Commercial and Corporations Law Study Material with Solved Assignments

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Commercial and Corporations Law
LEGL601
23-Apr-18
(Student Details: )

Commercial and Corporations Law
Question 1
Issue
Whether Mike would be able to take action against Mike’s Auto for the damage caused to his
car, based on the clauses provided under the invoice, or not?
Rule
Under the common law, particularly in context of the contract law, a substantial rule of law
relates to exclusion clause. Exclusion clause is such a clause, which is inserted in the contract,
and which has the ability of restricting the liability of one party, in case of certain events1. Where
the exclusion clauses are legal, for the reasons of being properly inserted in the contract, and
being legal, the party inserting the exclusion clause is safeguarded from the liability arising on
certain occurrences. It is crucial to note that the exclusion clause is invalid, where it restricts or
limits the applicability of any law. As stated earlier, it is important to properly incorporate the
exclusion clause in the contract, for it to be valid2.
Any party, which attempts to rely on exclusion clause, needs to show that a reasonable notice
had been given to the other party, regarding the presence of exclusion clause. In other words, it
needs to be shown that reasonable steps had been undertaken to bring the exclusion clause to
the notice of the other party. In Spurling v Bradshaw3, the exclusion clause was deemed to be
incorporated based on the previous dealings. In this case, the defendant used the services of
warehouse on regular basis, and signed invoice covering the exclusion clauses each time. Upon
the damages to orange juice, a claim was brought in context of exclusion clause not being
incorporated, but this claim was rejected by the court. This resulted in defendant being denied a
right of claiming compensation for the damage.
Application
The present case has an invoice being signed every time the services of Mike’s Auto are taken
up by John and every time John being given with an invoice covering exclusion clause. This
clause safeguarded Mike’s Auto from damage or loss to cars of customers by any mode. There
is a similarity being the present case and the precedent set through Spurling v Bradshaw. So,
the ruling of the former can be applied in the present case study. For the exclusion clause to be
1 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed., 2012)
2 Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Palgrave Macmillan, 2015)
3 [1956] 1 WLR 461
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Commercial and Corporations Law
valid, it needs to be shown that it was properly incorporated. Based on the quoted case, the
exclusion clause would be deemed to have been incorporated based on previous dealings. This
means that the loss of GPS navigation system or the accident caused by manager of Mike’s
Auto cannot be claimed upon Mike’s Auto due to the correct incorporation of exclusion clause.
Conclusion
Hence, based on the incorporation clause being properly incorporated based on previous
dealings, Mike’s Auto would not be liable for the damages caused to John’s car, based on the
operation of exclusion clause, which protects Mike’s Auto from loss caused to customer’s cars.
Question 2
Issue
Whether Peter, David, John and Lynette would be able to use the defence covered under
section 180(2) of the Corporations Act, or would they be made liable for contravention of section
180(1) of the Corporations Act?
Rule
The Corporations Act, 20014 puts certain duties and obligations on the directors of the
companies. One of such sections, covering these duties, is section 180. As per this section, the
directors have a civil obligation of using their powers, and fulfilling their duties, based on a
degree of care and a degree of diligence, which would be exercised by a reasonable person,
where such a reasonable person would have held the office of the director in similar situation
and had the same responsibilities as the director of the company5. Where the provisions of this
section are breached, the civil penalties covered under section 1317E are contravened6.
This section not only provides the criteria which would lead to breach of duty of care and
diligence, but also presents the directors with a defence, referred to as the business judgment
rule. As per this section, the director of the company would be deemed to have complied with
the provisions covered under subsection 1 of this section, based on business judgment rule,
where the following conditions are fulfilled:
The director makes the judgement for a proper purpose and in good faith,
4 Corporations Act, 2001 (Cth)
5 Corporations Act 2001, s180(1)
6 Corporations Act 2001, s1317E
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