Corporate Law Case Study: Negligence and Contracts

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BUSINESS AND CORPORATION LAW
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Table of Contents
Introduction................................................................................................................................3
Question 1:.................................................................................................................................4
Issue 1:...................................................................................................................................4
Rule:.......................................................................................................................................4
Applicability:..........................................................................................................................4
Conclusion:............................................................................................................................4
Issue 2:...................................................................................................................................5
Rule:.......................................................................................................................................5
Applicability:..........................................................................................................................5
Conclusion:............................................................................................................................5
Issue 3:...................................................................................................................................6
Rule:.......................................................................................................................................6
Applicability:..........................................................................................................................6
Conclusion:............................................................................................................................6
Issue 4:...................................................................................................................................7
Rule:.......................................................................................................................................7
Applicability:..........................................................................................................................7
Conclusion:............................................................................................................................7
Question 2:.................................................................................................................................8
Introduction:...........................................................................................................................8
Facts in brief:..........................................................................................................................8
Issue 1:...................................................................................................................................8
Issue 2:...................................................................................................................................9
Conclusion:..........................................................................................................................10
Question 3:...............................................................................................................................11
Issue 1:.................................................................................................................................11
Rule:.....................................................................................................................................11
Applicability:........................................................................................................................11
Conclusion:..........................................................................................................................12
Issue 2:.................................................................................................................................13
Rule:.....................................................................................................................................13
Applicability:........................................................................................................................13
Conclusion:..........................................................................................................................13
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Issue 3:.................................................................................................................................14
Rule:.....................................................................................................................................14
Applicability:........................................................................................................................14
Conclusion:..........................................................................................................................15
Conclusion:..............................................................................................................................16
References................................................................................................................................17
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Introduction
The presented submission on legal issues is an explanation of the Australian laws which
applies to issues relating to the law of taxation. In the first question, the report provides for a
solution to the legal problem by providing and citing case laws and legislative framework of
the Australian government. It provides for the liabilities of parties in cases where due care
and caution are not taken and the tax calculations are done negligently. In the next question,
the report contains a memorandum of legal advice relating to the law of contract. It contains
the application of contractual provisions in the given issue. The last question of the report
also explains the contractual provisions and how they are applicable to the given issue.
Overall the report is a description and elucidation of the Australian contractual laws governed
by the judicial decisions and precedents.
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Question 1:
Issue 1:
Whether Colin owe a duty of care towards his clients, Annie and Ben?
Rule:
Colin owes a duty of care towards his clients as he was acting in a professional capacity. He
was required to recheck the calculations made by his assistant but he failed to observe a
reasonable standard of care. Hence, Colin (the defendant) shall be held vicariously liable
under the Law of Torts for the negligent actions of his employee.1
Applicability:
In this context, the provisions of the Civil Liability Act 20022 shall be applicable along with
the provisions of Division 2, section 8 and 9 of Law of Negligence and Limitation of
Liability Act 2008 as these Acts and statutes provides for the provisions regarding the duty of
standard care to be taken in order to avoid the risk and damage to the other party.3
As per the provisions of Australian law regarding vicarious liability, the Australian High
Court has given a landmark judgment regarding this context in the case Prince Alfred
College Incorporated v. ADC4. In this case, the Australian High Court held that the employer
shall be held liable for the actions of his employee despite the employee is not himself in
fault.
Conclusion:
It is analysed that Colin is to be held vicariously liable for the actions of his assistant
employee as the employee was acting in his business course. Colin was under a liability to
take reasonable care and caution while acting in his professional capacity which he has failed
to do. Thus, he is under an obligation to pay his clients the amount of tax bared by them in
excess. The employer under this law is held liable for the actions of his employee.5
1 Goudkamp, J. and Plunkett, J., 2017. Vicarious liability in Australia: on the move? Oxford University
Commonwealth Law Journal, 17(1), pp.162-170.
2 Civil Liability Act, 2002 s 5O.
3 Law of Negligence and Limitation of Liability Act 2008 s 8 and 9.
4 [2016] Commonwealth Law Reports, 37
5 Goudkamp, J. and Plunkett, J., 2017. Vicarious liability in Australia: on the move? Oxford University
Commonwealth Law Journal, 17(1), pp.162-170.
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Issue 2:
Whether the duty of care is being breached by Colin?
Rule:
As per the provisions of the Law of Negligence and Limitation of Liability Act 2008, Colin
was under a duty to take reasonable care and caution when acting as a professional6. He was
under a duty to cross-check the calculations of his employee before proceeding with final
advice in which he failed; hence he is under a liability to compensate his clients Annie and
Ben for their loss.7
Applicability:
In the given scenario where Colin is a registered tax agent and acting in a professional
capacity, he is liable to owe his clients Annie and Ben as he is under a civil liability of taking
reasonable care whether acting himself or acting through a junior or assistant.
