Problem Question Assignment
To have a binding contract, there must be an offer and acceptance and for it to be enforceable, the alliance must be supported by consideration and there must be an intent to build legal relations between the parties involved. In this case, there are four legal questions. First, when will Teresa be held liable for procedural irregularities of the purported general meeting of members? Second, when will the company be held liable for a tort committed by one of the directors? Thirdly, when will Teresa and Robert be held liable for ignorance of the company’s constitution. And fourth, if a company is liable for a tort, when and to what extent will an innocent partner be held liable to that tort.
For the first legal issue, Teresa’s actions may be approved as valid to some extent. According to Division 3 Section 135 of Companies Act NSW, she had a right to convene a meeting due to her voting rights in the company (Goldring, Patt & Ryan, 1981). The Act also states that she properly serves notice to all the directors to attend and also follow on their awareness of the meeting which she did by calling them personally. However, the Act also required that the meeting be held as soon as it was practical. Clara and Johann, present their inability to join the meeting because of the short notice. Teresa should have therefore postponed the meeting to a later time when all of the directors would be available. The court was, therefore, is more likely to find Teresa guilty of an offense concerning this act.
Moreover, according to the rule is set out in Article 1 of the company’s constitution. The management of the company’s business can only be done by the directors. Here, the facts given do mention that Teresa does not liaise with her fellow directors in offering a contract to Ludwig. As it is seen she schedules a short-notice meeting, and despite Clara and Johann not attending the meeting, she goes ahead and approves the contract despite Robert’s disapproval. If the court accepts that Teresa was not working together with her fellow directors, and rules the resolution passed by Teresa and Robert are invalid, Ludwig will not need to prove this. However, if the court does not accept that Teresa was working without her colleagues’ consent, and rules the resolution passed by Teresa and Robert valid, Ludwig will need to provide evidence proving this. Given that the company was running a music teaching business and the tort was committed in the course of purchasing musical instruments, it is clear that Teresa was working to get the best instruments for the company but this legal test is considered from Ludwig’s perspective, a client who had no reason to suspect the business was not being conducted correctly.
Since Article 1 is satisfied, the company would not be liable for the tort since there is enough information to ascertain that Teresa did not have her colleagues’ consent when offering Ludwig a contract. The court is therefore likely to accept that Teresa signing an agreement without the other directors’ knowledge was not according to Article 1 of the company’s constitution.
Concerning the second legal question, the important rule is outlined in s10 of the Companies Act 1892 (Carlin, 2001). When a tort is committed by a partner, this section has four elements and already three have been satisfied as Teresa is a partner, Ludwig incurred losses (injury) and the loss was caused by Teresa’s wrong decisions. The fourth element is that Teresa might have been acting in the ordinary course of business or with the knowledge of her co-directors. Considering the knowledge of her co-directors, Ludwig does not need to prove that Teresa had been working with her co-partners to commit the tort instead he needs to prove in court that Teresa was actually working with consent from her co-partners when offering him a contract. The facts submitted notes that Teresa was working without her co-directors awareness, therefore, Ludwig would not need to prove this if the court agrees with these claims. Nonetheless, if the court does not agree that Teresa was not working in cooperation with her partners, Ludwig will have to provide evidence to prove these claims.
Given that the company was running a Musical Teaching business and tort was committed, it is evident that Teresa was working to acquire the best teaching instruments; ordinary course of the business but this legal test is likely to be considered on Ludwig’s perspective, an innocent client who was unaware of the company business was being conducted incorrectly. Therefore, since the fourth element is not satisfied, the company cannot be held liable for Teresa’s misconduct (Goldberg, 1970). The court is likely to accept that Teresa did not follow the company’s rules and regulations and rule that JRTC Company honor their contract with Ludwig.
