Doctrine of Separation of Powers in Business Law

This article discusses the doctrine of separation of powers in business law and its significance in maintaining a balance of power in the government. It explores the roles of legislative, executive, and judiciary organs in Australia and explains the principles of strict and liberal sense of separation of powers. The article also highlights how this doctrine prevents the misuse of powers and ensures responsible governance.

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Business Law

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Part A
The Doctrine of Separation of Powers
The doctrine of separation of powers is referred to a constitutional principle which is
introduced in order to divide the institution of government into three branches which
include legislative, executive and judiciary. As per this principle, each division has its own
powers which they can exercise, and they did not have the authority over each other. This
principle is a part of the Australia government.1 The objective of this doctrine is to ensure
that the legislative powers are not misused by the government. This principle raises the
question of where the power lies in the political system and who has the authority to
monitor these three branches of the government. The doctrine of separation of powers is
defined into two senses which include strict and liberal. As per the strict sense, the powers
are clearly divided between the three organs of the government in order to maintain
balance and keeps check on their operations.2 In this sense, there should be no overlapping
of the powers or functions of the three organs.
On the other hand, the liberal sense provides that there can be overlapping of specific
functions between the three organs; however, it is important that checks and balances are
maintained between the three organs. In the case of Australia, the first three chapters of
the Constitution are titled the ‘Parliament’, the ‘Executive Government’ and the ‘Judiciary’.3
The power of all these three organs is provided in the first three chapters of the
Constitution. The Parliament is given the right to add, remove and amend laws which apply
throughout the country. The Judiciary plays a key role in interpreting those laws in order to
protect the regulations in the country along with its citizens. The Executive Government
assists in implementing these laws in the country. Separate individuals are responsible for
exercising the powers and functions of each organ. The objective of this division is to
prevent misuse of powers by a specific authority. In Australia, the High Court provided in
the case of Victorian Stevedoring & General. Contracting Co Pty Ltd & Meakes v Dignan4 that
1 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 2011).
2 Cheryl Saunders, The Constitution of Australia: a contextual analysis (Bloomsbury Publishing, 2010).
3 John McMillan, ‘Re-thinking the Separation of Powers’, (2010) 38 Fed. L. Rev. 423.
4 (1931) 46 CLR 73

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a strict division between the legislative and executive organ is not practical and this was
outlined by the Constitution as well.
Legislative
The legislative is referred to the assembly where the laws which are implemented on the
country are introduced by the members of the Parliament. The process of introduction of
laws begins with the introduction of a bill in the parliament which is submitted by the
government. The bill is discussed either in the Senate or the House of Representative where
the opposition and the current government parties discuss the merits and issues of the bill. 5
Based on the discussion, changes are made in the bill, and after getting approach from both
the houses, the bill is sent for the Royal Assent of the Governor General who signs the bill,
and it becomes a law.
Executive
The executive is a key organ of the government which is responsible for imposing laws in the
country. This organ helps in preventing keeping of powers in small groups, and its role is to
enforce the law rather than interpreting it. Without executive government, it is not possible
for the legislative or judiciary to ensure that the laws are enforced in the country. 6 This
avoids the misuse of powers and ensures that the powers are separated correctly between
the three organs.
Judiciary
In the judgement of New South Wales v Commonwealth7, the court provided that a
fundamental principle of the Constitution is strict insulation of the judicial power. The role
of judiciary is to interpret the laws made by the legislative. It consists of judges, courts,
adjudicators and magistrates who run its operations. The doctrine of precedent is a key part
of the judiciary organ in Australia which imposes a fundamental constraint on judicial
decisions. As per this doctrine, judges have to give appropriate respect to the decisions
made by higher courts in the previous cases. It means that if the facts of a case are similar,
5 Ian D. Loveland, Constitutional Law (Routledge, 2018).
6 Roger Masterman, The separation of powers in the contemporary constitution: Judicial competence and
independence in the United Kingdom (Cambridge University Press, 2010).
7 [1915] HCA 17

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then the judgement given in the previous case by a higher court prevails. There are some
shortcomings of the doctrine of precedent, for example, it forces the court to impose
harsher or lesser penalties on the parties of a suit while complying with previous judgement.
This principle also resulted in imposing constraints on judicial decisions. IT also enshrines
decisions which are wrong since judges are bound to comply with the flawed decisions of
higher courts.8 This principle highlights the hierarchy of courts in Australia based on which
this principle applies. If a party is not satisfied with the decision of the court, then they have
the right to make an appeal in the higher court.
Conclusively, the doctrine of separation of power is a key principle which ensures that the
government acts in a responsible manner without misusing its powers. Although this
principle is not strictly implemented in Australia; however, it applies to the country in a
liberal sense. This principle ensures that those who make the laws are not the ones
interpreting it and enforcing on the citizens of the country. This assists in maintaining a
balance between the powers of constitutional authorities and prevents misuse of powers as
well.
8 Bede Harris, A new constitution for Australia (Routledge, 2013).

