Australian Commercial Law Assignment: LAWS20058 - Part A & B Analysis

This document offers a comprehensive analysis of an Australian Commercial Law assignment (LAWS20058), addressing key legal concepts such as Hart's three-part legal system, misrepresentation, and breach of contract. Part A examines the legal systems of the UK and Australia, focusing on the rule of recognition, rule of change, and rule of adjudication. Part B delves into a case study involving a business sale, analyzing whether a contract is void due to misrepresentation and whether there was a breach of contract. The analysis covers fraudulent misrepresentation, the application of the Competition and Consumer Act 2010, and the distinction between contractual terms and mere representations. The document concludes that the seller engaged in fraudulent misrepresentation, entitling the buyer to claim damages, and that there was a breach of both implicit and explicit terms of the contract.

LAWS20058 AUSTRALIAN COMMERCIAL LAW
ASSIGNMENT – I
Student Name
[Pick the date]

Part A
Question 1(b)
United Kingdom has been taken as the selected foreign country whose legal system would be
analysed keeping in mind the three part legal system described by Hart.
 Rule of recognition
A key condition necessary is that the source of law should be clearly identifiable which is
apparent in case of UK where there are three major sources that emerge. The most prominent
source of law in the UK is statute law which refer to those laws which have been legislated by
the Parliament and other authorised bodies. This is without doubt the most significant source
especially because the constitution is unwritten for UK> Another key source of law in UK is
common law and it acts as a source of legal principles which are highly regarded. Another source
of law relates to the European Union Law which assumes relevance in the backdrop of UK being
a member of EU1
In comparison, the law sources relevant for Australia are as outlined follows2.
1) Constitution
2) Statute Law
3) Case Law
4) Common Law
A key aspect worth mentioning is that in case of Australia, a significant role is played by
Constitution which does not happen for UK considering the vacuum created by the absence of a
constitution and hence emphasis is more on traditions and conventions.
 Rule of Change
1 Slapper Gary, Kelly David, The English Legal System (Routledge, 2014) 17
2 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)
1

The second component of Hart’s legal system is that there has to be mechanism for bringing
about change in law. This would essentially involve formulation of new laws coupled with
withdrawing the old laws. The UK parliament is the single most significant entity which tends to
function towards this cause. However, it is imperative to note that they do not work in isolation
and are constantly influenced by people through various feedback system such as the pension
system3.
In comparison, Australia also shares similar process with regards to making of law considering
common roots in the colonial history for both nations. Further, the law making power of the
legislature at the Federal and State level is dependent on the bifurcation of subjects between the
centre and the state. Also, there is judicial review which ensures that the law changing power is
kept under check and the constitutional principles are not breached4.
 Rule of Adjudication
When there are legal regulations, then disputes also logically would arise which would require a
dedicated adjudication system in place. The key role in this process is played by the judiciary.
However. Considering the overlapping powers of the various organs, the judicial powers were in
the past also vested in other organs such as Queen’s Bench and Privy Council. However, changes
over the last couple of decades have strengthened the judiciary and they serve as the primary
instrument of adjudication in UK5.
In Australia, the constitutional provisions and doctrine of separation of power ensures that the
judiciary remains independent. Further, there is a hierarchical structure of courts which tend to
exist at the state and the Federal level. Owing to administrative law, there are other mechanisms
for adjudication which have become prominent in the last five decades.
Part B
Question 2
3 Partington Martin, Introduction to the English Legal System 2016-2017 (Oxford University Press, 2016), 31-33
4 Ibid. 2, 20-22
5 Ibid. 1, 34-39
2

Issue
The issue is to comment on whether the contract would be classified as void contract based on
the underlying misrepresentation carried out by Angelo with Barry.
Relevant Law
When a buyer wants to purchase something, then the concerned seller would make various
representations related to that particular product or service. The set of representations is an
imperative factor on the part of buyer to enact a contract with the seller. Hence, when there is
any false representation which has been stated on the part of representor, then this false
representation will be named as misrepresentation. The misrepresentation can be either done
intentionally or by mistake. When, the representor has intentionally made false representation to
the buyer with the aim of forging a contract with the buyer, then it would result fraudulent
misrepresentation. When there is fraudulent misrepresentation made by the representor, then the
contract would become voidable and innocent party can take the damages from the representor
party6. The essential conditions that need to be satisfied to determine the given representation as
misrepresentation are shown below:
 The representations that would be considered are only factual representation. It means the
representation related to the future estimation or own estimation or opinion of the representor
would not be covered under misrepresentation. Moreover, it is noteworthy that when the
representor remains silent and would not say anything about some factual information, then
this would not be classified as misrepresentation by representor7.
 Representation of the factual statement must be significant enough to tempt the buyer into
executing the contract. Also, when the representor has provided some reports to the
concerned buyer party, then it is essential on the part of buyer to verify the representations.
The decision of Redgrave v Hurd8 case, highlighted the negligence on the part of buyer in
regards to check the validity would result enforceable contract for buyer9.
6 Robert Bryan Vermeesch, Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2011)
7 Andy Gibson, Douglas Fraser, Business Law (Pearson Publications., 8th e, 2014)
8 Redgrave v Hurd (1881) 20 Ch D 1
9 Ibid.2, 73-74
3

