The Principles of the Business Law - Assignment

Business Law
Business Law

Executive Summary
This report evaluated two case studies based on the principles of the business law. The first
case study deals with the principle of misrepresentation in a contract due to which a contract
becomes voidable. In this case, Jessica made an untrue statement relied on which Angela
entered into a legal contract with her. Therefore, the contract between the parties is voidable,
and Angela can claim for an appropriate remedy in the court to compensate her damages. The
second case deals regarding the principle of negligence which provides that parties can claim
for damages in case a duty of care is breached. In this case, the cola manufacturer owed a
duty of care towards its customers, and it failed to fulfil such duties due to which Andy
suffered serious injuries. Therefore, the Smith family can claim for damages for the loss
suffered by them for the cola manufacturer.
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Table of Contents
Introduction................................................................................................................................3
Case Study 1...............................................................................................................................4
Case study 2...............................................................................................................................6
Conclusion..................................................................................................................................9
References................................................................................................................................10
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Introduction
A contract forms a legal relationship between parties due to which they are required to
perform their contractual obligations and parties can legally enforce each other to comply
with their legal duties as provided in the contract. Therefore, it is necessary that a valid
contract is formed between the parties, and they cannot use illegal ways to form a contract. A
contract formed based on misrepresentation, undue influence or duress is considered as void
or voidable, and parties cannot force each other to perform its terms legally. On the other
hand, people are required to comply with different duties imposed by the law, and they are
expected to take the standard of care while performing any activity which could cause
damages to another party. A suit to negligence can be filed in case of breach of duty. In this
report, two case studies will be discussed based on these principles. This report will analyse
related legislation and case laws in order to understand each topic.
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Case Study 1
Key issue
The main issue in this case study is whether a suit for misrepresentation can be filed by
Angela against Jessica given that she gave her wrong information about her business.
Relevant legislation and case laws
Contracts form a legal relationship between parties based on which parties have both rights
and duties as given by the terms of the contract. They create a binding legal relationship
which is mandatory to comply by its parties, and people misuse them to gain unfair
advantages. In order to avoid these issues, there are a number of vitiating factors presence of
which resulted in making a contract void or voidable. A contract which is formed on a
vitiating factor cannot bind its parties into a legal contract; vitiating factors include mistake,
duress, illegal contracts against public policy, undue influence and misrepresentation. In case
a contract is formed based on misrepresentation, the contract becomes voidable, and the
contract relationship exists based on the will of representee (Sneddon, Bigwood and
Ellinghaus, 2012). It is referred to a false statement which is made by a party in order to
induce or attack another person into forming a legal relationship. During the course of
negotiation, the statements made by parties are considered as representations, and a suit for
misrepresentation can be filed in case such statements turn out to be false.
Misrepresentations are categorised into three categories which include innocent, negligent
and fraudulent misrepresentation. For filing a suit for negligence, certain criteria must be
satisfied by the parties to the contract based on which an actionable claim can be filed.
Firstly, there must be an untrue or false statement made by a party to a contract (Bisset v
Wilkinson [1927] AC 177) (Graw, 2012). It is necessary that such statement such be
regarding a fact or a law rather than a personal opinion regarding any future events or
estimations made by the parties (Esso Petroleum v Mardon [1976] QB 801 and Archer v
Brown [1985] QB 401). In common law, the rule of Parol Evidence Rule (PER) is used by
the court that was given in Goss v Lord Nugent [1833] 5 B & AD 58 which provides that if a
written contract is formed based on discussion between the parties then as per the rule of
PER, the discussion are considered as a party of the contract (De Lassalle v Guildford [1901]
2 KB 2015) (Giancaspro, 2017).
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Another key element of misrepresentation is that the party must be in a position to know
about the facts represented by him (Smith v Land & House Property Corp [1884] 28 Ch D 7).
An actionable claim can only be filed by the parties if the party had entered into the contract
based on reliance on the untrue statement made by representee (Horsfall v Thomas [1862] 1
H&C 90). However, if the representee checks the facts then it is not considered that he/she
has relied on such statement (Attwood v Small [1838] UKHL J60). On the other hand, if an
opportunity for checking the facts is given however the facts are not checked by the
representee, then a claim for misrepresentation can be filed by the party (Redgrave v Hurd
[1881] 20 Ch D 1 and Hayward v Zurich Insurance Company PLC CA [2015] EWCA Civ
327). Based on the type of misrepresentation, different remedies are available for parties
which include rescission, damages, and repudiation (Waddams, 2013).
