Commercial Law Assignment: Australian Legal Framework and Contracts

This assignment delves into Australian commercial law, examining the legal framework through the lens of H.L.A. Hart's Rule of Recognition, comparing it with the United Kingdom's system. It analyzes the validity of a contract between Angelo and Barry for a fruit and vegetable store, addressing issues of misrepresentation, fraudulent statements, and breach of contract. The assignment explores the elements of a valid contract, including offer, acceptance, and consideration, while also discussing remedies for breach, such as rescission, indemnity, and damages, referencing key legal cases like Carlill v Carbolic Smoke Ball Company, Hyde v Wrench, and Edgington v Fitzmaurice. The document concludes by evaluating the remedies available to the plaintiff, Barry, due to the fraudulent misrepresentations made by Angelo, and the potential for contract withdrawal and the application of common law principles.

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

1AUSTRALIAN COMMERCIAL LAW
Part A
Question 1(b)
H.L.A Hart has laid down the conception of law that is known to be the rule of recognition.
There are three requisites in this rule that needs to be prepared to become a law. Firstly, the
establishment of a test for a legal provision in the system of law1. Secondly, it discusses the
validity of the entire thing existing within the legal system that is applicable. And thirdly, all the
laws must be unified that prevails in the legal system that is applicable.
Generally, this means to use the system of three-tier that recognizes of what constitutes law in
such system. This system will be using the structure of descending order that will be from
Statutes to Judicial precedents (common law) to customs.
There are certain segregations that have been prepared in Rule of Recognition that is followed by
the legal system of United Kingdom. This also means that the legal system of United Kingdom
represents the system of three tier. As we know that there is no codified constitution of United
Kingdom but there are various legislations that have been passed over certain years. The
legislation in the constitution of Britain states the relationship between the citizens of Britain and
the states and the functioning of the legislature, executive, and judiciary. The initial criteria will
meet if it lays down of what will be the effective law in this system that will follow various
legislations. These legislations of the constitution provides for the separation of powers to
different sections that might be legislated conferring the validity on every law that is existing in
the system2. The British constitution is the base for the presence of the laws that is present in the
system and it unites every law that prevails in the system. There are sources that make the laws
1 Corones, Stephen G. Competition law in Australia. Thomson Reuters Australia, Limited, 2014.
2 Andrews, Neil. Contract law. Cambridge University Press, 2015.

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of the constitution and these are common law, customary law, and statutory law. Hart's legal
system of three-tier is embodied totally by this system. Therefore, in United Kingdom
Recognition Rule comes down from statutory laws to judicial precedents and then to customary
law.
A similar procedure is followed by the legal system of Australia. A system known as the federal
system is followed by the government of Australia that means governance of a two-tier structure.
These two tiers are distributed as many state government and commonwealth parliament also
known as federal government. Unlike the United Kingdom, Australia has a codified constitution
that is the Commonwealth of Australia Constitution Act. This states the collaboration between
the citizen of the state and many parts of the state3. The government of Australia includes the
principles of common law in their legal system and therefore the principles of common law that
is interpreted by the judicial precedents also effects to bind with them. There are certain customs
that are present in the legal system of Australia. Therefore, it is stated that rule of recognition is
followed by Australia as explained by Hart. It is evident from the information that Australia has
that constitution that states what law should be considered in the legal system of Australia, it
explains the contact between the state, their structure and the citizens of that state. It explains
those legislative powers by which the statutory law has been developed. Thus it helps in the
unity of all the laws prevailing in the legal system. As explained by Hart, the system of three-tier
prevails in Australia by which the laws are recognized through the constitution, including the
principles of common law by the judicial decisions and also including the customary laws. The
legal system of both the countries named Australia and United Kingdom can be linked as both
the countries prevail the system of three tier. The major difference between both the systems of
3 Klee, Lukas. International construction contract law. John Wiley & Sons, 2015.

