Legal Issues and Australian Consumer Law: Case Studies

1
Contents
Case Study 1....................................................................................................................................2
Issue.............................................................................................................................................2
Law...............................................................................................................................................2
Application...................................................................................................................................3
Conclusion...................................................................................................................................3
Case Study 2....................................................................................................................................4
Issue.............................................................................................................................................4
Law...............................................................................................................................................4
Application...................................................................................................................................4
Conclusion...................................................................................................................................5
Case Study 3....................................................................................................................................5
Issue.............................................................................................................................................5
Law...............................................................................................................................................5
Application...................................................................................................................................6
Conclusion...................................................................................................................................6
Reference List..................................................................................................................................7

2
Case Study 1
Issue
i. Whether the Partnership will be bound by the contract made between Lance and
Lynton?
ii. Is there any action that can be taken by the partners against Lance?
Law
Partnership is one form of business which can be operated in Australia. To establish a valid legal
partnership, the main essential requirements include: (Krawitz A, 2002)
i. There must be two or more than 2 persons to form a valid partnership;
ii. The persons must come together to fulfill a common objective and is held in (Smith v
Anderson (1880);
iii. The objective is achieved by carrying on a business;
iv. The purpose to form the partnership is to seek profits and share losses.
Compliance of all the elements results in partnership. the persons who form the partnership are
called the partners. As per Lang v James Morrison & Co Ltd (1911), the partners are the
firm’sagents and are the agents of each other. Thus, any act taken by the partner will bind upon
the firm and all the other partners and vice versa. (Egert 2007).
The authority within which the partners can bind the firm and the other partners can be
distinguished as:((McLaughlin 2013)
i. Actual authority – The authority sought by the partners directly from the firm or the
partnership agreement is an actual authority ([Hely-Hutchinson v Brayhead Ltd
[1968]. It can be
a. Express – The authority imposed on the partners directly either orally or in
written form is an express actual authority.
b. Implied – The authority which is required and which are attributed to the partners
along with the express authority is an implied authority, they are required to
comply with the express authority and thus are based on implications and is held
in Australia and new zealand bank, ltd. V. Ateliers de constructions electriques de
charleroi. [1966].

3
i. Ostensible authority –When the firm or any partners to the firm on behalf of the form
makes a representation to an outsider making him believe that a person is the authored
representative of the firm and has the power to bind the firm by his acts, then, any
contract made amid such an outsider and the person is binding upon the firm and the
other partners under the ostensible authority and is held in Freeman & Lockyer (A Firm)
v Buckhurst Park Properties (Mangal) Ltd [1964].
The partners are required to comply with several duties which includes the duty to avoid conflict
of interest not to make secret profits, to act within authority, to act with honesty, etc. If any
partners exceed his authority then, the other partners can sue the defaulting partners personally
for the loss so suffered by the firm.
Application
The Herbal Product Business has three partners, one of them is Lance. The Lance power to
establish contract on behalf of the business was limited to $20,000. Thus, the actual authority of
Lance was to establish contract but is limited to worth $20,000.
But, Lance exceeded his authority and enters into contract with Lynton (sales person of Mighty
Motors Pty Ltd) for the purchase of ute which is worth $ 25,000. Thus, Lance exceeded his
authority.
i. Now, the contract amid Lance and Lynton is valid and is binding upon the Herbal
business. It is submitted that Lynton is not aware that the power of Lance to enter into
contract is limited to worth $20,000. It is assumed that Lynton is of the belief that
Lance has the power to take contract on behalf of the firm and has no reason to
believe regarding the restriction of the powers of Lance. Thus, Lance has the
ostensible power to take contract on behalf of herbal business. Further, since all the
partners are agents of each other, thus, the acts of lance will bound the other partners
and the contract is binding in herbal business as well;
ii. Lance has violated his duty to cater is actions within his authority. Thus, he is
personally liable for the loss that is incurred to the firm and the other partners because
if his actions.