Company Law 266

How to study Law 266:

The following information is designed to help your studies in Company Law 266.
The materials below contain important information on how to effectively and easily cope with the
written requirements of this unit. Spend some time now and read the following pages thoroughly, as it
will be your ticket to success in this unit.
Tutorial, assignment and examination questions in business law can be of two types:

Essay questions; and

Problem (hypothetical fact situation) questions.

Essay Questions:
An essay question is one that requires students to write an essay examining or discussing a particular
area or principle of law. Words such as write notes on, explain and compare and contrast are
indicative of essay questions.
You should ensure that your essay contains an introduction, the body of the discussion and a
conclusion. In answering essay questions you should give as much detail as possible and ensure that
what you have written is relevant to the question that is asked.

Legal Problem Questions:

Answering legal problem questions is a key skill in legal studies.
A problem question is different from an essay question in that it presents you with a hypothetical fact
situation that raises questions about someones legal liability.
In answering a problem question you should remember that the question is designed for two main
purposes:

To allow you to show your knowledge of particular areas or principles of law; and

To allow you to demonstrate your ability to apply the law to a given set of facts in order to
conclude whether or not somebody could be legally liable.

In showing your knowledge and understanding of a particular area or principle of law, you should be
as detailed and as relevant as possible. Your marker or examiner will assume that what you have
written is all you know about that area or principle of law.
Some tutorial (and assignment) questions and a choice of examination questions are based upon the
four-step process to problem questions which is discussed below. You will be asked repeatedly
during semester to use this technique.
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The four step approach to answering legal problem questions:

A problem question cannot be effectively answered in an essay format. The following format is
suggested for answering problem-type questions where you are given a large amount of scope to
comment on the facts:
If a question is broken into several parts, treat each part as a separate question.

Step 1:
Identify the area(s) of law which needs to be explained in order to answer the question. Usually this
is easily worked out from the (key words used in the) question itself. One sentence is all that is
required for this step. For example, the area of law relevant to this question is creation of an agency
by necessity.

Step 2:
Discuss the principles of law relevant to the area of law. This is your best opportunity to obtain
marks by showing that you know the legal principles applicable to that area of law. This would usually
also require a discussion of the facts and decisions of relevant cases, and a statement of the
important principle of law that a case makes clear should be provided. The extent to which you will be
required to provide detail will of course depend upon the marks and time allocated to that problem
when you are answering examination questions, or the maximum word count allowable for an
assignment.
In step two you should explain the principles of law as if to someone who knows nothing about
business law. In that way you will make sure that you explain at the level and in the detail that is
required.
Remember that if you are writing a test or an examination, you do not have to quote citation of a case
just the names of the case. You can write very brief facts, but importantly the decision of cases is
required.
Please do not mention the facts or parties of your hypothetical question in step two. These are
introduced in step three.

Step 3:
Apply the law to the facts of the question in a reasonable and logical manner. Consider (as far as it
is applicable) each aspect or element of legal criteria discussed in step two and decide whether it is
satisfied in the scenario that you are considering. For example you could say Alex was entrusted with
the principals property because. It is always necessary to explain which of the facts of the question
indicate that any particular element of the action has been satisfied (or is lacking).
All aspects of the problem should be discussed objectively. Usually this is best achieved by first
presenting the point of view of the person initiating the case and then, second, the person defending
or responding to such an argument. You should avoid "siding" with a particular person in the problem
as this indicates bias and is unlikely to allow for a proper explanation of the law. In other words, try to
objective with your application of the law to the facts presented.
It will often be necessary for you to make an assumption if your hypothetical facts do not give you
enough detail. For example, you may not be told the cause of someones loss, and depending on that
cause liability may rest with one party or the other. Please make, and state, your assumption(s).

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Step 4:
State possible conclusion(s) Please note that many problems do not have a definite yes or no
answer until the matter has been decided by a court of law. It is best to state your conclusions in
language that reflects this reality. Use statements like it is likely that here.
Your conclusion can usually be put in one or two sentences and should include a likely remedy, if any.

