Business Law 2 Legal Analysis Report: Case Study 2017

This report provides a detailed legal analysis of a business law case study, addressing issues of negligence, exclusion clauses, and consumer law within the Australian legal framework. The analysis begins by examining the concept of negligence, referencing the case of Donoghue v Stevenson to establish a duty of care. It then explores the validity and application of exclusion clauses, referencing L'Estrange v Graucob. The report assesses liability in a scenario involving Locky, Alan, and Bing, considering the impact of an exclusion clause on Locky's potential negligence. Furthermore, the analysis extends to Alan's potential compensation from a manufacturer, applying the Caparo Industries plc v Dickman and Barnett v Chelsea & Kensington Hospital cases. Finally, the report examines whether Alan and Bing breached consumer-related laws, focusing on the Australian Consumer Law and relevant cases like Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited, and the contravention of consumer law by Bert.

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Question 1
Issue
Whether the exclusion clause inserted in the contract would give rise to liability for
Locky under negligence, or not?
Rule
A case of negligence can be made by one party, against another, when the first party
carries on such work, which has the capacity or probability of resulting in harm for the other
party, and as a result of this a duty of care is owed. When this duty of care is breached, the case
of negligence can be made (Turner, 2013). Donoghue v Stevenson [1932] UKHL 100 was a case
where the court held that the manufacturer of a product owes a duty of care to consumers owing
to the reasonable foreseeability and proximity between the parties (Latimer, 2012). Where the
duty of care is not fulfilled, and there is a contravention of the same, a case made for negligence
results in the plaintiff being awarded with damages for their loss or harm (Greene, 2013).
When a contract is formed, there are different clauses, and terms and conditions included
in it. Exclusion clause is one of the clauses in a contract, through which one of the contracting
parties is able to restrict or limit their liability in situation of some occurrences (Mau, 2010). So,
the exclusion clause has the power of limiting the liability which is raised from a case of
negligence or breach of contract, amongst the other things. However, there are certain criteria
which have to be fulfilled, in order for the exclusion clause to have validity in lawful terms
(Clarke & Clarke, 2016). The first requirement is that there is a need for the exclusion clause to
be properly inserted into the contract. This has to be followed by the exclusion clause to be

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brought to the attention of the parties, particularly when the same is covered at some other place
(Carter, 2007). Another requirement is that the exclusion clause cannot be against a law, and also
cannot restrict or limit the applicability of any statutory law or of any common law. If the
exclusion clause attempts to do so, the clause would not be deemed valid, and would not be able
to protect the party from liabilities (Bonell, 2009).
As has been stated earlier, the exclusion clause has to be properly brought to the attention
of the party against whom the same has been inserted. However, the case of L'Estrange v
Graucob [1934] 2 KB 394 presents a different viewpoint. In this case, a cigarette vending
machine had been bought by the claimant for using it in her cafe. An order form was signed by
her where it was stated that the warranties, conditions and other such aspects were not included.
When the machine did not work properly, the claimant attempted to reject the same based on the
provisions of the Sale of Goods Acts regarding the goods not being of merchantable quality. It
was held by the court that the order form had been signed which made the claimant bound by the
terms despite the fact that she read the terms of this form or not. Hence, an exclusion clause
which is covered under a contract and is signed by parties would have legal validity despite the
same not having being read by the signing party (Treitel & Peel, 2015).
Application
In the given case study, Locky owed a duty of care to Alan and Bing to take care when he
left after entering the premises. There was proximity between the parties as the action of Locky
had the capability of harming Bing and Alan. Also, it was reasonably foreseeable that a door left
open was bound to increase the chances of burglary. Thus, on the basis of Donoghue v
Stevenson, a duty of care was owed by Locky to Bing and Alan. And since this duty was not