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Part B
Issue
Whether a contract is formed between Events Management Ltd and Rigby Corporate
Functions Planners Pty Ltd? In case a contract exists between the parties, then whether it is
violated?
Law
A contract is defined as a legal relationship which can be formed between two or more
parties that binds them to comply with the contractual terms. A valid contract is legally
enforceable on contracting parties which means that one party can enforce another if they
did not comply with the contractual terms.9 There are certain elements which are necessary
to be present in order to form a contractual relationship between parties. It is important
that parties must enter into a valid agreement in order to form a contractual relationship.
One party must make an offer to do or not do a certain act. As per the general rule of a valid
offer, it must be communicated by the parties. The party who receives an offer for contract
has the right to accept the offer or reject the same. Another important rule of a valid offer
was given in the case of Harvey v Facey10 in which it was held by the court that the offeror
must have the intention to bind by the terms of the offer.
Acceptance is another crucial element of a contract. It is important that that acceptance
given in contact must be unconditional and it must be given in reliance on the offer. In the
judgement of Hyde v Wrench11 it was held by the court that the acceptance must match the
offer or else it becomes a counteroffer. Acceptance can also be defined as meeting of minds
of the contracting parties. Moreover, the court provided in the case of Brinkibon Ltd v
Stahag Stahl und Stahlwarenhandelsgesellschaft mbH12 that the general rule of acceptance
is that it must be communicated to the offeror or else it did not consider as effective. After a
valid acceptance is given, an agreement is constructed between two or more parties.
Consideration is another basic element of contract without which parties cannot enter into
9 Ewan McKendrick, Contract law: text, cases, and materials (Oxford University Press, 2014).
10 [1893] UKPC 1
11 (1840) 49 ER 132
12 [1983] 2 AC 34

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a contractual relationship. It is referred to exchange of a certain amount or promise to do or
not do something between the contracting parties.13
Consideration can be executed, executory and past. In a contract, past consideration is not
valid and a contract cannot be formed based on past contract. When a promise is made by
the contracting parties, and it is complete immediately by them, then it referred as
executed consideration.14 The goods are sold, and the payment is made immediately in this
contract. The executory consideration, on the other hand, is not given at the time the
contract is formed. When the promise made by the parties are not fully performed at the
time the contract is formed, then it is referred as executory contract. In the case of
Goldsborough Mort & Co Ltd v Quinn15, the court provided that mere giving a promise of
leaving the offer open is not enforceable on the contracting parties; thus, a promise which is
made by the parties without a valid consideration is considered as nudum pactum. On the
other hand, a promise which is made by the contracting parties along with a consideration is
binding in nature based on executory consideration.
The judgement given by the High Court in the case of Masters v Cameron16 provided key
provisions regarding when a contract can be legally binding on parties. In this case, a
document contained terms of the sale of land which was considered as an agreement for
negotiation rather than a binding contract. It was held by the court that the acceptance
given by the parties must be unconditional and rebutting the presumption of commercial
agreement. The court identified three categorises of signed contracts in this judgement. The
first type of contract is when the contracting parties agree to all the terms of the contract
and draw a draft which contains all the necessary terms of the contract.17 However, the
parties agree to draft a formal contract at a later date. In this case, the draft is considered as
legally binding on the parties of the contract.
The second category is when the parties agreed on all terms of the contract; however, they
agree that the performance of the contract will be made after a formal contract is formed
13 Stephen Graw, An introduction to the law of contract (Thomson Reuters, 2012).
14 Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Macmillan International Higher Education,
2015).
15 (1910) 10 CLR 674
16 (1954) 91 CLR 353
17 Ben Brady and Daniel Meyerowitz-Katz, ‘Contracts: Pavlovic v universal music Australia: Binding clients in
contract’, (2015) (18) LSJ: Law Society of NSW Journal 74.

