Business Law Assignment: Negligence and Contract Issues

This Business Law assignment addresses two key issues: negligence in financial advice and breach of contract with exclusion clauses. The first question examines whether a financial advisor, Sandy, is liable for negligent misstatement after providing incorrect investment advice to Susie, leading to financial losses. It explores the elements of negligent misstatement, including duty of care, breach of duty, and causation, referencing relevant case law like Hedley Byrne & Co Ltd v Heller & Partners Ltd. The second question analyzes a contract dispute where Joan and Henry purchased a motorhome from Catapult, only to find it unsuitable for its intended purpose. The assignment investigates whether the couple can cancel the contract due to Catapult's misrepresentations and the validity of the exclusion clauses attempting to limit liability. It considers principles of contract law, breach of warranty, and the potential for damages, drawing upon cases such as Alati v Kruger to support the arguments. The assignment concludes that Sandy is liable for the financial loss and Joan and Henry are entitled to cancel the contract.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Question One
Memorandum of Advice
Issue
Whether Sandy is required to defend the claim of Susie with respect to negligence alleged to
have been committed by Sandy in rendering financial advice. Whether Sandy is required to settle
the claim by paying the same.
Rule
The expression negligent misstatement depicts a situation where an individual has extended any
statement, which has to be construed as an advice but has not been correct for the carelessness of
that individual in the absence of any dishonest intentions on the part of him. However, for the
purpose of rendering the individual imparted the advice needs to have a special skill or
knowledge with the person to whom the advice has been imparted does not have. The concept of
negligent misstatement can be best explained with the case of Hedley Byrne & Co Ltd v Heller
& Partners Ltd [1964] AC 4651.
However, for the purpose of claiming a person to be liable of committing negligent
misstatement, certain elements are required to be established. Firstly, the person who has been
alleged to have committed negligent misstatement needs to have a duty in the eyes of law to be
careful to the person to whom he has been imparting the statement in a negligent manner. This
can be illustrated with the case of Donoghue v Stevenson [1932] UKHL 1002. Secondly, the
legal duty that has been conferred upon the person imparting the advice requires him to maintain
1 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
2 Donoghue v Stevenson [1932] UKHL 100

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the standard of care while exercising his task of imparting the advice. This can be illustrated with
the case of Hackshaw v Shaw [1984] HCA 843. Thirdly, an injury has been caused to another
person as a result of that negligent statement made by the alleged. This can be illustrated with the
case of Lindeman Limited v Colvin [1946] HCA 354.
However, for the purpose of claiming compensation from the person making the advice causing
injury to another, the aggrieved needs to establish that he has been relying upon the advice
provided to him while undertaking the endeavour for which he has been seeking the advice. This
can be illustrated with the case of Shaddock & Associates Pty Ltd v Parramatta City Council.
(No 1) [1981] HCA 595.
In case it has been established that the financial advisor has been negligent in providing advice to
another person causing injury, the damages recovered by the person injured would be the amount
that is necessary for the purpose of restoring the position of the injured to that of the position he
has been holding in the absence of such a negligent misstatement. This can be illustrated with the
case of Demagogue Pty Ltd v Ramensky [1992] 39 FCR 316.
Application
In the present case, Sandy, a financial advisor, has been visiting the local market for purchasing
some groceries. While in the supermarket he has met a friend named Susie, who has approached
him. While having a conversation, Susie has asked Sandy regarding his opinion about a specific
investment. In this furtherance, Sandy has advised Susie to proceed with the investment in
Quantize Comp Ltd. thinking it to be Quick Corp Limited. This can be treated as a negligent
3 Hackshaw v Shaw [1984] HCA 84
4 Lindeman Limited v Colvin [1946] HCA 35
5 Shaddock & Associates Pty Ltd v Parramatta City Council. (No 1) [1981] HCA 59
6 Demagogue Pty Ltd v Ramensky [1992] 39 FCR 31

