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case study of law for business managers

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case study of law for business managers

PART- 1

ISSUE OF THE CASE

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Funky Top Limited, is a company that deals in designing and the producing of the clothes for the teenager. Ronan is the managing director of the company. He has also been managing the renovation of the head office of the company (Salih, 2020). He was getting irritated and he simply dumped outside all the sets of old carpets as well as the furniture who were of no use.

He has also noticed some of the young landscapers who were working across the road at another commercial property (Nandamuri, et al., 2019). He also asks the landscapers that if they would remove the old furniture as well as the carpets from the outside of his head office by the end of the day, and if they would do so, he would provide them with fifty euros each (Salih, 2020). The landscapers have removed the item by the end of the day, but Ronan subsequently refused to give them the money they owed.

Would landscapers be successful in claiming their fifty euros each.?

RULE OF THE LAW

As per the contract act, 1872, it is the case of the contract which is made orally. There is presence of the element of the offer as well as the acceptance (Bhattacharya, et al., 2020).

According to the prescribed act, the offer is a valid offer when it is properly communicated by the offeror to the offeree and it has made some commitment, with a presence of the valid consideration (Bhattacharya, et al., 2020). The contract is valid when this offer is accepted by the offeree and this is called acceptance. The acceptance occurs when the offeree agrees to be mutually bound to the terms of the contract to fulfil his part of the promise.

The contract is also valid, where there is some consideration, from the part of the both the parties, that is simply meant as something (Nandamuri, et al., 2019) in return. The contract is also valid because there is presence of the mutual consent between both of the parties (Swaminathan, 2018).

The breach of the contract states that either one of the parties or both of the parties have failed to perform their part of the performance (Bhattacharya, et al., 2020), which are stated in the terms and the conditions of the contract. The breaching party is liable to pay the damages if any, to the aggrieved (Nandamuri, et al., 2019) party in the case of the breach of the contract.

With reference to the case law, Planche v Colburn [1831], it was entitled that there was agreed terms of the contract between the parties, the plaintiff or the claimant was entitled to recover money because defendant had prevented his part of the performance (Razak, et al., 2020).

With reference to the case law, Hoenig v Isaacs (1952), is concern regarding the performance of an entire level of the obligation, and further it was held that where there is a performance of the contract has been made, then money must be paid (Nandamuri, et al., 2019).

ANALYSIS OF THE CASE

As per the contract act, 1872, it is the case of the contract which is made orally. There is presence of the element of the offer as well as the acceptance. Hence it is understood that there is valid contract between Ronan and the landscapers (Razak, et al., 2020).

According to the prescribed act, the offer is a valid offer when it is properly communicated by the offeror to the offeree and it has made some commitment, with a presence of the valid consideration. The contract is valid when this offer is accepted by the offeree and this is called acceptance (Razak, et al., 2020). The acceptance occurs when the offeree agrees to be mutually bound to the terms of the contract to fulfil his part of the promise. Ronan has made an offer to remove the old furniture as well as the carpets from the outside of his head office by the end of the day, and if they would do so, he would provide them with fifty euros each. This offer was subsequently accepted by the landscapers (Swaminathan, 2018).

The contract is also valid, where there is some consideration, from the part of the both the parties, (ZAINUDIN, et al., 2019) that is simply meant as something in return. The contract is also valid because there is presence of the mutual consent between both of the parties (Razak, et al., 2020). The consideration here was that for Ronan, the landscapers would remove the old furniture as well as the carpets from the outside of his head office by the end of the day. And for landscapers, they going to be provided with fifty euros each by Ronan as consideration (Yonjan, 2019). Thus, there was agreed terms of the contract between the parties, the plaintiff or the claimant was entitled to recover money because defendant had prevented his part of the performance (Razak, et al., 2020).

The breach of the contract states that either one of the parties or both of the parties have failed to perform their part of the performance, which are stated in the terms and the conditions of the contract(Swaminathan, 2018). The breaching party is liable to pay the damages if any, to the aggrieved party in the case of the breach of the contract. But when Ronan subsequently refused to give them the money, they owed was a breach of the contract from the side of the Ronan (Yonjan, 2019). Thus, he is liable to pay the money to the landscapers as well as the damages if any. And further it is also stated that where there is a performance of the contract has been made, then money must be paid (Nandamuri, et al., 2019).

