Business Law: Sam's Liability for Damages in Fuel Contamination Case

This business law case study examines the liability of Sam, who operates a business refuelling aircraft, for damages resulting from contaminated fuel. The analysis focuses on the elements of negligence: the existence of a duty of care, its breach, and the resulting damages. Sam's responsibility to ensure fuel quality is established, and his failure to do so constitutes a breach of duty. The case considers three scenarios: the loss of an aircraft and a car (where Sam is liable), a loss suffered by Safmarine Ltd due to a flight cancellation (where Sam is not liable because he informed the pilot of the contamination), and damage to an aircraft owned by Green Ltd (where Sam is not liable because the pilot ignored his warning). The analysis applies legal principles, including the neighbour test and the concept of foreseeable damages, to determine Sam's accountability in each scenario.

BUSINESS LAW
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Business Law
Issue
The issue in the present case is to find in which scenario Sam is accountable for the damages
suffered by the various plaintiffs.
Law
Existence of duty to care, breach of duty of care and the damages because of the breach of the
duty of care are the three imperative factors in ascertaining the validity of tort of negligence in
any given scenario. In order to ascertain the presence of duty of care, neighbour test would be
taken into consideration (Crosling & Murphy, 2013). Once, it is confirmed that duty of care is
present on behalf of the defendant then the next step is to ascertain whether the duty of care has
been breached by the defendant or not. If duty of care has been breached by the defendant, then
the foreseeable damages incurred by the plaintiff are considered (Harvey, 2009).
Duty of care
The common practice to check the existence of duty of care on behalf of defendant for the
plaintiff is neighbour test. As per this test, the neighbour is an entity that could suffer significant
losses because of the action or inaction of the action doer. The judgement of famous case
Donoghue v. Stevenson [1932] AC 562 at 580 is the evidence of this aspect. In this case, the
court had announced that the duty of care of action doer (defendant) exists only when the act or
precaution of action doer can result substantial foreseeable losses to the plaintiff. Also, in regards
to determine the ambit of the foreseeable losses the court would take various aspects of the case
into cognisance (Davenport & Parker, 2014).
Breach of duty of care
It is essential that defendant must undertake appropriate measures to discharge requisite duty of
care in order to avert the foreseeable losses of plaintiff. Further, it is equally pivotal that action
doer who owes duty of care for neighbour must also inform them regarding the expected risk and
outcomes related to the breach of duty of care. It is essential that level of care is dependent on the
underlying risk because the breach of duty of care by the defendant in certain cases can lead to
loss of life of the neighbour or/and the substantial damages to the property as per the judgment of
Vaughan v Menlove(1837) Ct CP case (Gibson & Fraser, 2014). This breach of duty would arise
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Business Law
only when the action doer has behaved negligently in relation to the duty of care. Also, the
breach of duty would not cover the ambit of unforeseeable losses because no liability under tort
law would be applicable for the losses incurred which are not foreseeable to the defendant as per
the judgment given in Home Office v Dorset Yacht [1970] HL case (Latimer, 2016).
Damages
It is noteworthy that breach of duty of care on behalf of the defendant can result in damages to
the plaintiff. However, the defendant is held responsible only for those damages which are
foreseeable in nature as highlighted in the verdict of Jolley v Sutton LBC (1998) case. In order to
check whether the incurred losses are due to the breach of duty of care of defendant or not, it
needs to be considered that whether losses would also be incurred even if the duty of care had
not been breached by defendant. The influence of tort does not limit only to the materialistic
losses but also includes mental and emotional losses (Lindgren, 2014).
Application
It is evident from the case facts that Sam runs a business of refuelling aircraft tanks. It is
apparent that Sam has the responsibility to check the quality of the fuel because the fuel is
directly sent to the fuel tank and aircraft owners do not have any chance to check the quality of
the fuel. Therefore, it can be concluded that it is Sam’s responsibility to extend highest level of
duty of care to the potential plaintiffs. However, Sam has acted negligently and forgot to close
the lid of the fuel tank due to which the fuel became contaminated. Further, Sam did not check
the fuel quality before refuelling the tanks of the aircraft. It indicates that aircraft pilot and
owners did not have any suspicion regarding the contamination of the fuel that can cause
significant fatality. It is also evident that breach of duty of care by providing low quality or
contaminated fuel can create significant harm to the aircraft and to the loss of life of the
passengers and aircraft crew. Therefore, it can be concluded the breach of duty of care exists on
part of Sam.
Scenario 1: Loss of an aircraft owned by White Ltd and Mercedes Benz car of value $75,000
owned by Ms Susan Swift
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Business Law
The above losses are foreseeable losses and has incurred because of the beach of duty of care of
Sam. Therefore, Sam is accountable for both the above losses.
Scenario 2: Safmarine Ltd suffered a loss of $250,000 because one passenger could not reach
Sydney due to the cancellation of flight of Blue Ltd because of the presence of contaminated fuel
in the engine.
Sam has notified the pilot of the aircraft owned by Blue Ltd regarding the contaminated fuel and
the possible losses. Also, after getting the information about the inferior fuel quality, pilot did not
take off the aircraft. Therefore, no foreseeable damages were incurred and hence, Sam is not
liable for any losses. However, the loss incurred to Safmarine because of the cancelled aircraft is
categorised under unforeseeable loses for Sam and hence, Sam is not accountable for the loss
suffered by Safmarine.
Scenario 3: Damage of worth $200,000 to the aircraft owned by Green Ltd
Sam has notified the pilot of the aircraft owned by Green Ltd regarding the contaminated fuel
and the expected damages. However, even after getting the information related to the inferior
fuel quality and expected damages, pilot took off the aircraft which resulted in damage to the
airplane worth $200,000. In this scenario, the foreseeable damage could have been prevented if
the pilot had agreed with Sam’s advice to not take off the flight. Hence, no liability would be
applicable for Sam because the losses could have been easily prevented if pilot did not act
negligently.
Conclusion
Sam is accountable for losses suffered by owner of White Ltd and Mercedes Benz but not for
Safmarine Ltd and Green Ltd.
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References
Crosling, G. M. & Murphy, H. M. (2013) How to Study Business Law (4thed.). Sydney:
Butterworths.
Davenport, S. & Parker, D. (2014) Business and Law in Australia (2nded.) Sydney:LexisNexis
Publications.
Gibson, A. & Fraser, D. (2014) Business Law (8thed.). Sydney: Pearson Publications.
Harvey, C. (2009) Foundations of Australian law (2nd ed.), Victoria: Tilde University Press.
Latimer, P. (2016) Australian Business Law CC (1sted.). Sydney: LexisNexis Study Guide.
Lindgren, KE. (2014) Vermeesch and Lindgren's Business Law of Australia (12thed.). Sydney:
LexisNexis Publications.
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