Commercial Law Assignment: Legal System, Cases, and Advice

This commercial law assignment solution comprehensively addresses key aspects of the Australian legal system and contract law. Part A outlines the essential elements for establishing a legal system, emphasizing rules of recognition, change, and adjudication, along with communication mechanisms to ensure legitimacy and stability. Part B delves into the Australian legal system's features, elaborating on the rule of recognition, rules of change, adjudication, and the rule of law, highlighting their roles in maintaining a robust and stable legal framework. Part C focuses on the case of Commercial Bank of Australia Ltd v Amadio [1983] HCA 14, analyzing issues of undue influence, unconscionable conduct, and misrepresentation, and concluding that the contract was unenforceable due to a lack of genuine consent. Part D provides legal advice to Betty regarding her rights in a contract breach scenario, discussing anticipatory breach and potential remedies. The assignment integrates relevant case law and legal principles to provide a detailed and practical understanding of commercial law.

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PART A
In order to prevent any uncertainty, the first step is to ensure that rules of recognition are
made clear. This would ensure that the newly added families to the tribe would be aware
about who has the authority to form the law, interpret the law and enforce the same. The rules
could be framed by the head of the tribe or a council of elder men which must be
communicated through the constitution or any suitable means. Further, in case of any
confusion with regards to interpretation of law and granting justice, the suitable mechanism
needs to be clearly demarcated. This ensures legitimacy and stability in the tribe and would
ensure conformity in behaviour from the new families.
Additionally, the primary obligations along with source of the law should be identified so that
the same can be followed by the new families. This would provide a platform for the new
families to integrate into the tribe without violating the broad morality and social norms.
Also, the rules of change should also be communicated to the families so that they are aware
as to how the laws which lose relevance are modified. This is essential in order to ensure
continuity of the legal system in a systematic manner as the underlying laws are dynamic and
through a pre-determined procedure relevant changes can be introduced so that law reflects
the morality and social obligations of the day.
Further, the adjudication mechanism should also be communicated which essentially outlines
the mechanism to be followed in case there is violation of any primary or secondary law. This
ensures that the new families tend to confer to the existing laws and learn it rapidly or else
they may violate the same and would be punished. The communication of such a mechanism
also ensures fairness and provides clarity with regards to lawful conduct both to the new
families and also the tribe as a whole.
PART B
The various features of the Australian legal system (keeping in mind the requirements of a
legal system as outlined by Hart) are outlined below
 Rule of Recognition – This principle involves the identification of law which is
apparent in Australian legal system which stems from the constitution itself that
provides the law making authority to the Parliament. Further, the exact roles of the

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legislature and the executive in relation to the law have been outlined coupled with
the procedure of framing the law. Besides, the exact subjects on which the state and
Federal government can frame laws has also been highlighted in the written
constitution so as to clarify to the lawmakers along with the common people as to
who would be the law making authority (Harvey, 2009). Moreover, the various
fundamental rights have been provided to the people so as to ensure that the law
making power of the government have reasonable restrictions and the same may be
enacted in public interest. For the enforcement of laws, the executive has been given
the requisite responsibility along with powers to accomplish the same. Additionally,
the various sources of law have also been identified in the form of common law and
statute law. As a result, while the statute law is followed but at the same time, the
common law is also considered coupled with judicial precedents (Gibson and Fraser,
2014).
 Rules of Change – It is apparent that the legal system of Australia is not a static set of
rules which is why it has survived and so long and at the same time provided stability
to the nation. The constitution may be amended in order to reflect the needs of the
present times which may be different from the times when the constitution was
enacted. As a result, the procedure for amendment has also been outlined in the
constitution. Additionally, there are laws which are reductant and hence requisite
authority is available to the Parliament to remove such laws from the statute book.
However, limitations have been set with regards to the changes which can be brought
and thereby assuring that certain basic features of the constitution which are vital
remain intact. These are implemented through the use of judiciary which tends to
strike down any law which is in conflict with the basic structure of the constitution
(Davenport and Parker, 2014). Hence, the constitution in the Australian legal system
acting through the judiciary system tends to insert relevant checks and balances so
that power of change is used in a constructive manner to reflect upon the popular
public opinion along with present realities.
 Rules of Adjudication – This is also ensured in the Australian legal system through
the presence of the judiciary system. Considering that the legal system of Australia is
based on a written constitution, hence there is a need to interpret the provisions of the
constitution and these disputes are handled by the judiciary. Additionally, judiciary
acts as the custodian of the constitution ensuring that everyone plays according to the
rules. Further, the judiciary tends to enforce the rules and this enforcement is critical

