Australian Commercial Law Case Study 2022

Running head: AUSTRALIAN COMMERCIAL LAW
AUSTRALIAN COMMERCIAL LAW
Name of the Student
Name of the University
Author Note

1
AUSTRALIAN COMMERCIAL LAW
Part A
Issue Involved:
The court had to determine whether Ethan and Sally had any intention to create legal relations
between them as per the agreement.
Relevant laws:
In order to create a valid contract a person needs to have an intention to create legal
relation .This constitutes as one of the essential elements of a contract. To make a contract legal
and binding the parties must enter into an agreement with an intention to create legal relation so
that the rights and duties of the parties can be enforced which can be seen in the case of Blue v
Ashley [2017] EWHC 192. The court in case of commercial transactions presumes that the
parties who entered into the contract have the intention of creating a legal relation that can be
seen in the case of Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2.
Application:
In this particular case, the two parties who entered into the contract were Sally and her cousin
brother Ethan. Sally sold her store to Ethan for 1,55,000 dollars along with the cost of goodwill
of the business which cost 25,000 dollars. Sally had shown that the business had been having
profits for three years, which were wrong and inaccurate. Therefore, it could be seen that though
there were misrepresentation of facts both the parties agreed to be a part of the contract with the
intention of having legal relation as it can be seen in the case of Edwards v Skyways Ltd [1964]
1 WLR 349.

2
AUSTRALIAN COMMERCIAL LAW
Conclusion:
Therefore, from the above discussion, it can be concluded, that an intention of creating a legal
relation between Sally and Ethan is present.
2. Issue Involved:
The issue to be discussed in this part would be what are the remedies that can be provided to
Ethan after the court’s assessment prior to the representations made by Sally.
Relevant laws:
Either any statement made by one party to the other party before the formation of the contract
can become terms and conditions of the contract or it can be representation. The court actually
identifies whether it is considered to be a cause of action or if there is a remedy present in case of
any breach in the contract. To examine and investigate whether a representation is
misrepresented or distorted, the court checks it on the basis of certain conditions whether the
representation fulfills those certain conditions. Firstly, the representation made by a party should
not be false or misrepresented. False representation leads to distortion of facts that keeps the
other party of the contract in the dark. It can be seen in the case of Bisset v Wilkinson [1927]
AC 177. Another example of a case which includes distortion of facts is the case of Smith v
Land & House Property Corp (1884) 28 Ch D 7. Secondly, if any kind of false representation is
made then the court has the authority to decide whether the party who made such a false
statement was encouraged to do so or not. Therefore, it needs to be seen whether the party was
intending to rely on such false statement or not as it can be seen in the case of Horsfall v
Thomas [1862] 1 H&C 90. If the party has the chance to not use it and the party still relies on
such a fact then it is also considered misrepresentation of facts. It can be seen in the case of
Redgrave v Hurd (1881) 20 Ch D 1. In case of fraudulent misrepresentation the party that is not

3
AUSTRALIAN COMMERCIAL LAW
aware of the misrepresentation has the opportunity of claiming damages once they are aware of
the misrepresentation. It can be seen in the case of per Smith New Court Securities v
Scrimgeour Vickers [1996] 3 WLR 1051.
Application:
The facts of the case states that Sally’s business was incurring losses and it was not profitable but
Sally in order to sell her poorly running business to Ethan showed him inaccurate facts related to
business growth which showed that the business was profitable for almost three years which was
misrepresentation of facts on behalf of Sally. Since, Ethan had no business sense believed the
facts that were inaccurate and bought the business. From the above facts it can be seen that Sally
who misrepresented the facts had knowledge about business whereas, Ethan did not have any
knowledge thus, suffered a loss due to Sally. Therefore, it was considered to be
misrepresentation of facts on behalf of Sally as in the case of Esso Petroleum v Mardon [1976]
QB 801 as Ethan completely relied on it. Since, there was a misrepresentation of facts on behalf
of Sally to Ethan The former can be sued by the latter since the facts which were misrepresented
by Sally were part of a contract. Ethan has the authority to claim damages and terminate the
contract as in the case of Doyle v Olby [1969] 2 QB 158.
Conclusion
Thus, from the above discussion, it can understood that the court can examine the
misrepresentations made by Sally and because of the misrepresentation; Ethan has the authority
to claim for damages and terminate the contract.