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misstatement made by Sandy, as can be explained with the case of Hedley Byrne & Co Ltd v
Heller & Partners Ltd [1964] AC 4657.
Moreover, Susie has invested 100000 dollars in Quantize Comp Ltd, which has caused her injury
by incurring heavy losses. This can be treated as an injury caused to her by virtue of the
negligent advice given by Sandy. This can be illustrated with a case of Shaddock & Associates
Pty Ltd v Parramatta City Council. (No 1) [1981] HCA 598. This is because Susie has actually
relied upon the advice given by Sandy in in making the investment.
This has need Susie entitled to claim damages and recovered the same from Sandy. The claim
made by Susie is the loss she has incurred amounting to $67683. This needs to be discussed
under the principle that the financial advisor has been negligent in providing advice to another
person causing injury, the damages recovered by the person injured would be the amount that is
necessary for the purpose of restoring the position of the injured to that of the position he has
been holding in the absence of such a negligent misstatement. This can be illustrated with the
case of Demagogue Pty Ltd v Ramensky [1992] 39 FCR 319.
Hence, it can be stated that Sandy is not required to defend the claim of Susie with respect to
negligence alleged to have been committed by Sandy in rendering financial advice. He is
required to settle the claim by paying the same.
Conclusion
Sandy is required to settle the claim by paying the same.
7 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
8 Shaddock & Associates Pty Ltd v Parramatta City Council. (No 1) [1981] HCA 59
9 Demagogue Pty Ltd v Ramensky [1992] 39 FCR 31

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Question Two
Issue (a)
Whether Joan and Henry are entitled to cancel the contract with Catapult.
Rule
Exclusion clause is to be construed as a term incorporated within a contract, which has the effect
of excluding or restricting certain rights and entitlements of a party to the contract, which would
have not been restricted if such a clause has not been incorporated within the contract. There are
three ways in which an exclusion clause can be inculcated within a contract excluding the right
of a party to the contract. Firstly, as per the provisions contained in L'Estrange v F Graucob Ltd
[1934] 2 KB 39410, any exclusion clause inculcated within a contract which has been enumerated
in a written form and has been read and signed by both the parties while entering into the
contract would have the effect of a valid incorporation of the exclusion clause within the contract
restricting the liability of one of the parties who has been incorporating such a clause. In case no
incorporation by putting signature in the contract containing the exclusion clause has been made,
the person claiming exclusion of liability needs to established at he has brought the exclusion
clause to the awareness of the other party against whom he wants to enforce the same. Secondly,
as per the principles established in the case of Thornton v Shoe Lane Parking Ltd [1970] EWCA
Civ 211, the party to the contract who has been incorporating the exclusion clause for avoiding
liability needs to bring the presence of the clause to the attention of the other party for the
purpose of incorporating the same. Thirdly, as per the principle established in the case of
McCutcheon v David MacBrayne Ltd [1964] 1 WLR 12512, when there is a regular dealers
10 L'Estrange v F Graucob Ltd [1934] 2 KB 394
11 Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
12 McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125

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among the parties involved, the exclusion clause would be assumed to have been brought to the
notice of the party to whom it has been intended to be notified to.
As per the principles established in the case of The Council of the City of Sydney v. West (1965)
114 CLR 48113, it has been contended that for the purpose of interpreting the exclusion clause the
literal meaning inculcated within the contract would be taken into consideration.
However, there are certain clauses restricting liability that cannot be enforced as they considered
to be invalid. These include the clauses incorporated excluding liability for implied warranties
which may include satisfactory quality or fitness for the purpose for which a product has been
purchased. This can be illustrated with the case of Saint Gobain Building Distribution Ltd v
Hillmead Joinery Ltd [2015] EWHC B714.
13 The Council of the City of Sydney v. West (1965) 114 CLR 481
14 Saint Gobain Building Distribution Ltd v Hillmead Joinery Ltd [2015] EWHC B7

