Commercial Law Assignment: Rule of Recognition and Contracts

This assignment delves into Australian commercial law, examining the rule of recognition as articulated by Hart and its application within the Australian legal system, contrasting it with the UK's approach. It analyzes a case involving a contract for the sale of a fruit and vegetable store, focusing on misrepresentation, particularly concerning a van and loader, and its impact on contract validity. The assignment also explores remedies for breach of contract, referencing the Sale of Goods Act 1954 and relevant case law. The analysis includes discussions on implied conditions, fraudulent misrepresentation, and the implications of Angelo's actions, leading to the conclusion that he violated his duties as a supplier and the contract was void due to misrepresentation. It also includes the importance of the right to sell the property and the remedies available to the buyer. The assignment references key legal concepts and case precedents to support its arguments.

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

1AUSTRALIAN COMMERCIAL LAW
Part A
1 (b)
There have been several theories and provisions which have been provided in relation to the
functioning of the legal systems. One of such rules is known as the rule of recognition and has
been provided through Hart1. There are primarily three requirements which if present in a rule
provides them the eligibility to become the law. Firstly the rule has to impose validity in relation
to all things which are present with respect to the legal system, the rule consists of the test
through which valid legal results can be obtained and the rule unifies all provisions present and
applied within a particular legal system. Through such requirements, Hart signifies that a three-
tier system identified above has to be used in legal systems2. The system generally moves from
bottom to the top where the flow is to judicial precedents from states and to customs from
judicial systems. The primary rules are rules which if breached may lead to legal punishment
such as punishment for committing theft on the other had secondary rules are rules which are in
place to address the problems of the primary rules such as the rules of interpretation. The hart
legal system is based on three secondary rules which are rules of change, the rule of recognition
and rule of adjudication.
The Australian legal system has a similar approach as compared to the approach taken in the UK
legal system. The legal system of UK uses a three-tier system. This signifies that the rule of
recognition is to a large extent applicable in the legal system of UK. In Australia, on the other
hand, a two-tier system is used as it has a federal system of governance3. These tiers are divided
1Bix, Brian. "On the dividing line between natural law theory and legal positivism." Law and Morality. Routledge,
2017. 49-60.
2Green, Michael S. "A Puzzle About Hart’s Theory of Internal Legal Statements." Pragmatics and Law. Springer,
Cham, 2017. 195-221.
3Schauer, Frederick. "The Path-Dependence of Legal Positivism." Virginia Law Review (2015): 957-976.

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into the system of the Commonwealth government and the state legal system. Unlike that of UK,
the constitution of Australia is codified and is known as Commonwealth of Australia
Constitution Act. The constitution provided guidelines in form of legal principles which get out
the way in which the relationship between the state and the federal government is managed. In
addition to statutory provisions, the Australian legal system is also based on the principles of
common law which is to be taken into consideration for the purpose addressing legal issue.
However, Australia follows a policy that where a contradiction between statues and the common
law takes place common law will be superseded by statute law. Thus it can be therefore
evidently stated that in Australia also the rule of recognition as laid down by Hart is followed.
The position is further provided support through the fact that the country has a constitution
through which it is specifically set out that what is to be considered as law in the country and
what is not to be a part of the law. The constitution also defines provisions which set out rules
and regulations in relation to the relationship between state and federal government and defined
legislative powers which develop statutory laws. Thus it imposes validity in relation to all things
which are present with respect to the legal system, the rule consists of the test through which
valid legal results can be obtained and the rule unifies all provisions present and applied within a
particular legal system. Therefore it can be evidently stated that the three-tier legal system which
has been provided by Hart is incorporated into the Australian legal system as it recognizes laws
via the constitution, incorporates principles of common law via incorporating customary law and
judicial decisions. Hence, the Australian legal system can be compared to the UK legal system
which has Hart's three-tier legal system as its basis. The mere difference which the legal systems
have is that Australian legal system is codified and on the other hand UK's legal system is
unwritten4. The system followed in the UK provided additional scope in relation to common law
4McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

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interpretation while defining and regulating constitutional provisions. The use of common law in
Australia is thus less as compared to that in the UK.
Part B
Question 2
Issue
The issue here is that a contract was signed by Barry and Angelo to purchase a store of fruits and
vegetables. There were several terms that were provided in this contract but there was
misrepresentation of the facts that were provided in the contract.
Rule
The provisions of the Sale of Goods Act 1954 deal with those transactions on which the
Australian Consumer Law 2010 is not applicable. In the given situation ACL is not applicable as
the transaction is worth more than $40000.
The validity of contract can only be present only if the essentials like agreement, consideration
and the aim to form binding relationships in a legal way are present. Australia includes some
principles of common law in their system like that of United Kingdom.
Here, the word agreement means the contract made between two or more parties that are bound
legally. In short, it is also known as the existence of offer and acceptance.This also states that the
approval that is acquired that is the acceptance of the offer must be theright consent. A true
consent is obtained if these fraud, misrepresentation, coercion or undue influence are not present.

