Commercial Law Case Study: Contract Law and International Sales

This case study examines several key aspects of commercial law within an Australian context, presented as a response to a Deakin University MLC101 assignment. The first part of the case study focuses on contract law, specifically addressing the enforceability of contracts and the concept of undue influence, as illustrated through scenarios involving a loan agreement with a grandmother suffering from Alzheimer's and an agreement with an ex-girlfriend. The analysis considers relevant legal precedents, such as Johnson v Buttress and Gibbons v Wright, to determine the validity of these contracts. The second part of the case study delves into employment law, analyzing a restraint of trade clause within an employment contract, and whether a construction company can enforce the clause against former employees. The analysis considers the reasonableness of the clause, referencing HRX Holdings Pty Ltd v Pearson and Informax International Pty Ltd v Clarius Group Ltd (No 2). The third part of the case study addresses international commercial law, specifically the United Nations Convention on Contracts for the International Sale of Goods (CISG), examining the remedies available to a toy maker in Russia who faces breaches of contract from both a Spanish wood supplier and an Australian toy distributor. The analysis references CISG articles concerning seller and buyer obligations, and remedies for breach of contract.

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

1COMMERCIAL LAW
Answer 1
Issue
The issues that can be raised in context to the given scenario are-
 Whether the contract made by Hiro with his grandmother will be enforceable.
 Whether the contract made by Hiro with his ex-girlfriend will be enforceable.
Law
For a contract to be enforceable legally in Australia it is required for the parties to be entering
into such contract with free will and with the intention of creating a legal relation (Hunter 2017).
In case a party to a contract is induced for entering into a contract by exertion of undue influence
by the other party then the contract will be deemed void as discussed in the leading case in
Johnson v Buttress [1936] HCA 41.
In furtherance to this, a person who is of unsound mind is not legally eligible for entering into a
valid contract. Therefore, any contract that has been made with any party with unsound mind
will be considered void (Harper 2017). As discussed in Gibbons v Wright (1954) 92 CLR 423 if
a party is suffering from any mental disability and the other party is aware of it and still
influenced the former party into entering into a contract then the former party is eligible to seek
withdrawal from the contract.
Application
In the given scenario it can be observed that Hiro, an employee of the Federal Bank of Australia,
enters into two loan contracts on behalf of his bank for winning the year end competition prize.

2COMMERCIAL LAW
Hiro, in the given case can be observed as inducing his grandmother, who is an Alzheimer’s
patient, into entering into a contract of loan. Applying the Gibbons v Wright judgment in the
given scenario, it can be stated that as his grandmother has been suffering from mental
disabilities, the contract would be void. However, Hiro was unaware of his grandmothers mental
disability so the contract would not be void as per the judgement of the Gibbons case. However,
he used his relationship to coerce his grandmother into entering into a loan contract. Applying
the judgement in Johnson v Buttress in the given scenario the conduct of Hiro would be
considered as exerting undue influence to his grandmother. Therefore, the contract would be
void.
In furtherance, Hiro is also observed as making his ex-girlfriend, who is still in love with him, to
enter into a contract. He does so by promising her of marriage if she takes the loan. Applying the
Johnson v Buttress case in the given scenario, the contract would be void as it was made by Hiro
by exerting undue influence over his ex girlfriend.
Conclusion
Thus from the above discussion the following conclusions can be made-
 The contract made by Hiro with his grandmother will not be enforceable.
 The contract made by Hiro with his ex-girlfriend will not be enforceable.

3COMMERCIAL LAW
Answer 2
Issue
The issue that can be raised in context to the given scenario is whether Akshita can enforce the
employment contract clause against the two former employees.
Law
Restraint of trade clause can be defined as the term in an employment or a business sale
agreement or contract where a few restrictions are put on by one party for the other parties to
oblige to. In an employment contract, restraint of trade prohibits a former employee of a
company to enter into any kind of competition against the company during a specific time or
geographic location (Grasso 2017). Following the judgement in HRX Holdings Pty Ltd v Pearson
[2012] FCA 161 it can be stated that A Restraint of trade clause is required to be reasonable as
benefitting both the parties. For considering the reasonability of a restraint clause the court takes
certain factors into consideration. These factors can be seen as including- geographic area to
which the restraint clause applies, the duration through which the clause would be applicable, the
negotiation process, the position of bargaining of the individuals and the nature of relationship
existing between the parties of contract (Floyd et al. 2017). If any of these factors are found by
the court to be unreasonable then as per Informax International Pty Ltd v Clarius Group Ltd (No
2) [2013] FCAFC 7 judgement the employment contract term or the restraint clause would be
considered as void.
Application
In the given scenario It is seen that a construction company, Underground Solutions Pty Ltd, is
run by Akshita where the employees are provided with an employment contract under which one

