In this coursework writing service, the first scenario given involves the use of term‘breach of contract’. Prior Chris is suggested for legal advice, it is important to understand the conceptual meaning of business contract and breach of contract in the English legal system.
Contract and Breach of Contract
According to Koffman and Macdonald (2010), in a business world, agreements of two parties are entered into a contract to benefit both parties in which no dispute arises. In real business world, agreements, it is normal to experience delays, financial problems, and other sudden events that can hinder the success of contract. In legal terms, breach of contract is used to define disobedience of agreement. According to Blackstone and Lewis (2008), contract that comes because of agreement of two parties involves certain obligations to be fulfilled by the parties who entered into the agreement. By law, if a party fails to comply with the obligation of terms under contract, it is breach of contract. However, there are certain terms and conditions apply to breach of contract depending on the nature of breach. When a party breaches contract, the other party holds the right to sue the first part who breached the contract and is entitled to remedy under the law. The remedy under breach of contract may include damages, specific performance and cancellation of contract.
Answering the Question
According to the scenario given, there applies breach of contract according to which Alan, Betty and Chris had entered into a contract with Circuits Ltd for the supply of‘2,000 circuit boards per year at a fixed price of£10 per board’ over a period of 3 years. However, the time Alan, Betty and Chris entered into the contract Chris had been part of the business but it was applicable as long as Chris is the part of the partnership. Since, Chris is retired he is not obliged to abide by the contract and did not breach the contract. Alan and Betty have also entered into contract with Blacktown Bank by borrowing amount of£10,000. However, when Alan and Betty entered into contract Chris was already retired, yet his name was used in the contract paper, which is not acceptable. The matter of using Chris’ name can be brought into a legal affair because his consent was included in the contract and he is liable to the breach of contract.
The given scenario involves the term limited company and prior to discuss the legal position of T& P Computers Ltd, it is significant to understand the laws involved in the formation of limited company, and who possesses the least and the most rights of taking decisions in the company.
According to Brough (2005), a limited company is a company that is formed by incorporation, under which there is limited liability of shareholders to the paid up of the shares held by them in the firm. Such value is considered as nominal value of their shares but can be limited to the sum of the guarantee provided by the shareholders in the company limited by the guarantee. The limited liability of the shareholders cannot be increased without the consent of shareholders. Ownership is the important matter in the private limited company as it is established through the divisions of shares. A private company is restricted from selling out the shares to the public unlike public limited company. There are some requirements for establishing a private limited company, which includes the following: a unique name of the company, a registered office, at least one director who is willing to accept the responsibilities and duties of the post and at least one shareholder who is willing to purchase a share in the company. The directors possess rights to enter into contract with other company on behalf of the company.
Answer to the Question
The scenario given in this thesis writing service provides with some certain relative facts, which includes the following: Alan and Betty had been in partnership before they decided to form a private limited company, this proves that they had partnership contract for the business and possesses percentage of share. The decisions and formation of private limited company indicates that they both had consent for having limited shares in the company while the instructions given to solicitors regarding directorship was for both Alan and Betty. Thus, there are two directors in the T& P Computers Limited namely Alan and Betty. The time when contracts were made by Alan and Betty on behalf of the company as director of T& P Computers Limited, they were lawfully not directors of the company and had no right to make such decisions.
As far as the legal position of agreement made by Alan with the Bytes plc is concerned, it cannot be considered as contract and Bytes plc is not obliged to comply with the terms and conditions of the contract because legally Alan had no right to negotiate and make contracts. Therefore, Bytes plc is not liable for the contract as there was no contract occurred between them.
As far as the agreement of the company made by Betty on the behalf of the T& P Computers Limited with Zen plc is concerned, the company’s deny from the agreement is not the violation of the agreement because legally Betty was not the director of the company. Therefore, the contract made had no legal entity and T& P Computers Limited is liable for the remedy according to which contract was made based on the entity which has legal existence.
