LAWS20058 Australian Commercial Law Assignment - Term 2 Solution

This document presents a comprehensive solution to an Australian Commercial Law assignment, addressing various legal issues. Part A examines contract law, including intention to create legal relations, misrepresentation, and restraint of trade clauses, analyzing scenarios involving Sally and Ethan. Part B focuses on consumer law, specifically the rights and remedies available to Sally under the Australian Consumer Law (ACL) against Good Health Help Pty. Ltd. regarding medical services and statutory guarantees. Part C delves into negligence, exploring Sally's rights against David under common law and state legislation, examining duty of care, breach of duty, and causation based on the provided case facts. The solution incorporates relevant case laws, legislation, and legal principles to support the analysis and conclusions.

Running Head: BUSINESS AND CORPORATION LAW 0
Australian Commercial Law
9/10/2019
Student’s Name

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Contents
Part A...............................................................................................................................................3
Question 1 3
Issue..........................................................................................................................................3
Rules.........................................................................................................................................3
Application...............................................................................................................................3
Conclusion................................................................................................................................4
Question 2........................................................................................................................................4
Issue..........................................................................................................................................4
Rules.........................................................................................................................................4
Application...............................................................................................................................5
Conclusion................................................................................................................................6
Question 3........................................................................................................................................6
Issue..........................................................................................................................................6
Rules.........................................................................................................................................6
Application...............................................................................................................................7
Conclusion................................................................................................................................7
Part B...............................................................................................................................................7
Issue 7
Rules 7
Application 9
Conclusion 9
Part C...............................................................................................................................................9
Issue 9
Rules 9
Application 11
Conclusion 11
Bibliography..................................................................................................................................12

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Legislations 12
Case Laws 12
Books/ Journals 12
Other Resources 12

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Part A
Question 1
Issue
Whether an intention to create legal relationship between Sally and Ethan existed there? If yes,
how the court would determine the same.
Rules
Intention to create a legal relationship is one of the crucial elements of contracts. In general, the
court does not consider this element to be presented in the social and domestic agreements and
therefore such agreements fail to become a contract as decided in the case of Jones v Padavatton
1. Nevertheless, in many of the cases, such intention found to be there even after the social
relationship between the parties considering other elements2. In the case of Errington v Errington
Woods3, the court decided that if parties to the contract develop written contract then an intention
to create legal relation looks to be there.
Application
In the case presented hereby, Sally and Ethan are two parties to the contract. They are cousins
and in this manner has a social relationship. Sally sold her business to Ethan for consideration of
$155,000. They have developed a contract of sale for this transaction and applying the provisions
of Errington v Errington Woods, seems to be held intention to create legal relations.
1 Jones v Padavatton [1969] 1 WLR 328 Court of Appeal
2 E-lawresources.co.uk, Intention to create legal relations (E-lawresources.co.uk) < http://www.e-
lawresources.co.uk/Intention-to-create-legal-relations.php>.
3 Errington v Errington Woods [1952] 1 KB 290

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Conclusion
As parties have developed a written contract, it shows that they had the intention to develop legal
relation while entering into an agreement and the court will determine this by taking references
of above-discussed cases.
Question 2
Issue
Whether there was a misrepresentation of fact? If yes, whether such misrepresentation motivated
Ethan to pursue the contract? What remedies Ethan would have now?
Rules
At the time of development of a contract, parties make many statements to each other. Some of
these statements are only puffed i.e. sales talks and many of them are terms of the contracts. A
misrepresentation generally consists of a statement, which is not true. To prove such
representation in a case, certain requirements are needs to be satisfied. Firstly, a false statement
is required to be there.
Another requirement is inducement or reliance. This requirement says that every person who
claims the presence of misstatement is required to prove that the misstatement induced him/her
to enter into the contract. In the case of Horsfall v Thomas4, it was held that if there is a
misstatement but representee was unaware of the same then no inducement can be held to be
there5. Inducement is an important factor of misrepresentation, which is required to be a check
upon. The case of Attwood v Small6 is another important case, which helps in checking whether
the representee relied on the misstatement, or not. In this case, the claimant was to purchase an
4 Horsfall v Thomas [1862] 1 H&C 90
5 Mindy Chen-Wishart, Contract Law (OUP Oxford, 2012)
6 Attwood v Small [1838] UKHL J60

