Case Study: Ratification

1. Case Study: Ratification Mr Duke entered into a contract with Class-Sea Boats Ltd, including after his name the words “(Regal Boats 1992) a company”. Regal Boats 1991 Ltd was subsequently incorporated, but did not formally ratify the contract until the trial of the proceeding some two years later. Class-Sea Boats Ltd v Duke (1996) 7 TCLR 19 The Law of Business Organizations, Watson, 3rd Edition

2. Case Study: Ratification Ratification must occur after a reasonable time so that the third party is protected from the late or unexpectant exercise of ratification powers. Ratification came too late in this case. Class-Sea Boats Ltd v Duke (1996) 7 TCLR 19 The Law of Business Organizations, Watson, 3rd Edition

3. Case Study: Valid Service? The plaintiff served a s218 notice of demand under the Companies Act 1955 at the defendant’s registered office and a copy was sent to the defendant’s place of business. Subsequently, a notice of an application to wind up was served at the defendant’s place of business. The winding up order was granted and the defendant applied to set it aside on the basis, inter alia, that it had had no notice. Kensington Swan v New Zealand Fisheries Ltd (1990) 5 NZCLC 66, 186 The Law of Business Organizations, Watson, 3rd Edition

4. Case Study: Valid Service? It is valid for a creditor to serve at the last registered office shown on file at the Companies Office. The notice was held to have been validly served. Kensington Swan v New Zealand Fisheries Ltd (1990) 5 NZCLC 66, 186 The Law of Business Organizations, Watson, 3rd Edition

5. Case Study: Name Confusion A company called Stanley-Hunt Earthmovers Ltd appealed against the decision of the Registrar not to require a company called Stanley-Hunt Earthmovers (1996) Ltd to change its name. Stanley-Hunt Earthmovers v Registrar of Companies (1997) 9 NZCLC 261, 403 The Law of Business Organizations, Watson, 3rd Edition

6. Case Study: Name Confusion The Judge rejected the Registrar’s argument that the year marker sufficiently distinguished the companies. The Judged that the name “Stanley-Hunt” was particularly distinctive and therefore the names were almost identical. Stanley-Hunt Earthmovers v Registrar of Companies (1997) 9 NZCLC 261, 403 The Law of Business Organizations, Watson, 3rd Edition

7. Case Study: Name Confusion Flight Centre (NZ) Ltd objected to the use of the name Rotorua Flight Centre. Flight Centre (NZ) Ltd v Registrar of Companies (1994) 7 NZCLC 260, 612 The Law of Business Organizations, Watson, 3rd Edition

8. Case Study: Name Confusion Rotorua Flight Centre was held not considered almost identical to Flight Centre (NZ) Ltd. “Almost identical” are those in which the keywords and the order in which they appear make them virtually undistinguishable from one another. Flight Centre (NZ) Ltd v Registrar of Companies (1994) 7 NZCLC 260, 612 The Law of Business Organizations, Watson, 3rd Edition

9. Case Study: Name Confusion Taylor Bros Ltd had a well-established dry cleaning/linen hire business in Wellington. Taylors Group Ltd operated similar businesses in Auckland and expanded into Wellington. Taylors Textile Serbices Auckland Ltd v Taylor Bros Ltd (1988) 2 NZBLC 103, 032 (CA) The Law of Business Organizations, Watson, 3rd Edition

10. Case Study: Name Confusion Would an activity of the defendant mislead potential consumers into thinking the activity is that of the Plaintiff? The use of the word “Taylors” in their trade of linen hire was clearly misleading and deceptive. There was considerable confusion by customers and potential customers as to the identity of the 2 Wellington businesses. The injunction application was granted. Taylors Textile Services Auckland Ltd v Taylor Bros Ltd (1988) 2 NZBLC 103, 032 (CA) The Law of Business Organizations, Watson, 3rd Edition

11. Case Study: Agency A servant to a pawnbroker took in goods and the party came and tendered the money to the servant, who said he had lost the goods. Upon this, an action of trover was brought against the master; and the question was, whether it could lie or not? Jones v. Hart, Court of the King’s Bench, 2 Salk 441, 90 Eng.Rep. 1255 (1698) in Agency and Partnership Gregory/Hurst

