Commercial Law: Rules and Principles for Lease, Misrepresentation, and Restrictive Covenant

This article discusses the rules and principles of commercial law for lease, misrepresentation, and restrictive covenant. It covers cases and legal provisions in Australia and New Zealand. The article is relevant for students studying commercial law and related courses. Study material is available at Desklib.

Running head: COMMERCIAL LAW
COMMERCIAL LAW
Name of the student
Name of the university
Author note

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Table of Contents
PART A......................................................................................................................................2
PART B......................................................................................................................................3
PART C......................................................................................................................................4
Issue:......................................................................................................................................4
Rule:.......................................................................................................................................4
Application:............................................................................................................................5
Conclusion:............................................................................................................................5
PART D......................................................................................................................................6
Case law:................................................................................................................................6
Issue:......................................................................................................................................6
Rule:.......................................................................................................................................6
Application:............................................................................................................................7
Conclusion:............................................................................................................................8
PART E......................................................................................................................................8
Issue:......................................................................................................................................8
Rules:......................................................................................................................................8
Application:............................................................................................................................9
Conclusion:............................................................................................................................9
Bibliography:............................................................................................................................10

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PART A
An eminent British philosopher H.L.A. Hart bases the present question on the three
part legal system that has particularly pronounced. In his theory, he has defined the process
on how legal rules take part in the force of law1. In his book “Concept of law”, Hart has
mentioned certain rules on the recognition, change and adjudication. The rule of recognition
control cures the vulnerability of the essential principles by accommodating uniform
strategies for approval of such guidelines as laws2. The rule of change control accommodates
the presence of an arrangement that permits revision of the current guidelines and the static
standards in the legitimate framework could be changed in light of societal needs. On the
other hand, rule of adjudication accommodates a method of certain arbitration, (for example,
the development of a legal) this govern would characterize who decides and mediates issues
in the event that there is an assertion that standards have been broken.
In this section, it is required to make certain constitution for the tribe and before such
implementation; it is required to maintain certain uniformity in the adjudication process.
Further, the tribe should have to maintain the concept of justice in their list of Articles.
Separation of powers is an important concept in this regard. The universal tribe rule should be
attached with its social structure, a reason should be provided for accepting all these customs,
and there should be a law regarding the same. This rule supports the rule of recognition
mentioned by Hart. The legal structure should be liberal so that easy amendment process can
be generated while required. This supports the second theory of Hart. Further, a judicial body
1 Shaw, Geoffrey C. "HLA Hart's Lost Essay: Discretion and the Legal Process School." (Harv. L. Rev. 127
2013) 666.
2 Croce, Mariano. "A Practice Theory of Legal Pluralism: Hart’s (inadvertent) defence of the indistinctiveness of
law.” (2014) Canadian Journal of Law & Jurisprudence 27.1 27-47.

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should be there who can adjudicate legal rules for the tribe and in this process; third character
of Hart’s system can be embodied.
PART B
It is a known principle under Criminal law that crime is an offence exercised against
the society. There are several provisions in the globe that mark criminal offence as a
prejudicial process against the society. In almost every country, certain principles have been
adopted so that crime can be prevented by penalised the perpetrators. In this part, criminal
legal system of New Zealand has been discussed and certain comparisons will be there with
the Australia’s to understand the differences between the states.
In New Zealand, certain common law can be observed. However, considering the
legal system of New Zealand, it can be stated that Hart’s legal system has been included in
this country. Doctrines like separation of power have been adopted in this country. However,
the legal provisions of the English system can be found in this country and therefore, it can be
stated that rule of change has not been followed in this country. All the rules to prevent the
crime is imposed on the court system and it is hierarchy basis. Parliamentary system can be
found in this country. On the other hand, Australia typifies Hart's prescribed legitimate
framework also. It has a constitution (the Commonwealth of Australia Constitution Act)
which perceives law and accommodates correction in the event that it is required along these
lines exemplifying the manager of acknowledgment and the administer of progress . The
constitution additionally accommodates a reasonable detachment of forces by partitioning the
administration into three wings the governing body (to order the laws) an official (to uphold
the laws) and a legal (to decipher the laws). In this manner, the legal wing of the
administration is entrusted with settling lawful debate that may emerge in this way