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to the legal system being functional. The judicial system through the system of courts
and tribunals provides a platform whereby it could be judged whether the laws have
been violated through the conduct of the concerned entity. Besides, there is an actual
hierarchy of courts which tends to specify to the concerned party as to which court
needs to be approached with a given dispute. Also, the judicial system through
various critical rulings tends to provide a useful source of laws which are reflective of
the ongoing social norms, beliefs and practices (Harvey, 2009).
 Rule of law – Yet another feature of the Australian legal system which makes it
robust and stable is the presence of doctrine of rule of law. This ensures that there is
equality of all individuals before the law and hence the law becomes supreme which
drives the authority directly from the constitution. As a result, no individual is above
the law which tends to enhance the legitimacy of law and ensures a continuity of
sought since the government of the day cannot arbitrarily decide on the applicable
laws and have to carry forward the laws that are already existing since the legal
system tends to be inherited (Latimer, 2009).
PART C
The chosen case for discussion is Commercial Bank of Australia Ltd v Amadio [1983] HCA
14.
Issue
The key issue was to ascertain whether the mortgage guarantee contract enacted between the
bank and Amadio couple was enforceable or not. In this regards, the secondary issues which
were considered are highlighted below (Latimer, 2005).
 Presence of undue influence on the part of the bank
 Failure on the part of the bank to make requisite disclosures especially the contract
between the bank and the Amadio couple’s son
 Unconscionable conduct on part of the bank
Rule
One of the key requirements of contract formation is the presence of mutual consent.
However, it is essential that this consent must be genuine and should not be forced. The lack

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of presence of genuine consent renders the contract void. This also is the case when the
consent has been obtained through misrepresentation or force (duress). At times, owing to the
difference in the bargaining positions or knowledge of the subject matter involved, a
particular party may be put in an advantageous position which may potentially lead to
exertion of undue influence (Parker and Davenport, 2014).
In accordance to common law, the Court usually does not intervene in contract formation or
enforcement on the premise that one of the parties displays may display unjust conduct.
However, in cases where the bargaining power of the parties involved in the contract is
grossly unequal, there is a case for court intervention that owing to this there has been
unconscionable conduct by one of the party which has put the other party to disadvantage.
However in such instances, there is always the possibility of undue influence on the part of
the dominating party prompting the weaker party to enter the contract (Harvey, 2009).
Additional requirement of genuine consent is that the same should not be obtained through
misrepresentation. Typically, it may be negligent (due to carelessness) or fraudulent (on
purpose). A key issue here is to determine whether silence on a particular matter resorts to
misrepresentation or not. In this regards, as highlighted in Smith v Hughes (1871) LR 6 QB
597 case, if silence is with regards to a material disclosure which may alter the decision of the
other party to enter into the contract, then non-disclosure of such an information on purpose
resorts to fraudulent misrepresentation (Vermeesch and Lindgren, 2011).
Application
In the given case, the mortgage guarantee was offered by the Amadio couple on behalf of the
mortgage loan extended to their son Vincenzo Amadio. Their son defaulted on the loan and
hence the bank wanted to enforce the mortgage guarantee. However, the couple decided to
take legal recourse on grounds of the contract being null and void on account of absence of
genuine consent (Gibson and Fraser, 2014).
The bank was in an advantageous position and displayed unconscionable conduct as the
parents did not fully understand the nature and extent of the extended guarantee. This is
validated from their limited knowledge of written English considering their Italian origin,
failure on part of bank to seek an independent advice, lack of proper explanation by the
officer concerned and failure to disclose the bad financial situation of their son (Carter,
2012).

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The bank claimed that there was no onus on them to disclose the financial position of the son.
However, the Court reflected on a secret agreement between their son and the bank with
regards to clearing of overdraft in a matter of weeks. This agreement was material as a
reasonable guarantor on the knowledge of such an agreement would refuse to extend the
guarantee. As a result, the Court termed the absence of this disclosure as fraudulent
misrepresentation on the part of the bank (Vermeesch and Lindgren, 2011).
Conclusion
Based on the above discussion, it is apparent that in the given case, genuine consent from the
Amadio couple was lacking. The contract was entered through unconscionable conduct and
misrepresentation by the bank. As a result, the Court held the guarantee contract as null and
void and therefore non-enforceable (Latimer, 2005).
Part D
Issue
The central issue is to advice Betty about her legal rights in the present case scenario. Further,
the second issue is to find whether she is in the position to terminate the contract with Ram
and possible remedies in the circumstances.
Rule
The performance of various obligations under contract is vital for the discharging of the
contract mutually. There is a breach of contract when one of the parties does not discharge
the contractual obligations (Latimer, 2005). One of the related concepts is anticipatory breach
of contract which tends to occur when there is express or implied communication through
conduct of one party about the unwillingness or inability to fulfill their contractual
obligations in the future. This has been highlighted in the relevant discussion in the
Koompahtoo Local Aboriginal Land Council & Anor v Sanpine Pty Ltd & Anor (2007) 233
CLR 115 case (Pendleton and Vickery,2005).
The anticipatory breach of contract is also known as repudiation and is based on a clear signal
from the potential defaulting party in relation to the unwillingness or lack of readiness to
discharge the contractual obligations as highlighted in the Shevill v Builders Licensing Board

