Monday 3 June 2024
Dear Subscriber,
I hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
Question: GlobalTech Ltd, a private company, has recently held its annual general meeting (AGM). During the meeting, the board of directors proposed a significant amendment to the company’s articles of association. The amendment would introduce stricter voting requirements for certain types of shareholder resolutions, effectively reducing the influence of minority shareholders. Jane, a minority shareholder holding 10% of the company’s shares, opposed the amendment but was outvoted by the majority shareholders. Jane seeks to challenge the amendment.
Which legal mechanism allows Jane to challenge the amendment to the company’s articles of association?
1. Derivative action under section 260 of the Companies Act 2006
2. Petition for unfair prejudice under section 994 of the Companies Act 2006
3. Application for judicial review under the Administrative Court’s jurisdiction
4. Action for breach of directors’ duties under section 172 of the Companies Act 2006
5. Claim for misrepresentation under the Misrepresentation Act 1967
Study Material: Revise FLK business law by accessing the videos on this playlist. If you are looking for reading material on this topic, I recommend* the title you can find here.
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Answer and feedback to last week’s question: Emily, a freelance graphic designer, entered into a contract with ABC Publishing Ltd. to create a series of illustrations for their upcoming book. The contract stipulated that the illustrations were to be completed and delivered by May 1st, with a payment of £5,000 upon delivery. Due to unforeseen personal issues, Emily was unable to complete the illustrations by the agreed date. ABC Publishing Ltd., needing the illustrations urgently, had to hire another designer at a cost of £7,000 to complete the work. ABC Publishing Ltd. is now seeking to recover the additional cost from Emily.
Which of the following statements best describes ABC Publishing Ltd.’s legal position regarding the breach of contract?
1. ABC Publishing Ltd. can recover the full £7,000 from Emily as it represents their additional cost.
2. ABC Publishing Ltd. can only recover £5,000 from Emily, which was the original contract price.
3. ABC Publishing Ltd. can recover the additional £2,000 incurred, as it is the direct consequence of Emily’s breach.
4. ABC Publishing Ltd. cannot recover any additional costs because Emily’s breach was due to unforeseen personal issues.
5. ABC Publishing Ltd. can claim for £12,000, the combined total of the original contract price and the additional cost.
Correct Answer: 3. ABC Publishing Ltd. can recover the additional £2,000 incurred, as it is the direct consequence of Emily’s breach, and they are entitled to expectation damages. Feedback: Under contract law, when a breach occurs, the non-breaching party is entitled to damages that put them in the position they would have been in had the contract been performed as agreed. These are known as expectation damages. In this scenario, ABC Publishing Ltd. incurred an additional cost of £2,000 because they had to hire another designer at £7,000 instead of the originally agreed £5,000. This additional cost is a direct and foreseeable consequence of Emily’s failure to complete the illustrations on time.
Expectation damages aim to cover the loss directly resulting from the breach, not to provide a windfall to the non-breaching party. Therefore, ABC Publishing Ltd. can claim the additional £2,000 incurred due to the breach but not more than that. This principle is supported by the case of Hadley v. Baxendale (1854), which established the rule that damages must be foreseeable and directly resulting from the breach.
Thank you for subscribing and let me know how you are getting on in your preparation through our Facebook Group. Feel free to forward this email to anyone you think will benefit.
You will hear from me again soon.
All the best
Dr Ioannis Glinavos
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