Business and Corporation Law Questions: Case Study Analysis 2017

This assignment analyzes a business and corporation law case study, focusing on contract law and agency principles. The first part examines whether Airbus Corporation Ltd. is liable for a breach of contract due to an invalid exclusion clause, discussing the elements of contract formation, breach, and remedies, as well as the validity of exclusion clauses based on case law such as Olley v Marlborough Court Ltd and Thornton v Shoe Lane Parking Ltd. The analysis concludes that Airbus is liable due to the invalidity of the exclusion clause. The second part addresses whether Frank can initiate legal action against Gemma and Bob, and Frank's liability for Bob's actions. It covers employee duties, serious misconduct, agency law, and vicarious liability, referencing cases like Watteau v Fenwick and Panorama Developments (Guildford) Limited v Fidelis Furnishing Fabrics Limited. The analysis determines that Frank can take action against Gemma for breaching her duties and can summarily dismiss her. It also explores Bob's misconduct and its implications on Frank's liability. The document provides a detailed legal analysis of both scenarios.

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Contents
Question 1........................................................................................................................................3
Issue.............................................................................................................................................3
Rule..............................................................................................................................................3
Application..................................................................................................................................5
Conclusion...................................................................................................................................6
Question 2........................................................................................................................................6
Issue.............................................................................................................................................6
Rule..............................................................................................................................................6
Application..................................................................................................................................9
Conclusion.................................................................................................................................10
References......................................................................................................................................11

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Question 1
Issue
Whether Airbus Corporation Ltd can be made liable for a breach of contract, or not?
Rule
A contract denotes a promise being made, to do something in exchange for consideration.
The contracts can be formed by writing the terms on a document and getting the same signed by
the parties; thus, creating written contracts. Or can be formed by simply exchanging the terms
orally; thus, creating oral contracts (Mau, 2010 p. 5). The formation of contract encompasses
presence of certain elements which includes the agreement, i.e., offer and acceptance, followed
by consideration, intention, clarity and capacity (Miller and Cross 2015, p. 257). The terms of the
contract are an essential element and it is crucial that the parties obtain clarity on the terms of the
contract (Blum 2007, p. 2).
When the terms of the contract are not fulfilled, it results in the breach of the contract.
And in such cases the aggrieved party can make a case of breach of contract against the
breaching party. For the breach of contract, the aggrieved party can apply for monetary remedies
or for equitable remedies. The monetary remedies are in form of damages being awarded for the
breach of contract. And the equitable remedies are in form rescission of contract, specific
performance, injunction being obtained or repudiation (McKendrick and Liu 2015, p. 431).
Exclusion clauses are such clauses in the contract which have the power of limiting or
restricting the liability of one of the contracting parties. An exclusion clause is made binding

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only when the same is inserted properly in the contract. It is significant that the exclusion clause
is brought to the notice of the contracting parties or is signed by the contracting parties. The
exclusion clauses do not have the power of limiting, reducing, or extinguishing the applicability
of common law or statutory law and cannot be opposed to any legislative framework. In case an
exclusion clause makes an attempt to do so, the exclusion clause would be deemed as invalid
(Legal Services Commission, 2011).
When the exclusion clause is inserted into the contract after the same has been formed,
the exclusion clause is not considered as binding. This can be established through the case of
Olley v Marlborough Court Ltd (1949) 1 KB 532 and Thornton v Shoe Lane Parking Ltd (1971)
2 WLR 585. In both of these causes, the exclusion clause was held to have no lawfulness in
them, in the first case, the exclusion clause had been formed after the main contract had been
formed and so the exclusion clause was not valid. In the latter case, the exclusion clause was
stated at the back side of the parking ticket which was not brought to the attention of the party,
thus making it illegal (Stone and Devenney, 2017, p.206).
It is important that the exclusion clause is brought to the attention of the party. Chapelton
v Barry UDC (1940) 1 KB 532 was a case where the exclusion clause at ticket backside was not
brought to Chapelton’s attention, and the lack of reasonable notice made the court declare the
exclusion clause as invalid. Reference of the exclusion clause at another place, in Thompson v
London Midland & Scottish Railway (1930) 1 KB 41, resulted in the invalidity of the exclusion
clause (Poole, 2016, p. 223).
Where the exclusion clause is covered under a contract, which is signed by the
contracting parties, the exclusion clause is deemed as valid, irrespective of the fact that the

