Commercial and Corporation Law

This text covers various topics related to commercial and corporation law, including negligence, revocation of contracts, misrepresentation, restraints of trade clauses, undue influence, and more. It explains the rules and their application in different scenarios, along with relevant case laws. The text also discusses the duty to mitigate and the damages that can be claimed in case of a breach of contract.

Running head: COMMERCIAL AND CORPORATION LAW
Commercial and Corporation Law
Author Name(s)
Institutional Affiliation(s)
Author Note

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Question 1: Jason and Calum
i. For a claim of negligence, the claimant must demonstrate;
(a) A Duty: The claimant must establish that the defendant owed a duty to the
claimant.
(b) Breach of the Duty: The claimant must also demonstrate that in addition
to owing a duty of care, the defendant breached that duty.
(c) Causation: The harm that the claimant suffered must be reasonably arising
from the breach of duty. They must not be too remote.
(d) Damages: The damages that the claimant seeks to recover must reasonably
arise from the breach. Again, they should not be too remote.
ii. Jason will bring the legal action against Beta Company since Calum was an agent
of Beta Company and the company was the principal. The damages that Jason
wish to recover are all direct damages hence the claim will succeed. For example,
in (Mainguard Packaging Ltd v. Hilton Haulage Ltd, 1990), the court found that
all damages arose directly from the breach made by Hilton.
iii. In recovering losses, Jason will sue for compensatory damages and punitive
damages. Compensatory damages include special damages and general damages.
Special damages will cover all economic losses such as IRD penalty, the new
accounting system and time lost in contacting suppliers, creditors and debtors, and
lost earnings. General damages will cover noneconomic damages such like
emotional distress, pain and suffering.
Question 2: Alan
Issue: Rules of revocation of contracts via electronic system.

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Rule: As explained in (Latec Finance Pty Ltd v. Knight, 1969, l. 81), the general rules in contract
law is that there must be communication of offer, its acceptance or its revocation. The same rules
that apply for in the communication of offer and acceptance apply to the communication of
revocation of an offer. In (Carlill v. Carbolic Smokeball Co, 1892), the law requires the offerors
or the offerees to communicate their revocation or acceptance. The rules that apply to the
communication of acceptance and revocations through email are contained in section 11 in
(Electronic Transactions Act, 2002, sec. 11). At 11(a) communication is deemed valid when the
electronic communication enters the addressee’s information system, or (b) when it comes to the
notice of the addressee.
Application: On application, the law will test whether the communication was given as in
(Carlill v. Carbolic Smokeball Co, 1892). This rule is certified when Alan sent the message of
revocation to both Bertha and Clara at 2.00pm. The next step would be testing the rules as to
when the revocation is deemed to have validly reached the addressee. In this case, SEC 11 states
that the valid time is when the email reached the recipient’s communication system or when the
email came to the notice of the recipient. Therefore, revocation reached both Bertha and Clara at
2.00 pm. Any acceptance after that would be invalid.
Conclusion:
Alan’s revocation was valid and enforceable in law.
Question 3:
(i) David and Edwina.
Issue: Whether past consideration is enforceable.
Rule: Where an act has already been executed, any subsequent or future promise to pay for the
same act would not enforceable in the law of contracts held in (Roscorla v. Thomas, 1842). On