Here the court has to view that whether reasonable care is observed by the professional when
acting in such capacity. The general principle is to view the duty of care and also that the
person is not negligent in taking precautions against the risk and harm. The historical test for
determining the liability of the employer for the breach of his duty is to consider the
following two points:
 The employee is authorised to work under the employer
 The employee has done the activities authorised by the employer but in a negligent
manner.8
Conclusion:
Hence, it is analysed that there is a breach of duty on the part of Colin while proceeding with
the final quotations for the tax. Where he was required to take reasonable care, in such a case
he has failed to do so.
6 Cuniberti, G., 2013. The international market for contracts: the most attractive contract laws. Nw. J. Int'l L. &
Bus., 34, p.455.
7 Oliphant, K. and Nolan, D., 2017. Tort law: text and materials. Oxford University Press.
8 Freedland, M., Bogg, A., Cabrelli, D., Collins, H., Countouris, N., Davies, A.C.L., Deakin, S. and Prassl, J.
eds., 2016. The contract of employment. Oxford University Press.
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Issue 3:
Whether the breach by Colin has led to damage and losses suffered by his clients?
Rule:
The breach of duty by Colin has led to damages and losses to the clients and hence he is
liable for the effect of the breach under the Law of Negligence and Limitation of Liability
Act 2008.9
Applicability:
In the instant case, Colin has failed to take reasonable care while assessing the calculation of
the tax amount for his clients. These calculations were done by Colin's assistance and later he
filed the same calculations without reviewing and checking them leading to the payment of
tax in excess. As a result of negligence on Colin's part, it led Annie and Ben to pay $35,000
tax in excess.
Hence, the breach of duty incurred by Colin has led to damages and losses suffered by his
clients. This effect of breach is covered under Division 3, section 11 and 12 of the Law of
Negligence and Limitation of Liability Act 2008. Under section 11 contains provisions
regarding the factual causation and scope of liability.10
Conclusion:
Thus, Colin has failed to comply with the duty of reasonable care and standard and hence
there are losses incurred by the clients for which Colin is liable to compensate.
9 Law of Negligence and Limitation of Liability Act 2008 s 11 and 12.
10 Law of Negligence and Limitation of Liability Act 2008 s 11 and 12.
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Issue 4:
Whether Colin had opportunity to foresee the remoteness of the risk?
Colin was under an obligation to ensure that the calculations made by his assistant are
accurate and proper. He was well aware of the risk which can be levied on the clients in case
of misappropriation of calculation. Hence, the risk was not so remote so as to make it
impossible for its resolution. Hence, Colin has no defence of raising remoteness of risk.
Rule:
Under the provisions covered in the Law of Tort, not only the act of the defendant is
considered the cause of damage but it is also seen that the damage caused is not so remote.11
Also the provision covered under Division 4 of the Law of Negligence and Limitation of
Liability Act 2008 provides for the awareness of risk which shall be presumed by a prudent
man.12
Applicability:
In the instant case, Colin was well aware of the remoteness of risk as he was familiar with the
fact that his clients shall be levied with heavy taxes in case of miscalculations. He was also
aware of the fact that his assistant is not an experienced provider of accountancy advice.
Hence, Colin has a reasonable chance to sustain the risk as the miscalculations were
discovered after a long time.
Conclusion:
Hence, to conclude Colin is vicariously liable for the actions of his junior assistant and he
shall pay his clients the excess of the amount incurred by them. Colin is acting as an agent
and hence is covered under the provisions of the Law of Negligence and Limitation of
Liability Act 2008.
11 Arvind, T.T. and Steele, J. eds., 2012. Tort law and the legislature: common law, statute and the dynamics of
legal change. Bloomsbury Publishing.
12 Law of Negligence and Limitation of Liability Act 2008 s 13 and 14.
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Question 2:
MEMORANDUM
TO: Sandy
FROM: Junior Lawyer
DATE: May 5, 2019
FILE:
SUBJECT: Advice Regarding Contract Formation
It is important to understand the basics of the legislation system of Australia. The Australian
contract law is adapted from the contract law of the United Kingdom. It is concerned about
the enforcement of promises made by the parties contracting. It enables the formation of a
legal relationship between the parties where they are at an obligation to fulfil their duties. Bu
the formation of the contract requires the fulfilment of the essentials of the contract. The
contract can only be enforced if it is legally formed and there exists a legal relationship
between the parties.13
Facts of the Case
Sandy (plaintiff) took part in a competition which is to be completed in 45 sec. This
competition was advertised by Alpine Go-Karts and it was completed by the plaintiff in 43
seconds. The prize amount of the competition was $5000 which was later on cleared that the
amount is only $500 and it was a misprint. The plaintiff is now claiming $5000 as the prize.
