Australian Corporate Law and Insolvency Reforms

This assignment delves into various aspects of Australian corporate law and reforms, covering topics such as liquidation of foreign companies, environmental shareholder activism, class warfare in debt restructuring, and changes in attitude towards compliance. It references several key cases, including Carlill v Carbolic Smoke Ball Co and Chapelton v Barry urban District Council, and draws from research papers by authors like McBarnet and Harris. The assignment is likely related to law or business studies at an academic level.

Business and
Company Law

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
A) Explain how the contracts Avinash made with the Cafe were formed...................................1
B) Explaining legal entitlement of cafe on clause printed on the tickets.....................................3
QUESTION 2...................................................................................................................................5
Terms are the promises the parties agreed in a contract. Either expressed or implied. ..............5
CONCLUSION................................................................................................................................7
BIBLIOGRAPHY............................................................................................................................8

INTRODUCTION
Business law is a law relating to the business and commerce. Business law is a branch of
civil law and deals with issues in private law and public law. In commercial law corporate
contracts, hiring practices, sale and manufacture of consumer goods are included.
This report will study a case relating to the business. The case stats that a person named
Avinash purchased food and drink from a cafe and by eating that food he has suffered a serious
injury as his tooth broke due to presence of metal piece in it.
Thereafter report will include the procedure of formation of contracts between Avinash
and cafe. Also the report will state whether the cafe is legally entitled to rely on the clause
written on the purchase ticket of Avinash.
Furthermore report will state how expressed and implied terms are significantly different
from one another.
QUESTION 1
A) Explain how the contracts Avinash made with the Cafe were formed
Facts:
In this case Avinash a customer, purchases the product in cafe which results in formation
of contract between cafe and Avinash. Presence of metal piece in the food broke the tooth of
Avinash. As a result he claimed for the dental care compensation. But the management admits
that it is written on the purchase bill that management is not responsible for the injury from the
consumption of any food and drinks of cafe.
Issue:
Legal status of cafe regarding products supplied to Avinash.
Rules:
Contract law: The essential requirements of contract formation-
for a contract to come in action there are some requirements which is to be fulfilled by the parties
in the contract 1. The contact come into existence when the facts case follows the three essential
requirements which are as follows-
 The parties are legally bound in the contract.
1 McQueen, R., 2016.A Social History of Company Law: Great Britain and the Australian
Colonies 1854–1920. Routledge.
1

 For the payment of consideration in the contract there can be either formal execution of
agreement or alternative exchange of 'something in value' while the contract is made. Also the contact must be fulfilled as per the terms of contact.
Establishing the Existence of a contract- The legal status of a contract depends on the relevant
principles and rules. The following are the steps that led to the cafe supplying Avinash with its
products-
Step 1 This steps determines that whether there is sufficient agreement for a contract
which comprise of valid offer, negotiation, proper acceptance and also the terms of contract must
be sufficiently certain. In this case there were a contract between the cafe and Avinash who came
in contract buy delivering the food and drinks for some consideration which is accepted by both
the parties after negotiation. Therefore the contract is sufficiently certain 2.
Step 2 in this step it is checked that the parties in the contract are intend to be legally
bound by their agreement which includes the existence of relevant facts and objective. Therefore
in this case there is relevant facts that both the parties agreed and performance on part of both the
parties took place.
Step 3 this step evaluates that whether proper consideration was provided by the parties.
Therefore in our case the cafe delivered the food to Avinash and Avinash paid the money to cafe
in return, as a result there is payment of consideration to the cafe by Avinash.
Step 4 this checks the sufficient capacities to enter the contact, in this it is determined
whether the parties in contract are minors or any of the parties is mentally disabled. In our case
both Cafe management and Avinash is mentally sound and is not a minor. Therefore this
checklist is fulfilled.
Step 5 this step includes the that at what exact point contract obligations formed. In this
case contract obligation was formed when Avinash paid for the food offered by Cafe 3.
2 Kashyap, A. K. and et.al., 2019. An Introduction to Corporate Insolvency Law and
Reforms in Australia. In Corporate Insolvency Law and Bankruptcy Reforms in the Global
Economy (pp. 107-131). IGI Global.
3 Khan, A. and Williamson, S., 2016. The liquidation of foreign companies in
Australia. Australian Restructuring Insolvency & Turnaround Association Journal.28(2).
p.38.
2

