Business Law and Ethics - Mobile World Communication Ltd - Assignment Example

BUSINESS LAW AND ETHICS [Student’s Name] [Course Title] [Tutor’s Name] 21st August, 2011 BUSINESS LAW AND ETHICS QUESTION ONE: Business Structures The business name will be Mobile World Communication Ltd. The name is suitable because this is a company that will be dealing with the sale of Mobile phones. The company will have all types of phones the customers need and hence the name “Mobile World”. 1. Choice of Business Structure Mobile World Communication Limited takes the form of sole proprietorship; this is the simplest and basic of all the business structures. This is the business owned by one person without limited or corporation liability status. The owner is responsible for representing the company fully and legally. Several factors were put into consideration in my decision to start Mobile World Communication Ltd as a sole trader. These factors include; the low cost of starting up the business, unlike other businesses structures, sole proprietorship is easy to start and requires less capital. I did not have a huge capital to set up the businesses that needed more capital. I was able to raise money from my friends and family, I also had some savings in the bank. This was enough to set up this business structure. I also considered the advantages of sole proprietor over the other business structures; I will be fully responsible in the management of Mobile World Communication Ltd, a board of director is not necessary because I will have full control of the company. In addition the reduced costs of the business, cheap to start and discontinue with no legal expenses or required fees. 2. Business Name I came up with a business name that was not in use by any other company, I ensured that the name was short, easily pronounced and catchy to the customers, I also checked on the availability of the name Mobile World Communication Ltd and it was indeed available. All businesses need a name for identification; the name was checked if it was identical or similar to any companies and businesses registered in Australia. In addition the name was checked if it is against the corporation names on the National Names Index, the name was legally defensible and available. The registration process of a new business name starts with obtaining ‘Australian Business Number’, ABN. This is done online and at the same time a trademark search link should also be included. A written verification from the Australia’s Domains Names gave a way forward for use of registered name. 3. Characteristics of a Company A company can be defined as a legal unit that is allowed by legislation, it gives consent to a group of people as shareholders, to apply for the creation of an independent organization to the government. This organization can focus on pursue of set objectives, it is empowered with legal rights that are normally set aside for individuals. These rights include; own property, sue or get sued, borrow or loan money and hire employees (Davies, 1997). A company has essential characteristics that distinguish it from different business structures. Below are the characteristics; Common seal; a company is “An Artificial person”, there is no physical presence. Hence it acts through a Board of Directors responsible for its activities and entering into different agreements. Contracts like this must be under the company’s seal. The official signature of the company is the common seal. The common seal must be engraved on the company name; any document that does not bear the common seal might not be accepted as genuine or legal. Capacity to be sued or sue; the company has the ability of suing and in this case it is the plaintiff, in cases where it has been sued it becomes the defendant. Transferable ownership rights; a predominant amount of stocks is issued by the management of a corporation to the investors. An investor has all the right to sell part or all their shares to an outside investor. Functioning or the operation of the corporation is not affected by the transfer of the stock. Limited liability; members of the company have limited liability to contributions of the assets of the company and the amount an individual has invested. Creditors can not force legal claim on the personal belongings of the partners or shareholders. Separate legal existence; a company is different and distinct from its members by law. It has its own name and seal, its liabilities and assets are distinct and separate from the members. It is capable of incurring debt, owning property, employing people, entering into contracts, bank account, borrowing money and being sued and suing separately. Separate management; the company is managed and administered by the Board of Directors who oversee activities of the company, they appoint the president, vice president, treasurer and controller. Procedures and policies of the company are set into place by the Board of Directors. Perpetual succession; the company does not stop existing not unless it has completed the intended task or it purposely wound up. Death or insolvency does not affect the company’s existence. One share one vote; this is the company’s voting principle, if a person has 10 votes, he has 10 shares in the company. Regardless of the number of shares one has, one member is entitled to one vote. 4. Internal Management of the Company Every company must have “Articles of Association (AOA)”, this is a requirement for the establishment of a company under the UK, India and other countries law, this articles set out rules for the running of the internal affairs of the company (Hanner, 1999). All articles must be registered with Companies house by the company. The constitution of a company constitutes the “Memorandum of Association (MOA)” and “Articles of Association”. The “MOA” and “AOA” describe the rights, duties and powers of the governing body as amongst themselves and company at large, and the form and manner in which the business of the company will be carried out. The following are considered in the internal management of a company; issuing of stock (shares), appointment of the directors, management decisions; transferability of shares, winding up, voting rights of the chairman, policy of dividends and the first right of refusal- counter bid and purchase rights by a founder. Every shareholder and director must be given a copy of the constitution that governs the company. 