Liability of Partnership and False Advertisement: Legal Analysis

This article discusses the liability of partnership and false advertisement under Australian law. It analyzes relevant cases and principles such as promissory estoppel. The article covers topics such as the Partnership Act 1892, section 29 of the Australian Consumer Law, and the principle of unconscionable conduct. It also provides a case study for each topic to illustrate its application.

Business and
Corporate Law
2018

Question 1
I: Issue
Key issues:
 Whether the partnership is liable under the contract formed between Lance and
Lynton?
 What legal remedies available for the partnership?
R: Rule
A partnership is formed between two or more individuals who agreed to run a business in
common and share its earnings or losses with each other. It is governed by the provisions
given under the Partnership Act 1892. The relationship between partners is a key part of the
partnership which provides their rights and liabilities. It is a general rule that all partners are
liable for the actions of other partners which are taken by them while performing the
partnership business. Moreover, the liability is unlimited in case of a partnership which
provides that all the partners are personally liable for the debts of the partnership. Section 10
provides the provision regarding liabilities of partnership (Austlii, 2018a). It provides that all
partners are liable for the wrongful actions of a partner which are taken by him while acting
within the ordinary course of business and with the appropriate authority. In Polkinghorne v
Holland (1934) 40 ALR 353 case, the court provided in its judgement that all the partners are
jointly or severally liable for the action of one partner which are done under the ordinary
course of business. Furthermore, in Birtchnell v Equity Trustees (1929) 35 ALR 273 case, a
judgement was given by Dixon J who provided that partners owed a fiduciary duty towards
each other breach of which leads to legal consequences (Shankar, 2014).
A: Application
Facts of the case:
 A contract was constructed between Lance and Lynton regarding the purchase of a car
worth $25,000.
 Lance was instructed by other partners to purchase the car for business purposes. The
budget for the car was set to $20,000 by other partners.
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 Lynton knew that Lance is a partner, and he is purchasing the car for the partnership.
He did not know that Lance’s budget is for $20,000.
All partners took the decision for purchasing a new car, and they wanted to use it for
partnership purposes. Thus, the decision of Lance to purchase the car comes under the
definition of the ordinary course of business based on which other partners are also liable to
pay the car salesman (Polkinghorne v Holland). Since Lance acted against the instructions of
other partners, he breached his fiduciary duty based on which other partners can hold him
personally liable for purchasing a car by going over budget (Birtchnell v Equity Trustees).
C: Conclusion
Thus, the partnership is liable under the contract formed between Lance and Lynton.
Moreover, other partners can file a legal suit against Lance to recover extra money which he
spent on purchasing the car by violating his fiduciary duties.
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Question 2
I: Issue
Key issues:
 Whether customers can claim a remedy against false advertisement?
 Does the contract bind Saqlaim?
R: Rule
While operating their business in Australia, corporations have to comply with guidelines
issued by the Australian Consumer Law. Various prohibitions are issued by the Act regarding
false and misleading advertisements. An organisation can be held liable under section 29 for
issuing a false advertisement to the public in which they made false or deceptive remarks
regarding their products or services. The objective of this regulation is to protect customers
from misleading advertisements and preventing corporations from making false remarks
regarding the specifications of their products. By providing false or misleading information,
corporations could adversely affect the competition in the market by attracting customers to
purchase their products by highlighting wrong information. In ACCC v A Whistle & Co
(1979) Pty Limited (2015) FCA 1447 case, the corporation was held guilty for violating
section 29 because it used fabricated customers testimonies and internet reviews to write
positive reviews about its products and to attract more customers (Jade, 2018). The court held
that companies could not mislead customers by relying on false advertisements in which they
display deceptive or misleading information regarding their products.
In case of a contract, its parties are binding to its terms and legal action can be taken against
them in case of breach of contractual duties. Generally, once two or more parties entered into
a contract than they are binding in its terms, and they have to comply with them. However, a
leading judgement was given by the court in the case of Commercial Bank of Australia v
Amadio (1983) HCA 14 in which the contract was set aside. In this case, the claimant’s
English was poor, and the bank takes his advantage to enter him into a contract without
disclosing its terms. The court held that it was a case of unconscionable conduct because