Step 6 in this step it is determined that there is contract, whether the circumstances give
rise to a promissory estoppel. In this case there was a creation of contract and terms and
conditions were duly formed by the parties 4.
Law:
Carlill v Carbolic Smoke Ball Co5 :During the influence of influenza in England a
company named Carbolic Smoke Ball produced patented 'smoke balls' with some chemicals and
advertised that it prevents influenza. Also the company advertised that if some one would caught
influenza even after using the smoke balls, the company will pay £100 as a reward to that person.
Even the company deposited £1000 in their bank account to show the seriousness of this offer.
By seeing the advertisement Carlill a customer used smoke balls and even after using it caught
the influenza, she claimed the promised money by the company but the company refused to pay.
It was held that the company is legally binding under the terms of contract. The court
states that the advertisement was unlike the advertisement and also the company expressly
deposited £1000 to his bank account. This demonstrated that the company is legally binding to
the contract.
Application:
In this case, the cafe is legally binding to the contract with his customer Avinash as the
company offered the food to its customers in intention of serving him.
Conclusion:
Therefor the cafe is in legal contract with its customer Avinash as both the parties are in
legal relation to the contract. There was exchange in money and food by both the parties which
act as a consideration to the contract. Also there were a fulfillment of the terms of contract
between both the parties.
B) Explaining legal entitlement of cafe on clause printed on the tickets
Issue:
 Avinash is a customer and qualifies the conditions as per contract law.
 Also the legal entitlement of cafe as per clause written on the ticket. \
4 North, J. and Flitcroft, R., 2016. Businesses beware When does the Australian Consumer
Law apply.Governance Directions.68(5). p.306.
5 Carlill v Carbolic Smoke Ball Co
3

 The cafe could rely on exclusion clause and exclude their liability by proving that the
ticket contained ' contractual terms' that they have taken adequate steps in notifying the
customer the existence of the clause before the conclusion of the contract.
Rules:
Business law: business law refers to the regulation of all the law which monitors various
business activities and ensures that every business organization follows rules and regulations. It
ensures that the business organization follows the terms and guidelines prescribed by the law
while performing their normal course of business.
Consumer protection law: As per the consumer protection law of Australia, a consumer is
that person who purchases the goods and services through the buyer in order to consume the
product and not for further sale of those products. Also the consumer pays sufficient amount as a
consideration in return of the products purchased by them. This law in Australia concerns with
providing safeguard to the consumers from any fraud or negligence made by the company that
may result in damaging or harming the consumers. Under Australian consumer protection law,
prohibits the exclusion clause that attempts to exclude the consumer guarantees.
Also the law states that goods should be acceptable in appearance and finished. Also the goods
should be safe, durable and fits the purpose of its purchase 6.
The exclusion clause under the common law would only be binding legally only if it does not
breach the above specified statutory consumer rights.
Rights of customers: according to the Australian consumer law, a consumer contains
several rights while purchasing a product. The consumer have right to know the information
regarding products and services they are buying. Further if in any case consumer get harm or
damage due to use of that product they he/she is can claim the damages for compensation from
the seller.
Under the Common law: the business law has provides an exclusion clause while making
their agreement, the parties can induce a clause in the agreement which can result in the
6 Tushnet, M., 2017. Comparative constitutional law. In The Oxford handbook of
comparative law.
4

