Business Law Assignment

This Business Law assignment discusses various legal issues and case studies. It covers topics such as negligent misstatement, contract formation, exclusive dealing, economic duress, and breach of contract. The assignment provides an analysis of the rules of law and their application to the given scenarios. It also explores the remedies available to the parties involved. Suitable for students studying Business Law or related courses.

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Business Law Assignment
Author
Class (Course)
Professor (Tutor)
School (University)
City and State
Date

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Question One: Colin vs Ben and Annie
Issue
The dispute arising from this case is a matter of negligent misstatement. That is, whether
Colin’ is liable for the negligent misstatement committed by his assistant against Annie and Ben?
Rule of Law
There are circumstances where one can be liable for pure economic loss resulting from
negligent misstatements. The rules governing this area of law are those applicable to claims of
negligence as set in Donoghue v. Stevenson.1 For a successful claim of negligence, the claimant
must prove that the defendant owed a duty of care. The neighbor principle in Donoghue case
stated that a person owes a duty of care to all other persons who could reasonably be harmed by
that person’s negligent acts.2 These rules were later affirmed by Lord Atkin stating that some
relationships could create a duty where people should take reasonable care to prevent an act that
they could reasonably foresee that such acts would harm their neighbor.3
Once the claimant establishes a duty of care, he should also establish that the defendant
broke that duty of care. Courts take an objective test in affirming that there was a breach of the
duty. The law requires the defendant to provide the standard care that would have been provided
by a reasonable person with the same skills and position as that of the defendant.4The last
element that the claimant needs to provide is to demonstrate that the claimed loss arose directly
from the breach. Thus, the claimant must show that a causal link exists between the defendant’s
breach of duty and the claimed loss. While illustrating the ‘but for’ test used in establishing a
1 Donoghue v Stevenson (1992) 108 LQR.
2 Ibid.
3 Hedley Byrne & Co v Heller & Partners (1963) 2 All ER.
4 Wilsher v Essex Area Health Authority 1074 AC. Professionals are judged as per the position
they hold. The House of Lords held that the duty of care expected from the doctor is only that
flows from their post, but their experience is irrelevant.

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causal link, Denning J stated that a defendant would be liable for losses if it appears that the
claimant’s injuries would not have occurred but for the defendant’s negligent act.5
Application
In order to recover damages for their loss, Annie and Ben would have to establish the
elements for a claim of negligence. Firstly, they must establish that Colin owed them a duty of
care. In establishing a duty of care in people offering advice, the House of Lords in Hedley
Byrne stated that some ‘special relationship’ between the parties would demonstrate that a duty
of care exists to prevent financial losses that could arise from a negligent misstatement. This rule
was further elaborated in Caparo Industries case. In the case, the house of Lords set that for
there to be a special relationship in financial advisers, the claimant must show that the defendant;
(i) was aware that the claimant would use the statement with another person; (ii) the claimant
would use that statement for a specific transaction; (iii) the defendant reasonably expected the
claimant’s reliance on the statement in the transaction without looking for additional independent
advice. From the facts, we are told that Colin informed Annie that she could claim a deduction,
and meet the following week for exact. This fulfills the three first requirement set above thus
affirming that Colin owed a duty of care.
Annie needs also to establish that Colin breached a duty of care. In Nettleship v Weston,
the court stated that the standard duty of care expected from a trainee is the same as that of a
person holding a similar position.6 Therefore, even if the calculations were made by Colin’s
junior assistant, the assistant needed to provide the same standard of care as that expected from
experienced accountants. Since there were miscalculations, this counted to a breach of the duty
of care. Annie and Ben also need to establish that there was a causal link between their $35,000
5 Barnett v Chelsea and Kensington Hospital Management Committee (1969) 1969 QB 1.
6 Nettleship v Weston (1971) 1971 QB 2.