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epitomizing the run of mediation. Along these lines, the Australian lawful framework upholds
Hart's 3 section legitimate framework into its system enough.
PART C
Issue:
The main issue of the case is to determine whether case of Gumland Property
Holdings Pty ltd. V Duffy Bros Fruit Market ( Campbelltown) Pty Ltd3 is significant under
the Australian Contract Law or not.
Rule:
The present subject matter of the case is based on the rules relating to lease and the
termination process regarding the validity of the lease. Two legislations govern the provision
of lease in Australia such as Conveyancing Act 1919 (NSW) and Retail Leases Act 1994.
Under the Australian legal structure, certain rules have been stated on lease and the term has
been divided into four parts such as retail leases, commercial leases, licences and sub-leases.
According to section 117 of the Conveyancing Act, the lessor has every right to grant lease to
the lessee. Further, it has been mentioned that the lessee is under an obligation to maintain all
the terms and conditions of the lease agreement. According to the provision of the law, if the
lessee has failed to abide by any of the rules or failed to pay the stipulated money specified in
the lease agreement, the lessor has the right to terminate the validity of the lease agreement.
In addition, it has been mentioned under the common legislation of Australia, lease is a form
of contract and if such contract has been terminated due to certain fundamental breach, the
affected party has all the chances to get the compensation from the infringed party. If the
lessor has failed to obtain the bargain money from the lessee, he has every right to repudiate
3[2008] 234 CLR 237

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the contract of lease. The main reason behind it is that paying the lease money to the lessor is
a fundamental element for the lease agreement. The case of Shevill v Builders Licensing
Board4 is an important case to this effect. In this case, the lessee regarding the payment of the
lease subject has made certain breach and Lord Wright has pointed out that if the lessee has
any intention not to fulfil the contract, the other party has every right to rescind the contract.
Similar principle has been maintained in Federal Commerce v. Molena Alpha5. It has
observed in Progressive Mailing House Pty Ltd v Tabali Pty Ltd6 that where in the
agreement, the payment amount has been mentioned and the defendant has failed to maintain
the same. According to the court, lease payment is the essential element, any contravene
regarding the same would amount to fundamental breach, and the affected party can repudiate
the contract.
Application:
In this present case, it has been observed that certain lease agreement has been
contracted between the parties. According to the provisions of the lease agreements, it has
been observed that the lessor has mentioned certain lease amount mentioned in the agreement
and both the parties have given their consent. However, it has been observed that the lessee
has given one sublease on the premises and the parties have fixed certain payment amount.
Further, due to certain inconvenience, the lease amount has been reduced. The sublease
agreement has been expired in the year 2002 and the sub-tenant was not interested to renew
the same. In that year, the lessee to the agreement has failed to pay the lease amount to the
lessor and the lessor to this regard has generated a notice. However, the lessee had not made
any positive reply to that and case for terminating the lease contract has been filed. According
to the provisions of the Conveyancing Act 1919, failure to pay the lease amount is an
4 [198] 149 CLR 620
5[1979] AC 757
6[1985] 157 CLR 17

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infringement regarding the fundamental principle. Further, according to the case of Shevill v
Builders Licensing Board, it can be stated that the lease can be terminated as the lessee has
failed to pay the amount.
Conclusion:
Therefore, it can be stated that the lessor has the right to repudiate the agreement.
PART D
Case law:
McDonald v Denny Lascelles Ltd7
Issue:
The main issue here is to determine whether a contracting party can terminate the
validity of a contract if misrepresented by the other party or not.
Rule:
The subject matter of the case is based on the rights of the parties in case of causing
misrepresentation by other party. According to the common law related to the contract law in
Australia, there are certain obligations that the parties to a contract should have to maintain
before enter into the contract. Further, certain terms have been mentioned under the law by
which a contract can be terminated if follows by any of the parties. The term
misrepresentation is one of them. According to the common principle, when one party has
given false information to the other party before the commencement of the contract, the
affected party will get every right to terminate the validity of the contract. In case of
misrepresentation, the parties will get two options; first, to rescind the contract and second,
compensation for the losses accrued by the party. Under the Australian Contract Law, a party
7[1933] 48 CLR 457

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to the contract can challenge the validity of the contract whenever he finds certain
misrepresentation has been done with him. It has been observed in Reynolds v Fury8 that no
parties to the contract have any rights to make false statement with an intention to misguide
the other party. In case of any adverse condition, the affected party has all the rights to
rescind the contract. Further, it is to be analysed that the alleged party has the intention to
misguide the other party. However, it has been held in Smith v Hughes9, the affected party
could not bring an action for misrepresentation if has given previous assent to the
misrepresented acts of the other party. In another case of Freemen v Cooke10, it has been held
by the court that contract is an agreement where both the parties should have to agree on
certain common intention and they both have to give their consent over those terms. In case,
both the parties want to sign a contract with different terms, there will be no contract.
According to the rules of rescission of contract, the contract is not repudiate “ab initio”, but
“in futuro”. It means certain obligations are discharged even they are not performed.
Application:
According to the above noted rules, it can be stated that the contract law has
prohibited the parties to contract to make any misrepresented acts for the commencement of
agreement. In this present case, it has been observed that certain contract has been made in
between the parties where it has been held that the one party will sell certain portion of land
to the other and that other party will pay the money in instalment. Believing on the statement
made by the defendant, the plaintiff has transferred the rights on the land to the other party.
However, it has been observed that the party has failed to make all the instalments and stop
payment regarding the final payment. In this case, Starke J. has observed that the buyer has
failed to abide by the terms of the sale agreement and therefore, should be held liable for
8[1921] VLR 14
9[1871] LR 6 QB 597
10[1848] 154 ER 652

