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Business and Corporations Law - Question 1

Issues:

There are two major issues that are found in the situation given:

  • Is there a valid contract between Terry Tyler and Susan with respect to the sale of gold bars?
  • Can Terry be held liable for negligence for the wrong advice given to Kevin with regard to investments?

Rules:

  • Postal Rules- Equity rules that govern the essentials of a valid contract when made via post.
  • Australian Consumer Law, 2010

Application:

  1. The general rules that are followed in the postal rule are slightly different than the ones followed in Australia. The first case which discussed the provisions with regard to Postal Rule was Adams v Lindsell[1]. In this particular case, it was said that ‘acceptance is complete only when the letter containing the acceptance of the offer is posted’. Three pillars of the postal rule were laid down along with the decision of this case. These three rules were:
  • A postal acceptance would prevail over a withdrawal of offer that had been posted previously but had not reached the offeree at the time when the acceptance letter was posted.
  • An acceptance shall give rise to a valid contract the moment it is posted and it out of the control of the offeree. The acceptance shall be considered valid even if the letter is delayed or lost by the postal company and does not reach the offeror on time.
  • A valid contract is made exactly at the moment the acceptance letter is posted. Any other contract which may be entered into subsequently by the offeror with respect to the item of contract shall be considered void.

This decision was reiterated in the case of Henthorn v Fraser.[2] The facts of Henthorn v Fraser[3] are similar to those of the given situation and it may be held that the revocation of offer was communicated to Terry a day after he had already posted his acceptance to the previous offer. An argument may be made from the other party that the letter quoting the price of the gold bars was an invitation to offer and not an offer for sale,[4] but it can be proved as the letter dated 27 January sent by Susan to Terry, contains the expression that she would sell the gold bars to Terry for a specific price. Thus, the intention to enter a legal relationship are clear from the words used by Susan. In the case Tallerman & Co Pty ltd v Nathan's Merchandise (Victoria) Pty Ltd[5], the scope of the postal rule was narrowed down and it was held that a valid offer and acceptance could only be completed when the offeror was made aware of the acceptance by the offeree. In the given situation, the acceptance to the offer was posted on 3rd of February, while the revocation letter was received on 4th of February. Thus, the revocation would not be valid as it was communicated to the offeree after the acceptance letter had been posted. Susan did have the option of conveying the revocation before the acceptance was posted or even received by Terry. She could have called him to inform him of the revocation of offer.

Conclusion:

Since Susan refrained from the use of faster communication methods available, the contract for sale of gold bars between Terry and Susan shall be considered as a valid contract and the subsequent contract for the sale of the gold bars shall be void ab initio.

  1. According to the provisions of the Australian Consumer Law, 2010, section 20 provides that no person should engage in trade which is unconscionable.[6] The issue of intoxication may be included within the purview of ‘unconscionable’. According to the provisions of common law system, the primary reason for a contract to be voidable is- intoxication of one of the parties. The party to the contract who is under the influence of alcohol/any other form of intoxication, shall not be able to comprehend the nature of the contract and the liabilities attached to it. The party who claims to be under the influence of an intoxicant bears the burden to prove to the Court of law that:
  2. The party was suffering from a disability due to the influence of the intoxicant- It has to be proved to the Court that the party was truly not capable to understand the nature of the act resulting with his participation.
  3. The other party had the opportunity to be aware of the intoxication.

The case of Gibbons v Wright[7] lays down a test for capacity to be applied on the party claiming to be under the influence of an intoxicant. The law does not lay down a standard test for sanity to enter into contracts, thus, the only test available would be if the party to the contract was capable of understanding what he was entering into at the time the contract was entered into.

The case of Blomley v Ryan[8], it was held by the High Court of Australia that a party would not be excused from performing a contract just due to ‘mere drunkenness’. Only if a contract was entered into which put the party in serious disadvantage would the claim of intoxication be accepted. The fact that Terry does not remember meeting Kevin at the supermarket is proof of the fact that very drunk and did not know the nature of his acts.

