Business Law: Corporations Act 2001 Assessment Answer
Answer:
In order to answer this question, a discussion on the rule of Indoor management is needed. When an employee or authority from a company on behalf of the company, enters into a contract with any outsider, it is considered that the company as a whole is entering into the said contract. A noteworthy case in this regard is Bank of New Zealand v. Fiberi Pty Ltd[1]. The outsider entering into such contracts should keep in mind few points before entering into any contract. This includes knowing whether the person entering into the contract has the actual authority to draw such contract. The authority should be Actual because in cases of Ostensible authority, the validity of the contract can be questioned. To understand the principle of Ostensible authority a reference should also be made to the case of Freeman & Lockyer v Buckhurst Park Properties[2]. The third principle that an outsider should keep in mind is the rule of indoor management.
When a person(s) enters into a contract with a company, they enter such contract in good faith. They assume that the person executing the contract on behalf of the company acts within the powers and constitution which apply to them[3]. This assumption covers those factors which an outsider would not be aware of in normal course of business. The outsider assumes that everything has been properly performed and the contract has been legitimately executed by the representative of the company. This is the rule of indoor management[4]. This rule acts as a protection for those person(s) who enter the contract genuinely and who cannot know about any irregularity arising out of the executed contract.
The rule of indoor management has two major exceptions. The first exception is that the outsider should not be aware of the irregularity. If a person is aware that there is some irregularity and still, the person enters into the contract, in such a case, the person will not be entitled to any relief. The other exception to this rule covers the inquiry by the outsider. When the outsider raises some question that made the person suspicious about any possible irregularity and such person raises the inquiry for the same, they will not be covered under the rule of indoor management
In our present case, Mojo Beverage has placed an advertisement in the local newspaper about a reward on catching Lord Harry (a fish). But the advertisement wrongly quoted the reward amount as $100,000 instead of the actual price money of $ 1,000. The said event was to happen at Lake Tranquil on the Australian Day. Ben was one the persons who read the advertisement and went for the said event. Upon arrival and before catching the fish, he heard a rumor about the price money being quoted wrongly in the newspaper and that the actual price money was $1,000. A representative of the company confirmed that Ben had caught the fish. In this case, Ben claimed that Mojo Beverage owed him the wrongly printed amount.
The principle of indoor management would have been applicable in this case since Ben could not know about the right or wrong amount of the price advertised. But, before he could actually do the task mentioned in the advertisement he became aware of the irregularity. This is covered under the exception to the rule of indoor management. Though, on becoming aware about the irregularity, he did not raise an inquiry to the representative of the company. But since he was already covered by one of the exceptions of the rule, the claim for the wrongly printed amount cannot be made. Hence, the contention of Ben is completely wrong.
2.(a)
A contract is an offer and acceptance of certain terms that the parties to contract agree upon, for exchange of some consideration[5]. The contract should not cover anything that contradicts the law or which may result in violation of some legislation. Thus, it can be summarized that in order for a contract to be legally binding, there must be an offer[6], an acceptance, a consideration and an intention to enter into the contract.
The question arises as to whether an offer is same as an invitation to deal. The main criteria to understand the difference between the two is intent. When the party offers some terms to the other party, an acceptance is required. In case of invitation to deal, the intention of the other party would clarify the acceptance. If the invitation to deal states that any assent would be considered an acceptance, than that would be considered as acceptance. Or it may state that the assent would be considered as further negotiation. This difference could be clarified by referring to the case of Pharmaceutical Society of Great Britain v Boots[7].
If the offer states a time frame within which the offer has to be accepted, then any acceptances after the lapse of the said time frame will be deemed ineffective. In case, the time period is not mentioned in for the offer then the acceptance must happen within a reasonable frame of time and beyond that time period, the acceptance becomes ineffective.
The acceptance has to be clearly communicated whether verbally or written or even by conduct[8]. A mere mental decision cannot be treated as an acceptance. The acceptance has to be given by the person who received the offer. Any query raised by the party who has received the offer cannot be treated as an acceptance, unless the offer states so.
In the present case, Dorper Sheep Seller Pty Ltd (DS) was negotiating a deal with Livestock Brokers (LB). On June 1, DS had sent a letter to LB asking about certain details and also stated that LB replies to those within 14 days. LB replied inquiring some terms. To this, DS did not reply anything. On December 12, LB accepted the offer, at the opening of their business. DS replied by saying that LB was late and that they had started the purchase with a third party and the formalities of that arrangement were to be completed the next day.
In this case, the major issue revolves around acceptance. LB has failed to send a clear acceptance to the deal. A clear offer was made by DS which required an acceptance within the time frame of 14 days. LB only raised an inquiry during the given period but failed to accept the offer with the given time. Moreover, they sent the acceptance on 14 December which was six months the mentioned time frame. LB knew they had not sent any acceptance and hence no deal was made. Though this acceptance came at the opening of business of LB, but the time frame of acceptance had lapsed and so, the contention that the business was closed, cannot hold.