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and signed by the parties. In this case, the terms of the contract are enforceable on the
parties based on rebutting the presumption for commercial contract. The third category is
when the parties did not have the intention to bind themselves based on the preliminary
contract, and they decided to create a binding relationship after the contract is formed
based on a formal basis.18 In this case, the draft formed by the parties is not considered as
enforceable since the parties did not intend to make a concluding bargain at all until they
develop and sign the formal contract. In the judgement of Masters v Cameron, the court
provided that Cameron intended to create a legally binding contract after a formal contract
is developed by the parties based on which the terms of the draft contract is not
enforceable on the parties.
Another relevant judgement was given by the court in the case of Souter v Shyamba Pty
Ltd19. The parties in this case agreed to purchase land along with a hotel business, and they
both negotiated the terms of the contract. Both the parties gave their informal acceptance
in relation to terms of the property, price and settlement data when the contract was
executed. The party agreed to pay the balance of the deposit to the solicitor of the vendor
after the contract is formed and exchanged. However, during this time, the vendor received
a better deal on the land and hotel business, and the vendor repudiated the contract by
arguing that a valid contract has not constructed between the parties. The court rejected
this argument and provided that the original offer given by the party was considered as a
valid contract and its terms are legally enforceable on the parties.
Application
Events Management Ltd (Events) agreed to purchase the business of Rigby Corporate
Function Planners Pty Ltd (Rigby) and both the parties shared the details regarding this
acquisition through emails. The parties gave their acceptance on certain terms of this
contract which include details about the price of the business, ownership structure, date
when the assets will be transferred. Events prepared a draft of the contract; however, it was
not sent to Rigby. Later Rigby decided to withdraw from this agreement. A valid contract is
formed between parties if all its essential elements are present. The offer given by the
18 Gregory Tolhurst, J.W. Carter and Elisabeth Peden, ‘Masters v Cameron-Again’, (2011) 42 Victoria U.
Wellington L. Rev. 49.
19 [2002] NSWSC 929

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parties is valid since it is communicated and the offeror has the intention to bind by its
terms (Harvey v Facey). The parties communicated the acceptance, and it was unconditional
based on which it was valid (Harvey v Facey). In this case, the consideration is executory
since the parties decided to make the payment in the future rather than immediately as
discussed in the case of Goldsborough Mort & Co Ltd v Quinn.
Based on these elements, a valid contract is constructed between the parties. As discussed
in the judgement of Masters v Cameron, the second category of contract is construction
between parties. Events and Rigby agreed on all the terms of the contract, and they were
waiting for constructing the formal contract to sign and implement those terms. Thus, the
contract is enforceable on the parties based on rebutting the presumption for commercial
agreement. The provisions discussed in the case of Souter v Shyamba Pty Ltd apply in this
scenario as well. The parties agreed the key terms such as property, price and settlement
date based on which Rigby cannot rebut the contract and its terms are legally binding upon
the parties.
Conclusion
The key elements of the contract discussed above are present in this case based on which a
valid contract exists between Evens and Rigby. It is advised to Samantha that Events can rely
on principle rebutting the presumption for commercial contract to enforce the terms of the
contract on Rigby as discussed in Masters v Cameron case and stop the company from
refuting the contractual terms.

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Bibliography
A Articles/Books/Reports
Brady, Ben and Daniel Meyerowitz-Katz, ‘Contracts: Pavlovic v universal music Australia:
Binding clients in contract’, (2015) (18) LSJ: Law Society of NSW Journal 74.
Graw, Stephen, An introduction to the law of contract (Thomson Reuters, 2012).
Harris, Bede, A new constitution for Australia (Routledge, 2013).
Latimer, Paul, Australian Business Law 2012 (CCH Australia Limited, 2011).
Loveland, Ian D. , Constitutional Law (Routledge, 2018).
Masterman, Roger, The separation of powers in the contemporary constitution: Judicial
competence and independence in the United Kingdom (Cambridge University Press, 2010).
McKendrick, Ewan and Qiao Liu, Contract Law: Australian Edition (Macmillan International
Higher Education, 2015).
McKendrick, Ewan, Contract law: text, cases, and materials (Oxford University Press, 2014).
McMillan, John, ‘Re-thinking the Separation of Powers’, (2010) 38 Fed. L. Rev. 423.
Saunders, Cheryl, The Constitution of Australia: a contextual analysis (Bloomsbury
Publishing, 2010).
Tolhurst, Gregory, J.W. Carter and Elisabeth Peden, ‘Masters v Cameron-Again’, (2011) 42
Victoria U. Wellington L. Rev. 49.
B Cases
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34
Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674
Harvey v Facey [1893] UKPC 1
Hyde v Wrench (1840) 49 ER 132

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Masters v Cameron (1954) 91 CLR 353
New South Wales v Commonwealth [1915] HCA 17
Souter v Shyamba Pty Ltd [2002] NSWSC 929
Victorian Stevedoring & General. Contracting Co Pty Ltd & Meakes v Dignan (1931) 46 CLR
73