Australian Commercial Law

Running head: AUSTRALIAN COMMERCIAL LAW
AUSTRALIAN COMMERCIAL LAW
Name of the Student
Name of the University
Author Note

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AUSTRALIAN COMMERCIAL LAW
Part A
Issue 1
Whether there has been an intention for the purpose of creating legal relationship existing
between Sally and Ethan in the agreement instituted between them.
Rule
There needs to be an objective of creating legally enforceable agreement for the purpose of
institution of valid contract. As per the principles established in the case of Balfour v Balfour
[1919] 2 KB 571, social agreements are generally construed to have been instituted with no
intention of holding each other under legal relationship. However, as per the principle
established in the case of Merritt v Merritt [1970] EWCA Civ 6, commercial agreements are
generally considered to have been backed by the creating legal relationships. Again, as for the
principal established in the case of Ermogenous v Greek Orthodox Community of SA Inc [2002]
HCA 8, it has been held by the court that consideration needs to be given to the circumstances of
the case and the objective test needs to be applied instead of the subjective test that have used to
be applied previously.
Application
The facts of the case presents the situation that Sally and Ethan has been cousins and has entered
into a contract to sale the convenience store belonging to Sally to Ethan. The store has been sold
for consideration of 155000 dollars and has been paid with the Goodwill of $25,000. This
requires an intention to be conceived from situation for the purpose of creating a valid contract
existing between Sally and Ethan. This has further been supported by the involvement of the

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AUSTRALIAN COMMERCIAL LAW
lawyers that they have been intending to create a valid contract as can be supported with the case
of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8.
Conclusion
Hence, there has been an intention for the purpose of creating legal relationship existing between
Sally and Ethan in the agreement instituted between them.
Issue 2
Whether there are any remedies that can be extended to Ethan for the prior statements made by
Sally before the institution of the contract.
Rule
The statements that any individual involved in the institution of a contract makes prior to the
formation of the same can depict two forms namely a condition for a representation. For the
purpose of arriving at a decision the court will examine the presence of any misrepresentation
distortion of facts and whether such miss representation has been made with respect to a
condition of the contract. The court needs to investigate that there has not been any false
statement made by the parties involved. First representations prevents the parties to form an
informed judgement as can be illustrated with the case of Bisset v Wilkinson [1927] AC 177.
The court also needs to consider the fact that the false representation that has been made has not
been intended to be executed by the party making the statement the party to whom it has been
made has decided to rely upon the same as can be treated with the case of Horsfall v Thomas
[1862] 1 H&C 90. The party who has been subjected to misrepresentation without any fault on
his part main claim damages against the party who has made search misrepresentation. This can
be supported with the case of Redgrave v Hurd (1881) 20 Ch D 1.

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AUSTRALIAN COMMERCIAL LAW
Application
In the present case there has been a misrepresentation made by Sally while selling his business to
Ethan. In this case Sally has represented her business to have profits and prosperity by presenting
her profits for three years which again has not been accurate. The figure she has presented to him
has been fabricated for the purpose of depicting enhanced figure which is not true. Being
unaware of any business activities and having no experience in the business ventures Ethan had
no means of discovering the statements to be false. The financial difficulties faced by the
business has not been known to Ethan. And because of his inexperience in the field of business
he has no means to be aware of the same. Hence, Ethan has no other means to have discovered
the fact other than on relying upon the representations made by Sally. This can be illustrated with
the case of Bisset v Wilkinson [1927] AC 177. Moreover, this misrepresentation has made
Ethan to suffer losses which entitles him to claim damages from Sally for the misrepresentation
she had made. This can be supported with the case of Redgrave v Hurd (1881) 20 Ch D 1.
Conclusion
There are remedies that can be extended to Ethan for the prior statements made by Sally before
the institution of the contract as the same were misrepresentations.
Issue 3
Whether the restraint of trade clause incorporated in the contract between Sally and Ethan can be
enforced or treated as valid in case of any contravention of the same by Sally.
Rule