It was the duty of LB to clearly state the acceptance within 14 days and hence, LB cannot contend this case on any basis.
(b)
In the second part of this question, LB sends a fax of acceptance on June 14. But, DS did not receive any acceptance due to a transmission error. To answer whether such acceptance would be deemed acceptance, one must consider the famous case of Blackpool & Fylde Aero Club v Blackpool Borough Council[9].
In the mentioned case, the council had invited tenders which were to be submitted in a given time frame. Aero Club had submitted these documents but due to an error on part of the Council, it was recorded as to be received as late and the tender of Aero Club was not considered. The Club alleged it as a breach of contract by claiming that the Council should have considered all the tenders which were submitted within the due date. The judge in this case held that if the tenders are submitted by the Club within the time frame and within the procedures required for submission of such tenders, the submission would be considered as timely. The judge also held that the Club had submitted the tender in the given time frame and so they held that the tender would be opened and considered. The delay on part of the Council cannot be blamed upon the Club.
Relating this case study to our present case, a submission made by LB on July 14 would be considered as a valid acceptance and LB cannot be held liable for the transmission error by DS. In this case, LB can sue for breach of contract.
3.
In situations where the landlord sells his accommodation to someone and there is a tenant in that accommodation, the tenant attains certain rights. It is not necessary that a new rent agreement be drawn in case of a new landlord. As long as both parties (the tenant and the new landlord) agree to the terms of same agreement, the old agreement (between the tenant and the old landlord) can continue. If the new landlord does not wish to rent the property, they have to give a standard notice to vacate[10]. In case of sale of property, the new landlord and the old landlord have to notify to the authorities stating that the property has changed hands[11].
When a tenant is under a fixed term rent agreement (given the time period is under two years), the rent cannot be increased unless and until it is entered in writing[12]. Once it gets over, the agreement becomes periodic or of rolling lease (unless the parties enter into another fixed term rent agreement). The rent gets increased in such agreements. A table depicting time frame after which the rent increases depending upon the region is given at the end (Table 1).
In case of a dispute with the landlord, a tenant can apply with the respective authorities. For a dispute in New South Wales region, a tenant can go to NCAT (NSW Civil and Administrative Tribunal)[13] for relief. In Victoria region, RTBA (Residential Tenancies Bond Authority), VCAT (Victorian Civil & Administrative Tribunal), EOCV (Equal Opportunity Commission Victoria)[14] are applicable.
A tenant can request the landlord for a reduction the rent. The landlord may or may not agree to such reduction. In case the landlord agrees to such reduction, it is advisable to get such reduction in writing[15]. In case the property changes hand and the said arrangement is not in written, it cannot be enforced upon the new land owner. Though, an understanding of the same proposal can be reached with the new owner, if they agree.
In case a tenant under pays the rent, the landlord can demand such short paid rent. The landlord can use Form 21 (breach notice of nonpayment of rent) or just give the notice in writing. Such short paid rent has to be paid within 14 days of the notice. If the tenant fails to be the arrears, the landlord can issue the notice of termination in form 1A[16]. This agreement acts as an end of the rental agreement and the tenant has to vacate the accommodation in the following 7 days.
In present case, the tenant Stuart had a lease agreement for a period of 5 years (at the end of 2010) with Westphalia Marts Pty Ltd (WM). The rent amount was fixed at $1000 a week. In 2013, due to a decline in his business, he asked the landlord to reduce his rent by $300 thereby making the rent as $700. The landlord agreed to the revision in price and started paying the rent of $700. There was no written agreement to give effect to this reduced price. WM decided to sell off the mall (in which Stuart had his shop) in December 2014. In order to make the Mall’s income look healthy, they asked Stuart to pay the arrears of each month. The question here arises whether Stuart has any relief in this case.
Stuart had a written agreement with WM which stated the full amount of rent. Even though both the parties had agreed to a lower amount of rent, a new agreement or a revised agreement was not drawn. There was no written agreement to give effect to the changed rent. And due to this shortfall, Stuart does not have any right to sue.
References
Australasian Legal Information Institute, Corporations Act 2001 Section 125-129, New South Wales, 2016.
Australian Contract Law. Blackpool & Flyde Aero Club v Blackpool Borough Council. Australian Contract Law, 15 August 2016, <https://www.australiancontractlaw.com/cases/blackpool.html>
Carter, J W, Contract law in Australia. 5th edn, LexisNexis Butterworths, Sydney, 2007.