reducing or eliminating of liabilities and obligations of the firm towards another party 7. The
exclusion clause can be of two types-
Firstly- the nature of the document should be examined. It should check whether the
contract agreement contains contractual terms or merely a receipt after the formation of the
contract.
In the case Chapelton v Barry urban District Council 8, where Chapelton hired a pile of
desk chairs. The ticket offered to customer contains a exclusion clause excluding the liability for
accidents caused. Chapelton was successful as the receipt was obtained after the formation of the
contract and the notice does not include any exclusion clause.
Secondly- it should be examined whether reasonable steps taken to notify the customer of
the existence of the clause before the conclusion of contract.
In the case Balmain New Ferry Co Ltd v Robertson9 where a notice contained that the payment
is done while entering and exit from ferry whether or not a customer traveled in ferry. Since
Robertson missed the ferry and tried leaving without the paying. The court implied that he had
traveled many times in ferry and very well aware of the terms and conditions, therefore it is
binding on him.
Application:
Key facts: Under common law
 Ticket received by Avinash was unsigned document which contains a exclusion clause in
the reverse side stating the cafe accepts no responsibility for the injury caused to
customers from the consumption of the food and drinks.
 Ticket was received before the contract was made between the customer and cafe.
 Avinash was a regular customer.
As the ticket was issued before the payment, therefore the ticket couldn't be referred as a
receipt. Irrespective of the fact the customer Avinash read the receipt or not but it formed a
contractual terms which states the terms in the contract before the contract have been formed. As
7 Lumsden, A., 2019. The Wider Implications of the Hayne Report for Corporate Australia.
Available at SSRN 3342855.
8 Chapelton v Barry urban District Council
9 Balmain New Ferry Co Ltd v Robertson
5

the case Chapelton v Barry urban District Council suggests that the initial notice did not
specified any exclusion clause, but included in the receipt later.
Also Avinash was a regular customer to the cafe. According to the case Balmain New
Ferry Co Ltd v Robertson the court stated that there were past dealings between the company and
Robertson and he is well aware about the conditions. Therefore Avinash too is reasonably known
about the conditions as he visits the cafe regularly 10.
Therefore with the above justification,the cafe can rely on the exclusion clause and avoid
their liability as it satisfies both the test under common law.
Key facts: Under Australian Consumer Law
According to the consumer rights of the Australian customer law Avinash is a customer
as he paid consideration for the food and drinks. Also in the customer law is stated that customer
have a right over the guarantee for the acceptable quality of goods. In the case cafe has neglected
the provisions. Therefore the cafe will not be able to rely on the exclusion clause rather they will
be held liable under the Australian Consumer Law as well.
Conclusion:
Avinash can sue for the breach of the contract and claim damages for his injury. The cafe
is not legally entitled to rely on the clause printed on the ticket to avoid liability.
QUESTION 2
Terms are the promises the parties agreed in a contract. Either expressed or implied.
Express terms are those terms in the contract which are promised by the parties in
contract. The terms included in contract can be written or oral like verbal comments. The oral or
verbal communication is difficult to prove and are less clear to parties as it doesn't provide a
record of the conditions by the parties.
On the other hand, implied terms are invisible terms but are valid. These terms are neither
written in a written contract nor they are spoken verbally by the parties in the contract. These
have binding effect on the parties forming the contract. There terms are generally supplementary
to the conditions of contract which is expressed, to make the deal effective. These could be
implied by both common law and statute.
10 Riddell, G., 2016. Environmental shareholder activism in Australia after ACCR v CBA.
Australian Resources and Energy Law Journal.35(2). p.172.
6

