Business Laws

This article discusses two case studies related to business laws. The first case study deals with contractual claims and misrepresentation, while the second case study deals with negligence and duty of care. Relevant laws and their application have been discussed in detail.

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

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ANSWER 1
IDENTIFIED ISSUE
Is there any contractual claim which can be made by Angela from Jessica as when she sold her
business she suggested that the profits were $10000 but they actually turned out to be only
$2000.
RELEVANT LAW
There are several correspondences which take place between the parties before a contract
between them is formed. In such correspondences many statements are discussed which can be
distinguished as terms or the contract and a representation. When contract terms are breached the
parties are provided the right to claim damages or rescind the contract according to the rules of
Bettini v Gye 1876 QBD 183. On the other hand when a false representation has been made a
party can claim misrepresentation which makes the contract voidable at the option of the
innocent party according to the rules of Bisset v Wilkinson [1927] AC 177. According to Oscar
Chess v Williams [1957] 1 WLR 370 a representation is a statement which has been discussed by
the party before the contract is formed and is not a term of the contract.
In Esso Petroleum v Mardon [1976] QB 801 the judges held that when a representation which
has been made by the party is false relating to a fact but not an existing law or a mere opinion the
first element of establishes misrepresentation will be satisfied.
In Horsfall v Thomas [1862] 1 H&C 90 the judges stated that when a representation which has
been made by the party is false relating to a fact but not an existing law or a mere opinion and it

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has been used by the party to form a contractual relationship the second element of
misrepresentation will also be satisfied.
Misrepresentation of are three kinds, innocent, negligent and fraudulent. When the
misrepresentation is innocent the parties are discharged from their contractual liability, when the
misrepresentation is negligent or fraudulent the injure person can claim compensation and also
claim recession in form of a remedy. A person would be deemed to have fraudulently
misrepresented a statement of fact when they ought to know the truth behind the statement as
found by the judges in the landmark case of Derry v Peek [1889] UKHL 1.
The question that a statement represented is a mere opinion or an actual fact relies on specific
legal provisions of common law. Generally when a party claims that they had only made an
opinion and not a statement of fact but they are in a position to know the truth behind such
opinion they are regarded to have made a statement of fact by the court of law as it was done in
the case of Smith v Land & House Property Corp (1884) 28 Ch D 7
The question whether a statement represented has induced or made a person to get into a contract
is also addressed by special provisions of common law. Generally when a person has been given
an opportunity to check the validity of a statement and has verified information which had been
provided by the representor than they have no right to claim inducement or reliance in relation to
the statement. However where such information is not verified reasonably than it would give a
right to the person to claim reliance or inducement with respect to the statement as done in
Redgrave v Hurd (1881) 20 Ch D 1.
APPLICATION OF LAW

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There are a few correspondences which take place between Angela and Jessica before a contract
between them is formed. In such correspondences many statements are discussed which can be
distinguished as terms or the contract and a representation and one of the statement was that the
profits were $10000. This is not a term of a contract which has been formed between them. Thus
a case of misrepresentation can be filed where the statement represented has turned out to be
false and the profits are only $2000. The rules discussed above stipulate that there are two ways
elements of misrepresentation. The first element is that of a “false statement of fact”. The
statement in relation to the profit of the business is neither a statement of opinion nor a
statement of law. This finding is based in the fact that Jessica had knowledge about the profits
which the business made being its owner. Further she had provided a chance to Angela to verify
the financial accounts. She handed her a large box which contained account information. Angela
only looked into information on the year 2007 and relied on it to make the contract. Although
according to the general rule when a person has been given an opportunity to check the validity
of a statement and has verified information which had been provided by the representor than they
have no right to claim inducement or reliance in relation to the statement, Angela did not check
the accounts of the following years. Here she can sue the laws which have been set out in the
case of Redgrave v Hurd as base her claim on the fact that she had not reviewed all accounting
documents. Thus Angela can have a successful misrepresentation case against Jessica. The
remedy of misrepresentation relies on the type of misrepresentation which has been found. Here
Jessica would be deemed to have fraudulently misrepresented the statement of fact related to
profit as she ought to know the truth behind the statement. Thus Angela can claim recession and
compensation.
CONCLUSION

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Angela can claim recession and compensation for fraudulent Misrepresentation
ANSWER 2
IDENTIFIED ISSUE
 Whether a duty of care is present on the part of Acne Cola towards Sandra Smith and her
husband at common law and statutory provisions.
 Whether such duty has been breached at common law and statutory provisions
 If the duty is breached has is resulted in the injury
 If negligence is established what damages can the family claim from Acne Cola
RELEVANT LAW
Negligence
Negligence is a failure to take reasonable care which results in an injury according to section 5 of
the Civil Liability Act 2002 (NSW)
As stated via the case of Grant v Australian Knitting Mills HCA 35 (1933) negligence takes
place when a party does not take reasonable precautions to avoid a foreseeable injury to the other
party.
Negligence has three elements
 Duty of care
 Breach of duty of care
 Causation
Duty of care

