LAWS20058: Australian Commercial Law Term 3, 2019 - Assessment 1

This document presents a comprehensive solution to an Australian Commercial Law assignment, addressing three key issues. Part A examines contract law, focusing on the formation of a contract between Wing and Tom, and the application of promissory estoppel concerning an unfulfilled promise of a salary increase and promotion. Part B analyzes the application of the Australian Consumer Law to a defective purchase from Lies IT Pty. Ltd., specifically regarding statutory guarantees and potential remedies. Part C explores a negligence claim against Wing's accountant, Betty, concerning advice on a business purchase, applying the principles of negligence tort law. The solution incorporates relevant case law, including Walton Stores v Maher, Donoghue v Stevenson, and Thornton v Shoe Lane Parking, along with the Australian Consumer Law, to provide a detailed legal analysis and potential outcomes for each issue. The assignment concludes with a bibliography of sources used.

Australian commercial law
NAME: ________
STUDENT NUMBER: __________

Part A
Issue 1
The issue in the given case is to determine whether there was an enforceable agreement
between Wing and Tom. Thus, the equity and common law provisions would be reviewed in
relation to the formation of the contract and the promise made by the parties post the
formation of the contracts.
Rule 1
The Australian Contract Law governs the matters pertaining to the establishment of the
contract, management and operation of the contracts and the termination or the execution of
the contracts between the parties. It is essential to note that the law lays down certain
conditions that are mandatory to be complied with for an agreement to be regarded as a
contract that can be enforced in the courts1. These conditions are offer and acceptance of the
terms, intention to create legal relationships, presence of the consideration and lastly the
terms must be certain of the contract. The presence of all of the conditions will make an
agreement a contract that is enforceable in the courts2. If any of the above mentioned
conditions is not fulfilled, the agreement between the parties cannot be regarded as a valid
contract. One of the yet other legal rules is concerned with the doctrine of promissory
estoppel. The doctrine of promissory estoppel states that when the parties are already bound
by the contractual relationships and one of the parties relies on the promise or representation
made by the other party such that the former relies on it and acts accordingly, then the other
party cannot opt out from the said promise. The principle has been well pronounced in
numerous case scenarios including the Walton Stores (interstate) Ltd v Maher3. Three
conditions must be present necessarily are described below. The first condition is that the
parties must have acted in the reliance of the promise even when there is no support of the
consideration, secondly the initial contractual relationship must be valid and supported by the
consideration, and lastly a consideration must have been present in the original contract.
Application 1
The description of the application of the above stated legal principles to the given case
scenario is stated as follows. Wing and Tom shared a valid contractual relationship in the
light of the employer employee relationship. This is because both of them were associated as
1 Amanda P. Stickley, Australian torts law (LexisNexis Butterworths, 2016)
2 Clive Turner and John Trone, Australian Commercial Law 32nd edition, (Lawbook Company Australia, 2019)
3 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

employer and employee, Tom would pay remuneration in the form of the consideration and
the parties are aware of their duties and responsibilities that are certain. The initial contract
relationship additionally involved the payment of remuneration to Wing by the Tom’s
computers. In order to avoid the loss of the employee Wing, it was promised by Tom that the
salary of Wing would be doubled from 1 July 2020, to which later Tom refused. Applying the
principles of the doctrine of promissory estoppel and the pronouncement of the case Walton
Stores (interstate) Ltd v Maher, it can be stated that Wing relied on the Tom’s promise which
was in addition to the initial valid contractual relationship. Initially the contract was
supported by the presence of the consideration as well. Thus, the conditions of the promissory
estoppel are validly fulfilled.
Conclusion 1
The first conclusion is reached that a valid agreement is formed between Tom and Wing for
the payment of increased salary and the promotion of the employee as a partner, and the same
is validly enforceable in the light of the promissory estoppel rule.
Issue 2
The yet other issue is to identify the possible remedies that may be employed in the given
case study, if the valid agreement is stated to be established between the parties Wing and
Tom.
Rule 2
It has been stated in the case law of Walton Stores (interstate) Ltd v Maher that if the
promisor does not performs the promise later on, it would be inequitable for the promise for
the performance of the terms of the contract. Hence, the promissory estoppel is regarded as a
rule of equity and aims at defending the parties whose rights and position is undermined
because of the reliance being placed on the promise. The case further states for the payment
of the damages to the party whose rights has been undermined by the other party.
Application 2
The application of the above stated legal principles to the given situation leads to the
observation that the position of Wing has been undermined as he did not choose to leave the
job because of the expectation of the increased salary as promised by the employer Tom.
Conclusion 2

