LST5CCL: Contractual Obligations and Negligence in Business Law

This assignment presents a case study involving James and Lloyd Right Pty Ltd, focusing on contract law principles, negligence, and potential legal risks. It examines the elements of a contract, including offer, acceptance, intention, and consideration, and analyzes the implications of implied terms and exclusion clauses. The assignment also delves into the tort of negligent misrepresentation, exploring the duty of care and potential financial compensation. Furthermore, it addresses other legal risks such as innocent misrepresentation and ACL strict manufacturer liability, offering insights into risk management and compliance. The analysis references key legal cases and statutes to support its conclusions and recommendations. Desklib provides a platform to access similar solved assignments and past papers for students.

Running head: COMPANY AND COMMERCIAL LAW
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Company and Commercial Law
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COMPANY AND COMMERCIAL LAW 2
Company and Commercial Law
For there to be a contract, there has to be an offer and acceptance as well as intention and
consideration. James went into a contract with Lloyd Right Pty Ltd. As the manager, I agreed to
fulfill James’ demands of a minimum of 100 seating capacity and assured James that it would be
the case only to find out later that it did not fulfill the client’s wishes since the tables and chairs I
ordered were slightly larger than the recommended table size for restaurants. According to
Beswick v Beswick, we cannot blame the manufacturers since it is the general rule of a contract
that only the parties can incur liabilities or acquire the rights. Term was not incorporated in the
contract in writing making it not legally binding such as in the case of L’Estrange v Graucob
heard in the Court of Appeal which incorporates the breach of an implied term.
The contract we had evidently had an exclusion clause as it was not in writing and since
there was a contract in writing, then the parol evidence does not matter in the case. Therefore, the
assistance I would offer James would entail offering going back to the manufacturer and asking
for the tables and chairs to be remodeled to fit the size of those used in restaurants. I would not
offer financial compensation as the implied terms were overruled by the terms of the written
contract which makes me not liable for any kind of contract breach. Moreover, since, it was my
duty to check the table sizes before ordering them, I should then try and rectify the situation by
communicating with the manufacturers to at least try to change the models of the products.
Additionally, I will offer to try and sell the extra tables and chairs to recover some of the wasted
cash and reduce the damages encountered by the client.
Assistance and Financial Compensation
In Australia, costs usually follow the event whereby a successful party in the defense is
able to recover the costs from the other party. Moreover, the usual costs do not cover the entire
litigation cost since the court fee scales range from 50% – 70%. Therefore, if taking my
responsibilities under the tort of negligent misrepresentation, I would offer James some
assistance and financial misrepresentation to help settle the damages incurred in the agreement.
According to Donoghue v Stevenson, one must take rational care to avoid omissions or acts that
might harm the other person in the contract which in this case include losses on the part of my
client. Donoghue v Stevenson depends on the negligence of the contract and it holds that in the

COMPANY AND COMMERCIAL LAW 3
circumstances from a contract, there is a duty relationship thus establishing tort as separate from
the laws of the contract. The High Court also through Levi v Colgate Palmolive Pty Ltd
established the importance of taking reasonable care and realizes that an act or omission is likely
to bring harm to the other.
My client, in this case, was not physically affected by my actions but rather experienced
an economic loss as identified in Perre v Apand. According to Club Italia (Geelong) Inc v
Ritchie, the duty of care was excluded resulting in a gross economic loss. Therefore, just as in
Wyong Shire Council v Shirt, I would consider the risk magnitude and the degree as well as
probability of its reoccurrence including the financial expenses incurred and any other
conflicting responsibilities that James might have, thereby offering to pay for the damages
incurred. In addition, the Supreme Court of Western Australia in O’Dwyer v Leo Buring Pty Ltd
argues that negligence in the design choices will result in paying for the loss suffered by the
client as it is the duty of every supplier to provide proper products as expected by the customer.
Additionally, in such a case, the court considers whether the defendant should take
responsibility for the consequences brought about by their conduct and to what extent the
responsibility should go. In consideration of The Wagon Mound No. 2 which implies that if the
damage suffered is too far-fetched or too remote then it is irrecoverable. In this case, the
damages are not too remote or too far-fetched and any reasonable person could have foreseen
such a happening which called for proper actions to avoid them. I will, therefore, ask for a
proportional reduction of the damages and offer financial compensation for part of the damages.
Legal Risk
Aside from the ‘Tort of Negligence Misrepresentation’, the other legal risks that I might
face are an innocent misrepresentation, and ACL, Strict Manufacturer Liability. Innocent
misrepresentation might come about by the oral agreement as well as the purchase of outside
street-side tables which would not be put to use due to the council’s prohibition of street-side
dining. As the manager, I had reasonable grounds for believing that street-side dining was not
prohibited. However, had I contacted the council before making the orders, I would have
prevented the loss that was incurred from the extra tables and chairs. The ACL guarantees fair
treatment from manufacturers and suppliers as they conduct businesses with others. This legal

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risk might be applicable in this case scenario as my company is likely to be in violation of the
Consumer Guarantees Regime by ordering tables that are different from the expected ones.
In this case, we are the suppliers of the products that are to be used in the new restaurant
and the ACL strict Manufacturer Liability makes the supplier just as liable as the manufacturer.
This means that Lloyd Right Pty Ltd has committed a strictly liable offense by not meeting the
expectations of the customer and thus owes a duty of care to the business supplied with the
goods. According to Glendale Chemical Products v ACCC, a defect on the goods does not
necessarily indicate that they are inherently defective but that they were not suitable for the
particular purpose intended for them. The beautiful Italian design tables were not ‘defective’ but
were not the standard size for restaurant tables indicating that the products did not comply with
the mandatory standard for restaurants. Glendale Chemical Products v ACCC is also helpful in
reviewing this case as the plaintiff purchased a substance and repackaged it making it liable for
any defects that may arise from the product. This case shows that goods are naturally defective if
they do not fit the desires of the customer. ACL, Strict Manufacturer Liability can be better
managed in the future by taking reasonable care through ensuring that the products have a safety
defect which depends upon their labeling, marketing, and the intended uses. Providing clear and
detailed labels as well as information on products can in a way help to protect against liability in
the future.

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References
Beswick v Beswick [1968] AC 58
Donoghue v Stevenson [1932] AC 562
Glendale Chemical Products v ACCC (1998) 1571 FCA
L'Estrange v Graucob [1934] 2 KB 394
Levi v Colgate Palmolive Pty Ltd (1941) 41 SR (NSW) 48
Perre v Apand (1999) 198 CLR 180
O’Dwyer v Leo Buring Pty Ltd [1966] WAR 67 (Supreme Court of Western Australia)
Club Italia (Geelong) Inc v Ritchie (2001) 3 VR 447
Wyong Shire Council v Shirt (1980) 146 CLR 40
The Wagon Mound No. 2 [1967] 2 All ER 709