The Law Bible.docx

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Monash University
Business Research
Mark Bender

How to find a legal solution 1. Study the facts carefully: a. who are the parties? b. what do they want? - What cause of action might arise? - What are its elements? - What are the consequences if the cause of action is made out? c. how could they get this? 2. Think about the law: What cause of action (breach of contract, negligence, breach of directors' duties, etc) might be involved? What are the elements of each cause of action? For example, breach of contract requires a contract and a breach; negligence requires a duty of care, breach of the applicable standard of care and resulting harm. Where do they come from (which case/s; which Act, section)? What are the consequences of the cause of action being made out in this case? 3. Connect the facts to the law that you need to solve the problem For example, if you have a newspaper advertisement, is it an offer? Or is it an invitation to treat? Your choice of legal box can make a big difference to the outcome. 4. Form a conclusion predict what a court might find, so your conclusion can never be entirely certain (nobody knows for sure what the result will be until after the court case). Reduce the uncertainty, and to show HOW a court would approach this case and what their options would be. Say what is MOST LIKELY to happen. Negligent Misstatement- (wrong information etc.) Key Terms  Duty of Care: People who you owe responsibility to. Donoghue v Stevenson Standard of care: Actions that are EXPECTED to be carried out by a reasonable person. Grant v Australian Knitting Mills Ltd  Neighbour Vicinity: People who will be directly affected by my actions.  Objective test: Has the defendant acted reasonably in providing information.  Reasonably foreseeable: Damages that a reasonable person would expect to occur due to the action. 1. Duty of Care a) Was the statement in relation to serious matter? b) Was the defendant aware that plaintiff trusted in them? Shaddock & Associates Pty Ltd v Paramatta City Council c)Was action by defendant reasonably foreseeable? d) Was it reasonable for plaintiff to rely on info? Ta Hoe Ma Pty Ltd v Allen–Reasonable reliance CONCLUSION: YES Special Relationship proven Esso Petroleum Co Ltd v Mardon 2. Breach of DOC/ has the defendant exercised the standard of care? Objective Test- Has the defendant acted reasonable in providing information? NO Weighing Test Wyong Shire Council v Shirt a) Was the magnitude of risk High or low. (Was the damage powerful) HIGH/LOW b) The probability of it happening. (Because of the misstatement, what are the chances of damage) HIGH/LOW VS c) Measures require removing the risk. (Was it hard to prevent the Mistake?) Hard/Easy Conclusion: Standard of care exercised? (Usually not in negligent misstatement cases) 3. Damages a) Causation: Plaintiff must prove that the negligence caused the damage. “March v Stramare Pty Ltd” & “Chapel v Hart” BUT FOR TEST- use to decide on the cause of negligence. “If it wasn’t for the wrong information given. Would Plaintiff suffer the damage he is suffering now? b) Remoteness- The wrongful act must be the cause but also it must be reasonably foreseeable. Were the damages too far-off? Overseas Tankship Ltd v The Miller Steamship Co Pty Ltd (The Wagon Mound #2) What are the losses? Was it reasonably foreseeable? Reasonable person test “would a reasonable foresee” Defences Voluntary assumption of risk: Plaintiff is fully involved. Does not recover anything. MUST PROVE 3 things 1)does Plaintiff know of danger 2) does Plaintiff appreciated the risk of injury 3) does plaintiff accept the risk of danger Moore v Woodforth Contributory negligence: Plaintiff is partly involved. Defendant damages reduced proportionally. 1)Did plaintiff show lack of care in his duty 2) How much did the lack of care cause damage. March v Stramare Disclaimer: Exemption clauses? Conclusion: will Plaintiff succeed in Suing? Formation of Contract - 143 General Rule: Contract needs an agreement includes offer, Acceptance, Intention to contract and consideration. Must be distinguished from:  A question (Harvey v Facey)  A mere indication of possible future conduct  Invitation to treat (Partridge v Crittenden) Making the contract offer (152) and acceptance (169)  Advertisements: Generally do not form as an offer.  