You have just joined a new business establishment as a young executive after completing your studies. Since you are fresh from University, most of your office mates have this idea that you will have better knowledge on latest laws affecting some of the issues that they are facing. They approach you with various legal questions.
QUESTION
You have just joined a new business establishment as a young executive after completing your studies. Since you are fresh from University, most of your office mates have this idea that you will have better knowledge on latest laws affecting some of the issues that they are facing. They approach you with various legal questions.
- Jamal who loves classic cars came across a classic car owned by Ramli while taking a drive near his housing estate. When Jamal approached Ramli an enquired about the car, he was given assurance that it was indeed a car that was manufactured in 1930 and it is a classic. In fact, Ramli adduced documents to show that it was indeed a 1930 classic. Jamal agreed on the price and paid the price quoted by Ramli. After few weeks of taking the car home, Jamal decided to take the car to a mechanic and was shocked when he was informed that the car was not really a 1930 classic. Jamal would like to know if he can bring a legal action against Ramli to get back his money.
(40 Marks)
- Jamal also would like know what is meant by legislation and case laws since your advice will be based on these sources.
(20 Marks)
- Jack would like to know in what is meant by separate legal personality and in what kind of circumstances the courts will be willing to lift the veil of incorporation and hold the director or owners to be liable for the debts of the company.
(25 Marks)
- Jesse approaches you with questions on law of Agency. One of the employees of the company had gone ahead and entered into a contract on behalf of the company without getting prior approval of Company. Jesse would like to know whether the Company can still go ahead and rectify such a contract.
(15 Marks)
You are required to advice Jamal, Jack, Jesse on the legal issues, and your answer must be supported with laws and cases.
(Total: 100 Marks)
ANSWER
Legal Issues in Business: Providing Advice on Classic Car Purchase, Separate Legal Personality, and Contracts
Introduction
As a young executive with fresh knowledge from university, I understand the importance of legal expertise in navigating various business matters. In this essay, I will address the legal questions posed by Jamal, Jack, and Jesse. Specifically, I will advise Jamal on his potential legal action against Ramli regarding a misrepresented classic car, explain the concepts of legislation and case law, discuss the concept of separate legal personality and circumstances for lifting the veil of incorporation, and clarify whether a company can rectify a contract entered into without prior approval.
Jamal’s Legal Action against Ramli
Jamal’s case centers around the misrepresentation of a classic car by Ramli. While Ramli assured Jamal that the car was a genuine 1930 classic and provided documents to support this claim, the subsequent revelation that the car is not as represented raises questions of fraudulent misrepresentation and potential legal recourse (Answers_Misrepresentation – Poole’s Casebook on Contract Law 14e Student Resources – Learning Link, n.d.).
Under contract law, misrepresentation occurs when a false statement is made with the intent to deceive the other party, inducing them to enter into a contract. In Jamal’s case, Ramli’s assurance and presentation of documents asserting the car’s authenticity can be seen as fraudulent misrepresentation, as the car turned out to be different from what was claimed.
Jamal may have grounds for bringing a legal action against Ramli to rescind the contract and seek the return of his money. He can argue that the misrepresentation induced him to enter into the contract, and had he known the true nature of the car, he would not have agreed to the purchase. It is important for Jamal to gather evidence, such as the mechanic’s report, to support his claim.
Legislation and Case Law
Legislation refers to laws enacted by the legislative body, such as parliaments or congresses. These laws are formally written and passed by the governing authority. They serve as primary sources of law and provide a framework for regulating various aspects of society, including business transactions. In the context of legal advice, legislation can guide individuals in understanding their rights and obligations in specific areas.
Case law, on the other hand, refers to legal principles established through judicial decisions in court cases. Courts interpret and apply legislation to resolve disputes and create precedents for future cases. These precedents form the basis of case law, which helps interpret and clarify the provisions of legislation.
When advising on legal matters, it is crucial to consider both legislation and case law. Legislation provides the statutory framework, while case law offers insights into how courts have interpreted and applied the law in specific situations. By examining relevant statutes and analyzing precedents set by past cases, one can provide well-rounded legal advice.
Separate Legal Personality and Lifting the Veil of Incorporation
Separate legal personality is a fundamental principle in company law that distinguishes a company as a separate legal entity from its shareholders or directors. This means that a company has its own rights, liabilities, and obligations, separate from those of its owners.
However, in certain circumstances, courts may “lift the veil of incorporation” and hold directors or owners personally liable for the debts or actions of the company. This concept arises when the separate legal personality of the company is abused or used to perpetrate fraud, thereby justifying the disregard of the corporate entity (Enang, 2019).
Courts are typically willing to lift the veil of incorporation when there is evidence of fraudulent or improper conduct, such as using the company as a mere facade to avoid legal obligations or perpetrate illegal activities. The leading case of Salomon v. Salomon & Co. Ltd. (1897) established the principle of separate legal personality, but it also recognized exceptions to this principle when the corporate structure is misused.
Rectifying a Contract Entered into Without Approval
In the scenario presented by Jesse, where an employee entered into a contract on behalf of the company without prior approval, the legal doctrine of “ratification” comes into play. Ratification refers to the act of affirming or accepting a contract that was initially unauthorized or entered into without proper authority.
In general, a company has the power to ratify a contract, even if it was not approved beforehand. However, the ability to ratify depends on the circumstances and the applicable laws. Some jurisdictions may have specific requirements for ratification, such as board approval or shareholder consent (Hansmann & Kraakman, 2017). It is crucial to consult the relevant legislation and seek legal advice to determine the specific procedures for ratification in the relevant jurisdiction.
Conclusion
In conclusion, legal knowledge is essential in addressing various issues that arise in a business setting. By understanding the concepts of misrepresentation, legislation, case law, separate legal personality, lifting the veil of incorporation, and contract ratification, individuals can make informed decisions and seek appropriate legal remedies. It is always advisable to consult legal professionals for personalized advice based on the specific circumstances and applicable laws in the relevant jurisdiction.
References
Answers_misrepresentation – Poole’s Casebook on Contract Law 14e student resources – Learning Link. (n.d.). https://learninglink.oup.com/access/content/poole-casebook-14e-student-resources/poole-casebook-14e-answers_misrepresentation
Enang, A. (2019). Modern trends on Lifting the veil of incorporation. Thespringhouse. https://www.academia.edu/41122293/Modern_trends_on_Lifting_the_veil_of_incorporation
Hansmann, H., & Kraakman, R. (2017). Agency Problems and Legal Strategies. In Oxford University Press eBooks (pp. 29–48). https://doi.org/10.1093/acprof:oso/9780198739630.003.0002
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