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upheld, which resulted in the valuable equipment of Bing and Alan being stolen, Locky would be
guilty of negligence and would have to compensate Bing and Alan for their loss.
However, when the contract was signed between Locky and Bing and Alan, an exclusion
clause was covered under it. This clause excluded the liability of Locky from any kind of loss or
damage caused to the customers from breach of contract or otherwise. This contract does not
invalidate the applicability of any law, so it would be deemed as valid. Further, this clause was
properly inserted into the contract and again this would uphold the validity of the exclusion
clause. Lastly, the clause would be valid as the contract was signed by Bing and Alan, even when
they had not read the exclusion clause, based on the case of L'Estrange v Graucob. This would
mean that the liability arising from negligence of Locky would not bind him to compensate Bing
and Alan owing to the validity of the exclusion clause.
Conclusion
Hence, from the discussion carried on above, it can be concluded that the exclusion
clause would be deemed as valid and Locky would not have to compensate Bing and Alan for
their loss.
Question 2
Issue
Whether Alan can get compensation from the manufacturer in this case, or not?
Rule
The basics of negligence have been explained in the previous segment. And through
Donoghue v Stevenson, it has been shown that a duty of care is owed by the manufacturer to the

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consumers. In the case of Caparo Industries plc v Dickman [1990] 2 AC 605, a threefold test
was presented whereby in order for a case of negligence to be made, there is a need to show that
there was proximity between the parties, there was reasonable foreseeability and lastly, the
imposition of penalties would be deemed as just for the plaintiff. And the compensation can be
awarded for the economic loss sustained as well (Lunney & Oliphant, 2013).
When a case of negligence is brought before the court, the damages are awarded by the
court only after considering some factors. In this regard, the ‘but for’ test given in Barnett v
Chelsea & Kensington Hospital [1969] 1 QB 428 proves to be of help. In this case, the court held
that in order for the damages to be awarded to the plaintiff, it has to be shown before the court in
a reasonable manner that the injury or the damage would not have been sustained by the plaintiff,
save for the breach of duty of care by the defendant (Strong & Williams, 2011).
Application
In the given case study, the threefold test given under the case of Caparo Industries plc v
Dickman would help in establishing if a case of negligence can be made by Alan against the
manufacturer. In this case, there was proximity between Alan and manufacturer based on
Donoghue v Stevenson as the product manufactured by the consumer, if malfunctions, had the
reasonable foreseeability of injuring the consumer. Also, by compensating Alan, it would be
deemed as a fair thing to do. And he would be compensated for not only his injury, but for the
economic loss in terms of lost one week.
Before damages are awarded to Alan, it has to be shown that the injuries would not have
taken place had the product not malfunctioned. Applying Barnett v Chelsea & Kensington

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Hospital, the ‘but for’ test is satisfied as Alan would not have been hurt had the electrical
appliance worked properly.
Conclusion
Hence, from the discussion carried on above, it can be concluded that Alan can
successfully compensation from the manufacturer.
Question 3
Issue
Whether Alan and Bing breached any consumer related laws in this case, or not?
Rule
In Australia, the consumers are protected through the Australian Consumer Law, which is
covered under Schedule 2 of the Competition and Consumer Act, 2010 (Corones, 2012). The Act
is concentrated on protecting the consumers and promoting competition in the nation. Under the
Australian Consumer Law, which is a part of the main act, certain restrictions have been imposed
over the business owners with regards to their conduct during the course of trade and commerce
(Coorey, 2015). One of such restrictions relates to section 18, where a restriction has been placed
on the businesses regarding indulging in misleading or deceptive conduct. Section 29 of this act
puts a restriction on the businesses from falsely or misleadingly making representations to the
consumers. And section 33 of the Australian Consumer Law imposes a restriction on misleading
conduct with regards to the nature of goods; where such is done, it would be deemed as an unfair
practice (Austlii, 2017).

