Commercial Law Assignment: Contract Law and Legal System Analysis

This assignment delves into the realm of Commercial Law, commencing with an analysis of the UK and Australian legal systems through the lens of H.L.A. Hart's three-part legal system, encompassing rules of recognition, change, and adjudication. The analysis includes how the legal systems of the UK and Australia address the requirements of Hart's three-part legal system. The assignment then transitions to contract law, examining the essential elements of a valid contract, including offer, acceptance, and consideration, as well as defeating conditions such as misrepresentation. A case study evaluates a scenario involving a business sale, assessing issues of misrepresentation in advertising and the potential for breach of contract. The analysis incorporates relevant case law, such as Fisher v Bell and Smith v Land & House Property Corp, and statutory provisions like the Consumer and Competition Act 2010, to determine the validity of the contract and potential remedies for misrepresentation and breach.

Running head: COMMERCIAL LAW 0
Commercial Law

COMMERCIAL LAW 1
Part A
Question 1(b)
In this file, the legal system of United Kingdom will be analysed to evaluate how it
addresses the requirements of Hart’s three-part legal system. Further, it will be compared
with the legal system of Australia to address the same requirements. Herbert Lionel Adolphus
Hart divided legal rule include two parts which include primary and secondary rules. Hart
provided a legal system requires three types of secondary rules which include rules of
recognition, rules of change and rules of adjudication. The rules of recognition given by Hart
provide to prevent uncertainty about the law and the process of development of the law
should be certain and free from ambiguity. In case of UK, there are three sources of law
which include legislation, common law and European Union law which avoid ambiguity
regarding the formation of a law which proves the availability of rule of recognition principle
given by Hart1. Furthermore, the laws in the UK are changed by the government and the court
when any discrepancies are found in either public or private law.
When any problem emerges on the agenda of the government or based on the request
made by the court, a bill is proposed in the Parliament based on which rules are replaced,
added, deleted or changed. This proves the existence of Hart’s rule of change in the legal
system of UK. The rule of adjudication highlight the limitations in the law by empowering
bodies to determine whether the individual has broken any primary rules and it also provides
the procedure to seek an adjudication2. The legal system in the UK is divided into two parts
which include public law and private law. The public law governs the relationship between
the state and individuals whereas the private law governs relationships between private
organisations and individuals. Different courts have been established in the country which
handles criminal and civil cases based on public laws and private law matters such as
contract, employment, land, negligence, family matters and others issues. In criminal cases,
the concept of mens rea (guilty mind) applies which means the crime has to be proved
without any doubt3. Therefore, it proves that the rule of adjudication is applied in the legal
system of the UK.
1 Richard Ward, Walker & Walker's English Legal System (Oxford University Press, 2011).
2 J. Woodford Howard, Courts Of Appeals In The Federal Judicial System (Princeton University Press, 2014).
3 Mohamed Elewa Badar, The Concept Of Mens Rea In International Criminal Law: The Case For A Unified
Approach (Studies In International And Comparative Criminal) (Hart Publishing Limited, 2013).