4
AUSTRALIAN COMMERCIAL LAW
3. Issue Involved:
The issue to be discussed in this part is whether Sally’s new store valid and if not then what are
the remedies available to Ethan against Sally.
Relevant laws:
Restriction on trade is considered to be a doctrine of common law. It is related to the
enforcement of the restriction that is imposed on freedom for coordinating any business that is
similar which is laid down in the contract as it was first introduced in the case of Mitchel v
Reynolds (1711) 1 P Wms 181. Lord Smith in this case held that a trader’s right is to carry out
the business activities within the country which does not limit the trader’s right if it is not
contrary to the law. There are certain provisions or clauses which needs to be considered, if it is
not considered to be fulfilled it will remain void and cannot be enforced by law. The provisions
need to be rational and needs to secure the goodwill of the business as it can be seen in the case
of Southern Cross Computer Systems Pty Ltd v Palmer (No 2) [2017] VSC 460. The court has
the authority to reject it based on its validity and if the court finds it unreasonable on the basis of
negotiation happening between the parties. Features of the parties who are restrained and the
extent to which the restraint clause is enforced. Duration of such a restraint and if any remedies
are available if there is a breach of such restraint in order to claim injunction against the party
who had breached.
Application:
From this case study it can be understood, that Sally had sold her poor running business to her
cousin Ethan for 155,000 dollars along with the goodwill of the business. The contract drafted by
Ethan’s lawyers had a clause, which stated a restraint of trade clause that did not allow Sally to
open another store within 100km radius of the convenient store bought by Ethan for a period of

5
AUSTRALIAN COMMERCIAL LAW
10 years. If the facts of the case are considered then it can be said that such a clause was
reasonable. Ethan had bought the convenience store from Sally along with the goodwill of the
business therefore Ethan had the authority to put forth such a clause where it prevented Sally
from building another business, which was similar to his, within the area in order to protect and
secure his own business. If Ethan had become successful in the legal action taken by, him against
Sally for the breach of such a clause Ethan could have bought a permanent injunction against
Sally for building a similar business within the area of Ethan’s convenience store.
Conclusion:
Therefore, from the above discussion, it can be understood, that the restraint clause between
Ethan and Sally are valid and if there is a breach of that clause by Sally the remedy for such a
breach is injunction.

6
AUSTRALIAN COMMERCIAL LAW
Part B
Issue Involved:
The issue to be discussed in this part is in the light of Consumer Law Legislation of Australia
what kind of action can be taken by Sally against Good Health Help Pty. Ltd.
Relevant laws:
According to Section 60 of the Competition and Consumer Act 2010- Schedule 2 of the
Consumer Law of Australia states that for any kind of services there will be guarantee of due
care and skill. This means that the service provider would guarantee to take care of the
consumers while providing the services by using their skill and technical knowledge to avoid any
kind of loss or damage. Under Section 267 remedies are given if there is a failure to provide with
the guarantee which is considered to be a major failure. If there is an opportunity to provide with
a remedy for the failure then within a reasonable amount of time the failure needs to be
remedied. If there is a major failure, that cannot be remedied, then the consumer has the right to
terminate the contract immediately and ask for a compensation for the loss or damage caused due
to the service provider or the supplier and an action can also be taken by the consumer against
the service provider.
Application:
From this case study, it can be understood, that after Sally had left the hospital she then visited a
medical company which was known as Good Health Help Pty. Ltd. The people who used to
work in that medical company advised her to have a special kind of back injury which would
relieve her of her back injuries. The advise given by the people who worked there were based on
incorrect facts as a result of the wrong X-rays. After the operation Sally’s condition worsened.

7
AUSTRALIAN COMMERCIAL LAW
As a result, this showed that the medical company did not take due care and diligence, which
acted as a breach on behalf of the medical company according to section 60. Since it was a major
failure under section 267 it could either be remedied within a reasonable time or Sally had the
authority to take action against the medical company or claim damages for the injuries sustained
by her.
Conclusion:
Therefore, from the above discussion, it can be concluded, that Sally can either claim for
compensations for the injuries sustained by her from Good Health Help Pty. Ltd or it can be
remedied by the medical company by operating on her again within a reasonable period of time.

