Commercial Law Case Study: Negligence, Liability, and Duty of Care

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Commercial Law
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Contents
Introduction...................................................................................................................... 3
Question 1.................................................................................................................... 4
Question 2.................................................................................................................... 7
References.....................................................................................................................10
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Introduction
Commercial Law is a branch of law that regulates and governs business contracts and
other commercial activities and is often considered as a branch of civil law. The
commercial law deals with matters of both public and private nature. This branch of law
is considered the most important branch of law and as it deals in particular with the
matters that may arise when business deals with the government, other companies and
existing or potential customers. This essay is presenting the application of commercial
laws in a given case scenario. Such case scenarios relating to the tort of negligence
and the duty of care that an individual is expected to undertake.
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Question 1
Issue
Peter started excavating work for his wall in a dark sky and rainy weather. Eventually,
due to storms, he forgot to cover the excavation and as a result of Thomas, Ella, Ben,
and Joe faced injuries. The issue here is to identify the rights available to Thomas, Ella,
Ben and Joe and the liabilities of Peter.
Rule
In Australia, the tort of negligence is prosecuted under Law of Negligence and
Limitation of Liability Act, 2008. It can be described as a legal wrong which is
suffered by an individual as a result of the mistake of another. Such other person failed
to take proper care to avoid a foreseeable risk. The tort of negligence can be made
applicable in both cases where there is a contractual relationship or not (Australian
Government, 2016). There are five elements of negligence. These include duty,
breach of such duty, cause, in fact, proximate cause, and damages. For the purpose of
establishing a case of negligence, it is important to ensure that the defendant owed a
duty to the plaintiff and such duty has been breached by the defendant. Further, it must
be proved by the plaintiff that his injuries are a result of the actions of the defendant.
The defendant shall be held responsible only if the harms were foreseen as a result of
his actions. Lastly, the harm caused to the plaintiff must be either personal injury or
harm to his property (Sugarman, 2017).
Application
The facts of the given case scenario can be linked to the decided case of Caparo
Industries plc v Dickman (1990), 2 AC 605. In this case, a three-fold test was
established in order to determine if the duty of care existed. The test required that the
harm caused to the defendant was reasonably foreseeable as a result of the conduct of
the defendant. Further, there exists a relationship of proximity and that the imposition of
liability is just and fair in given circumstances (Goudkamp, and Ihuoma, 2016). In the
given case scenario, it can be stated that as a result of actions of Peter, the harm
caused to Thomas, Ella, Ben, and Joe was reasonably foreseeable and the relationship
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of proximity or neighborhood also existed. Due to the injuries caused, it is just and fair to
impose liability on Peter. Therefore, it can be concluded that there existed a duty of
care.
In another landmark case Donoghue v Stevenson (1932) AC 562, it was held that an
action for negligence could also succeed in cases even where there is no contract. The
plaintiff can claim that he is entitled to a duty of care (Cassel, 2016). In a given case,
injuries were caused to Thomas, Ella, Ben, and Joe and they were entitled to a duty of
care. Though there exists no contract between Thomas, Ella, Ben, Joe, and Peter but
they can take action for negligence.
An individual can be held liable for a tort of negligence only if all the elements of
negligence are present. The facts of the given case scenario can be related to the tort of
negligence as all of its elements were present. Peter was excavating for his wall in bad
weather and when it started raining, he failed to cover the excavation. In this case, he
had a duty to ensure that his actions cause no harm to any person in the neighborhood
but the harm was caused. Therefore, it can be stated that he breached his duty. Further,
his actions caused injuries to Thomas, Ella, Ben and Joe and the harm caused was
foreseen due to bad weather. As a result, it can be stated that all the elements of
negligence were present in the case scenario.
Defense
When a person is held liable for negligence, he may have two defenses. These
defenses include Volenti non fit injuria and Contributory Negligence. The term
‘Volenti non fit injuria’ literally means that ‘to a willing person, the injury is not done’.
This implies that if the defendant proves that the plaintiff accepted the loss or risk or
damage, then he may not be held liable. Such acceptance by the plaintiff can be both
implied or express. Further, Contributory Negligence means that the plaintiff contributed
in some way or another to the harm caused. This will reduce the payout for damages
(Katsivela, 2013).
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In the given case scenario, Peter cannot benefit from these defenses as in no way the
injured persons have agreed to undertake the risk and also their actions did not
contribute to the harm caused.
Conclusion
Based on applicable laws and decided cases, it can be concluded that in the given
situation, Peter is liable under the tort of negligence.