For the third legal question, the significant rule is set out in Article 2 of the company’s constitution. The company cannot sign any contract that’s worth more than $5,000 in any calendar year unless that deal is approved by ordinary resolution in a general meeting of members. Again, the facts show that Teresa, the Chief Executive Officer of the JRTC company called for a meeting and it was held at her house with only two directors in attendance, herself and Robert. And despite Ludwig’s contract costing $10000, Teresa went ahead to approve the deal even without considering Robert’s disapproval of the agreement and the absence of two other directors. If the court accepts that signing a $10000 contract with Ludwig goes against the company’s constitution and rules the contract invalid, Ludwig could sue the company for compensation as he would have easily signed another contract for $15000 with a corporate customer but he felt bound to the JRTC company contract. However, if the court dismisses this, it may require that JRTC honor their contract to Ludwig. This legal test is likely to be considered from Ludwig’s perspective, a client who had no idea that the company cannot enter into contracts that may cost the company more than $5000.
Since Article 2 is satisfied and there is enough information to prove that JTRC $10000 contract with Ludwig, the court is, therefore, likely to accept that the contract signing goes against the company’s constitution.
Moreover, the JRTC Musical Pty Ltd may want to revoke Ludwig’s contract because Robert’s signature was forged. Robert may go ahead and defend the proceedings on the basis that he had not signed the contract, therefore, Ludwig can rely on the statutory assumption according to sections 127, 128 and 129 of the Corporations Act concerning its ability to rely on and enforce the agreement since he was unaware that the presumption was wrong at the time when making the deal.
The court is therefore likely to rule in favor of the company since Ludwig had no previous dealings with the company to just assume or have no suspicion of forgery, considering he got an immediate approval of the contract, therefore, Ludwig would have to provide the contract as evidence to prove that there was an intent to create legal relations between him and the company. However, the court might also accept that Ludwig had no knowledge or suspicion of forgery and rule the forgery irrelevant. And with this, Ludwig can convince the court to require JTRC Musical Pty Ltd to abide by their agreement with him.
General traditions, which are the widespread rule, make up the common law in its stricter and more usual importance. This states that law which defines several rules, not written down in any ordinance or statute but relies solely on immemorial involvement, that is, on the common law, for their reinforcement. Court rulings are the prominent and most commanding proof that can be given of the presence of such a custom that forms a scope of the common law. The jurisprudence and the opinion of the judge are at times exchangeable terms; despite being a general rule in which the judgments of the judiciary are shreds of evidence of what is common law. Considering the facts provided, the court is likely to accept that Ludwig’s contract as valid and require the JRTC Musical Pty Ltd to abide by the bargain with Ludwig based on the common law, as he was an innocent client who was bound to a contract and had no knowledge on the company’s rules and regulations. It is also worth considering the legal implications if the court accepts Ludwig’s contract as invalid, Ludwig may sue the company for the losses he incurred and opportunities that he missed since he was bound to the JRTC contract.
Concerning the fourth legal issue, when and to what the other members of the company be held liable, the court will rule this out depending on two elements. First, is their knowledge based on Teresa’s signing of the contract, and second is the circumstances that led to the power accorded to Teresa being the CEO of the company. According to the first element, the other directors did not give their consent of entering the contract through a signature, and they were, therefore, unaware of the purchases they were to be made to Ludwig (Mark & Cowdroy, 2003). On the other hand, in relation to the power accorded to Teresa by the other members, for being the CEO of the company, the court will rule that the other directors were either confident in her decision making for the company or either they were irrational in making her CEO (Sutton, 1985). According to the Companies Act of New South Wales, a CEO has the authority to make decisions for the company. Even though there were no legal documents to certify Teresa’s position, their consent for her in this position must have come from a background that she was well able to make decisions for the company. If not then the directors did not think through their decision for making Teresa the CEO of the company which therefore makes the decisions she makes a consequence of their lack of thoroughness in accessing the necessary qualities fit to make her CEO. The other directors will consequently be held accountable to the extent of their reasoning to make Teresa the CEO of the company.
Conclusion
In conclusion, the court might decide to hold Teresa accountable for the illegal breach of the constitution of JRCT Musical Pty Ltd and the illegal entering of a contract with Ludwig. Knowing that there were no legal documents to make her CEO of the company and that the other directors who had equal say in the decisions to be made by the company, she went on and entered the company in a contract it had not planned, and one that the constitution did not cater for.