Castle, J. Tenants doing it tough. Choice, 24 November 2014, 15 August 2016, <https://www.choice.com.au/money/property/renting/articles/rental-rights-you-didnt-know-you-had/>
Clarke, P. And Clarke, J. Contract Law: Commentaries, Cases and Perspectives. 3rd edn, Oxford University Press, South Melbourne, 2016.
Department of Commerce. Breaches of tenancy agreement. Government of Australia, Perth, 2014, 15 August 2016 < https://www.commerce.wa.gov.au/consumer-protection/breaches-tenancy-agreement>
Department of Justice. Renting a home: A guide for tenants and landlords, Consumer Affairs Victoria, Melbourne, 2005.
Elliot, C. Contract Law. 8th edn, Pearson, London, 2011.
Jacobs, C. 4 rules to know when your landlord is selling up. Realestate, 16 September 2014, 15 August 2016, <https://www.realestate.com.au/advice/renters-rights-home-sale/>
Lai, Katrina. ‘Bank of New Zealand v Fiberi Pty Ltd’, Melbourne University Law Review, Vol. 20, No. 1, June 1995, pp. 252-259, retrieved 15 August 2016, APAFT database.
Morisson, D. The Continued Role of the Common Law Indoor Management Rule Due Inquiry Exception. University of Queensland, 1996, 15 August 2016, <https://espace.library.uq.edu.au/view/UQ:356124/UQ356124_OA.pdf>
Swarb. Freeman & Lockeyer v Buckhurst Park Properties; CA 1964. United Kingdom, 2016, 15 August 2016, <https://swarb.co.uk/freeman-lockyer-v-buckhurst-park-properties-ca-1964/>
Tenants Rights Factsheet. Sale of rented premises. New South Wales, 2015, 15 August 2016, <https://intranet.tenants.org.au/print/fs28.pdf>
Tenants Union of Victoria. The landlord is selling. Victoria, 2013, 15 August 2016, <https://www.tuv.org.au/articles/files/resources/landlord-is-selling-FS-2013.pdf>
Tenants’ Union of NSW. Factsheet 28: Sale of rented premises. NSW, 2015, 15 August 2016, <https://www.tenants.org.au/factsheet-28-sale-of-rented-premises>
Thomson Reuters. Pharmaceutical Society of Great Britain v. Boots Cash Chemists. Westlaw, 1953, 15 August 2016, <https://legal.thomsonreuters.com.au/product/AU/files/720502512/pharmaceutical_society_of_great_britian_v_boots_cash_chemists.pdf>
[1] Lai, Katrina. ‘Bank of New Zealand v Fiberi Pty Ltd’, Melbourne University Law Review, Vol. 20, No. 1, June 1995, pp. 252-259, retrieved 15 August 2016, APAFT.
[2] [1964] 2 QB 480
[3] Australasian Legal Information Institute, Corporations Act 2001 Section 125-129, New South Wales, 2016.[4] Morisson, D, ‘The Continued Role of the Common Law Indoor Management Rule Due Inquiry Exception’, University of Queensland, 1996, retrieved 15 August 2016, <https://espace.library.uq.edu.au/view/UQ:356124/UQ356124_OA.pdf>.
[5] Carter, 2007
[6] Clarke & Clarke, 2016
[7] Court of Appeal [1953] 1 QB 401; [1953] EWCA Civ 6; [1953] 1 All ER 482, [1953] 2 WLR 427[8] Elliot, 2011
[9] Court of Appeal [1990] 3 All ER 25[10] Jacobs, C. 4 rules to know when your landlord is selling up. Realestate, 16 September 2014, retrieved 15 August 2016, <https://www.realestate.com.au/advice/renters-rights-home-sale/>
[11] Tenants Union of Victoria, The landlord is selling. Victoria, 2013, retrieved 15 August 2016, <https://www.tuv.org.au/articles/files/resources/landlord-is-selling-FS-2013.pdf>
[12] Castle, J. Tenants doing it tough. Choice, 24 November 2014, retrieved 15 August 2016, <https://www.choice.com.au/money/property/renting/articles/rental-rights-you-didnt-know-you-had/>
[13] Tenants Rights Factsheet. Sale of rented premises. New South Wales, June 2015, retrieved 15 August 2016, <https://intranet.tenants.org.au/print/fs28.pdf>
[14] Department of Justice. Renting a home: A guide for tenants and landlords, Consumer Affairs Victoria, Melbourne, 2005.
[15] Tenants’ Union of NSW. Factsheet 28: Sale of rented premises. NSW, 2015, retrieved 15 August 2016, <https://www.tenants.org.au/factsheet-28-sale-of-rented-premises>
[16] Department of Commerce. Breaches of tenancy agreement. Government of Australia, Perth, 2014, retrieved 15 August 2016 < https://www.commerce.wa.gov.au/consumer-protection/breaches-tenancy-agreement>
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