Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256
The case of Carlill v Carbolic Smoke Ball Co (1893) deals with the law of contract. In order for a contract to be enforceable, some basic conditions need to be fulfilled. There has to be an agreement that has the approval of all parties to the contract, it should be supported by some consideration and be legally binding. This case deals extensively with the issue of offer and acceptance and covers most of the conditions that need to be present for a contract to be binding. The following diagram depicts the components of a simple contract.
Facts
The defendants issued an advertisement and they offered to pay 100 pounds to any person who contacted influenza after following some specific instructions. The plaintiff saw the advertisement and on faith of it bought the balls and followed the instructions given but still contracted influenza (UK Law).
Held
It was held that the contract between the defendant and the plaintiff was binding and therefore the defendants were to pay the plaintiff the 100pounds that had been promised.
The full decision of the case
The UK law states that according to Lord Justice Lindsey, L.J, the defendants were guilty as charged. This is because, from the advertisement relating to this case, it was clear that the defendants had every intention to create a binding agreement. The sincerity of the defendant is depicted by the message communicated by the advertisement concerning the acceptance of the offer. The offer could only have been binding if it was accepted. The offer was deemed to be binding because some money had been deposited into the bank and therefore the defendant’s claims could not hold. According to UK Law Online, the case of Williams v. Carwardine has set precedence in most of the other cases that include advertisements. There was also the issue that acceptance needs to be communicated. The judge ruled that this was a continuing offer and was never revoked before acceptance and therefore it was binding.
The other issue was regarding consideration. It was ruled that the buying of the smoke balls constituted enough consideration by the plaintiff and the contract was therefore binding. The sale benefited the defendants and therefore was considered as consideration.
Business Structures
A company has different characteristics: it is a separate legal entity with its own rights and obligations can sue and be sued in its own name, must have a certificate of registration (ASIC website). The ASIC also stipulates that it is owned by shareholders and represented by directors and other officers, its ownership and management are separate and it can exist in perpetuity until it is deregistered. Companies vary in size, nature of enterprise, capitalization, structure, numbers of people involved, and other factors (Tomasic, R). The owners who happen to be the shareholders are responsible for their debts through the managers and directors owe a duty of care to the shareholders and are therefore to ensure that the debt situation does not get out of hand.
As a company officeholder one needs to enter into dealings carefully and be on top of things as far as the company is concerned. When running a business one needs to be careful with the operations as people’s money is involved and one can be sued if anything goes wrong. Payment of debts on time is another area one needs to be careful about. All money owed to external parties like suppliers, creditors, and other people that one has dealings with the need to be paid on time. Proper financial records should be kept and audited both internally and externally. Some of the most important financial records that must be kept and are even used by lenders are the financial statements which include; Statement of Financial Performance, Statement of Financial Position, and Statement of Cash Flows. In the case where there are any form of changes in the company for example resignation, retirement, etc, the Australian Securities and Investments Commission (ASIC) should be notified within a stipulated period of time otherwise this will lead to a criminal offense.
The next thing one needs to consider when starting a company is the company name. A company name needs to show its legal type and these need to be reflected in its name. Thus this means that a name must show the liability of the members as part of its name. My company name which is ‘Eagles Panda Ltd’ falls in this category. The liability of the members is therefore attached to their shareholding due to the aspect of limited liability of the company. For one to come up with a company name they need to do a thorough check to make sure that the name does not exist. For one to be sure they need to check with the National Names Index, Schedule 6 of the Corporation Regulations, or confirm with the IP Australia website.
According to the ASIC website, a company can be managed internally by the replaceable rules in the Companies Act, its constitution, or a combination. When a company decides to use the replaceable rules in the Act, it has to make sure that its own constitution is up to date with the changes in the replaceable rules as set out in s.141 of the Act. When a company decides to use its own constitution this has to be presented to ASIC when the company is being registered and it has to be adhered to unless it is changed by a special resolution in which members have to be involved.
Before a company is registered one must seek approval from people who will accept to fill the positions of director(s), secretary, and member(s). For a public company, there need to be three directors and one secretary; two of the directors and the secretary must reside ordinarily in Australia. The officeholders are obligated to act in the interest of the company and exercise the duty of care to the company members. Where there might arise a conflict of interest then it is expected that the officeholders would act in the best interest of the shareholders.
