Legal Analysis Report: BLW17 Business Law Assignment, Nov 2017

This business law assignment analyzes a case study involving negligence, exclusion clauses, and consumer protection. The report addresses whether an exclusion clause limits Locky's liability for negligence, based on the principles of duty of care established in Donoghue v Stevenson and L'Estrange v Graucob. It further examines if Alan can claim compensation from the manufacturer of a faulty product, applying the threefold test from Caparo Industries plc v Dickman and the 'but for' test. The assignment also assesses whether Alan and Bing breached consumer laws by misrepresenting the origin of their food products, referencing Australian Consumer Law and the case of Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited. Finally, it investigates whether Bert contravened Australian Consumer Law and if he has any defenses against claims from Alan and Bing. The assignment demonstrates a clear understanding of legal principles and their application to the given scenarios.

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BLW17 Business Law
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ASSESSMENT –Legal Analysis -
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Due date: FRIDAY 10TH November 2017 12.00 NOON
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Question 1
Issue
Whether the exclusion clause inserted in the contract would give rise to liability for
Locky under negligence, or not?
Rule
A case of negligence can be made by one party, against another, when the first party
carries on such work, which has the capacity or probability of resulting in harm for the other
party, and as a result of this a duty of care is owed. When this duty of care is breached, the
case of negligence can be made (Turner, 2013). Donoghue v Stevenson [1932] UKHL 100 was
a case where the court held that the manufacturer of a product owes a duty of care to
consumers owing to the reasonable foreseeability and proximity between the parties
(Latimer, 2012). Where the duty of care is not fulfilled, and there is a contravention of the
same, a case made for negligence results in the plaintiff being awarded with damages for
their loss or harm (Greene, 2013).
When a contract is formed, there are different clauses, and terms and conditions
included in it. Exclusion clause is one of the clauses in a contract, through which one of the
contracting parties is able to restrict or limit their liability in situation of some occurrences
(Mau, 2010). So, the exclusion clause has the power of limiting the liability which is raised
from a case of negligence or breach of contract, amongst the other things. However, there
are certain criteria which have to be fulfilled, in order for the exclusion clause to have
validity in lawful terms (Clarke & Clarke, 2016). The first requirement is that there is a need
for the exclusion clause to be properly inserted into the contract. This has to be followed by
the exclusion clause to be brought to the attention of the parties, particularly when the

same is covered at some other place (Carter, 2007). Another requirement is that the
exclusion clause cannot be against a law, and also cannot restrict or limit the applicability of
any statutory law or of any common law. If the exclusion clause attempts to do so, the
clause would not be deemed valid, and would not be able to protect the party from
liabilities (Bonell, 2009).
As has been stated earlier, the exclusion clause has to be properly brought to the
attention of the party against whom the same has been inserted. However, the case of
L'Estrange v Graucob [1934] 2 KB 394 presents a different viewpoint. In this case, a cigarette
vending machine had been bought by the claimant for using it in her cafe. An order form
was signed by her where it was stated that the warranties, conditions and other such
aspects were not included. When the machine did not work properly, the claimant
attempted to reject the same based on the provisions of the Sale of Goods Acts regarding
the goods not being of merchantable quality. It was held by the court that the order form
had been signed which made the claimant bound by the terms despite the fact that she read
the terms of this form or not. Hence, an exclusion clause which is covered under a contract
and is signed by parties would have legal validity despite the same not having being read by
the signing party (Treitel & Peel, 2015).
Application
In the given case study, Locky owed a duty of care to Alan and Bing to take care
when he left after entering the premises. There was proximity between the parties as the
action of Locky had the capability of harming Bing and Alan. Also, it was reasonably
foreseeable that a door left open was bound to increase the chances of burglary. Thus, on
the basis of Donoghue v Stevenson, a duty of care was owed by Locky to Bing and Alan. And
since this duty was not upheld, which resulted in the valuable equipment of Bing and Alan

being stolen, Locky would be guilty of negligence and would have to compensate Bing and
Alan for their loss.
However, when the contract was signed between Locky and Bing and Alan, an
exclusion clause was covered under it. This clause excluded the liability of Locky from any
kind of loss or damage caused to the customers from breach of contract or otherwise. This
contract does not invalidate the applicability of any law, so it would be deemed as valid.
Further, this clause was properly inserted into the contract and again this would uphold the
validity of the exclusion clause. Lastly, the clause would be valid as the contract was signed
by Bing and Alan, even when they had not read the exclusion clause, based on the case of
L'Estrange v Graucob. This would mean that the liability arising from negligence of Locky
would not bind him to compensate Bing and Alan owing to the validity of the exclusion
clause.
Conclusion
Hence, from the discussion carried on above, it can be concluded that the exclusion
clause would be deemed as valid and Locky would not have to compensate Bing and Alan
for their loss.
Question 2
Issue
Whether Alan can get compensation from the manufacturer in this case, or not?
Rule
The basics of negligence have been explained in the previous segment. And through
Donoghue v Stevenson, it has been shown that a duty of care is owed by the manufacturer
to the consumers. In the case of Caparo Industries plc v Dickman [1990] 2 AC 605, a
threefold test was presented whereby in order for a case of negligence to be made, there is

