Research Articles Base: Contract Law

The Discharge of Contract

a)    “The courts are not easily convinced that a given change of circumstances is of sufficient gravity to frustrate a contract” Discuss!   Frustration of contract  is the termination of a contract as a result of an unforeseen event that makes its performance impossible or illegal.   According to (1958), “the term frustration, impossibility, or changed circumstances expresses basically the same in which in legal traditions it arises when the unforeseen circumstances subsequent to the date of contract, render performance either legally or physically impossible, or excessively difficult, impractical or expensive, or destroy the known utility which the stipulated performance had either party. “ The problem created in such a situation is, of course, whether deviation from the stipulations of the contract should be allowed, by means of the contract’s adjustment, postponement or termination (1958). This problem can be better viewed as a conflict between the principle of private autonomy, well expressed in the medieval maxim reservanda sunt pacta, and the modern need of attributing a social function to private contracts, thereby considering extra-contractual elements, such as good faith, reasonableness and practicality ( 1964).   Significantly, in the case of frustration, the balance of losses has been modified  from the common law position by the Law Reform (Frustrated Contracts) Act (1943). However, the circumstances in which the courts are prepared to find frustration have not changed, so the common law is still relevant. Particularly, in deciding whether frustration has occurred, the courts have to balance two competing requirements.   One of these competing requirements which the court consider is whether there is the desire for certainty of contract. Good business relations depend on an assumption that once a contract has been entered into, it will be performed by both parties and, if it is not, the wounded party is entitled to compensation. The courts should not lightly intervene to set aside a good contract, even if future events reveal it to be onerous for one party. It would be difficult to do business at all if money received as part of a contractual arrangement could not be spent until the contract was fully performed, in case a court acted to undo the contract.   In addition, the other requirement in which the court considers is whether there is the requirement to try to do justice in the individual case. If it becomes impossible to perform a contract owing to events beyond the control of the parties, it is not particularly just that one party should end up having to compensate the other when he is not at fault. This tension is not easy to resolve, but in general the courts will not set aside a contract that was good when it was made unless supervening events have made it essentially impossible to perform, or performance would render to one or other party none of the benefit that was anticipated.   Even though the contract is frustrated, it is deemed to be discharged since there remains the problem of how any losses should be apportioned between the parties ( 1994). The rule at common law was first definitively set out by the King’s Bench in Chandler v Webster 1904 ( 1994), although a number of earlier cases had reached the same conclusion. This rule said that the losses should `lie where they fall’. That is, any losses incurred before the supervening frustrating event could not be recovered. This was a simple rule, but a harsh one.       b)   Fred runs a plumbing business. He wins a contract with George for the installation of water systems in a housing estate being built by George. Fred agrees to complete the work by December 1990 and George promised Fred that he would be able to start the work on the 1st January 1990. As George fell behind schedule, Fred was only able to start work on the 1st March. He protested about the delay but attempted to complete the work in accordance with his contract. However, in December he abandoned the contract when he had completed three quarters of the work in order to start work on another project which he had contracted to start in December in anticipation of the work for George being completed. George has given Fred nothing in payment for the work completed. Advise Fred.   If the contractor is permitted Fred to do further work after the frustrating event, then, unless a fresh agreement is made, the contractor is not doing work pursuant to the contract. Nevertheless, the contractor must be paid a fair remuneration for any work done, on the basis of quantum meruit or restitution. This may be more or less than the contract rate. The expression quantum meruit means “the amount he deserves” or “what the job is worth” and in most instances denotes a claim for a reasonable sum (1999). A claim on a quantum meruit does not usually arise if there is an existing contract between the parties to pay an agreed sum. But there may be a quantum meruit claim where there is (1999): 1. an express agreement to pay a reasonable sum. 2. no price fixed. If the contractor does work under a contract express or implied, and no price is fixed by the contract, he is entitled to be paid a reasonable sum for his labor and the materials supplied. 3. a quasi-contract. This may occur where, for instance, there are failed negotiations. If work is carried out while negotiations as to the terms of the contract are proceeding but agreement is never reached upon essential terms, the contractor is entitled to be paid a reasonable sum for the work carried out . 4. work outside a contract. Where there is a contract for specified work but the contractor does work outside the contract at the Employer’s request the contractor is entitled to be paid a reasonable sum for the work outside the contract on the basis of an implied contract.         c)    Harry, who owns a sandwich bar, sells beef sandwiches to Ian, John and Kate. The meat, which he cooked himself, was contaminated and Ian, John and Kate are very ill and were forced to spend two weeks in bed. Ian is retired and spends the time resting and reading. His garden becomes a little neglected. John is an independent sales representative. In an average week he would expect to earn Â£500 gross. Kate is an actress and when buying sandwiches from Harry, told him that she was going to audition for a new West End Musical the following day. As a result of the illness she misses the audition. The musical is a hit and transfers to Broadway with the original cast and is now being filmed. Assuming that the illnesses are traceable to the sandwiches and the fault lies with Harry, advise him of the likely liability for damages for breach of contract.   According to  (1999), any breach of contract gives rise to a cause of action; not every breach gives a discharge from liability. This will depend whether the term breached is a condition or a warranty or whether there has been repudiatory breach. Damages are intended to compensate the innocent party for the loss that he has suffered as a result of the breach of contract. In order to establish an entitlement to substantial damages for breach of contract the injured party must establish that ( 1999): - actual loss has been caused by the breach; and - the type of loss is recognized as giving an entitlement to compensation; and - the loss is not too remote; and - the quantification of damages to the required level of proof. A breach of contract can be established even if there is no actual loss. In that case there will only be an entitlement to nominal damages (1999).                                                     Credit:ivythesis.typepad.com

The Discharge of Contract

a) “The courts are not easily convinced that a given change of circumstances is of sufficient gravity to frustrate a contract” Dis...

