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LAW6000_Assessment 2_Case Study ASSESSMENT BRIEF Subject Code and Name LAW6000 Business and Corporate Law Assessment Assessment 2 Case study Individual/Group Individual Length 2000 words +/- 10% Learning Outcomes This assessment addresses the following subject learning outcomes: b) Demonstrate a sound comprehension of the essential elements required to create, manage and discharge a contract and assess the remedies available for breach of a contract; c) Examine legal principles related to creation and operation of various forms of business organisations and critically evaluate their effectiveness across a range of business scenarios. d) Explain the processes for incorporating, managing and winding up of a company, including key director duties, the importance of the Corporations Act 2001 and the role of regulatory bodies. e) Evaluate the role of agency in contract formation for different business vehicles and identify the associated risks such as vicarious liability for negligent acts. f) Employ legal skills (statute law and case law), critical reasoning and make informed judgements as to likely legal outcomes of a range of business scenarios. By 11:55pm AEST/AEDT Sunday of Week 9 (Module 5.1) Weighting 25% Total Marks 100 marks Context: This assessment allows students to solve practical problems that arise from a fact scenario and to give appropriate advice to clients. LAW6000_Assessment 2_Case Study Instructions: There are five case studies you are required to critically analyse. With respect to each case study: ✓ Identify the legal issue(s) arising from the facts of the case study ✓ Identify the appropriate legal rules that requires discussion in the case study ✓ Apply the law to the facts of the case study ✓ Reach a conclusion/ give practical advice to your client. Your analysis should refer to appropriate cases and statutes and be referenced using the APA Reference system. Submission is through SafeAssign by 11.55 AEST Sunday of Week 9 of the relevant trimester LAW6000 Assessment 2 Case study analysis Question 1 (20 marks) Sharleen owns a vintage furniture store in the south east of Melbourne. There are a few such stores scattered in the area. Sharleen’s store imports vintage furnishings from various European countries. Sharleen recently completed a very successful end of year sale and now hopes to replace old stock with new stock from overseas. She already placed an order for the stock some months ago and she needs the new season furnishings urgently. The sale went very well and 70% of her stock was sold. She is aware that if she does not get the new stock in on time from overseas, she will lose a lot of money in sales. Her cash flow will be adversely affected and she will not be able to pay her rent, telephone and electricity costs. She will also struggle to meet employee salaries and the substantial payments on her overdraft with her bank. In fact, if her order from overseas is not delivered on time to her business, Sharleen is likely to face bankruptcy. She contacts the delivery company, Overseas Fright Solutions Pty Ltd, with which she has been dealing for a number of years. Davinder is the director and owner of this company. He is now aware of Sharleen’s financial problems and instead of charging his company’s normal delivery fee of $6,000 per delivery, which the parties have already agreed upon, Davinder now advises Sharleen that his company cannot deliver the goods for the agreed price and that if she wants them, she will need to pay $12,000 per delivery. Sharleen is very unhappy with this news but reluctantly agrees because of her desperate financial position. It takes three delivery trips for the goods to be received at Sharleen’s business and she pays the higher price for each delivery. The total payment is $36,000. Sharleen is distressed and seeks your advice. REQUIRED: With reference to relevant legal principles, use the IRAC legal problem-solving approach to advise Sharleen as to her common law rights against Davinder and/or Overseas Fright Solutions Pty Ltd. Use appropriate case law in support of your answer. (20 marks) Question 2 (20 marks) Jim Blonde is a former defence consultant who now works for Intelligent Sellutions Pty Ltd, a company that deals with modernising motor vehicles so that they can self drive. Jim is skilled in the area of artificial intelligence and autonomous vehicle technology, having worked in the area during his consultancy. Intelligent Sellutions Pty Ltd has hired Tom Stone, a GPS navigation expert, to build a suitable navigation system that will allow autonomous cars to safely navigate any road network. A written contract was signed between the parties. Tom is a high achiever. He attended Massachusetts Institute of Technology (MIT) and graduated with the highest honours at age 16. He knows almost everything relating to navigation science and technology. He is a professional engineer and can craft any kind of navigation device. Tom is famous for creating the intelligent navigation systems that are used in the new futuristic defence aircrafts. LAW6000 Assessment 2 