12. Case Study: Agency Holt, CJ: If the servants of A with his cart run against another cart, wherein is a pipe of wine, and overturn the cart and spoil the wine, an action lieth against A. So where a carter’s servant runs his cart over a boy, action lies against the master for the damage done by this negligence: and so it is if a smith’s man pricks a horse in shoeing, the master is liable. For whoever employs another, is answerable for him, and undertakes for his care to all that make use of him. The act of a servant is the act of his master, where he acts by authority of his master. Jones v. Hart, Court of the King’s Bench, 2 Salk 441, 90 Eng.Rep. 1255 (1698) in Agency and Partnership Gregory/Hurst

13. Case Study: Agency Appellee is a securities dealer with whom appellant kept a trading account, in his name only. Appellant’s estranged wife, who was not authorized to draw on the account, wrote to Appellee about an emergency and asked to withdraw $1,000. The account balance was $1,072. Appellee drew a cheque payable to Appellant and mailed it to the wife at her residence. The wife endorsed the cheque and cashed it. Appellant sues Appellee for the funds. Taylor v Merrill Lynch, Pierce, Fenner & Smith, Inc. District of Columbia Court of Appeals, 1968. 245 A.2d.426 in Business Law, Schantz/Jackson

14. Case Study: Agency One making payment to an agent has the burden of showing that the latter had express or apparent authority to receive such payment on behalf of a creditor. The only question is whether making the check payable to appellant under the present circumstances constituted payment to him. We hold that it did not. Taylor v Merrill Lynch, Pierce, Fenner & Smith, Inc. District of Columbia Court of Appeals, 1968. 245 A.2d.426 in Business Law, Schantz/Jackson

15. Case Study: Duty of Agent The plaintiff was a builder. The defendants were auctioneers and estate agents. The plaintiff commissioned the defendants to act as agents to sell property belonging to the plaintiff for $2,500 at an agreed fee. One month later, the defendants communicated an offer of $1,900 from a 3rd party which the plaintiff refused. The offeror later offered $2,100 and as the defendants said they could get no more, the plaintiff agreed to sell. The defendants kept $50 as their fee. The plaintiff later discovered that the defendants had received a $20 commission from the buyer. The plaintiff sues for the $50 and the $20. Andrews v Ramsay and Co [1903] 2KB 635 in Understanding Commercial Law, Gerbic/Lawrence 4th Edition

16. Case Study: Duty of Agent An agent who breaches his duty of loyalty also forfeits any fee, commission, or other compensation provided for by the terms of the agency. An the agent is liable for any damages incurred by the principal by reason of the breach (e.g. where the agent sells the property at less than a fair value to an innocent third party who is entitled to keep the property). The plaintiff was entitled to recover both commissions from the agent. Where an agent takes secret commissions, the principal can recover it, plus any commissions the principal has already paid to the agent. Andrews v Ramsay and Co [1903] 2KB 635 in Understanding Commercial Law, Gerbic/Larence 4th Edition

17. Case Study: Agent’s Duty The plaintiff owned a steamship. The ship was mortgaged, and payments were in arrears. The plaintiff sent the ship to China for sale there via agents, Gilman & Co. Their authority was to sell for no less than $90,000 in cash, and had authority to appoint sub-agents. Gilman appointed defendant Alt who had business in Japan, to try and sell it there. The plaintiff was informed of this. Alt told Gilman he was having difficulty in selling the ship, and offered to buy it himself for $90,000, but in fact he had already negotiated a sale in Japan for $160,000. He got the ship and later sold it for his own $70,000 profit. The plaintiff discovered the full facts some time later, and four years after the sale, the plaintiff sued Alt for an account and payment of profits made by Alt as his agent. De Bussche v Alt (1878) 8 Ch D 286 in Understanding Commercial Law, Gerbic/Lawrence 4th Edition

