Australian Commercial Law Assignment: LAWS20058, Term 3, 2019

This document presents a comprehensive solution to an Australian Commercial Law assignment, addressing key legal concepts and principles. Part A analyzes a contract law scenario, determining the existence of a legally enforceable contract between an employer and employee, considering offer, acceptance, and consideration. It references relevant case laws like R v Clarke, Australian Woollen Mills, and Pao On. Part B explores potential remedies for breach of contract, including damages and equitable remedies, referencing Robinson v Harman. Part C examines the application of Australian Consumer Law (ACL) to a case involving deceptive conduct, consumer guarantees, and product defects, referencing sections 18, 54 of the ACL, and ACCC remedies. Finally, Part C also considers a negligence claim against an accountant, focusing on duty of care principles and referencing Donoghue v Stevenson and Caparo Industries PLC v Dickman.

Running head: AUSTRALIAN COMMERCIAL LAW
AUSTRALIAN COMMERCIAL LAW
Name of the student:
Name of the university:
Author’s note:

1AUSTRALIAN COMMERCIAL LAW
Part A
Response to question 1
Issue
The issues involved in this case whether there is a contract between the employer, Tom
and the employee, Wing.
Rules
In this given case, the provisions of Australian Contract Law have to apply for analysing
the relationship between Tom and Wing. There are several case laws to analysis this case
regarding the contractual relationship between them, such as R vs Clarke 1927, Australian
Woollen Mills Pty. Ltd. Vs The Commonwealth 1954, Pao On vs Lau Yiu Long 1979, Roscorla
vs Thomas 1842 and Helmos Enterprise Pty. Ltd vs Jaylor Pty. Ltd 2005.
Application
In the scenario of this case, an employer, Tom has employed a brilliant IT programmer,
Wing. The ideas of programming of Wing have helped in commercial success in his business
throughout the year 2019. Seeing this progress, Jerry’s computer, a competitor of Tom, has
approached Wing to join in his company with an excellent salary. With a bona fide intention,
Wing has informed everything to Tom. Therefore, Tom also offers Wing a double amount of his
recent salary from the 1st day of July 2020 and makes him a partner of his company. Here, it is to
be discussed whether there is an existence of a legally enforceable contract between them or not.
In the case, R vs Clarke 1927, the High Court of Australia has clarified that in the existence of a
contract between the parties, there should be an offer and acceptance 1. In this given case, there is
1 R v Clarke [1927] HCA 47, (1927) 40 CLR 227, High Court

2AUSTRALIAN COMMERCIAL LAW
an offer from Tom, who is an offeror and acceptance from Wing, who is an offeree here. At the
time of hiring, Tom has offered a salary for the employment of Wing, which forms here as a
consideration of the contract. This term of consideration has decided in the case of Australian
Woollen Mills Pty. Ltd. Vs The Commonwealth 1954 as a second necessary element of the
formation of a contract 2. In this given problem, Tom has promised a double salary and a position
of partner in his company, which is a reasonable consideration in the part of him. Accordingly,
Wing has guaranteed not to leave Tom’s company. Therefore, there is an existence of the
element of consideration on the part of both Parties. It can be mentioned in this context that, this
consideration on the part of Tom is past consideration. In the case, Roscorla vs Thomas 1842 it
was decided that usually, the past consideration is not adequate consideration for a contract 3.
However, this judgment has been withheld by the Privy Council in the opinion of Pao On vs
Lau Yiu Long 1979 4. In that case, the Lordships of Privy Council held that past consideration is
a reasonable consideration where the offeree has performed the act at the request of the offeror
and it is implied that the offeree would be got the reward for the performance of that act. It is
relevant in this case to form a legal relationship between the employer and the employee. In the
case of Helmos Enterprise Pty. Ltd vs Jaylor Pty. Ltd 2005, it is held that the intention requires
a commercial arrangement to create a legal relationship between the parties to the contract and
2 Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20, (1954)
92 CLR 424, High Court.
3 Roscorla v Thomas [1842] EWHC J74, (1842) 3 QB 234, High Court (England and Wales).
4 Pao On v Lau Yiu Long [1979] UKPC 17, [1980] AC 614