Allocation of marks for problem questions

Step two attracts most of the marks, then step three as it is the second most important step. Steps
one and four make up the remainder of the marks (i.e. how you have sent out your answer, grammar,
etc).

Using the Text and the Recommended Texts

You must be absolutely clear about how you may and may not utilise your textbook(s) when dealing
with assignment questions. The following points may be of assistance:

express your answers in your own words in the way that you understand the application of the
law;
you may quote from your textbooks but make sure that your citation is correct e.g. Harris, J.
2012, Australian Corporate Law, Butterworths at page 123.;
cases must be correctly cited as shown in your textbooks eg Public Trustee v Shultz (1964) 38
A.L.J.R. 128;
do not copy segments out of references or texts and attempt to portray these as your own
work as this can be held to be plagiarism which is in direct contrast to university policy.
The preferred reference style for Curtin is Chicago Referencing.

Example Question
Kelvin Tan, a Perth resident, recently commenced a business selling hardware and fixings to the
mining industry. He operates his business from the garage in his backyard and he has an office
inside the house where he processes the paperwork. The house is registered in the names of Kelvin
and his wife Lindy. The couple still have a $200,000 mortgage in favour of Big-Bank. Lindy and the
couples teenage children sometimes help out in the business, mainly dealing with online orders.
Kelvin supplied some bolts to a company to secure a hydraulic lift to a drilling rig. However, the bolts
were not high tensile, as requested by the customer. The weakness in the metal caused the hydraulic
lift to break which resulted in significant damage to both, the drilling rig and the lift itself. The owners
of the damaged equipment have now commenced legal action.
With reference to the above set of facts, and using the four-steps-process, discuss who may be liable
for the customers losses, and to what extent.
Example Answer in POINT-FORM for 4 Steps
Area of law:
Sole traders - Unlimited personal liability
Principles of law:
Brief introduction of nature, benefits and disadvantages of sole trader
Business is not legally separate from the owner
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Therefore owner is responsible for all debts incurred by the business

If the assets of the business are insufficient to cover all debts, the sole trader risks losing their personal assets
(Background information which you may or may not know: Both, sole trader or creditor(s) can apply for
bankruptcy if sole traders debt exceeds specified amount. Certain assets cannot be touched, e.g. low cost motor
vehicle, basic household items, etc. All this is governed by the Bankruptcy Act 1966 (Cth) )
Sole traders are responsible for the acts of their employees and agents

Apply the law to the facts:

Facts state that Kelvin recently commenced a business which he operates from his garage. Kelvin is a sole
trader. Even though Lindy and the children sometimes help out there is nothing to suggest that they are
partners. (A partnership is defined in section 7(1) of the Partnership Act 1895 (WA) as the relation which subsists
between persons carrying on a business in common with a view to profit). Helping out does not amount to
carrying on the business in common. (Further, the children are still minors, therefore lack contractual capacity).
The sole trader is personally responsible for the debts incurred by the business, even if the debts exceed the
assets of the business.
The facts state that damage to the lift and the rig is significant
Kelvin has recently established the business. He operates the business from his back yard. Assume a small
assets base. It therefore appears that the business assets will not be sufficient to pay the damages likely to be
awarded to the plaintiffs, should the matter proceed to judgment. It is likely that at least some of Kelvins personal
assets will be absorbed.
Personal assets: Kelvin and Lucy have some equity in the family home, but no details provided otherwise. Apply
here whatever makes sense.
(Note: Please ignore the fact that the house is jointly owned by Kelvin and his wife. This concerns a different area
of law).
Conclusion:
It is likely that Kelvin will have to sell the business and at least some of his assets to pay the owners of the
equipment for their losses.
Please note that most areas of law or principles of law studied in this unit are more complex that unlimited
liability of sole traders. As you work though the materials you will find that many questions require you to discuss
principles of law, sections of legislation and decided cases in much greater detail. Problem questions need to be
answered in the four-steps-format. Please also note that you are required to write sentences and paragraphs
when preparing your answers. It is not acceptable to submit point-form answers.

Company Law 266

Assignment Question
Curtin Business School

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