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loss and Colin’s breach of duty. In the ‘But For’ test explained in Barnett v. Chelsea and
Kensington Hospital Management Committee, Denning J stated that for the claimant to establish
a causal link, he or she must show that the loss could not have occurred, but for the defendant’s
breach of duty.7 Similarly, it is a fact that Annie and Ben’s loss would not have occurred, but for
Colin’s breach of duty.
Conclusion
Ann and Ben would recover the loss of $35,000 since they resulted from the negligent
misstatements by Colin’s assistant.
Question Two: Sandy vs APK
Issue
The issue in this scenario is a matter of contract formation. In particular, it is a matter of
whether there was a contract between Sandy and APK.
Rule of Law
A valid contract must have all three main elements. These elements are an agreement
made of offer and acceptant, a valid consideration, and an intention to create legal relation.8 In
respect of an agreement, the rules of an offer are that it must be certain with definite terms, must
be made the offeror and communicated to the offeree.9 In regard to acceptance, the offeree must
communicate the acceptance to the offeror, and the acceptance must in accordance with the
stated terms.
A valid contract must be supported by consideration. A basic definition of consideration
is the price that one party pays for the exchange of a promise.10 The rules of consideration require
7 Barnett v Chelsea and Kensington Hospital Management Committee (n 5).
8 Carlill v Carbolic Smoke Ball Company (1983) 1983 QB 1.
9 Daniel V Davidson and Lynn M Forsythe, Business in the Contemporary Legal Environment
(Wolters Kluwer, Second edition, 2017) 259.
10 Elizabeth Macdonald, Ruth Atkins and Laurence Koffman, Koffman & Macdonald’s Law of
Contract (Oxford University Press, Eighth edition, 2014) 51.

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that consideration must be sufficient, and it does not have to be adequate. Consideration must
also move from the offeree to the offeror. The law of contract can only enforce an agreement
made with the intention to create a legal relationship.11 Where there is a dispute as to whether
parties intended to make a binding agreement, the law classifies the agreement as either as
commercial or domestic arrangement. A domestic arrangement is presumed to have been made
without the intention to make them binding.12 A commercial agreement is presumed to have been
made with the intention to create a legally binding arrangement.13
Application
On application, Sandy would need to prove that all the elements stated for a contract
exist. Firstly, Sandy must demonstrate that APK had provided an offer. In the case of the
Carbolic Smoke Ball Case, the Court of Appeal found that the terms included in the
advertisement made it a unilateral offer ready to be accepted.14 Similarly, the advertisement of
APK included all the terms of an offer such as the price of $5000, and a requirement to complete
the lap in 45 seconds. These terms were clear suggesting no need for further negotiations. Also,
like in Carbolic Smoke Ball Case, the offer made by APK was a unilateral contract that only
required full performance as the acceptance of the contract.15
In regard to consideration, Sandy would have to show that he provided consideration for
the promise. A landmark case illustrating consideration was ruled by Lush J stating that valuable
consideration is any right, profit, interest, or a benefit moving to one of the parties.16 Either, it
can also be a detriment suffered by one party in order to get the promise from the other.17
11 Ewan McKendrick, Contract Law: Text, Cases, and Materials (Oxford University Press, Sixth
edition, 2014) 267 (‘Contract Law’).
12 Ibid.
13 Ibid.
14 Carlill v Carbolic Smoke Ball Company (n 8).
15 Ibid.
16 Currie v Misa (1875) 10 Ex.
17 Ibid.

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Considering this position, Sandy already provided consideration as he ran the race in less than 45
seconds as required.
Sandy would also need to show that these arrangements were made with the intention to
create a legally binding agreement. The basic principles are that all agreements made on a
commercial context are presumed to have been made with the intention to make a legally binding
arrangement. For instance, in the case of Esso Petroleum, the House of Lords concluded that the
fact that Esso was conducting their promotion in a business context made it their deals legally
binding, hence they were liable for the tax.18 Similarly, as the arrangements of APK were on a
business context, this made them legally binding arrangement.
Conclusion
This was a valid contract between Sandy and APK. Therefore, the contract is enforceable.
Sandy should receive $5000.
Question Three: Mike Vs Northgate Organic Syrups and Sodas (“Northgate”)
Issue
There are six main issues that the court would be considered in the case. The first issue is
whether the terms that were previously agreed in an oral contract can be admitted into a written.
The second issue is whether the clause for exclusive dealing for Mike to purchase beverage only
to the Northgate for 12 months is enforceable. Thirdly, there is an issue of economic duress. That
is, whether the money paid to Northgate is recoverable since Mike paid it for lack of an
alternative. Fourth, there is an issue on the Northgate’s breach of contract when it installed a
faulty system, and whether Mike can recover the damages caused by the breach. Fifth, there is an
issue of misrepresentation in purporting to sell 100% Organic Syrups and Sodas while instead,
18 Esso Petroleum Ltd v Commissioners of Customs and Excise (1976) 1976 WLR 1.

