Commercial and Corporation Law - Assignment on Contract and Law

This assignment delves into the intricacies of commercial and corporation law, commencing with an exploration of H.L.A. Hart's three-tier legal system, examining the rule of recognition, rule of change, and rule of adjudication, and applying these concepts to the Australian legal framework. The a...Read More

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

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Part A
Question 1 (A)
H.L.A Hart formulated the concept of a three-tier legal system in his book the Concept of
law. These defined how mere rules could attain the force of law. This is known as the rule of
recognition. The rule of recognition provides for the procedure through which rules attain the
force of law1. However in case of a society that functions based on law that is not codified
(primary rules) Hart suggests two conditions that should exist within such a framework.
There must be some restriction imposed on an individual’s freedom to act and there must
be defined contributions to the common good of that societal structure. A majority of the
members of the populous of such a society must also accept these rules as binding within that
societal structure. However, the rule of recognition does not encompass the entire three part legal
system defined by Hart. This contains 3 separate rules which are2:
1. Rule of Recognition: This rule remedies the uncertainty of the primary rules by providing
for uniform methods of validation of such rules as laws.
2. Rule of Change: This rule provides for the existence of a provision that allows
amendment of the existing rules and the static rules in the legal system could be changed
based on societal needs.
1 Bix, Brian. "On the dividing line between natural law theory and legal positivism." Law and Morality. Routledge,
2017. 49-60.
2 Shaw, Geoffrey C. "HLA Hart's Lost Essay: Discretion and the Legal Process School." Harv. L. Rev. 127 (2013):
666.

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3. Rule of Adjudication: This provides for a mode of certain adjudication (such as the
formation of a judiciary) this rule would define who determines and adjudicates issues in
case there is an allegation that rules have been broken.
Thus, for a tribe that follows primary rules such a system needs to be implemented to
ensure that there is uniformity in adjudication and the concept of justice. Thus in such a case the
tribe would first to enact a constitution which defines the system of governance and separates the
powers and responsibilities of all the various wings3. This constitution would thus have to
embody all the three rules recommended by Hart and does so by:
1. Providing a rule for validity: For the uniformity in traditions of the tribe customs that are
accepted by the tribe would have to be considered as the primary rules prevailing in that
societal structure. This provision would also provide for why these customs are accepted
as laws and in such a case any other practices that meet the parameters of such a rule of
recognition would also be considered a law under the constitution. This provision would
embody the first rule of Hart’s recommended legal system. This provision would also
state that the earlier decisions in the same circumstances would have to be considered
when deciding present disputes.
2. Providing a rule for amendment: This would also be provided for in the constitution and
it would state that the customs and practices accepted as rules as per the prevailing legal
system would be binding on all circumstances falling within the ambit of such a
recognized rule. However, this provision would state that in case it can be successfully
established that the societal framework requires an amendment to the existing custom
such a custom would be liable to be amended to the extent required for operation of
3 Priel, Dan. "Reconstructing Fuller’s Argument against Legal Positivism." Canadian Journal of Law &
Jurisprudence 26.2 (2013): 399-413.

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uniformity. Thus, it would mean that these laws are binding but are not absolute when the
societal framework requires a change. This would thus embody the rule of change
recommended by Hart.
3. Providing the rule of adjudication: This provision of the constitution would provide for
the separation of powers. It would recommend the formation of a judicial body comprised
of elders, but these elders should ideally be different from the ones who decide which
customs are to be accepted as laws of the tribe (thus causing a separation of powers
between legislature and judiciary). These elders would be tasked with adjudication of
disputes. However, in such a system there must be representation of the subsequent
generations and thus the judicial system of elders should also comprise of representation
from the younger generations (in proportion to the number of elders to ensure there is a
balance in the adjudication process). During the adjudication process the judicial body
would have to consider previous decisions but the effect of these decisions would be
subject to the rule of change. This would thus embody Hart’s third recommendation of
the rule of adjudication.
Australia embodies Hart’s recommended legal system as well. It has a constitution (the
Commonwealth of Australia Constitution Act) which recognizes law and provides for
amendment in case it is required thus embodying the rule of recognition and the rule of change4.
The constitution also provides for a clear separation of powers by dividing the government into
three wings the legislature (to enact the laws) an executive (to enforce the laws) and a judiciary
(to interpret the laws). Thus the judicial wing of the government is tasked with adjudicating legal
4 Croce, Mariano. "A Practice Theory of Legal Pluralism: Hart’s (inadvertent) defence of the indistinctiveness of
law." Canadian Journal of Law & Jurisprudence 27.1 (2014): 27-47.

