Minco NL: Legal Issues - Essay Example

?Contents PART A 2 Step Identify Legal Issue/s 2 Step 2: Relevant Law 2 Step 3: Apply the Law 3 Step 4: Conclusion 3 PART B 4 Step Identify Legal Issue/s 4 Step 2: Relevant Law 5 Step 3: Apply the Law 6 Step 4: Conclusion 7 PART C 8 Step 1: Identify Legal Issue/s 8 Step 2: Relevant Law 8 Step 3: Apply the Law 10 Step 4: Conclusion 11 PART A Step 1: Identify Legal Issue/s The legal issues in the mentioned case relate to the extent of compliance requirement of Minco NL with the company’s constitution and the proper process to amend it. Step 2: Relevant Law According to the company law ACT (124) a company is a separate legal entity which is bound for all liabilities and wrongs; it can be sued or can sue in the position of separate legal body. Therefore, a company can be liable (legally responsible) for civil and criminal wrongs. It is treated as a natural separate person due to which, it is responsible for all acts or liability bound to it. The company therefore can enter into contract on its own name and due to which it liable for any breach of that contract, e.g. the director is considered as a natural person who acts on behalf of the company. The managing director who is working on behalf of company is actually considered as secondary liability in which the company is responsible for the acts of another. the director in this case is working on behalf of company and his acts are directly attributed to the company as he is not the servant or agent of company, he is director with powers to bind the company into contract which clearly states that any guilt or liability arise due to the contract by director will automatically bound the company into that contract , and so the company will be liable for that contract and any breach of that contract can sue the company as a separate legal entity and not the director. The organic theory states that People entrusted with a high degree of responsibility for the management of the company can be said to represent the company's direct mind and will’. according to this theory the director is entrusted employee and is company`s representative due to which the company is bound into the contract if he signs the contract. Step 3: Apply the Law According to the case (Tesco Supermarkets Ltd v Nattrass [1972]) when the store manger failed to take down the signs showing the lower price and the company was liable for that mistake of manager. In the given scenario the director of company entered into the contract of $1 million, but actually the director was only allowed to enter the contract below $ 500,000. The director is exceeding his capacity for entering into the contract. However the company mincoNL will be sued for the wrongful act of the director, and company can fine or charge the director for his wrongful act. So according to the case in Tesco Supermarkets Ltd v Nattrass, in this scenario the same situation applies on company. Step 4: Conclusion if the director enters into the contract, the company according to The corporate criminal liability, company is convicted of a crime committed by directors or employees who are acting as the company`s mind. Under the criminal and civil penalties, the director will be fined or can be banned by the company. Although the company is liable for the contract the company will sue the director for exceeding his authority powers of contractual capacity which he was not permitted by the company. PART B Step 1: Identify Legal Issue/s EquiPtyLtd is facing problems about the legal matters regarding company law and want an advice. The company had a contract to deliver 2 buses of worth $1m to MincoNL. But now MincoNL’s directors refused to take delivery of buses on the basis of following grounds. 1. EquiptyLTD was entered into the contract with jaonne flywell, the managing director of the MincoNL. Jaonne has only the maximum purchasing limit of 0. $5m .As this was written in constitution so Equiptyltd should know about it. The Area of law which deals with this matter is the statutory assumptions described in the company law. The issue is that whether the MincoNL can refuse to fulfill the contract on the basis of that the Equiptyltd must have known about the limit or not. What action should be taken by EquiptyLtd against it ? Can EquiptyLtd enforce Agreement according to Law? 2. The second issue mention by the MincoNL directors was that it was Written in our constitution ‘The company has no legal capacity to operate a tourists business and this should be known to EquiPtyLtd. The area of Law which deals with this matter is amending the constitution, Statutory Contract and Statutory assumptions. The issue is that whether the MincoNL can refuse to fulfill the contract on the basis of that the Equiptyltd must have known about the Restriction of Companies activities or not? . What action should be taken by EquiptyLtd against it or not? Step 2: Relevant Law Statutory assumptions state that when outsiders deal with the company they are entitled to make assumptions about certain matters. The assumptions are set out in s 129 and included the following: The outsider who is going to contract with company must have knowledge about any applicable replaceable rules described in the constitution of the company The officer to whom the outsider is going to contract with has relevant authority to act on the agreement Here in the scenario the EquptyLTd is the outsider company who had the contract with the mincoNL. As far as statutory assumptions are concerned the equiptyLtd being as outsider Company should have to confirm the authority of the Director (Lionne) as described in the Constitution. The point which the euiptyLtd could make here is that the Director was apparently acting as an agent on the behalf of company. So company should fulfill the contract. Replaceable rules are the rules which are stated in the company constitution. These are the rules which company set by itself according to the needs of the company. Company could change these rules if the company wishes to do it. For change in the rules the company should pass a resolution on 21 days notice. The rules will be changed on getting the resolution 75% of the director’s support. Here in Scenario the Company NicoNL is going to change its business from exploration of gold and silver to tourism or in other words the company was jumping over from its limitations. The point to be noted is that it was all happening with the full support of directors of NicoNL but, On the other hand, directors don’t like the style of bus so the try to get the Veil of incorporation that it was written in their constitution, not to cross the Restriction. Here the directors of the company are acting like guilt. The case which could be presented as best example of the ‘Tessco super market Ltd vs Nattras (1972) “He is not a servant, representative, agent or delegate. He is an embodiment of the company or one could say, he hears and speak through the persona of the company. If it’s a guilty mind then guilt is the guilt of the company”. Step 3: Apply the Law So this case suggests that if there is guilt in the company’s agent mind then it’s the guilt of the company. Means company should pay on the behalf of agent. On the other hand the company as separate legal entity should sue the agent on its own behalf. Here in the scenario directors first agreeing on that to start tourism business start