Business Torts and Consumer Law

This assignment explores the concepts of business torts, negligence, and their application in consumer law within the context of Australian legislation. It delves into cases like Joysticks Co., Uber vs Fetch Media, highlighting how these legal principles can impact businesses and consumers. The role of the Australian Consumer Law (ACL) is analyzed, emphasizing its protection against unfair practices and its provisions for remedies.

Running head: BUSINESS LAW
Business law
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Author Note

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A tort may be defined as a civil wrong that is committed by one individual against
another. There is no specific legislation or a statute that defines the term as it has evolved mainly
through common law or judge made laws. Tort law in Australia is heavily influenced by the
common law of other countries such as the United Kingdom owing to the colonial heritage of
Australia. However, there have been modifications in the tort law with the enactment of the
statute ‘Civil Liability Acts’ in several Australian states. Some of the common torts in Australian
Law includes negligence, trespass, misrepresentation, breach of statutory and public duties,
interference with employment and family relations, intentional damage to economic interests,
private nuisance, defamation, etc (Leon 2015).
The torts applicable in business situations are known as economic torts. Economic or
business torts are wrongful acts that are committed against the business entities. Such wrongful
acts are often committed deliberately and sometimes they result from recklessness or negligence,
which causes some kind of pecuniary loss to the aggrieved party. Although these torts are not
criminal offenses but some acts may amount to criminal offences as well such as restraint of
trade (Little et al. 2014). The wrongful acts that leads to financial loss in business as a result of
intentional negligent acts, the aggrieved party or the business is entitled to bring a civil
compensation in the civil court and seek monetary compensation or obtain an injunction order
with a view to prohibit the defendant from committing such unlawful activities.
The most common form of torts that is applicable in business situations includes the tort
of negligence and the tort of misrepresentation. Negligence may be defined as the failure of an
individual to exercise duty of care towards a person he owed such duty. The principle that an
individual owes a duty of care to his neighbor has been established in the Donoghue v
Stevenson’s case. The term ‘neighbor’ refers to the person who would be affected by the acts or

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omissions of the person committing such acts or omission. The risk of harm that would result
from the action or omission of the person must be reasonably foreseeable and the person must
take reasonable steps to avert such risk.
In order to establish a claim against a person for negligence, the aggrieved must establish
the essential elements of the tort of negligence. The aggrieved party must establish that the
defendant owed a duty of care and has caused a breach of that duty. The plaintiff has suffered
damages and sustained injuries as a result of such breach. The damage caused must be the direct
result of the consequence of such breach as was held in Barnett v Chelsea & Kensington
Hospital [1969] 1 QB 428. Further, it is imperative to establish for the aggrieved party that the
loss resulted was the consequence of breach and the risk was reasonably foreseeable. Any
reasonable person could have foresee the risk if he was in the position of the defendant, under
same circumstances. This principle was introduced in the case Wagon Mound No 1 [1969] AC
388, where the court ruled that if the defendant were liable for the loss that was foreseeable, he
would be completely liable for the loss.
An instance of tort of negligence in business situations may be exemplified in a case
Oyston v St Patricks’s College [2011] NSWSC 269, where a student won a negligence case
against his school where the school failed to exercise its duty of care. Jazmine Oyston brought a
legal action against her former high school, St. Patrick’s College, in New South Wales, on the
ground of negligence. Jazmine alleged that she was injured at the time of enrolment and was
subject to harassment, bullying which caused her to suffer from panic attacks, depression, and
anxiety. She alleged that the policies and practices of the school failed to safeguard her from the
foreseeable and recognized harm. The court held that the risk of harm was foreseeable and the