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breaching the principle terms of the contract. This will be enabling the affected parties to
rescind the validity of the contract. Further, the rule of Smith v Hughes will not be applicable
in this case, because neither the parties have the knowledge regarding the misrepresented
facts.
Conclusion:
Therefore, in this case, it can be stated that the affected party can rescind the
effectiveness of the contract on the ground of misrepresentation.
PART E
Issue:
The main issue in this case is to determine whether Pedro can take any step against
Lisa and/or obtained any compensation from her or not.
Rules:
The subject matter of the case is based on the principle of restrictive covenant. It is a
part of the employment contract, where it has been mentioned that an individual is obliged to
protect their interest under this terms by restricting others from doing similar occupation. The
main purpose of this principle is to reduce the competitiveness in the business so that interest
of the managerial employee could be secured. Under this principle, individuals are restricted
to open similar kinds of business or disclose confidential information to others. Restrictive
covenants are public policies and it restricts the individual when it is reasonable. Therefore, it
can be stated that no restriction can be imposed on the individual if that violate the legal right
of that person. There are some limits with respect to a court to separate a restriction condition
where it observes to be absurd, empowering the sensible components of the condition to be
enforceable against the worker. Aside from the State of New South Wales, where particular

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limitations of exchange enactment applies, severance is normally just conceivable where the
provision contains a progression of covering restrictions, known as a 'progression' or 'falling'
restriction condition. A business will for the most part look to implement a prohibitive
contract against a previous worker through an application to a Federal, State or Territory
court for an interlocutory directive. Different cures that might be accessible incorporate a
lasting directive or a request for harms. A business cannot singularly force such a contract
upon a current representative, in spite of the fact that the business can condition any new
offer of work upon the planned worker and here and there on the offer of advancement into
such a pledge. The consideration of a limitation provision in a business contract is an issue to
be consulted between the business and worker. Nevertheless, as showed above, such
conditions are generally gone into by senior administrators, directors and other expert
representatives. In Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company11, it
has been held that the grounds of restrictive covenants are invalid unless it has been shown
that the steps are taken for the betterment of the company. Further, according to Lindner v
Murdock’s Garage12, the interest of the company should be legal in nature. According to
common law, in case of any failure, the affected party can sue the other and obtain damage
thereby.
Application:
In this case, it can be seen that a contract has been held in between Pedro and Lisa and
it has been decided that Lisa will not open similar kinds of business within certain period in
anywhere of Australia. In this case, it is important to mention that they were previously
engaged with jewellery business. When Lisa had transferred her business in the name of
Pedro by pronouncing the term that she will not start up any similar kind of business within
11[1894] AC 535
12[1950] 83 CLR 628

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two years, her statement will be considered as final and hence, Lisa is restricted by a
covenant. However, Lisa is attempting to make breach of that restriction and according to the
facts of the case; she has started a similar business within one year of making such statement
to Pedro. The business is carried out far from the place when Pedro conducts his business and
thus the clause of not allowing Lisa to run same business anywhere in Australia is
unreasonable. It is not being used for taking legitimate protection of his business by Pedro.
According to Lindner v Murdock’s Garage, the clause is void.
Conclusion:
Pedro cannot sue Lisa as the court will not find the restraint of trade clause to be
reasonable

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Bibliography:
Conveyancing Act 1919 (NSW)
Croce, Mariano. "A Practice Theory of Legal Pluralism: Hart’s (inadvertent) defence of the
indistinctiveness of law." (2014) Canadian Journal of Law & Jurisprudence 27.1: 27-47.
Federal Commerce v. Molena Alpha [1979] AC 757
Freemen v Cooke [1848] 154 ER 652
Gumland Property Holdings Pty ltd. V Duffy Bros Fruit Market (Campbelltown) Pty Ltd
[2008] 234 CLR 237
Lindner v Murdock’s Garage [1950] 83 CLR 628
McDonald v Denny Lascelles Ltd [1933] 48 CLR 457
Nordenfeldt v Maxim Nordenfeldt Guns and Ammunition Company [1894] AC 535
Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] 157 CLR 17
Reynolds v Fury [1921] VLR 14
Shaw, Geoffrey C. "HLA Hart's Lost Essay: Discretion and the Legal Process School."
(2013) Harv. L. Rev. 127: 666.
Shevill v Builders Licensing Board [1982] 149 CLR 620
Smith v Hughes [1871] LR 6 QB 597