Australian commercial Law (PDF)

AUSTRALIAN COMMERCIAL LAW (LAWS20058)
Assignment I
Student Name
[Pick the date]

PART A
Question 1(b)
The foreign legal system which would be analysed for the presence for Hart’s components of a
legal system is India. Also, comparison with Australia is drawn and the result highlighted.
 Rule of Recognition
According to Hart, there need to be week defined source for legal authority so as to avoid
ambiguity in this regards. For the Indian legal system, there are essentially four main sources.
One is the statute law which essentially comes into frame based on the laws enacted by the
representatives of the people. Another is the constitution which outlines the broad legal
framework as desired by the constitution framers. Besides, case law serves as an important
source especially for the lower courts which need to follow the judicial precedents set by the
higher courts. Besides, certain laws based on custom and traditional values are also prevalent1.
In comparison, Australia has also four main sources with three overlapping with that of India.
The only different source law is common law which essentially is also adhered to in India as
judicial decisions tend to consider the common law owing to common British legacy. Thus both
countries tend to have defined authority which acts as sources of law.
 Rule of Change
Laws are not static and hence there needs to be a set procedure in relation to changing the
laws of the land. In India, the parliament is entrusted with enacting the laws and also
repealing them. However, the constitution itself can also be amended so as to reflect the
changing realities. Further, in accordance with the constitution the powers with regards to law
making and repealing for the legislature at the states and centre has been well defined2.
Owing to common British legacy of both countries, a similar well defined system is in place
for Australia also. Infact in Australia the due process in repealing and altering laws typically
1 Indian Government , Source of Law (n.d.) <https://archive.india.gov.in/citizen/lawnorder.php?id=6 >
2 Sheela Rai, Hart's Concept of Law and the Indian Constitution (2012) < http://www.supremecourtcases.com/index2.php?
option=com_content&itemid=5&do_pdf=1&id=783 >
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also involves seeking suitable public option which is quite helpful. Thereby this element of
the Hart’s legal system is adhered to by both India and Australia.
 Rule of Adjudication
Additionally, it is imperative that a well-defined dispute resolution mechanism must be in
place to resolve the legal disputes. This is present in India in the form of an independent and
cohesive judiciary system which has a hierarchical structure but tends to cover the span of the
nation. Besides, disputes regarding the constitution interpretation are decided by the Supreme
Court as it is considered to be the interpreter. Besides, the judicial system, there are
additional mechanisms (for instance. Administrative tribunals) which also play an active role
in adjudication3.
Australia also has a comparable system of courts along with other mechanism including
administrative tribunals. The hierarchical structure is similar and well –defined. Thus, the
Australian court system provides an effective resolution mechanism for different disputes that
can be resolved in an amicable and timely manner. Thereby, this aspect has also been satisfied
by both nations.
Part B
Question 2
Issue
The issue is to offer a legal advice to Barry on the account of the contract enacted by Angelo
based on the various representations under the common and statute law.
Law
Misrepresentation on the part of contractual parties is considered a key issue in the enactment of
an enforceable contract. Misrepresentation arises when false information is provided to the buyer
in order to attract the party to enter into contractual relationship. Hence, in order to classify the
3 Ibid. 2
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information stated by seller as misrepresentation, the following aspects need to be taken into
consideration4.
 Misrepresentation must be done for the factual statements by the seller
Misrepresentation would arise, when the concerned seller has falsified the factual statement to
the buyer. However, any false statements cited by the seller in regards to futuristic aspects would
not be considered as misrepresentation. Also, if the concerned seller has not said anything and
remains silent and also, the buyer has not specifically asked for that information, then this would
also not be considered as misrepresentation by seller5. The evidence of this aspect would be
taken from the judgement given in Smith v Hughes6 case, where the seller (defendant) was very
well aware about the aspect that the oats quality which the buyer (plaintiff) was looking for
would not be satisfied by the available oats. However, seller did not inform that to the buyer and
also, the buyer did not ask that to the seller. Hence, the silence of seller regarding the served oats
would not be considered as misrepresentation. Therefore, the court decided that it was mistake
on the part of buyer that he did not ask clearly regarding the quality of the oats from seller.
Hence, the buyer cannot revoke the contract and both the parties are liable to complete the
contractual obligations7.
 Misrepresentation made on the part of seller must be with regards to a significant item.
In this scenario, there must be an intension on the part of seller to bring the buyer into legal
relation by making misrepresentation. Thus, attempt would be made by the seller to misrepresent
a fact which is pivotal for the contract. However, it is essential to note that the aspect that must
be taken into account would be based on the fact that whether the buyer has negligently not
considered the evidence of the representation of the seller8. The judgement given in Redgrave v
Hurd9 case would be taken into consideration, where a solicitor wanted a partner for his
company and hence, in order to attract a person he had misrepresented the facts regarding the
total revenue of the company. However, he had clearly stated that the books have all the monthly
4 Andy Gibson, Douglas Fraser, Business Law (Pearson Publications., 8th e, 2014)
5 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)
6 Smith v Hughes (1871) LR 6 QB 597
7 Robert Bryan Vermeesch, Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2011)
8 Ibid 4, pp. 65-67
9 Redgrave v Hurd (1881) 20 Ch D 1
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revenues receipts and other business related information. Also, the concerned person had not
bothered to check the booklet given by solicitor and enacted a contract with him. After some
time, the new partner came to know that the actual revenue receipts are entirely different from
what the solicitor said. In this situation, the honourable court had taken the consideration of the
negligence done by new partner and announced the judgement that it was mistake on the part of
new partner not on the part of solicitor. Therefore, new partner was held liable complete the
contractual liability10.