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school had foreseen the same that the students were often bullied and harassed by some of the
pupils in the school.
The court laid emphasis on the fact whether the school policies or other reasonable steps
taken by the school as sufficient to ensure that the school has fulfilled its duty of care that it
owed to Oyston. In this scenario, the court stated that the school was have failed to exercise its
duty of care as despite the implementation of the policies of the school related to bullying, the
school has failed to take reasonable steps to safeguard Oyston from being subject to bullying or
harassment when the school was aware of the problem. The policies were inadequate and
consequently, Oyston sustained injuries (Stickley 2016).
The judge further stated that any reasonable person would have initiated investigation of
the complaints made by Jasmine and would have arranged for strict monitoring of the actions of
the pupils. In terms of causation, the judge held that the injuries sustained by Oyston in the form
of psychological injury, is the direct result of the failure of the College to take reasonable steps to
prevent Oyston from being injured due to such bullying or harassment. The court has awarded
damages to Oyston.
In this present scenario, it can be observed that the plaintiff, Oyston, had established that
the college owed a duty of care to her, it had failed to exercise such duty of care, and such breach
has directly caused her damages. The college failed to take reasonable steps to prevent such risk
when it was reasonably foreseeable by the college.
The torts of misrepresentation refer to the false statement of law or fact that induces a
representee to enter into an agreement. A statement that is made during negotiations is classified
as representation and when the statement turns out to be false, it is classified as

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misrepresentation. In case, any contractual term turns out to be a misrepresentation, the contract
becomes voidable which implies that the representee is entitled to set aside or rescind the
contract (Sandeen 2015). In order to establish a claim of the misrepresentation, the aggrieved
party must establish the essential elements of misrepresentation. One of the significant element
of misrepresentation is false statement with respect to any fact or law as oppose to opinion or
estimate of future events. This element was considered as an essential element in Esso
Petroleum v Mardon [1976] QB 801. If the person making false statement is aware of the fact
that the statements are false, he shall be held liable for committing misrepresentation as was
observed in Smith v Land & House Property Corp [1884] 28 Ch D 7.
The other essential element of misrepresentation is that the aggrieved party has relied on
the false statement made by the representator and have entered into the contract. If the aggrieved
party has not relied on the false statements made by the representator, or was not induced to enter
into a contract, he shall not be entitled to bring a claim of misrepresentation (North and Flitcroft
2016). There are three types of misrepresentation, which includes fraudulent misrepresentation,
negligent misstatement, and innocent misrepresentation.
An instance of misrepresentation from recent business scenario can be observed in the
Joystick Company Pty Ltd where the Australian Competition and Consumer Commission
(ACCC) has initiated legal proceedings against the Joystick Company in the Federal Court on
the ground that the company has been engaged in misrepresentation of products. The company
has been alleged for making false statements to its customers that the products of the company
do not contain any formaldehyde or toxins. The commissioned tests conducted against the
company reveal that the tested e-cigarette product of the company contains toxic chemicals
including acrolein, acetaldehyde that is carcinogenic to humans. The court held that the director

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of the joystick company is aware of the fact that the products of his company contains toxic
chemicals that is injurious to the human health and still the company makes false statements to
induce the consumers purchase their products (Corones 2014).
In Australia, the Competition and Consumer Act 2010 was introduced to safeguard the
rights of the consumers with respect to the conduct of the seller in relation to trade and
commerce. The statute prohibits individuals, businesses form engaging into any unfair practices
under section 18 of schedule 2 of the Act that deals with Australian Consumer Law that
involves misleading or deceptive conduct, unconscionable conduct, unfair terms, false, or
misleading representations, bait advertising, referral selling, misleading the public etc. The
schedule 2 of the Competition and Consumer Act 2010, stipulates consumer guarantees to the
consumers, which must be complied with the persons or businesses providing such goods or
services. The consumers of the businesses are entitled to receive goods or services of appropriate
quality and the statements made by the persons or businesses with respect to the quality,
condition, value and price must match while the goods are delivered and services are rendered to
the customers.
The businesses in Australia are prohibited from making any false statements that are
likely to mislead or induce the customers to enter into the contract. The other forms of torts other
than negligence or misrepresentation that are applicable in business situations include restraint of
trade, fraudulent misrepresentation, defamation, breach of statutory duties and intentional
damage to economic interests (Howells and Weatheril 2017). The businesses must not make
false statements knowing it to be false without believing that such statement is true. It must
ensure that the businesses do not be recklessly careless about the fact whether such statement is
true or false.