Essential Elements Of A Contract In Sales

ESSENTIAL ELEMENTS OF A CONTRACT IN SALES       The situation goes like this, one day Andrew put an ads in a leading newspaper selling his 2009 model car for a 00 US dollar. Bobby saw his ads and called him on the phone that he is interested to pay the car but during the conversation bobby has a terrible reception that he could hardly hear that Andrew accepted of his offer. Bobby tried to confirm his offer by texting Andrew but his message goes for somebody else. After a few days Andrew made another offer to his colleague Cyndi for the same amount. Cyndi thought about it for quite a while and after a few days she decided to leave a voicemail for Andrew confirming his decision to buy the car only if it has MOT and full service history. After a week Jay saw the ads of the car and sent a letter of intent to buy the car of Andrew.       If he decided not to sell his car the question is does Andrew have a contract or obligation to sell his car to any of the three possible buyers? Personally I believe that the statement above shows that it is absolutely clear that Andrew has not made any contract in any of the possible ways since they have not made a close sales even in verbal and non verbal communication therefore Andrew has all the freedom if he decided not to sell his car. Bobby, Cindy and Jay do not have the rights of claim if they chose to pursue the transaction in buying his car. The following elements in a contract in sales will explain further the situation as written above that such essential elements must be present to presume that there is a contract in sales. 1.    The consent of at least two parties should be present. This simply means that a contract in order to be formed should be present between two or more person and it should be between the consent of the buyer and the seller. In the case of Andrew and his possible buyers the consent between them is not present when Bobby has not made a clear confirmation about his intention to buy the car that Andrew decided to sell it to other person, in the case of Cindy she has made a condition that made clear Andrew does not guarantee to accept such conditions and later Jay has not made any transaction with him because Andrew already decided not to sell the car that he made no response to Jay. The involvement and meeting of mind of at least two parties has not been made, therefore there is no essential elements of contract so there should be no sales. This is the basic foundation of a sales contract and if it has not been met the next few essential contracts below may not be applicable as a clear element in a sales contract. 2.    The condition of the sales should be in the form of goods. Andrew is selling car so the element is a goods, therefore there is a possibility of sales. (But since the first essential element of sales which is the consent of at least two parties has been void already there are still no sales involved). 3.    There should be transfer of the property, the ownership or possession of the goods should also be transferred. If there should be sales automatically the rights of the seller in the goods he is going to sell will go entirely to the buyer. The physical transfer or delivery of the goods is not necessarily essential in the contract although it can be stipulated between the buyer and the seller. Again this element only applies if there is consent between two or more parties.      4.    Consideration of payment should be made in cash, the physical characteristic of money is the payment that should be applicable in a certain condition that the payment has been made through goods and services there should be another contract or stipulation to make it clear that it is a valid payment. It can also be a combination of money and goods to clear the payment but definitely the form of cash is the most accepted payment methods to clear the obligation of the buyer.       There are many other considerations and essential elements involved depending on sales and the availability of goods they are going to buy and sell that a simple appliances or even a simple dress must require a receipt, a guarantee to protect the buyer. Selling land would require a land title, selling goods and services requires originality, a writer should sell his book without plagiarism all these are essential elements in sales that requires a thorough presence and manifestation to protect both the buyer, the seller and the government. In the case of Andrew he is still free from any obligation if he decide not to sell his  car, he can also enjoy the privilege to choice the price he want and to sell to anyone his car since he has not yet made a contract of sales to anyone. (http://www.slideshare.net/varun23oct/the-sale-of-goods-act)         Credit:ivythesis.typepad.com

Essential Elements Of A Contract In Sales

ESSENTIAL ELEMENTS OF A CONTRACT IN SALES The situation goes like this, one day Andrew put an ads in a leading newspaper selling hi...

Contract Law-Mistake Question

The common contract mistakes are: 1. Res extincta – a contract will be void at common law if the subject matter of the agreement is, in fact, non-existent. 2. Res sua – where a person makes a contract to purchase that which, in fact, belongs to him, the contract is void. 3. Mistake as to quality – a mistake as to the quality of the subject matter of a contract has been confined to very narrow limits. A mistake will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.   Basic Model of Nondisclosure             The basic nondisclosure issue can be illustrated with two examples involving yard sales transactions. In the first, a party studies older audio equipment that is still favored by audiophiles. She then makes a Saturday morning tour of yard sales looking for specific models of audio equipment. She buys the components for yard prices and resells at much higher prices. The profit is a return to the investment made in learning about stereo equipment. If disclosure were required, the likelihood that the information will be gathered decrease, and the chances that valued stereo equipment will find its way to a landfill or to someone who does not appreciate its quality increases. Put slightly more technical terms, the system promotes allocative efficiency in that components are more likely to find their way to people who value them the most. In effect, the research has resulted in a market correction. The seller of the equipment will, of course, claim that a mistake has occurred, but the social cost of responding to that claim is that various resources will remain misallocated. An example of this type of reasoning in Neill v. Shamburg in which one co-tenant purchased the rights to land another co-tenant. The land had undergone limited development and included one marginally productive oil well. Wells on neighboring lad were found to be significantly productive. The buying con-tenant knew this and instructed those who had contact with the selling co-tenant not to reveal the information to her. In ruling that the buyer had no obligation to disclose, the court noted that the defendant had invested substantial sums and reasoned that they do not find in the acts of Shamburg, under the circumstances, anything more than a positive intention and effort to reap the benefit for his enterprise, by keeping knowledge of its results to himself.             In the second example, the yard sale shopper knows very little about stereos, Just before going shopping, however, he stops at a friend’s house where the friend has music playing. The friend says, “I just bought that 1972 Nakamichi 890 tube receiver for only 0 on ebay”. A few minutes  later, while looking for fishing equipment, the shopper spots the same receiver at a yard sale for and buys it. Under deliberate/casual distinction, the buyer would have disclosed this information to the seller. This has no impact on the gathering of information in the future because it was acquired without the sort of effort for which one expects to be compensated. Fundamental mistake is rare: it is hard to convince a court that consent was so flawed by mistake that the contract is void. There was once a case 10 in which life insurance was obtained by A by getting his friend’s body examined for the required medical rather than his own which, in the event, proved to be on its last legs; but cases like that do not come up very often. A corollary of the strictness of the law about mistakes is that the insured cannot get out of an insurance contract because of an uninduced mistake about its terms. Normally the insurer is entitled to assume that the insured read the policy and, if the insured did not understand it, sought advice.   Credit:ivythesis.typepad.com

Contract Law-Mistake Question

The common contract mistakes are: 1. Res extincta – a contract will be void at common law if the subject matter of the agreement is, in...