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A contract when validly created, inculcates a legal relationship between the parties involved and
generate certain rights and obligations for both the parties. Any discrepancy exhibited by the
parties in performing their part of obligations towards the contract would be required to be
treated under the legal mechanism. There are several ways in which the party who has been
aggrieved by the contravention may choose to avail remedy based on the circumstances of the
case under which he has been dealing. These may include claiming of damages along with
rescinding the entire contract. The party to the contract who has been aggrieved by the breach of
duty of another with respect to the contract may choose to rescind the contract as an equitable
remedy with respect to the breach that has been committed by the other party to the contract.
This can be illustrated with the case of Alati v Kruger [1955] HCA 64. However, as per the
principles established in the case of Long v Lloyd [1958] EWCA Civ 3, if the party who has
been claiming to rescind the contract has previously consented to the breach of the other party
with respect to the rights and obligations under the contract would not be able to claim the
recession of the contract.
Application
In the present situation, Catapult has made some incorrect presentations to Joan and Henry that
has made them purchase a motorhome to travel off road. However, the motorhome was not fit for
travelling off road. Again, the couple has specifically mentioned a motorhome to be suggested
which would consume fuel under the amount of 20 litres for every hundred kilometre. However
the motorhome suggested by Catapult has been consuming more fuel than mentioned by the
couple. But the same has been represented by catapult to have been matching the description
provided by the couple. However, Catapult has excluded there liability with respect to warranty
or guarantee of the motorhome provided for with respect to its fitness for the purpose for which

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it has been bought. It has also excluded it’s liability for any loss that might have been faced by
the purchaser owing to the use of the motorhome.
Although the contract has been duly signed by the parties and the payment of 650000 dollars has
been paid by the couple to by the motorhome, but the exclusion clause would not hold good as it
has been excluded in the liability under breach of warranty of the product delivered and its non
conformity with the fitness required with respect to the commercial norms.
Consequently, the motorhome has been unfit for the purpose for which it has been bought and
the couple has suffered enormous losses. This would provide the couple with a chance to claim
repudiation of the contract for the contravention committed by Catapult. Hence, the couple
would be entitled to cancel the contract.
This can be viewed as a breach on the part of Catapult by providing a motorhome which has not
been matching the description provided by the couple wood allowed the couple to claim
recession of the contract by cancelling the same. This can be supported with the case of Alati v
Kruger [1955] HCA 64.
Conclusion
Joan and Henry are entitled to cancel the contract with Catapult.
Issue (b)
Whether Joan and Henry would be entitled to recover any damages from Catapult.
Rule
Exclusion clause is to be construed as a term incorporated within a contract, which has the effect
of excluding or restricting certain rights and entitlements of a party to the contract, which would

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have not been restricted if such a clause has not been incorporated within the contract. There are
three ways in which an exclusion clause can be inculcated within a contract excluding the right
of a party to the contract. Firstly, as per the provisions contained in L'Estrange v F Graucob Ltd
[1934] 2 KB 39415, any exclusion clause inculcated within a contract which has been enumerated
in a written form and has been read and signed by both the parties while entering into the
contract would have the effect of a valid incorporation of the exclusion clause within the contract
restricting the liability of one of the parties who has been incorporating such a clause. In case no
incorporation by putting signature in the contract containing the exclusion clause has been made,
the person claiming exclusion of liability needs to established at he has brought the exclusion
clause to the awareness of the other party against whom he wants to enforce the same. Secondly,
as per the principles established in the case of Thornton v Shoe Lane Parking Ltd [1970] EWCA
Civ 216, the party to the contract who has been incorporating the exclusion clause for avoiding
liability needs to bring the presence of the clause to the attention of the other party for the
purpose of incorporating the same. Thirdly, as per the principle established in the case of
McCutcheon v David MacBrayne Ltd [1964] 1 WLR 12517, when there is a regular dealers
among the parties involved, the exclusion clause would be assumed to have been brought to the
notice of the party to whom it has been intended to be notified to.
As per the principles established in the case of The Council of the City of Sydney v. West (1965)
114 CLR 48118, it has been contended that for the purpose of interpreting the exclusion clause the
literal meaning inculcated within the contract would be taken into consideration.
15 L'Estrange v F Graucob Ltd [1934] 2 KB 394
16 Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
17 McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125
18 The Council of the City of Sydney v. West (1965) 114 CLR 481

