Commercial and Corporation Law Case Study: Breach of Contract Analysis

This case study examines a commercial law dispute where Bob Burke, setting up a marketing business, secured a verbal assurance from Southfield Shopping Centre Ltd that no competing businesses would be allowed to lease premises. Despite this assurance, a similar business was later permitted, leading to a decline in Bob's business. The assignment analyzes the legal issues, including breach of contract, misrepresentation under the Australian Consumer Law, and the applicability of the parole evidence rule. It explores whether the verbal agreement constitutes a collateral contract and examines potential remedies available to Bob, such as damages and ancillary orders. The analysis considers relevant case law, including L’Estrange v F Graucob Ltd, DeLasselle v Guildford, and Wardley Australia Ltd v Western Australia, to determine Bob's rights and the company's liabilities. The conclusion suggests Bob can sue for breach of collateral contract, despite signing a contract with a disclaimer clause, based on the misrepresentation and breach of the verbal assurance.

Running head: COMMERCIAL AND CORPORATION LAW
COMMERCIAL AND CORPORATION LAW
Name of Student
Name of University
Author Note

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Table of Contents
Facts.................................................................................................................................................2
Issue.................................................................................................................................................2
Rule..................................................................................................................................................3
Application......................................................................................................................................3
Conclusion.......................................................................................................................................5
Reference.........................................................................................................................................6

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Facts
In the given case it can be seen that Bob Burke who worked for a marketing firm for
three years, decides to establish his own business. The business specializes in marketing issues
relevant to business websites. For setting up his business he inspects an office in a new shopping
centre owned by Southfield Shopping Centre Ltd in Melbourne. Before signing the lease Bob
asks for an assurance to the effect that no other similar businesses would be allowed to lease
premises which is verbally agreed by the managing director, Ken Keen. Receiving the assurance
Bob signs the lease agreement without reading the clauses one of which contains a clause
effecting that only the terms and conditions mentioned in the lease papers represent the entire
agreement excluding any oral or verbal representations by any representative of Southfield. The
shopping centre is a financial failure because of high vacancies of the shops and for that reason a
business similar to Bob’s is allowed to lease premises in the shopping center six months later.
There is a decline in Bob’s business due to this reason. Bob complains to Ken who informs Bob
that there is no clause in the agreement that prevents the company from leasing premises to a
competitor. Ken further notifies that effecting the disclaimer clause in the lease contract the
verbal assurance given to Bob was not binding.
Issue
The issue in the given case can be recognized as the rights of Bob under the common law
and statute for the breach of agreement.

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Rule
The present case deals with breach of condition. A breach of condition arises where it
appears from the nature of a contract or some particular term or terms that the promise that has
been breached was of such importance to the promisee that they would not have entered into a
contract without an assurance of strict performance of the promise. The case further is in breach
of terms of expressed terms of the contract. Express terms are defined under the Australian
Consumer Law as verbal, written or partly written partly verbal terms that a contract is made up
of. A basic rule of terms of contract is that regardless of whether or not a person read a document
or not they are bound by the terms contained in the said document if they sign the document.
Under section 18 of the Australian Consumer Law (formerly section 52 of Trade Practices Act
1974) misrepresentation is defined as engagement of a person in trade or commerce in a conduct
that can be classified as misleading or deceptive or is likely to be misleading or deceptive. Under
section 4 of the Australian Consumer Law provisions relating to misleading or deceptive
promises and predictions. Section 4 of the ACL states any representation in respect to any future
matter made by a person who does not have any reasonable grounds for making the
representation shall be termed as misleading representation. A party can sue on a promise if they
gave consideration for that promise. For misrepresentation under section 18 a person can claim
for remedies in the form of Damages and ancillary orders under sections 236 and 246 of the
Australian Consumer Law.
Application
In the case Bob has been misled into signing a contract. He was led to believe that the
verbal promise made by Ken Keen would be legally binding. This results to the breach of

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expressed terms of the contract. But a verbal agreement is not always considered to be legally
binding. It has been stated that if a promise is not included in the terms then it becomes ‘mere
representation’ and affects the remedies to the victims. In the parole evidence rule if a statement
is not included in written contract it may be excluded and evidence regarding previous or
contemporaneous agreement that would have affected the contract in any way would not be
accepted. This was discussed in the Mercantile Bank of Sydney v Taylor (1891). Although the
parole evidence rule dismisses verbal agreements as binding to the terms of written contract there
are certain exceptions to the rule. The exceptions to the parole evidence rule were discussed in
the Van Den Esschert v Chappell (1960). The court implied in the case that whether the terms
were written in the contract or not the verbal assurance of the seller was considered a term of
contract and the seller was responsible false allegations and breach of contract.
The company can also be sued for breach of collateral contract. a statement may form a
contract itself if it does not become a term of contract. The effectiveness of the terms of
collateral contracts were discussed in the case DeLasselle v Guildford (1901). For a statement to
be inferred as a collateral contract certain conditions are needed to be considered- The alleged
contract needs to be consistent with the main contract [Hoyt’s Pty Ltd v Spencer (1919)], The
representation is promissory [JJ Savage and Sons Pty Ltd v Blakney (1970)] and for the alleged
collateral contract there must exist a separate consideration [DeLasselle v Guildford].
Bob can escape the basic rule of terms of contract that states that a person signing a
document is bound by the terms contained in it regardless of whether they read the terms before
signing or not, by proving that his signature was brought about by fraud or misrepresentation as
stated in the case L’Estrange v F Graucob Ltd (1934). Exceptions to the basic rule of terms of

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contract can be further observed in the cases Curtis v Chemical Cleaning and Dyeing Co (1951)
and Le Mans Grand Prix Circuits Pty Ltd v Iliadis (1998).
Bob can further sue the company for actionable misrepresentation of pre-contractual
statements and fraudulency. The essentials to prove misrepresentation are- presence of false
representation, that representation is one of fact, it must induce the contract and must be
addressed to the person who seeks to rely upon it. In the case of Lockhart v Osman (1981) it was
held by the court that any verbal or written words or any silence would only amount to
misrepresentation if it is subsequently discovered by the representor that the representation has
been false.
Bob can claim for damages for the loss he suffered for the misrepresentation of
statements made by the managing director of the company under the section 236 of the
Australian Consumer Law (previously section 82 of the Trade Practices Act). In the case
Wardley Australia Ltd v Western Australia (1992) the court held that loss or damage induced by
misleading or deceptive conduct is suffered at the point in time where the loss is ascertainable.
He can further claim for ancillary orders under the section 246 of the law. The court can make
non-punitive orders on application of regulator for one or more conducts mentioned in the
section.
Conclusion
It can be concluded from the facts discussed that although Bob has signed the contract
and is bound by the terms mentioned he can sue the company for the breach of collateral
contract. he can prove that he signed the contract under the expressed terms that there would not
be any business similar to his allowed to lease premises.

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Reference
Australian Consumer Law
Curtis v Chemical Cleaning and Dyeing Co (1951)
DeLasselle v Guildford (1901) 2 K.B. 215
Hoyt’s Pty Ltd v Spencer (1919)
JJ Savage and Sons Pty Ltd v Blakney (1970)
L’Estrange v F Graucob Ltd (1934)
Le Mans Grand Prix Circuits Pty Ltd v Iliadis (1998)
Lockhart v Osman (1981)
Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252, 262 (Innes J)
Trade Practices Act 1974
Van Den Esschert v Chappell (1960) WAR 114
Wardley Australia Ltd v Western Australia (1992)