Application
Jessica made a false statement regarding his business by stating that the business made an
annual profit of $10,000. This statement is a part of the contract (Goss v Lord Nugent), and a
claim for misrepresentation can be formed because Angela relied on such statement (Horsfall
v Thomas). Jessica could argue that she gives the accounts to Angela for checking the validity
of facts, and she did check her records of 2007 based on which a case of misrepresentation
cannot be formed. However, Angela only checked one year of profits because she had trust in
the statement of Jessica based on which an actionable claim for misrepresentation can be filed
(Redgrave v Hurd and Hayward v Zurich Insurance Company PLC CA). Angela can claim
for damages and rescission of the contract.
Conclusion
Angela can file a suit for misrepresentation against Jessica and demand appropriate remedies.
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Case study 2
Key issue
The issue is whether the Smith family can claim for damages from Acme Cola Company Ltd
based on a suit of negligence.
Relevant legislation and case laws
If a party is required by the law to take appropriate care while performing a specific act and
such party failed to take care which resulted in causing damages to another, then a suit for
negligence can be filled. Donoghue v Stevenson [1932] AC 562 is an important case in which
the court provided the principle for negligence. A person becomes seriously ill after drinking
from a bottle in which remains of a decomposed snail were present. The party claim for
damages based on the fact that the defendant has breached the duty of case. The court
provided its judgement based on the “neighbour test” which provides that negligence occurs
in case parties have a relationship of proximity and the damages were foreseeable (Stewart
and Stuhmcke, 2009). In Caparo Industries PLC v Dickman [1990] 2 AC 605 case, the
‘Caparo test’ was used by the court for determining whether the party owed a duty of care.
The House of Lords held that there are three principles given under the Caparo test based on
which the court evaluates the duty of care of a party. The three elements include
foreseeability of damage, proximity relationship and when it is just and fair to impose such
duty (Johnson v Gore Wood and Co (A Firm) ChD [2002] EWHC 776 Ch) (Harris, 2013).
There are different relationships in which a duty of care exists, and failure to comply with
such duty gives rise to a suit of negligence. For example, in Miller v Miller [2011] HCA 9
case it was held that drivers have a duty of care. Furthermore, occupiers have a duty of care
towards the visitors in case their premise is dangerous (Hackshaw v Shaw [1984] HCA 84).
Similarly, manufacture owes a duty to care to ensure that the packaging of the good is correct
which does not cause damage to another party (Adelaide Chemical and Fertilizer Co Ltd v
Carlyle [1940] HCA 44) (Latimer, 2011). Moreover, the common law provides different
provisions in order to protect customers from the negligence of manufacturers or shopkeepers
that owed a duty of care to ensure that their goods are not hazardous. The Competition and
Consumer Act 2010 (Cth) provides provisions regarding the protection of customers from
negligent act of manufactures or shopkeepers. Section 18 provides that a party must not
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engage in any conduct which is misleading or deceptive or which is likely to mislead or
deceive another party. While dealing with customers, suppliers are required to ensure that
they provide right supply to customers (section 54).
Section 62 deals with a duty of care which is owned by a supplier or manufacturer regarding
guarantee of quality of goods. For establishing a suit for negligence, certain elements are
required to be fulfilled unless the parties can not claim a suit for damages. Firstly, it is
necessary to ensure by the court that a breach of duty has occurred by a party due to the
failure of compliance with a standard of care. The court uses an objective test to evaluate
whether the party breaches a duty of care (Vaughan v Menlove [1837] 3 Bing N.C. 467)
(Keating, 2016). The element of causation is important is a negligence case which is
established by the court based on the ‘but for’ test which was given in Barnett v Chelsea &
Kensington Hospital [1969] 1 QB 428. The test provides that the damage suffered by the
innocent party had not occurred, but for the actions of the defendant, the injury has occurred.
Furthermore, the damages must not be too remote or else the party can not file a claim for
negligence. It is necessary that the damages which are suffered by a party are the result of
direct consequence of the failure to maintain a standard of care by a party (Lindeman Ltd v
Colvin [1946] HCA 35).