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Northgate sold the syrup that was not organic. Six, there is an issue is whether Mike could
recover the damages that have resulted from selling non-organic syrup.
Rule of Law
Issue 1: Whether orally agreed terms can supersede subsequent terms of a written
contract.
Disputes as for whether terms agreed orally can supersede written terms are dealt with
using the parole evidence rule. The parol evidence rule states once parties summarize their oral
terms into a written contract, the court should reject any other oral evidence that is contrary to
the written terms.19 However, there are exceptions to this rule which are;
(a) Ambiguity. If the wording of the written agreement is ambiguous or does not cover
the intention of the parties, the court would admit the oral evidence.20
(b) Incompleteness. The court will admit oral evidence where one party demonstrates
that the written agreement missed some of the fundamental terms.21
(c) Custom. The court may include an oral term where such a term is implied by custom.
(d) The court will admit an oral claim that adds a date where the written contract is
missing commencement date or deadline.22
(e) Where the written agreement was supposed to record the oral terms but instead it fails
to accurately represent them, the court will admit the oral terms.23
19 Gregory Klass, ‘Parol Evidence Rules and the Mechanics of Choice’ (2019) 20 Forthcoming in
Theoretical Inquires in Law <https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?
article=3066&context=facpub>.
20 Robert W Emerson, ‘Franchising and the Parol Evidence Rule’ (2013) 50 Am. Bus. LJ 659.
21 Lee Roach, Card and James’ Business Law (Oxford University Press, 4th ed, 2016) 166.
22 Ibid.
23 Edwin Peel, Treitel on the Law of Contract (Sweet & Maxwell, 14th ed, 2015) 6–018.

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Issue 2: Whether the clause with provisions for exclusive dealings that restrict Mike to
only purchase Northgate beverages for 12 months is enforceable.
The Australian Consumer Competition Act (CCA) prohibits all actions of exclusive
dealing that can significantly lessen competition.24The High Court in News Limited v South
Sydney provided clarification that exclusionary provisions are only valid if they have a genuine
reason for excluding other persons.25
Issue 3: Economic duress. Whether the money paid to Northgate is recoverable since
Mike paid it for lack of an alternative
Economic duress arises where one party agrees to the terms after being subjected to
pressure by the other party.26 Establishing economic duress requires the innocent party to
demonstrate that there was pressure or threat from the other party.27 It must also demonstrate that
the threat was extensive to leaving it no alternative other than accepting the agreement. The court
mainly applies an objective test to see what the person in the claimant position would have done
if placed in such circumstances. Where there is a proof of economic duress, the agreement is not
enforceable.
Issue 4: Whether Northgate was liable for damages in incorrectly installing the post-
mix system and their failure to comply with regulations.
Owners have different remedies regarding defective work remote.28One of the remedies is
going by contract law as stated in the Multiplex case.29 the High Court restated that people
contract law offers compensatory damages in inadvertent harm to economic benefits where the
24 Competition and Consumer Act 2010.
25 News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR.
26 Ewan MacIntyre, Business Law (Pearson Education Limited, Eighth edition, 2016) 159.
27 Pey-Woan Lee, ‘Contract Modifications—Reflections on Two Commonwealth Cases’ (2012)
12(2) Oxford University Commonwealth Law Journal 189.
28 Kathrin Kuhnel-Fitchen and Tracey Hough, Optimize Contract Law (Taylor & Francis, 2nd ed,
2017) 214.
29 Plan 61288 v Brookfield Multiplex (2012) 1219 NSWSC.