Since the rule of the promissory estoppel is established in the earlier parts, the possible
remedies that is available for Wing under the stated doctrine is to seek for the damages
sustained on account of the termination of the employment and non-increment of the salary.
Part B
Issue
The issue in the given case study is to identify as to what actions can be taken against the
company Lies IT Pty. Ltd under the provisions of the Australian Consumer Law.
Rules
In addition to the contract law principles, one of the significant laws in context of Australia
that governs the commercial contracts is the Australian Consumer Law. The consumer law is
aimed at defending the rights of the consumer in light of quantity, quality and others. The
section 64 of the Australian Consumer Law is comprised of statutory guarantees that must be
complied in the manufacturing and trading of goods and services to be fit for consumption4.
One of the statutory guarantees state that the products must be fit for consumption and must
adhere to the requirements of quality. It has been additionally stated that goods that are sold
must be safe and must be secure for the consumption. One of the yet another guarantees of
the consumer law states that if there are certain express and implied terms in the contract, the
same must be complied with and if the said obligation is not complied with, it would lead to
breach of the terms and the legal actions being enforced. One of the implied terms to the
contract is that the duty of care must be complied with by the seller regarding the quality and
specifications of the contract. The vitality of the statutory guarantees and the adherence to the
same were stated in the Thornton v Shoe Lane Parking5 as well, apart from others.
Application
The application of the legal rules as elaborated below in the above section to the given
situation is stated as follows. A laser printer and a computer have been purchased by Wing
through the company Lies Pty Ltd. It was mentioned in the advertising of such products that
all the products of the company fall under the guarantee in relation to the quality or damages
of the products, and the refunds would be provided within a period of 12 months in relation to
4 "Consumer Guarantees", Australian Competition And Consumer Commission (Webpage,
2020) <https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-
guarantees>
5 Thornton v Shoe Lane Parking [1971] 2 QB 163

the breach of such guarantees. The goods have been found defective that have been sold to
Wing.
In light of the statutory guarantee under the Australian Consumer Law, the computers and the
printer that has been purchased are not fit to be used by the consumers, because there is an
inherent defect in the manufacturing. Thus, the statutory guarantee of goods being fit for
consumption for customers has been breached.
Additionally it has been specifically mentioned that the products are within the ambit of
guarantees. This clause leads to the formation of an express condition of the contract between
Wing and Tom, for either repair, or payment of the damages for the defects sustained in the
products. The said guarantee and the condition has been later violated by the company Lies
Pty Ltd.
Conclusion
The rules relating to the guarantees in the Australian Consumer Law and the application of
the same to the given situation leads to the conclusion that the statutory guarantees have been
breached by the company Lies Pty Ltd in the consumer law. The action that can be taken by
Wing against the company is to sue the party for the damages on account of repair of the
products.
Part C
Issue
The third issue that has been identified is that whether a legal action can be established under
the light of negligence tort law for the advice of the business purchase and the applicable
legal principles would be recognised.
Rules
The applicable rules are related to the negligence tort law. The concept of negligence is the
vital law of tort. Under the said tort law, the negligence is defined as a conduct whereby an
individual or a party to the contract have not acted in a reasonable manner. The outcome of
such a failure is that the reasonable prudence has been overlooked and additionally there is an
omission of certain acts and care which not have been done by a reasonable prudent person. It
was stated in the case of Donoghue v Stevenson6 that certain conditions are mandatory to be
present for a successful negligence claim to be established. The first condition is that there
6 Donoghue v Stevenson [1932] UKHL 100

must be present a duty of care on the parties to the contract. There must be proximate
relationship shared between the parties to the contract for the duty of care to arise. There
must be a violation of the said duty of care by the parties to the contract and there must be
present certain damages on account of such negligent acts, and the damages must be the
direct result of the negligence of the person. Thus, in order to establish a valid claim of
negligence, all of the above mentioned conditions must be present simultaneously.
Application
The application of the rules related to the negligence to the given situation is stated as
follows. The accountant of Wing that is Betty was asked to examine the financial and other
information pertaining to the business in question so as to arrive at the decision whether the
purchase of the business is fruitful or not. The accountant Betty performed the analysis and
the enquiry exercise of the business in question and suggested for the purchase of the
business. The employer employee relationship shared between the parties is a proximate
relationship enough to establish the duty of care on the part of the accountant. The duty of
care that was present was to perform the analysis of the financial position and enquiry of the
business vitality and background with care. Wing has relied on the analysis of Betty and
bought the business. The business has shut down post the purchase and it has been later
assessed that the financial position of the business was poor and was not analysed properly by
Betty. Thus, the duty of care has been breached by Betty and the damages has been sustained
by Wing due to the improper analysis and purchase of business.
Conclusion
The conclusion is reached that Wing would be successful in establishing the negligence case,
based on the principles of the negligence tort law and the guidelines in the Donoghue v
Stevenson. Hence, it can be concluded that the duty of care existed on the part of Betty
towards Wing and the same has been breached.

Bibliography
Books and Journals
Stickley, A. P., Australian torts law (LexisNexis Butterworths, 2016)
Turner, C. and Trone, J., Australian Commercial Law 32nd edition, (Lawbook Company
Australia, 2019)
Case Laws
Donoghue v Stevenson [1932] UKHL 100
Thornton v Shoe Lane Parking [1971] 2 QB 163
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Others
"Consumer Guarantees", Australian Competition And Consumer Commission (Webpage,
2020) <https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-
guarantees>