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estate and his accountant checked the validity of accounts and was satisfied. After this
verification claimant purchased the assets and later found that, the accounts showed the incomes
in a greatly exaggerated manner. The court held claimant failure in his claim since he got his
experts to check out the reports and did not rely on misstatement made by seller. It means in
those cases where the claimant or his/her agent check the validity of a fact, it is assumed that
they had not relied on any misstatement. In the case titled Redgrave v Hurd7, the court held that
in those cases where representee has chance to verify the facts of misstatement but do not check
the same, then also he/she would have a remedy under law.
If to discuss remedies available in case of misrepresentation, this is to state that the same
depends on the type of misrepresentation. If representor knows, the truth yet makes a false
statement then such kind of misstatement knows as fraudulent misstatement and the innocent
party has the right to cancel the contract in addition to asking for damages.
Application
In the case presented hereby, Sally made misrepresentation regarding the profit of the business
and showed the trading figures for the last 3 years. Since Ethan had no experience of business, he
believed in Sally. Ethan was aware of the statement made by Sally in the case and entered into a
contract believing that the business was profitable. Neither he nor any of his agent checked the
validity of accounts and statement made by Sally. Here applying the provisions of
misrepresentation discussed above and the decision of the case of Attwood v Small, the court can
held Ethan entitled to claim remedies under misrepresentation. Sally was running the business,
she was going out of money, and in such a manner, she is assumed to be aware of the true
7 Redgrave v Hurd (1881) 20 Ch D 1

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situation of the business. Therefore, the misstatement will be counted as fraudulent
misrepresentation.
Conclusion
Ethan would be entitled to cancel the contract and to ask for damages, as the misrepresentation
was a fraudulent one.
Question 3
Issue
Whether the restraint of trade clause mentioned under the contract is valid or not? If yes then
what remedies are available to Ethan?
Rules
A restraint of trade clause is the one, which limits the right of a person to carry a business or
trade in a free manner, and therefore such clauses are void at prime facie. Nevertheless, some
such clauses are valid which are reasonable between the parties and also reasonable in public
interest. To check whether a clause is reasonable or not, the court applies a certain test under
common law. The first test is related to the area of restraint. Courts check whether the decided
area is reasonable or not. In another test, a court, check the periods of restraint and type of
business. In the case of Attwood v Lamont8, the court held the restraint clause void as it was
going beyond the job of person and was looking unreasonable for this reason9.
If such a clause is held valid then, the innocent party has right to enforce such clause and to
restrict the other person by carrying the business activities.
8 Attwood v Lamont [1929] 3 KB 571: V & L 12.29
9 Chris Turner, Key Facts: Employment Law (Oxon: Routledge), 26.

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Application
In the case presented hereby, restraint of trade clause was for convenience store and the business
sold by Sally was also a convenience store. Further, the clause does not seems to be in breach of
any public policy and hence in the opinion of the court seems to held reasonable. Since Sally
started doing the same business within the limit of 20 km from the old business and that too just
after a year, she breached the clause in this manner.
Conclusion
As trade clause was valid and Sally breached the same so Ethan now has the right to enforce the
clause and can seek the remedy for the closure of Sally's new business.
Part B
Issue
What action Sally can take against Good Health Help Pty. Ltd being a consumer under
Australian Consumer? What guarantees will apply in this case and what remedies will be
available to her.
Rules
Under Australian Consumer Law, consumers have certain remedies against the seller of goods
and provider of services. The provisions of ACL can be found under schedule 2 of Competition
and Consumer Act 201010. To protect the interest of the consumer, ACL provides certain
statutory guarantees in respect to quality and other aspects of goods and services. The guarantees
related to services are mentioned under 60 to 63 of ACL. The very first and significant guarantee
is mentioned under 60 of the act. As per this section, if a person supplies services to the
consumer then there is guarantee related to the quality of services which says that supplier of
10 Competition and Consumer Act 2010