The rising issues in the instant case are:
Issue 1: Whether there is a formation of a legal contract between the parties
involved?
The formation of a legal contract between the parties requires the fulfilment of certain
essentials. These essentials are:
 There shall be a valid agreement in existence between the parties.
 There shall be a valid consideration to form the agreement.
 The parties must be in a capacity to enter into the agreement.
13 Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing.
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 The parties must have an intention to enter a legal relationship.
 There shall be certainty in the contract which means the terms of the contract shall
be specific and not ambiguous.
Hence, the counsel submits that in the instant case, it can be seen that APK is bind by the
terms it has provided in the advertisement. The issuing of the advertisement is considered as a
valid offer being made by the company to which acceptance can be given by any person. It is
further submitted that the court of appeal in a landmark judgment has held that the presence
of offer and acceptance, consideration and intention to create legal relation is enough for the
formation of a binding contract.14
Issue 2: Whether APK is obligated to abide by the terms in the contract or not?
It is submitted by the counsel that in the instant case the plaintiff is entitled to get the contract
enforced and claim the prize amount. There exists a valid contract between the parties which
come into effect when the plaintiff accepted the offer by taking part in the competition. The
APK issued an advertisement in the newspaper which is considered as a valid offer being
made not to the public at large but to ones who are interested and have acted upon it. Hence
the plaintiff accepted the offer by taking part in the competition which in return led to the
formation of a contract.
All the essentials required for the enforcement of the contract are present and hence, the
plaintiff is at a right to get the contract enforced in the court. Though there is no signing of
any document between the parties, there is offer and acceptance made between the parties
through advertisement and participation. Thus, the contract came into force as soon as the
offer is accepted.
It is also submitted that the terms of the contract were expressed and clear and the
advertisement contained the prize amount to be $5000 which had no point of ambiguity. The
express term of the contract is enforceable, whether written or oral that forms a part of the
contract. It is also held by the court that promissory statements made orally can also be
enforced in the court which forms a part of the contract.15
14 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
15 Oceanic Sun Line Shipping Company Inc v Fay [1988] HCA 32
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The counsel also submits that the terms of the contract may be implied also but it shall be
reasonable and equitable. Implied terms can only be enforced in the court when they are just
and reasonable.16
Thus, to conclude the counsel submits that there is the formation of a valid contract between
the parties and hence the APK is under an obligation to fulfil its part of the contract. The
advertisement and the participation in the competition are treated as the offer and acceptance
in the contract. APK becomes liable to pay the amount as soon as there is acceptance to its
offer.
16BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13 (1977) 180 CLR 266, Privy Council
(on appeal from Australia).
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Question 3:
Issue 1:
Whether the contract signed between Mike and Northgate Organic Syrup and Sodas is
enforceable or not?
Rule:
The laws of the contract shall be applicable in the instant case as there is the formation of a
valid contract between the parties who have signed a contract for their business transaction.17
It was also held in the case of Green v Wilden Pty Ltd,18 that failure in the mechanism of the
contract would not render it void but it shall be a matter of the court to provide for the relief
and remedy to the aggrieved party.
Applicability:
Mike entered into a contract with the Northgate Organic Syrup and Sodas to deal with soft
drinks which are 100% organic. The company affirms that the installation charges are fixed
and shall not exceed as mentioned beforehand. The company affirms that all its drinks are
organic and Mike by getting attracted by this offer enters a contract with the company. The
following are the clauses mentioned in the contract:
 Northgate will supply the system and shall also install it without any extra charge.
 The total amount of the purchase and install is $50,000 which is to be paid within
30 days from the contract being signed.
 There has been an acknowledge by the purchaser that he shall be liable for all the
extra costs including the unanticipated installation costs.
 Northgate also affirms that all the reasonable care shall be taken while the process
of installation.
 It also contained a clause of trade restraint where the purchaser cannot purchase
beverages for a period of 12 months from any other company until the period of
the agreement.
Hence, it can be affirmed that the agreement fulfils all the essentials of a valid contract and so
it is enforceable in the court. But it is to be seen that the clauses of the contract are not harsh
17 Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil lawyer.
Bloomsbury Publishing.
18 Green v Wilden Pty Ltd [2005] WASC 83
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