Application
The injury suffered by Andy is caused due to the remains of the cockroach which were
present in the cola bottle. The remains were there because Acme Cola Company Ltd failed to
maintain a standard of care while packaging its products. As given in the judgement of
Adelaide Chemical and Fertilizer Co Ltd v Carlyle case, a manufacturer has a duty of care
regarding packaging of a good based on which it can be stated that the cola manufacturer
owed a duty of care towards its customers and the Smith family can file a claim for damages
against the company. There is proximity to the relationship, and the harm was foreseeable by
the cola manufacturer. Furthermore, it is just and fair to impose such duty for the protection
of the customers. The Competition and Consumer Act 2010 (Cth) also provides provisions
regarding maintenance of a duty of care by a manufacturer regarding the quality of goods
(section 62). Based on these facts, the Smith family can claim for damages from the cola
manufacturer because the injury suffered by Andy is caused due to the direct consequence of
the actions of the cola manufacturer.
Conclusion
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A claim for damages caused due of negligence can be filed by the Smith family against the
cola manufacturer because the company filed to maintain its duty of care towards customers
which resulted in causing injury to Andy.
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Conclusion
To conclude, in case parties of a contract misrepresent certain facts or information, then the
contract becomes voidable which can be set aside by the innocent party. On the other hand, a
claim for negligence can be made by the party if the defendant failed to maintain a standard
of care which is expected by the law which resulted in causing damages. In the first case
study, Jessica made a false representation regarding her business based on which she and
Angela entered into a contract. Although Jessica gives an opportunity to Angela to check the
validity of her statement, however, Angela did not fully check the representation due to her
reliance on Jessica’s statement. Therefore, a claim for misrepresentation can be filed by
Angela, and she can demand remedies such as rescission or damages for the losses suffered
by her. In the second case study, Acme Cola Company Ltd has failed to maintain a standard
of care which is required to ensure by the firm in order to protect its customers from harm.
Based on which, the Smith family can claim damages from the cola manufacturer for the
losses suffered by them due to its negligence.
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References
Adelaide Chemical and Fertilizer Co Ltd v Carlyle [1940] HCA 44
Archer v Brown [1985] QB 401
Attwood v Small [1838] UKHL J60
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Bisset v Wilkinson [1927] AC 177
Caparo Industries PLC v Dickman [1990] 2 AC 605
Competition and Consumer Act 2010 (Cth)
De Lassalle v Guildford [1901] 2 KB 2015
Donoghue v Stevenson [1932] AC 562
Esso Petroleum v Mardon [1976] QB 801
Giancaspro, M. (2017) Do Workplace Policies Form Part of Employment Contracts? A
Working Guide and Advice for Employers. SSRN.
Goss v Lord Nugent [1833] 5 B & AD 58
Graw, S. (2012) An introduction to the law of contract. Toronto: Thomson Reuters.
Hackshaw v Shaw [1984] HCA 84
Harris, P. (2013) Corporate tax law: Structure, policy and practice. Cambridge: Cambridge
University Press.
Hayward v Zurich Insurance Company PLC CA [2015] EWCA Civ 327
Horsfall v Thomas [1862] 1 H&C 90
Johnson v Gore Wood and Co (A Firm) ChD [2002] WEHC 776 Ch
Keating, G. (2016) Are Corporations Responsible Agents. Jotwell: J. Things We Like, p.344.
Latimer, P. (2011) Australian Business Law 2012. Sydney: CCH Australia Limited.
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Lindeman Ltd v Colvin [1946] HCA 35
Miller v Miller [2011] HCA 9
Redgrave v Hurd [1881] 20 Ch D 1
Smith v Land & House Property Corp [1884] 28 Ch D 7
Sneddon, N.C., Bigwood, R. and Ellinghaus, M.P. (2012) Cheshire & Fifoot: Law of
Contract. England: Oxford University Press.
Stewart, P.E. and Stuhmcke, A.G. (2009) Australian principles of tort law. Annandale: The
Federation Press.
Vaughan v Menlove [1837] 3 Bing N.C. 467
Waddams, S. (2013) Mistake in Assumptions. Osgoode Hall LJ, 51, p.749.
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