Remedy
In cases of negligence, the principle remedy is an award for damages caused due to
negligence. These amount of damages may be categorized into three categories
including compensatory damages, punitive and nominal damages. Compensatory
damages take into consideration the personal injury that may be suffered by the plaintiff
in addition to any other future loss which he may suffer. Punitive damages are usually
awarded in cases of gross negligence. Nominal damages are awarded when the plaintiff
has not suffered any major financial loss (Bell, and Jocic, 2017). In the given case,
Peter can be held liable for punitive damages as his negligence was gross.
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Question 2
Issue
Mike inherited $30,000 from his parents and he invests the money in Magnum Ltd. on
the advice of his friend Sandy. Sandy is a trainee auditor in Peters & Co, and he told
Mike that he looked into accounts of Magnum Ltd. and it will be a good investment.
Eventually, Mike lost his money. The issue here is to advice Mike, Sandy and Peters &
Co for any rights and liabilities.
Rule
As per Section 18 of Law of Negligence and Limitation of Liability Act, 2008, in
cases involving the allegation of negligence against the person who holds himself to be
a person possessing knowledge and skills, the court shall apply a standard to identify if
the defendant acted with due care or is guilty of negligence. Such standard includes the
reasonable expectation from the person possessing the knowledge and skill and the
relevant circumstances on the date on which negligence is claimed to have occurred
(Stewart, and Stuhmcke, 2014). Section 19 of the Act states that shall not be held to
have acted negligently if he acted in a professional manner.
Further, based on the doctrine of apparent authority, a principal is bound by the
actions of his agent holding apparent authority. This means that when an agent perform
deals with the third party and such third party is under the impression that the agent is
acting in authority of his agency, then in such cases, the principal can be held liable for
actions of the agent (Tosato, 2016).
Application
Based on Section 18 of the Law of Negligence and Limitation of Liability Act, 2008,
Sandy is assumed to possess the skill to give advice to Mike related to investment.
However, she acted negligently in providing such advice. She did not check the
accounts carefully and gave the wrong advice. Here, she is guilty of negligence.
Further, she cannot claim protection under Section 19 as she did not act in a
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professional manner and instead gave wrong advice to Mike (Goudkamp, and Ihuoma,
2016).
In the given case scenario, Sandy is an agent of Peters & Co. Based on the concepts of
agency, the principal shall be liable for the actions of his agent in cases of apparent
authority (Tosato, 2016). Here, it can be stated that Sandy had apparent authority to act
on behalf of Peters & Co.
Conclusion
It can be concluded that Mike has a right to initiate proceedings for negligence against
Sandy as she did not perform her duty with care. He has a right to claim damages.
Further, Sandy is liable for her negligence and Peters & Co can be held liable for the
acts of its agent.
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Conclusion
From the study of the essay, it can be concluded that the tort of negligence can be
made applicable to both contractual and non-contractual relationships. It is important for
every individual to undertake the duty of care in his/ her actions in order to avoid any
liability for negligence. Further, it can also be concluded that a principal can be held
liable for actions of his agent in cases of apparent authority.
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References
 Australian Government, 2016. Law of Negligence and Limitation of Liability Act,
2008. [Online]. Federal Register of Legislation. Available at:
https://www.legislation.gov.au/Details/C2016Q00058/Html/Text#_Toc197935207
[Accessed on 15 Febraury 2019].
 Bell, M. and Jocic, W., 2017. Negligence Claims by Subsequent Building
Owners: Did the Life of Bryan End Too Soon. Melb. UL Rev., 41, p.1.
 Cassel, D., 2016. Outlining the Case for a Common Law Duty of Care of
Business to Exercise Human Rights Due Diligence. Business and Human Rights
Journal, 1(2), pp.179-202.
 Goudkamp, J. and Ihuoma, M., 2016. A Tour of the Tort of Negligence. Oxford
Legal Studies Research Paper No. 20/2016.
 Katsivela, M., 2013. The Volenti Defence under Australian and Canadian Law: A
Comparative View. J. Comp. L., 8, p.322.
 Stewart, P. and Stuhmcke, A., 2014. High Court Negligence Cases 2000–10.
Sydney Law Review.
 Sugarman, S.D., 2017. Torts and Guns. Journal of Tort Law, 10(1), pp.3-22.
 Tosato, A., 2016. Commercial agency and the duty to act in good faith. Oxford
Journal of Legal Studies, 36(3), pp.661-695.
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