Business Law Assignment: BUMAN103A - Partnership, Contracts & Damages

This document presents a comprehensive solution to a Business Law assignment, addressing three key legal issues using the IRAC method (Issue, Rule, Application, Conclusion). The first question examines the existence of a partnership between Michael and Kate in a restaurant business, analyzing their liabilities regarding a truffle order. The second question focuses on contract terms, differentiating between conditions and warranties in a bike purchase agreement between Damion and Cassandra. The third question explores expectation damages, determining Sarah's entitlement to recover losses from Vincent Lee due to a breach of contract, considering foreseeability and relevant case law like Hadley v. Baxendale. The solution thoroughly applies legal principles and case precedents to each scenario, providing a clear and logical analysis of the issues.

Question 1
Issue: it has to be seen if there is a partnership between Michael and Kate. And as a result, Kate
is bound by the liabilities of the business that have been incurred by Michael.
Rule: the relationship of partnership is present between the persons who are carrying on a
business; in common; and with a view to profit. In case of a partnership, there is an agreement
between two or more parties performed legally binding relationship. Essentially this relationship
is conceptual in nature. In Green v Beesley (1835), the partnership has been described as a
mutual participation yet the participants don't form a legal entity, while creating a partnership. In
this way, and not in a partnership can be described as a partnership that comprises of definite
individuals who are bound jointly by contract created between themselves for jointly working for
common objective, either during pleasure or for a limited time. Essentially, partnership
comprises the persons who have generally entered into the contract with each other (Smith v
Anderson, 1880). According to the partnership act, the three elements that are essential for
establishing the presence of a partnership can be described as follows:-
 Carrying on of the business;
 In common;
 With a view to profit.
On the other hand, if any of these elements is not present, the relationship between the parties
cannot be described as a partnership. The law provides that the partners are jointly and severally
liable for the debts and obligations of the business.

Application: In the present case, Michael and Kate are running the restaurant business jointly.
Each of them had contributed capital for the establishment of the business. Both of them are
equally and acted the involved in the business. It was agreed between them that all costs of the
business will be shared equally by them. Similarly, any profit will also be divided equally
between them. Under these circumstances in order of a shipment of truffles was made by
Michael. He had placed this order without consulting Kate. Two days later, Michael had to go, as
his father was ill. While Michael could not be contacted, Kate received a letter from Australian
Truffles Delicacies claiming the price of the truffles. Considering the effects of the present is, it
can be said that Michael and Kate were running the business as a partnership. Therefore, they
can be held liable to pay for the truffles.
Conclusion: in this case, Kate is liable to pay for the truffles that have been ordered by Michael.
The reason is that they are considered to be running the business as a partnership.

Question 2
Issue: The issue here is related with the terms and conditions of the contract created between
Damion and Cassandra.
Rule: Every contract has key terms. These terms fall into different categories. The parties made
expressly agree regarding the terms of the contract, orally or in writing. At the same time, terms
may also be implied by the law in a contract or from the conduct of the parties, custom, previous
dealing or the intention of the parties.
In this context, the terms of a contract can be described as conditions, warranties and innominate
terms. This can be specified by the parties and the contract or implied by the nature of the or
implied by law.
A term of the contract can be described as a condition if in case of a breach of the term, the other
party gets the right to either terminate the contract or performing. At the same time, in such a
case, the aggrieved party also has the right to claim damages.
On the other hand, in case of a breach of warranty, the other party does not get the right to
terminate the contract. Therefore in case of a breach of warranty, the aggrieved party only gets
the right to claim damages. In this way, a term can be described as a condition if it is a basic term
of the contract and goes to the root of the contract. Conversely, a statement or an assurance made
regarding a factual matter will generally be considered as a warranty. The difference between the
two can be explained with the help of famous cases of Poussard v Spiers (1875) and Bettini v
Gye (1875).
In case of innominate terms, the remedy for the breach of contract depends on the effect of the
breach. Therefore, if the breach has substantial effect on the eve party, it will be considered as a

basic term and give a right to such party to terminate the contract. If this is not the case, the
aggrieved party may only claim damages.
Application: in the present case, it was a condition that the bike should be made in Japan.
Another condition was that the bike should be of midnight blue color. However, it was a
warranty that it was a fantastic bike.
Conclusion: in the present case, there has been a breach of condition. This provides the right to
Damien to terminate the contract.

Question 3
Issue: The issue present in this question is, if Sarah is entitled to recover the expectation damages
from Vincent Lee?
Rule: expectations loss can be described as the usual measure of damages that may be awarded
by the gays in case of a breach of contract. Expectation damages refer to the loss of a bargain
suffered by the innocent party, like the profit that would have been expected to be made by such
a party in the contract was performed properly, less the cost. That would have been incurred by
the party to earn such profit. The purpose behind awarding expectations loss damages is to raise
the innocent party in a similar position where it would have been if the contract was performed
properly. Expectation loss has to be contrasted with reliance loss, which is also a measure of
damages awarded in case of breach of contract and generally known as wasted expenditure.
In Hadley v. Baxendale (1854) the crankshaft of the steam engine of the mill broke down. A
replacement was ordered from a supply would require that the broken shaft should be provided
for making sure that the replacement was fabricated to correct dimensions. Under these
circumstances, Baxendale was hired for delivering the old shaft supplier by a particular date. But
there was a delay in the delivery. Consequently, Hadley was delayed in receiving the
replacement shaft. During this time the mail cannot be operated and he lost business. Therefore
he sued Baxendale for lost profit.
The Court has stated that the lost profits were not the reasonably foreseeable consequence of the
failure of Baxendale to perform the contract on time.
Application: because in the present case, Sarah had not informed Vincent Lee regarding the
orders with the local hospital and the special orders for glutton free wedding cake, she cannot be
allowed to claim these damages from Vincent Lee.

Conclusion: Sarah may claim damages for the breach of contract from Vincent Lee but she
cannot be allowed to claim expectation damages for the loss of profit suffered by her as a result
of the breach of contract.

References
Bettini v Gye (1875) L.R. 1 QBD 183
Green v Beesley (1835) 2 Bing N C 108
Hadley v Baxendale [1854] EWHC J70
Poussard v Spiers (1875) L.R. 1 QBD 410
Smith v Anderson (1880) 15 Ch D 247