Law Assignment

LAW Assignment   1.                  Ping is thinking of opening a restaurant. On Monday she contacts Dennis and is offered by him a restaurant property lease at Causeway Bay for a good rental. Dennis says that he would like to hear of her acceptance “by the end of the week”. All that week she thinks about it. On Friday morning, Ping hears from Billy that the lease has been offered by Dennis to Myna, and Myna has accepted. Ping drives past the property on Friday afternoon and this information appears to be true, as Myna is moving in. Ping is upset that the offer to her of the restaurant lease has apparently been revoked. Pretending she knows nothing of Myna, she calls Dennis Saturday morning and accepts his offer before he can get a word in. Does she have a contract? If so, why? If not, why not? (400 words)               Ping does not have a contract because there was an effective revocation of the offer. To form a contract, there should be a valid offer made by one party and duly accepted by the other party. An offer is a proposal made by an offeror, which if duly accepted by an offeree creates a valid contract (Graw, 2005). This means that the offer is communicated in a manner that would result to the formation of a contract once is accepted. In the given case, there is a valid offer for the lease of the restaurant property at a given monthly rental. In addition, Dennis communicated that he would like to know of Ping’s acceptance before the end of the week. From this, the offer remains open until the end of the week.             However, there are instances when an offer lapses such as when the time given for acceptance has lapsed (Ramsgate Victoria Hotel v Montefiore, 1866), a reasonable time has already elapsed (Ramsgate Victoria Hotel v Montefiore, 1866; Manchester Diocesan Council v Commercial & General Investments Ltd, 1970), a counter offer came about (Hyde v Wrench, 1840), and if one of the parties loses the capacity to contract such as because of the death of one party (Bradbury v Morgan, 1862). An offer can also be terminated at any time as long as this is before an acceptance is given (Byrne v Van Tienhoven, 1880), provided the revocation or termination of the offer is communicated to the offeree (Dickinson v Dodds, 1876). In the revocation of an offer, it is an absolute condition that the fact that the offer has already been revoked has to be communicated or made known to the offeree. According to Dickinson v Dodds (1876), the manner of communicating the revocation does not need to be made personally by the offeror or on the offeror’s behalf. This means that as long as the offeree learned of the revocation, then there is an effective communication, giving rise to a valid revocation. In the given case, Ping learned of the revocation of the offer through a call from Billy telling her that Dennis has made an offer to Myna, which Myna has accepted. Ping even went to the lease site to see for herself that Myna was already moving in. This means that there was an effective communication of the revocation of the offer. As such, even if Ping called Dennis before the end of the week to communicate her acceptance, there was already no offer to accept.       2.                  Ping is also looking to buy an apartment in Aberdeen as an investment. She approaches Aberdeen Property Holdings (APH) stating that she will only buy an apartment where there are reliable tenants already in the apartment. APH advise her that they have just the property that she is looking for, “with some exceptionally good tenants who have been there 3 years”, they say. Ping buys the apartment but the tenants are terrible, always behind in their rent and regularly damaging things and neglecting the garden. She later finds out that the tenants had been there only 3 months, not 3 years. The misrepresentation was made to her due to an innocent miscommunication between staff at APH. Ping now wants to rescind the contract. APH have offered her another set of very reliable tenants who can move in immediately (since the tenancy has just expired) but Ping wants nothing more to do with APH. Advise her. (400 words)               Ping is entitled to the remedy of rescission with indemnity based on the misrepresentation. Misrepresentation pertains to the issuance of a false statement by one part to another party over a fact resulting to the inducement of one of the parties to enter into a contract (Graw, 2005). Based on this definition of misrepresentation, there are two major conditions to support rescission based on misrepresentation. One is the existence of a false statement of fact, which should be material fact (Kennedy v Panama New Zealand and Australian Royal Mail Co Ltd, 1867). The other is the inducement of the party to engage in a contract because of the misrepresentation of a material fact. In the given case, there is misrepresentation because APH falsely stated to Ping that there were reliable tenants in the apartment building when the tenants have stayed in the apartment for only three months. This material fact induced Ping to enter into a lease contract since she specifically considered reliable tenants as a motivation to enter into a contract with APH. There was a substantial difference between the material fact stated to Ping about the tenants of the apartment and the actual situation of the tenants of the apartment.             Even if the statement was issued because of an innocent misunderstanding among the staff of APH, there was misrepresentation because of the occurrence of its elements in the case. Specifically, there was innocent misrepresentation (Graw, 2005) since the staff made the statement to Ping with the belief that what they were saying was true. In the event of a misrepresentation, the outcome could be rescission with indemnity or affirmation of the contract through express communication or action such as by continuing the contract or implied by allowing the lapse of a substantial period after learning of the misrepresentation. Rescission for innocent misrepresentation finds support in Leason Pty Ltd v Princess Farm Pty Ltd (1983), which provides there is no authority that precludes entitlement to rescission of the aggrieved party to an innocent misrepresentation. Rescission with indemnity based on a claim of innocent misrepresentation is an action available to Ping because she does not have any intention to continue the contract even if APH has stated that new tenants will replace the existing tenants. Ping needs to file an action in court seeking indemnity and rescission of the contract with APH and she has to prove the existence of the elements of innocent misrepresentation.                3.                  