In accordance of s. 18 (1), CCL, any misleading advertisement would be terms as deceptive if
the following conditions are satisfied11.
 The transaction must be of commercial nature.
 There must be possibility of deception and actual deception is not mandatory to establish
 Further, intention to deceive is not essential. However, as per Perre v Apand Pty Ltd12 case,
this section would be enforceable only through the presence of deceiving conduct.
 It is essential that there must be some actual financial loss for the buyer.
Application
It can be seen from the given facts that seller Angelo has misrepresented the factual statements
i.e. monthly revenues, expenses, number of competitor and so forth to buyer Barry. It is also
apparent from the given information that the facts stated by Angelo are tempting for Barry and
good enough to bring him into contractual relation. Also, Angelo did not give Barry any booklet
related to the actual figures of revenues and other essential information of business. Hence, the
representations made by Angelo are the only factors that Barry can consider for the execution of
contract. Therefore, it can be said that if Barry wants to revoke the contract, then the contract
would become void because Angelo has engaged in fraudulent misrepresentation. Also, the
advertisement made by Angelo to sell the business was completely deceptive and the transaction
is also of commercial nature. Due to these, Barry has received a significant financial loss.
Therefore, under the outlines of s. 18 (1) ACL, Barry has the rights to recover the damages from
Angelo.
10 Ibid. 7, pp.65-66
11 Pathinayake, Athule, Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014)
12 Perre v Apand Pty Ltd [1999] HCA 36
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Conclusion
The conclusion can be drawn that the contract would be held voidable because of the false
representation made by Angelo. Also, Barry has the legal rights to recover the damages under the
highlights of s. 18 (1) ACL and common law.
Question 3
Issue
The issue is to comment on the possibility of the action that can be incurred on the account of
breach of contract based on the express an implicit terms present in the contract enacted between
Angelo and Barry.
Law
A contract would be formed based on the various terms agreed upon between the contractual
parties. These contractual terms can be express terms or implicit terms. Negotiations are made
between the two parties where seller represents the facts and information to the buyer so that
buyer can agree to be in contractual relation with seller. However, it is noteworthy that not all the
information shared or representations made by seller are considered as term for the contract. It is
imperative to distinguish between the two considering that breach of terms would result in
breach of contract while the same is not true for representations. Express terms are those which
are clearly stated on the part of buyer and the implicit terms are those which are made explicit
but are apparently conveyed through the conduct of the parties13.
The parole evidence rule is one of the key factors that helps to determine whether a
representation is a term for contract or not. All the representations that have written in the
contractual form are considered as term for a contract. The oral representations would not be
classified as term of the contract because if the oral statements are essential for the contract, then
the contractual parties would have written the oral statement in the contractual form14. Further,
13 Pendleton, Wayne & Vickery, Roger, Australian business law: principles and applications, (Pearson Publications, 5th ed., 2015)
14 Ibid. 11. P. 110-112
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the position of the parties would also be taken into account while deciding the statements as term
of contract. When, the representor party has expertise to check the validity of the claim. than the
representation would be term for the contract as highlighted in the verdict of Oscar Chess Ltd v
Williams15. According to that case, the representor was the seller of a car and stated that the
model of the car was 1948 but in realty the model of the car was 1939. The court announced that
the representor had the requisite knowledge to check the validity of the claim regarding the
model number of the car and hence, the statement regarding the car would be a term of contract.
Further, any representation which is essential parameter for the buyer to enter into contractual
relationship would be considered as term. As per the verdict of Bannerman v White16 case the
buyer had specifically asked for the hops which had received sulphur treatment, it can be seen
that hops with sulphur treatment are the key factor for buyer for enacting a contract and hence,
sulphur treated hobs was considered to be a term for the contract17.
Application
It can be seen from the case information that there are set of representations that would be taken
as contract term between Angelo and Barry. The financial performance of the business would be
a key factor for Barry to buy the business from Angelo. However, it is also evident from the
given case information that Barry is not a business person and hence, the information provided
by Angelo is the key element for Barry for taking decisions considering that Angelo has the
position to check the financial status of business. Also, absence of any report/account books is
the critical aspect due to which Barry has to rely on the representations stated by Angelo and
hence, these representations would be implicit terms of the contract. This is because financial
details are imperative aspects for Batty and if Barry would have seen the reports or actual figures
of the business then he would not have purchased the business. Also, there are set of express
term of the contract which has mentioned in the written contract in regards to the value of van
and loader. It can be seen that there is breach of implicit terms as well as express terms because
false statement about financial position results have led to breach of implicit terms. Further,
breach of express terms occurs due to wrong representation of worth of loader and lease amount
15 Oscar Chess Ltd v Williams [1957] 1 WLR 370
16 Bannerman v White (1861) 10 CBNS 844
17 Ibid. 7, pp. 78-79
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for van. Therefore, it can be concluded that contract between Angelo and Barry is breached
because of the violation of implicit and express terms.
Conclusion
It can be said based on the above, that contract comprises both implicit and express terms.
Further, both the terms are violated by Angelo and hence, the contract has been breached. Also,
Barry has right to recover the incurred damages from Angelo.
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