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The persons carrying out the business must not make any statement for which they have
no reasonable grounds to believe that such statement is true. The torts of negligence and the torts
of misrepresentation are the most common torts that take place in the corporate world. For
instance, in a business situation, within the premises of the retailer, the retailer must ensure that it
does not engage in any conduct that would engage any unfair practices (Latimer 2016). The
retailer must ensure that he does not make any false statement regarding the quality, value, price,
condition or nature of the goods and services rendered to the customers to prevent any act of
misrepresentation.
In regards to the tort of negligence, the businesses must ensure the safety of the goods
and services and that such goods or services does not cause any harm to the customers, as the
businesses owe a duty of care towards its customers. If the risk that may arise from the goods or
the services is foreseeable, reasonable steps should be taken to avoid such risks and prevent the
customers. In case of any claim made by the clients against the actions of the businesses, the
businesses must establish that it had complied with the consumer guarantees stipulated by the
Australian Consumer Law (Pearson 2017). Further, the Businesses must establish that it has
disclosed all relevant information related to the goods or services, thus, ensuring safety of the
customers.
The statutory authority such as the Australian Consumer law, ensures that the businesses
does not engage in any unfair practices which causes significant imbalance in the rights and
obligations of the parties to the contract and that it does not results in the detrimental of the
consumers (Brody and Temple 2016). In case of any unfair practices, the aggrieved party shall
be entitled to refund or repair of the goods or compensate the aggrieved party for the loss
suffered or injuries sustained by the aggrieved party. It is evident from the scenarios above; it is

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evident that any person who owes a duty of care must take reasonable steps to prevent any risk
that may arise from the acts or omissions of the person exercising such duty of care especially
when such risks are reasonably foreseeable.
Another instance like that of Joysticks company, Uber brings a legal claim against mobile
ad agency Fetch Media for making misrepresentations with respect to the mobile ads and have
failed to prevent the advertising of such fraudulent ads thus, the company becomes liable for
committing negligence and misrepresentation. These instances are evident of the fact that the
business or Economic torts that arises out of business transactions are likely responsible for
interfering with the business relationship and not only results in financial loss but affects the
reputation and goodwill of the business as well.

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Reference List
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428.
Brody, G. and Temple, K., 2016. Unfair but not illegal: Are Australia's consumer protection laws
allowing predatory businesses to flourish?. Alternative Law Journal, 41(3), pp.169-173.
Competition and Consumer Act 2010 schedule 2
Corones, S.G., 2014. Competition law in Australia. Thomson Reuters Australia, Limited.
Esso Petroleum v Mardon [1976] QB 801.
Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge.
Latimer, P., 2016. Protecting Consumers from Unfair Contract Terms: Australian Comparisons.
Leon, J.J., 2015. Negligence-Torts-Negligent Misrepresentation-Downfall of Privity-Hanberry v.
Hearst Corp., 81 Cal. Rptr. 519 (1969). DePaul Law Review, 19(4), p.803.
Little, J.W., Lidsky, L.B., O'Connell, S.C. and Lande, R.H., 2014. Torts: Theory and Practice.
LexisNexis.
North, J. and Flitcroft, R., 2016. Businesses beware When does the Australian Consumer Law
apply?. Governance Directions, 68(5), p.306.
Oyston v St Patricks’s College [2011] NSWSC 269,
Pearson, G., 2017. Current Issues for Consumer Protection Law in Australia. In Consumer Law
and Socioeconomic Development (pp. 199-208). Springer, Cham.

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Sandeen, S., 2015. LAW9151-W. Torts: The Common Law Process. F15. Sandeen, Sharon.
Smith v Land & House Property Corp [1884] 28 Ch D 7.
Stickley, A.P., 2016. Australian Torts Law. LexisNexis Butterworths.
Wagon Mound No 1 [1969] AC 388,