Case study analysis Jim Blonde told Tom that it was essential that the navigation system was safe and that it should be able to update itself for at least 5 years. He added that the system ought to work on marked roads and unmarked roads. Tom replied “All of our navigation systems are intelligent and can be used all over the universe on any terrain. We have it sorted. They will also update themselves for upto 10 years.” The two agreed on this verbally and this statement was not incorporated into the written contract. The cost of developing the navigation system was $500,000, to be paid in two instalments: at the start of the work and the balance on completion. Intelligent Sellutions paid $200,000 while the work was being carried out. When Tom indicated that he had finished the work, Intelligent Sellutions ran some tests on the navigation system as soon as they received it. Jim Blonde installed it in one of the cars that they were working on and took it out for a drive. Immediately the car reached a busy unmarked road, the navigation system failed and the car stalled and would not move any further. As a result, Intelligent Sellutions refused to pay Tom, arguing that the navigation system was not safe and did not work according to their agreement. REQUIRED: With reference to relevant legal principles, use the IRAC legal problem-solving approach to advise Intelligent Sellutions of their common law rights against Tom Stone as they seek to rely on his assertions. Use appropriate case law in support of your answer. (20 marks) Question 3 (20 marks) Benedicto and Prakash are the directors and shareholders of a “Healthy Solutions Pty Ltd” which imports personal protective equipment from the European Union for sale to various local health institutions. The company has a large warehouse where it keeps its goods, and distributes all its products from there. Two months ago, the company entered into a contract to supply a large local health care provider with disposable face masks. Benedicto and Prakash were excited and they ordered a large shipment from the European Union to enable them honour the contract. The company ordered sixty shipments of face masks from their supplier and have paid a large deposit. The shipping company which brings the goods into Australia is now waiting for payment. Healthy Solutions makes its first delivery but soon thereafter there are concerns about the safety of this type of mask. The government issues a order banning these masks and specifies that only “N95” masks can be used in the health services sector. As a result the health care provider cancels all further orders. Healthy Solutions now has no future revenue. They have huge stocks of masks which cannot be sold. The shipping company needs to be paid. There are various other bills due to the tax office. Employees and other service providers have also not been paid. It is not certain how all these expenses will be met. LAW6000 Assessment 2 Case study analysis Benedicto and Prakash are desperate, and do not know what to do. They approach you for advice on whether the company is insolvent, and if it is, what they must do. REQUIRED: With reference to relevant sections of legislation, use the IRAC legal problem-solving approach to advise Benedicto and Prakash on whether their company, Healthy Solutions Pty Ltd, is insolvent and if it is, what are the implications of such insolvency for Benedicto and Prakash and for the company in relation to any action which they may take. (20 marks) Question 4 (20 marks) Mrs Donovan bought shares worth $170 000 in Digi-money Enterprises Pty Ltd when the company was incorporated by her friends John and Jessica Rych. At the time this was equivalent to 10% of the issued shares. John and Jessica Rych took up 35% each and the remaining 20% was were taken up by their son Paterson. Digi-money Enterprises Pty Ltd was run very profitably for several years. Dividends were regularly paid out of the profits of the company for the first 4 years. In the fifth year, there was a disagreement between Mrs Donovan on the one hand and John and Jessica Rych on the other. Subsequently, the company paid no dividends. The company however paid hefty salaries, bonuses and directors fees to the Rych family. They retained additional funds in the Retained Earnings account, and did not allow Mrs Donovan to inspect the records of the company. This effectively ensured that the Rych family received a steady income stream, while Mrs Donovan received no funds from the company for the next 3 years. She has tried to sell her shares but under the constitution of the company, the Rych Family are the only ones she is permitted to sell to, and they offered her $17,000 for her investment. It is now four years since Mrs Donovan received a dividend from the company, and she has come to seek your advice as to her position. She believes that the company is being run solely to benefit the Rych family and that she has been oppressed by their actions. REQUIRED: With reference to relevant sections of the Corporations Act 2001 (Cth) and appropriate case law, use the IRAC legal problem-solving approach to advise