to disagree it. It was just due to not getting the design from EquityLtd as desired by them. It is sure the company NicoNL directors are now trying to save their end as company director’s .But it will be Very difficult to do. EquityLtd should try to enforce his contract. EquityLtd can pressurize the directors of NicoNL or EquityLtd can sue the Company for Cost of damages on the basis of that the directors of NicoNL acting as guilt. Lionne should be sued also because he had exceeded his limit of purchasing. The case of EquityLtd weakens where statutory assumptions come into effect. For such high money contract the equityLtd didn’t even tried to read the constitution of the NicoNL Company. From the constitution equity ltd could know that the director to whom she is going to contract has not authority to fulfill or purchase more than $ 0.5m. Despite of all of the facts EquityLtd should try to enforce the contract, because it is in the best interest of the EquityLtd. Step 4: Conclusion The MincoNL company can`t refuse to accept the delivery of buses on the basis that the contract was made by the director of company who has the power to influence such decisions, and is said to be a directing mind in law which acts are directly attributed to company and that the company is bound to the contract made by directing mind. However the director of the company can be sued on his position by the company for acting above his authority and power. PART C Step 1: Identify Legal Issue/s The legal issues relate to the concerns of on succeeding in a legal proceeding on the basis of levels of authority given to Joanne and Wilbur. The legal issues would relate to the abuse of authority and power by Joanne and Wilbur to refute any claims in the proceedings for the breach of contracts. Step 2: Relevant Law The company is separate legal entity ( company law ACT ` 124 ) but due to the contracts arise by the company's director Joanne Flywell and the company secretary Wilbur Fox, the company is bound into the contract depends on the authority and the power of the position the employees are in. both employees are in different position and different authorities. Director is said to be the willing mind, companies directing mind, whose actions and decisions can bound the company due to his position and authority power. But the secretary of company don`t has such position or power that he can influence the agreement or contract. However the authority given to director in this given scenario was limited to $ 500,000 and he actually exceeded it to $ 1million. In the case of ( Tesco Supermarkets Ltd v Nat trass [1972] ) the manager of Tesco was an employee in such a position that his mistakes or wrongful act`s don't give rise to any loss to a company , he was treated not as an employee whose decision or mistakes can bound the company to be liable for that action. The manager here in this scenario can be relate to the secretary who don`t have power to bound the company in the contracts signed by him. His position or level doesn’t allow him to do so. So any contract or agreement arise due to the contracts made by secretary can`t bound the company to that contract. The director of company in this given scenario has the power to sign or enter a contract to a limit of $500, 00, however due to this power and authority he entered into a contract which exceeded his limit. Here the organic theory states that People entrusted with a high degree of responsibility for the management of the company can be said to represent the company's direct mind and will. according to this theory the director is entrusted employee and is company`s representative due to which the company is bound into the contract if he signs the contract. So his position bounds the company for that contract which he agreed by exceeding his powers. A company is liable for the actions and acts of those who are said to be the directing mind of the company, such as the director here. Company is committed to corporate criminal liability when the directors are directly or indirectly acting on the behalf of company, they are considered as an agent of the company and their decisions will comply and bound company in liability. And the breach of which can cause the company to be sued or pay the damages to the opposition client. The company itself is liable in delegating the wrong authorities or power to those who may not manage the delegated authority. In such a case obligation cannot be transferred to the director or the delegated person and the company itself is liable for the losses and damages to other party. When a company has contractual liability it cannot exceed his liability through their agents directly or indirectly. Therefore the law of agency is relevant when an agent acts on the behalf of the company (principle). Within the scope of apparent authority the agent may deal on behalf of company, the company verbally or parentally makes that agent the representative so he can act on behalf of the company. The person who works without the authority fall into a contract is committed to an offence for breaching the law. Such as the secretary falling into a contract without his contractual capacity will be considered as breaching the law and will be personally liable and responsible for the losses and damages to the company. In the case of (Lloyd v Grace Smith `1912) Mr. Sandles who was an employee of grace Smith Company acted in exceed of his authority which raised the conflict of client. Lloyds was a client of grace Smith Company and the Mr. Sandles provided advice to Mrs. Lloyds. Mrs. Lloyds signed the document which she didn't read and it was stated that the property papers which she signed are now transferred to Mr. Sandles. She sued the firm for this fraudulent or wrongful ACT, but company was not liable for it, Mr. Sandles was personally liable for this contract, he was not in the position or authority to do such an ACT. So the losses were personally beared by Mr. Sandles. In this case in given scenario the secretary is also acting over his authority which makes him personally liable for the breach of the contract and the losses. Step 3: Apply the Law In both cases the secretary and the director, company has a secondary liability towards the law, both are the agents of the company and both offence the law. But due to the different positions of director and secretary, the case and scenario is different of how the law treats in both cases. the director of company Joanne Flywell entered into the contract which was above his powers and authority but due to his position the law here states that director is the company directing mind and his offences and acts are directly attributed to the company so the company therefore is liable for the acts and losses for the contract or the breach of contract. On other hand the secretary of company Wilbur Fox who is not in the position for making the contracts, entered into the contract. Due to his position and level in company the company is not liable for any losses or damages due to the breach of contract that the secretary entered into. The secretary is not the directing mind of the company nor is he the representative of the company. Step 4: Conclusion The company is liable for the losses of director but not for the losses of secretary, the secretary will personally bear the losses and the company can sue the director for his wrongful Act. Read More