The scenario given demands the legal position of the company about the contract for the transport maintenance equipment, as company was registered as computer manufacturers and not liable to do a business, which is not in its domain. Secondly, rights of shareholder is the concerned in the T& P Computers Limited if a minority shareholder has right to restrain the company from carrying out the transport business. Third, Alan and Betty want to know the issue related toultra vires. Prior to discussing the scenario in detail, it is significant to analyze the conceptual meaning ofultra vires.
According to Field (2010), a company is a legal entity with definite purpose and power that are held by the owners and directors of the company and have limited diversion of activities. Thus, organizations or corporations cannot refer to the act that is out of their powers by law. According to Brice (2009), according to law, if a corporation enters into a contract that is beyond the scope or limitation of corporate power, the contract is illegal. According to Pettet (2005), the companies Act 2006 sections, 31 and 39 has reduced the applicability ofultra vires in the corporate law of United Kingdom. However, it is applied for charities while shareholders can also apply for command or ruling, to avoid an act, which is stated to be ultra vires.
Answer to the Question
The given scenario requires explanation for three different legal matters related toultra vires. Using notepaper of the company, which deals with the computer supply business for the order of heavy transport maintenance equipment, falls under theultra vires. T& P Computers Ltd was registered as private company for computer supply business and supply of heavy transport maintenance equipment is against the company registration. According to ultra vires,T& P Computer Ltd has committedultra viresby conducting a business for which they are not registered therefore the contract occurred between supplier of the maintenance equipment and T& P Computers Ltd is not valid.
According to Vries (2010), a person who owns more than 50 per cent of the shares in the company possesses almost total control of the company’s activity. According to Boyle (2002), minority shareholders in a private limited company have few rights and are subject to the notion of the majority shareholders. The shareholders with large shares using right to veto execute the power to control the decisions of company. Therefore, with this consideration, Meany, a minority shareholder in T& P Computers Ltd, despite being will to control the company’s activity has not enough power to want the company to shut down the transport part of the business.
In regard to suggest Alan and Betty for avoiding the problems with theultra vires rule, it is necessary for them to be fully aware of the rule ofultra vires and must know what they are provided for by the concerned laws. Moreover, constitution is superior authority and laws that cross the limitations of given for by a constitution is considered ultra vires. In addition, understanding with the corporate capacity, restriction applied on the companies and limited power of managerial authority in this regard. The corporate capacity refers that a company has certain capacity to conduct any act and such act is identification of the capacity within which companies endeavour to achieve their corporate goals. Companies with restricted capacity have to be careful when drafting the objects clauses of their companies as a priority.
The scenario given requires the explanation of rights of company to raise capital using different means such as borrowing and selling shares. Moreover, company’s obligation to make the repayment is the another consideration of the question.
According to Vinturella and Erickson (2003), companies can raise capital to establish or expand the company by either selling the shares of the company or borrowing the amount as long-term debt. According to Berkery (2007), directors have the power to decide to raise the capital on different terms. However, company usually needs extra money for a long period and cannot always sells shares, therefore, company can raise public loans. The amount of such loan is divided into small denomination and company sells them. The unit is called debentures and individual or group holds debentures is called debenture holders. A company by issuing a certificate with its seal acknowledges the debt taken by the company.
Considering the debenture issues of the company, the debentures issued to banks were secured by a charge on the assets of the company. However, the company had issued debentures to two banks on the same asset, which could raise certain problems regarding the interest rate of the company to be paid to banks because there is possibility that rate on the asset is not acceptable for three of the banks. As far as the company’s priority of the charges attached to the debentures is concerned, there are certain complications due to conflict in the date of issue of the debentures to banks and date of registration of asset for the debentures. However, the company is not wound up but company may be liable to some legal issues. According to law, the company is bound to make payment of interest to the bank to whom debentures was issued first like Big Bank plc but registration of charge on the asset was made on April 10 while debenture B that was issued to Huge Bank plc on March 1 registered the charges on April 1. Since on May 01, the company is unable to make repayment on debentures on the maturity of debentures due to shortage of cash flow, the debenture holder can sue the company for the principal and interest and execute the verdict against the property of the company.