COMMERCIAL LAW 2
The three-part legal system given by Hart applies to the legal system in Australia. The
secondary rules given by Hart are included in the Constitution of Australia, and its legal
system is based on English law. The Constitution of Australia of 1901 provides established a
federation of States which is called Commonwealth of Australia, and it defined the scope of
federal powers4. The rule of recognition applies to the Australian legal system because the
authority of law is clear which is given in the Constitution. The judges have the power to
create laws which applies to the courts as long as they did not contradict with the laws
implemented by the Australian Parliament. The Constitution clearly defines the scope of
power; therefore, the rule of recognition applies in the legal system. While comparing it with
the legal system of the UK, both are similar in terms of rule of recognition because the scope
of power is clearly established in both legal systems.
The rule of change also applies in the Australian legal system because the
Constitution has established clear policies for change, replace, delete and adding of the law.
The government proposes the bill in the House of Parliament, and the majority of votes
passes it5. Similarly, as the government of the UK, the Australian government monitors of
application of laws and it proposed new bills for changing, deleting, adding or replacing of
the law. Just as compared to the UK’s legal system, the Australian legal system complies
with the rule of adjudication6. The courts are divided in order to hear criminal and civil
matters. In case of criminal matters, the principle of mens rea applies just as the UK’s legal
system. The hierarchy of the courts includes High Court, Supreme Court, and the Federal
court which are the superior courts. Further, district, magistrate and state tribunals are known
as intermediate, inferior and tribunals respectively. The hierarchy is similar to the court
system in the UK. Therefore, the three-part legal system given by Hart is widely acceptable,
and both Australia and the UK comply with the same.
4 Charles Rembar, The Law Of The Land (Open Road Media, 2015).
5 Roger Cotterrell, Law, Culture and Society (Routledge, 2017).
6 Ihasn Yilmaz, Muslim Laws, Politics And Society In Modern Nation States: Dynamic Legal Pluralisms In
England, Turkey And Pakistan (Routledge, 2016).

COMMERCIAL LAW 3
Part B
Question 2
Issue
The issue is whether a valid contract exists between Barry and Angelo based on the
statements made by Angelo before the contract was established?
Rule
A contract is referred to a legal agreement which binds two or more parties to its
terms. In case of breach or noncompliance with the terms, the party can file a suit against
another party for breach of the contract for enforcing the performance or demand for
damages. In order to form a valid contract, there are three essential elements which are
necessary to be fulfilled by the parties to the contract7. The first essential element is that an
agreement should be established between the parties on definite terms. It is necessary that one
party made an offer for contract to another and the party accepts the offer without any
changes in its terms. The second essential element is the intention of the parties to enter into a
legal contract and create a legal relationship. The third element is consideration provided by
each party which include price, performance or a promise.
Furthermore, there are three possible defeating conditions as well which makes a
contract void such as lack of legal capacity, lack of genuine assent and illegality. An offer is a
crucial element which affects the legality of a contract. It refers a commitment to do or not do
something in return for something to be done or not done by the other party. An offer is
different from an invitation to treat8. The offer is a commitment in the sense that if offeree
accepts the offer than the offeror is bound by its terms whereas an invitation to treat does not
bound its parties and they can negotiate the terms of the contract. The Fisher v Bell (1961) 1
QB 394 is a good example in which the defendant displayed a knife at his shop with a price
tag, and offering of such knife for sale was an illegal offence. A suit was filed against the
shopkeeper, and the court held that display of the knife is not for sale instead it is an
invitation to treat9.
7 Ewan McKendrick, Contract Law (Oxford University Press, 2018).
8 David Echeverry Botero, "Contract Interpretation Law In Australia: It Is A Maze, Not A Straight Way" (2015)
2(41) IUSTA.
9 Jacqueline Martin, The English Legal System (Routledge, 2014).