18. Case Study: Agent’s Duty Was there any privity of contract between Alt and the plaintiff? If yes, had the agency ended before Alt sold the ship in Japan? If no, had the plaintiff lost lost the right to sue by taking 4 years to take proceedings? The authority to appoint a sub-agent as substitute brought the plaintiff and the defendant into an agency contract situation. The plaintiff had never ended the agency, and so Alt sold him the ship in Japan as plaintiff’s agent. The reason for the delay in suing was the evidence and the facts had been hard to obtain, so the delay did not prejudice the plaintiff’s case. De Bussche v Alt (1878) 8 Ch D 286 in Understanding Commercial Law, Gerbic/Lawrence 4th Edition

19. Case Study: Secret Principal The plaintiff had put on a play at the defendant’s theatre. Takings were poor. After much dispute, the defendant forced the play to be taken off. The relationship between the plaintiff and the defendant deteriorated, and the defendant barred the plaintiff from the theatre. 2 months later, the plaintiff tried to buy 2 tickets for a new play in the theatre, but the defendant refused to sell them. The plaintiff had a friend buy the tickets for him without saying who they were for. The plaintiff was refused admission and sues for damages. Said v Butt (1920) 3 KB 497 in Understanding Commercial Law, Gerbic/Lawrence 4th Edition

20. Case Study: Secret Principal Could the plaintiff succeed, as the principal in an undisclosed principal situation? There was no contract. This was because the identity of the plaintiff was a vital factor to the defendant, so the plaintiff could not claim the benefit of the contract. Said v Butt (1920) 3 KB 497 in Understanding Commercial Law, Gerbic/Lawrence 4th Edition

21. Harvey v Facey (1893) AC 552 Harvey wanted to buy a property from Facey and telegrammed: “Will you sell us Bumper Hall Pen? Telegraph us your lowest cash price”. Facey sent back a telegraph stating: “Lowest price for Bumper Hall Pen $900”. Harvey returned: “We agree to buy Bumper Hall Pen for $900, being asked by you”. The seller refused to complete the arrangement and Harvey sued him in Court.

22. Harvey v Facey (1893) AC 552 There was no contract, so Harvey could not force the sale to go ahead. Harvey’s initial statement was an inquiry. Facey’s reply was only information as to the minimum price, if any sale should take place, and definitely not an offer. The reply by Harvey could not be an acceptance, and was really just an offer.

23. Harris v Nickerson (1873) LR 8 QB 286 The defendants advertised details of a sale of furniture by auction. Harris travelled to the place stated in the advertisement and then found out that the sale was not to go ahead. Harris sued for damages for his travelling expenses on the grounds of breach of contract.

24. Harris v Nickerson (1873) LR 8 QB 286 Harris failed in his action. There was no contract on the basis of offer and acceptance. The advertisement was not an offer, only a statement of intention. Any offers (and contracts) would not take place until later at the auction itself.

25. Byrne v Van Tienhoven (1880) 5 CPD 344 1 October: Van Tienhoven posted an offer to sell to Byrne. 8 October: Van Tienhoven posted a letter of revocation to Byrne. 11 October: Byrne received the offer and telegraphed back an acceptance. 20 October: The letter of revocation reached Byrne. Byrne sues for breach of contract.

26. Byrne v Van Tienhoven (1880) 5 CPD 344 There was a contract in existence. The offer had not been revoked because communication of the revocation had not reached the offeree prior to acceptance. The rule of postal acceptance does not apply to revocations.

27. Dickinson v Dodds (1876) 2 Ch D 463 On 10 June, Dodds made an offer to sell his house to Dickinson for $800 and said it would be left open until Friday, 12 June, at 9:00am. On Thursday, 11 June, Dodds sold the property to a third party. That evening a mutual friend informed Dickinson of the sale. On Friday before 9am, Dickinson gave the vendor a written acceptance of the offer. The acceptance was refused by Dodds.

28. Dickinson v Dodds (1876) 2 Ch D 463 There was no contract, because a valid revocation had been made. The law is not concerned with how the revocation is made, only that it reaches the offeree prior to any acceptance. On getting the news of the sale it was clear to Dickinson, that Dodds no longer wanted to sell him the properties, and so his communication was just as valid as any personal revocation.