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parties read it or not, as was seen in L'Estrange v Graucob [1934] 2 KB 394. Though, where it
can be proved that the representation pertaining to exclusion clause was misleading, the clause is
deemed as invalid, as was seen in Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805
(Gibson and Fraser, 2014, p. 501).
Application
In the given case study, a contract was formed between Qantas and Airbus for a new
aeroplane on certain terms and conditions. These terms and conditions were covered under the
contract and this contract was sent to be signed by Airbus to Qantas. In the documents which
were sent for signing, an exclusion clause limited the liability of Airbus at $300,000. The validity
of this exclusion clause is contested.
The exclusion clause is not opposed to any law, so on this criteria, it is valid. However,
the same was not inserted in the contract properly. Applying the case of Thornton v Shoe Lane
Parking Ltd, the exclusion clause was inserted inside a bundle of documents and was not
expressly brought to the attention of Qantas. On the basis of Olley v Marlborough Court Ltd, the
contract had already been formed and this was inserted later on, which would make the exclusion
clause invalid. This exclusion clause was not brought to the notice of Qantas in a reasonable
manner and was hidden, which would make it invalid on the basis of Chapelton v Barry UDC.
Also, the exclusion clause was mentioned in a separate document instead of the main contract, so
on the basis of Thompson v London Midland & Scottish Railway, the exclusion clause would
have no validity.
The exclusion clause could have been valid even when Qantas did not read it on the basis
of L'Estrange v Graucob, had it been covered under the main contract and not separately inside

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the bundle of documents. Though, as such was not the case, the exclusion clause would not be
valid. And so, the liability of Airbus for breach of contract would not be limited to $300,000.
The contract was clearly breached in this case as term 455 was contravened whereby only
34 channels were available instead of the contracted 36. And so, Qantas can make a claim of
breach of contract against Airbus and claim monetary or equitable damages, without any
capping.
Conclusion
Thus, Airbus Corporation Ltd can be made liable for a breach of contract without any
capping, owing to the invalidity of exclusion clause.
Question 2
Issue
Whether a legal action can be initiated by Frank in this case against Gemma, or not?
Whether a legal action can be initiated by Frank in this case against Bob, or not? And lastly,
whether a liable is raised for Frank for the actions undertaken by Bob towards Angela in this
case, or not?
Rule
Under the common law, the duty has been laid down for the employees to work towards
the employer’s benefit instead of working towards their personal benefit. So, it is the duty of
employees to be loyal towards their employer. Certain other duties have also been imposed over
the employees of the company and include the duty of performing the work in the best manner as

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they can. In case of contravention of common law duties, the employee can be dismissed by the
employer on the basis of the circumstances present, along with the non-compliance of the
employee (Walsh, 2013). Where the employer makes the decision to terminate the employee, the
termination of employment has to be initiated and the employee has to be paid severance pay.
Under the regulation 1.07 of Fair Work regulations, 2009 (Cth), the serious misconduct
has been defined. This regulation presents that a conduct would be deemed as serious
misconduct where the misconduct results in a serious and imminent risk to the viability,
profitability and reputation of the employer’s business. There are different examples of serious
misconduct and some of these include, fraud, theft or assault by the employee during the course
of employment; refusal of the employee in carrying out the lawful or reasonable guidelines
which have been covered under or are aligned with the employment contract; and the
intoxication of the employee during work timings (Federal Register of Legislation, 2009).
Where serious misconduct on part of the employee can be established, the employee has
to be summarily dismissed and an investigation is undertaken to determine the validity of these
charges (K&L Gates, 2013). Upon these charges being proved right, the employer can terminate
the employee permanently. And in such cases, a notice of termination or the payment in lieu of
notice is not required to be paid to the employee (Walsh, 2013).
The agency law presides over relationship which is present between the employer and
employee. Under the agency law, the principle is liable for the acts the agent towards the third
party. There are two broad classifications of authority which is given to the agents, i.e., the actual
authority and the apparent authority. The former is again divided into express and implied
(Thampapillai et al, 2015, p. 141). Express authority denotes the authority given to the agent in

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an express manner, for acting on behalf of the principal. In cases of implied authority, the
authority is given to the agent by the virtue of position held by them (Kleinberger, 2008, p. 30).
The other key classification of agency law is apparent authority, which is also known as
ostensible authority (McLaughlin, 2015, p. 311). In such cases, where the words or the conduct
of the principal gives such an impression to a reasonable person that the agent has been given the
requisite authority to act on behalf of the principal, it is deemed as a case of ostensible authority.
And for the ostensible authority, the principal is made liable to the third party (Griffiths, 2005, p.
245). This is due to the reason that he third party does not have the knowledge if the authority is
indeed present or if the same has been annulled (Stone, 2005, p. 162).
Watteau v Fenwick (1893) 1 QB 346 was a case in which the court came to a conclusion
that the third party could hold the principal responsible for the sold cigars, even when it was
established that the agent acted out of the authority given to him (H2O, 2016). Similarly, in
Hely-Hutchinson v Brayhead Ltd (1967) 1 QB 549, a contract was made by Richards with
Brayhead without even taking the requisite permission from the company’s board. The judges
concurred in this case that Richards had the ostensible authority, along with the implied actual
authority owing to the board’s conduct over months, due to Richards acting as the CEO of the
company (Vanuatu, 2016).
The agency law gives rise to the doctrine of vicarious liability, based on which, a strict
liability is laid down on the superiors for the work done by their subordinates and this liability is
owed towards the third parties (Faure, 2009, p. 134). And due to this principle, the employee’s
act make the employer liable (Giliker, 2010, p. 22). In Panorama Developments (Guildford)
Limited v Fidelis Furnishing Fabrics Limited [1971] 2 QB 711, the acts undertaken by the