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Agreement that forms the contract of sale should not be breached. If these terms are obtained
then this contract would be mentioned as void contract and the parties will be assured by the
legal terms of the contract. The court has the right to order specific performance in certain cases.
According to case named AGC (Advances) Ltd v McWhirter Supreme Court of New South Wales
(1977) 1 BLR 9454 it has been mentioned that an offer was placed but it was not accepted5.
However, a counteroffer was made in the case Hyde v Wrench (1840) Beav 334, after the
rejection of the first offer, that offer cannot be restored and it has to be accepted by the person
who made the offer6.
The word misrepresentation is a wrongful representation of the facts that is not stated in the
contracted but is represented to the party. There are some elements of misrepresentation that
makes a contract void are the information that are presented as the false statement and that
statement must comprisethe consent for contract. These elements form misrepresentation and
make a contract void. There are manykinds of misrepresentation and they are a mistake,
fraudulent or negligent. Fraudulent misrepresentation arises if an individual who makes the
statement knows that statement is untrue but he still says to be true. This kind of representation
indicates the acceptance of the offer. As per the case Henjo Investments v Collins Marrickville;
[1988] FCA 40; (1988) 39 FCR 546; (1988) 79 ALR 837, it has been stated that the defendant
made a fraudulent statement in the contract and the result was that the plaintiff had to remove the
contract. The judgment made by the court was that fraudulent misrepresentation has been made
and the plaintiff carries the right to withdraw the contract. The similar thing happened in the case
named Smith v Hughes (1871) LR 6 QB 597.
5 AGC (Advances) Ltd v McWhirter Supreme Court of New South Wales (1977) 1 BLR 9454
6 Hyde v Wrench (1840) Beav 334
7 Henjo Investments v Collins Marrickville; [1988] FCA 40; (1988) 39 FCR 546; (1988) 79 ALR 83

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There are some remedies whereby acceptance was acquired by fraudulent representation in case
of contract and they are withdrawal of the contract as mention in the case Immer (No. 145) Pty
Ltd v The Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR
26; (1993) 112 ALR 6098. The word indemnity that was mentioned in the case Whittington v
Seale-Hayne [1900] 82 LT 499 and damages as stated in Luna Park (NSW) Ltd v Tramways
Advertising Pty Lt (1938) 61 CLR 2810
Application
In the given situation ACL is not applicable as the transaction is worth more than $40000.
Angelo placed an offer of selling the store and this offer can be accepted by any such person who
is willing to buy it. The same thing has been stated in the judgment of the case of AGC Ltd v
McWhirter Supreme Court of New South Wales. Further, there was a counter-offer that was
placed by Barry and the offer that was given by Angelo got cancelled for the reason that of the
counter offer. This was described in the case of Hyde v Wrench. The selling value of the shop
was the only thing that differed from the original offer. However, Angelo accepted the counter-
offer but the terms and conditions in the contract remains the same in exception for the price.
Angelo has the same business as that of the vegetable and fruit store and he knew about the
monthly expenses and profit of this business. He also knew that there were competitors present.
After some days some people came and repossessed the van saying that it was already on lease.
These misrepresentation convinced Barry to make a counter offer. The contract is said to be the
void contract as there were fraudulent misrepresentation about the van and the loader. As
8 Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182
CLR 26; (1993) 112 ALR 609
9 Whittington v Seale-Hayne [1900] 82 LT 49
10 Luna Park (NSW) Ltd v Tramways Advertising Pty Lt (1938) 61 CLR 28

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mentioned by Angelo about the loader that it was totally fine but it did not came out to be like
that. Instead the loader was broken down and rather than replacing it there was no other option.
Conclusion
Therefore Angelo has violated his duties as the supplier which the made the contract a void
contract. The statements made by Angelo before the contract was made were false and this led to
misrepresentation which is a contract vitiating factor.
Question 3
Issue
The main determination of this issue is to get remedies in case of contravention of contract as
this contract has created several disputes towards them.
Rule
As per the section 19 of the Sale of Goods Act 1954, there was an implied condition that rested
down on the supplier with respect to quality and fitness of the items. The definition of implied
term is explained as a term of a contract that is not an expressed term but it states that there was
not any written or verbal comment in among the parties in relation to include such terms as they
are obvious and necessary to take them in contract.
There are many options that are available to the buyer when there is the breach of contract and
those are defined in part 6 of this act deals with the actions for breaking the contract11. The
remedies for non-delivery has been mentioned in section 54 and it also offers with the damages.
11