Law of Contract
The doctrine of Part Performance
Section 54 A of the Conveyancing Act 1919 (NSW) provides that part performance of a contract can be proved by verbal evidence, notwithstanding that a particular kind of evidence required by statute is missing (Ongrsquo, D). Some conditions need to be fulfilled before the doctrine is invoked. First and foremost, the part performance should be capable of referring solely to the contract seeking to be enforced. This was the case in Maddison v Alderson, 1883; the deceased promised the plaintiff to leave her his house in his will if she would stay in his house during his lifetime. The promise was not in writing. She fulfilled the condition of the deceased and stayed with him during his life. The deceased made a will to this effect, which was declared void due to lack of proper attestation. The plaintiff sued A’s executor who alleged lack of memorandum. The plaintiff claimed the work performed by her for the deceased without payment constituted part performance of the contract. The House of Lords stated that non-compliance with the statutory requirements does not render a contract void or illegal, but renders ‘the kind of evidence required indispensable when it is sought to be enforced. Another condition is that the part performance relied on is such that it should be fraudulent to allow the defendant to take advantage of the lack of written evidence. This was held in the case of Rawlinson v Ames, 1925. Ms. Jones can therefore sue Fashion Afloat Ltd (FAL) for breach of contract and prove there was indeed an enforceable contract because FAL was aware that substantial work had already been done as per the agreement and therefore FAL will have no choice but to lease the building as earlier agreed. Damages, in this case, will not be an adequate remedy.
Intention to Create Legal Relations
When agreements are of people who are related socially, it is presumed that the intention to create relations that are binding by law was non-existent. The intention to create legal intentions can only be inferred from the circumstances surrounding a particular case ( Peter, G). In Simpkins v Pays, 1955; the defendant, her granddaughter, and the plaintiff agreed that they should submit in the defendant’s name a weekly coupon in a newspaper competition and to share the prize. A forecast by the granddaughter was correct and the defendant received 750 pounds which she refused to share. The plaintiff sued her for his share. It was held that there was an intention to create legal relations as it was a joint enterprise and that the parties expected to share any prize that was won (Wishmart, M.C). Joseph can therefore claim for damages to the extent of services rendered. The fact that his aunt, Ms. Jones, made him leave his job and help her renovate the building, shows that there was an intention to create legal relations.
Consumer Protection
According to the Trade Practices Act (1974), a defective good falls short of what a customer expects (Clarke,E). The customer’s expectation should be for what that good should ordinarily be used for. SWPL has broken provisions of the Trade practices Act by manufacturing and even displaying goods that they knew very well were not original and went further to exclude themselves from liability by putting a label that gave a very different message from what Ms. Hunter perceived the goods to be. She was sure she had bought goods that were designed and made in Australia which was not the case. Thus Ms. Hunter could sue for damages and could sue the supplier or anyone on the supply chain. In Bateman v Slateyer an amount was awarded for the misrepresentation that a second-hand truck was reliable and suitable for interstate transport, which was not the case and the defendant was therefore liable. Thus SWPL is liable for damages as it has broken several provisions of the Act by not only misrepresenting facts in its advertisement but also wrongfully exempting themselves from liability (Hans,F).
Negligence
In order for there to be proof of negligence, the plaintiff must prove the following; that the defendant owed him a duty of care, that that legal duty has been breached and that the plaintiff suffered an injury to his person or property (Latimar,P). The nightclub owner owed some standard of care to Debbie, he should have warned her against staying in the club until so late, which led to her getting involved in an accident. To this extent, Debbie could sue him. This was as in the case of Donoghue v Stevenson, 1932 where it was held the defendant owed the plaintiff a duty of care. However, it might be difficult to establish this fact as Debbie was injured by Matt and not the club owner. She could therefore sue Matt for negligence as he was driving knowing very well he was drunk and ended up injuring Debbie and two of his friends. Matt is therefore liable for negligence and Debbie can sue him for negligence.
It is however difficult to establish if Matt is fully liable as Debbie knew very well that Matt was drunk and she still decided to get into his car.
Reference List
Australian Secuirities and Investment Commission website. Starting a Company or Business. Web.
Australian Secuirities and Investment Commission website. Your Company and the law. web.
Clark, E., Cho, G., Hoyle A. & Hynes, P. Cyber Law in Australia, 2010. Australia: Kluwer Law International. Web.
Hans, F., Trade Practices Act: A twenty-five year stock take, 2010. Sydney: The Federation Press. Web.
Latimer. P., Australian Business Law. 28th Edition, 2008. Australia: CCH Australia Limited. Web.
Ongrsquo. D., 2007. Trust Law in Australia. Australia: The Federation Press. Web.
Peter. G., Concise Contract Law. Sydney: The Federation Press. Web.
Tomasic.R., Bottomley. S. & Mc.Queen. R., 2002. Corporations Law in Australia, 2nd ed. Australia: Federation Press. Web.
UK Law Online., 1998. Carlill v Carbolic Smoke Ball Company. Web.
Wishart. M.C., 2008. Contract Law, 2nd ed. New York: Oxford University Press. Web.