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In the case of Australian Competition and Consumer Commission v Coles Supermarkets
Australia Pty Limited [2014] FCA 634, Coles had been advertising its bread by using the phrases
like ‘freshly baked’, ‘baked today, sold today’, ‘freshly baked in-store’, and ‘baked fresh’.
However, the reality was that the bread was only baked partially and at some instances, the bread
was stored to up to six months before the same was defrosted for the final baking process taking
place at the stores of Coles. As a result of this, a case was initiated against Coles by ACCC, i.e.,
the Australian Competition and Consumer Commission. The court held that the company had
indeed breached sections 18, 29(1)(a) and 33 of the Australian Consumer Law (Burrows, 2015).
Application
In the given case study, a case can be made against Alan and Bing for the breach of
sections 18, 29 and 33 as they mislead the consumers into believing that they used fresh products
and that too which were sourced locally. The reality was that they importing the products from
Spain for producing the sauce. And so the fresh vegetables were not locally produced, as claimed
within 50 kilometres of restaurant located and were instead imported. The local produce came
from Queensland instead of South Australia, where the restaurant was situated. Hence, based on
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited,
this would be deemed as misleading and deceptive conduct, apart from the breach of the quoted
sections. So, the information put on the menu by Alan and Bing was meant to mislead the
consumer resulting in the breach of consumer related laws of the nation.
Conclusion
Hence, Alan and Bing had indeed breached the consumer related laws, specifically the
provisions of Australian Consumer Law.

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Question 4
Issue
Whether the provisions of Australian Consumer Law have been contravened in this case
by Bert, or not? Whether he has any defences available to him from the claims made by Alan and
Bing, or not?
Rule
As has been explained in the preceding segment, Australian Consumer Law is a
substantial piece of consumer protection legislation in Australia (Miller, 2016). In order to make
a claim under the Australian Consumer Law, there is a need to show that the person was a
consumer based on section 3 of this act. As per this section, a person would be deemed to be a
consumer only when the good or services purchased are used for household, domestic or
personal use purposes and the value of such good/ service is less than $40,000 (Austlii, 2017).
Under section 18 of the ACL, the businesses have an obligation of not indulging in any
such conduct which can be considered as misleading or deceptive. In the case of Australian
Competition and Consumer Commission v TPG Internet Pty Ltd [2013] FCAFC 37, the court
held that TPG had been engaged in misleading and deceptive conduct. The company had, in this
case, claimed in its advertisement that a single amount had to be paid for the product being
offered by the company. However, in reality, consumes were required to pay hidden which led to
a price being paid, which was higher than the advertised price. Since TPG had purposely
withheld these amounts, the court held TPG liable for misleading the consumers (High Court of
Australia, 2013).

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As per section 29 of the ACL, the businesses are not to indulge in false or misleading
representations. Under section 29(1)(i) it has been stated that the businesses are to refrain from
engaging in such conduct when the services or products offered by the company through the
promotion, particularly when such promotion can be deemed as false, misleading or unfair
representation with regards to the value of the products. In Australian Competition and
Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263, the court held the defendant
liable for being engaged in false representation when they were promoting their services to the
consumers, particularly due to the falsely represented drip pricing (Jade, 2015).
In case the consumer gets a defective service, the consumer has the option for asking for
the defective services to be remedied, claiming damages and terminating the service contracts
where the response is not satisfactory (Singh & Kaur, 2011). Section 268 provides that when a
major failure takes place in context of services, such claim can be made. So, where the services
are not of state, condition, quality or nature as had been promised, this claim can be made.
However as a remedy, the service provider can avoid a claim being made against them by
responding to the defective service through another proper service (Hobart Community Legal
Service, 2013). A defence can also be claimed in the context of having deployed the due care and
skill based on section 60 of the ACL. A key defence available under the ACL is to show that the
act was the fault of other person, which was not in control of the defendant and that the
reasonable precautions and due diligence had been undertaken by the defendant to avoid such
breach (Clayton UTZ, 2012).
Application
In the given case study, with regards to the claim of Alan and Bing against Bert, different
claims and defences can be made. In the matter of the tour of Great Wall, Bert has the option of