Thus, yes, the landscapers would be successful in claiming their fifty euros each (ZAINUDIN, et al., 2019). 

CONCLUSION OF THE CASE

In a case of the contract act, the contract gets completed when the obligation gets fulfilled by each of the parties who are binded in the terms of the contract (Yonjan, 2019). And once, there is a breach of the contract, the breaching party must provide an adequate remedy to the aggrieved party. At least a compensatory damage must be given to the non-breaching party to make it sure as if breach has never happened (Swaminathan, 2018)

PART-2

ISSUE OF THE CASE

A lady named Griet was travelling somewhere by flight, and she met another lady named Amanda, who was sitting just next to her (Nelson, 2018). They both started having conversations about the global economic conditions and challenges. Suddenly Amanda said to Griet that there is no guarantee, but she could bet that value of the gold would continue to rise this year and one who shall buy the gold, would be very rich by the end of the year.

And after few days, Griet buy gold, using all her savings. But subsequently, the market get collapse, and Griet lost all her money (Nelson, 2018).

Whether Griet can claim against Amanda for her negligent misstatement?

RULE OF THE LAW

The case of negligent misstatement (Bengtzen, 2019) arises where one party has carelessly made a statement to the second party, and also there is such kind of relationship between the both of the parties is that one party owes a duty of care to another party (Bengtzen, 2019). The rule of the negligent misstatement is brought at the perspective of the common Law assignment in tort.

The case of negligent misstatement is the form of advice or the information, that is given being honest, but is not correct and also sometimes it is misleading (Bengtzen, 2019). There are three major elements of the cause of the action which are found in the course of negligence are-

  • A duty that is legal should be recognised in the circumstances which requires a certain conduct which is standard, for protection against such risk that is foreseeable.
  • There should be a breach of the duty which parties fail to meet the required standard of care (Nästega, 2020).
  • The plaintiff must have suffered the injury which is material, as a result of the breach.

With the reference to case law of, Derry v Peak [1889] 12 APP CAS 377, the English court of appeal has decided that if there is occurrence of a negligent misstatement, then it was not enough in supporting the action in deceit because a misrepresentation that is not fraudulent (Nästega, 2020), and also there is absence of the contractual relationship or the fiduciary relationship between the parties, then it was not sufficient for the establishment of the duty of the care.

With the reference to case law of, Hedley Byrne & Co v Heller & Partners, it was held that there might be presence of the liability in the tort for the case of negligent misstatement, in certain circumstances, or the situations (Roberts, 2017). These are the situations in which a certain advice or the information is sought from a person who possess some special judgement or the skill where that party is relying on the his or her information.

The term negligent misstatement also states that there must be element of the legal duty that should be recognised in the prevailing circumstances, which will require a certain standard of conducting which would provide protection against the foreseeable risk. As per the rule of the law of torts, there must be breach of the duty which will fail to meet the required standard of care, that both the parties have owed (Roberts, 2017). And finally, it is also stated that plaintiff must have suffered either mental or physical injury, which occurs as a result of the breach.

ANALYSIS OF THE CASE

In this case, Griet can not make any claim against Amanda for her negligent misstatement.

There are three major elements (Roberts, 2017) of the cause of the action which are found in the course of negligence in given scenario are-

  • A duty that is legal must be recognised in the circumstances which requires a certain conduct which is standard, for protection against such risk that is foreseeable-

In the give case, there is neither any contractual relationship between Griet and Amanda, neither Amanda owes any duty of the care in regards to Griet, as there is also an absence of fiduciary relationship between both of them (O'Byrne, et al., 2019).

  • There should be a breach of the duty which parties fail to meet the required standard of care (Brennan, 2019)-

Griet has met her in flight during travelling, they both were unknown to each other, hence there is no breach of the duty which Amanda has failed to meet the required standard of care (Roberts, 2017).

  • The plaintiff must have suffered the injury which is material, as a result of the breach-

Griet has suffered a loss of finance and savings, but due to her own negligence and not because of Amanda (O'Byrne, et al., 2019). She herself must have research before investing.

Hence, it could be said that Griet can not make any claim against Amanda for her negligent misstatement.