parties entered into the contract without appropriate knowledge about its terms. Thus, the
court provided that the contract is not binding on its parties (Austlii, 2018b).
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A: Application
Facts of the case:
 Xiaojing made a false advert about his moisturiser in which she made a false claim
that the moisturiser slows down the effect of ageing.
 The partners are unhappy with the car, and they decide to sell it to Saqlaim who only
understand little English.
 Lance used his charisma and fast taking to convince Saqlaim to enter into a contract
with the partnership to purchase the car.
Customers can file a suit against Xiaojing’s business for making a false advertisement under
section 29 (ACCC v A Whistle & Co (1979) Pty Limited). They can hold the company liable
and demand for damages for the misleading advert. On the other hand, Saqlaim did not know
about the complete terms of the contract and Lance took advantage of his poor knowledge of
English. Thus, Saqlaim can set aside the contract based on unconscionable conduct
(Commercial Bank of Australia v Amadio).
C: Conclusion
Thus, customers have a remedy under section 29 of the false advertisement. Moreover,
Saqlaim is not bound by the terms of the contract based on the principle of unconscionable
conduct.
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Question 3
Key issue:
 Can Felix claim $100 as promised by Xiaojing?
R: Rule
The principle of promissory estoppel is relevant since it prevents parties from going back on
a promise which is made by them based on their legal rights. To establish this doctrine,
certain elements are required to be fulfilled. Firstly, the party who is relying on this doctrine
must have a pre-existing legal or contractual relationship with the party. Provisions regarding
this element were given Brikom Investments Ltd v Carr (1979) CA case. This is a relevant
case because it was held by the court that when a promise is made by parties by negotiating
their contractual terms, then the provision of promissory estoppel prevent the party from
going back on the promise (Turner, 2013). The second element provides that the promise on
which promissory estoppel is applied must not be ambiguous and its terms must be clear.
Another element is that the legal position of the parties must be changed after making of such
promise. A relevant judgement was given in Ajayi v Briscoe (1964) 1 WLR 1326 case. It is a
relevant case regarding this matter because the court rejected the requirement of suffering
detriment while applying the doctrine of promissory estoppel as long as the promised change
or affect the position of parties. Lastly, in D & C Builders v Rees (1966) 2 WLR 28 case, the
court provided that in order to rely on promissory estoppel it must be inequitable for the party
to let the defendant go back on his promise (Barker, 2014).
A: Application
Facts of the case:
 Felix was working as a casual for Xiaojing to pick lavender for $25 per bag.
 Due to Felix’s good work, Xiaojing promised that she would pay him an extra $100.
 Later she changed her mind and rejected her promise to pay $100 to Felix.
In this situation, Felix can apply the doctrine of promissory estoppel to claim $100 from
Xiaojing. All the elements must be present in the case to apply the principle of promissory
estoppel. Firstly, a pre-existing contractual relationship existed between the parties since
Felix was hired as a casual for Xiaojing (Brikon Investments Ltd v Carr). The term was clear
and unambiguous. Due to the promise, the legal position of parties was changed since
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Xiaojing owed $100 to Felix (Ajayi v Briscoe). Moreover, Felix is a student, and he is doing
the job to earn some extra money. Therefore, it is inequitable to let Xiaojing go back on her
promise (D & C Builders v Rees).
C: Conclusion
Thus, Felix can rely on the doctrine of promissory estoppel since all of its elements are
fulfilled to enforce Xiaojing to perform on her promise and pay him $100 as promised.
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References
ACCC v A Whistle & Co (1979) Pty Limited (2015) FCA 1447
Ajayi v Briscoe (1964) 1 WLR 1326
Austlii. (2018a) PARTNERSHIP ACT 1892 - SECT 10. [Online] Available from:
http://classic.austlii.edu.au/au/legis/nsw/consol_act//pa1892154/s10.html [Accessed 7 August
2018].
Austlii. (2018b) Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151
CLR 447 (12 May 1983). [Online] Available from:
http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/HCA/1983/14.html?
stem=0&synonyms=0&query=title%20(%20%22amadio%22%20) [Accessed 7 August
2018].
Barker, D. (2014) Law made simple. Abingdon: Routledge.
Birtchnell v Equity Trustees (1929) 35 ALR 273
Brikon Investments Ltd v Carr (1979) CA
Commercial Bank of Australia v Amadio (1983) HCA 14
D & C Builders v Rees (1966) 2 WLR 28
Jade. (2018) Australian Competition and Consumer Commission v A Whistle Co (1979) Pty
Limited. [Online] Available from: https://jade.io/j/?a=outline&id=421949 [Accessed 7
August 2018].
Partnership Act 1892
Polkinghorne v Holland (1934) 40 ALR 353
Shankar, T. (2014) The Place of the Dishonest and Fraudulent Design Requirement in
Accessorial Liability for Assisting in a Breach of Trust or Fiduciary Duty. Monash UL
Rev., 40, p.793.
Turner, C. (2013) Contract law. Abingdon: Routledge.
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