Invitation to treat: In the case of Partridge v Crittenden, it is acknowledged clearly that an invitation to treat is merely an invitation to attract parties and therefore advertisements are just Invitation to treat. Exceptions were ruled where advertisements were recognised as an offer in Carlill v Carbolic Smoke Ball Co (1893) Because there was large sum of money involved in the offer.  Offer: Is an indication by one person to another of his willingness to enter into a contract.  Counter Offer: is any material alteration of the terms of the original offer and will reject or destroy the original offer. Hyde v Wrench Request for information. “A: Whats the lowest price you can go.B:$25000. A: Ok i Accept.” Is not an acceptance or offer its just request for infoHarvey v Facey  Option: is an offer than cannot be revoked prior to acceptance, an option will only be valid is consideration is given. EG DEPOSIT Routledge v Grant  Postal Rule: Offeree must communicate with offeror if the method of Post acceptance will be valid. Postal rule states acceptance made once posted. Tallerman & Co Pty Ltd v Nathan’s Merchandise Pty Ltd  Revocation rule: a. Offeror may revoke offer at any time prior to acceptance even if the offeror has promised not to revoke it. Routledge v Grant b. However, if an offer have been accepted it cannot be revoked. c. Communication must be communicated to offeree and will applies when offeree receives the revocation notice. Byrne & Co v Van Tienhoven & Co d. The rule is that an offer is not withdrawn until the revocation has actually been communicated to the offeree. -revocation does not necessarily have to be communicated by the offeror in person (it is sufficient if the offeree learns of the revocation in some reasonably reliable manner. Dickinson v Dodds)  Rejecting an offer: a) offer may be rejected expressedly or by implication (offeree’s conduct may indicate rejection) b) offer is terminated on rejection and cannot be later accepted c) a counter offer acts as a rejection of original offer. Hyde v Wrench -counter offer does not equal request for clarification Agreement  Must be certain. (generally the courts require certainty as to the parties, the subject matter of the contract and the price  Agreement may be uncertain because it contains unclear, ambiguous or contradictory terms or because it is incomplete  Where parties have agreed to sell and buy a good but no price has been fixed, the parties are taken to have agreed that the buyer would pay a reasonable price  Agreement to agree, agreement to negotiate, subject to contract is not binding Intention (187) and consideration (194)  Domestic Arrangement: Lord stated clearly that domestic agreements were not presumed intending to be a contract Balfour v Balfour. o However, domestic arrangement can be rebutted when large sum of money involved Todd v Nicol  Commercial agreement courts will presume that parties intended to bound. Roufos v Brewster  Consideration: Is something of value. According to Goldsborough Mort & Co Ltd v Quinn (1910) considerations were given for the promise to keep the option open couldn’t be withdrawn as item of value was compromised. o Consideration may be executory(not started) , executed(started but not complete) but not past(Contract has past before promise made) Roscola v Thomas. o Exceptions: Re Casey’s Patents: Stewart v Casey o Consideration doesn’t need to be adequate. They just require you to give something of value in return  Renegotiating Contracts (203) o Promise to perform an existing contractual duty may not be valuable consideration. Stilk v Myrick o Practical Benefit (exception to Stilk v Myrick)- Williams v Roffey Bros o However, if a builder promises to finish earlier a week he is entitled to claim the renegotiated part. Finish a week earlier is a consideration o Renegotiating Debts: Foakes v Beer, consideration must be given  E.G. X owes Y 500, Y promise if X pays on the Deadline 400 is acceptable. However Y can change is mind he is able to get the other 100.  However, if X give 400 plus a bottle of wine or if X pays 400 earlier than the deadline, Consideration is given and Y cannot ask for the remainder 100. Generally, any legal person may create a contract -Companies, partnerships and adults may create contracts -A contract may be created by an agent on behalf of someone else -Some people lack capacity to create purchase contracts -Minors generally lack capacity to create purchase contracts except to purchase ‘necessaries’ -intoxicated people and people with severe mental disability may lack contractual capacity Express Terms of Contract - 225 Express terms: Contractual promise stated orally and/or written in a contract. 