Australian Commercial Law Case Study 2022
Added on 2022-09-17
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Running head: AUSTRALIAN COMMERCIAL LAW
AUSTRALIAN COMMERCIAL LAW
Name of the Student
Name of the University
Author Note
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.
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.
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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
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.
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.
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