zealand which could mislead people.
C: Conclusion
To conclude, a proprietary company should be registered with ASIC that will be a small proprietary company in the first year. The category will not be same after five years. It will become a large proprietary company. The prior permission of ASIC is also necessary before selecting the name of the company.
References
ASIC. (2018a) Are you a large or small proprietary company.reports/are-you-a-large-or-small-proprietary-company/ [Accessed on 20th September 2018].
ASIC. (2018b) Company name availability.
Austlii. (2018) Corporations Law – Sect 45A.
Bender, M. and Do, C. (2014) How to Pass Business Law. North Ryde: CCH Australia Limited.
Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256
Chen-Wishart, M. (2012) Contract law. Oxford: Oxford University Press.
Corporations Act 2001 (Cth)
Entores v Miles Far East (1955) 2 QB 327
Fitzpatrick, J., Symes, C., Velijanovski, A. and Parker, D. (2017) Business and Corporations Law. 3rd ed. Chatswood, NSW: LexisNexis Butterworths Australia.
Harvey v Facey (1893) UKPC 1
Jones v Padavatton (1969) 1 WLR 328
Monaghan, C. and Monaghan, N. (2013) Beginning Contract Law. Abingdon: Routledge.
Partridge v Crittenden (1968) 2 All ER 425
SLV. (2018) Companies in Australia.
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