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Section 5B of the Act provides rules for determining the duty of care. According to the section a
person will be have a duty of care if:
 The risk is reasonably foreseeable
 There is sufficient probability of the risk occurring
 Additional precautions would be taken by a prudent person being present in the same
position
At common law there are few criteria for analyzing the element
1. Donohue v Stevenson [1932] AC 562 (Foreseeability test and neighbour principle)-
Facts- Plaintiff consumed a beer which had an insect. The consumption made the plaintiff sick.
He filed a case against the manufacturer. Manufacturer argued that there is no contact and no
remedy. The court stated that when a risk to another person can be foreseen due to one’s act or
omission a duty of care is identified. The manufacturer had to provided damages to the plaintiff.
2. Caparo Industries pIc v Dickman [1990] 2 AC 605 (Caparo test or proximity test)
The test stated that where there is proximity with respect to the parties to a claim a duty of care
will be present.
Breach of duty of care
Section 5B(c) of the Act states that the where additional precautions are to be taken by a prudent
person being present in the same position they need to take into account
 The chance of the injury taking place where the precautions are not taken (probability)
 The damages such injury causes is of a significant extent (seriousness)

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 The effort which needs to be taken to consider the precautions (burden)
 The need of the activity which caused harm (social utility)
At common law an objective criteria is deployed for analyzing the element
The objective criterion has been deployed in the case of Bugden v Rogers [1993] NSWCA 49.
The objective test imposes a reasonable person in the position of the defendant and then
compares if such reasonable person would have taken more care than the plaintiff or not in the
situation. If the reasonable person does so the duty is breached.
Factual causation
Section 5D of the Act helps to determine factual causation in a situation. According to the
section
1. The primary cause of the harm suffered by the person is the negligence of the other
person (Factual Causation)
2. It would be appropriate for the courts to extend the liability of the defendant to the injury
sustained by the plaintiff (Scope of liability)
At common law a “But for” is deployed for analyzing the element
The test had been given out by the case of Barnett v Chelsea & Kensington Hospital 1969] 1 QB
428. The causation element would be established where the plaintiff would not be injured but for
the negligence.
Remoteness of damages

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Damages are paid in case of negligence to compensate the party who has suffered an injury
wither physically, mentally or in relation to economic losses. However a negligent action can
result in a chain of incidents which may cause various forms of losses to the plaintiff or people
associated with them. However, all such damages cannot be claimed by the plaintiff as they may
be “too remote” for the defendant to foresee. The principles were used in the case of The Wagon
Mound no 1 [1961] AC 388.
APPLICATION OF LAW
Form the above discussion of law it has been derived that there are three elements which
constitute a case of negligence. Therefore if all such elements are present in the present case then
a claim for damages can be made.
The Donoghue v Stevenson case when applied in the scenario makes it clear that the Acne will
have a duty of care to the husband. This is because in the same way in the present case also the
husband consumed a drink which had an cockroach. The consumption made the husband sick.
Here also Acne can argue that there is no contact and no remedy. The court in this case also will
state that when a risk to another person can be foreseen due to one’s act or omission a duty of
care is identified. Thus Acne would be owing a duty to the husband. Further the risk is
reasonably foreseeable and there is sufficient probability of the risk occurring so a duty of care is
also there according to the Act.
Acne here has failed to take reasonable care and while doing so have breached the duty. This is
because a reasonable person in the position of Acne would have taken more care than the
plaintiff or not in the situation. In addition the chance of the injury taking place where the
precautions are not taken were high, the damages such injury causes is of a significant extent,

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there is not much effort which needs to be taken to consider the precautions and consuming cola
is a regular social activity and thus the duty had been breached as per the Act as well.
The causation element would be established where the plaintiff would not be injured but for the
negligence. The husband would not be injured where there was no cockroach in the drink. Thus
causation is present.
The family has incurred medical cost, the husband has faced physical distress and the Sandra and
the husband has lost employment. The husband’s mother had suffered a Phobia. Here the only
damages which can be claimed as per the remoteness test would be that of medical cost, physical
distress and lost employment as they are reasonably foreseeable. The phobia caused to the
mother cannot be claimed as it cannot be foreseen reasonably.
CONCLUSION
Acne will be liable for the damages incurred by Sandra and her husband

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References
Barnett v Chelsea & Kensington Hospital 1969] 1 QB 428
Bettini v Gye 1876 QBD 183
Bisset v Wilkinson [1927] AC 177.
Bugden v Rogers [1993] NSWCA 49
Caparo Industries pIc v Dickman [1990] 2 AC 605
Civil Liability Act 2002 (NSW)
Derry v Peek [1889] UKHL 1.
Donohue v Stevenson [1932] AC 562
Esso Petroleum v Mardon [1976] QB 801
Grant v Australian Knitting Mills HCA 35 (1933)
Horsfall v Thomas [1862] 1 H&C 90
Oscar Chess v Williams [1957] 1 WLR 370
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.