Also, under Competition Consumer Act 2010, the aspects related to the misrepresentation that
would be taken into consideration and are shown below. A deceptive advertisement of the seller
would be considered if the below outlined factors are satisfied10.
 Commercial nature of the transaction between seller and buyer
 Deception in reality would not be required and hence, the significant deception is sufficient
for the applicability of s. (18), ACL.
 Reliability of seller that deception would provide some edge per the verdict of Perre v Apand
Pty Ltd
 Actual losses in terms of monetary terms incurred for the buyer because of the misleading
representation
Application
Barry is working for a company and wants to earn significant gains and therefore, has decided to
buy a business that can result in substantial gains. At the same time, Barry has seen the
advertisement given by Angelo that states the attractive aspects such as significant gains, less
expenses and no competitor of the business. Barry was impressed with the factual representation
made by Angelo and hence, decided to enter into contract based on the representation of Angelo.
It is also noteworthy that Angelo does not grant him any annual revenue receipts or financial
statements related to the business performance. Therefore, the only resource for Barry to depend
is the representation extended by Angelo. Also, Angelo is well aware about the aspect that strong
financial position of the business is key in seeking interest from Barry. Also, Barry would not
enact contract with Angelo, if he would have any knowledge that the actual financial
performance would be different from what Angelo has stated to him. Further, it is also evident
from the case that Barry does not have any clue or suspicion regarding the misrepresentation of
Angelo. Therefore, it can be said that Angelo has knowingly represented false factual
information to Barry so that he would impress with the facts and would enact a contract of
acquiring the business.
It can also be seen that Angelo has mentioned the wrong figures and information related to the
van and loader’s worth. Angelo has not specified that van has been taken on lease and hence,
10 Pathinayake, Athule, Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014)
4

every month it is essential to pay the lease amount to lease the van. Also, the loader does not
have any value. It would be fair to conclude that deceptive advertisement and false information
made by Angelo has extended the rights to Barry to ask for the damages from Angelo in
accordance with the ACL.
Conclusion
Angelo has indulged in fraudulent misrepresentation so that Barry would be ready to enter into
contract. Hence, due to the presence of misrepresentation, Barry can claim the damage from
Angelo because the enacted contract would become void.
Question 3
Issue
After considering the assumption that contract has not been nullified, the issue is to determine
whether the contractual terms have been breached or not and based on this if there has been a
breach of contract by Angelo.
Relevant Law
The contract would not be breached when there is no violation of the contractual term by either
of the contractual parties. The terms can be implicit or express based on the representation. It is
noteworthy that both implicit and express terms are having same value in contract. Hence, it is
imperative to decide as to which representations would be classified as term of contract while
which would be mere representations11.
There are several essential parameters that would be considered to separate a term from the
representation. There should be sufficient skill of the representor party to check whether the
stated representation is right or not. The rule of thumb opines that the representor having
expertise knowledge to verify the representation stated to the representee would be categorised
as term. This is because, there is a significant probability that representee does not have the
11 Pendleton, Wayne & Vickery, Roger, Australian business law: principles and applications, (Pearson Publications, 5th ed.,
2015)
5

requisite knowledge to verify the correctness of the representation and hence, he/she has to
completely rely on the representation of representor12.
The importance of the representation for the representee would be an imperative parameter to
decide whether it is just representation or contractual term. In order to describe this aspect the
decision given in Bannerman v White13 case would be taken into consideration. In this case, the
quality of hobs being sulphur treated was a critical aspect of purchasing the hobs from the seller.
Also, if the seller has said that the hobs are not treated with sulphur then the buyer would never
have entered into contract with the seller. Therefore, it can be said that quality of hobs treated
with sulphur is non-negotiable parameter for the decision of buyer to enact a contract of buying
the hobs and hence, it is a contractual term14. Also, if the seller falsifies the statement and does
not bother to inform buyer that the hobs are not sulphur treated, then there would be a contractual
breach. Hence, the breach of contractual term would provide the rights to the innocent party to
recover all the incurred losses from representor who has violated the term. Also, there is the
parole evidence rule for which the decision would be made in relation to the separation of
representation from terms of contract. According to this principle, all the respective
representations which have clearly been mentioned in the written contract would automatically
be the terms of contract while the oral ones would be considered insignificant and hence only
representations15.
Application
It can be said from the given case information that the essential aspect for Barry to buy any
business is financial performance of business which is also evident from the below listed
parameters.
 Barry is an employee and has become sick from his job and hence, wants to change his
profession
 He wants to derive significant gains and therefore, he was highly impressed with the
advertisement put up by Angelo.
 Angelo has stated the following aspects related to the sale of the fruits and vegetable store.
12 Ibid. 10, 134-136
13 Bannerman v White (1861) 10 CBNS 844
14 Ibid. 6, 150-152
15 Ibid. 7, 175-179
6

 Highly profitable venture
 Turnover $20,000 per month
 $$250,000 plus stock in the trade
 Zero competitor of the business
 Barry is totally impressed and hence, has decided to buy the business based on the above
highlighted representation
 Angelo has the requisite experience and skill to verify the representation that the figures of
the business are not what he has mentioned in the advertisement.
 Also, Barry is not having any previous knowledge to determine whether the business has the
stated financial position or not.
 Hence, the representation of Angelo is the only available reference source.
 Thus, it is apparent that financial information related representation constitute implicit terms
for the contract.
 Also, there are certain express terms related to the contract which are contained in the written
document and deal with the value of the van and loader.
Based on the given information, it is apparent that Angelo has breached the implicit and express
terms of the contract. Therefore, Barry can claim damages. from Angelo for breach of the
contract.
Conclusion
It can be seen from above that there is a breach of contractual terms (both implicit and express)
and therefore, Barry has the legal rights to take the Angelo to the court and can ask for the
compensation of the damages suffered.
7

8