1a) Signature Rule General rule states that a person who signs a document that has a contractual appearance about it is bound by the contents of the document. This applies even when they did not read the document “L’estrange v F Graucob Ltd”. On the other hand, oral agreement is an exception to the signature rule. J Evans & son ltd v Andrea Merzario Ltd case, the courts declare that the oral agreement was a term of contract and Merzario could not rely on written term. 1b) Plaintiff will look to rebut the PER. Parol evidence rule: Parol Evidence Rule is that the written contract is intended to contain the whole agreement and no other evidence is allowed to vary or contradict the contract “British Movietone News v London & District Cinemas Ltd”. Nevertheless, the exception to Parol Evidence Rule indicates that (1)the written contract is not a complete record and (2)when it is affected by misrepresentation or fraud “Van Den Esschert v Chappell” 1) Contract is incomplete; it did not contain Albert’s promise. 2) Albert has misrepresented the condition of the roof. He said its fine but it’s not fine. Conclusion: Yes they can rebut the PER rule. Signature rule doesn’t apply because oral agreement was a term and could not rely just on written term. 2) Oral Statements can be a 1)TERM 2)Representation (statement that persuade you to enter contract but is not Promissory) 3) PUFF- Bullshit Which Statement is a term of contract: To determine what a reasonable person would regard as promises, Reasonable bystander test is used. REASONABLE BYSTANDER TEST - 240 I. Is the oral Statement included in a written contract? II. Does the statement sound promissory? Oscar Chess Ltd v Williams “morris car case” III. Was the oral statement made close to the formation of contract? The closer the oral statement is to the written contract, the more likely it is to be a term “Van Den Esschert v Chappell” IV. How important is the oral statement to the parties in entering contract? V. Did either parties have special knowledge about the subject? Esso Petroleum Co Ltd v Mardon. Esso has the special knowledge e.g. sales record, revenue etc. Conclusion: Was the oral Statement Promissory? 3)Collateral Contract: A contract separate from but related to the main contract. There are 3 requirements for Collateral contract to exist I. Oral Statement must be promissory  Refer to REASONABLE BYSTANDER TEST II. The oral statement must not conflict with written contract. Hoyt’s Pty Ltd v Spencer and Gates v City Mutual Life Assurance Society Ltd III. Was there consideration? Entering the main contract is regarded as consideration. De Lassalle v Guildford Conclusion: Collateral contract exists? Then you can argue that the written contract doesn’t contain everything!!! 4)Exemption clause (249) Rule: Exemption clauses are used to limit liability to others. However, exemption clause doesn’t automatically mean it will be followed in law. The Courts will determine whether the exemption (1) clause is the term of contract. And (2) does the exemption cover the breach? (1) An exemption clause contained in a signed contract will usually be binding Toll Pty V Alphapharm Pty Ltd. Also if a reasonable notice have been given it is likely to be binding. The factors to determine Reasonable notice is the nature of document, the nature of transaction and the nature of the clause itself Parker v South Eastern Railway Co. (2)Contra proferentum states that any ambiguities in the exemption clause will be resolved against the person seeking to rely on the exemption clause and in favour of the other party Photo Production Ltd v Securicor Transport Ltd. To effectively avoid the consequences of one’s own wrongdoing, the words must be clear Lord Wilberforce. This means that clarity is the essence, in order for the exemption clause to be effective it must be understandable and specifically stated in the clause. 5)Remedies: Is the statement a condition or warranty (258) Rules: Conditions are an important term of the contract. It is the essence of the contract and breach of condition allows the person to claim for damages and terminate the contract. Warranty is less important and is only subjected to damages. But if exemption clause applies then most likely to be just warranty. Factors the court will examine to determine whether it’s a condition or warranty is based on Associated Newspapers v Bancks. 