The effects ACL has on Contract

Part A

The effects ACL has on Contract

Australian Consumer Law (ACL) was implemented after the Bill to amend the Trade Practices Act 1974 was passed. Australian Consumer Law was meant to address the issues of unfair contract terms, consumer redress option, enforcement powers and penalties. The ACL was also meant to amend and strengthen Australian Securities and Investments Commission Act 2001. After the introduction of ACL, it was expected to affect consumer contract within the commonwealth’s legislative power. ACL renders contract void if it is unfair in accordance to the statutory and if the contract is a standard form contract. ACL states that the contract is unfair if it has significant imbalance that affects the obligations and rights of one party especially the consumer of goods, service and financial products. Secondly, the legislation is unfair if it causes detrimental in terms of finance to the party if were relied on.

Advantages and disadvantages of sole trader compared to partnership

Sole proprietorship is described as a business owned by one person, who has total control of all business activities taking place. Advantages of sole trader include

Advantages Disadvantages

The trader has full control of how the business should be operated or run, hence no interference from the others.

Sole trader does not share profits with anyone.

The secret and private data about business operations. This contrast the limited company that is require to make public after registering.

Sole traders have competitive advantage based on the specialization of the products.

Sole traders make quick decisions because they don’t have to consult anyone. Sole trader is liable to any debt the business faces, thus the business owner risk personal saving and any other assets including the homes.

Sole trader may find it difficult to raise the required capital. Hence the expansion of business may not be achieved.

Sole traders are unable to maximize economies of scale as the way the limited companies would do.

Since the decision making process is solely the responsibility of the business owner so the success and failure depends on one person.

Partnership

Partnership is a form of business where two or more people comes together to establish a business.

Advantages Disadvantages

The have more powers of raising the required capital to start and expand the business as compared to sole trader.

Flexibility is high because all they need is the partners to agree on the way forward.

The partners share the responsibility of running the business thus maximizing their abilities.

The decision making process allow partners to help each other. Profit sharing among the partners, one of the partner may feel unfair if he/she put more efforts to the business.

Taxation issue: the law requires each partner to pay the taxes as the sole trader. This means that each partner is expected to fill self-assessment tax return.

In case of ordinary partnership, they are subject to unlimited liability. This means that each partner is liable to financial risk.

Disagreements is the common factor, thus affecting the progress of the business.

Part B

Case study (a)

Issue

The main issues here is that the Pebel sports terminate an offer that was send to the customers through mail. Considering the issue that was presented in carrilli&calibolic smoke ball, the case of Sarah was an invitation for offer for all the items sold in pebel sport. In simple terms, Sarah went to a pebel sport to bought items she needed after receiving an invitation, but upon collecting the items she needed and presenting them at the counter, the girl in the counter informed her the offer was closed because they realized they losing a lot of money. The offer was valid because it was send to Sarah through mail. Sarah should demand a 10 % off from the pebel sport because the offer become valid the moment Sarah went to the store to collect the items she needed. This means that there was acceptance of an offer since it did not specify the time line of terminating the offer.

Rules

According to the case in carrilli&calibolic smoke ball, it is evident that the rule of promise, acceptance and consideration time should be analyzed in the case of Sarah. The rule of promise arises the moment the mail was send to Sarah stating that pebel sport was offering a 10 % discount in all the item they sale. This means that the company promised all the customers that received the mail a 10 % discount if they purchase any of their products. Therefore, the issue of promise in clear in this case.The second rule is acceptance, in this case the company did not specify whether the consumer should give the notice of acceptance before visiting the store, therefore, the rule of acceptance has not been breached because the customer was not required to give notice of acceptance. The third rule is time factor, the company did not specified in their writing the time limit for offer to be terminated. Therefore, by the time Sarah visited the store to collect items the offer was still on. Based on this three rules, Sarah can demand for the 10 % offer stated in the mail she received.

Apply

The three rules discussed above should be applied in this case study if the pebel sports refuse to give Sarah the 10 % offer as stated in the mail.

Conclusion

In conclusion, it evident that the offer is valid because it means all the condition the required and incase the case was taken to the law court, Sarah may argue her case based on the three rules of promise, acceptance and time.

Case study (b)

Options available to creditor

When the debtor fails to pay creditor, there are several options that the creditor may explore to recover his/her money. Some of these options include self-help remedies, secured transitions, court based options and lawsuits and liens.

Self-help options

This is the first option the creditor may explore to recover the money owed by Sarah and Jane. This option does not involve courts, the creditor can contact the administrator directly and demand for payment. If the attempts failed to yield fruits, the creditor may transfer the debtor’s account to a collection agencies. The collection agencies should be regulated by Fair Debt Collection Practices Act (FDCPA).

Secured transactions

This is the process whereby the creditor increases the chance of collecting bad debts. In the case study presented, the creditor can claim the property of Sarah and Jane in order to secure the payment of the debt. This also claiming the assets and properties of TBA pty ltd. This also allow the creditor to enter into agreement with the administrator on the best way to collect the debts.