3AUSTRALIAN COMMERCIAL LAW
affects legal consequences 5. In the Wing’s case, there is a commercial arrangement between the
employer, Tom and the employee, Wing.
Conclusion
It can be concluded in this case that there is a contractual relationship between Tom and
Wing. Therefore, Wing is entitled to get the remedies from Tom for the breach of contract.
Response to question 2
Issue
The issues involved in this case that what the possible remedies available if Wing gets
success in legal action against Tom for breach of contract.
Rule
In the mentioned case in the question, the Australian Contract Law and the case of
Robinson vs Harman 1848 will apply here will apply to avail the remedies for breach of contract.
Application
In the scenario of the given case, there is a breach of contract on the part of the employer
as he fails to keep the promise for increasing Wing’s salary and position of the employment as a
partner of his business. If Wing files a suit in the Court of Common Law and gets success, then
he is entitled to obtain the remedies from Tom for breach of contract. The employee, Wing is
eligible to get damages which is the common Law remedies available for the breach of contract.
In the case of Robinson vs Harman 1848, it is held that the innocent party is in a position to
5 Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235, Court of Appeal (NSW).

4AUSTRALIAN COMMERCIAL LAW
assess the value of the cost of the remedy 6. The court of law will use the more appropriate
method for the valuation of the remedy. He is also entitled to equitable remedies such as specific
performance which directs Tom to perform the contract because the damages may not provide
adequate compensation relating to the contract.
Conclusion
Therefore, it can be concluded that Wing can avail the compensation for the employer,
Tom, as well as the equitable remedies for the breach of contract.
Part B
Response to the question
Issue
The issues involved in this case which actions can Wing take against the Lies IT Pty Ltd
under the Australian Consumer Law.
Rules
Schedule 2 of Competition and Consumer Act 2010 deals with unfair trade practices
which include deceptive conduct, conditions and warranties in several consumer transactions,
product safety and liability. Section 18 of the Australian Consumer Law (ACL) deals with false
and misleading conduct. Division 3 of part 3-1 of this Act7 prohibits the bait advertisements in
business transactions. Division 1 part 3-2 of this Act8 deals with the consumer guarantee.
6 Robinson vs Harman (1848) 1Ex-Rep 850, 154ER 363
7 Australian Consumer Law 2011 (Cth)
8 Australian Consumer Law 2011 (Cth)

5AUSTRALIAN COMMERCIAL LAW
Chapter 4 of this Act9 describes that misleading or fraudulent conduct carries out by any
company can be prosecuted by the state. Australian Competition and Consumer Commission
(ACCC) allows remedies for the breach of consumer guarantees.
Application
In this case, Wing, a consumer of Lies IT Pty Ltd, has bought a new computer, a scanner
and a laser printer form this company for $10,000. The company demonstrates an advertisement
which states that all products of this company consist of unconditional guarantee for 12 months
with a full refund with the request of the consumer. Unfortunately, some defectives arise in that
new computer. The company refuses to repair the equipment as well as return the money to
Wing. There is deceptive conduct appears in the conduct of the company. Under section 18 of
this Act10, the misleading manner is one of the essential parts of the consumer and it allows the
individuals as well as ACCC to take steps against the misleading and deceptive conduct of the
companies. Chapter 4 of this Act11 also gives power to the State to prosecute the company for
misleading manner. The company, in this case, displays a lure advertisement and makes a
misrepresentation regarding its advertisement which is strictly prohibited by Division 3 of part 3-
1 of this Act12. Division 1 of Part 3-2 of this Act13 suggests the consumer guarantees into such
contracts. In this case, the Lies IT company has guaranteed the consumers to repair or refund
money for the defective products which have been bought within 12 months or refund the
money. Section 54 of this Act14 describes that the implied conditions such as the merchantable
9 Australian Consumer Law 2011 (Cth)
10 Australian Consumer Law 2011 (Cth)
11 Australian Consumer Law 2011 (Cth)
12 Australian Consumer Law 2011 (Cth)
13 Australian Consumer Law 2011 (Cth)
14 Australian Consumer Law 2011 (Cth)

6AUSTRALIAN COMMERCIAL LAW
quality of the goods are mandatory. In this case, the company has sold a computer which
becomes defective within 12 months. Therefore, the merchantable quality of the computer is in
imperfect nature and the company is liable for repairing it or refund money to its consumer,
Wing. The most essential of these references is that the consumer is expected to be of
satisfactory quality. This Australian Consumer Law has been breached if the good or service has
been failed to reach the necessary level of quality such as the price of the commodities or
services, malfunctioning or disrupted goods or do not do what it should do. In this context,
ACCC allows remedies such as compensations which include the cost of the computer as well as
for other expenses such as loss of productivity or time. It is hard for the law to figure out the
monetary value of damages as it varies from case to case. The consumer, Wing can claim a
remedy from the company as the product does not meet the consumer guarantee. The remedies
should put him in a situation he would have been in if the services had done what the company is
supposed to do under the consumer guarantee.
Conclusion
Therefore, it can be concluded that in this case, there is a breach of the consumer
guarantee form the part of the company and Wing entitles to get remedies from the company.
Part C
Response to the question
Issue
The issues involved in this case whether Wing could proceed legal action in negligence
against his employee, Betty.