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these states is that the United Kingdom prevails an unwritten constitution but it has various
legislations that help in regulating the provisions of the constitution and it provides with the
larger scope of interpretation of common laws and recognition of laws4. On the other hand,
Australia carries a codified constitution and it has advanced definitions of recognition of laws.
This states that principles of common law provide with lesser space in incorporating judicial
decisions but it does not have that binding effect as it is in the provisions of the codified
constitution.
Part B
Question two
Issue
Angelo and Barry had signed a contract to buy a vegetable and fruit store. The owner of the shop
made an offer that the shop made high profits and the turnover of the shop is $20,000. There
were no competitors. A statement was made by Angelo was that the shop expenses would cost. It
was mentioned in the contract that the sale included a loader and a delivery van. There were
various problems that were faced by Barry. The problems were of revenue that was very low as it
was said, the van for delivery was repossessed and it was on the lease, the competition was there
and replacement of loader was required. The issue in this situation is whether the contract was
valid or not.
Rule
4 McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. Palgrave Macmillan, 2015.

4AUSTRALIAN COMMERCIAL LAW
Like the United Kingdom, Australia also included the principle of common law in their legal
system. A contract can only be valid if these elements are present in it like consideration,
agreement and the main intention is to form relationships that are legally bound.
An agreement is defined as the presence of acceptance and offer. However, the meaning of
acceptance here means the basis of formation of sale that should not be spoiled. This states that
that agreement that is obtained should be a true consent5. The term true consent means the
consent that is acquired if there is no misrepresentation, fraud, undue influence or coercion. If
anyone of these is found in a contract then the contract will be stated as a void contract and then
the parties will not be assured by the conditions of the contract. In certain cases, the court might
instruct for specific performance.
An offer that is made in public might be accepted by any person according to the case
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 16. According to the case Hyde v
Wrench [1840] 49 ER 1327 it was stated that another offer was made that is the counter offer that
will lead to the refusal of the offer and a change in the terms of the offer. Then a person who
prepared that original offer will have to accept the offer.
The term misrepresentation is the wrong representation of the information in a contract that is
presented to the party8. In order to make a contract a void one, then there are few elements that
misrepresentation contains. They are a wrongful statement of the facts that are presented and
secondly, these statements must contain consent for the contract.
5 Bridge, Michael G. The International Sale of Goods. Oxford University Press, 2017.
6 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
7 Hyde v Wrench [1840] 49 ER 132
8 Liu, Tingting, Yan Wang, and Suzanne Wilkinson. "Identifying critical factors affecting the effectiveness and
efficiency of tendering processes in Public–Private Partnerships (PPPs): a comparative analysis of Australia and
China." International Journal of Project Management 34.4 (2016): 701-716.

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In order to establish misrepresentation then these elements must be presented and therefore the
contract will be void. There are various types of misrepresentation of negligent, mistake or
fraudulent. The term fraudulent misrepresentation is defined as the person who creates the
declaration is attentive to the fact that there is a false statement and it seems to be correct. The
acceptance of the offer is led by the representation. In a case named Edgington v Fitzmaurice
[1885] 29 Ch D 459 9 the company’s directors made a representation that is fraudulent and then
the plaintiff wanted to withdraw the contract. In a case named Car & Universal Finance v
Caldwell [1965] 1 QB 52510, the same thing was repeated. Certain remedies are there where
acceptance is obtained by fraudulent misrepresentation. They are contract’s rescission as
mentioned in Hadley & Anor v Baxendale & Ors [1854] EWHC Exch J70 (23 February 1854)11,
indemnity as mentioned in Malec v JC Hutton Pty Ltd [1990] HCA 20 (Malec)12 and the
damages that are laid down in the case named Doyle v Olby (Ironmongers) Ltd. [1969] 2 QB
15813.
Application
In the situation provided, a social offer has been put up by Angelo and it can be recognized by
anybody according to the case in Carlill v Carbolic Smoke Ball Company. Another offer has
been made by Barry for their shop and therefore the previous offer got canceled because of the
same reason as explained in the case Hyde v Wrench. There was a single term that varied and
that was the price of the sale and therefore the offer was accepted by Angelo in the original terms
that were set by him except for the price.
9 Edgington v Fitzmaurice [1885] 29 Ch D 459,
10
11 Hadley & Anor v Baxendale & Ors [1854] EWHC Exch J70 (23 February 1854)
12 Malec v JC Hutton Pty Ltd [1990] HCA 20 (Malec)
13 Doyle v Olby (Ironmongers) Ltd. [1969] 2 QB 158

