Corporation Law: Case Study Assignment

This case study assignment discusses the rights of Bob under common law and statute in the context of corporation law. It explores the factors that determine whether a statement is a term or representation in a contract and the remedies available for breach of contract. The case references relevant Australian contract law cases and provides an analysis of the application of these rules to the present case. The conclusion highlights Bob's right to sue for breach of contract.

Running head: CORPORATION LAW
CASE STUDY ASSIGNMENT
Name of the Student
Name of the University
Author Note

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Identification of issues:
The issue involved in this case is whether Bob has any rights under the common law
and statute.
Rules:
Cases:
1) Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37,
(2015) 256 CLR 104 (14 October 2015), High Court (Australia).
2) Dick Bentley Production v Harold Smith (Motors) Ltd [1965] 2 AII ER 65
3) Van den Esschert v Chappell [1960] WAR 114
4) Routledge v Mckay [1954] 1 WLR 615
5) J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435
6) Heilbut, Symons & Co v Buckleton [1912] UKHL 2
7) Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
8) Australian Contract Law.
In a contract, the agreement contains the terms and clauses that determine the rights
and duties of the parties of the contract. When a contract is to be executed, the parties decides
their respective terms and conditions that will be imposed on the parties once the contract is
formed. The statements made in course of a contract are to be determined whether they
amount to a term of the contract or a representation. The parties must be aware whether a
statement amounts to a term or a representation in the contract. This is important for the
parties to distinguish between the two to avail the remedies they have. If the statement
amounts term of a contract and when that term is not satisfied, then the deprived party has the

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option of suing the other party for violating the contract. On the other hand, when the term
appears to be a representation and if such representation is false or fraudulent, then the
suffering party can institute case against the party who made such fraudulent or false
representation. The remedies also differ when the statement is a term and when its is a
representation.
The court generally takes in to consideration few deciding factors depending on which
a statement is judged whether it is a term or representation. These factors are as follows:
 The parole evidence rule.
 The relative experience of the parties.
 The importance of the statement.
 Timing factor.
The parole evidence rule is a method that when an agreement is being written and
duly executed by all the parties to the contract by signing it, then it cannot be changed or
modified by any oral evidence like a statement that can be contradictory to the terms of the
actual contract except in the cases of fraud and mistake. This was observed in the case of
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited1.
The next factor to be considered by the court is the relative experience or expertise of
the parties to the contract. If the representor who made the statement has a better knowledge
and experience, then it is more probable to be a term of the contract. On the other hand, if the
representee has better knowledge and experience than the representor, then it is probable to
be a representation. It was observed in the case of Dick Bentley Production v Harold Smith
(Motors) Ltd2.
1 Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37, (2015) 256 CLR 104 (14
October 2015), High Court (Australia).
2 Dick Bentley Production v Harold Smith (Motors) Ltd [1965] 2 AII ER 65.

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Another matter that the court takes into consideration is the importance of the
statement and its reliability. Where the representee mentions the representor the significance
of the statement, then it is probable to be a term. This is entrenched in the case of Van den
Esschert v Chappell3.
Lastly, the court refers to the timing, the longer the time passes after making the
statement, before making the contract, then it is probable to be a representation as held in the
case of Routledge v Mckay4.
As per the Australian contract law, collateral contract depicts an ancillary contract
which persuades a person to make a contract or which is dependent on the main contract for
the existence of it. A party to a contract that already exists may make an attempt to prove that
a collateral contract is present if his claim for a contract breach does not succeed as the
statement such party depended on cannot be regarded as a contract term. In order to be
successful in such claim, the party must show that the statement is promissory in nature. This
was discussed in the case of J J Savage & Sons Pty Ltd v Blakney by the High Court of
Australia5.
This collateral contract can be denoted as an exception the above mentioned parole
evidence rule as discussed in the case of Heilbut, Symons & Co v Buckleton6.
Application:
In the present case, Bob Burke, a graduate decided to form his own business. For this,
he made inspection of an office located in a shopping centre at Melbourne whose owner is the
Southfield Shopping Centre Ltd, hereinafter referred to as Southfield. Bob wanted that no
3 Van den Esschert v Chappell [1960] WAR 114.
4 Routledge v Mckay [1954] 1 WLR 615.
5 J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435.
6 Heilbut, Symons & Co v Buckleton [1912] UKHL 2.

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same type of business to be allowed to be conducted on lease in that building prior to signing
of the lease. This was verbally agreed by Ken, the managing director of Southfield. As it was
not put into document and agreed upon verbally, as per the Parole evidence rule and the
Relative expertise of the parties, the statement amounts to be a representation and not a term.
However, depending and relying on the verbal assurance by Ken, Bob agreed to the
lease agreement. He without reading the lease agreement signed it. This agreement of the
lease had a clause denoting that the terms & conditions of such lease agreement depicts the
detailed information of the entire agreement between Bob and Southfield. But the agreement
had no reference of the verbal representation made by Ken.
However, the shopping centre failed miserably causing great financial loss, as many
of the shops were not sold. After six months, the company in order to overcome the losses,
allowed another similar type of business that Bob conducted, to carry on business on the
premises of the shopping centre. This showed that Shopfield had breached the contract with
Bob. Due to this, Bob suffered losses as his business did not incur gain because of
competition.
When Bob complained about this to Ken, Ken informed him that there is no existence
of any such clause in the agreement of lease indicating that the company was prevented to let
any shop on lease for carrying on business of similar nature as that of Bob. Moreover, Ken
also declined the verbal statement he made on the basis of the clause in the lease contract.
The disclaimer clause was not binding on Bob as he did not read it while signing it.
Moreover, the statement made by Ken amounts to be a collateral agreement on the basis of
which the main agreement was entered by Bob. Hence, such statement made by Ken though
not put inside the agreement, it will be considered as a term and hence, it will be binding on
the parties.

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Thus Ken on behalf of the Southfield Shopping Centre Ltd had breached the terms of
the contract for which he will be liable to Bob according to the decision given in the case of
Hoyt's Pty Ltd v Spencer7. Moreover, since Bob incurred losses because of the competition
given by the similar type of business, he can also claim compensation for such losses.
Moreover, Bob can also claim for remedies against Ken for the breach of the collateral
contract.
Conclusion:
A close perusal of the rules enumerated together with the application discussed, it can
be seen that the Bob has a right to sue the Southfield Shopping Centre Ltd for the breach of
the contract executed by them.
7 Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133

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References:
Australian Contract Law
Dick Bentley Production v Harold Smith (Motors) Ltd [1965] 2 AII ER 65
Heilbut, Symons & Co v Buckleton [1912] UKHL 2
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37, (2015)
256 CLR 104 (14 October 2015), High Court (Australia).
Routledge v Mckay [1954] 1 WLR 615
Van den Esschert v Chappell [1960] WAR 114