Ping’s friend Polly operates an import/export company in Wan Chai. She arranges for a load of a client’s furnishing supplies to be sent by train to Guang Zhou. She approaches the manager of transport services at the railroad company, Mr Bao. He prepares the written contract. Nothing is said on the written contract about when the journey will be made, and Polly is worried that the goods may arrive too late in Guang Zhou. She tells Mr Bao of her concerns. He replies: “I promise you that I will get this load on the train leaving Thursday morning.” Polly is pleased, and pays the price quoted immediately. In fact, the goods are not loaded until Friday and they eventually leave Saturday morning. Sadly, that train is involved in an accident and fire en route, and the goods are badly damaged. The written contract has an exemption clause “exempting KCR from all liability for any damage caused to a client’s goods by accident or fire during transit.” Advise Polly. (400 words)               A collateral contract constitutes a promise, which does not form part of a principal contract (Graw, 2005). A collateral contract constitutes a contract in itself operating independently but significantly linked to the primary contract so that the collateral contract emerges when a consideration of one party is engagement in the main contract (Heilbut, Symons & Co v Buckleton, 1913). In Evans v Andrea Merzario (1976), a collateral contract is explained as a promise or assurance given with the intention of acting on it through the engagement in a contract and the actual entry into a contract makes the promise binding. This means that in deciding whether statements constitute a collateral contract, the statement should be delivered with the intention to rely on it, the party insisting on the presence of a collateral contract should have relied on the statement, and the party making the statement delivered this with the intention to guarantee its truth. Concurrently, there are two major elements of a collateral contract. First, the statement communicated has a promissory nature and in the form of an assurance (JJ Savage & Sons v Blakney, 1970). Second, there should not be any inconsistency arising between the primary contract and the collateral contract. In Hoyts Pty Ltd v Spencer (1919), the promise was not recognized as a collateral contract because this was inconsistent with the primary contract. In JJ Savage & Sons Pty Ltd v Blakney (1970), the promise was not also considered as a collateral contract because this does not have a promissory nature. In the given case, Polly made express mention of her concern over the schedule of the loading of the goods to reach the destination on time. This is in the context of an already existing contract between Polly and Mr Bao. Mr Bao replied that he promises Polly that he will have the goods loaded on the train that leaves Thursday morning to reach the destination on time. This constitutes a collateral contract because this involves a promise made for the fulfillment of the primary contract. In addition, the statement was communicated as a promise or an assurance and there is not inconsistency between the promise comprising the collateral contract and primary contract for transit.             In the case of the exemption clause, this should clearly form part of the terms of the contract. However, the operation or validity of the exemption clause constitutes a matter of court determination but Photo Production Ltd v Securicor Transport Ltd (1980) provides for the application of the contra preferentum rule that the exemption clause is interpreted against the party claiming its protection. 4.                  Polly’s friend Paul (now 27) is a chef for Hokkaido Pty Ltd, which owns the famous Hokkaido Japanese restaurant (owned by Yoshi) in Kowloon Tong. Paul has been working there for 10 years and now thinks he can make more money if he is his own boss. He wishes to move to Discovery Bay and open another Japanese restaurant there, called “Paul’s Japanese Restaurant.” Yoshi reminds Paul that when he joined Hokkaido he signed a letter stating that he would not open another Japanese restaurant “anywhere in Hong Kong for a period of 5 years” if he left Hokkaido Pty Ltd.  Paul doesn’t remember signing the letter, as it was 10 years ago. When it is shown to him, he realises that he did sign it, but that happened 6 weeks before his 18th birthday. He wants to know if he is bound by the terms of the letter. If so, why? If not, why not? (400 words)               Paul may not be bound by the restraint of trade clause by proving that the clause is too broad because it covers any area in Hong Kong and the limitation of five years is too unreasonable. Restraint of trade is an employment clause that puts a restriction on the freedom of individuals to deal or trade assets or information, in a particular manner, or trade with third parties. This applies during the period of employment and could extend after the termination or expiration of the employment contract. (Graw, 2005) Laws covering restraint of trade consider this practice as against public policy making unenforceable subject to the exception that the interest of a party or public interest justifies the reasonableness of the restraint (Attwood v Lamont, 1920). This means that a restraint of trade clause becomes unenforceable when this is unreasonable, subject to the determination of courts at the time of the imposition of the clause. The burden of proof rests upon the party wanting to enforce the restraint of trade clause while the party claiming unreasonableness have to show proof of the violation of public policy by the clause. (Linder v Murdock’s Garage, 1950) Restraint of trade applies to interests subject to protection so that in the case of an employment context, broad restraint of trade clause that covers all possible future forms of competition with the employer is unenforceable because it is unreasonable and does not constitute an interest subject to legal or contractual protection. In Wentworth Partners Estate Pty Ltd trading as RE MAX Gold v Gordony (2007), the restraint clause was considered unenforceable because the clause was broad. In Orton v Melman (1981), validity of a restraint of trade clause depends on factors such as the relative bargaining power of the parties, the nature or type of the prohibition, and the period or scope of the clause. In IRAF Pty Limited v Graham (1982), a restraint period of nine to twelve months was deemed sufficient in the case of a hairdressing salon.             Paul signed the employment contract including the restraint of trade clause when he was a minor but the employment contract stands since it covers employment, which is generally beneficial to him and the continuity of his employment when he achieved the age of majority constitutes ratification of the contract (Graw, 2005). However, Paul may also question the validity of the employment contract on the grounds of unreasonable terms subject to the consideration of the court.   References   Secondary Source   Graw, S. (2005). An introduction to the law of contract (5th edn.). Pyrmont, NSW: Lawbook Co.     Cases   Attwood v Lamont (1920) 3 KB 371 Bradbury v Morgan (1862) 1 H&C 249 Byrne v Van Tienhoven (1880) 5 CPD 344 Dickinson v Dodds (1876) 2 ChD 463 Evans v Andrea Merzario (1976) 1 WLR 1078 Heilbut, Symons & Co v Buckleton (1913) AC 30 Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 Hyde v Wrench (1840) 3 Beav 334 IRAF Pty Limited v Graham (1982) 1 NSWLR 419     JJ Savage and Sons v Blakney (1970) 119 CLR 435 Kennedy v Panama New Zealand and Australian Royal Mail Co Ltd (1867) LR 2 QB 580 at 587 Leason Pty Ltd v Princes Farm Pty Ltd (1983) 2 NSWLR 381 Lindner v Murdock’s Garage (1950) 83 CLR 628 Manchester Diocesan Council v Commercial & General Investments Ltd (1970) 1 WLR 241 Orton v Melman (1981) 1 NSWLR 533 Photo Production Ltd. v Securicor Transport Ltd. (1980) A.C. 827 Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 Wentworth Partners Estate Agents Pty Ltd trading as RE MAX Gold v Gordony (2007) NSWSC 1135 Credit:ivythesis.typepad.com