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disputes that may arise thus embodying the rule of adjudication5. Thus the Australian legal
system enforces Hart’s 3 part legal system into its framework adequately.
Part B
Question 2
There was a purchase contract between Barry and Angelo relating to the purchase of a
fruit and vegetable store. The contract stated that the shop was a highly profitable venture and
has revenue figures amounting to a total of $20,000 per month. It was further stated that there are
no competitors. Thus Barry made an offer for the shop for $200,000 and such a sale would also
include a loader and a delivery van. It was later discovered by Barry that there was competition
in the area and that the van was liable to be repossessed and the loader was damaged beyond
repair. The validity of such a contract in law must be determined as the issue here.
Rule
Common law principles developed through judgments in the U.K. are applicable in the
Australian legal system. As established in common law the essentials of a valid contract are as
follows6:
 Agreement between the parties.
 An intention to create legally enforceable relationships.
 Consideration to both parties.
The existence of legally valid offers and acceptances would be construed to create legally
valid contractual relationships. This means that the consent of the parties obtained (especially in
5 d'Entreves, Alexander Passerin. Natural law: an introduction to legal philosophy. Routledge, 2017.
6 Shecaira, Fábio Perin. "Sources of law are not legal norms." Ratio Juris 28.1 (2015): 15-30.

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case of the acceptance) in such a case must be free from any form of fraud, coercion,
misrepresentation or undue influence7. In case any of these elements are present the acceptance
would be deemed to be tainted and thus it does not create legally binding relationships and such
a contract is void.
The case of Carlill v Carbolic Smoke Ball Company8it was held that a public offer could
be accepted by any member of the public. It has also been stated in Hyde v Wrench9 that a
counter offer by the person who the initial offer was made to amounts to the rejection of the
present offer. Thus such an offer would have to be accepted for it to form a legally binding
contract.
Misrepresentation maybe defined as a falsified impression of the facts of a particular
agreement that is conveyed to the person accepting it. This thus means that that such an
acceptance would amount to a contract that is void ab initio and would thus not have any legal
binding. The elements of misrepresentation to be established to prove that a contract is void are:
 A falsified statement regarding the facts and circumstances surrounding the agreement.
 This representation must have been made to obtain consent.
Fraudulent misrepresentation would be the endorsement of falsified facts when the
person making such representation is aware of the facts and circumstances being false. This
representation would also have to amount to the acceptance of the other party to the contract. In
Edgington v Fitzmaurice10it was held that in case of consent obtained through fraudulent
misrepresentation the person accepting it has the right to rescind the contract.
7 McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
8 [1892] EWCA Civ 1.
9 [1840] 49 ER 132.
10 [1885] 29 Ch D 459.

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The remedies available to a plaintiff in case of a contract based on consent obtained
through fraudulent misrepresentation are as follows:
1. The plaintiff can rescind the contract as held by Car & Universal Finance v Caldwell11.
2. The plaintiff can apply to the court for indemnity for such a misrepresentation as laid
down in Whittington v Seale-Hayne12.
3. The plaintiff in such a case can claim damages for such fraudulent misrepresentation as
laid down in Doyle v Olby (Ironmongers) Ltd13.
Application
As per the judgment in Carlill v Carbolic Smoke Ball Company a public offer could be
accepted by any member of the public and thus Barry accepted Angelo’s public offer. The
subsequent offer of $200,000 made by Barry would be construed as a counter offer and thus
following the judgment in Hyde v Wrench it would amount to a revocation of the initial offer.
The counter offer however comprised of one variation which was the total price of the store and
thus the other representations made would be deemed to be valid and form a part of such a
counter offer.
The representations made by Angelo which was regarding the regular revenue figures of
the shop, the statement regarding the competitors, the condition and ownership of the van and
loader formed a part of this contract and were essential in obtaining Barry’s consent for the
purchase. This purchase would thus be executed through a contract that was formed on the basis
of fraudulent misrepresentations made by Angelo. Thus following the judgment in Edgington v
11 [1965] 1 QB 525.
12 [1900] 82 LT 49.
13 [1969] 2 QB 158.