COMMERCIAL LAW 4
While making an offer, any statement made by the party in order to attract another
party to enter into a legal contract is considered as misrepresentation. A misrepresentation
makes a contract void, and the parties can demand damages. Both common law and the
statutory law provide that false statements make a contract invalid. However, mere opinion
regarding a fast cannot be constituted as a false statement. A good example was given in
Smith v Land & House Property Corp (1884) 24 Ch D 7 case. In this case, the plaintiff made
an offer to sale his hotel by stating that it was let to a “most desirable tenant”. Based on such
statement, the defendant purchased the hotel, and later the tenant become bankrupt. The
plaintiff argued that the statement was mere opinion hence he cannot be held liable. The court
held that the statement made by the plaintiff was a false statement rather than a mere opinion;
therefore, he is liable for the damages. Although common law considers advertisement as an
invitation to treat, however, section 29 of the Consumer and Competition Act (2010) in
statutory law provides that any misleading advertisement is considered as misrepresentation
based on which parties can be held liable10.
Application
In the case of Barry, Angelo issued an advertisement in the paper regarding sale of a
business that is highly profitable and has no competitors. The advertisement is an invitation
to treat because it cannot accept by anyone and parties are required to enter into a contract
with Angelo. As per the judgement of Fisher v Bell case, parties cannot be held liable or
bound by the offer in case of invitation to treat. However, as per Consumer and Competition
Act 2010, Angelo can be held liable for posting misleading advertisement. Furthermore,
Angelo told Barry that expenses of the business were $8,000 for a month whereas Barry had
to pay $8,500. Although Angelo can claim that the number of expenses was just an opinion,
however, he was the owner of the business, and he is expected to know its expenses.
Therefore, it can be argued that Angelo made the statements to attract Barry to enter into a
contract. As per Smith v Land & House Property Corp case, Angelo can be held liable for
misrepresentation for providing a false statement regarding his business to Berry, and he can
claim for damages.
10 William Kolasky, "'Unfair Methods Of Competition': The Legislative Intent Underlying Section 5 Of The
Federal Trade Commission Act" [2014] SSRN Electronic Journal.

COMMERCIAL LAW 5
Conclusion
To conclude, the advertisement is an invitation to treat however as per statutory law
Angelo can be held liable for misrepresentation. In case of misleading information about
expenses, Barry can held Angelo liable for providing misleading information.
Question 3
Issue
The issue with whether Barry can file a suit against Angelo for breach of contract?
Rule
A contract legally binds its parties into its terms and noncompliance of such terms
resulted in a breach of a contract. In case of a breach of contract, the party can file for
damages against another party for non-fulfilment of contracting terms11. The remedies for
breach of contract include rescission, damages, specific performance, injunction and
repudiation. In repudiation, the contract comes to an end. In rescission, the party is allowed to
go back to the position of pre-contractual position. As provided in Victoria Laundry
(Windsor) Ltd v Newman Industries Ltd (1949) 2 K.B. 528 case, the court held that the party
could only claim for damages which may reasonably occur due to breach of the contract.
Furthermore, the aggrieved party can also claim for specific performance of the contract to
avoid the losses which occur due to breach of the contract12. The remedy of injunction stops a
party from breaching the terms of the contract to avoid the losses.
Application
In this case, Angelo provided that the business makes a profit of $20,000 in a month
and it did not have any competitors. Although both of the statements are false but they are
provided in the advertisement, and as discussed above they were a part of an invitation for
treat rather than the actual contract. Therefore, Barry cannot claim for damages from Angelo
based on these factors. The selling contract includes the costs for delivery van and loader,
however, Angelo did not tell Barry that the van is on the lease. Angelo made a false statement
that the monthly expenses of the business are $8,000 whereas after including the lease
amount of the van, Barry has to pay expenses of $8,500. Based on this misrepresentation,
11 John Carter, "Good Faith In Contract: Why Australian Law Is Incoherent" [2014] SSRN Electronic Journal.
12 Manju Nandana, "The Implied Terms And The Damages Of Contracts Under Common Law" [2018] SLQS
Journal.

COMMERCIAL LAW 6
Barry can file a suit against Angelo for breach of the contract and claim for rescission. Barry
can ask for repayment of $15,000 which he paid for purchase of the van, and he can also
claim for additional damages which he had to pay because of the misrepresentation of
Angelo. As provided in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd case, the
motive of remedies is to claim for damages which occurred due to breach of contract. In case
of the loader, nothing was stated in the contract, and there was ambiguity regarding its
working condition. Therefore, it would be difficult for Barry to claim for damages for Angelo
regarding the loader.
Conclusion
To conclude, Barry can fail a suit against Angelo for claiming the damages for the van
and addition expenses. He can file the suit for either misrepresentation or breach of contract.
Further, no information was given in the contract regarding the loader; therefore, Barry might
not succeed in getting damages for the loader.