Law Assignment

LAW Assignment 1. Ping is thinking of opening a restaurant. On Monday she contacts Dennis and is offered...

Importance of Intention to Contract

Importance of Intention to Contract                                         Introduction               In any business transactions in which large amount of money and intention are involved, creation of a contract is necessary. In the case of Chris, Jas and Pat, their agreement concerning the buying of equipments and installation of it to Pat’s shed should have an enforceable contract.  However, in the creation of this contract, certain terms and conditions must be reviewed carefully in order to identify its impact if one of them breaches this contract. In addition, the terms and conditions should be fair enough to the parties involved.  And since the purchase of the necessary equipment is for their benefit, thus certain shares of money should be divided among them.  It means to say that there is a need to have an agreement regarding the money involved in this transaction.  With this respect, the following discussion will relate the importance of intention to contract with respect to the given case of Chris, Jas and Pat.   Discussions   To start with the context of this paper, let us define first what contract is. According to Wehberg, H. (1959), the contract is “an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law.” Basically, this is the stage in which an unqualified offer passed in acceptance and the parties engaged reach Consensus ad Idem. Meaning, the parties must have the essential capability to have an agreement/contract and this should not be insignificant, indefinite, unfeasible or unlawful. Usually, written contracts are required specifically when buying a house. However, most contracts can be and are made orally, such as what happened in the case of Chris, Jas and Pat. Contract law can be classified, as is usual in civil law systems, as part of a general law of obligations. Apparently, under UK law, an agreement sustained by reflection is not enough to create a legally binding contract, the parties must also have an intention to create legal relations (Salanié, B. 1997). Usually, the intention to create legal relations is specifically stated by the contracting parties. In other cases, the law will readily imply the intention, because of the nature of the commercial dealings between the parties. The existence of consideration is often indicative of the intention to create legal relations, though there are situations where the presumption of the intention can be rebutted, thus determining that there is no contract and no legal liability. In many domestic agreements, in which our subjects Chris, Pat and Jas are not covered, the agreements made between wives and husbands and children and parent, there is no intention to create legal relations and no intention that the agreement should be subject to litigation. Actually, familial relationships do not disqualify the arrangement of a binding contract, although to create contractual relations, there must be a comprehensible/lucid intention on either party to be bound. In commercial agreements in which we may consider the case of Chris, Pat and Jas, there is a rebuttable presumption that parties intend to create legal relations and conclude a contract (Salanié, B. 1997).  As indicated in the paper of Salanié, B. (1997), in determining whether parties have created legal relations, courts will look at the intentions of the parties. If in the course of business transactions, the parties clearly and expressly make an agreement stating that it ought not be binding in law, then a court will uphold those wishes. However, if a court is of the view that there is any ambiguity of intention, or that such intention is unilateral, such contract will be voided. The burden of rebutting the presumption of legal relations in commercial agreements lies on the party seeking to deny the contract. In terms of commercial contracts involving large sums of money, case law has determined that it is a heavy burden.  With this consideration, the parties specifically Pat and Jas clearly agreed on the purchase of the necessary equipment which justify their intention to create legal relations which could be the basis of contract but the conditions regarding this agreement is not clearly stated.  Actually, it has been decided in the UK, that so called “Letters of Comfort” (Steyn, L. 1997), which express a parties intention on business dealings can amount to an intention to create legal relations and so bind a party in contract, but that it will depend on the nature of the specific wording used (Steyn, L. 1997). Basically, there can be no contract without the requisite intention. And if we reviewed the case of Chris, Pat and Jas, there is an intention for the parties to buy necessary equipments of their satellite link , therefore, creation of contract is possible. As we note, contract with the requisite intention is trite law (Balfour v Balfour). Actually, not only in the case of Chris, Pat and Jas raised the question of the intention to create legal relations but also some agreements between some known companies and trade unions (McKendrick, E. 2005). The paper of McKendrick (2005) pointed out that collective agreements are generally not intended to be legally binding. It has been held that specific provisions of collective agreements can be incorporated into individual contracts of employment and thus legally binding. The intention to create legal relations is an essential feature of contract law in the UK, and the existence of the intention will depend on the nature and form of the contract and the contracting parties (Atiyah, P.S. 1986). Although we have observed that the reasons for making some promises (for example, the promises involved in marriage) are much stronger than the reasons for making other promises (for example, the promises involved in ordinary buying and selling or like what Chris, Jas and Pat made). The explanation that naturally suggests itself is that the community created by marriage promises somehow exercises a greater draw on persons than the community created by promises to buy and sell–perhaps because it involves sharing more significant ends, or even a more significant mode of sharing. With respect to the case, we may say that contract presents a special case of promise, and a species always incorporates the essential characteristics of the genus to which it belongs, so that the reasons for making and keeping contracts must be expressed in terms of the reasons for making and keeping the promises that contracts involve. Thus, both the intention and conditions should be apparent and clearly stated. The focus on contract therefore represents not a new departure but a move inward–an effort to elaborate the precise forms of respectful community that arise in connection with the particular class of promises presented by contract (Bolton, Patrick and Dewatripont, M. 2005). As shown in the case of Chris, Jas and Pat, contract law governs transactions involving one or more promises. We may say that a promise is a commitment or assurance that something will (or will not) be done in the future. This commitment or assurance invites reliance by the promisee. Promising takes place within the context of a social practice and derives its significance from that practice (Barnett, R.E. 2003). A social practice is established whenever people engage in a regular pattern of conduct because they agree that this is the right way to act. The behavioral regularity that we observe in a social practice is the result of people internalizing the rules of the practice and judging each other’s conduct by these rules. In the social practice of promising, we have one important rule: “Keep your promises!” Most members of our society adhere to this rule most of the time, because they believe this is the right way to act. Because promises are usually kept, it is usually reasonable to rely on a promise, and promises are usually relied upon. The social practice of promising is quite rudimentary and incomplete, however. It is not highly developed like our practice of mathematics or our linguistic practices or our game of baseball. We have our basic rule, “Keep your promises!” But the practice of promising does not determine, in any precise way, what counts as a promise. It is generally agreed that one need not say “I promise” in order to make a promise, but we have no agreed-upon test specifying which kinds of words or actions constitute a promise and which do not. Nor does our promising practice include a set of rules determining what counts as an excuse or justification for breaking a promise. Few would maintain that all promises are absolutely binding, but those who recognize excuses do not agree as to which circumstances justify breaking a promise. Furthermore, our promising practice lacks a generally accepted method for interpreting promises. Promising is a speech act often riddled with ambiguity, and in the absence of a prescribed method of interpretation, the social practice cannot establish what an ambiguous promise means and thus cannot determine whether certain promises have been kept or broken. Finally, our social practice of promising does not prescribe penalties or sanctions (other than general social disapproval) for unexcused promise-breaking. If our legal system is to enforce promises, it must thus go beyond the social practice in establishing rules and standards by which contractual disputes are to be resolved. Nevertheless, if a social practice or usual way of doing things exists and is relevant to some legal issue, we can expect the legal system to take it into account. In the Uniform Commercial Code, for example, the word “agreement” is defined to include not only terms expressly agreed upon, but also “usages of trade” recognized as business customs, and any “course of dealing” or “course of performance” established by the manner in which the two parties to the agreement have been doing business with each other. Our legal system thus gives effect to many implied promises that were never expressed in the promisor’s words but are implied by the usual way of doing things. In the eyes of the law, a person who voluntarily engages in a transaction of a type involving normal practices will be held to have promised to abide by the usual way of doing things, unless he clearly expresses himself to the contrary. Another source of implied promises is the objective approach courts take in deciding whether a promise has been made. Given the lack of a definitive social practice determining what counts as a promise, courts could take a subjective approach and say that a person has made a promise only if she actually intended to commit herself, or courts could take an objective approach and say that a person has made a promise if her words and conduct could reasonably be interpreted as a commitment. Because it is often impossible to know what a person intended in her own mind, and because of a perceived need to protect those who reasonably rely on what looks like a promise, our courts generally take an objective approach. Thus, a person may be bound by a promise implied by her words or conduct, even though she never expressly said “I promise” and never even intended to commit herself. When we consider all the promises implied from business practices or the usual way of doing things, and all the promises implied by some reasonable contextual interpretation of words or conduct, we find that a vast number of the promises enforced by our courts are implied promises. When we say that contract law governs transactions involving a promise, we must therefore use the word “promise” in a broad sense that makes room for a variety of implied promises.   Conclusion As evidently observed in the case, contracts generally do not, however, involve shared cooperative activity. Some forms of promise, especially among intimates, may well invoke the intentions in favor of mutual support that constitute the core of cooperation (think of the traditional marriage vow’s language “in sickness and in health” or indeed of contractual promises to establish partnerships or joint ventures. But contracts can arise among parties who retain opposed interests in the joint activity that the contracts contemplate and who are each unwilling, when the other stumbles and places the success of the joint activity in jeopardy, to shoulder any uncompensated increases in their shares of the burden of the joint activity. And although even discrete contracts do not necessarily involve parties who are in this sense uncooperative–although even discrete contracts may be sufficiently profitable, and the costs associated with their breakdown sufficiently large, so that the parties are willing to shoulder additional uncompensated burdens in order to keep their contracts afloat–the legal structure of the discrete contract relation characteristically accepts such uncooperative participants. As a general matter, a material breach by one party to a contract relieves the other of its obligation of return performance. Moreover, the law never requires a disappointed promisee to catch a stumbling promisor and (shouldering the burden herself) ensure that the contemplated performance occurs. In place of mutual support, contract imposes only a much thinner nondefection condition on joint intentional activity. The parties to a contract need not be willing to compensate for each other’s shortcomings; they need only be committed to not stumbling first.       References:   Atiyah, P.S. (1986) ‘Consideration: A Restatement’ in Essays on Contract, Oxford University Press, p.195.   Barnett, R.E. (2003) Contracts, Aspen Publishers ISBN 0-7355-6535-2   Bolton, Patrick and Dewatripont, M. (2005) Contract Theory, MIT press.   McKendrick, E. (2005) Contract Law – Text, Cases and Materials, Oxford University Press ISBN 0-19-927480-0   Salanié, B. (1997) The Economics of Contracts, MIT Press, Cambridge, Mass. & London, England.   Steyn, L. (1997) Contract Law: Fulfilling the Reasonable Expectations of Honest Men, 113 LQR 433.   Wehberg, H. (1959), Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.                                                                 Credit:ivythesis.typepad.com