5. Duties of Officeholders of the Company The shareholders of a company can not run it on their own so they delegate there duties to the Board of Directors who run the affairs of the company on their behalf. They are responsible of electing the BOD which is normally done on. There are many officeholders in a company; the chairperson, CEO, managing directors, directors and the company secretary. According to (Davies, et al, 2009), the officeholders have duties assigned to them and must be followed as a requirement set out in the corporation Act 2001. These are fiduciary duties and statutory duties and common law duties. Under the duty of fiduciary; a duty of care and loyalty is imposed to a company’s officeholders. Duty of care requires an officeholder to act with care as another officeholder would have under the same circumstances. The duty of loyalty; an officeholder is supposed to refrain from any competitive business to the company, any conflict of interest between his personal life and his line of duty, disclosure of documents or any information related to the companies affairs that the share holder has in his procession. Under the company’s law, the moment the officeholder complies with the requirements, a transaction between the officeholder and company is approved by the BOD. Question two: case study Baltic Shipping Co. v Dillon (1993) 176 CLR 344 This case falls under contract law. More specifically, this is a case of carriage contract. In the case study, there is a visible breach of contract which requires that one party awards some payment to the other party for the damages which have occurred in the case. The facts of the case will be briefly explained in the following paragraph. The two parties involved in this case are Mrs. Dillon and Ms. Lermontov, Mikhail who has a cruise ship. Mrs. Dillon had purchased a cruise from the chatterer, Ms. Mikhail. Dillon obtained a booking from the chatterer, Ms. Mikhail on 6th December 1985 after paying the initial deposit. She subsequently received her tickets on 24th January the following year which had a clear indication that there was limited liability to personal injury. During the cruise, there was an accident that resulted to the sinking of the ship whereby Dillon was injured. Following the accident, the passenger Dillon got a compensation for the loss of her valuables but was not compensated for her personal injury. On the other hand, she was offered a certain sum which was given on condition that she signed a consent form (release form). She accepted the offer, signed the form and got a reimbursement. Later on the following year (1987), Dillon instituted a legal case in order to get compensated for the injuries as well as some other losses. Looking at the time in which the contract came into existence, all the involved parties are supposed to bound by the terms and the call of exclusion by Dillon therefore happens to act against the terms. Ms Dillon is acting in terms that were not explicitly stated by the time that they agreed to sign the contract. If at all she would have deserved to change the terms of the contract, then this would have been unacceptable given that the other party had already committed herself to the contract by paying the deposit fee. When the case was held, Mrs. Dillon won the case and was awarded $51, 000 which would act as a compensation for the losses that she incurred including personal injury losses. The court claimed that there were no reasonable measures that were taken to inform the passengers of any such clause which would mean that such eventualities would be catered for. Flow chart Part B: Finding a case The process of finding a case involves various steps as will be discussed in this section. In the first place, I looked into the details that were given in order to arrive at the case at hand. This also involved reflecting at the learnt legal issue to arrive at the area of law within which the case lies. After ascertaining that it is a contact law case, I narrow down basing my argument on facts to find that the case was a contract of carriage. The terms of the contract that were stated are followed in order to get to who breached the contract. The case is arranged in accordance to the parties involved in order to come up with the name of the case. Challenges There are various challenges that were encountered in this process. This is largely due to the numerous facets that the case can assume. Before determining the specific legal way in which this case is to be judged, there has to be a proper follow up to look at the exact clause that will determine the case. In assessing the case and the legality or the reasons as to why certain judgments were made by the juries, there needed to be strict follow up of the right legal channels which are very challenging. This is mainly hard due to the variety of cannels that can lead to so many twists in the case. Question 3: Negligence Part A Negligence can be defined as the failure of a reasonable person to exercise the care which a reasonable and prudent person would do or doing something which that person would not do. The “Core” idea of negligence is that a person should exercise rational care during their actions by being accountable of the possible harm that might be foreseeably caused to other people (Deakin et. al, 2008). According to (DeMitchell, 2007), the tort of negligence presents a cause of actions that lead to damages or to relief, in every case it is intended to protect the legal rights such as; property, personal safety, and at times intangible economic interests. The following elements have to be established in a negligence case by the claimant; breach, duty, causation, absence of remoteness and financial damages. In this case Debbie has to prove each element so that she can prove negligence and win her case. Duty of care; Matt