8
AUSTRALIAN COMMERCIAL LAW
Part C
Issue Involved:
The issue to be discussed in this part is whether there can be any legal action, which can be taken
by Sally for the negligence caused by David.
Relevant laws:
To prove negligence in the court there needs to be a fulfillment of certain conditions like the
claimant must be able to prove that there was a duty of care towards the claimant by the
defendant. The claimant must be able to prove that a breach happened. The claimant must be
able to prove that damage was caused due to such breach and lastly, the claimant must be able to
prove that the damage was not remote to the cause of action.
To prove that the defendant has a certain duty of care towards the plaintiff the defendant must
apply the Caparo test which can be seen in the case of Caparo Industries Plc v Dickman [1990]
2 AC 605. In this case it was stated by lord Bridge that any person must be able to anticipate any
kind of harm which can be caused. It can be seen in the case of Home Office v Dorset Yacht Co
Ltd [1970] AC 1004 there must also be a certain duty of care towards the claimant by the
defendant and there must be a relation between the two when the act of negligence occurs like in
the case of Bourhill v Young [1943] AC 92. The second fulfilment to know whether there was a
breach of such duty can be proved by the objective test as it was held in the case of Vaughan v
Menlove (1837) 3 Bing. N.C. 467. The third fulfilment that needs to be looked after was if there
was any cause of damage on the claimant as it can be seen in the case of Barnett v Chelsea &
Kensington Hospital [1969] 1 QB 428. The fourth and the last fulfilment would be to see
whether the defendant was able to anticipate such kind of injury which was caused to the

9
AUSTRALIAN COMMERCIAL LAW
claimant as it can be seen in the case of in The Wagon Mound no 1 [1961] AC 388. According
to the Civil Liability Act, 2002, Section 5D provides that the claimant must be able to provide a
factual causation where the defendant would be liable for the harm caused due to the act of
negligence.
Application:
According to the facts of this case, as Sally went to visit David’s store she fell on the floor as the
floor was wet and slippery as a result she broke her back. According to the facts it can be seen
that the store was owned as well as operated by David therefore he had a certain duty and care
towards the people who visited his store. The breach of duty happened when the floor of the
store was left wet and slippery which led to Sally falling down and injuring her back. Therefore,
there was causation of damage. Therefore, David satisfies all the conditions for committing the
act of negligence as it can be seen in the case of Donoghue v Stevenson [1932] AC 562.
Conclusion:
Therefore, from the above discussion, it can be concluded, that David satisfies all the conditions
for committing the act of negligence and Sally could take a legal action against David for
sustaining injuries due to his negligent behavior.

10
AUSTRALIAN COMMERCIAL LAW
References
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. Lexlaw.co.uk. (2019). Retrieved 25
September 2019, from https://lexlaw.co.uk/wp-content/uploads/2018/02/Barnett-v-
Chelsea.pdf.
Bisset v Wilkinson [1927] AC 177. Bisset v Wilkinson & Anor | [1927] AC 177 | Privy Council
| Judgment | Law | CaseMine. (2019). Retrieved 25 September 2019, from
https://www.casemine.com/judgement/uk/5b2897dd2c94e06b9e19c802.
Blue v Ashley [2017] EWHC 192. (2019). Retrieved 25 September 2019, from
https://www.judiciary.uk/wp-content/uploads/2017/07/blue-v-ashley-2010726.pdf
Bourhill v Young [1943] AC 92. Bourhill v Young | [1942] UKHL 5 | United Kingdom House of
Lords | Judgment | Law | CaseMine. (2019). Retrieved 25 September 2019, from
https://www.casemine.com/judgement/uk/5a8ff87860d03e7f57ec104e.
Caparo Industries Plc v Dickman [1990] 2 AC 605. Caparo Industries v Dickman. (2019).
Retrieved 25 September 2019, from http://e-lawresources.co.uk/cases/Caparo-Industries-
v-Dickman.php.
Donoghue v Stevenson [1932] AC 562. (2019). Retrieved 25 September 2019, from
https://www.uni-trier.de/fileadmin/fb5/FFA/KURSUNTERLAGEN/Anglo-
Amerikanisches_Recht/Law_of_Torts/Siry-SS-2012/
Donoghue_v_Stevenson__1932__UKHL_100__26_May_1932_.pdf.