In the given situation, the drop in value of the shares of the company mentioned in the advice given by Terry was due to a scandal of Insider Trading. No financial adviser would be able to foresee a scandal of insider trading even if he/she was not under the influence of alcohol.

Conclusion:

Kevin would not be able to succeed in his claim for negligence as Terry would be eligible to claim the defence of intoxication and as a financial advisor, Terry could not have reasonably foreseen the scandal of the Ziro Ltd company and advised Kevin against the investment.

Business and Corporations Law - Question 2

Issues:

  • Is the contract between Florence Nightingale and Renzo Rocco free of all misrepresentations?
  • Remedies available to Florence against GLO company for the breaches in contract.

Rules:

  • Equity Laws with regard to breach of contract
  • Australian Consumer Law, 2010

Application:

  1. In the contract between Florence and Renzo, the contract is flawed, as Renzo has made major misleading comments with regard to the weekly turn-over of the Café. Renzo had been specifically asked about the turn-over of the Café and he stated an amount which was 3 times the actual turn-over of the Café. This was one of the major points which was taken into consideration by Florence while deciding whether to purchase the café or not. The liquor license and the capacity to hold the number of patrons was also lied about by Renzo. The fact that the statements made by Renzo were not in written format and were only oral in nature does not diminish the right to a remedy for Florence as the law recognises oral as well as written statements as misrepresentation if it is proved to be false.

It is mandatory that the party must have believed the misrepresented fact and the contract must have been induced of the same misrepresented fact for the party to claim any remedies in a Court of Law. In the given situation, the turnover of the café, the liquor license and the capacity to hold patrons were major misrepresented facts based on which the contract of sale was induced. In a case, Horsfall v Thomas[9], the contract was not induced based on the misrepresented facts, and thus, a claim to rescind the contract was not entertained by the court. Section 18[10] specifically prohibits conduct that may be misleading or deceptive while entering a contract. Renzo shall be liable under the section for entering into a contract by making misleading statements and misrepresenting facts.

In the case of Smith v Land & House Property Corp[11], a differentiation was made between statement of facts by the owner of the establishment and opinions of the owner. In the given situation, the statement made by Renzo should be considered as a statement of fact and not his opinion as he stated the same as a truthful fact. In the case of Edgington v Fitzmaurice[12], it was held that any false statement made by a party which influences the other party to go forward with the transaction based on the statement made shall be considered as misleading or deceptive statement. In the case of With v O’Flanagan[13], the worth of the property purchased was falsely represented to be higher at the time of contract. Subsequently, the price further went down due to the act of the purchased. It was held that the failure of the seller to disclose the real turn-over of the property would be considered as misrepresentation. In the case of Redgrave v Hurd[14], it was held that a party cannot claim that due-diligence could have brought out the true facts against misrepresentation. In the contract between Florence and Renzo, it may be claimed by Renzo that he had indicated the liquor license which could have been checked by Florence to discover that it had expired. But, keeping in mind the above-mentioned precedent, absolutely no false statements must be made by the seller.

Conclusion:

The contract between Florence and Renzo is flawed and Florence can claim remedies against the acts of Renzo and render him liable in she chooses to.

  1. Florence may claim damages with regard to the extra expenditure that had to be made by her to re-do the work of GLO company and the loss suffered by her due to the extension of time needed to complete the work, but she is under an obligation to pay the remaining amount after the amount of damages have been taken out from the total amount of the invoice. The purpose of awarding damages is to put the innocent party in a position that they would have been in if the contract had been performed properly. In the case of Hadley v Baxendale[15], it was held that all the losses that were incurred due to the breach of the contract and due to acts, that could not be foreseen by the parties would be paid by the party guilty of breaching the contract. In the case of Victoria Laundry (Windsor) Ltd. Vs Newman Industrial Ltd.[16], it was held that a loss caused by the breach of the contract due to the acts of one party would have to be paid by the breaching party to put the innocent party in a position which would have ensued if no breach had been committed.

