LAW514 Commercial Law Assignment: Terms, Contract, and Insurance Law

This report presents a detailed analysis of a Commercial Law assignment, addressing key aspects of contract law, insurance law, and employment law. The assignment begins by defining and differentiating between express, implied (including those implied by courts and statutes), and statutory terms within the context of contract law, with specific reference to the Sale of Goods Act in the Northern Territory. The report then explores the implications of contract law, insurance law, and employment law for accounting professionals, emphasizing the importance of understanding these laws to manage risks, ensure compliance, and protect both the professionals and their clients. The discussion includes topics such as exclusion clauses, third-party liability disclosures, and damages under contract law, as well as the role of insurance in mitigating professional risks. The report also highlights the significance of employment law in managing accounting firms and the rights and obligations of employees. Overall, the assignment provides a comprehensive overview of the legal landscape relevant to commercial practices and accounting professionals.

Commercial Law
3/31/2020
Student’s Name

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Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................4
References........................................................................................................................................8

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Question 1
A contract does refer to a legally binding agreement developed between the parties. As soon as a
valid contract becomes develops between the parties they become liable to act as per the terms of
the contract and therefore these terms have their huge implication and significance in contract
law. These contractual terms provide specific details of the agreement such as entitlements and
liabilities of the parties. Mainly two types of terms can be seen in contract namely express and
implied terms. Implied terms further include two types of terms such as implied by courts and
implied by statues. In the following description, these terms will be discussed in detail:-
Express terms:- As the name implies, an express term refers to the one which is decided between
the parties and known to them in expressed manner. A term of the contract may become an
express term in two ways. The first is by inclusion in the contract itself which is signed by the
parties. Another way is by bringing it to the notice of another party before the formation of the
contract. In the case of L'Estrange v F Graucob Ltd [1934] 2 KB 394, it was provided that
parties seem to be bound by all the express terms where the same are written under a contract
signed by parties, irrespective of the fact that whether the parties actually have read those terms
or not. However, there are some exceptions to it. For instance, due to the cooling-off period, a
written contract may be held unenforceable. Similarly, these express terms may not be enforced
in those situations where the invalidity of the contract is proved due to the reasons that the
defendant was on a mistake regarding the character of the contract. Further, in the case of Petelin
v Cullen (1975) 132 CLR 355, it was decided that express terms mentioned in a signed contract
cannot bind a party who cannot understand its meaning and implication of the same (Bant, 2009).

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As already mentioned express terms may be incorporated in two ways, here it is clear that if such
term is not mentioned underwritten and signed contract, then the other party must have
reasonable notice of the same before entering into the contract. In the case of Thornton v Shoe
Lane Parking Ltd [1970] EWCA Civ 2, it was decided that a term brought into attention in the
notice of party after the formation of contract cannot be treated as a valid express term (Paterson,
2009).
Implied terms: - Opposite to express terms, an implied term does not decide between the parties.
Many times court imposes some condition by itself to fill the gaps of contract where these terms
are consistent with express terms, are reasonable and fair, and are important to convert the
contract into a viable one. Court mainly imposes these terms in those situations where express
terms do not seem enough to decide a matter. These terms may derive from the trade or custom
usage, or continuing relationship of the parties. Lastly, there are certain terms which do apply to
all the contract and these terms known as universal implied terms.
The third type of term is statutory terms. The most general type of commercial contract is the
contract of sale of goods. In this way, the statutory terms derive from the sale of goods act. Sale
of goods act of each jurisdiction outline some of such implied terms. These terms may be related
to many aspects. In Australia, each state has it is the different sale of goods legislation whereby
in northern territory, Sale of Goods Act 1972 (NT). A contract for the sale of goods refers to the
one where the seller agrees to sell certain commodities/ies to the buyer in exchange for monetary
consideration. This statute outlines some entitlements of the buyer that further becomes implied
terms of the contract for the sale of goods. These terms include a guarantee of the merchantable
quality of goods, guarantee of goods to be correspondence with the sample and description,
guarantee of goods to be fit for the relevant purpose and so on. These terms are mentioned in the

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legislation itself. For instance, Section 18 provides provisions of sale of goods by description and
section 19 provides implied condition of quality and fitness. Similarly, section 20 outlines the
statutory terms of sale of goods by sample (legislation.nt.gov.au, 2020). If a seller fails to comply
with these terms, the same seems liable for the breach of contract even when the terms were not
mentioned in the contract or decided between the parties.
Apart from the protection of buyers, some other areas are also there where these statutory terms
do apply in a contract for the sale of goods. These areas are related to ownership, delivery,
payment, and acceptance. Statutory terms act in these areas as an implied term to fill the gap of
contract. In other words, this is to state that statutory terms regarding the above stated four topics
do apply where the contract remains silent about those and express terms are not enough to
resolve a matter of dispute.
Here some additional points are required to be mention. One such point says that statutory terms
of merchantable quality and fitness for the purpose do not apply if the seller does in such kind of
goods. In other words, this is to state that where the seller does not deal with certain types of
goods than to the sale of those goods, the above said two terms cannot be implied. On the
different side, no matter in what type of goods, the seller deal, the statutory terms of description
and title do always apply.
Another important point here to make here is that statutory terms protecting the buyer may be
overridden by an express term as given in the case of L'Estrange v F Graucob Ltd.
Question 2
For every professional, it is necessary to have some knowledge regarding a variety of laws as
they influence their behavior and manner of conduct. It general it seems that an accounting