Importance of Intention to Contract

Importance of Intention to Contract Introduction In any busine...

Importance of Intention to Contract

Importance of Intention to Contract                                         Introduction               In any business transactions in which large amount of money and intention are involved, creation of a contract is necessary. In the case of Chris, Jas and Pat, their agreement concerning the buying of equipments and installation of it to Pat’s shed should have an enforceable contract.  However, in the creation of this contract, certain terms and conditions must be reviewed carefully in order to identify its impact if one of them breaches this contract. In addition, the terms and conditions should be fair enough to the parties involved.  And since the purchase of the necessary equipment is for their benefit, thus certain shares of money should be divided among them.  It means to say that there is a need to have an agreement regarding the money involved in this transaction.  With this respect, the following discussion will relate the importance of intention to contract with respect to the given case of Chris, Jas and Pat.   Discussions   To start with the context of this paper, let us define first what contract is. According to Wehberg, H. (1959), the contract is “an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law.” Basically, this is the stage in which an unqualified offer passed in acceptance and the parties engaged reach Consensus ad Idem. Meaning, the parties must have the essential capability to have an agreement/contract and this should not be insignificant, indefinite, unfeasible or unlawful. Usually, written contracts are required specifically when buying a house. However, most contracts can be and are made orally, such as what happened in the case of Chris, Jas and Pat. Contract law can be classified, as is usual in civil law systems, as part of a general law of obligations. Apparently, under UK law, an agreement sustained by reflection is not enough to create a legally binding contract, the parties must also have an intention to create legal relations (Salanié, B. 1997). Usually, the intention to create legal relations is specifically stated by the contracting parties. In other cases, the law will readily imply the intention, because of the nature of the commercial dealings between the parties. The existence of consideration is often indicative of the intention to create legal relations, though there are situations where the presumption of the intention can be rebutted, thus determining that there is no contract and no legal liability. In many domestic agreements, in which our subjects Chris, Pat and Jas are not covered, the agreements made between wives and husbands and children and parent, there is no intention to create legal relations and no intention that the agreement should be subject to litigation. Actually, familial relationships do not disqualify the arrangement of a binding contract, although to create contractual relations, there must be a comprehensible/lucid intention on either party to be bound. In commercial agreements in which we may consider the case of Chris, Pat and Jas, there is a rebuttable presumption that parties intend to create legal relations and conclude a contract (Salanié, B. 1997).  As indicated in the paper of Salanié, B. (1997), in determining whether parties have created legal relations, courts will look at the intentions of the parties. If in the course of business transactions, the parties clearly and expressly make an agreement stating that it ought not be binding in law, then a court will uphold those wishes. However, if a court is of the view that there is any ambiguity of intention, or that such intention is unilateral, such contract will be voided. The burden of rebutting the presumption of legal relations in commercial agreements lies on the party seeking to deny the contract. In terms of commercial contracts involving large sums of money, case law has determined that it is a heavy burden.  With this consideration, the parties specifically Pat and Jas clearly agreed on the purchase of the necessary equipment which justify their intention to create legal relations which could be the basis of contract but the conditions regarding this agreement is not clearly stated.  Actually, it has been decided in the UK, that so called “Letters of Comfort” (Steyn, L. 1997), which express a parties intention on business dealings can amount to an intention to create legal relations and so bind a party in contract, but that it will depend on the nature of the specific wording used (Steyn, L. 1997). Basically, there can be no contract without the requisite intention. And if we reviewed the case of Chris, Pat and Jas, there is an intention for the parties to buy necessary equipments of their satellite link , therefore, creation of contract is possible. As we note, contract with the requisite intention is trite law (Balfour v Balfour). Actually, not only in the case of Chris, Pat and Jas raised the question of the intention to create legal relations but also some agreements between some known companies and trade unions (McKendrick, E. 2005). The paper of McKendrick (2005) pointed out that collective agreements are generally not intended to be legally binding. It has been held that specific provisions of collective agreements can be incorporated into individual contracts of employment and thus legally binding. The intention to create legal relations is an essential feature of contract law in the UK, and the existence of the intention will depend on the nature and form of the contract and the contracting parties (Atiyah, P.S. 1986). Although we have observed that the reasons for making some promises (for example, the promises involved in marriage) are much stronger than the reasons for making other promises (for example, the promises involved in ordinary buying and selling or like what Chris, Jas and Pat made). The explanation that naturally suggests itself is that the community created by marriage promises somehow exercises a greater draw on persons than the community created by promises to buy and sell–perhaps because it involves sharing more significant ends, or even a more significant mode of sharing. With respect to the case, we may say that contract presents a special case of promise, and a species always incorporates the essential characteristics of the genus to which it belongs, so that the reasons for making and keeping contracts must be expressed in terms of the reasons for making and keeping the promises that contracts involve. Thus, both the intention and conditions should be apparent and clearly stated. The focus on contract therefore represents not a new departure but a move inward–an effort to elaborate the precise forms of respectful community that arise in connection with the particular class of promises presented by contract (Bolton, Patrick and Dewatripont, M. 2005). As shown in the case of Chris, Jas and Pat, contract law governs transactions involving one or more promises. We may say that a promise is a commitment or assurance that something will (or will not) be done in the future. This commitment or assurance invites