CONCLUSION OF THE CASE

It is concluded that there is presence of the liability in the tort for the case of negligent misstatement, in certain circumstances, or the situations (O'Byrne, et al., 2019). These are the situations in which a certain advice or the information is sought from a person who possess some special judgement or the skill where that party is relying on the his or her information (Brennan, 2019). The term negligent misstatement also states that there must be element of the legal duty that should be recognised in the prevailing circumstances, which will require a certain standard of conducting which would provide protection against the foreseeable risk (O'Byrne, et al., 2019).

PART-3

INTRODUCTION

In the give case law, Salomon v A Salomon and Company Ltd (1897) AC 22, is a landmark (Dahal, 2018) company law case in the country of United Kingdom. It was decided in the year 1897, the court of house of lords in United Kingdom.

FACTS, ISSUES AND FINAL JUDGEMENT

In the case, the facts stated that a man named Mr A Salomon was making leather shoes as a sole proprietor owner, and his sons were being wanted to become the business partners, so he turned his business of sole proprietorship into the limited liability company (Dahal, 2018).

The company had bought the business of Mr A Salomon, at an excessive price. The subscribers of the company were his wife and his five children. And his two other sons became the director of that company (Mishra, et al., 2020). Mr A Salomon purchased around twenty thousand shares of the company, the value of each share was one euro, and the total numbers of shares were twenty thousand and seven shares. The company has also issued the transfer of the business which has taken place on 1st of June in the year 1892. Mr A Salomon was also issued the debentures of the company of ten thousand euros. He also received five thousand euros as an advance from Edmund Broderip.

But sooner there was decrease in the sales of the company, and the company fail to make payment of the interests of the debentures as well as held by that of Edmund Broderip. Mr Edmund Broderip sued the company (Dahal, 2018) and the company was put into the liquidation procedure. Edmund Broderip was repaid his amount, and the company was left with only one thousand and fifty-five euros which was the value of the assets and the debentures of the company that was retained by Salomon. If it would be claimed by the Salomon, there would be nothing left for the creditors' (who were not secured) of the company (Mishra, et al., 2020).

The liquidator counter claimed on the behalf of the company that the amount must be paid back by Salomon, (Kleitman, 2018) and all the debentures which were hold by him were cancelled. They also revealed the fact that Salomon had breached his fiduciary duty to his company. First, he has done the promotion of the company by selling his company in an excessive price. It was further revealed that the formation of the company was a done with a intention of fraud and was totally against the unsecured creditors of the company (Kleitman, 2018).

It was held that Salomon had abused and breached the provisions regarding the incorporation of a limited liability company (Mishra, et al., 2020). It was also held by an expert that for Salomon, the company was acting like trustee, and thus only he was bound to pay all the due debts of the company. It was also held that the scheme of Mr A Salomon was considered a device that was used to defraud the unsecured creditors of the company (Dignam, 2019).

SIGNIFICANCE

The major significance of the case law Salomon v A Salomon and Company Ltd (1897) AC 22, (Kleitman, 2018) is that this case law is still responsible for representing the traditional view that company is a separate legal personality under the companies' act. Although there are numbers of exception to it.

According to Justice Slade, while giving decision for the case of Adams v Cape Industries Plc [1990] CH 433, the court was not free that it could easily does not regard the principle of Salomon v Salomon and Company Ltd (1897) AC 22, only because it is considered by the law. This case law was responsible for examining of the certain grounds, like agency, frauds, sham, or cloak, or injustice or unfairness.

The term lifting of corporate veil is also used for the case law of Salomon v Salomon and Company Ltd (1897) AC 22 (Kabour, 2018). The fiction of the legality which reveals about the term corporate veil, and also responsible for enunciating that a company under the Companies Act, 1862, is having a legal personality that is independent as well as separate from its shareholders or the owners.

In the case law of Prest v Petrodel Resources Ltd [2013] 2 AC 415, the case law of Salomon was referred as a clear and quite principled decision that has been standing as one of the unimpeached decisions over the centuries (Kleitman, 2018).

This simply has stated that company was just an agent for some one who wants do some wrong or make some fraud or want to hold the property based on the concept of trust. This could also be used for the purpose of tax evasion.

But this case of Salomon was also criticised by some of the author. The author Otto Kahn Freund was the one who called that decision take by the courts of House of Lords, was calamitous in one of his articles. He also considered regarding that there should be abolition of the private companies in the same article (Kabour, 2018).