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company secretary of the company, due to the doctrine of vicarious liability, made the company
liable (French, 2014, p. 625).
Application
The case of Gemma highlights that her acts resulted in Frank having to bear a loss of $50
since Frank was induced to sell the product to Frances for $300 even when she had the
knowledge regard the proposal of Tom to purchase the same for $350. The reason for indulging
in such conduct was to make a personal profit and this resulted in her common law duties being
breached. The statutory regulations were also contravened in this case. Furthermore, as Gemma’s
niece was benefited from this and a fraud was committed by Gemma by forgoing the benefits of
Frank. Due to these reasons, Frank can initiate action against Gemma and summarily dismiss her
for the serious misconduct, and this would mean that Frank is not required to pay any notice or
payment in lieu of notice to Gemma.
For Bob, he was fired for being intoxicated and late. This occurred despite the constant
warnings where Bob did not improve his condition. On the basis of Regulation 1.07, the serious
conduct was committed by Bob, which would give Frank the right to dismiss Bob summarily.
Though, firing him pending investigation is a breach of these regulations. Hence, Frank should
summarily dismiss Bob instead of firing him for the serious misconduct undertaken on Frank’s
part. Only after the investigation determines the presence of serious misconduct, should Bob he
fired.
For Angela, the agency law and doctrine of vicarious liability would have to be applied.
Bob had the implied authority for acting on Frank’s behalf owing to implied authority. Also, Bob
had, in the past, made such authorities, which shows the presence of implied actual authority.

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Due to these reasons, Frank would be made liable for the order placed to Angela due to the fact
that as a third party, Angela was not aware of Bob being fired. And on basis of the cases quoted
above, Frank would have to pay the requisite amount to Angela, i.e., $10,000 or else, he would
have to give her the machines Angela ordered.
Conclusion
Hence, Frank can sue Gemma for serious misconduct and dismiss her summarily. For
Bob, Frank needs to dismiss him summarily instead of firing him, till the investigation shows
him as guilty. And for Angela, Frank would have to pay her or deliver the machines owing to the
vicarious liability and agency law.

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References
Blum, BA (2007). Contracts: Examples & Explanations, 4th ed, New York: Aspen Publishers.
Faure, M (2009). Tort Law and Economics, 2nd ed, Northampton: Edward Elgar.
Federal Register of Legislation. (2009). Fair Work Regulations 2009. Retrieved from:
https://www.legislation.gov.au/Details/F2017C00559
French, D, Mayson, S, Mayson and Ryan, C (2014) Mayson, French & Ryan on Company Law,
31st ed, Oxford: Oxford University Press.
Gibson, A, and Fraser, D (2014). Business Law 2014, 8th ed, Melbourne: Pearson Education
Australia.
Giliker, P (2010). Vicarious Liability in Tort: A Comparative Perspective, Cambridge:
Cambridge University Press.
Griffiths, A (2005). Contracting with Companies, Oxford: Hart Publishing.
H2O. (2016). Watteau v. Fenwick 1 QB 346. Retrieved from:
https://h2o.law.harvard.edu/collages/1557
K&L Gates. (2013). Doing Business in Australia Employment Law. Retrieved from:
http://www.klgates.com/files/Upload/DoingBusinessInAustralia_Employment_Law.PDF
Kleinberger, D S (2008). Agency, Partnerships, and LLCs: Examples and Explanations, 3rd ed,
New York: Aspen Publishers.

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Legal Services Commission. (2011). Exclusion Clauses. Retrieved from:
http://www.lawhandbook.sa.gov.au/ch10s02s06.php
Mau, S D (2010). Contract Law in Hong Kong: An Introductory Guide, Hong Kong: Hong Kong
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McKendrick, E and Liu, Q (2015). Contract Law: Australian Edition, London: Palgrave.
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Poole, J (2016). Textbook on Contract Law, 13th ed, Oxford: Oxford University Press.
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Stone, R, and Devenney, J (2017). Text, Cases and Materials on Contract Law, 4th ed, Oxon:
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Thampapillai, D, Tan, V, Bozzi, C, and Matthew, A (2015). Australian Commercial Law,
Melbourne: Cambridge University Press.
Vanuatu. (2016). Hely-Hutchinson V. Brayhead Ltd., And Another. Retrieved from:
http://www.vanuatu.usp.ac.fj/courses/LA313_Commercial_Law/Cases/Hely-
Hutchinson_v_Brayhead2.html
Walsh, P (2013). Australia: Termination of Employment in Australia: Best Practice Guide.
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