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Therefore the conditions that were set by Angelo were still a portion of a contract. The
statements mentioned that there were no competitions and the income of the shop will still be the
part of a contract. It was found by Barry that the scheduled income of that shop is lesser than the
price that was initiated in the contract and it was also found that there were some grocery shops
that used to sell the same items which were sorted by Barry. The profession of vegetables and
fruits made Angelo conscious of the facts that the statistics of the revenue won’t change as there
are competitions nearby. These are the representations that made Barry convinced to prepare for
another offer and in such case, this agreement got obtained by misrepresentation.
The judgment of the case named Edgington v Fitzmaurice [1969] 2 QB 15814 the judgment has
been followed and it has become obvious that this contract will be responsible to be withdrawn.
The statements that were mentioned in the contract about the loader and the van are also
fraudulent misrepresentations in the extent that no right was provided to Angelo to sell the loader
and the van is damaged that it will be replaced and will lead to the contract being a void one.
Conclusion
Therefore, the legitimacy of the sale contract can be challenged by Barry with the benefit of the
promises that were made by Angelo. Those fraudulent misrepresentations that were prepared by
Angelo will effect in making the contract a void one. If the contract follows the statements of
common law judicial then the contract will be withdrawn. There are certain remedies which
Barry can opt for like damages or indemnity. According to common law, Angelo has breached
his duties as a seller.
Question 3
14 Edgington v Fitzmaurice [1969] 2 QB 158

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Issue
A contract was made between Angelo and Barry that gave rise to several problems. The contract
made between them was accepted as the valid contract and therefore the Barry, the plaintiff will
discover the breach of contract. The main reason is to find out the remedies that are available in
such breach of contract.
Rule
According to the case Car & Universal Finance v Caldwell [1965] 1 QB 52515, it has been stated
that the car's title was not transferred, then that car will not be in a sale if it transfers its physical
possession. This also explains that if the property's possession is transferred to any other person
unless and until the concerned person who is preparing for the transfer carries some rights of the
ownership of the title then it will not be considered as the appropriate sale and then no effect will
be there.
In order to withdraw the contract, it is not necessary that there must be a fraudulent
misrepresentation16. According to the case East v Maurer [1991] 2 All ER 73317 it has been
stated that the court might grant damages for the fraudulent misrepresentation.
As per the section 19 of the Sale of Goods Act, 1954, an implied condition has been laid down
on the seller with the reference to the fitness or quality of the products. A term of a contract
which is not an expressed term which means that there have not been any verbal or written
correspondences between the parties to the contract with respect to the incorporation of such
terms but which are necessary and obvious to carry out the contract and are identified by the
15 Car & Universal Finance v Caldwell [1965] 1 QB 525
16 Taylor, Richard, and Damian Taylor. Contract Law Directions. Oxford university press, 2017.
17 East v Maurer [1991] 2 All ER 733