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harm consisted of disappointed expectations from the contract.30 The second remedy is available
through statutory provisions in CCA section 259-277 and Part 3-3 under the Safety of consumer
goods and product.31
Issue 5: Issue of misrepresentation in purporting to sell Organic Syrups and Sodas
while instead, Northgate sold the syrup that was not organic.
Misrepresentation happens when a party to a contract makes untrue statements which end
up inducing the other party into the contract.32 For the claim of misrepresentation to succeed, the
innocent party must prove that there was a statement made orally, in writing, or by conduct by
the other party.33 The statement must also be false.34 That statement must also have been made in
fact as opposed to opinion, and it must have succeeded in inducing the other party.35
Issue 6: Six, there is an issue is whether Mike could recover the damages that have
resulted from selling non-organic syrup.
The two main remedies for misrepresentation are either rescission and an award for
damages. The remedy of rescission brings a contract to an end and returns both parties to the
position they were before they made the contract.36 In rescission, the contract may order the
parties to return all the benefits they had received from the nullified contract. An award for
damages is a financial payment for compensating the innocent party. In misrepresentation, the
damages are intended to restore the innocent party to the position it would have been had if the
misrepresentation had not occurred.37
30 Ibid.
31 Competition and Consumer Act (n 23).
32 Qi Zhou, ‘What Can Contract Lawyers Learn from Law and Economics’ (2011) 30 U. Tas. L.
Rev. 157.
33 Jill Poole, Textbook on Contract Law (Oxford Univ. Press, 12. ed, 2014) 516.
34 Ibid.
35 Ibid.
36 Ewan McKendrick, Contract Law (macmillan education, 12th ed, 2017) 13.8.
37 Ibid 13.9.

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Application
On application, the law will look at all the laid out issues from top to bottom. Starting
from the issue of parole evidence rule where mike claims that he was told by a representative
there would be no additional installation costs. In deciding whether to admit this evidence, the
court will look at the exceptions that exist. In White v Australian and New Zealand Theatres Ltd,
the court stated that extrinsic evidence could be admitted to give meaning to the unclear
language used in the contract.38 However, since the language is clear in the case of Mike and
Northgate, this exception would not apply. The second exception is that incompleteness. In Van
den Esschert v Chappell the court allowed the purchaser to recover damages from the seller who
affirmed that the house had no termites before the contract was signed which late turned out to be
untrue.39 Similarly, the Northgate representative lied to Mike to induce him to the contract.
Mike’s oral evidence would be admitted due to the incompleteness of the written contract.
The second issue of regards to exclusive dealings. The enforcement of this rule would be
determined by what the court in News Limited v South Sydney, referred to as the subjective
purpose of excluding another person. In this case, the Court would identify whether there was a
genuine reason for preventing Mike from purchasing soft drinks or post-mix syrups from any
other beverage supplier. Given that the drink that Northgate was supplying were not
Organic as agreed, the court would likely find that the subject matter of this exclusion did not
exist.
On application of the rules of economic duress on the third issue, Mike would need to
establish that he was subject to pressure that was too significant leaving him with no practical
alternative other than to accept the contract.40 For instance, in Kolmar Group AG v Traxpo
38 White v Australian and New Zealand Theatres Limited (1943) 6 HCA.
39 Van Den Esschert v Chappell (1960) 1960 WAR.
40 Lee (n 26).

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Enterprises Pvt Ltd, the Kolmar had agreed with Traxpo for the supply of methanol for an agreed
price. However, Traxpo increased the price at the time Kolmar urgently needed the methanol for
its client. The court reversed the renegotiated agreement after finding that Kolmar was left with
no choice. Similarly, in the case of Mike, we are told that Northgate demanded an additional
payment of $16,000 contrary to what was agreed, and refused to supply any post-mix syrups
until this payment was made. This Northgate refusal left Mike with no alternative other than to
accept. Like in the case of Kolmar Group AG v Traxpo Enterprises Pvt Ltd, it is possible to find
that Mike was subjected to economic duress, thus this payment should is recoverable.41
The fourth issue regards Northgate liability for damages resulting from defects of on the
installation of the post-mix system. From the facts provided, we are told that the post-mix system
broke down and further investigation shows that Northgate did not comply with ith state
regulations. Under the law of Contract, Mike can use Northgate for a breach to recover all the
damages including the $35,000 required to rectify. In H Parsons (Livestock) Ltd v Uttley Ingham,
the court found the defendants in breach for the failure of the installed ventilation The Court
found the defendants liable for all the damages including the loss of the claimant’s pigs.
Similarly, Mike can recover all the damages resulting from the faulty post-mix system. In
addition, the CCA requires products to comply with all Safety standards. Under section 138, a
person who suffers loss or damage due to defective products may recover damages through
action to the manufacturer. In this sense, Mike would be able to recover damages resulting from
Northgate’s breach.
On the issue of misrepresentation, Mike would be required to establish that there was a
statement made to him by Northgate, the statement was made in fact, it was false, and that
statement caused him to accept the contract. Looking at the facts, Northgate already told Mike
41 Kolmar Group AG v Traxpo Enterprises Pvt Ltd (2010) 2010 EWHC.

