Introduction to the company law practial applications

1
Introduction to the company law practial
applications

• Dr. Mitja Kovac, LL.M.
• 16.10.2009

2
Precontractual liability

• Mr. Bean was the owner of small bakery shop.
  Shortly the number of his consumers start to
  decrease. Yet, a manager of Mercator approached
  him and suggested that he could gain their
  license agreement. But, in order to obtain it he
  must pay 40.000 in cash to be introduced,
  trained ect. With the system. Mr. Bean indeed
  takes a huge loan, moves to better location, pays
  for the trainings ect. After two months manager
  returns and notifies Mr. Bean that he must pay
  additional sum of 15.000 to get the license. Mr.
  Bean goes mad and sues Mercator for the
  conclusion of contract!

3
RED OWL case

• Promisory estoppel!
• Doctrine of Culpa in contrahendo!

4
Separate legal personality

• Case study

5
Salomon v Salomon Co. Ltd (1879, AC 2)

• The issue of a company possesing a legal
  personality was established exactly in this case.
• This case established the importance of the
  limited company, limiting the liability of the
  members of the company to the shares/money owed
  to the company.
• Whilst it may have appeared unfair, the company
  was correctly registered and the creditors had
  been informed of the new status and hence the
  potential implications for trading with a limited
  company.

6
Macaura v Northern Assurance Ltd (1925, AC 619)

• Owner of a timber mill sold his timber to a
  company of which he and his nominees were the
  only shareholders. The company owed him money,
  and he took it upon himself to insure the
  companys assets, but did so in his own name
  (rather than through the company). When the
  timber was destroyed in a fire and Macaura
  attempted to claim on the insurance policy.
• Would he manage to get the insurance money?
• A contract of insurance requires that the person
  who insures the relevant item would be likely to
  sustain some loss or be subject to a claim by
  another who has suffered a loss. Only those with
  an insurable interest may enforce such a contract.

7
Answer

• In this case again the element of separate legal
  personality was again demonstrated. He was
  informed that he has no insurable interest in the
  companys assets and was thus ineligible to
  claim.
• The company and he were separate legal entities
  and the insurance should have been made through
  the company rather than than him personally!

8
Gilford Motor Co. Ltd. v Home

• A company must not be established to commit some
  fraud or to attempt to circumvent contractual
  agreements or the veil will be lifted to
  indentify the true nature of the undertaking.
• The veil of incorporation protects the members of
  the company. The veil can be lifted in the
  interest of justice and when it has been deemed
  relevant!