Assistance to James in Contractual Violation, Negligent Misrepresentation and Legal Issues under ACL

This article discusses the assistance that should be given to James in case of contractual violation, negligent misrepresentation and legal issues under ACL. It covers the relevant rules and their application in the given scenario.

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Foundation of Company and Commercial Law
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Answer 1
Issue
The issue is what assistance/financial should be given to James in order to compensate the
violated of the contractual terms?
Rule
A contract imposes its terms on the parties based on which they are bind by them. They
have the legal obligation to comply with the same. The terms which are included in a
contract are categorised into two types: express and implied. The expressed terms are
included by the parties in the contract whereas implied terms are included by the statute or
the court. Moreover, the express and implied terms are categorised into condition and
warranty. The conditions are terms which are significant based on which the entire contract
is formed, and non-fulfilment of them resulted in terminating the entire contract.
Warranties are those terms which are not as important as conditions, and the contract is
not rescinded in case they are violated by the parties.
The Parol Evidence Rule (PER) is significant in contract law which provides that after forming
a contract, the oral evidence of the terms which contradict with the existing written terms
will not prevail in the contract. However, the court provided in Curtis v Chemical Cleaning
case that this rule is not applicable in case any party misrepresent the terms of the contract.
The court provided in Costa Vraca Ltd v Berrigan Weed & Pest Control Pty Ltd & Anor case
that while forming a service contract, the parties of a contract have to ensure that they
maintain a standard which a reasonable person would in the particular situation. After
violation of contractual terms, the aggrieved parties can demand remedies from the
contract which include rescission, repudiation, damages, specific performance, and
injunction.
Application
A valid contract was formed between James and Lloyd Right Pty Ltd (Lloyd) in which an
expressed term is included by the parties. The term specifies that it is the obligation of Lloyd
to collect a permit from local council regarding putting the chair in the sidewalk. Lloyd can

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rely on the doctrine of PER to eliminate the term of minimum seat capacity which took
between the parties. However, Lloyd specified to James that 120 seats would be put in the
restaurant while purchasing them. As discussed in Curtis v Chemical Cleaning case, Lloyd
cannot rely on PER based on the misrepresentation made by him. The expressed term is
violated by Lloyd due to failure of taking the permission from the local council. Based on this
breach, the financial compensation should be paid by Lloyd for the loss suffered by James of
40 customers. The amount of loss as per $30 per customer should be paid, and the amount
of contract should not be paid by James that is $15,000.
Conclusion
Based on the above observations, James has the right to terminate the contract based on
violation of the term and misrepresentation. Lloyd should provide financial assistance to
James for the loss suffered by him.

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Answer 2
Issue
The issue raised in this case is what financial compensation should be given by Lloyd based
on the tort of negligent misrepresentation?
Rule
A contract which is formed based on the misrepresentation made by a party is considered as
voidable. A party can be held liable for misrepresentation in case a statement is made by the
party to another which is false, and the purpose of making such statement is to form a
contractual relationship with another party. After providing the misrepresentation in a
contract, the innocent party has the right to discharge from his contractual obligations by
setting aside the contract or comply with its terms. In Shaddock v Parramatta City Council
case, wrong information was given by the council to the party regarding a road widening
proposal. The court provided that the council is at the fault since it provided wrong
information to the person who relied on such information as it had a duty.
Moreover, in case the party is in the position to know the true facts, then the party cannot
provide that the statement was a personal opinion rather than a misrepresentation as given
in Smith v Land & House Property Corp case. There are three types of misrepresentations
which are made by a party which includes innocent, fraudulent and negligent. Negligent
misrepresentation is made by a party when he/she did make the statement without having
the reasonable grounds to believe in its truth. The Australian Consumer Law provides under
section 268 that a service contract can be terminated by the party in case another party
failed to comply with a key term of the contract. Thus, the party can terminate his/her legal
obligations which rose in the contract be rescinding them.
Application
The statement made by Lloyd regarding the size of the seats and overall seating capacity in
the restaurant is considered as negligent misrepresentation because there was no
reasonable reason available for Lloyd to believe in its truth. Lloyd violated the duty because
wrong information was given to James on which he relied upon as given in Shaddock v

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Parramatta City Council case. As discussed in Smith v Land & House Property Corp case,
Lloyd cannot provide that it was a mere personal opinion since it was in the position to
know the facts. Moreover, setting arrangement was a major term of the contract which was
important for James as he will suffer substantial loss in case the number of seats is less.
Since a major term of the service contract was violated by Lloyd, James has the right under
section 268 of ACL to terminate the contract. Lloyd should give financial compensation to
James which includes payment for 40 customers who are not able to seat at the restaurant
due to the fault of Lloyd. Moreover, James should not pay $15,000 to Lloyd since he has the
right to rescind the contract based on violation of a major term.
Conclusion
Based on the above analysis, Lloyd is liable for negligent misrepresentation and violating the
provisions of ACL based on which the contract can be rescinded, and compensation should
be given to James.

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Answer 3
Issue
Whether Lloyd faces any legal issue under section 18 of ACL?
Rule
Section 18 of the ACL provides that parties should not make a false statement regarding
products and services which can mislead or deceive customers or likely to do so. They can
be held liable for making such false representations based on which the contract can be
rescinded, and the innocent party can demand compensation.
Application
Lloyd is liable under section 18 of the act for making a misleading and deceptive statement
regarding the products. The statement that the seating capacity of the restaurant will be
120 was a false statement given by Lloyd. James has the right to terminate the contract, and
he did not have to pay $15,000. Moreover, James can recover the compensation for the loss
suffered by him due to the misleading statement made by Lloyd.
Conclusion
Based on the above observations, Lloyd is liable for violating section 18 of ACL based on
which the contract can be terminated, and compensation will be paid to James.