Some contact contains both express and implied terms. In the cases of exclusion clauses
in the contracts, even when the parties exclude the liabilities through the expressed terms by the
contract in writing or verbally, sometimes implied terms would hold the party imposing the
exclusion clause liable.
In the case, White v John Warwick & Co Ltd11 white was injured by hiring a bicycle from
John Warwick and co. The defendant company exclude their liability, using the expressed
(written) terms in the contract which states that “Nothing in this agreement shall render the
owners liable for any personal injury”, this was decided that the company cannot exclude its
expressed liability which is a implied liability according to the contract.
Under the Australian consumer protection law, the statutory implied terms are prohibition
of certain consumer guarantees from being excluded . For example in the case of David Jones
Ltd V Willis, it was held that retailer was liable because the shoes were not merchantable quality
and also not of suitable quality. Therefore express terms of the contract will be overwritten over
the implied terms in case the goods are not of proper quality. These implied terms are established
by the Australian consumer protection laws which protects the rights of consumers.
Relation with case
In this case Avinash and Cafe is in a contract which consist of both expressed and
implied terms. The expressed terms in the contract are the note written on the backside of the
ticket which states that company will not be held liable in case of injury or damage to the
customer. The note expressly excludes the liability of Cafe regarding the quality of the goods.
Also the implied terms in the contract are those which comes under the common law legislation
12.
Avinash was assumed to have knowledge of the exclusion clause as he was dealing with
the cafe in past. Therefore it was implied that proper notice has been provided to him under the
common law. Also under the consumer law statutory implied terms are consumer guarantees 13.
11 White v John Warwick & Co Ltd
12 McBarnet, D., 2019. When compliance is not the solution but the problem: From changes
in law to changes in attitude. Centre for Tax System Integrity (CTSI), Research School of
Social Sciences, The Australian National University.
13 Harris, J., 2017. Class Warfare in Debt Restructuring: Does Australia Need Cross-Class
Cram down for Creditors' Schemes of Arrangement. U. Queensland LJ.36. p.73.
7

From the above cases and legislation it is stated that there is wide difference between the
expressed and implied terms in contracts.
CONCLUSION
From the above report it is concluded that functioning of a business includes contract
laws, its essential elements for the formation of contract which are offer, acceptance,
consideration etc. also the report concluded that, the Australian consumer protection laws
protects the interest of consumers and determined the validity of exclusion clause. The report
also states that, the cafe is responsible for the damages incurred by Avinash.
Furthermore, the report contained the information about terms of contract which
contained the express and implied terms of contract. Also the report states that the express terms
are those which are being expressed by any of the parties in contract in oral or written form.
Whereas implied terms of contract are those which are implied by the fact of the contract or the
law.
8

BIBLIOGRAPHY
Books and Journals
 Carlill v Carbolic Smoke Ball Co
 Chapelton v Barry urban District Council
 Balmain New Ferry Co Ltd v Robertson
 White v John Warwick & Co Ltd
McQueen, R., 2016.A Social History of Company Law: Great Britain and the Australian
Colonies 1854–1920. Routledge.
Kashyap, A. K. And et. al., 2019. An Introduction to Corporate Insolvency Law and Reforms in
Australia. In Corporate Insolvency Law and Bankruptcy Reforms in the Global Economy
(pp. 107-131). IGI Global.
Khan, A. and Williamson, S., 2016. The liquidation of foreign companies in
Australia. Australian Restructuring Insolvency & Turnaround Association Journal.28(2).
p.38.
North, J. and Flitcroft, R., 2016. Businesses beware When does the Australian Consumer Law
apply.Governance Directions.68(5). p.306.
Tushnet, M., 2017. Comparative constitutional law. In The Oxford handbook of comparative
law.
Lumsden, A., 2019. The Wider Implications of the Hayne Report for Corporate Australia.
Available at SSRN 3342855.
Riddell, G., 2016. Environmental shareholder activism in Australia after ACCR v CBA.
Australian Resources and Energy Law Journal.35(2). p.172.
McBarnet, D., 2019. When compliance is not the solution but the problem: From changes in law
to changes in attitude. Centre for Tax System Integrity (CTSI), Research School of Social
Sciences, The Australian National University.
Harris, J., 2017. Class Warfare in Debt Restructuring: Does Australia Need Cross-Class Cram
down for Creditors' Schemes of Arrangement. U. Queensland LJ.36. p.73.
9