29. Eliason v Henshaw (1849) 4 Wheaton 225 Eliason made an offer to buy flour from Henshaw. The offer arrived in a wagon and stated that the answer be sent in the wagon, which was returning to Eliason. Henshaw sent his acceptance by post, because he thought that it would be quicker. The acceptance arrived after the return of the wagon. Eliason refused to be bound by any contract.

30. Eliason v Henshaw (1849) 4 Wheaton 225 There was no contract so Eliason did not have to buy the flour. An offeror may stipulate a method of acceptance, and if that is done, then the offeree must accept in the manner stipulated. If the letter arrived before the wagon, then that would be a valid acceptance, because the offeror did not refuse a more expeditious method of acceptance. If “wagon only” had been stipulated, only this method was allowed.

31. Lucy v Zehmer Supreme Court of Appeals of Virginia, 1954 The Lucys want to enforce a contract whereby the Zehmers sold them land based on a writing “We hereby agree to sell to WO Lucy the Ferguson Farm, complete for $50,000, title satisfactory to buyer”, signed by both Zehmers. Lucy had offered $50,000 cash at the time, Zehmer thought it was made in jest, after both had been drinking. Zehmer wrote out the ‘memorandum’, induced his wife to sign it, Lucy pocketed it and wanted to give Zehmer $5.00 to bind the contract, which Zehmer refused. Zehmer then told Lucy he was just joking. Lucy said he now owned the farm and left.

32. Lucy v Zehmer Supreme Court of Appeals of Virginia, 1954 Lucy testifies he had preciously offered money for the farm and Zehmer had backed out. He had asked Zehmer “I bet you wouldn’t take $50,000 for that place”, and Zehmer answered: “Yes, I would too; you wouldn’t give fifty”. Lucy said he would, and Zehmer wrote out the note on the back of the restaurant check. Lucy then said Zehmer better write it out saying “We…” because Zehmer’s wife would have to sign, too, and Zehmer tore up the note and re-wrote it, signed it and had his wife sign it. The next day Lucy called his attorney, who reported favorably 10 days later. Upon request to settle, Zehmer replied in writing he had no intentions to sell, and Lucy sued. Zehmer testified at Court, that he had had too much to drink. Zehmer claims the writing was intended to bluff Lucy into admitting that he didn’t have the $50,000.

33. Lucy v Zehmer Supreme Court of Appeals of Virginia, 1954 Zehmer claimed he was “high as a Georgia Pine”, which is inconsistent with his attempt to testify in great detail as to what was said and what was done. The record is convincing that Zehmer was not intoxicated to the extent of being unable to comprehend the nature of and consequence of the instrument he executed and hence the instrument is not to be invalidated on that ground. The appearance of the contract, the fact that it was negotiated over 40 minutes, the objection to the first draft, the re-write, the provisions as to title, the signing by Mrs Zehmer, furnish persuasive evidence that the execution of the contract was serious business, rather that a jesting matter. Lucy actually believed, and he was warranted in believing, that the contract represented a serious business transaction and a good faith sale and purchase of the farm. In contracts “We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intentions.” The mental assent of the parties is not requisite for the formation of the contract. If the words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed statement of his mind. So, a person cannot set up he was merely jesting when his conduct and words would warrant a reasonable person in believing that intended a real agreement.

34. Hyde v Wrench (1840) 3 Beav 334 Wrench offered to sell a property to Hyde for $1,000. Two days later, Hyde made an offer to buy for $950. This offer was refused by Wrench. Hyde then wrote to Wrench saying that he would now pay $1,000. Wrench claimed there was no contract between the parties and Hyde sued in Court for specific performance.

35. Hyde v Wrench (1840) 3 Beav 334 There was no contract. The offer of $950 was a counter-offer, which had the effect of ending the original offer, so there was no longer an offer of $1,000 to accept.

36. Carlill v Carbolic (1893) 1 QB 256 • Carbolic makes and advertise medical smoke balls. Its ad said “$100 will be paid by Carbolic Smoke Balls to any person who contracts influenza, colds or any diseases, after having used the ball three times daily for 2 weeks. $1,000 is deposited with the Allied Bank, showing our sincerity in this matter. One Carbolic Smoke Ball will last a family several months. The ball can be refilled for $.05”. • The plaintiff decided to buy a ball. She used it for 2 months, when she had influenza. • She asked for payment, was refused and sued, on grounds of a contract.