reliance by the promisee. Promising takes place within the context of a social practice and derives its significance from that practice (Barnett, R.E. 2003). A social practice is established whenever people engage in a regular pattern of conduct because they agree that this is the right way to act. The behavioral regularity that we observe in a social practice is the result of people internalizing the rules of the practice and judging each other’s conduct by these rules. In the social practice of promising, we have one important rule: “Keep your promises!” Most members of our society adhere to this rule most of the time, because they believe this is the right way to act. Because promises are usually kept, it is usually reasonable to rely on a promise, and promises are usually relied upon. The social practice of promising is quite rudimentary and incomplete, however. It is not highly developed like our practice of mathematics or our linguistic practices or our game of baseball. We have our basic rule, “Keep your promises!” But the practice of promising does not determine, in any precise way, what counts as a promise. It is generally agreed that one need not say “I promise” in order to make a promise, but we have no agreed-upon test specifying which kinds of words or actions constitute a promise and which do not. Nor does our promising practice include a set of rules determining what counts as an excuse or justification for breaking a promise. Few would maintain that all promises are absolutely binding, but those who recognize excuses do not agree as to which circumstances justify breaking a promise. Furthermore, our promising practice lacks a generally accepted method for interpreting promises. Promising is a speech act often riddled with ambiguity, and in the absence of a prescribed method of interpretation, the social practice cannot establish what an ambiguous promise means and thus cannot determine whether certain promises have been kept or broken. Finally, our social practice of promising does not prescribe penalties or sanctions (other than general social disapproval) for unexcused promise-breaking. If our legal system is to enforce promises, it must thus go beyond the social practice in establishing rules and standards by which contractual disputes are to be resolved. Nevertheless, if a social practice or usual way of doing things exists and is relevant to some legal issue, we can expect the legal system to take it into account. In the Uniform Commercial Code, for example, the word “agreement” is defined to include not only terms expressly agreed upon, but also “usages of trade” recognized as business customs, and any “course of dealing” or “course of performance” established by the manner in which the two parties to the agreement have been doing business with each other. Our legal system thus gives effect to many implied promises that were never expressed in the promisor’s words but are implied by the usual way of doing things. In the eyes of the law, a person who voluntarily engages in a transaction of a type involving normal practices will be held to have promised to abide by the usual way of doing things, unless he clearly expresses himself to the contrary. Another source of implied promises is the objective approach courts take in deciding whether a promise has been made. Given the lack of a definitive social practice determining what counts as a promise, courts could take a subjective approach and say that a person has made a promise only if she actually intended to commit herself, or courts could take an objective approach and say that a person has made a promise if her words and conduct could reasonably be interpreted as a commitment. Because it is often impossible to know what a person intended in her own mind, and because of a perceived need to protect those who reasonably rely on what looks like a promise, our courts generally take an objective approach. Thus, a person may be bound by a promise implied by her words or conduct, even though she never expressly said “I promise” and never even intended to commit herself. When we consider all the promises implied from business practices or the usual way of doing things, and all the promises implied by some reasonable contextual interpretation of words or conduct, we find that a vast number of the promises enforced by our courts are implied promises. When we say that contract law governs transactions involving a promise, we must therefore use the word “promise” in a broad sense that makes room for a variety of implied promises.   Conclusion As evidently observed in the case, contracts generally do not, however, involve shared cooperative activity. Some forms of promise, especially among intimates, may well invoke the intentions in favor of mutual support that constitute the core of cooperation (think of the traditional marriage vow’s language “in sickness and in health” or indeed of contractual promises to establish partnerships or joint ventures. But contracts can arise among parties who retain opposed interests in the joint activity that the contracts contemplate and who are each unwilling, when the other stumbles and places the success of the joint activity in jeopardy, to shoulder any uncompensated increases in their shares of the burden of the joint activity. And although even discrete contracts do not necessarily involve parties who are in this sense uncooperative–although even discrete contracts may be sufficiently profitable, and the costs associated with their breakdown sufficiently large, so that the parties are willing to shoulder additional uncompensated burdens in order to keep their contracts afloat–the legal structure of the discrete contract relation characteristically accepts such uncooperative participants. As a general matter, a material breach by one party to a contract relieves the other of its obligation of return performance. Moreover, the law never requires a disappointed promisee to catch a stumbling promisor and (shouldering the burden herself) ensure that the contemplated performance occurs. In place of mutual support, contract imposes only a much thinner nondefection condition on joint intentional activity. The parties to a contract need not be willing to compensate for each other’s shortcomings; they need only be committed to not stumbling first.       References:   Atiyah, P.S. (1986) ‘Consideration: A Restatement’ in Essays on Contract, Oxford University Press, p.195.   Barnett, R.E. (2003) Contracts, Aspen Publishers ISBN 0-7355-6535-2   Bolton, Patrick and Dewatripont, M. (2005) Contract Theory, MIT press.   McKendrick, E. (2005) Contract Law – Text, Cases and Materials, Oxford University Press ISBN 0-19-927480-0   Salanié, B. (1997) The Economics of Contracts, MIT Press, Cambridge, Mass. & London, England.   Steyn, L. (1997) Contract Law: Fulfilling the Reasonable Expectations of Honest Men, 113 LQR 433.   Wehberg, H. (1959), Pacta Sunt Servanda, The American Journal of International Law, Vol. 53, No. 4 (Oct., 1959), p.775.                                                                 Credit:ivythesis.typepad.com

Importance of Intention to Contract

Importance of Intention to Contract Introduction In any busine...

