Prepare advice for him citing full legal authority as to


Question 1

Steve Jones is an entrepreneur with a variety of business interests. He learned of a gold deposit in Western Australia. Because he was anxious to exploit the opportunity, he flew to Perth and on 6 July and entered into a contract to buy a drilling machine from Thor Mining Machinery Ltd, to be used to drill a test shaft. The contract specified that the drill would be delivered, and payment of the $ 125 000 price would fall due, on 30 July. He signed the contract as follows:

Steve Jones, on behalf of WA Gold Exploration Ltd.

WA Gold Exploration Ltd was registered as a company by ASIC on 10 July, with Steve as 90% shareholder. He and the other shareholders met on 11 July, to elect a board of five directors. Steve himself was not elected to the board, because although he had originally discovered the opportunity, he had no experience in mining operations, and so did not want to be a director.

On 14 July, the board signed a contract with for a fleet of five ore trucks from Volvo Trucks (Australia) Ltd, costing a total of $ 500 000, to be delivered on 30 September. The board also established a sub-committee to determine the company's technical needs, and on 25 July the board accepted the committee's recommendation that the company buy a drill from United Mining Machinery Ltd for $ 100 000. The board also contacted Thor Mining Machinery Ltd and told it that it would not be taking delivery of the drill.

Unfortunately, in mid-September it became clear that the gold deposit was not as large as hoped, and the board ceased trading on the basis that the company had only $ 400 000 in assets and had accumulated $ 2 million in liabilities. The company is therefore unable to pay for the trucks.

Steve, who has personal assets of $ 1 million, has now been sued for breach of contract by both Thor Mining Machinery Ltd and Volvo Trucks (Australia) Ltd. Assume you are his legal advisor. Prepare advice for him citing full legal authority, as to what his legal position is.

Question 2

Simon, George, Sara and Mary were all employed by different IT companies. However, they felt that they could do better if they went into business themselves. They pooled their available cash and drew up a partnership agreement, which stated that each partner had authority to enter into transactions on behalf of their firm, which they called Computer Solutions. The firm operates in Sydney and provides a service of storing data for customers. The agreement states that partners have authority to enter into contracts of up to $ 10 000, but that any contract for more than that must be approved unanimously by all partners.

George, Sara and Mary approach you for legal advice in relation to two transactions entered into by George, who had acted without referring back to the partners.

One was for a 50TB hard-drive, bought by Simon on behalf of Computer Solutions, from Sunstar Computer Hardware Ltd, costing $ 15 000.

The other was for a second-hand ute, costing $ 9 000, which Simon ordered for the firm from You Beaut Ute Ltd, on the basis that the partnership should branch into the freight business - an idea that the other partners had previously rejected.

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Business Law and Ethics: Prepare advice for him citing full legal authority as to
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