Business Law Assignment: Analysis of Contract Law and Negligence

This business law assignment explores various legal issues through a series of scenarios. Part 1 examines the liabilities of a financial advisor and potential breach of contract, focusing on the Civil Liability Act 2003 and relevant case law. Part 2 addresses the issue of negligence in a car accident, analyzing contributory negligence and the application of the Civil Liability Act 2002 and case law. Question 2 delves into contract formation, including the validity of oral agreements and the concept of consideration, referencing cases like Smith v Hughes, Carlill v Carbolic Smoke Ball Co, and Pennzoil v Texaco. The assignment also considers the enforceability of oral promises and the application of estoppel, as seen in the case of Waltons Stores Ltd Vs. Maher. Finally, it assesses guarantor liability when a principal debtor defaults on a loan, referencing cases like Hodgson v Shaw and Wolmershausen v. Gullick.

Running head: BUSINESS LAW ASSIGNMENT
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BUSINESS LAW ASSIGNMENT
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Question 1
Part 1
Issue
Issues have involve in the given scenario, whether Manuel has possessed any right
towards Loren, financial advisor and any liabilities against Ripoff Credit.
Law
Rules relating to the liability of financial advisor and breach of contract will be
applicabl0 of the here to resolve such issues mentioned above. Section 20 of the Civil Liability
Act 2003 deals with the definition of professional. This means any professional should be a
person who has been practising in his field. The duties of care of a professional have described in
section 22 of the Act. He should not breach his duty of profession, which arises from his service
of the profession. Section 15 (2) describes that the professional should inform his client that risk
of financial loss may arise if he (client) follows such advice of him. If any party to a contract
does not fulfil any contractual relationship, then there will be arisen a breach of contract. In the
case of Tramways Advertising Pty. Ltd vs Luna Park Ltd 1938, it demonstrates that breach of
any contract can be arisen from not fulfilling any material fact.
Application
In the given scenario, Manuel has tried to expand his business on the advice of the
financial advisor Loren. He has taken a loan for $2,500,000 from a union named Ripoff Credit.
Manuel has suffered a great loss and unable to pay the loan amount.
Applying section 22 of the Civil Liability Act 2003 in this scenario, Loren has a
professional duty towards Manuel as Manuel has appointed her as a financial advisor.

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Applying Section 15(2) of the Act, Manuel has followed Loren’s advice and taken a loan
form a union to start the business. He has started so but has failed due to some reasons, which
Loren should inform him. Therefore, Manuel has a right to get compensation from Loren.
Applying the case of Tramways Advertising Pty. Ltd vs Luna Park Ltd 1938 in this
scenario, Manuel should have to repay the loan amount to Ripoff Credit; otherwise, there may
arise a breach of contract. Therefore, Manuel is liable to pay the loan amount.
Conclusion
Therefore, it can be concluded in this scenario that Manuel has a right to claim
compensation from Loren and the liabilities arise towards Ripoff Credit to repay the loan
amount.
Part 2
Issue
The issue involved in this scenario whether Bob is liable for physical injury of Roger.
Law
Law relating to negligence will be applied here to decide Bob’s liability. There are four
elements to establish a negligent act of the wrongdoer. A duty of care of the defendant should
arise towards the plaintiff. The defendant should violate such duty, and the plaintiff has suffered
an injury for such violation. The plaintiff has to prove a proximate relation between the injury
and such duty. In the case of Donoghue vs Stevenson 1932 has discussed that the plaintiff
should prove those four elements to claim damages for the negligent act of the plaintiff. In the
case of Pennington vs Norris 1956, the court has said that the defendant can take a defense of
contributory negligence to avoid such liability, that is, there is a wrong on behalf of the plaintiff