Court-based option

This third option is extra ordinary because the creditor may initiate court proceedings to help them recover their debts. In the case study presented, the move of Sarah and Jane to appoint administrator requires an emergence intervention from the court. This allows the creditor to seize the properties of TBA pty ltd as the court proceedings continues. There are two options known in pre-judgment: replevin and attachment. Replevin allows the creditor to take the title of property if the debtor fails to repay debt. Whereas attachment is the procedure that is spelt out in the statute, thus requiring court hearing then followed by court order which authorize the creditor to hold title or property of the debtor as the court proceeding continues.

Lawsuits and liens

This is the last option after all the other options have failed. If creditor decided to sue Sarah and Jane, he/she is entitled to enforceable judgment. In this case, if Sarah and Jane fails to contest the claim in court, the creditor can enforce the judgment by claiming the properties of TBA pty ltd that is equivalent to the amount of money owed by the company.

Breaching corporation act

By appointing administrator, Sarah and Jane did not breach corporation act because the act allows for the appointment of administrator if the board of director have reach an agreement. The creditor and the administrator may convene the meeting to discuss about the debts.

Appointment of liquidator

According to Corporation Act 2001 Section 477, the company or the court may appoint the liquidator. The liquidator may carry out the operations of the business as long as the operations benefits the winding up or disposal of the business. The liquidator is also mandated to pay creditors in full subject to the provisions of section 556 of the corporations act. The liquidator may make arrangement or compromise with any creditor against the company or in the circumstance the company is likely to be rendered liable. Any legal proceeding brought against the company may be defended by the liquidator, appoint a solicitor to help him/her to carry out the duties and finally may dispose or sell properties of the company.

Part C

The importance of corporate governance

Several studies have shown that corporate governance play important role by making people more accountable as well as streamlining business operations. Corporate governance helps the business in decision making by informing and explaining to shareholders, stakeholders and board their responsibilities and duties within the company. By making all the people involved in company’s operations to understand their responsibilities and duties, each one would be aware of where he/she will be held accountable. For instance, board is tasked with the responsibility of ensuring that the company is managed properly by the management. Therefore, if the company is poorly manage, the board would be held accountable for not evaluating the management properly. Other important aspect of corporate governance include lowering risk, public acceptance, public image and having successful business.

Lowering risk

Corporate governance helps to mitigate and reduce the risks involved in business operations. Due to accountability, corporate governance helps to prevent or eliminate the issues of criminal liability, fraud and scandals in the company. Since corporate governance ensures that each person in the company is informed and explained about their duties and responsibility the actions of one person would not lead to a down fall of the entire company. This also ensures that each person is held accountable for his/her actions. Proper identifications and distinguishing of roles helps the corporation to make informed decision and incases of one person offending, it would be very easy to be located and made to account for his actions. Also, corporate governance is a form of self-policing. Before the external intervention is called to assist the company, the corporation would be able to handle some of the issues that take place. The establishment of hierarchies and roles play by each individual create effective communication standards within the company.

Public acceptance

Studies have indicated that a business with corporate governance is widely accepted by the public than those lacking it. This attributed to the levels of transparency and disclosure of the activities and operations of the company. Corporate governance ensures that the people working the company as well as the general public get the necessary information through full disclosure, thus enhancing the levels of public trust. In addition, based on the way corporate governance is setup, the case of criminal and fraud activities is eliminated, thus boost the public trust.

Public image

Currently many companies hold high levels of corporate governance due to public image they want to maintain. Corporate governance ensures that corporations take more accountability for their actions by allowing them to know what is going on in the general public CITATION Kla14 l 1033 (Klazema, A., 2014). This helps the company to be aware of the public image in regards to the corporation. For a business to be successful in the current market, it needs to consider the issue of public image and profits.

Why the concept of artificial legal person is a fiction?

Artificial legal person which is fiction in law is the corporation. There are five theories that explain the artificial legal person. These theories are fiction theory, realist theory, the purpose theory, the bracket theory and the concession theory.

The fiction theory: this theory is perceived to have been promulgated by Pope Innocent IV (1243-1254). This theory state that the legal personality of the entities other than the natural human being is the fiction. The theory requires that if the corporation has fulfilled the requirement it becomes a person under the law, therefore, it is distinct and independent from its members.

Concession theory: This theory states that a country is perceived to be in the same level as the human being, therefore, it can withdraw or bestow legal personality from associations residing within its jurisdiction as an exercise of sovereignty.

The purpose theory: This theory states that only human beings are considered person and have rights. Fiction person is not person but considered a subject less property that was formed for particular purpose and there is ownership CITATION Law13 l 1033 (LawTeacher, UK, 2013). This means the corporate is formed based on purpose and object.

The symbolist theory: This theory is also known as bracket theory. This theory is considered similar to fiction theory because it states that only human beings have rights and interest of a legal person.

References

BIBLIOGRAPHY l 1033 Klazema, A. (2014, May 14). The Importance of Corporate Governance. Retrieved from Udemy blog: https://blog.udemy.com/importance-of-corporate-governance/

LawTeacher, UK. (2013, November). Corporate Personality. Retrieved from Law Teacher: http://www.lawteacher.net/free-law-essays/company-law/corporate-personality.php?cref=1