Assignment Solution on Business Law (pdf)

Running head: BUSINESS LAWS
Business Laws
Name of the student
Name of the university
Author note

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BUSINESS LAWS
Issue
Whether Angela is eligible to make a claim in relation to the contract she has entered into with
Jessica to purchase her business. The claim which has been identified in the situation can be
addressed in a proper way by referring to the laws relating to misrepresentation
Rule
The law relating to misrepresentation will give right to a party where it can be identified that
before the contract was formed with the other party there was a representation which had been
made in form of a statement or expression and such statement or expression is not a contractual
term.
Misrepresentation takes place when one party represents to the other party a “false statement of
facts” as opposed to a statement of law or a statement of opinion. This statement which has been
represented by the party has to be false. The false nature of the statement does not depend upon
the knowledge of the person making it. If the representation is false in nature it would lead to a
misrepresentation. In addition misrepresentation also does not depend upon the intention of the
person making the statement to commit misrepresentation and the elements of this contract
vitiating factor can be identified irrespective of intention of the parties. However the intention of
the parties will lead to the determination of the type of misrepresentation which has taken place
which is essential to derive its remedies these rules had been stated in Bisset v Wilkinson [1927]
AC 177.
The court in Esso Petroleum v Mardon [1976] QB 801 stated that misrepresentation will take
place when two factors are indentified in the pre contractual correspondences between the
parties. The first factor is that one of the parties to the contract made a representation or

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statement of fact which is false and not true. The second factor is that the other party relied on or
got induced via such representation to make the agreement with the other person.
There are certain rules laid by the court which are deployed for the purpose of indentifying the
elements of misrepresentation as done in Edgington v Fitzmaurice (1885) 29 Ch D 459. A
statement of fact is required to make misrepresentation as distinguished from a opinion or
statement of law. Thus in the case of Smith v Land & House Property Corp (1884) 28 Ch D 7 it
had been stated by the court that where the party making the opinion would had known that such
opinion is untrue then such opinion will be considered as a statement of fact rather than a
opinion. As per the case of Alati v Kruger (1955) 94 CLR 216 this statement has to be untrue
of false for a misrepresentation claim to arise.
Whether the other party had relied in or had got induced by such statement of fact to get into the
contract is also an essential element as discussed via the principles of Horsfall v Thomas [1862]
1 H&C 90. The courts have also provided different tests for the purpose of identifying whether
the party had been actually induced or not. In Redgrave v Hurd (1881) 20 Ch D 1 the court
stated that where a party has been given a chance by the person making the statement of fact via
which he or she had the opportunity to verify the statement, but there was a failure on the part of
the party to do so they can still claim inducement in relation to misrepresentation. However this
rule will not be applied when the party has actually verified the truth behind the statement given
in Attwood v Small [1838] UKHL J60
The innocent party’s damages are reliant on the kind of misrepresentation which takes place.
When a party makes a statement of fact having knowledge that it is false it would give rise to a

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fraudulent misrepresentation which may result in damages and recession of contract as stated in
Derry v Peek (1889) 5 T.L.R. 625.
Application
Therefore to analyze misrepresentation between Angela and Jessica it has to be identified that
there was a “false statement of facts” as opposed to a statement of law or a statement of opinion
and whether Angela relied on or got induced via such representation to make the agreement with
the Jessica. Jessica was the owner of the restaurant which has been sold in the situation. She
must be knowing about the financial position of the business. She has told that the business
makes a profit of $10000. This is a statement of facts according to the case of Smith v Land &
House Property Corp. The actual profit of the business was $2000 so it is also provided that the
statement is false in nature. The first limb of misrepresentation is satisfied.
In relation to the second limb of misrepresentation there has to be inducement. Here Jessica had
given a chance to Angela to check a statement. As per Attwood v Small when the party has
actually verified the truth behind the statement there can be no claim of inducement. On the other
had as per Redgrave v Hurd where Angela has been given a chance by Angela via which she
had the opportunity to verify the statement, but there was a failure on her part to do so properly
as she only looked into 2007 financial accounts she can still claim inducement in relation to
misrepresentation. Thus the second limb is also satisfied and it leads to misrepresentation.
Jessica was the owner of the restaurant which has been sold in the situation. She must know
about the financial position of the business and thus the false statement was made intentionally
leading to fraudulent misrepresentation so Angela can rescind the contract and claim damages.
Conclusion