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(1982) 149 CLR 620 case. Objective determination of repudiation or anticipatory breach of
contract is imperative (Carter, 2012). The key parameter is to ascertain if the party’s conduct
makes it clear to a reasonable person acting in the capacity of the other party to the contract
that there is renunciation of any fundamental obligation or the contract on the whole. In
relation to conveying the inability to perform the contract, it may be communicated through
reference to the facts as highlighted in the W & J Investments Ltd v Bunting [1984] 1
NSWLR 331 (Vermeesch and Lindgren, 2011).
When either due to express or implied conduct of communication, anticipatory breach of
contract is established, one option that is available to the innocent or non-defaulting party is
to accept the repudiation and terminate the contract and sue the defaulting party for the losses
caused as a result. On the other hand, the innocent party can ignore the repudiation and
demand performance of contract and thus lead to the actual breach of contract and then
pursue the legal recourse available for actual breach of contract as highlighted in Wallis v
Pratt [1911] AC 394 case (Andrews, 2011). However, it is noteworthy that in cases when the
defaulting party is citing facts that would potentially make it impossible to fulfil the
contractual obligations, then mitigating action is expected on the part of the innocent party to
minimize the losses as demanding the performance of the contract could lead to frustrated
contract whereby the court would terminate the contract and allocate losses as per the
circumstances (Gibson and Fraser, 2014).
Application
Based on the given case facts, it is apparent that Ram and Betty have enacted a contract in
2014 and the contract has a life of 10 years. Ram has three coal mines and Betty has used the
coal for her steel works. As per contract, Ram is liable to deliver 400 tons of coal on or
before 20th days of the respective month to Betty. On 31 July 2017, Ram has realized that due
to heavy rain all the three mines has been flooded and hence, further mining would not be
possible. Therefore, Ram has informed Betty that he would not be able to supply the coal till
January 2018.
The clear communication by Ram to Betty regarding the inability of performance of
fundamental obligation of the contract clearly is anticipatory breach of contract. Clearly
under such a situation, Betty has the right to accept repudiation and thereby terminate the
contract. Further, in such a situation, she can take the legal recourse and aim to recover
damages from Ram. Another option is to wait for actual breach when Ram is not able to

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perform the contractual obligation of providing requisite coal quantity. However, given that
due to flooding of mines, the discharging of contractual obligations is simply not possible,
waiting for actual breach is not a recommended action. Instead, Betty must take mitigating
actions by finding another supplier so as to limit the extent of losses and disruptions caused.
Delaying taking any action would adversely impact the ability to claim losses at a later stage
as it is evident that the unwillingness on Ram’s party is not his fault.
Conclusion
Based on the above discussion, it is apt to conclude that owing to anticipatory breach of
contract, Betty does have the right to terminate the contract and recover losses. Another
remedy she has is to ignore repudiation and demand contract performance and thus wait for
actual breach of contract but this is not a recommended course of action given the flooding of
coal mines due to rain.

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References
Andrews, N. (2011) Contract Law. 3rd edn. Cambridge: Cambridge University Press.
Carter, J. (2012) Contract Act in Australia. 3rd edn. Sydney: LexisNexis Publications.
Davenport, S. and Parker, D. (2014) Business and Law in Australia. 2nd edn.. Sydney:
LexisNexis Publications.
Edlin, D. (2007) Common law theory. 4th edn. Cambridge: University Press Cambridge.
Gibson, A. and Fraser, D. (2014) Business Law. 8th edn. Sydney: Pearson Publications.
Harvey, C. (2009) Foundations of Australian law. 3rd edn. London: Tilde University Press.
Latimer, P. (2005) Australian business law. 24th edn. Sydney: CCH Australia Ltd.
Pendleton, W. and Vickery, N. (2005) Australian business law: principles and applications.
5th edn. Sydney: Pearson Publications.
Vermeesch, R. B. and Lindgren, K. E. (2011) Business Law of Australia. 12th edn. Sydney:
Butterworths.