CONCLUSION

Overall, (Dignam, 2019) it is concluded that the case law of Salomon is ruling and thus is still treated as one of the predominant cases. It has still been continued to under pin the English company law. Wherever there is any case regarding fraud, façade and sham, there is an invocation of veil piercing in some limited situations or the circumstances. These are the grounds which are not very much exhaustive, (Kabour, 2018) and thus is left under the discretion as well as the making of the interpretation of the courts on the basis of different cases.

LEGISLATION

Salomon v Salomon and Company Ltd (1897) AC 22

Adams v Cape Industries Plc [1990] CH 433

Prest v Petrodel Resources Ltd [2013] 2 AC 415

Derry v Peak [1889] 12 APP CAS 377

Hedley Byrne & Co v Heller & Partners

Planche v Colburn [1831]

Hoenig v Isaacs (1952)

REFERENCES

Bengtzen, M., 2019. An economic analysis of liability for continuing corporate disclosures in English law (Doctoral dissertation, University of Oxford).

Bhattacharya, S., Chintapanti, A.K., Gangwar, S., Mysoor, D., Swaminathan, S. and Tripathi, I., 2020. Law of Contract I-Fall 2020.

Brennan, C., 2019. Tort Law Concentrate: Law Revision and Study Guide. Oxford University Press.

Dahal, R., 2018. Salomon v Salomon: Its Impact on Modern Laws on Corporations. Available at SSRN 3169431.

Dignam, A. and Oh, P.B., 2019. Disregarding the Salomon Principle: An Empirical Analysis, 1885-2014. Oxford Journal of Legal Studies39(1), pp.16-49.

Kabour, R., 2018. Revisiting the Inhibited Doctrine of Piercing the Corporate Veil in English Company Law. King's Student L. Rev.9, p.58.

Kleitman, Y., 2018. Shareholder Actions, A. Charman & J. du Toit: company law-book review. Without Prejudice18(3), pp.11-12.

Mishra, A., Zafar, F., Latayan, K., Bhattacharya, P. and Bansal, S., 2020. Company Law I-Fall 2020.

Nandamuri, P.P., Munaganti, A.D. and Jain, R.R., 2019. Legal Analysis of Contract Management for Effective Supply Chain Administration: The Indian Perspective. In Emerging Applications in Supply Chains for Sustainable Business Development (pp. 219-237). IGI Global.

Nästega, E., 2020. The Tort Liability of CRAs in Europe and the Need for a Harmonized Proximity Requirement at the Union Level. European Business Law Review31(5).

Nelson, T., 2018. Negligence, Negligent Misstatements and Leaky Buildings: Southland Indoor Leisure Centre Charitable Trust v. Invercargill City Council. Auckland UL Rev.24, p.294.

O'Byrne, S.K. and Schipani, C.A., 2019. Personal Liability of Directors and Officers in Tort: Searching for Coherence and Accountability. U. Pa. J. Bus. L.22, p.81.

Razak, F.A. and Abd Ghadas, Z.A., 2020. From Barter System to E-Contract: Development on Trade in Malaysia.

Roberts, M., 2017. Negligent Misstatement in the Court of Appeal.

Salih, R.S., 2020. The Concept of Offer in Different Legal Systems. JL Pol'y & Globalization101, p.146.

Swaminathan, S., 2018. The Will Theorist's Mailbox: Misunderstanding the Moment of Contract Formation in the Indian Contract Act, 1872. Statute Law Review39(1), pp.14-26.

Yonjan, Y.K., 2019. An Analysis on Major Elements of a Valid Contract Under Muluki Civil Code, 2074. Available at SSRN 3437233.

ZAINUDIN, F.L.B., 2019. THE PROFILE OF BREACHES OF CONTRACT IN CONSTRUCTION INDUSTRY (Doctoral dissertation, Universiti Teknologi Malaysia)

FOOTNOTES

Max Radin, 'The Endless Problem of Corporate Personality' (1932) 32 Colum. L. Rev. 643.

1897 AC 22.

Ibid 30-31 (Lord Halsbury LC). See also, Gas Lighting Improvement Co. Ltd. v Commissioners of Inland Revenue, 1923 AC 723 (Lord Sumner).

Jennings v Crown Prosecution Service, 2008 UKHL 29.

Marc Moore, 'A Temple Built on Faulty Foundations: Piercing the Corporate Veil and the Legacy of Salomon v Salomon' (2006) JBL 180.

1925 AC 619.

1961 AC 12.

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