Table of Contents
The below study is created to examine different scenarios regarding the company law of Hong Kong. Examining the business examples below will provide the audience and students a better understanding of the structure and priorities of the company legislation and regulations, so they will be able to navigate easier in the legal field after finishing their studies and starting working as a company lawyer. It is important to review both legislation implemented by the Chinese government and recommendations when analyzing the two cases, therefore, both the legal requirements and government guidelines will be taken into consideration. As both of the scenarios are complex, they are going to be examined from different aspects. When A is the Wholesaler and B is the retailer, they will have an extended responsibility towards customers. The hierarchy of responsibility can only be determined by studying the relevant bill of the Hong Kong corporate law. The responsibility of Party C has to be determined, regarding timely and safe delivery.
The current procedures are based on the Contract Law guidebook created by Betty Ho (Ho, B. 1994.). However, it is crucial to follow up the development since the 1997 handover, as – just like the English and American corporate system – the Hong Kong legislation has changed significantly as well. (Fisher, M., Greenwood, D. 2007.) As the English common law has a great influence on the Hong Kong system, it is also beneficial for the researchers to find relevant international examples for similar corporate situations. Still, the main purpose of the study would be to create a better understanding of the Hong Kong corporate legislation’s main principles. The essay will examine two different cases: one when Party C made a mistake regarding a late delivery, which caused financial loss for the end user and Party D, while in the second scenario the level or responsibility from all sides need to be clearly determined, based on the recommendations of the Hong Kong Law. As there are not only linear structures of responsibilities present, every level needs to be examined according to their involvement and the type of contract.
Scenario 1. Late Delivery caused by Party C's Negligence
In this case, there is no evidence of written contract between Party A and Party C. There is also no evidence that Party A had a written contract with the retailer, therefore, it is important to look for other types of evidence. The email messages between the two companies are clearly stating the delivery date, however, there is no information about the request sent over to Party C with the right date. From the description of the scenario, it is evident that the mistake was created by Party C, therefore we would assume that they were informed about the delivery time and schedule. When examining the case, parol evidence needs to be investigated. (Fisher, M. and Greenwood, D. 2007. p. 151.) The parol evidence in this case is the company's emails, and they will need to be certified by the court to be submitted for the case. As there are three different interest groups involved, it is crucial to examine the level of involvement and responsibility, as well as the evidences. As there were two different parol evidences to be used as a supplement for a corporate contract, they need to be examined separately.
Party A was made responsible for the delivery of products by its customer. Party B did not get involved in the delivery and clearly stated that it was Party A's competence. Therefore, as the delivery date was clearly stated by Party B and confirmed by Party A, “Party A will be responsible for the delivery of the products and the shipment transit risk should be borne by Party A” it is evident that party B did not make any mistakes when placing the order. Although the confirmation is not written in an official form, the “no problem” statement indicates that the delivery would be on time. A negligence claim can be submitted by both Party A against Party C, and also by Party B against Party A. There is no evidence of payment or contract aboParty Dut the delivery assigned to Party C, therefore, this issue will need further investigation. While, there is no base for Party B to file a case against Party C, as they had no written or oral contracts; party C made Party A responsible for the goods, risk and delivery. There are different outcomes of the case, based on which party takes the first legal step. In the following part the two different scenarios will be examined.
Legal Advise to Party A
In case Party A decides to file a case of negligence and financial loss, they have the evidence of the emails and payments to prove the contract did take place. The company would have potentially had a loss of profits, reputation and business, and they would be eligible for a compensation. As the delivery did take place, there is no option to ask for a refund, however, they would be able to get a compensation for the inconvenience, business- and financial loss. As Party C in this case is an innocent buyer, there will be nothing to be held against the company, as they were clear in their communication. Although they did not enter a formal agreement with Party A to deliver the goods, the court would rule that they acted out of trust. The company will be eligible for a compensation of damages, provided that they are able to bring up enough evidence. There were no illegal business actions involved, of which Party C would have known, therefore, this case would be simple from their perspective. However, there was no written contract with disclosures regarding late delivery. In some cases, late delivery penalties are issued when the goods are not supplied in time. For example, there are some cases within the oil industry, where this is common. (Tohmatsu, D. 2008. p. 411.) This usually occurs when there is a penalty clause within the contract, and as this is not present in this case, evidence needs to be submitted to the court to prove the level of financial and reputation loss of Party B. Different relating regulations have been retrieved regarding the non-delivery of products, however, there is no clear indication whether these relate to the case studied.
“Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, the place ofdeliveryis the seller’s place of business, if he has one, and if not, his residence:
Provided that, if the contract is for the sale of specific goods, which, to the knowledge of the parties when the contract is made, are in some other place, then that place is the place ofdelivery.
(2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.
(3) Where the goods at the time of sale are in the possession of a third person, there is nodeliveryby seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf:
Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods.Want an expert to write a paper for you Talk to an operator now
Case between A and C – Legal Advice for Party C
There is another paragraph, relating to the compensation level for non-delivery. We can use the paragraph to successfully determine the damages caused by the late delivery, just like we would if the goods were not delivered at all. We need to establish whether there was an acknowledgement from Party C's side sent to Party A, confirming the address and the date of delivery. In this case, we will assume that this did take in place, as the case study states that the responsible party was Party C. The first paragraph of the regulation states that if there was no time fixed for delivery, the supplier would be responsible for supplying the goods in a reasonable time. However, the proof to be submitted to the court states that there was an acknowledgement of delivery. Although Party B (B) stated that “the delivery must not be late”, they did not set any penalty clauses, therefore, the amount of compensation would be determined by the court. The amount will depend on the level of financial and reputation loss and the length of delay. In this case, Party B might be able to claim compensation for loss of business, provided that they had market demand for the 10.000 units, also reputation loss. If Party B (C) can prove that they lost a larger business because of the delayed delivery, or an existing customer, they would be eligible for further amounts of compensation. The court would not take into consideration the relationship between Party A and Party C, as it is party A-s responsibility to ensure that the delivery is carried out in a timely manner.
Remedies of buyer (chapter 26. section 53.)
Again, we need to examine the similar law regarding non-delivery, and this can be found in Chapter 26. the buyer (C) has the right to file a court action against Party A, and the compensation is based on the level of loss caused by the negligence of buyer. If there is a difference in the market price at the time of the delivery and the proposed date, this amount of difference should also be paid by Party A.
(1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller fordamagesfor non-delivery.
(2) The measure ofdamagesis the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract.
(3) Where there is an available market for the goods in question, the measure ofdamagesis prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed fordelivery, then at the time of the neglect or refusal to deliver.
Legal advice for Party B
To establish the basis for compensation claim initiated by A towards C, we need to review Article 19 within the Application of the Montreal Convention.
“Party C is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, Party C shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.“(Gazette number L.N. 215 of 2006)
It is evident that Party A suffered business damages, because of the wrongful actions of C. They are due to be taken legal action against the company and a compensation claim is more than likely to be submitted against them. The case would be designed to determine whether A had enough measures in place to ensure timely delivery and whether they communicated their requirements clearly towards Party C. We have already assumed that this happened, therefore, Company A would be eligible for a compensation for the loss of business and reputation, in case they are able to provide the claims court enough evidence that the company did everything for the goods to be delivered in a timely manner. Delivery notes and administration documents would be needed to support the case. They would also need to prove that B did not do everything to avoid delay in delivery, therefore, the neglect of contract did take place.
Legal advice for Party C
Party C would need to work together with their legal team to prove that they did have measures in place to ensure that the delivery would be made on time. Unless they would be able to prove that one of the other parties (A or B) are responsible for the delay – even partly –, they would need to prepare for paying an amount of compensation. The company needs to prove that they kept in touch with Party A, and that the delivery did take place.
As there is no legal contract, the company might be able to shift the responsibility over to Party A, provided that the company is unable to present written confirmation of timescales sent by Party C. The outcome of the case will depend on the level of damages and legal documents presented. If there is no proof that the contract took place, Party A will be obliged to prove that the agreement was created between the parties.
Scenario 2. Compensation claim for health damage
In the following scenario, the active parties in a potential claim would be Party B and consumer. Although there is an involvement of A and C in the process, the responsibility can be determined from Party B to its customer. Party B did ask about the originality of goods in the email, but not about the CE Certificates and quality checking process. The details of the case will be expanded on below. The following study will provide legal advice for both Party D and Party B, taking into consideration the circumstances, events prior to the problems occurring and the level of responsibility.