The given scenario has provided with certain facts, which includes that Ellie is an employee (Managing Director) at Xanadu plc and director of T& P Computers Ltd. T& P Computers Ltd has been in business with Xanadu plc through Ellie as he used his power as a managing director to persuade the Xanadu plc for specific business dealing. As far as the profit sharing issue between the shareholders of T& P Computers Ltd is concerned, there are certain facts needs to be clear. The scheme of profit sharing in a company is determined by the shareholder agreement, which refers to a legal binding contract between a group of and all of the shareholders in a company (Thomas, Ryan and Baylis, 2007). According to Cadman (2004), Companies Act assumes the majority shareholder as to have control in a company. There are three shareholders in the T& P Computers Ltd including Alan, Betty and Ellie. The land sold by Ellie to T& P Computers Ltd on the amount of£60,000 was charged£60,000 as it was the real value of that land but same land was sold to Xanadu plc in£100,000, which is 40% extra charge than the real value of land. It can be assumed that Ellie has important role in confirming the deal from the side of Xanadu plc. In such case, he can claim extra profit than other shareholders, as their contribution in deal was limited.
After the directors of Xanadu plc have found the shareholding of Ellie in T& P Computers Ltd and that Ellie is the director of the company, the directors should consider that Ellie had been working at Xanadu plc but his dedication was for his own company in which he is director. He allowed a costly deal happen between Xanadu plc and T& P Computers Ltd while he was aware that the deal was costly deal. Moreover, he pressed for certain deals to happen between both companies, which might also put the Xanadu plc in loss.
The given scenario requires the clarification of certain themes related to valuation of the company that was sold by T& P Computers Ltd to other company, removal of director in the company, annual general meeting of shareholders, and contracts of service for the executive duties as directors for a period of 10 years. As far as the worth of the company is concerned, the approach can be used for valuation of the company, which includes asset valuation, price or earnings ratio, entry cost valuation, and industry rules of thumb.
As far as the issue of director’s removal is concerned, the removal of director may be conducted under the Companies Act 1985. According to Companies Act 1985, shareholders can remove a director with ordinary resolution of a simple majority before the expiration of the period of his office despite there is provision to the contrary in the articles of the company and terms of his contract (Slorach and Ellis, 2007).
The private companies do not hold Annual General Meetings (AGM) as long as they are required to carry out such meetings by the article of the company. As far as the'Extraordinary General Meeting' is concerned is no longer used and replaced by the General Meetings of shareholders (Willcocks, 1991).
The English Legal System
In the English legal system, laws are classified according to their types and nature such as criminal laws, corporate laws, constitutional law, and family and administrative law. However, the legal system of UK is the result of historical development of constitution, the historical development of constitution has greatly served to stabilize the law in the country (Slapper and Kelly, 2009). The main source of law in the English legal system is the conventions practice while structure of court and legal profession has been influenced by the constitutional development.
Under the legal system of the United Kingdom, different natures of disputes are dealt with different sphere of law. The contract law rules business contract but it largely regards the areas of law relevant to disputes. The legal system of England does not deal with all contracts under the law of contract because some contracts are not considered to be legally binding the parties.
Non-Contractual Obligations of the Seller/Producer
Business contracts in UK are taken into account with some legal obligations for those who are involved in the selling and purchasing of the goods and services. This helps the parties to understand the contractual rules that are imposed by the law. This may include the set of rules that applies such as liability of consumers, liability of employees and safe and healthy work environment. These obligations are imposed under the Act of Parliament, and by the Common Law.
European Community Law
European Community law also known as European Union Law is a community based body of laws and treaties, which functions the legal system of the European Union members. The underlying source of the EU laws is the EU's treaties while power-giving treaties, which determines the broad policy goals and establish institutions functions the legislation in order to achieve the objectives of the European Union legal system (Davies, 2003).