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the other hand, a promise to pay for a past service has implications to pay if both parties
contemplated that there would be paid after the service as stated in (In re Casey’s Patents, 1892).
Application: On applying the rules to the case of David and Edwina, the Court will look to see
when David provided his consideration. If the consideration came after the service, the rule in
(In re Casey’s Patents, 1892) would require that both parties should have contemplated about the
payment of $150 at the time of the formation of the agreement. In this case, the payment came to
the notice of Edwina only after she had won the case. In this case, the amount is not enforceable.
Conclusion: David cannot recover $150 since it is a past consideration.
(ii) Bruce and Joan.
Issue: Allocation of risk
Rule: The general rule is that the party that promises to provide something for a fixed
price is the one that bears the risk. In (North Ocean Shipping Co Ltd v Hyundai Construction Co
Ltd, 1979), the threat to stop work due to price increase was interpreted as an economic duress
since the party the shipbuilders had impliedly agreed to take the risk.
Application: While Bruce was promising to offer the service, the law expected that he
impliedly agreed to take the risk of the price increase as seen in (North Ocean Shipping Co Ltd v
Hyundai Construction Co Ltd, 1979). The law will therefore not enforce the increment of the
price.
Conclusion: Joan is not obliged to pay.
Question 4:
Issue: Duty of the lessee
Rule: In hire purchase, the customer hires the goods with a promise to possess the goods
once the final payment has been made. According got (Lilleholt et al., 2009, p. 257), any lease

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control has an implied duty for the lessee to take care of the goods. There is also express duty to
submit payments in installments as agreed. Any failure of the two would cause the seller to sue
for damages.
Application
Harriet had a duty to take care of the goods as stated in (Lilleholt et al., 2009). She cannot
bring an argument that the motorcycle should have been cheaper after damaging it.
Conclusion: Harriet must pay for the total sum of the installments.
Question 5: Bodo, Wilhelmina, and Luther.
(i) Misrepresentation has occurred. This is innocent misrepresentation which occurs
when a party makes a false statement but the party believes that the statement is
true, and causes the other party to change position.
(ii) Whether or not damages can be claimed?
The provisions for misrepresentation are contained in section 6 and 7 in (Contractual
Remedies Act, 1979). Under subsection 6(a), a party to the innocent misrepresentation may
receive damages as though the misrepresentation was a term of the agreement. However,
subsection 6(b) states that the innocent party cannot receive damages under the tort of deceit.
Bodo and Wilhelmina may receive any other remedy as though the statement “plant being free
from viruses or infections” was a term. Like in (Contractual Remedies Act, 1979), Bodo and
Wilhelmina cannot bring a claim under the tort of deceit.
(iii) Whether contract can be cancelled
Section 7 provides the remedy for either innocent or fraudulent misrepresentation where
the innocent party has a choice for rescission. A clarification by (Emma, 2011) states that the
representee cannot recover damages, but the court may allow him to either rescind or perform the

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contract with no compensation due to the loss caused by the misrepresentation. Bodo and
Wilhelmina may choose to treat the statement as a term or not, and then choose whether they
would rescind the contract.
Question 6: Vinod and Angela
Issues: Application of restraints of trade clauses (RTC).
Rule: According to Lord Macnaghten in (Nordenfelt v Maxim Nordenfelt Guns and
Ammunition Co Ltd, 1891) RTCs are unenforceable since they are contrary to public interests.
The main exception to this rule regards the reasonableness of the clause which is assessed in
terms of a legitimate interest, the reasonable duration for the clause, and a reasonable
geographical coverage.
(i) An RTC must protect a genuine interest such as confidential information, client
details, trade secrets, and details of the employer’s staff. In (Two Lands Services
Pty Limited and 1 Ors v Gregory Robert Cave, 2000) an RTC preventing an
employee from working for a competing company for one year to protect the
employer's legitimate interest.
(ii) The time should be reasonable. Time assessment differs with the facts of each
case. In most of the cases, the court will consider 2 to 3 years reasonable. For
instance, in (Southern Cross Computer Systems Pty Ltd v Palmer (No 2), 2017), 4
years clause was enforced. In (Cream v. Bushcolt Pty Ltd, 2004), a 10 years
clause was enforced.
(iii) An RTC must cover a reasonable geographical area. Again, the area differs from
the facts of each case. The Court in (Herbert Morris Ltd v Saxelby, 1916) stated