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that they were offering 100% organic post-mix syrup only to turn out that the post-mix syrups
were not organic. In Esso Petroleum Ltd v Mardon, the court stated that an incorrect statement
made by a professional constitutes misrepresentation if it induces the other party into a contract.42
Applying the same scenario, Northgate was in a profession, so state that their mix was 100%
organic when in fact it was not was an actionable misrepresentation.
On the issue of damages, the two damages available for misrepresentation are rescission
and an award for damages. Under rescission, this is an equitable remedy that the courts awards if
monetary damages cannot restore a party to the position it would have been had there been no
misrepresentation. For instance, With v O’Flanaganin, the court allowed the purchaser to rescind
the practice because the income turned out to be less than what was promised. The fact that the
Also, the sanctions for non-compliance with the post-mix system was not in compliance with
regulation standards creates another reason for rescission. In ACCC vs Dimmeys Stores, the
defendant was ordered to recall the bicycles that were noncompliance. Similarly, Mike can ask
for the recall of the post-mix system because it was non-compliance. Further, in Smith New
Court Securities v Scrimgeour Vickers, the court allowed the claimant to recover all the loss that
resulted from fraudulent misrepresentation. Similarly, Mike would be able to recover all the loss
that results from reduced sales due to selling non-organic syrup and lost profit.
Conclusion
Mike would be able to recover rescind the contract with Northgate and recover all the
losses that directly resulted from the breach.
42 Esso Petroleum Ltd v Mardon (1975) 1975 WLR 2.

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Bibliography
Davidson, Daniel V and Lynn M Forsythe, Business in the Contemporary Legal Environment
(Wolters Kluwer, Second edition, 2017)
Emerson, Robert W, ‘Franchising and the Parol Evidence Rule’ (2013) 50 Am. Bus. LJ 659
Klass, Gregory, ‘Parol Evidence Rules and the Mechanics of Choice’ (2019) 20 Forthcoming in
Theoretical Inquires in Law <https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?
article=3066&context=facpub>
Kuhnel-Fitchen, Kathrin and Tracey Hough, Optimize Contract Law (Taylor & Francis, 2nd ed,
2017)
Lee, Pey-Woan, ‘Contract Modifications—Reflections on Two Commonwealth Cases’ (2012)
12(2) Oxford University Commonwealth Law Journal 189
Macdonald, Elizabeth, Ruth Atkins and Laurence Koffman, Koffman & Macdonald’s Law of
Contract (Oxford University Press, Eighth edition, 2014)
MacIntyre, Ewan, Business Law (Pearson Education Limited, Eighth edition, 2016)
McKendrick, Ewan, Contract Law (macmillan education, 12th ed, 2017)
McKendrick, Ewan, Contract Law: Text, Cases, and Materials (Oxford University Press, Sixth
edition, 2014) (‘Contract Law’)
Peel, Edwin, Treitel on the Law of Contract (Sweet & Maxwell, 14th ed, 2015)
Poole, Jill, Textbook on Contract Law (Oxford Univ. Press, 12. ed, 2014)
Roach, Lee, Card and James’ Business Law (Oxford University Press, 4th ed, 2016)
Zhou, Qi, ‘What Can Contract Lawyers Learn from Law and Economics’ (2011) 30 U. Tas. L.
Rev. 157
Barnett v Chelsea and Kensington Hospital Management Committee (1969) 1969 QB 1
Carlill v Carbolic Smoke Ball Company (1983) 1983 QB 1
Currie v Misa (1875) 10 Ex.
Donoghue v Stevenson (1992) 108 LQR
Esso Petroleum Ltd v Commissioners of Customs and Excise (1976) 1976 WLR 1
Esso Petroleum Ltd v Mardon (1975) 1975 WLR 2
Hedley Byrne & Co v Heller & Partners (1963) 2 All ER

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Kolmar Group AG v Traxpo Enterprises Pvt Ltd (2010) 2010 EWHC
Nettleship v Weston (1971) 1971 QB 2
News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR
Plan 61288 v Brookfield Multiplex (2012) 1219 NSWSC
Van Den Esschert v Chappell (1960) 1960 WAR
White v Australian and New Zealand Theatres Limited (1943) 6 HCA
Wilsher v Essex Area Health Authority 1074 AC
Competition and Consumer Act 2010