1. Ways in which the term is expressed? “Trust me it’s fine” Clearly states that 100% fine. 2. The likely Consequence of breach? Because of the misrepresentation stuff in the house may get wet because tiles are not fine and water leaks etc. 3. How important is the term to the overall contract? Very important 4. Is Damages are an adequate compensation? It may be adequate. However, in different case it is not adequate and can terminate contract. Implied Terms – 268 When does Trade Practices Act apply? 4 steps SERVICE n GOODS 1. Is the provider subject to TPA? This means that the seller must be a corporation or TPA doesn’t apply. 2. What is a consumer under the trade Practices Act? a. Under Section 4B i. Price must not exceed $40000 ii. And if the price exceeds $40000, was the Goods or service a domestic or household use? For instance, Ostrich egg incubators are not household goods Crago v Multiquip pty ltd 3. Was the sale in the course of business? By this it means that was the sale an act of profit making. Private sales would not be classified as TPA. 4. Was the sale an auction?(Only for Goods.... service is not auction. This doesn’t really come up) Conclusion: TPA applies What Terms are implied by Trade Practices Acts? ( Consumer contracts ) Goods  Correspondence to Description Section 70 o Breach of s70 occurs when goods do not correspond with the description would need to determine that descriptions were used as part of sales talk and the goods turned out not meeting the description. o (Varley v Whipp), ( Beale v Taylor)  Merchantable Quality Section 71(1) o If the buyer makes known the purpose for which goods are required and the buyer rely on the seller’s skill in choosing the appropriate goods then the goods must be reasonably fit for that purpose. Consumers can sue for breach of contract on the basis that goods are not fit for purpose if seller do not follow the procedure. o (Bartlett v Sidney Marcus ltd)  Fitness for particular Purpose 71(2) o Buyer makes known of the purpose for which goods are required and the buyer relies on the seller’s skill in choosing the goods. Goods must be fit for purpose. o David Jones Ltd v Willis Services Implied warranty under TPA o S74(1) Corporation must provide service with Due care and skill and that any materials supplied in the course of business must be fit for purpose o S74(2) When consumer make known to the corporation of any particular purpose. There is an implied warrant that the services supplied under the contract must be reasonably fit for purpose and should the result should be reasonably as expected unless it is unreasonable to rely on the corporation. Exclusion and limitation Clause... Section 68 Void or Valid? Any term attempting to limit liability of the corporation for breach of a condition or warranty implied by TPA is void. Section 68 states that in cases which the goods aren’t domestic goods the seller have rights to restrict the liability.  Liability for breach of implied terms may be limited o Section 68(1)  Replacement and repair of goods  Paying for cost of replacement or paying for repair.  Limitation must be fair and reasonable o Section 68(2)  If the limitation clause is not fair  E.G. the repair and replacement place is in another city or country. Conclusion: if the goods are not household use the limitation clause are Valid Remedies Damages: consumers are entitled to damages for breach of contract whenever an implied term is breached. Returning the goods: One advantages of TPA is that a consumer is entitled to return the goods where there has been a breach of implied condition  Section 75(1) o Corporation supplies good to consumer in course of business and Breached contract for the goods o Then consumer is entitled to rescind contract by (1) Informing the corporation of the breach WRITTEN or ORALLY. o The goods must be return in a reasonable time after consumer has seen them. o Conclusion: if there is breach of contract rescission is applicable. Unless there’s limitation clause. Vitiating factors Fraud – 4 steps 1. Did the defendant make a false representation of fact? a. Fact or opinion “Smith Anderson v Land and House Property Corp” b. Fact or Silence “Lockhart v Osman” 2. Did the representation induce the plaintiff to act in some way? a. Did it induce the party to enter contract? “Redgrave v Hurd” 3. Did the defendant act dishonestly or recklessly? 