or the night club owes Debbie duty of care, legal duty of care is the first element of negligence. This is concerned with the plaintiff’s and defendant’s relationship; there must be an obligation to the defendant to take proper care of the plaintiff and avoid causing any injury to them. There are some situations that the courts recognize existence of duty of care. They normally arise when there is a special relationship between the parties, in this case Matt and Debbie had a relationship since they were friends. In Donoghue Vs Stevenson (1932) case, Donoghue could not take direct action against vendor; this is because there was no contract between them. Her only option was to sue the manufacturer on the grounds that the manufacturer owes a duty of care to other users. Breach of duty to take care; after the duty of care by the defendant to the plaintiff is established, the next step is to find out if the duty was breached or not, and hence must be settled. This test is objective and subjective. If a defendant knowingly exposes the claimant to risks, he/she breaches the duty (subjective). Failure of the defendant to realize the risk of loss to the claimant, that another person in the same situation would have realized, breaches the duty. Each an every member in the society has a duty of care towards other people and their property. In the case Bolton v Stone (1951), it was established that that the defendant was not negligent because the damages to the plaintiff were not a convincingly foreseeable result of his behavior although she had been injured. Legal remoteness or causation; for a defendant to be liable, causes of damage or the losses sustained must be shown by his/her negligence. In the case of Debbie, she has to consider if the injuries sustained would have happened without or before the defendants breach of the duty of care they owed to her. She should show that the injuries she got were caused by the doings of Matt or the night club owner. While viewing the case Palsgraf v Long Island Rail Road Co, the judge’s opinion was that the defendant (a railway) was not liable to the injuries that Palgraf (plaintiff) sustained. The plaintiff was hit by scales that fell on her as she waited for the train on the platform. The scales fell due to a far-away chaos. The defendant argued out that negligence of the conductor was too remote for the plaintiff’s injury. It was ruled out that the defendant owed a duty to Palgraf, in spite of foreseeability, people owe one another a duty of care and must avoid being negligent. Debbie has a case she can sue Matt or the night club owner for breaching the duty of care, because they were responsible for ensuring that she was safe. Remoteness or proximity should be considered, Debbie may not have a case against the owner of the night club, simply because there was no sufficient proximity between them when she had the accident, she was with Matt and had already left the night club. In Jaensch v Coffery case, Mrs. Coffery sustained an injury that resulted from a car accident although she was not there at the time of the accident. It was required that there must be adequate proximity between the defendant who caused the accident and the plaintiff, in this case there was sufficient causal closeness. Damages; the harm done is placed on a monetary value by the damages acquired, damages are compensatory, and this damages address a claimant’s loss. To prove negligence by the plaintiff, damage or loss must be suffered by plaintiff as a result of the defendant’s bleach of duty The plaintiff might not recuperate not unless he/she can prove the defendant’s breach of duty of care caused pecuniary injuries. Part B There was voluntary assumption of risk by Debbie. She stayed out in the club very late even after the friends she was with went home. She voluntarily accepted Matt’s lift, she knew that Matt had been drinking and he was possibly drunk and was in no good condition to drive, he smelled of alcohol and was swerving on the road. In addition it was a wet evening and it was dark too. Not too far after leaving the night club, Matt lost control of the vehicle and had an accident. Debbie and two of her friends were seriously injured. Debbie should not have accepted the ride home knowing to well of Matt’s condition; instead she should have stayed in the night club till morning where she was assured of her safety. To some extent she was responsible for her action and was negligent. Onus of proof, in this case was difficult to prove on the balance of probabilities, if Matt or the night club owner was negligent and responsible for Debbie’s accident. This was overcome by Res Ipsa Loquitor (the thing speaks for itself). The elements of breach and care are at times inferred from the nature of an outcome or accident, regardless of evidence on the behavior of any defendant (Clarke, 2003). Question four: PART A: Legal Issues in Relation to Ms Jones From the onset of the negotiations, it’s point blank that there was a contractual agreement between Ms Jones and Fashions Afloat limited (FAL). The agreement to refurbish all the three floors of three building and make the substantial renovations justifies Ms Jones claims of award of damage from the breach of contract from the other party, FAL. The agreement constituted a preliminary agreement of basic terms in absence of formal agreement but that which was bound immediately.