Business Law Assignment

BUSINESS LAW ASSIGNMENT 1
Business Law Assignment
Author
Class (Course)
Professor (Tutor)
School (University)
City and State
Date

BUSINESS LAW ASSIGNMENT 2
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.

BUSINESS LAW ASSIGNMENT 3
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.

BUSINESS LAW ASSIGNMENT 4
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.