Business Law

Name: Mohmedfaizal Kadri Roll No. : D-302422 Assignment No.: 01 (Hadley v/s Baxendale, Salomon V/s Salomon, Ashbury railway carriage Case) Date: 23rd January, 2013

CASE NO. 01 : HADLEY V/S BAXENDALE

Introduction :
This case is based on the breach of contact. There were plaintiffs who operated the mill. Mill was doing well but because of the breakdown of machine causing them to shut down the mill. Some of the components of their steam engine broke so they contacted with some of common carriers to take their engines components to W. Joyce and company to collect created new components. As neglect of the Defendant delivery was delayed and it caused plaintiffs mill. The mill was remain closed for longer time than expected. So Plaintiffs mill sued Defendant to recover the damages.

Findings about the case :

Plaintiff had a milling business that suffered loss by delivery delay and remain closed for longer period of time. Crank shaft component of the steam engine was broken and needed to send to an engineer so new component could be made and engine again work continue but in the mean time mill could not operate. Plaintiff contracted with the Defendant to carry the shaft to an engineer. That time defendant agreed and told plaintiff that it would be delivered on next day if they received the shaft by before noon. Because of the negligence of Defendant delivery of components was delayed so plaintiff did not received the new components for steam engine early as they should have. As a results they lost profits because of the stoppage of steam engine as business remain closed for long time. For breach and lost profits Plaintiff sued Defendant.

Judgement :
In the proceedings lower court jury founded for plaintiff and awarded 25 pounds to them. Court of Exchequer has reversed and ordered for new trial and also award should not include lost profit.
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 Conclusion :
From the analysing and discussion we can conclude that as per the rule after breach, the injured party can recover damages reasonably considered to arise naturally from a breach of contract and also damages within the reasonable contemplation of the parties at the time of contract. The main issue was that under what circumstances a breaching party should be held liable for consequential damages ? We can say that debtors are only liable for the damages foreseen which might have been foreseen at the time of the execution of the contract. When special circumstances are wholly unknown to the party who is breaking the contract and he at most could only be supposed to have had in his contemplation the amount of injury which would arise generally and in the great multitude of cases not affected by any special circumstances from such a breach of contract. Such consequences would not in all probability like it is obvious that in the great multitude of cases of millers sending off broken shafts to third parties by a carrier. But here in the case these special circumstances were never communicated by Plaintiff and the defendant. Thus, we can conclude that the loss of profits cannot reasonably be considered such consequences of the breach of contract as could have been fairy and reasonably contemplated by both parties when they made this contract of the component.

CASE NO. 02 : SALOMON V/S SALOMON

Introduction :
This Case of Salomon vs Salomon is about the decision and judgement of the house of lords in salomon v salomon & co. Ltd. Separate legal entity doctrine was a two-edged sword. Cases states that the creditors of the insolvent enterprises or companies could not be file a sue to the shareholders for the debts.

Findings about the case :

Many years ago an old man Salomon started the shoe business were britain enacted statute providing for the incorporation of business. Corporation than had to have at least seven shareholders in the company. Salomon formed corporation with that all seven shareholders being members of the family. The business of the salomon corporation eventually went under and leaving considerable unpaid debts of the company. Creditors argued in the court that shareholders should be liable for the debts of corporation as they were all related to old Salomon and the corporation was set up a mere sham.
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Company went into the liquidation and liquidators are argued that the debentures used by Salomon as security for debt was invalid on the ground of fraud. The judge Mr. Vaughan Williams J. Accepted the appeal ruling that since salomon had created the company solely to transfer his business. As the principle was liable for the debts to unsecured creditors and the company was in reality his agent and he also.

Judgement :
The court were held and decision in favour of the shareholders and old man Salomons relatives. The main fact was that the shareholders were all related to old man Solomon was irrelevant in determining the corporation legimately existed as a separate entity.

Conclusion :
Thus the individuals, shareholders were not held liable for the corporations debts. The court of UK appeal of anti semetic and felt salomon was a fraud and his company was a sham but the house of lords court stated that the company was properly set up and there was no fraud and thus Salomon was distinct entity from his company and his directorship and also shareholding and his rights as a secured creditor. From the analysis we can say various exceptional circumstances have been delineated both by legislatures and the judiciary in the England and also other countries when courts can legitimately disregard a companys separate legal entity such as where crime or fraud has been committed and although salomon case is cited in court to this day and it has met with the considerable criticism.

CASE NO. 03 : ASHBURY RAILWAY CARRIAGE

Introduction & Findings :
Here in this case of Ashbury Railway Carriage company the main objects set out in the companys memorandum were to make and sell or land on hire railway carriage and wagons and also other all kinds of railways plant, machines, fittings, rolling stock to carry on the business of mechanical engineers and general contractors to lease or purchase sell mines, lands and buildings to sell and purchase merchants, coal and other materials on commission as agents.

Judgement :
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Judgement plays a significant role, the construction of a railway as distinct from rolling stock was ultra vires. So therefore action for the breach of the alleged contract failed as it was void. So Richie cannot sue file against the company and contract will be null and void.

Conclusion :
Thus by analysing the case we can say that by applying t modern law to the Ashbury case directors committed a breach of duty by making the contract and might have been restrained by action by member of the company but as once the contract was made its validity could not be questioned provided that the making of the contract was act done by the company. By dealing with the company in good faith a person the power of the board of directors to bind the company or authorise others to do so, shall be deemed to be free of any limitation under the companys constitution. It is important for the consideration. The objection met by Sec 35A 1 that it was not such an act because the director had no power to make the contract.