(Cram Notes,2010). Even though there was no initial formal agreement, the contract is enforced by the writing to Ms Jones from FAL informing her that they no longer wanted to lease the building. The consideration by Ms Jones was a present one hence was enforceable as stipulated in the law of contract. Whenever two parties enter into an agreement they endeavor to enter into legal relations. This is the case with the Ms Jones and FAL as the buildings were to be refurbished for leasing for a commercial purpose. The case of Carlill v Carbolic Smoke Ball Company is an example of a 'unilateral contract'. Obligations are only imposed upon one party upon acceptance by performance of a condition, and in our case, FAL had accepted to perform the condition of leasing the building to Ms Jones once she performed the condition of renovating and refurbishing the premises. Ms Jones has a locus standi in claiming damages over breach of contract by FAL. This is because FAL decided, through writing discontinue with the lease of the building to her. The contract between FAL and Ms Jones was constituted by an agreement hence could tentatively be discharged via the same agreement. Even though the contract was not put into paper, the absence of a formal agreement does not whitewash the validity of the contract; hence the case is admissible in the law courts. Advice to Ms Jones on Her Legal Rights A contract pits more that one person, otherwise referred to as parties. A contract is a promise that is legally-enforceable or given set of promises made by parties to each other. It’s an agreement that is legally binding and that which entails a bargain which is essentially for profit in nature and that also involves selling or hiring of merchandise such as goods, services, buildings or land. Ms Jones is one of the party in the contract the other being FAL and is therefore entitled to the rights in the contract. The terms in the contract were that Ms Jones was to all three floors of the building and make substantial renovations and Fashion Afloat Ltd was to lease out the premises to her. However, they breached the contract through a letter to Ms Jones that they were no longer willing to lease the premises to her. By breaching the contract, Fashion Afloat Ltd gave Ms Jones legal rights to claim awards of remedies as FAL failed to meet the terms of the contract as initially agreed. Drawing from Wikipedia’s definition of a contract, this is….. “a legally enforceable agreement between two or more parties with mutual obligations, which may or may not have elements in writing or orally,” the law has a remedy for a breach of a contract which is usually termed as ‘damages. The judge in such a lawsuit is guided by the contractual law to award the damaged party, which in our case is Ms Jones, the benefit of the bargain or expectation damages which are by far bigger than mere reliance damages, as in promissory estoppels. In Ms Jones vs. Fashion Afloat Ltd case, here, Ms Jones can either choose to relinquish the entire contract and claims full damages, or she can treat the breach as a ‘breach of warranty’ which entitles her to claim damages instead of repudiating the entire contract. Ms Jones is also entitled to remedies for partial performance from FAL since the letter they did to her barred her from performing her obligation (reads refurbishing and renovating the premises as outlined in the contract. PART B: Legal Issues in Relation to Joseph The fact that there was no formal agreement between the two parties, Ms Jones and her niece Joseph legally shows that there was no contract whatsoever. The two parties showed no intentions of entering into legally binding relations as they had promised to each other to do nothing. Ms Jones merely asked Joseph to relocate from Brisbane Sydney to assist in the renovations. The latter didn’t offer any consent to the offer made by his aunt, hence no contract like the one between Ms Jones and Fashion Afloat Ltd. The contract therefore renders Joseph a third party. The ‘contract’ between Joseph and Ms Jones should hereby be discharged as its not legally binding. Joseph’s Rights Joseph is a third party to Fashion Afloat Ltd, and is therefore not entitled to any right whatsoever. This implies that he got no right of any payment by FAL for breach of contract between FAL and Ms Jones. According to the law of contract, the right to incur liabilities and rights exists only to the parties in a contract and who are bound by the terms of the contract. The doctrine of “privity of contract” depicts that only those parties involved in striking a certain bargain would be entailed to enforce that bargain. In general terms, only the parties that are involved in a contract may breach for the breach of the contract. In the present case, the law entails that since Joseph is not in the written agreement as he is a third party, he cannot be able to institute a suit on behalf of Fashion Afloat. The contract entered by Joseph and Ms Jones is different from that one between Ms Jones and FAL, therefore, the obligation abiding between Ms Jones and FAL in not tied with that one between Ms Jones and Joseph. The possible consequences of the agreement may be looked at by the courts to establish the conduct of the parties and hence determine if there was implied or express intention to enter into legal relations between Ms Jones and her niece Joseph. Despite the fact that Joseph is a nephew to Ms Jones, he is a builder and had to relocate from Brisbane to Sydney for the purpose of renovation and hence is entitled to claims from Ms Jones for any damages accrued due to the discontinuation of the contract by Ms Jones and FAL. He draws his claim through the erosion of the privity rule. This has led to the current situatuin where third party beneficiaries can be allowed to recover any damages that result from a breach of a contract that they were not part of. This is because Joseph is an injured party in that he left his job in Sydney to work in the premises which resulted in the contract thereby is legally entitled to payment of damages from Ms Jones. References Clarke, A., 2003. Negligence: a practical learning approach. Butterworth: LexisNexis. Davis, D. et al., 2009. Companies and other business structures: commercial law. Oxford: Oxford University Press. Davies, P. (1997) Gower's Principles of Modern Company Law, 6th Ed., London, Sweet & Maxwell. Deakin, et al., 2008. Markesinis & Deakin's Tort Law. Oxford: Oxford University Press. DeMitchell, T. A., 2007. Negligence: what principals need to know about avoiding liability. Melbourne: Rowman & Littlefield Education. Hanner – Ofer., (1999), ‘Companies Law’, Retrieved 21 August 2011 from http://www.hanner.co.il/Israel-Lawyers/Israel-Laws/Company-Law/CompanyLaw34.htm McKendrick, Ewan (2005), Contract Law - Text, Cases and Materials, Oxford: Oxford University Press. Read More