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for such incident. Section 5 of the Civil Liability Act 2002 has describes that the plaintiff of any
incident will not be entitled to claim damages if there is any contributory negligence.
Application
In the given scenario, Bob has injured Roger by a car accident. Roger and her friend ride
their bikes on the freeway not in the cycleway without the red rear reflector of the bikes.
Applying the case of Donoghue vs Stevenson 1932 in this scenario, Bob has a duty
towards the other cars not to make any accident. Roger is injured for such an accident. Therefore,
there is a liability arising out of the negligent activity of Bob, and he will be liable for such an
incident.
Applying the case of Pennington vs Norris 1956 in this scenario, Roger and her friend
has made contributory negligence for such incident as they have ridden their bike on the wrong
root and without such red read headlights on their bike. Therefore, Bob can take a defense of
such contributory negligence to avoid liability towards them.
Applying Section 5 of the Civil Liability Act 2002 here, Bob is not entitled to provide
any compensation to Rodger.
Conclusion
Therefore, it can be concluded in this given scenario that Bob will not be liable for such
incident as there is contributory negligence from Rodger.

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Question 2
Part 1
Issue
An issue arises in this given scenario, whether there is a contract between Cecil and
Ranie or not.
Law
The rules of formation of any contract will apply here to resolve such issue. In the case of
Smith vs Hughes 1871, the court emphasizes on the valid offer regarding the intention of the
offeror. In the case of Carlill vs Carbolic Small Ball Co 1892, the court demonstrates that the
offeree should receive such an offer to fulfil it. In the case of Ramsgate Victoria Hotel vs
Montefiore 1866, the court cites that the offer should be accepted with the stipulated time. In the
case of Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd 1915, the decision-maker has
emphasized on consideration to form a contract and legally binding.
Application
In the scenario, Ranie offers to sell some meats to Cecil and says she will open this offer
for the next 24 hours. However, another person offers Ranie to buy those meats at a higher price,
and she accepts so. After 5 hours, Cecil accepts the offer.
Applying the Smith vs Hughes 1871 here, there is a valid offer on the part of Ranie to
Cecil.
Applying Carlill’s case in this scenario, there is an intention to make an offer to Cecil,
and it is a valid offer from Ranie.
Applying the case of Ramsgate vs Montefiore 1866 here, Cecil has accepted her offer
within the stipulated time that is 24 hour. It is one of the parts to form a contract.

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Applying the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd here, there is a
consideration from both parties. Therefore, there arises a contractual relationship between Ranie
and Cecil.
Conclusion
Therefore, it can be concluded in this scenario that Cecil can sue for breach of a contract
between them.
Part 2
Issue
The issue involves in this scenario whether there are an oral promise and contract
between Cecil and Gus or not.
Law
Law relating to the validity of oral agreement will apply here to decide contractual
validity between them. In the case of Pennzoil vs Texaco 1987, the court has decided the validity
of an oral contract. An oral contract is as binding as a written contract. In the case of
Toll(FGCT) Pty Ltd v Alphapharm Pty Ltd. 2004 the Australian High Court has described that
the oral contact, as well as a contract made by any conduct, has made a contractual relationship.
In the case of Tramways Advertising Pty Ltd v Luna Park 1938, the court mentions that the
parties should fulfil the essential fact of the contract; otherwise, there will arise a breach of
contract.
Application
In this scenario, Cecil buys a motorbike from a company and Gus is the sale manager of
that company. Cecil requests to provide such first service without any charge. Gus does not want
to provide free service after two months.

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Applying the case of Pennzoil vs Texaco 1987 in this scenario, there is an oral contract
between Cecil and Gus, on behalf of the company. An oral agreement is a binding contract
between the parties. Therefore, if Gus denies honouring his given promise, then there will be a
breach of contract on the part of Gus.
Applying the case of Toll(FGCT) Pty Ltd v Alphapharm Pty Ltd. 2004 in this given
scenario, there is a contractual relationship among Cecil and Gus on behalf of that company.
Therefore, Gus should keep his promise to provide the first servicing free of cost.
Conclusion
Therefore, there is an oral contract between Cecil and Gus, and he should fulfil his
promise; otherwise, a breach of contract will arise there.
Part 3
Issue
The issue involves in this scenario whether there is a contract between Cecil and Nano or
not.
Law
The laws relating to the construction of a contract have been applying to consider this
issue in this scenario. In the case of Rose & Frank Co vs JR Crompton & Bros Ltd 1924, it has
demonstrated that it is one of the essential elements to form a contract between the participants
of the agreement. It has also decided in the case of Merritt vs Merritt 1970 that there must be an
intention to make any legal consequence of such promise. In the case of Pennzoil vs Texaco
1987, the court has concerned on the oral agreement and it has named as a handshake deal
regarding a contract. Such a handshake deal or oral contract is valid in the eye of Common Law.
In the case of Waltons Stores Ltd Vs. Maher 1988, the Australian court of law has applied the

