Issue 1. As per the first issue, David was employed at the position of sales representative in the Nu Shampoo Pty. Ltd which distributes the hair-care products within South Australia.
In this case, as per the contract term, if David leaves this company then he will be unable to engage in the hair product industry upto five years. But in 2017, David left Nu Shampoo Pty Ltd and registered a company named as Hair-Glo Pty Ltd.
Issue 2.Under the second issue, it is determined that David registered his company with 99% shares and he is also appointed as the Operation Manager for the company Hair-Glo. I
n this way, a loan of $ 1 million has also been taken by David and his sister as the start-up capital and in this loan process, no security was needed by the bank. After that, in 2017 and 2018 the company did well but in 2019, it was unable to repay the bank’s loan instalment of $ 100,000. This time, David breached the contract here too.
Under the analysis of this case study, it is determined that David was involved in two contracts and the conditions of these two contracts were not completed by the one party that means, the contract of breach law is applicable in this case study.As per theAustralian Contract Law (2019),
the Australian contract law is determined as the legal enforcement of the promises which were created as the part of the bargain for freely entering into so that a legal relationship can be formed that is called contract.
At the same time, the breach of contract is found when a party under a contract mentions that he is unable to perform their liabilities described under the contract (Debt Recovery Qld, 2017).
In this manner, While concerning the case laws, it is determined that anticipatory breach occurred in the case of Nu Shampoo Pty Ltd in which David did not perform their liabilities in the contract and apart from this, in case of bank loan, David made actual breach in which David did not perform their liabilities when the time arrives towards the party to perform their side under the contract (Legalvision, 2015).
In this case of David, there was a breach of contract due to David do not follow the condition of contract i.e. till 5 years he will not engage in the hair-product industry even if he leaves this company.
This contract condition was signed by David when he was doing a job in New Shampoo. The second case was that David could not pay the loan of instalments of $100000 from Standard bank law Australia.
According to the Australian Law, as discussed above he has breached the contract in both as he does not follow the condition and another he could not repay the loan of the bank of Australia.
Breach of contract can be defined as the action or inaction which violates in terms of a binding legal agreementWhen the person is found liable then the party who breached the contract have tofulfil it or pay damages to another party according to court (Legalvision, 2015).
There are four types of breach of contract according to Australian Law such as material breach, minor breach, anticipatory breach, and actual breach. On the basis of Judgement of Judge on David anticipatory breach of contract will be held in terms of situation one that is a breach of contract with Nu Shampoo company (Debt Recovery Qld, 2017).
Anticipatory breach of contract is the contract that occurs when a party in terms of contract repudiates the obligation under the contract before there is a time set on the performance for obligations.
Hence, the advice can be given to David if he can prove that there was no loss or damage to the company from where he breached the contract. For example, if X can prove that Y has a breach of contract but he is not able to prove what damage or loss they have suffered.
On this condition, the court makesan order that Y can pay X amount of $1 in terms of damages. In terms of David situation, this Nominal Damages remedy can be applied. He can pay $1 according to the Australian contract law as penalty or liability (Legalvision, 2016).
On the basis of the second situation of repayment of a loan he can apply Reliance damages breach of contract remedy. Reliance damages are the damages where A party has given the money to B party but B party breached the contract by refusing to pay the money back to A party (Legalvision, 2016).
Reliance damage is awarded in the circumstance where there is inadequate expectation damage. In this case, if the defendant proves that the plaintiff would not recover the expenditure if the contract is performed then in this situation court will not order anthe award of reliance damages.
This can be applied by David in case of repayment of the loan as a remedy.
In terms of other condition, i.e. loan repayment the actual breach of contract will be applied.
After discussing all the important aspects related to the case study above, it can be concluded that the default was done by David by breaching the contract terms in case of Nu Shampoo Pty Ltd.
And by not performing the contract terms in case of Standard Bank Ltd. Both the parties in the different contract have the authority to sue on David for the compensation or penalty. In addition, it can be advised to David that in case of Nu Shampoo company, nominal damages have occurred because the company is unable to prove his damages legally so David can pay nominal damages and get free from the sue.
Similarly, in concern of the bank loan, reliance damages are identified in which if David did not pay the expectation damages then he has to pay Reliance Damages.In the end, it can be disclosed that in case of bank loan David has to pay the bank loan instalment amount so that it can save himself from the sue.
As per the case study, Jane, Anne, Mary and Sarah decided to make a partnership with name of Local Doctor at Western Sydney to work as medical practitioners. But it was observed that Jane ordered the costly printer to her boy friend while she also ordered for the supplies of amount $13000 and did not ask anyone before ordering the supplies valued more than $10,000.
In addition, Sarah used Uber rental service but it was decided that this service will be used when practice was not busy. So overall, Anne and Mary are not pleased with these activities done by Jane and Sarah. So the following issue will be identified in this case:
- What liabilities arise from the facts of the case for Jane and Sarah?