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However, there are certain clauses restricting liability that cannot be enforced as they considered
to be invalid. These include the clauses incorporated excluding liability for implied warranties
which may include satisfactory quality or fitness for the purpose for which a product has been
purchased. This can be illustrated with the case of Saint Gobain Building Distribution Ltd v
Hillmead Joinery Ltd [2015] EWHC B719.
As established in the case of Clark v Macourt [2013] HCA 5620, in case of contravention of the
contract by a person , the damages provided to the aggrieved party would be the sum which
would return the aggrieved to the financial position that would have prevented in the absence of
any contravention in the contract.
Application
As the exclusion clause has not been valid because it has been restricting the warranty of the
motorhome the couple would be entitled to claim damages from Catapult. However the damages
would be available to the couple as to the amount, which would restored position of the couple to
the financial position that would have existed in case of the proper performance of the contract.
This would include the towing charges of $450, the steering column repair charges amounting to
4000 dollars and the local motors de amounting to $1000. It would also in title the couple to
recovered any such amount that would seem fit in the given circumstances to restore their
position on the contract. Hence, Joan and Henry would be entitled to recover any damages from
Catapult.
Conclusion
Joan and Henry would be entitled to recover any damages from Catapult.
19 Saint Gobain Building Distribution Ltd v Hillmead Joinery Ltd [2015] EWHC B7
20 Clark v Macourt [2013] HCA 56

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Issue (c)
Whether Joan and Henry would be able to recover 5700 dollars that has been deposited by them
to Catapult for the trailer.
Rule
One of the most important legal remedies that has been available to an aggrieved party whose
rights under the contract has been hampered by the non performance for contravention of the
performance of the contractual obligations by another party is the claim for damages that has
been incidental from the injury caused by the aggrieved. The main aim existing between the
claiming of damages and awarding the same is the motive of compensating the aggrieved with
respect to the loss he has suffered for the breach of the contractual obligations by the other party.
As established in the case of Clark v Macourt [2013] HCA 5621, in case of contravention of the
contract by a person , the damages provided to the aggrieved party would be the sum which
would return the aggrieved to the financial position that would have prevented in the absence of
any contravention in the contract.
However, for the purpose of claiming the damage, the aggrieved party is under in obligation to
establish the connection between the injury against which the has been claimed to that along with
the breach of the contractual obligations by the other party. Remote connection between the
cause of the injury and the breach of publication by the other would not bring success to the
aggrieved in claiming damages from the party at breach. This can be illustrated with the case of
Hadley v Baxendale (1854) 9 Ex Ch 34122.
21 Clark v Macourt [2013] HCA 56
22 Hadley v Baxendale (1854) 9 Ex Ch 341

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Application
In present situation, the 5700 dollars has been deposited by the couple under a different contract
which has nothing to do with the motorhome. Therefore none of the facts of the circumstances
occurring in contract in relation to the motorhome will not be applicable with respect to the
contract entered into for the trailer. Hence the breach of contract with respect to the motor home
would not entitled the couple to claim the advance paid for the trailer which has been part of a
different contract. In this case, the trailer has not been a part of the main contract and has no
proximate connection with the contract for purchasing motor home created between Catapult and
the couple. The remoteness of the same would not create any right on the part of the couple to
claim the amount paid. This is because the advance paid for the trailer has no connection with the
main contract of the motor home. It will not be claimable as a damage for the breach of the
contract for the motorhome. This can be supported with the case of Hadley v Baxendale (1854) 9
Ex Ch 34123.
Conclusion
Hence, Joan and Henry would not be able to recover 5700 dollars that has been deposited by
them to Catapult for the trailer.
23 Hadley v Baxendale (1854) 9 Ex Ch 341

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Bibliography
Clark v Macourt [2013] HCA 56
Demagogue Pty Ltd v Ramensky [1992] 39 FCR 31
Donoghue v Stevenson [1932] UKHL 100
Hackshaw v Shaw [1984] HCA 84
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Lindeman Limited v Colvin [1946] HCA 35
McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125
The Council of the City of Sydney v. West (1965) 114 CLR 481
Saint Gobain Building Distribution Ltd v Hillmead Joinery Ltd [2015] EWHC B7
Shaddock & Associates Pty Ltd v Parramatta City Council. (No 1) [1981] HCA 59
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
Alati v Kruger [1955] HCA 64
Long v Lloyd [1958] EWCA Civ 3
Hadley v Baxendale (1854) 9 Ex Ch 341