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that the only distance that the court would allow is the one which sufficiently
protects the employer’s interests.
Application: On application, the court would look at the employer’s interests, time of the
clause, and geographical area. Like as mentioned in (Two Lands Services Pty Limited
and 1 Ors v Gregory Robert Cave, 2000), the clause must protect legitimate interests for
it to stand. As persons who had access to this information at Vinod confidential
information, the clause would apply.
As of time, two years for both Angela and Colleen was reasonable. In the
Southern Cross case, 5 years was held to be reasonable. Again, on the matters of
distance, the court in (Jaddcal Pty Ltd v Minson [No 3] 2011) explained that a reasonable
area is one where the former employer’s customer cannot access the employee’s
business. In regard to three kilometers from Vinod’s office, the Court would be likely to
state that the area is within the operation of the clause.
For the case of Vinod training Jane in new accounting software which Vinod had developed, and
plans to sell to the accounting profession, the situation was explained in the Court in (Wright v.
Gasweld Pty Ltd, 1991, para. 291) that the status of confidentiality of information would depend
on whether (i) the learned skills were given to allow the employee easier access to the company’s
information; (ii) Whether the employer jealously defended the information; (iii) Employee was
informed on the confidentiality of the information; (iv) The manner in which the information can
be used. Since we are told that Jane was trained on an accounting software that Vinod had
developed, the clause would apply.
Conclusion

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The clause would apply to all the cases and the employee would not be allowed to work for
another company for the stipulated time.
Question 7: Albert and the Bank
Issue: Undue influence and unconscionability in transactions due to inequality of the parties
bargaining power.
Rule: In (Contractors Bonding Ltd v Snee, 1992), Richardson J, explained undue influence
involve the stronger party acquiring an unfair transaction by using its power unconsciously to
influence the weaker party. In the ruling of (Gustav & Co Ltd v Macfield Ltd, 2008), the
Supreme Court explained that Equity seeks to intervene in situations where one party acquires a
transaction unconsciously by taking advantage of the other. The Court explained that Equity
comes to protect the innocent parties enter in the state of a disability, and the stronger party
decides to take advantage of that disability. The Court further explained a qualifying disability as
a condition which significantly weakens a party's capacity to assess its best interest best interests.
Application: While applying these rules, the fact that Alberta acquired the shares at a very low
price, and the fact that the bank was vulnerable to exploitation due to lack of funds will be
enough grounds for the unconscionable transaction.
Conclusion: The transaction can be set aside due to unconscionability.
Question 8: Camilla and Tim
(i) Cost of renting an alternative apartment and legal rules regarding damages
In a delayed completion, the action constitutes a breach which allows the owner to seek
damages. However, the rule of remoteness requires that both parties must contemplate on the
liabilities involved in case there is a breach. For example, in (Victoria Laundry v Newman
Industries, 1949), the claimant recovered the profit they would have earned had there been no

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delay. In the case of Camila, she would be able to recover the loss she underwent due to the
delays. All that is needed is to prove that Tim was aware that Camila required the house for
November. This loss would include the reasonable cost incurred on rents for the alternative
house.
(ii) Duty to mitigate
A duty to mitigate requires that the innocent party would try its best to prevent
unreasonable loss. For example in (Brace v. Calder, 1895), the claimant could not recover
damages for the breached contract since he refused to take an alternative contract that had similar
terms. Despite that, the innocent party does not have to risk further or do something
extraordinary to mitigate the loss. By seeking the help of a family member, Camila has already
done her best, but she would also receive compensation for the fee paid in childcare.
(iii) Damages for the emotional distress
The general rule regarding non-pecuniary damages was stated in (Addis v Gramophone
Co Ltd, 1909) that these are non-recoverable. However, an exception to this rule is the situation
where the contract was made for the purpose of pleasure and enjoyment as held in (Watts v.
Morrow, 1991). Another exception is where mental distress from the breach causes physical
discomfort as in (Hobbs v. London and South Western Railway Co, 1875).
Camila be compensated for non-pecuniary damages since the agreement was for the
enjoyment of the house so the case falls within the rules in (Watts v. Morrow, 1991).

