LAWS20058: Australian Commercial Law Individual Assignment - Term 3

This report provides a detailed analysis of an Australian Commercial Law assignment, addressing three key scenarios. Part A examines the enforceability of an oral agreement between Wing and Tom, exploring offer, acceptance, consideration, and intention, and concluding that the agreement is not ...Read More

Running head: AUSTRALIAN COMMERCIAL LAW
AUSTRALIAN COMMERCIAL LAW
Name of Student
Name of University
Author Note

1AUSTRALIAN COMMERCIAL LAW
Table of Contents
Part A.........................................................................................................................................2
Issue 1.....................................................................................................................................2
Rule 1.....................................................................................................................................2
Application 1..........................................................................................................................3
Conclusion 1...........................................................................................................................3
Issue 2.....................................................................................................................................4
Rule 2.....................................................................................................................................4
Application 2..........................................................................................................................4
Conclusion 2...........................................................................................................................5
Part B..........................................................................................................................................5
Issue........................................................................................................................................5
Rule........................................................................................................................................5
Application.............................................................................................................................6
Conclusion..............................................................................................................................7
Part C..........................................................................................................................................7
Issue........................................................................................................................................7
Rule........................................................................................................................................7
Application.............................................................................................................................8
Conclusion..............................................................................................................................8
Reference....................................................................................................................................9

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Part A
Issue 1
The issue that can be raised in the given scenario is whether there was an enforceable
agreement between Wing and Tom.
Rule 1
Under the provisions set down in the common law an oral agreement has been
described as a method of business contract that has been agreed by way of spoken terms and
not in written form. An oral contract would be considered to be legally valid if the agreement
is found that both parties had intended in carrying out the contract and secondly there have
been an exchange of consideration.1
For considering a verbal contract to become valid three elements are required to be
established- existence of a valid offer and acceptance, exchange of consideration and the
existence of intention between the parties to be entering into a lawful relationship. These
essential elements have been discussed in the judgment of the landmark case of Carlill v
Carbolic Smoke Ball Company [1892] EWCA Civ 1.2
The validity of the statements of agreement for becoming representative or
promissory depends solely on the intents of the parties. This was held in the judgment of the
leading case of Hospital Products Ltd v United States surgical Corporation [1984] HCA 643.
1 Abebe, Gumataw K., et al. "Contract farming configuration: Smallholders’ preferences for contract design
attributes." Food Policy 40 (2013): 14-24.
2 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
3 Hospital Products Ltd v United States surgical Corporation [1984] HCA 64

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The courts in their judgment in Joachim v. Weldon (1962) OK 276 380 P.2d 940 4held
that if any element construing a valid contract is seen to be missing from any oral agreement
then the oral agreement would not be considered as valid.
Application 1
In the given scenario it was observed that Wing, an IT programmer was employed by
Tom in his business named Tom’s Computer. A major part of the success of the business of
Tom’s Computer was considered to be because of the ideas and programming by Wing. In
the given case study it was observed that Wing was approached by Jerry’s Computers, which
is a competitor to Tom’s Computer, to join as a partner in the company and leave Tom’s
Computers. However, Tom was seen as proposing to Wing a double salary and equal partner
in his company if Wing does not leave the company. This was agreed by Wing.
Applying the decision made by the court in the Carlill case it can be said that Tom
offered Wing to stay in his company which Wing accepted. For this offer the consideration
that had been exchanged was double salary by Tom in exchange of the continued
employment service of Wing. However, the third element, that is, the mutual intention was
not fulfilled in the given scenario. Although Wing intended to follow the agreement, but Tom
had no intention to follow his part of the agreement.
Applying the decision of the court in the Hospital Products Ltd case in this case study
it can be stated that the agreement would be promissory rather than being representative as
Tom did not intend to be bound by the offer he proposed to Wing.
In context to this, in the given case study, as the final element which construes a valid
contract, the element of mutual intention, is missing therefore, applying the decision of the
Joachim case it can be said that the oral agreement between Wing and Tom is not valid.
4 Joachim v. Weldon (1962) OK 276 380 P.2d 940

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Conclusion 1
From the above discussion it can be concluded that the agreement between Tom and
Wing is not enforceable.
Issue 2
The issue that can be raised in context to the given scenario is whether Wing would be
successful in claiming for the breach of contract against Tom.
Rule 2
In their judgment in the case of Gordon v Selico [1986] 18 H.L.R 2195, the judges
were seen as stating that in any situation where an individual makes any false statement
which makes another person to enter in any contract which they would not have entered into
in normal circumstances then it would be amounting to breach of contract.
For any breach of contract under the common law, the court might order for either
termination or performance of the contract or entitle the aggrieved party for damages6.
Application 2
In the given scenario, it can be observed that Tom proposed to Wing to stay in his
company. In exchange for Wing’s continued service in his company Tom was observed as
offering double salary and equal partnership in the company to Wing. By considering the
offer Wing was seen to be agreeing to stay in Tom’s Computer. However, at the time of
following the terms agreed upon, Tom refused to acknowledge the agreement.
Applying the decisions in the Gordon case in this scenario it can be stated that Tom
had made a false statement to Wing which made Wing enter into the agreement. Therefore,
5 Gordon v Selico [1986] 18 H.L.R 219
6 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