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rule of estoppel it the defendant has not wanted to fulfil his promise, and the plaintiff has done
something on behalf of his promise.
Application
In this scenario, Cecil commences a negotiation with Nano to lease a premise. Nano
shakes Cecil’s hand and makes to deal. Cecil takes a huge amount a loan to remodel that
premises; however, Nano refuges the deal.
Applying the case of Rose & Frank Co vs JR Crompton & Bros Ltd 1924 in this
situation, there is an intention between Cecil and Nano to make such deal. Therefore, it is a part
of the formation of a contractual relationship between them.
Applying the case of Pennzoil vs Texaco 1987 in this scenario, there is an oral contract
between them, and if Nano does not proceed such deal, then there will arise a violation or breach
of such contract.
Relating to the case of Waltons Stores Ltd Vs. Maher 1988 with this scenario, Cecil can
claim the rule of estoppel as he has taken a loan and spent that on the basis of that contract.
Conclusion
Therefore, it can be concluded in this scenario; there is a binding contract between Cecil
and Nano and Cecil can claim for compensation to Nano.
Part 4
Issue
The issue involves in this scenario whether the parents of Cecil will be responsible for the
loan amount as a guarantor, which Borat borrows.

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Law
The laws relating to the liability of guarantor if a principal debtor fails to repay the loan
amount. In the case of Hodgson vs Shaw 1834, it has decided that a person will be liable as a
guarantor on behalf of the principal debtor if the person has given his consent to the guarantee
deed. In the case of L'Estrange vs F Graucob Ltd 1934, Lord Denning has ruled that if a party
signs in a contract document then it has been presumed that he has read the full content of the
paper. In the case of Wolmershausen v. Gullick 1893, it concerns that if the principal debtor
makes any default to make the payment, then the creditor can compel the guarantor to repay the
loan amount.
Application
In this scenario, Cecil’s brother Borat has taken a loan from a bank to start his new
business, and his parents have signed as a guarantor. However, he has failed to pay the loan
amount due to insolvency. The bank looks to his parents to repay their obligations.
Applying the case of Hodgson vs Shaw 1834 in this scenario, the parents have signed on
the guaranteed deed even after clarification of the bank. They will be responsible for repaying
the loan amount to the creditor, the bank.
Applying the case of L'Estrange vs F Graucob Ltd 1934 in this situation, as the parents
have signed in that document, then it will be presumed that they have known the context of the
document. Therefore, they are bound to pay the loan amount to the bank as a guarantor.
Applying the case Wolmershausen v. Gullick 1893 in this scenario, as their son
(principal debtor) has failed to pay the loan amount then they have to pay such an amount to the
bank.

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Conclusion
Therefore, it can be concluded in this context that Cecil’s parents will be responsible for
paying the loan amount to the bank as a guarantor.

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References
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Civil Liability Act 2002 (Cth)
Civil Liability Act 2003 (Qld)
Donoghue v Stevenson [1932] UKHL 100
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1
Hodgson v Shaw (1834) 3 My. & K. 183
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Merritt v Merritt [1970] EWCA Civ 6
Pennington v Norris - [1956] HCA 26
Pennzoil v. Texaco, Inc. (1987) 481 U.S. 1
Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109
Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2
Smith v Hughes (1871) LR 6 QB 597
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd. [2004] HCA 52
Tramways Advertising Pty Ltd v Luna Park (N.S.W.) Ltd 1938 S.R. (N.S.W.) 632
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 61 CLR 286
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Wolmershausen v Gullick [1893] 2 Ch. 514