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services must render the services with skills and due care11. It means whenever a person provides
certain services to the consumer the same is required to be careful and must keep care while
doing so as failure to do the same attracts the issue of breach of guarantee under section 60 of
ACL.
The subjective law does not only provide provisions related to guarantee but it also enlightens
remedies in case of breach of guarantees. Section 267 of the act states remedies in case of
failures to comply with the guarantees. Subsection 3 of the act states that if the failure is a major
failure by the supplier of services and cannot be remedied then consumer may withdraw the
contract and can also demand the compensation for the decrease of value of services because of
such failures12. Further subsection 4 of the section confirms that the consumer suffered from the
action of supplier may also ask for damages in if a loss occurred to the consumer that was
reasonably foreseeable by the supplier of services.
Section 268 of ACL clarifies the failures that can be considered as major ones. Clause d of
section 268 of the act provides that if services are not of nature or quality which are reasonably
expected in a normal circumstance to achieve the desired results and now are not possible to
remedied then such failure is known as a major failure. Clause d of section 268 of ACL further
states that if provided services create an unsafe situation then also it is treated as a major failure.
Application
In the presented case, Sally went to take medical services from Good Health Help Pty.Ltd. Here
the issue of the case started when the medical staff of the company provided wrong advice to her
11 Australiancontractlaw.com, Schedule 2: Australian Consumer Law (Australian Contract Law) <
https://www.australiancontractlaw.com/legislation/acl/acl60.html>.
12 Jenny Kojevnikov and Kathryn Edghill, Australia: Statutory Guarantees Under the Competition and Consumer
Act: A Can of Worms - Part 2 (Mondaq)
<http://www.mondaq.com/australia/x/170910/Consumer+Law/Statutory+Guarantees+Under+the+Competition+and
+Consumer+Act+A+Can+of+Worms+Part+2>.

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according to which she was required to have back surgery. Applying the provisions of Section 60
of ACL, it is guaranteed that the services provided by a provider must come with due care and
skills. Assuming that Good Health Help Pty. Ltd produced the X-ray reports only, the subjective
guarantee seems to be a breach. Before providing any advice to Sally, the staff members were
required to check the authenticity of x-ray and other reports but they failed to do so. This seems
to be a major failure under clause d and e of section 268 of ACL. If to discuss the remedy for this
failure this is to state that under section 267 (3) Sally can ask for the compensation for the poor
service as well as can also ask the amount of damages as being a medical error the risk was
foreseeable for the staff members of Good Health Help Pty. Ltd.
Conclusion
Conclusively Sally can take the action against Good Health Help Pty. Ltd for commendation as
well as for damages occurred to her.
Part C
Issue
What rights related to negligence Sally has against David under common law as well as under
state legislation.
Rules
Under Common law, tort law consists of provisions related to negligence. As per the provisions
of Tort Law, negligence is defined as a situation where a person who owes a duty of care
breaches the same. Duty of care refers to the liability to behave responsibly. It means negligence
is a position where someone fails to act responsibly. For an effective claim of negligence, certain

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elements are required to be there which has been set out under the case of Donoghue v
Stevenson13. The very first element is the presence of duty of care.
According to the facts and decision of the case of Caparo Industries plc v Dickman14 a duty of
care present in those cases where claimant and defendant has a relationship of proximity in
mutual, the risk was foreseeable by the defendant and imposing the penalty to the defendant was
fair and just15.
Another element is the breach of such duty. The third element states that claimant must suffer
with certain loss and as per the fourth and last element; such loss must be a straight result of the
action of the defendant. If all the four elements of negligence present in a case then the claimant
can ask for damages. Damages can be demanded monetary losses, physical injury, and
psychiatric injury.
Apart from the common law, statues also consist of provisions of negligence. In Australia,
different states have different civil liability act that provides provisions related to negligence. In
the Victoria state of Australia, Wrongs Act 195816 is there which provides provisions such as
damages and remedies for all kind of losses out of a claim of negligence. This act includes
remedies for cases such as falls or slips at public places that result in medical treatment. In such a
situation, a person can ask damages for economic as well as for non-economic damages under
division 2 of the act17. As per section 48 of the act, a person is held liable for negligence where
13 Donoghue v Stevenson [1932] AC 562
14 Caparo Industries plc v Dickman [1990] UKHL 2
15 Matthias Kloth, Immunities and the Right of Access to Court Under Article 6 of the European Convention on
Human Rights (BRILL, 2010), 167.
16 Wrongs Act 1958 (Vic)
17 Nicole Norris and Jessica Rosla, Australia: Do the Victorian Wrongs Act thresholds for non-economic loss apply
to ACL claims? (Mondaq) <
http://www.mondaq.com/australia/x/778300/Personal+Injury/Do+the+Victorian+Wrongs+Act+thresholds+for+none
conomic+loss+apply+to+ACL+claims>.