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Fitzmaurice it may be inferred from the provided circumstances that the contract thus formed on
the basis of these fraudulent misrepresentations would be liable to be rescinded by the plaintiff.
Conclusion
To conclude Barry could successfully challenge the legal validity of the contract and thus
it would become evident that by virtue of the negligent misrepresentations made by Angelo the
contract could be rescinded by Barry. In addition to this Barry could also claim for indemnity
from Angelo for such negligent misrepresentation or claim for damages from Angelo for the
same.
Question 3
Issue
Angelo and Barry are two parties to a contract that is subject to various disputes. Since
the court has accepted that this contract is legally enforceable it would follow that Barry would
not have any claims unless he can adequately establish a breach of contractual terms. Thus the
issue is to determine the remedies that would be available to Barry in case he can sufficiently
establish breach of contract by Angelo.
Rule
A valid sale of a commodity requires the transfer of title, the mere transfer of possession
is not sufficient to establish a legally valid sale. This thus mandates that the person making such
a transfer of possession must also be able to transfer the title in such a case sufficiently in order
to bring a valid contract of sale into effect. This position has also been reiterated in Car &

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Universal Finance v Caldwell14. It is also well settled law that in case of a contract based on
fraudulent misrepresentations the court can provide other remedies than rescission of contract.
For example, the court can award damages in case of such a contact as held in East v Maurer15.
In contracts of sale there is an implied warranty regarding the fitness of the goods
provided by the seller. This is mandated by virtue of Section 19 of the Sale of Goods Act, 195416.
This section provides that when the purpose of the goods bought is made clear to the seller by the
buyer the seller would have an implied duty to ensure that the goods sold must adhere to the
purposes stated by the buyer and must be fit for such a purpose17.
As per Section 54 of the act18 non-delivery of goods sold would amount to the court
awarding damages to the plaintiff and it would be treated as a breach of contract. Section 55 of
the act provides for the court ordering specific performance in case of breach of contract. Section
56 of the act provides for damages in case of a breach of warranty (implied and express). Section
57 of the act provides for the recovery of interest and special damages in case where any amount
has been paid without the consideration being delivered to the plaintiff.
Application
In this case Angelo did not have the title to the van which forms a part of the contract and
thus Barry did not receive any consideration for the payment made by him for the van. This is
because following the judgment in Car & Universal Finance v Caldwell it would be held that no
sale had been put into effect with respect to the van. This would also amount to non-delivery,
breach of warranty and non-delivery of consideration when payment has been made.
14 [1965] 1 QB 525.
15 [1991] 2 All ER 733.
16 Sale of Goods Act, 1954.
17 Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
18 Sale of Goods Act, 1954.

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Thus in this case Barry could recover damages following the judgment in East v Maurer
and statutory damages as provided for in Section 54 of the act. Barry can also claim for specific
performance as per the provisions of Section 55 of the act. Barry can also claim damages for
breach of implied warranty as per Section 56 of the act for the condition of the loader and title of
the van. Interest and special damages can even be claimed by virtue of the provisions of Section
57.
Conclusion
Thus the remedies available to Barry would be:
 Damages.
 Specific performance.
 Interest and special damages.

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Bibliography
Statues
Sale of Goods Act, 1954.
Cases
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1.
Hyde v Wrench [1840] 49 ER 132.
Edgington v Fitzmaurice [1885] 29 Ch D 459.
Car & Universal Finance v Caldwell [1965] 1 QB 525.
Whittington v Seale-Hayne [1900] 82 LT 49.
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158. East v Maurer [1991] 2 All ER 733.
Articles
Bix, Brian. "On the dividing line between natural law theory and legal positivism." Law and
Morality. Routledge, 2017. 49-60.
Croce, Mariano. "A Practice Theory of Legal Pluralism: Hart’s (inadvertent) defence of the
indistinctiveness of law." Canadian Journal of Law & Jurisprudence 27.1 (2014): 27-47.
d'Entreves, Alexander Passerin. Natural law: an introduction to legal philosophy. Routledge,
2017.

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McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK),
2014.
Poole, Jill. Textbook on contract law. Oxford University Press, 2016.
Priel, Dan. "Reconstructing Fuller’s Argument against Legal Positivism." Canadian Journal of
Law & Jurisprudence 26.2 (2013): 399-413.
Shaw, Geoffrey C. "HLA Hart's Lost Essay: Discretion and the Legal Process School." Harv. L.
Rev. 127 (2013): 666.
Shecaira, Fábio Perin. "Sources of law are not legal norms." Ratio Juris 28.1 (2015): 15-30.