Company and Commercial Law

This article discusses the legal risks and course of action arising out of Contract and Tort of Negligent Misrepresentation in Company and Commercial Law. It explains the rules of contract and tort, and how they apply to the given scenario. It also highlights the legal risks that may arise and the possible defenses available. The subject is Company and Commercial Law, and the course code and college/university are not mentioned.

Running head: COMPANY AND COMMERCIAL LAW
Company and Commercial Law
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Question 1
Course of action arising out of Contract
The issue here is to provide assistance or financial compensation to James for not
performing for the responsibilities taken up by the manager of Lloyd Right Pty Ltd.
Under the common law, non-performance of the terms of an agreement between
parties amounts to breach of contract. The rights of the parties under contract are either
express or implied, and sometimes comprising both. Where there are express terms to a
contract, the parties are bound by it. Express terms can be oral, written or both. In Hopkins v
Tanqueray, it was held that a contract having express terms, the parties must have the
opportunity to verify the terms of the agreement and there should not be anything that
prevents them from verifying the statement of such agreement. In Pym v. Campbell, it was
discussed that the parties must have the knowledge about the importance of the statement.
The contract must specify expressly if the parties have any specific skill or knowledge that
would aid the contract (Oscar Chess v Williams). While in terms of implied terms of a
contract, the agreement must be based upon Co-operation and good faith; while the special
contractual relationships would additionally include an agreement for a specific service, like
the services provided by an engineer, architect, lawyer or doctor. In IBA v. EMI (electronics),
it was held that Contracts between professional person and their clients would include
contractual duties with reasonable care and skill. The professionals are under an implied
warranty that puts them under a responsibility to carry out their duty cautiously, so that the
clients do not face any issue. They are expected to perform their services, which would be fit
the purpose for which they were hired. In case of breach of such duties and responsibilities,
the aggrieved client is liable to receive damages pertaining to the loss suffered due to such
non-performance. Damages are recovered for breach of contract, either for the losses that
arise ‘naturally’ or ‘in the usual course of business’. However, in Hadley v. Baxendale, it was
held by Baron Alderson that when a contracting party fails to foresee a probable risk and
eventually fails to intimate about such risk to the breaching party, then the breaching party is
not liable to bear the entire loss incurred by such contracting party.
In this case, the manager failed to take permission from the local council about the
outside seating option, yet installed tables on the sidewalk. The local council sent a notice to
remove such arrangement on the sidewalk, as it is not permissible in the area. The manager

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failed to carry out his duties here, which would cost James a heavy loss. Therefore, the
manager must arrange for compensations for James, particularly for the mistake that he made
by ordering the wrong furniture for which James would be losing $30 per customer.
Applying the rules of contract, the manager would be liable to pay a sum that would
compensate James for every customer that he would lose due to the inconvenience of the
seating arrangement. The damages need to be calculated and settled by both the parties, to a
certain point when James will be able to make a start a venture or arrange for some
alternative options for the restaurant.
Question 2
Course of action arising out of Tort of Negligent Misrepresentation
The issue here is to assist or financially compensate James for the loss that he
incurred under the tort of negligent misrepresentation.
Under the law of tort, a type of civil wrong, negligence refers to the act or omission of
a duty, which the person was liable to do and such act or omission has amounted to a loss to
the victim. In Costa Vraca Ltd v Berrigan Weed & Peset Control Pty Ltd, it was held that
anyone who is close and can directly be affected by another, such persons are ‘neighbour’ to
each other and the act or omission of certain things by one such person has the capability to
bring loss to the other. In the case of Levi v Colgate Palmolive Pty Ltd, it was discussed that
the defendant needs to foresee the risks that might occur to the plaintiff due to the negligence
to carry out his duty. It is only expected from a man of common prudence that his act or
omission to act would cause injury to the other. In such scenario, the defenadant would be
liable to pay damages for the negligence to carry out his duty. However, in The Wagon
Mound No. 2, it was observed that if the damage suffered by the victim is too far-fetched or
remote, then the defendant would not be held liable. The Australia Consumer Law (ACL)
provides that a person should not enter into a contract to deceive or mislead another (section
18 of ACL). Therefore, it is necessary to prove fraud or negligence to be eligible for damages.
(Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd). The Sale of Goods Act (Victoria)

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too holds similar provision for negligent misrepresentation to the duty of care of the
defendant.
In this matter, James delegated the responsibility to the manager to take the permit of
the restaurant from the local council. The manager failed to foresee the risk he is taking by
installing the tables without verifying the fact about the outside seating arrangement from the
council. This is a negligent misrepresentation of the manager that would cost James heavily
as he would be losing $30 per customer.
Question 3
Legal risks
A legal risk under the Australian Consumer Law refers of the risk arising out of the
non-performance of a contract. Both the parties to the contract may encounter such legal risk
for breach of contract. Legal risk, as under section 18 of ACL, is applicable in trade and
commerce where there is a breach of agreement due to misleading or deceptive conduct of
the defendant. Failure to foresee such legal risks and encounter one makes the plaintiff
eligible to draw damages from the defendant. However, the defendant has certain less
effective defenses like Exclusion clause and disclaimers.
As for the probable legal risks, James would be liable to receive the bigger sized
furniture ordered by the manager that would amount to a loss of business by the restaurant.
Additionally, James would be liable to remove the installed table in the sidewalk, which
would again attract charges. A risk that James might face in the course of business is that the
restaurant might not incur the amount of profit that it wanted to, before starting the business.
The manager would have taken reasonable care and caution while taking the permit
from the local council and should have enquired about the outside sitting arrangements.
Additionally, the manager should have checked the size of the furniture and ordered them as
per the area of the restaurant to fit 100 seating.

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Reference list:
Costa Vraca Ltd v Berrigan Weed & Peset Control Pty Ltd (1998) 693 FCA
Hadley v. Baxendale (1854) EWHC J70
Hopkins v Tanqueray (1854)
IBA v EMI (Electronics) Ltd (1980) 14 Build LR 1
Levi v Colgate Palmolive Pty Ltd (1941) 41 SR (NSW) 48
Oscar Chess v Williams (1957)
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) ATPR 40-307
Pym v Campbell (1856)
The Wagon Mound No. 2 [1967] 2 All ER 709