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citing the defences available under ACL and stating that he had taken due care regarding the
services offered by him and that it was not his fault that the tour was cancelled as the same was
done owing to the incompetence of the local bus driver, which could not have been foreseen by
him. However, in the case of public holiday, this defence would not work for Bert, as he failed to
fulfil the due care that was required on his party as a provision of ACL.
With regards to having being promised a flight in Qantas and instead having to be flown
in Thai Airlines, Bing and Alan can make a case against Bert on the basis of Australian
Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited¸ for breach
of sections 18, 29 and 33 as Bert mislead about the goods being offered. With regards to the ‘all-
inclusive’ price quote, it would be deemed as misleading conduct on the basis of Competition
and Consumer Commission v TPG Internet Pty Ltd, and false representation on the basis of
Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd. This is because
the conduct of Bert was to mislead Alan and Bert, and in this regard, his advertisement covered
false and misleading representations, thus breaching the quoted sections. And as a result of this,
Bing would be liable for breaching different provisions of Australian Consumer Laws.
Conclusion
Hence, the provisions of Australian Consumer Law have been contravened in this case by
Bert; and he has defence available to him only in context of the first claim made by Alan and
Bing. Thus, for the remaining two claims, Bert would be liable.

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References
Austlii. (2017). Competition and Consumer Act 2010 - Schedule 2. Retrieved from:
http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html
Bonell, M.J. (2009). An International Restatement of Contract Law: The Unidroit Principles of
International Commercial Contracts (3rd ed.). New York: Transnational Publishers, Inc.
Burrows, M. (2015). Update to Australian Competition and Consumer Commission v Coles
Supermarkets Australia Pty Limited [2014] FCA 634. Retrieved from:
https://www.dundaslawyers.com.au/update-to-australian-competition-and-consumer-
commission-v-coles-supermarkets-australia-pty-limited-2014-fca-634/
Carter, J W. (2007). Contract law in Australia (5th ed.). Sydney: LexisNexis Butterworths.
Clarke, P. & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.).
South Melbourne: Oxford University Press.
Clayton UTZ. (2012) The Australian Consumer Law. Retrieved from:
https://www.claytonutz.com/ArticleDocuments/178/Clayton-Utz-The-Australian-
Consumer-Law-An-Essential-Guide-For-Product-Manufacturers-And-Suppliers-
2012.pdf.aspx?Embed=Y
Coorey, A. (2015). Australian Consumer Law. London, United Kingdom: LexisNexis
Butterworths.
Corones, S.G. (2012). The Australian Consumer Law. New South Wales: Lawbook Company.
Greene, B. (2013). Course Notes: Tort Law. Oxon: Routledge.

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High Court of Australia. (2013). Australian Competition and Consumer Commission V TPG
Internet Pty Ltd (M98/2013). Retrieved from:
http://www.hcourt.gov.au/assets/cases/m98-2013/M98-2013.pdf
Hobart Community Legal Service. (2013). What remedies are available?. Retrieved from:
http://www.hobartlegal.org.au/tasmanian-law-handbook/consumers-money-and-debts/
australian-consumer-law/what-remedies-are-available
Jade. (2015). Australian Competition and Consumer Commission v Jetstar Airways Pty Limited
[2015] FCA 1263; (2016) ATPR 42-523. Retrieved from: https://jade.io/j/?
a=outline&id=418609
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia
Limited.
Lunney, M., & Oliphant, K. (2013). Tort Law: Text and Materials (5th ed.). Oxford: Oxford
University Press.
Mau, S.D. (2010). Contract Law in Hong Kong: An Introductory Guide. Hong Kong: Hong
Kong University Press.
Miller, R.V. (2016). Miller's Australian Competition and Consumer Law Annotated. St, Pyrmont
NSW: Thomson Reuters Australia.
Singh, J., & Kaur, G. (2011) Australian Consumer Law. Düsseldorf Germany: Lambert
Academic Publishing.
Strong, S.I., & Williams, L. (2011). Complete Tort Law: Text, Cases, & Materials (2nd ed.).
Oxford: Oxford University Press.

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Treitel, G H. & Peel, E. (2015). The Law of Contract (14th ed.) London: Sweet & Maxwell.
Turner, C. (2013). Unlocking Torts (3rd ed.). Oxon: Routledge.