It is required to consider the professional liability for the individual in the partnership. As per the contract law, it is mandatory for the partners to fulfill the contract while developing a partnership. In the contract, all the terms and conditions need to be fulfilled while conducting the business activities.
In the corporation law, it is crucial for the directors or owners of the partnership firm to show dignity and professional behavior while conducting the business activities. It is mandatory for the partners to promote the success of the company and exercise independent judgment (Appleman et al., 2016).
Apart from this, it is necessary for the partners to consider all the terms and conditions mentioned in the partnership contract. In addition, it is also crucial for the partners to exercise reasonable care, skill and diligence and avoid conflicts of interest. It is also necessary for the partners to declare the interest and discuss the decisions with the other partners.
At the same time, Corporation Act shows that there is an equal right of each partner to control the business procedure and freely express the decisions. These partners need to be liable to replay all the answers related to profit or loss as they need to take decisions in interest of the business (Becker & Strömberg, 2012).
In addition, directors or partners need to exercise the reasonable degree of care and diligence in the implication of their power in performing their duties. They need to perform the professional behavior while conducting their activities.
They should be careful while making decisions to avoid risk of harm to the interests of the company. Own benefits should not be superior to the objectives or interests of the company. If they need to sacrifice their own interests in place of the organizational motives then they should proceed (Bruner, 2013).
From the given case, it can be stated that the partners did not fulfil their duties carefully that caused the issues related to the business aspects. The entire case shows that the involved partners Jane and Sarah both neglected the interests of the firm and caused a loss to the firm through unprofessional activities.
It can be observed from the case that the contract law, corporation law and partnership act were breached by both partners as they showed the negligence of the professional behaviour and acted in careless manger leading to the loss of the company (Ribstein, 2011).
Due to their activities, the firm’s interests harmed as Jane purchased a printer at higher rate from her known person than the market rate. The market rate of printer was quite lower than the purchased rate by Jane.
At the same time, Jane also gave order for supplies with value of $13000 but it was discussed in starting of the business that no one will take decisions valued more than $10000 without consultation.
But they did not show professional behaviour and breached the contract while making partnership contract. Apart from this, Sarah also breached the contract as he used the rental services but it was not allowed to use the rental service until service was not busy.
In this case, Jane is liable for the loss that occurred due to her on purchasing the printer at higher rate. At the same time, they are liable for paying extra debts that incurred due to making uninformed decisions.
However, there was also duty of Anne and Mary to be active in the business to contribute to its growth but they did not participate in any activity that caused carelessness among other partners and caused a loss due to improper business decisions.
In relation to the decision taken by Jane, she through about own benefits rather than the company‘s interests. It is because purchasing printer was a decision that harmed the interests of the company.
She ignored the interests of the company over own benefits. Even both partners did not exercise reasonable care, skill and diligence and avoid conflicts of interest.
Even they also didn’t consult with other partners and took decision related to purchasing of supplies valued more than $10000 showing their carelessness and ignorance towards other partners.
There was equal right of each partner to have control on the business activities and show their opinions regarding the business. But both partners did not consider it necessary to ask remaining two partners about the business decisions.
Based on the above discussion, it can be concluded that it is mandatory for the partners or directors show integrity and manage the contracts. The partners need to show professional behavior and take decisions after consulting with all partners with the focus on the interests of the company.
In addition, there is need for the partners to consider the company’s interests rather than own benefits. so in the given case, Jane and Sarah both are liable for their decisions as both did not consider the organizational objectives and interests and made decisions at own level without consultation with other partners.
They also breached the contract terms and conditions as both are liable for the losses to the company that they made.
Appleman, J. A., Appleman, J. and Holmes, E. M. (2016). Contract Concerns: Reinsurance Contract Formation, Validity, And Judicial Construction (Vol. 14). Appleman on Insurance Law and Practice.
Australian Contract Law. (2019). Australian contract and consumer law. Retrieved from: http://www.australiancontractlaw.com/.
Becker, B., & Strömberg, P. (2012). Fiduciary duties and equity-debtholder conflicts. The Review of Financial Studies, 25(6), 1931-1969.
Bruner, C. M. (2013). Is the Corporate Director’s Duty of Care a Fiduciary Duty-Does It Matter. Wake Forest L. Rev., 48, 1027.
Debt Recovery Qld. (2017). Breach of Contract. Retrieved from: https://debtrecoveryqld.com.au/breach-of-contract/.
Legalvision. (2015). 4 Types of Breach of Contract. Retrieved from: https://legalvision.com.au/4-types-of-breach-of-contract/.
Legalvision. (2016). Damages: The Most Common Remedy for Breach of Contract. Retrieved from: https://legalvision.com.au/damages-the-most-common-remedy-for-breach-of-contract/.
Ribstein, L. E. (2011). Fencing fiduciary duties. BUL Rev., 91, 899.
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