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Angela can rescind the contract and claim damages.
Answer 2
Issue
The issue is to identify negligence in the party of Acne Cola Manufactures with respect to
Sandra’s husband which has become ill by consuming the Cola.
Rule
The Civil Liability Act 2002 (NSW) deals with the rules required to establish negligence. The
common law principles are also applicable for the purpose of identifying negligence in Australia.
Part 1A of the CLA gives out rules relating to negligence. According to section 5 of the Act
harm is any personal injury or economic loss and negligence refers to failing to exercise proper
skill and care situation. Personal injury includes a disease.
It has been provided by s 5B of the CLA that a party would not be negligent for failing to take
care which results in an injury caused to the other party unless the risk of injury was foreseeable,
the risk was sufficient and a reasonable person will take such care in the same position to avoid
the harm. As per s 5B(c) of the CLA a reasonable person will take such care by considering the
harm’s probability in absence of such care, the seriousness of the injury, the liability of taking
care to avoid the injury and the social utility of the activity by which the injury was created.
Section 5C provides other principles relating to negligence such as burden of taking care means
burden of taking care stop any similar injury. The rules relating to causation are given in section
5D of the CLA. As per the section the necessary condition for which the harm was caused was

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the negligence (Factual Causation) and it is just to extend the liability of the wrongdoer to the
injury (Scope of liability).
Along with the CLA the common law principles of negligence can also be applied to determine
negligence. The principle common law principle relating to negligence was given in the case of
Donoghue v Stevenson [1932] AC 562.
The plaintiff has consumed a beverage for a shop which contained a snail in the bottle. As the
bottle was opaque the plaintiff was not able to see the snail and consumed the drink. When the
plaintiff had seen the sail he started to feel ill. In this case the plaintiff instead of making a claim
from the cafe made a claim from the manufacture of the beer. It has been ruled by the court that
the claim against the manufacturer is valid because of the existence of a duty of care. The duty of
care will be present where one person can foresee damages to another person because of his or
her acts of omissions without any contractual obligation being present between them. Thus in the
given situation the court stated that any reasonable person who would have been in the position
of the manufacturer would have taken additional care to ensure that the beverages did not have
any external element as in this case the snail which may cause injury to any person who
consumes such beverage. If any person is injured by the consumption of such a beverage than the
manufacturer would have to compensate such person for the harm caused irrespective of any
contractual obligations.
The development of the law of negligence has provided specific tests to determine its elements.
These tests include the proximity test to find out the duty of care between the parties given by the
case of Pyrenees Shire Council v Day (1998) 192 CLR 330 , the objective test to find out the
breach of duty as per McNamara v Duncan (1971) 26 ALR 584 , the “but for” test to find out

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causation given by Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428 and the “not too
remote” test to analyze damages to be paid as per The Wagon Mound no 1 [1961] AC 388
Application
As per the provisions of Common law, if the facts of the case of Donoghue v Stevenson are
compared to the facts of the present case then similarity between the facts of the cases can be
identified. According to rule in this case Sandra who has purchased drinks form a local store can
make a claim against the manufacture of the drink which is Acne Cola as they would have a duty
of care to any person who consumed the drink. In addition any reasonable person as per the
reasonable foreseeability test who would have been in the position of the manufacturer would
have taken additional care to ensure that the beverages did not have any external element as in
this case the cockroach which may cause injury to any person who consumes such beverage.
Here the injury has been caused to Sandra’s husband because of consuming the drink as it would
not have been caused otherwise the rules of the “but for” test are satisfied and subsequently the
Manufacturer would be liable to compensate for the losses sustained by the family. Any
reasonable person as per the “not too remote” test who would have been in the position of the
manufacturer would have foreseen that if a person consumes a drink having cockroach they can
get ill and loss their job and may also have to borne medical expenses. Thus these damages have
to be compensated. However any reasonable person as per the “not too remote” test who would
have been in the position of the manufacturer would not foresee the injury caused to the
husbands mother. So damages for such injury cannot be claimed.
In addition as per the rules of the CLA also the manufacturer has a duty of care to Sandra’s
husband. This is because all provision in relation to section 5B are satisfied in this case. The risk

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of injury in this case was foreseeable, the risk was sufficient that injury may be caused to the
consumer and a reasonable person in place of the manufacturer will take additional care in the
same position to avoid the harm as the harm is very probable and injury which can be caused is
also serious. Factual causation has also been established in this case and it would be just to
extend the liability of the Manufacture to the injury. Therefore negligence is present at both
common and statute law.
Conclusion
Sandra’s family can make a claim for the medical expenses, the personal injury and the loss of
employment directly from the manufacturer.

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References
Alati v Kruger (1955) 94 CLR 216
Attwood v Small [1838] UKHL J60
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Bisset v Wilkinson [1927] AC 177.
Civil Liability Act 2002 (NSW)
Derry v Peek (1889) 5 T.L.R. 625.
Donoghue v Stevenson [1932] AC 562
Edgington v Fitzmaurice (1885) 29 Ch D 459
Esso Petroleum v Mardon [1976] QB 801
Horsfall v Thomas [1862] 1 H&C 90
McNamara v Duncan (1971) 26 ALR 584
Pyrenees Shire Council v Day (1998) 192 CLR 330
Redgrave v Hurd (1881) 20 Ch D 1
Smith v Land & House Property Corp (1884) 28 Ch D 7
The Wagon Mound no 1 [1961] AC 388