37. Carlill v Carbolic (1893) 1 QB 256 • There was a valid contract in all respects. • The offer went beyond a puff. • An offer can be made to the world at large and then can be accepted by anyone. • By the terms of the offer, no communication of the acceptance was necessary. • The plaintiff’s consideration consisted of inhaling three times a day for 2 weeks or more. Adequacy of consideration is irrelevant.

38. Felthouse v Bindley (1862) 11 CB (NS) 869 • Felthouse wrote and offered to buy his nephew’s horse for $30. He went on to say: “If I do not hear from you, then I will consider the horse mine at that price”. • The nephew decided to sell the horse to his uncle, but did not tell him. He was arranging an auction for his horses, and advised the auctioneer that the horse was to be kept out of the sale. • The horse sold by mistake and Felthouse sues.

39. Felthouse v Bindley (1862) 11 CB (NS) 869 • There was no contract, so the uncle was not the owner of the horse and must fail in his action. • No acceptance had ever taken place. • Silence or failure to act is a common human condition and does not always unequivocally indicate acceptance of a contractual offer. • The terms of the offer did not convert silence into an action.

40. May & Butcher v The King(1934) 2 KB 17 The plaintiff made an arrangement to buy surplus war tentage from the government at “a price to be agreed upon from time to time”. Difficulties in setting the price occurred and the parties went to Court.

41. May & Butcher v The King(1934) 2 KB 17 There was no contract, because the parties had failed to agree on essential terms. The parties had ‘agreed to agree’, and this was insufficient to show that the parties had intended to be bound by the arrangement.

42. Scammell v Ouston (1941) 1 All ER 14 The parties made an agreement to buy and sell a car on ‘hire purchase terms’. The actual terms were never established by the parties. The sellers refused to provide the van, and the buyer sued for non-delivery. The sellers pleaded no contract existed, because even though there had been an offer and acceptance, there had been no agreement on essential terms.

43. Scammell v Ouston (1941) 1 All ER 14 There was no contract, because there was no evidence of clear agreement between the parties. In the motor trade alone, a wide variety of hire purchase terms existed, so the term was meaningless. The arrangement never got beyond the negotiation stage. The parties did agree that credit should be given under a hire purchase agreement, but the agreement never completed, by establishing what the hire purchase terms were to be.

44. Steadman v Steadman (1974) 2 All ER 977 The parties are husband and wife, and joint owners of a house. After separating, they met at a maintenance hearing and orally agreed that the wife would sell her share in the house to her husband for $1,500. She would give up maintenance rights, and the husband would pay arrears of $100. The agreement was announced in Court and approved. The husband paid the arrears and had his solicitors send the sales agreement to the wife. The wife did not wish to sign, and the husband sued for specific performance. The husband claimed as part performance: $100 paid, advising the Court of the agreement, and instructing his solicitors.

45. Steadman v Steadman (1974) 2 All ER 977 There were acts of part performance and the plaintiff was entitled to specific performance. Payment of the $100 was not an act of part performance, because it was made after the Court hearing and could easily be regarded as relating to that rather than a contract. However, it did occur with advice to the Court of an agreement, abandonment by the husband of total remission of maintenance and preparation and forwarding of a transfer. Together, these amounted to acts of part performance because they were carried out on reliance of a contract. In the circumstances, it would be inequitable to allow the wife to rely on the defense of lack of writing. She was present in Court, and heard the husband announce details of the oral agreement, and made no objection. She also had received $100 on the strength of the agreement.

46. Stilk v Myrick (1809) 2 Camp 317 A ship on voyage from England to the Baltic and back lost two of its crew, who deserted on the outward leg. The captain, unable to find replacements, promised on behalf of the owner to divide the share of the deserters’ wages among the rest of the crew if they worked she ship home short-handed. The owner repudiated the extra wages bonus.

47. Stilk v Myrick (1809) 2 Camp 317 The promise of extra wages was not enforceable. This was because there was no consideration for the promise, as in sailing the ship home the crew had only done what they were already bound by the original contract to do; this included dealing with normal emergencies, of which minor desertions were one.