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References
Addis v Gramophone Co Ltd, AC 488 (1909).
Brace v. Calder, 1895 QB 2 (1895).
Carlill v. Carbolic Smokeball Co, 1892 EWCA Civ (1892).
Contractors Bonding Ltd v Snee, 2 NZLR 157 (CA) (1992).
Contractual Remedies Act (1979).
Cream v. Bushcolt Pty Ltd, 2004 WASCA (2004).
Electronic Transactions Act (2002).
Emma, B. (2011). Should an Innocent Half-Truth be an Actionable Misrepresentation under the
Contractual Remedies Act 1979. Retrieved from
http://www.nzlii.org/nz/journals/NZLawStuJl/2011/6.html#fn33
Gustav & Co Ltd v Macfield Ltd, NZSC 47 (2008).
Herbert Morris Ltd v Saxelby, 1 AC 688 (1916).
Hobbs v. London and South Western Railway Co, 10 QB (1875).
In re Casey’s Patents, 1892 Ch. 1 (1892).
Latec Finance Pty Ltd v. Knight, 1969 NSWR 2 (1969).
Lilleholt, K., Victorin, A., Fötschl, A., Konow, B.-E. R., Meidell, A., & Bjoranger-Torum, A.
(2009). Lease of Goods. Walter de Gruyter.
Mainguard Packaging Ltd v. Hilton Haulage Ltd, 1990 NZLR 1 (1990).
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd, AC 535 (1891).
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, QB 705 (1979).
Roscorla v. Thomas, 3 QB (1842).
Southern Cross Computer Systems Pty Ltd v Palmer (No 2), 460 VSC (2017).

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Two Lands Services Pty Limited and 1 Ors v Gregory Robert Cave, NSWSC 14 (2000).
Victoria Laundry v Newman Industries, 1949 KB 2 (1949).
Watts v. Morrow, 1991 WLR 1 (1991).
Wright v. Gasweld Pty Ltd, 22 NSWLR (1991).
Brace v. Calder, 1895 QB 2 (1895).
Carlill v. Carbolic Smokeball Co, 1892 EWCA Civ (1892).
Christensen, S. A., & Duncan, W. D. (2009). Sale of Businesses in Australia (2nd ed.).
Federation Press.
Contractors Bonding Ltd v Snee, 2 NZLR 157 (CA) (1992).
Contractual Remedies Act (1979).
Cream v. Bushcolt Pty Ltd, 2004 WASCA (2004).
Derry v. Peek, 14 App. (1889).
Electronic Transactions Act (2002).
Emma, B. (2011). Should an Innocent Half-Truth be an Actionable Misrepresentation under the
Contractual Remedies Act 1979. Retrieved from
http://www.nzlii.org/nz/journals/NZLawStuJl/2011/6.html#fn33
Gustav & Co Ltd v Macfield Ltd, NZSC 47 (2008).
Hadley v. Baxendale, 9 Exch. (Supreme Court 1854).
Herbert Morris Ltd v Saxelby, 1 AC 688 (1916).
Hobbs v. London and South Western Railway Co, 10 QB (1875).
In re Casey’s Patents, 1892 Ch. 1 (1892).
Latec Finance Pty Ltd v. Knight, 1969 NSWR 2 (1969).

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Lilleholt, K., Victorin, A., Fötschl, A., Konow, B.-E. R., Meidell, A., & Bjoranger-Torum, A.
(2009). Lease of Goods. Walter de Gruyter.
Mainguard Packaging Ltd v. Hilton Haulage Ltd, 1990 NZLR 1 (1990).
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd, AC 535 (1891).
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd, QB 705 (1979).
Roscorla v. Thomas, 3 QB (1842).
Southern Cross Computer Systems Pty Ltd v Palmer (No 2), 460 VSC (2017).
Two Lands Services Pty Limited and 1 Ors v Gregory Robert Cave, NSWSC 14 (2000).
Victoria Laundry v Newman Industries, 1949 KB 2 (1949).
Watts v. Morrow, 1991 WLR 1 (1991).
Wright v. Gasweld Pty Ltd, 22 NSWLR (1991).