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the risk is significant, was foreseeable and could be prevented by taking reasonable steps which
have not been taken. Section 50 of the act outlines that a person who owes duty of care has also a
duty to warn of risk. Further section 51 says that action can be taken against defendant if
negligence was a lead reason behind harm.
Application
Starting the discussion from the applicability of Tort Law to the case this is to state that applying
the provisions of Caparo Industries plc v Dickman, David seems to have a duty of care to Sally
as being the visitor of the store she had the relationship of proximity with David and David could
foresee the incident. Further imposing penalties to David also sound fair and just. In this manner,
the first element of negligence is established here. The second element i.e. breach of duty of care
was also there as David did not take any steps to fix the wet and slippery floor. Because of this
wet floor, Sally slipped and got a physical injury. In this manner, the third and fourth condition
of negligence is also satisfied here. Here Sally can ask damages for physical injury under Tort
Law.
Moving the focus towards remedies under Wrongs Act 1958, this is to state that Sally slipped at
a public place and occurred injury in her back. Applying the provisions of 48 of the act,
negligence presented in the case as risk was foreseeable, significant and could be prevented. It
was duty of David under section 50 to warn Sally but he failed to do so and under section 51 the
injury was a direct result of negligence of David.
Conclusion

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Conclusively this is to state that yes, Sally can take legal action against David under Common
Law and State legislation as all the conditions are satisfied.
Bibliography
Legislations
Competition and Consumer Act 2010
Wrongs Act 1958 (Vic)
Case Laws
Attwood v Lamont [1929] 3 KB 571: V & L 12.29
Attwood v Small [1838] UKHL J60
Caparo Industries plc v Dickman [1990] UKHL 2
Donoghue v Stevenson [1932] AC 562
Errington v Errington Woods [1952] 1 KB 290
Horsfall v Thomas [1862] 1 H&C 90
Jones v Padavatton [1969] 1 WLR 328 Court of Appeal
Redgrave v Hurd (1881) 20 Ch D 1
Books/ Journals
Kloth, Matthias , Immunities and the Right of Access to Court Under Article 6 of the European
Convention on Human Rights (BRILL, 2010), 167.
Turner, Chris, Key Facts: Employment Law (Oxon: Routledge), 26.

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Other Resources
Australiancontractlaw.com, Schedule 2: Australian Consumer Law (Australian Contract Law) <
https://www.australiancontractlaw.com/legislation/acl/acl60.html>.
E-lawresources.co.uk, Intention to create legal relations (E-lawresources.co.uk) < http://www.e-
lawresources.co.uk/Intention-to-create-legal-relations.php>.
Jenny Kojevnikov and Kathryn Edghill, Australia: Statutory Guarantees Under the Competition
and Consumer Act: A Can of Worms - Part 2 (Mondaq)
<http://www.mondaq.com/australia/x/170910/Consumer+Law/Statutory+Guarantees+Under+the
+Competition+and+Consumer+Act+A+Can+of+Worms+Part+2>.
Nicole Norris and Jessica Rosla, Australia: Do the Victorian Wrongs Act thresholds for non-
economic loss apply to ACL claims? (Mondaq) <
http://www.mondaq.com/australia/x/778300/Personal+Injury/Do+the+Victorian+Wrongs+Act+t
hresholds+for+noneconomic+loss+apply+to+ACL+claims>.