Conclusion:

Florence shall be under an obligation to pay GLO only an amount which remains after deductions of damages from the total invoice amount sent by GLO.

  1. Under the provisions of law, it has been mentioned above that Renzo has breached the provisions of the Australian Consumer Law, 2010. Florence has access to remedies against both the parties.

Against Renzo:

Florence can either claim damages that have been suffered by her due to the misrepresentation of facts made by Renzo, or she can choose to rescind the contract entered between Renzo and herself. In Car & Universal Finance v Caldwell[17], the innocent party was allowed to rescind the contract as it was induced on misrepresented statements. In Doyle v Olby (Ironmongers) Ltd[18] and East v Maurer[19], the guilty party had to pay damages to the innocent party to make up the losses suffered due to the misrepresented statements.

Thus, the two remedies that Florence can claim against Renzo are- Rescinding of the contract that was entered into by both the parties based on statements that turned out to be false, or to claim the damages suffered by Florence due to the misrepresented statements made by Renzo

Against Glo:

A remedy for claim of direct damages suffered due to the breach of contract may be made by Florence against GLO. These damages may include the expenses incurred by Florence to re-do the work that was originally included in the contract as well as the losses suffered in business by her due to the extra time taken to complete the work agreed upon by GLO. The test of direct damages has been discussed in the case of Hadley v Baxendale[20]. The method used to calculate the damages suffered has been provided in Robinson v Harman[21]. The purpose of awarding damages by the Court has been states and discussed in the case of Anglia TV v Reed[22].

Business and Corporations Law - Question 3

Issue:

  • Is the contract between Justine and Leeroy valid?

Relevant Law:

  • Section 18 of the Australian Consumer Act, 2010
  • Provisions of the Common Law System
  • Case-Laws

Application:

  1. Justine has entered a contract with Leeroy and is under an obligation to make a payment to him, but payment of the total amount that has been sent by way of invoice to Justine is not needed. There has been a breach of contract in the given situation. The paragraph included in the written contract which states that the company shall not be liable and takes no guarantee to provide materials matching to the samples shall not release the company from its incurred liability. The very purpose of showing samples to customers before any work is commenced is that the customers should be able to picture a result in their mind and then decide if they want to go forward with the sample material or want it to be changed. Secondly, the law recognises oral as well as written contracts. The Construction company cannot escape liability based on the fact that the statements made by Leeroy have not been written in the contract. The statement made by Leeroy about lifetime warranty shall be treated as misrepresentation if the company does not abide by it. Justice (the customer) had made specific statements to provide instructions with regard to the quality of work she desired and expected from the contractors. The breaches in contract that have been made by the Leeroy J’s Building Constructions are:
    • The carpet does not match the samples shown to Justine; the colour mentioned has not been matched and the item is of a different colour than specified and the material is cheaper.
    • The tiles that have been placed are of cheaper quality and are more expensive to maintain than the original type of tile that had been decided on before commencement of the construction work.
    • The pool fence is of a cheaper quality and does not match the sample shown to Justine; the specification mentioned by Justine with regard to the standards and regulations of the state have not been met.

The fact that Justine had to keep her business establishment closed to re-do the work of the Construction company has only caused further loss in business.

Conclusion:

Justine may not pay the invoice sent to her by Leeroy at the moment. She should move to the Court to claim damages and once damages have been awarded, she can set-off the amount from the invoice and pay the remaining amount to Leeroy.

  1. Justine has access to remedies under the law. She can choose to claim for damages of the losses and the extra expenditure incurred due to breach of contract by Leeroy’s Construction company. In Dunlop Pneumatic Tyre Co Limited v New Garage & Motor Co Limited[23], the Court held that there was no upper limit to the amount of damages that could be claimed against a party that had committed a breach of contractual obligations.