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when Tom refused to increase Wing’s salary or make him an equal partner, it amounted to
the breach of contract by way of misrepresentation.
In the given scenario Wing can claim for the damages he suffered as an available
remedy for the breach of contract.
Conclusion 2
Thus from the above discussion it can be concluded that in the given situation Wing
can claim for damages for breach of contract from Tom.
Part B
Issue
The primary issue that can be raised in the given scenario is whether Wing can take
any legal action against Lies IT Pty. Ltd under the provisions of the Australian Consumer
Law.
Another issue that can be raised in context to the given case study is whether there are
any remedies and guarantees available to Wing.
Rule
The schedule 2 of the Competition and Consumer Act7 provides for the legislation for
protection of the consumers, known as the Australian Consumer Law (ACL). Under section
18 of the ACL any person who participates in commerce or trade cannot participate in any
kind of misleading conducts. This provision was discussed in the judgement of Australian
Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 548.
7 Competition and Consumer Act, sch 2
8 Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54

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Section 23 of the Australian Consumer Law provides any term in contract which
essential towards the completion of the contract between two parties. As per this section a
contract would be considered as being void unless the term for which controversies have
raised are addressed. This was held in the judgement of Directors of Consumer Affairs
Victoria v Craig Langley Pty Ltd Ltd & Matrix Pilates & Yoga Pty Ltd [2008] VCAT 4829.
The Australian Consumer Law can also be seen as providing the available remedies
for the breach of the provisions in the ACL. In section 138 of the ACL the provisions for the
remedy to granted to the aggrieved parties include payments for the damages that have been
suffered by the aggrieved party for the misleading and false conduct of the person who has
been engaged in trade.
Application
In the given scenario it can be observed that Wing had bought a computer and laser
printer and scanner from Lies IT Pty Ltd. There was a 12 month unconditional guarantee that
had been provided by the company which also provided the refunds fully in case the products
are found to be faulty.
Applying the judgment in TPG Internet case in this context it can be said that Lies IT
Pty Ltd has the duty to not be participating in any kind of misleading or deceptive behaviour
in commerce or trade. However, in the given scenario the advertisement of the 12 months
guarantee is not enforceable.
Applying the judgment in the case of Directors of Consumer Affairs Victoria v Craig
Langley Pty Ltd Ltd & Matrix Pilates & Yoga Pty Ltd [2008] VCAT 482 in the given
9 Directors of Consumer Affairs Victoria v Craig Langley Pty Ltd Ltd & Matrix Pilates & Yoga Pty Ltd [2008]
VCAT 482

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circumstance it can be stated that the contract entered into by the parties would be considered
to be void if there was any absence of the consideration.
As per section 138 of the Act the Lies IP are observed to be in breach of their duty
when they failed to repair the damages to the device and pay for any damages that the court
might find is appropriate.
Conclusion
Thus it can be concluded that Wing can take legal actions against Lies IT Pty Ltd. It
can further be concluded that Wing will be eligible for claiming damages.
Part C
Issue
The issue in the given scenario is whether any action can be taken by Wing against
Betty under the negligence law.
Rule
The term professional negligence can be described as the breach of a professional to
the duty of care they owe to their clients. Under the common law of torts the duty of care has
been established as the expectation of a client towards any professional having a certain
degree of professionalism.10
The concept of duty of care was first established in the decision of the judges in the
landmark Donoghue v Stevenson [1932] UKHL 10011. In this case it was held that for a
successful negligence claim the defendant needs to establish that the plaintiff owed them a
10 Fraser, Gordon Rowland. Landscape Professional Practice. Routledge, 2016.
11 Donoghue v Stevenson [1932] UKHL 100

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duty of care which they breached and because of the breach the defendant suffered physical,
emotional or economic harm.
To reach into a verdict the judges in the landmark Caparo Industries Plc v Dickman
[1990] 2 AC 605 12established a three step test named the Caparo Test. By way of the test the
foreseeability of the harm, the proximate relation between the parties and fairness of the duty
of care is tested to establish a successful negligence claim.
Application
In the given scenario, Wing gave Betty the responsibility of investigating the business
he was buying. Betty was seen as making serious accounting error which caused Wing to lose
all the money he invested in the business.
Applying the Donoghue case in the given scenario, it can be seen that Betty, as an
accountant of Wing, had a duty of care towards him. She was seen as breaching the duty
when she made serious accounting error, which caused economic loss to Wing.
Applying the Caparo Test in this case study it can be observed that as an accountant it
was reasonably foreseeable for Betty the financial condition of the business and what
situations might arise from that condition. As Betty was the accountant of Wing, she has a
proximate relation with him. Thirdly, as Betty is Wing’s accountant, therefore as a
professional her duty of care towards Wing is just and fair.
Therefore considering all the factors Betty was negligent in her duty towards her
client Wing.
Conclusion
Thus in conclusion to the above discussion it can be stated that action can be taken by
Wing against Betty under the negligence law.
12 Caparo Industries Plc v Dickman [1990] 2 AC 605

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Reference
Abebe, Gumataw K., et al. "Contract farming configuration: Smallholders’ preferences for
contract design attributes." Food Policy 40 (2013): 14-24.
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54
Caparo Industries Plc v Dickman [1990] 2 AC 605
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Competition and Consumer Act
Directors of Consumer Affairs Victoria v Craig Langley Pty Ltd Ltd & Matrix Pilates &
Yoga Pty Ltd [2008] VCAT 482
Donoghue v Stevenson [1932] UKHL 100
Fraser, Gordon Rowland. Landscape Professional Practice. Routledge, 2016.
Hospital Products Ltd v United States surgical Corporation [1984] HCA 64
Joachim v. Weldon (1962) OK 276 380 P.2d 940
McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK),
2014.