Legal advice for Party D (D)
It is important that the contract took place between Party D and Party B. There were no other parties involved, Party D might have known of. It is not the buyer's responsibility to check the origin and safety of goods. In this case, Party D needs to prove different things based on the level of compensation they would be looking to file a case for. The reasoning of the case would be easy, and it should start with proving that the merchandise was sold. Different ways of proving this might be created: original invoice, wrapping or any advertising material retrieved by Party D, showing that the item was marketed as a trademarked and safe toy. The recommendations for age are also to be checked on the original packaging, to prove that Party D did act in the best interest of his son. Proving that Party D purchased the merchandise from B can be done through retrieving invoices or witness statements, if the above are not available. Party D would be eligible for a damage of health compensation, and the fact that his son was a talented and award-winning painter, the loss of his remaining eye would be taken into consideration excessively. The fact that the child had lost one of his eyes previously would not be a direct result of Party B, therefore, this fact might or might not be taken into consideration.
Another question is whether the user manual and safety warnings were clearly displayed on the item. If there were any of these, a case needs to be created to prove that the child and his parents did adhere the recommendations, and used the toy, according to the description.
The parents of the child would also need to provide evidence to the court that the loss of eye was a direct result of using the toy, and this can be done by witness statements or medical reports. The reason why the accessory sprang out, hitting the one remaining eye of the child needs to be established. The Gundam TOYs might have been faulty, or below standard, which would establish Party A’s responsibility. Medical examiners and doctors might need to be involved in the case to fully examine the health effects and the contributing circumstances. For example, the level of damage, speed of seeking medical help and the direct connection between the use of the toy and damage of health. There is also a need to prove whether the damages are recoverable.
Finally, Party D also needs to provide proof that the child was a talented painter. They need to represent different awards and certifications, to prove that the career options of the boy were reduced as an effect caused by the negligence of Party B.
Chapter 424 of Schedule 1 says that all the European standards should be followed when marketing and selling toys to end customers, especially children. “(3) A person who contravenes subsection (2) commits an offence.” Therefore, there is a legal case to be submitted against Party B, based on the fact that the toy was not safe for children.
Another approach to the case would be initiated from the fact that the company sold counterfeit and fake toys, as well as the original Gundam TOYs. This, itself is a crime and should be punished. The negligence claim in this case should be based on the fact that the company (Party B) did not only do everything to check the certificates of the toy, but they also endangered the health of all the children they sold the toy to. The case would be still based on the damage and compensation, however, the company would also face governmental prosecution. Although the Gundam TOYs were original, the fact that they had the relevant CE certificates attached is not established. Party D would win the compensation claim, in case the other party is unable to prove that there was any negligence from Party D.
Legal Advice for Party B
Party B will face prosecution based on the fact that they failed to check the certificate of a merchandise and ensure that it was an original and safe item. Party B’s legal team will need to work on collecting proof that there were measures put in place to check the origin of goods. As the Custom Department has already confirmed the fact that the company sold fake toys, there is no way to deny this. The level of involvement in the crime would still be questionable. The company needs to submit the copy of the email to Party A to prove that they were in the belief that the company sold original items. Still, B would face many challenges by the court, based on the TRADE MARKS ORDINANCE Law; Chapter 559. Schedule 4. The bill clearly states that every item needs to have a trademark and certification mark. It is Party B's responsibility to check the originality of goods, and they should have asked for a confirmation of origin to reduce health and legal risks within the company.
According to the Legislative Council Brief,
Children’s products must comply with children’s product standards”.
(2) Section 5(1) is repealed and the following substituted – “(1) A person must not manufacture, import or supply a children’s product unless the product complies with all
the requirements contained in at least one children’s product standard that is specific to the product.”
The fact that Party A also sold and marketed the popular Bakugan Battle Brawlers counterfeit toy would have no relevance in this case, however, when starting an investigation within the company, different penalties would be issued by the Customs Department, and the reputation loss of Party A would be significant. Selling counterfeit merchandise would be considered as a crime, however, creating permanent health damage for customers would be a subject of a compensation claim. The company would suffer reputation and business loss, which would even make them go out of business. They would be able to file a case against Party A, based on the exchange of emails, however, there is no proof that Party B ever asked for a certificate of origin, legally required by Chapter 324, Section 4.) As the company is proven to have committed the crime, they would need to retrieve any communication with Party A regarding the originality of goods, apart from the email. The toys should have come with a certificate of trademark and origin, and the current policies of the company regarding the initial checks of merchandise will be examined. Company workers and retail managers would be questioned as witnesses, to provide an insight into the selection and approval process of retail merchandise. The legal system differentiates between counterfeit and substandard goods, just like the WFO. In this case, it is clear that the goods were fake, and unfortunately, based on the British legal system’s policies: ignorance of the Law is no excuse.