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course themselves is known as an implied term18. According to section 19(1), it has been
explained that there is a condition where the purchaser makes the usage clear to the supplier and
this implies that the purchaser is dependent on the judgment of the supplier as he is concerned
about the fitness and quality of the products. The supplier is obliged to assure that the fitness and
quality of the goods that he has received are fit for its purpose.
There are such cases where the breach of contract has taken place and several options are
available for the buyer as it has been explained in part 6 of the act that deals with breach of
contract19. According to s. 54 of this act, remedies for the non-delivery and delivers for the
damages in this case. As per the s. 55 specific performance has been defined and makes it
mandatory that for the plaintiff in case of breach of contract that he has to apply in court to
prepare an order in relation to the specific performance. Section 56 of this act is dealt with the
breach of warranty and it also provides with the damages for the similar thing20. And lastly,
section 57 handles the special damages and interests and it also gives the amount of recovery if
there is no delivery of the consideration.
Application
Angelo knew that van was on the lease and he does not carry any selling right. A detailed term
was added in the contract in relation to the loader and the van. The van has been bought for the
purpose of the business and therefore it can be concluded that Barry is dependent on the
judgment of Angelo in relation to the value of the truck and the loader.
18 Frey, Martin A. Essentials of contract law. Cengage Learning, 2015
19 O'Sullivan, Janet, and Jonathan Hilliard. The law of contract. Oxford University Press, 2016.
20 Goldberger, Jeffrey. "An overview of developments in key areas of Australian contract law." Commercial Law
Quarterly: The Journal of the Commercial Law Association of Australia 30.1 (2016): 17.

9AUSTRALIAN COMMERCIAL LAW
In a case named Car & Universal Finance v Caldwell, the judgment has been followed and it has
been concluded that as Angelo does not have the ownership of that car, then the delivery of
possession will not result in the delivery of goods that have been agreed on. Therefore no such
delivery was done. In such situation as per the requirements of section 54, Barry can claim
damages for delivering the van as agreed in the contract. The purpose of the loader is to load the
goods in the van but the loader was damaged in that extent it requires to be mended and it will
lead to the breach of warranty as per the section 19(1) of this act. There are certain provisions of
section 56 of this act that states the breach of contract and then he will be responsible to claim
the damages. In relation to this Barry will also get the interest.
Conclusion
In order to conclude, it has been stated that there are certain remedies that are offered to him as
stated in Part 6 of this act. In relation to the delivery of van, legally Barry can chase Angelo for
not delivering the van as stated in section 54. As provided in the breach of guarantee, Barry can
get back his damages as mentioned in section 56. He can also get back his money that has been
paid to Angelo as explained in section 57.

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Biblography
Andrews, Neil. Contract law. Cambridge University Press, 2015.
Bridge, Michael G. The International Sale of Goods. Oxford University Press, 2017.
Car & Universal Finance v Caldwell [1965] 1 QB 525
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Corones, Stephen G. Competition law in Australia. Thomson Reuters Australia, Limited, 2014.
Doyle v Olby (Ironmongers) Ltd. [1969] 2 QB 158
East v Maurer [1991] 2 All ER 733
Edgington v Fitzmaurice [1885] 29 Ch D 459,
Frey, Martin A. Essentials of contract law. Cengage Learning, 2015
Goldberger, Jeffrey. "An overview of developments in key areas of Australian contract law."
Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 30.1
(2016): 17.
Hadley & Anor v Baxendale & Ors [1854] EWHC Exch J70 (23 February 1854)
Hyde v Wrench [1840] 49 ER 132
Klee, Lukas. International construction contract law. John Wiley & Sons, 2015.
Liu, Tingting, Yan Wang, and Suzanne Wilkinson. "Identifying critical factors affecting the
effectiveness and efficiency of tendering processes in Public–Private Partnerships (PPPs): a
comparative analysis of Australia and China." International Journal of Project Management 34.4
(2016): 701-716.

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Malec v JC Hutton Pty Ltd [1990] HCA 20 (Malec)
McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. Palgrave Macmillan, 2015.
O'Sullivan, Janet, and Jonathan Hilliard. The law of contract. Oxford University Press, 2016.
Taylor, Richard, and Damian Taylor. Contract Law Directions. Oxford university press, 2017.