7AUSTRALIAN COMMERCIAL LAW
Rules
The legal principles relating to a duty of care and negligence, which has envisaged in the
case of Donoghue vs Stevenson 1932 will apply in this given case. There is a leading case in the
tort law about negligence on the test for duty of care in Caparo Industries PLC vs Dickman 1990.
The judgment of the case Ansell vs Waterhouse 1817 will apply in this case.
Application
The scenario of the case mentioned in this question is relating to the negligence in the
duty of care in a business transaction. In this case, Wing wants to buy a business of Sydney
Computer to obtain his income. Investigating the financial and trading background of the
company, Betty, his accountant, advises him to buy that. Unfortunately, Betty misapprehends the
accounts of the trade of that company and makes a severe accounting fault. Due to the poor
financial condition, the business has failed and Wing has lost the money deposited in that
business. There is the negligence of duty of care on the part of Betty, the accountant of Wing. In
the case of Ansell vs Waterhouse 1817, it is established that the legal liability can arise for an act
or omission, which contrasts the duties oblige by law on him or her in a particular situation15.
Applying this statement, in this case, legal liability arises on Betty for the act of misread the
accounts of the business for which Wing has suffered a severe loss. In the case, Donoghue vs
Stevenson 1932, the plaintiff has found a decomposed snail in a ginger bottle16. The House of
Lords has provided a landmark judgment in the decision of this case. According to them, the
defendants possess a legal duty of care to the plaintiff if it is not possible to identify the defects.
The defendants of that case are liable for the negligence of duty of care. Applying this judgment
15 Ansell v Waterhouse, 1817 M & S 385
16 Donoghue v Stevenson [1932] UKHL 100

8AUSTRALIAN COMMERCIAL LAW
in this case, Betty has possessed a duty of care in her act of accountancy in the business. She has
failed in her performance which is not possible for Wing to identify the defects in it. As an
accountant has to take all responsibility for the accounts, Betty also possesses an obligation or
the duty of care in the business of her employer. Therefore, Betty breaches the duty of care by an
act of negligence. In the case, Caparo Industries PLC vs Dickman 1990, the House of Lords
pursuing the decision of the Court of Appeal promulgates a ‘three-fold test’ of duty of care arises
in negligence17. These are, firstly, the harm is reasonably predictable caused by the defendant’s
conduct; secondly, there is a proximate relationship between the parties; and lastly, the liability
imposed on the defendant must be just, fair and reasonable. These three-fold tests will apply in
the given case study. The harm has led by the conduct of Betty for the misread of the account of
the business. There is a proximate relationship between Wing and Betty as employer and
employee, and the liability, which imposed on Betty is fair, just and reasonable. Thus, there is a
negligence of duty of care on the part of Betty for the down of the business of Wing.
Conclusion
Therefore, it can be concluded that Betty makes negligence in the conduct of her
profession, which is also a breach of duty of care. The employer, Wing, is legitimate for taking
legal action against Betty for her advice to purchase the business.
17 Caparo Industries PLC v Dickman [1990] UKHL 2

9AUSTRALIAN COMMERCIAL LAW
Bibliography
Cases
Ansell v Waterhouse, 1817 M & S 385
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20, (1954)
92 CLR 424, High Court.
Caparo Industries PLC v Dickman [1990] UKHL 2
Donoghue v Stevenson [1932] UKHL 100
Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235, Court of Appeal (NSW).
Pao On v Lau Yiu Long [1979] UKPC 17, [1980] AC 614
R v Clarke [1927] HCA 47, (1927) 40 CLR 227, High Court
Robinson vs Harman (1848) 1Ex-Rep 850, 154ER 363
Roscorla v Thomas [1842] EWHC J74, (1842) 3 QB 234, High Court (England and Wales).
Legislation
Australian Consumer Law 2011 (Cth)