4. Did the plaintiff suffer losses as a result of the false representation? a. Prove the relation. “Boyd v Glasgow Railway” Misleading or Deceptive conduct: Section 52 TPA: “A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceive “ 1. Was the defendant a corporation? 2. Was the defendant’s conduct during the course of trade or commerce? a. What is trade and commerce nature? i. Product claim “made in Italy” ii. Statements made during the course of sale iii. Statement made during business negotiation iv. Statement made by REAL ESTATE agent during sale of house b. What is not trade and commerce in nature? i. Political speech ii. Statement made by OWNER during private sales 3. Did the defendant’s behaviour amount to conduct? a. Misrepresentation of fact b. Silence- Failure to disclose would be misleading and deceptive. c. Opinions d. False prediction and broken promises 4. Was the defendant’s conduct misleading or deceptive? Exclusion Clause and Disclaimers  It is not possible to rely on an exclusion clause or disclaimer to avoid liability under S 52  Bateman v Slayter – the inclusion of disclaimer by the defendant was held to be ineffective in an action for misleading and deceptive conduct.  Remedies for Breach of Section 52- injured parties may seek these remedies  S 80 “injunction”  S 80A “corrective advertisement”  S 82 “damages”  Ancillary orders- e.g. business could be ordered to void or vary contract or refund money. Agencies – 377 Agency: Is a word used in the law to indicate an authority in one person to bind legal relations between principal and third party. International Harvester v Carrigan’s Hazeldine.  Does he keep profits?  Does he get commission?  Does he need to provide information to Principal regarding a sale etc. Partnership: Generally are agents for each other. Creation of Agency  Express Agreement: Orally or by written instructed by Principal of what Principal wants the Agent to perform.  Implied Agreement: Circumstances that parties have behave themself in such a way that principal-agent relation exists. Norwich Fire Insurance Society Ltd v Brennans Pty Ltd  Estoppel by conduct: Agent was terminated but Principal didn’t inform the Third parties. Court would estopped the principal to deny that the person was his agent. The agent acted Status Quo Pole v Leask. Agents Authority- Both are very similar.  Actual Authority: Principle can instruct certain instructions to agent (Express) Hely- Hutchinson v Brayhead Ltd. Implied authority is to carry out activities that would make agreement effective. E.G. Agents would be able to collect money for Principal because its implied that it is his job. ANZ bank Ltd v Ateliers Constructions  Ostensible Authority: Ostensible Authority of an agent is the authority as it appears to others. Lord Denning in Hely-Hutchinson v Brayhead Ltd. o E.G. Agent was not formally appointed by company. He then acts as if he was and hired architects to see floor plan. The company let him carry on. However, company didn’t pay the architect claiming that agent had no authority to do this. Court says that although agent does not have actual authority he has Ostensible authority. Freeman & lockyer v Buckhurst Park Properties Ltd  Was there representation by Principal to Third party that agent had Authority? Yes company let agent carry on work... giving agent power to continue is work  Did someone with actual power give power to AGENT? No, not formally hired.  Did third party rely on holding out? Yes, they assume Principal knows and involved. They thought agent had actual power o Exceptions case to Ostensible authority- Director of post and telegraph v Abbotts  Agent is a clerk working in POST. Had acted as if he could arrange telephone connection for Abbott on certain dates  Abbott sued for breach of contract  Abbott lose the case because court proved that Agent cannot say these stuff in nature. Ratification- Principal approves the action of Agent despite the fact that he didn’t instruct.  Ratification only applies if Agent is known to be agent and not Sole contractor. Keighley, Maxted & Co v Durant  Only Principal can ratify and must be in certain amount of time  Ratification must apply to whole contract  Can be inferred from the principal conduct and need not to express. Undisclosed principle rule- Agent does not disclose to Third Party of the Principle and act as if he is Principal.  Undisclosed principal may sue or be sued where o Agent was not acting on the principal behalf but was acting on his actual
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