Law Essay and Problem Solving: Company Law

Company Law             Based on the given case and the corporate laws, it can be said that the directors of companies in Hong Kong SAR should adopt an approach where they are able to promote the success of the company for the benefit of all its members which also include their shareholders. Accordingly, the directors of various organizations should be able to ensure that all members are benefited.  It can be mentioned that corporate governance is centered on the careful administration of the processes involved particularly on the relationships among all the stakeholders (Bhattacharya, 2000). Accordingly, directors should work effectively for the benefits of all members of the company which include the shareholders also. Though there are issues concerning the context of maximizing the values of shareholders, it is more important that all other members and stakeholders should also be given importance by the directors. Some authors mentioned that there is a need for rational approaches through which the directors can be induced to ensure the maximization of shareholders’ wealth at the same time protecting the interests of all parties involved, including the managers, large and small shareholders, and creditors and other investors. Jobber (1998) reports that this kind of approaches are being implemented within diverse stakeholder groups for the purposes of determining the most valuable ways to manage essential business resources through the utilization of methodical methods as result of empirical studied taken among various fields of application. Thus, efficient approaches by the director are considered good for all the members because it serves mainly on the most effectual control and management of organizational operations. It can develop corporate performance by minimizing the total cost of aligning managers’ and shareholders’ incentives, and of unavoidable self-interested managerial behavior (Jensen and Meckling, 1976). The directors’ good governance is good for all the members because it provides proper incentives for the Board and management to pursue objectives that are in the interests of the company and its shareholders. In addition, the directors should also facilitate effective monitoring thereby encouraging firms to use their resources more efficiently and ensure that the company adheres to the needs of the employees and the community as well. Aside from protecting stakeholders’ rights, it also focuses on the guaranteed achievement of organizational objectives leading to outstanding corporate performance and profitability. It must be remembered that the directors have full responsible emerging culture of effective corporate actions which is directed to a competitive company conduct and performance. Thus, the company’s position on corporate governance is among their competitive edge against their rivals, general business strategy and performance.               On the given case, it can be noticed that the shareholders of SBS CO Ltd (A, B, C, D) has encountered problems in terms of decision-making approaches. It can be mentioned that the failure of the management of the SBS Co Ltd to strategically decide on its venture and contracts with SM Ltd, have been one of the major caused of their sales reduction.  In this regard, to be able to solve the this kind of problem, shareholders must be provided with legal and specific actions for their negligence that cause major problems in the financial and economic status of SBS. The risk issue that can be noted is in terms of its inefficient and strategic decision making approach as well as having a vague and ambiguous firm economic and practice objectives which has been neglected by shareholders of SBS. It is said that in an organization, indistinct, unclear or vague economic and practice objectives are oftentimes an indication of an absence of direction towards outcomes that are compatible with the personal, professional and economic objectives of the business, which may lead for having conflicts and risks that will affect the company. And this situation has been encountered by the four shareholders, as they made decisions that affect the performance of the company. Herein, the venture to SM Ltd that required major financial support, since SM Ltd has financial problems. In order to resolve problematic matters and support business plans, the shareholders attempted to consider various strategies. However, the company’s strategies, specifically their strategic plan only went from one major loss to the next. Because of the inability of the management to have a strategic decision making, which leads to wrong investments and partnerships, the company’s growth slowed down considerably. As a result more of its weaknesses had grown more apparent. Financial losses and various cases against the company had resulted to a major downfall. In order to solve the third issue, the company has been able to initiate a proper and strategic decision-making of the company. Herein, the company’s decision were made strategically by identifying first the pros and cons of the decision that they made. The management sees to it that everybody should agree to the decision so that further conflict or risks within the company would not arise. Good decision making can be attributed as one of the vital factors that will help the business to achieve its core mission and objective. This alternative is helpful in a way that it can make the company more competitive and survive in the marketing environment. Furthermore, in terms of the negligence of the shareholders (A, B, C, D) proper actions must be undertaken since they brought the company to a major problem.  In this regard, the company can take immediate actions for these shareholders by suspending them to some controls of the company and/or filing lawsuits against them if legal issues are concerns. On the other hand, the shareholders can also be subjected to regulatory and governmental authorities if in case these shareholders have breach the laws and regulations that leads to company problems. Since there is an involved winding up actions, the official receiver/liquidator of the company may investigate the conduct of the shareholders and evaluate their past and present activities and pursue litigation against the shareholders. The case of these shareholders and their issue on financial losses due to their wrong decisions and plans serves as a realization to have an effective management approach. In this regard, the company must be able to have the ability to identify the issue.  The company may also use some approaches to analyze the actions to be undertaken against the shareholders. Criticality Analysis enables companies to assess and evaluate risks that focus on the gravity of the consequences of an event. The Criticality Analysis involves the identification of an initiating event that can turn out to be risky, the outcome of the initiating risk event, the mode of failure in the negative outcome, and the consequences that are faced by a particular organization. If critical thinking has been prioritized by the company, its management could have developed better and more practical financial decisions. This is because the presence of critical thinkers in the workplace promotes results-orientedness, openness to ideas, willingness to change as well as flexibility. Furthermore, critical thinker develop better decisions as they are more analytical, assertive, creative, observant and spirited to take on challenges and risks. It can be concluded that, based on the case of the SBS Co Ltd and SM Ltd  it is important that every shareholders in the business field should know how to manage or to handle situations in order for the business to achieve success and to be able to managed risks effectively. In our case, it is important that the lessons learned from these issues should serve as enlightenment in making efficient approach and decision making. The company is responsible in taking actions against anyone that puts the company in trouble which leads to performance failures. In accordance to theory, the directors of public companies are held responsible for their action by their shareholders. On the other hand, the authority of the shareholders to influence the behavior of the company directors should also be monitored to avoid power abused. By and large, it can be said that shareholders have duties to perform and so the management of the company. If the former is doing some illegal actions and misconduct, then the management of the company should take immediate actions and that includes the suspension or other lawsuits that can be provided to the one who made the mistake, like in this case the shareholders of SBS Co Ltd (A, B, C and D). Currently, different companies have been attracting a significant deal of interest from the public due to its apparent purpose and significance for the general economic health of various corporations as well as the society.   Reference Bhattacharya, C. B. (2000) Relationship Marketing in Mass Markets, Handbook of Relationship Marketing, Thousand Oaks, CA: Sage.   Chen, J. (2004) Corporate Governance in China, New York: RoutledgeCourzon.     Credit:ivythesis.typepad.com

Law Essay and Problem Solving: Company Law

Company Law Based on the given case and the corporate laws, it can be said that the directors of companies in Hong Kong SAR...