4COMMERCIAL LAW
of the terms include that any person employed in the Underground Solutions are banned from
entering into any firm within Australia by using the similar skills for which they had been
employed in the company. Two of the employees in Underground Solutions are seen as leaving
the company and joining two different companies in Australia which are in competition with
Underground Solutions.
Following the judgement in HRX Holdings Pty Ltd v Pearson in the given scenario it can be
stated that if the employment clause is found to be reasonable then the parties are bound to the
employment contract. For considering whether the restraint of trade clause in this scenario is
valid, the geographic area, the duration of the clause, the negotiation process, the position of
bargaining of the individuals and the nature of relationship existing between the parties are
required to be taken into consideration. Following the judgement set in Informax International
Pty Ltd v Clarius Group Ltd (No 2) in the given scenario it can be stated that the restraint of 10
years and for the entire region of Australia it's not reasonable towards the employees of
Underground Solutions.
Conclusion
From the above discussion it can be concluded that Akshita cannot enforce the employment
contract clause against the two former employees as the timeline and the geographic extent
mentioned in the clause is not reasonable towards the employees.
Advise
It is also advised to Akshita to enforce her future contracts in a way that they are reasonable and
fair towards all the employees of the company. For making the future restraint of trade terms

5COMMERCIAL LAW
reasonable Akshita might consider mentioning a time frame or a geographic location which is
not detrimental towards the employees as well as Underground Solutions.
Answer 3
Issue
The issue involved in the case is whether Carmen has any remedies under the relevant
international covenant.
Law
The United Nations Convention on Contracts for the International Sale of Goods (CISG), often
known as the Vienna Convention, can be described as a multilateral treaty for the establishment
of a identical outline for the international commerce (Schlechtriem 2016). The Convention on
Contracts for the International Sale of Goods can be seen as governing a major portion of the
world trade. The main application of CISG is the sale of goods contracts possible between the
parties having business in different States provided in the article 1(1).
According to Article 2 the CISG would be applicable towards goods and products that are
commercial in nature.
According to Article 30 of the CISG the duties of a seller is delivering the goods and documents
and transferring the property in the goods to the buyer as mentioned in the contract within a
reasonable or stipulated time.

6COMMERCIAL LAW
According to Article 53 of the CISG the duties of a buyer is taking delivery of the goods and
making subsequent payments for them within a reasonable time.
If there is a breach in contract of sale of goods the aggrieved party is eligible to claim for
damages as per the provisions of Article 74. The damages claimed would be following the
principles of common law in Hadley v Baxendale (1854) Exch 341.
Application
In the given scenario it has been observed that Carmen runs a toy making business in Russia. She
is seen to be buying the woods to make toys from Spain. After making the toys she sells them to
Australian companies for them to resell. In the given scenario it is observed that the company
from where Carmen buys woods from in Spain fails to deliver the goods she paid for without any
reasonable excuse. In furtherance to this, the company in Australia she supplies the toys to have
also refused to pay for a shipment of toys she delivered.
As per Article 1 (1) of the Convention on Contracts for the International Sale of Goods, Carmen
can enter into contracts of sale of goods with different member countries of the Unite Nation.
Following Article 2 the CISG would be applicable towards both her purchase of woods from
Spain and her sale of toys to Australia as both are commercial in nature.
The company from Spain selling woods to Carmen has been in breach of Article 30 of the CISG,
where the duties of a seller is mentioned to be delivering the goods and documents and
transferring the property in the goods to the buyer as mentioned in the contract, as they failed to
supply the goods without any reasonable excuse even after receiving payment from Carmen.
The company from Australia buying toys from Carmen has been in breach of Article 53 of the
CISG, where the duties of a buyer is mentioned to be taking delivery of the goods and making

7COMMERCIAL LAW
subsequent payments for them, as they refused to pay for the shipment of toys that Carmen
delivered.
Following the provisions in Article 74 Carmen can claim for damages from both the companies
following the common law principles in Hadley v Baxendale.
Conclusion
It can be concluded that Carmen can claim for damages under the common law provisions for the
breach of contract by both the companies in Australia and Spain under the provisions in The
United Nations Convention on Contracts for the International Sale of Goods (CISG).

8COMMERCIAL LAW
Reference
Floyd, L., Steenson, W., Coulthard, A., Williams, D., & Pickering, A. C. (2017). Employment,
Labour and Industrial Law in Australia. Cambridge University Press.
Gibbons v Wright (1954) 92 CLR 423
Grasso, Michael. "Can your employer enforce restrictions on you during and post-
employment?." (2017): N22-N22.
Hadley v Baxendale (1854) Exch 341
Harper, J. "Contract Law." Legal Magazine (2017).
HRX Holdings Pty Ltd v Pearson [2012] FCA 161
Hunter, Howard. "Modern Law of Contracts." (2017).
Informax International Pty Ltd v Clarius Group Ltd (No 2) [2013] FCAFC 7
Johnson v Buttress [1936] HCA 41
Schlechtriem, P., 2016. Commentary on the UN Convention on the International Sale of Goods
(CISG). Oxford University Press.