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professional need to know his/own field but the same is not true as many other laws are there
which affects them and therefore having knowledge of them becomes crucial. This part of the
report has the objective to develop an understanding of the significance and role of various laws
in the profession of accounting professionals. The laws selected for the discussion hereby are
contract law, insurance law, and employment law.
Contract Law
Every contract is subject to the contract law of that particular nation and affects parties by
determining their rights and liabilities. Knowledge of contract is crucial for everyone to develop
a valid contract considering all the pros and cons of the situation. For accounting professionals
also, contract law has great implications. The knowledge of contract law is crucial for accounting
professionals for many reasons, but the following three are most crucial out of those:-
 Accounting professionals becomes able to deal and negotiate with their clients in a more
confident manner
 They become more competent professional
 Such professionals may better understand the implication of the negotiation done with
their clients. (Huddleston, 2020)
In general, accounting professionals must have enough knowledge of all terms of the contract
and different provisions of contract law, yet in the following sections, some specific topics are
discussed which seems important for accounting professionals in their profession.
 Exclusion Clause: - Exclusion clause is an important concept of contract law that is a
kind of unfair terms. As the name implies, such clauses limit or exclude liability for some
of the areas of the contract. By inserting this clause in the contract, accounting

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professionals may skip their liability for certain terms and can reduce the risk of breach of
contract on their part. The contracts of accounting and advisory services are risky ones
where professionals become agree to provide their services concerning the financial
statements of a firm. In such a situation, any small piece of wrong advice may bring
adverse results to their professional careers.
 Third-party liability disclosure:- The financial statement of a business is to be used by
many of the third parties and they can pursue further actions against auditors. In such a
situation, accounting professionals have to face the detailed consequence of their actions
but they may limit their liability to the potential third parties. Such a disclaimer of limited
may be incorporated in the engagement letter developed with the client as well as can
also mention in the actual work produce by them such as on a piece of written advice or
audit report. In the case of ADT v BDO Binder Hamlyn (1995), auditors of a company
held liable to the potential of the same as a duty of care was established by the court.
Auditors had to pay £105m as an award of damages (Roder, 2017). The decision of the
case provides a lesson to the accounting professionals that they can avoid these additional
liabilities to third parties by making an advance third-party liability disclosure.
 Damages:- Each contract outlines provisions of damages payable by parties in case of
breach of contract and hence this is another important topic for the professionals under
contract law. A contract with the client determines what liability auditors may face if
would breach a contract. Since these accounting professionals sign this contract they
become bind with the same as per the decision of L'Estrange v F Graucob Ltd. Therefore
it becomes necessary for the professionals to pay attention to such a clause and to

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determine the liabilities appropriately. Above mentioned are some of the key topics of
contract law, knowledge of which are important for such professionals. However in
addition to above many other topics such as confidentiality, consideration, reliance on
clients and others. These topics help the professionals in the development of a valid and
suitable contract for them protecting their best interests.
Insurance Law
Insurance law is an area of law that provide safeguard against future potential risk. Such risk can
be related to loss of life, critical illness, assets, or type of business risks. For accounting
professionals, Insurance law seems to have a huge implication. Clients seek the professional
advice of such accountants and these professionals play a crucial role in helping businesses and
individuals in building their financial futures. Here there is always a risk that clients may sue
such professionals for their mistake or negligence if the same has not been excluded trough the
exclusion clause under a contract. In such a situation, insurance law provides safeguard to the
risk and assure these professionals that they and their accounting and auditing firms would
remain covered from financial repercussions of any kind of legal actions that clients may initiate
against them. Insurance law provides peace of mind to professionals where they can focus on
delivering the best of their services. When these professionals would know insurance law and
protection granted under the same, they will be able to purchase insurance to cover the risk of
their accounting errors (Chen, 2019).
Employment Law

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This is the third type of law which also influences accounting professionals and therefore having
knowledge of it becomes necessary. An accounting professional that runs his own firm employs
many people such as assistance, accountants, and other clerical persons. These people are
considered as an employee of the firm and have certain rights and obligations under applicable
employment law. In this manner, it becomes necessary for accounting professionals to consider
the rights of their employees and to provide the same. Failure in doing so can bring legal
consequences to the firm in form or heavy penalties hence to ignore these situations,
professionals need to comply with these laws. Similarly, employees also have some duties and
obligations to the employer such as keeping the organizational assets secure, maintain
confidentiality and performing their duties. The accounting professional can ask about his
entitlements in the capacity of the employer but he can only do so when he would know this law.
In this manner, these three laws have significant implications in professional life.

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References
ADT v BDO Binder Hamlyn (1995)
Bant, E., 2009. Incapacity, Non Est Factum, and Unjust Enrichment. Melb. UL Rev., 33, p.368.
Chen, P. (2019) Business Insurance for Accountants and Accounting Firms. [online] Available
from: https://advisorsmith.com/financial-professionals/accountant-insurance/ [Accessed on
04s/04/2020]
Huddleston, J. (2020) What All CPAs Need to Know About Contract Law. [online] Available
from: https://www.accountingweb.com/practice/practice-excellence/what-all-cpas-need-to-
know-about-contract-law [Accessed on 31/03/2020]
legislation.nt.gov.au. (2020) SALE OF GOODS ACT 1972. [online] Available from:
https://legislation.nt.gov.au/en/Legislation/SALE-OF-GOODS-ACT-1972 [Accessed on
31/03/2020]
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Paterson, J., 2009. The Australian unfair contract terms law: The rise of substantive unfairness as
a ground for review of standard form consumer contracts. Melb. UL Rev., 33, p.934.
Petelin v Cullen (1975) 132 CLR 355

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Roder, E., 2017. Combining Limited Liability and Transparent Taxation: Lessons From the
Convergent Evolution of GmbH & Co. KGs, S Corporations, LLCs, and Other Functionally
Equivalent Entities. Fla. Tax Rev., 21, p.762.
Sale of Goods Act 1972 (NT)
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2