Another option for Justine would be to claim the remedy of Specific Performance of Contract. Usually, this remedy is awarded by the courts when monetary damages cannot repair the breach that has been done, the party guilty of breach is ordered to perform its obligations as specified in the contract. In this particular given situation, the losses have already been incurred by Justine and her motel has been shut till changes fulfilling the criteria set by the regulations of the State are not fulfilled. To hire another company to re-do all the work that has been wrongly done by Leeroy’s company would cost almost the same amount as that which has already been spent. Thus, the court may order Leeroy for Specific Performance and ask them to re-do all the previously given work using the materials that were shown in the samples to Justice and fulfil all the required regulations.

In Ryledar v Euphoric[24], the concept of rectification has been introduced. This concept is very similar to that of Specific Performance, the only difference between the two being in Rectification, the guilty party is asked to make changes and rectify the items due to which there has been a breach of contract.

Conclusion:

The remedies available to Justine pay for all the extra expenses incurred as well as the loss due to her business being shut down. She can choose to go forward with any of them.

Bibliography for Business and Corporations Law

Articles

Sherwin, E. L. [1991]. Law and Equity in Contract Enforcement. Md. L. Rev., 50, 253.

Smith, H. E. [2011]. The Equitable Dimension of Contract. Suffolk UL Rev., 45, 897.

Veytia, H. [1994]. Requirement of Justice and Equity in Contracts. Tul. L. Rev., 69, 1191.

Cases

Adams v Lindsell [1818] 1 B & Ald 681

Anglia TV v Reed [1972] 1 QB 60

Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362

Car & Universal Finance v Caldwell [1965] 1 QB 525

Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

Dunlop Pneumatic Tyre Co Limited v New Garage & Motor Co Limited [1915] A.C 79

East v Maurer [1991] 2 All ER 733

Edgington v Fitzmaurice [1885] 29 Ch D 459

Gibbons v Wright [1954] 91 CLR 423

Hadley v Baxendale [1854] EWHC J70; [1854] 9 Exch. 341

Harvey v Facey [1893] UKPC 1, [1893] AC 552

Henthorn v Fraser [1892] 2 Ch 27

Horsfall v Thomas [1862] 1 H&C 90

Redgrave v Hurd [1881] 20 Ch D 1

Robinson v Harman [1848] 18LJ Ex 202

Ryledar v Euphoric [2007] NSWCA 65

Smith v Land & House Property Corp [1884] 28 Ch D 7

Tallerman & Co Pty ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10

Victoria Laundry (Windsor) Ltd. Vs Newman Industrial Ltd., [1949] (1) ALL ER 997

With v O’Flanagan [1936] Ch 575

[1] Adams v Lindsell [1818] 1 B & Ald 681

[2] Henthorn v Fraser [1892] 2 Ch 27

[3] Ibid.

[4] Harvey v Facey [1893] UKPC 1, [1893] AC 552

[5] Tallerman & Co Pty ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; 98 CLR 93; [1957] ALR 1198; [1957] ALR (CN) 1198

[6] Section 20 of the Australian Consumer Law, 2010

[7] Gibbons v Wright [1954] 91 CLR 423

[8] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362

[9] Horsfall v Thomas [1862] 1 H&C 90

[10] Section 18 of the Australian Consumer Law Act, 2010

[11] Smith v Land & House Property Corp [1884] 28 Ch D 7

[12] Edgington v Fitzmaurice [1885] 29 Ch D 459

[13] With v O’Flanagan [1936] Ch 575

[14] Redgrave v Hurd [1881] 20 Ch D 1

[15] Hadley v Baxendale [1854] EWHC J70

[16] Victoria Laundry (Windsor) Ltd. Vs Newman Industrial Ltd., [1949] (1) ALL ER 997

[17] Car & Universal Finance v Caldwell [1965] 1 QB 525

[18] Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

[19] East v Maurer [1991] 2 All ER 733

[20] Hadley v Baxendale [1854] 9 Exch. 341

[21] Robinson v Harman [1848] 18LJ Ex 202

[22] Anglia TV v Reed [1972] 1 QB 60

[23] Dunlop Pneumatic Tyre Co Limited v New Garage & Motor Co Limited [1915] A.C 79

[24] Ryledar v Euphoric [2007] NSWCA 65

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Law Assignment Help

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