11
AUSTRALIAN COMMERCIAL LAW
Doyle v Olby [1969] 2 QB 158. Doyle v Olby. (2019). Retrieved 25 September 2019, from
http://www.e-lawresources.co.uk/Doyle-v-Olby.php.
Edwards v Skyways Ltd [1964] 1 WLR 349. Edwards v Skyways. (2019). Retrieved 25
September 2019, from http://www.e-lawresources.co.uk/Edwards-v-Skyways.php.
Esso Petroleum v Mardon [1976] QB 801. Esso Petroleum Co. Ltd. v. Mardon. (2019). Retrieved
25 September 2019, from http://www.uniset.ca/other/cs3/1976QB801.html.
Home Office v Dorset Yacht Co Ltd [1970] AC 1004. Home Office v Dorset Yacht Co Ltd.
(2019). Retrieved 25 September 2019, from https://www.lawteacher.net/cases/home-
office-v-dorset-yacht.php.
Horsfall v Thomas [1862] 1 H&C 90. E-lawresources.co.uk. (2019). Horsfall v Thomas. [online]
Available at: http://www.e-lawresources.co.uk/Horsfall-v-Thomas.php [Accessed 25 Sep.
2019].
Mitchel v Reynolds (1711) 1 P Wms 181. Lawschoolcasebriefs.net. (2019). Mitchel v. Reynolds
case brief. [online] Available at: http://www.lawschoolcasebriefs.net/2014/06/mitchel-v-
reynolds-case-brief.html [Accessed 25 Sep. 2019].
Redgrave v Hurd (1881) 20 Ch D 1. Lawcasesummaries.com. (2019). [online] Available at:
https://lawcasesummaries.com/wp-content/uploads/kalins-pdf/singles/redgrave-v-hurd-
1881-20-ch-d-1.pdf [Accessed 25 Sep. 2019].
Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2. E-lawresources.co.uk. (2019).
Rose & Frank Co v Crompton Bros. [online] Available at: http://www.e-

12
AUSTRALIAN COMMERCIAL LAW
lawresources.co.uk/Rose--and--Frank-Co-v-Crompton-Bros.php [Accessed 25 Sep.
2019].
Smith New Court Securities v Scrimgeour Vickers [1996] 3 WLR 1051. Casemine.com. (2019).
Smith New Court Securities v. Scrimgeour Vickers | [1996] UKHL 3 | United Kingdom
House of Lords | Judgment | Law | CaseMine. [online] Available at:
https://www.casemine.com/judgement/uk/5b46f1f82c94e0775e7ef2e4 [Accessed 25 Sep.
2019].
Smith v Land & House Property Corp (1884) 28 Ch D 7. E-lawresources.co.uk. (2019). Smith v
Land and House Property Corp. [online] Available at: http://www.e-lawresources.co.uk/Smith-v-
Land-and-House-Property-Corp.php [Accessed 25 Sep. 2019].
Southern Cross Computer Systems Pty Ltd v Palmer (No 2) [2017] VSC 460.
Holdingredlich.com. (2019). Four year restraint found to be reasonable after sale of
employee shares. [online] Available at: https://www.holdingredlich.com/blog/four-year-
restraint-found-to-be-reasonable-after-sale-of-employee-shares [Accessed 25 Sep. 2019].
The Wagon Mound no 1 [1961] AC 388. E-lawresources.co.uk. (2019). The Wagon Mound no 1.
[online] Available at: http://www.e-lawresources.co.uk/The-Wagon-Mound-no-1.php
[Accessed 25 Sep. 2019].
Vaughan v Menlove (1837) 3 Bing. N.C. 467. E-lawresources.co.uk. (2019). Vaughan v
Menlove. [online] Available at: http://www.e-lawresources.co.uk/Vaughan-v-
Menlove.php [Accessed 25 Sep. 2019].

13
AUSTRALIAN COMMERCIAL LAW