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As per the section 56, breach of warranty is dealt by them and section 57 provides with interests
and special damages and gives the recovery of the paid amount if not delivered.
As per the case Car & Universal Finance v Caldwell [1965] 1 QB 525 it has been said the
possession of the car will not be transferred and if there is any sale then the physical possession
of the car will not be transferred12. A person can only transfer the property’s possession to any
other individual if he has the right of ownership over that property. It cannot be referred to as a
proper sale and therefore there will be no effect. It is not obligatory that fraudulent
misrepresentation leads to the withdrawal of the contract. As mentioned in the case Bisset v
Wilkinson & Anor [1926] UKPC 1 the court may allow damages for the fraudulent
misrepresentation13.
Application
Angelo knows that there was no right provided to him to sell the car as the car was on lease. A
clear statement has been incorporated in the contract with relation tovan and loader. The
situation makes it evident that the van has been part for the purpose in business. Through the
previous situation it was seen that Barry was dependent on Angelo for the quality of the loader
and truck. But this dependency created problems for Barry which led to the breach of contract by
Angelo. A judgement was held in the court for the case of Royscot Trust Ltd v Rogerson & Anor
and it was followed. It was said that the ownership of the car was not carried by Angelo and the
delivery of that possession cannot be made. Thus it was stated that no delivery was made
regarding the van because the van was on lease. As the terms were mentioned in the contract
12Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases and materials.
Wolters Kluwer Law & Business, 2016.
13 Bisset v Wilkinson & Anor [1926] UKPC 1

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Barry would demand for the charges for not sending the van and breaking the contract. The
main usage of that loader is to carry the load onto the van. However, it was held that it was
damaged and the main requirement is to get it repaired but as per section 19(1) it leads to the
breach of warranty. Barry has the right to claim damages and the provisions of the section 56 of
the act will be drawn by the violation of warranty. Barry also carries the right to claim for the
amount he has paid and the interest of the paid amount. There are several remedies that have
been provided in the part 6, by which Barry can claim for the damages that have been caused to
him.
Conclusion
Therefore it can be concluded that there are various remedies that have been provided to Barry to
claim for the damages that have been caused to him by Angelo after breaching the contract. The
contract had been breached because of the violation of the implied terms of title and quality of
goods as per SOGA and common law.
Part C
 Hi Barry, I will be suggesting you with some recommendations regarding the contractual
problems that you have faced.
 I have come to know that you have signed a contract with Angelo in regards with the
purchase of the fruit and vegetable store and the contract contains the term that it
included a loader and a delivery van.
 You should know that Australia includes some principles of common law in their system
of law like that of United Kingdom.

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 A contract can only be valid only if the essentials like agreement, consideration and the
aim to form binding relationships in a legal way are present.
 The agreement that is made must not be breached. In this contract, there was a
misrepresentation of facts that you must know.
 There are some elements of misrepresentation that makes a contract void are the facts that
are presented as the false statement and that statement must contain consent for the
contract.
 There are various types of misrepresentation that must be in your knowledge are the
mistake, fraud or negligent.
 Fraudulent misrepresentation arises if the person who makes the statement knows that
statement is untrue but he still says to be correct.
 It must be known to you that there was only one term that differed and that was the sale
price and therefore the offer was accepted by Angelo in the term that was set before and
they still remain in force but excluding the price.
 I got to know that you made various correspondences
 It also came to my knowledge that there was also fraudulent misrepresentation about the
loader and the van, therefore it made the contract avoid one.
 You can challenge whether the contract is legal or not by taking the advantage of the
promises that were made by Angelo.
 I got to know that Angelo and you signed a contract which gave rise to many disputes.
 You can get the remedies in case of breach of contract. A breach of contract means
breaking the terms that are mentioned in the contract.

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 You must know the fact that there are many options that are available to the buyer when
there is the breach of contract.
 There is other information that must be to your knowledge like the remedies for the non-
delivery and it also provides with the damages.
 In order to recover the amount you have paid, you must get this in your mind that breach
of warranty. Breach of warranty means the seller or the supplier fails to fulfill the terms
of the promise made by him.
 .You can demand damages for not delivering the van as mentioned in the contract.
 It must be known to you that you can claim against Angelo for not delivering the van.
 All these will help you get back the damages that you have faced because of this contract.
 You can also claim damages in relation to the defective loader which has been provided
under the contract as implied terms in relation to its quality have been breached.

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References
AGC (Advances) Ltd v McWhirter Supreme Court of New South Wales (1977) 1 BLR 9454
Bisset v Wilkinson &Anor [1926] UKPC 1 (20 July 1926)
Bix, Brian. "On the dividing line between natural law theory and legal positivism." Law and
Morality. Routledge, 2017. 49-60.
Car & Universal Finance v Caldwell [1965] 1 QB 525
Green, Michael S. "A Puzzle About Hart’s Theory of Internal Legal Statements." Pragmatics and
Law. Springer, Cham, 2017. 195-221.
Henjo Investments v Collins Marrickville; [1988] FCA 40; (1988) 39 FCR 546; (1988) 79 ALR
83
Hyde v Wrench (1840) Beav 334
Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) [1993] HCA
27; (1993) 182 CLR 26; (1993) 112 ALR 609; (1993) 67 ALJR 537
Issa, Mustafa Rashid. "Damages and Compensation in Case of Breach of Contract." International
Journal of Social Science Research 3.1 (2015): 190-201.
Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases
and materials. Wolters Kluwer Law & Business, 2016.
Luna Park (NSW) Ltd v Tramways Advertising Pty Lt (1938) 61 CLR 28