a need to show that there was proximity between the parties, there was reasonable
foreseeability and lastly, the imposition of penalties would be deemed as just for the
plaintiff. And the compensation can be awarded for the economic loss sustained as well
(Lunney & Oliphant, 2013).
When a case of negligence is brought before the court, the damages are awarded by
the court only after considering some factors. In this regard, the ‘but for’ test given in
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428 proves to be of help. In this case,
the court held that in order for the damages to be awarded to the plaintiff, it has to be
shown before the court in a reasonable manner that the injury or the damage would not
have been sustained by the plaintiff, save for the breach of duty of care by the defendant
(Strong & Williams, 2011).
Application
In the given case study, the threefold test given under the case of Caparo Industries
plc v Dickman would help in establishing if a case of negligence can be made by Alan against
the manufacturer. In this case, there was proximity between Alan and manufacturer based
on Donoghue v Stevenson as the product manufactured by the consumer, if malfunctions,
had the reasonable foreseeability of injuring the consumer. Also, by compensating Alan, it
would be deemed as a fair thing to do. And he would be compensated for not only his
injury, but for the economic loss in terms of lost one week.
Before damages are awarded to Alan, it has to be shown that the injuries would not
have taken place had the product not malfunctioned. Applying Barnett v Chelsea &
Kensington Hospital, the ‘but for’ test is satisfied as Alan would not have been hurt had the
electrical appliance worked properly.

Conclusion
Hence, from the discussion carried on above, it can be concluded that Alan can
successfully compensation from the manufacturer.
Question 3
Issue
Whether Alan and Bing breached any consumer related laws in this case, or not?
Rule
In Australia, the consumers are protected through the Australian Consumer Law,
which is covered under Schedule 2 of the Competition and Consumer Act, 2010 (Corones,
2012). The Act is concentrated on protecting the consumers and promoting competition in
the nation. Under the Australian Consumer Law, which is a part of the main act, certain
restrictions have been imposed over the business owners with regards to their conduct
during the course of trade and commerce (Coorey, 2015). One of such restrictions relates to
section 18, where a restriction has been placed on the businesses regarding indulging in
misleading or deceptive conduct. Section 29 of this act puts a restriction on the businesses
from falsely or misleadingly making representations to the consumers. And section 33 of the
Australian Consumer Law imposes a restriction on misleading conduct with regards to the
nature of goods; where such is done, it would be deemed as an unfair practice (Austlii,
2017).
In the case of Australian Competition and Consumer Commission v Coles
Supermarkets Australia Pty Limited [2014] FCA 634, Coles had been advertising its bread by
using the phrases like ‘freshly baked’, ‘baked today, sold today’, ‘freshly baked in-store’, and
‘baked fresh’. However, the reality was that the bread was only baked partially and at some
instances, the bread was stored to up to six months before the same was defrosted for the

final baking process taking place at the stores of Coles. As a result of this, a case was
initiated against Coles by ACCC, i.e., the Australian Competition and Consumer Commission.
The court held that the company had indeed breached sections 18, 29(1)(a) and 33 of the
Australian Consumer Law (Burrows, 2015).
Application
In the given case study, a case can be made against Alan and Bing for the breach of
sections 18, 29 and 33 as they mislead the consumers into believing that they used fresh
products and that too which were sourced locally. The reality was that they importing the
products from Spain for producing the sauce. And so the fresh vegetables were not locally
produced, as claimed within 50 kilometres of restaurant located and were instead imported.
The local produce came from Queensland instead of South Australia, where the restaurant
was situated. Hence, based on Australian Competition and Consumer Commission v Coles
Supermarkets Australia Pty Limited, this would be deemed as misleading and deceptive
conduct, apart from the breach of the quoted sections. So, the information put on the menu
by Alan and Bing was meant to mislead the consumer resulting in the breach of consumer
related laws of the nation.
Conclusion
Hence, Alan and Bing had indeed breached the consumer related laws, specifically
the provisions of Australian Consumer Law.
Question 4
Issue
Whether the provisions of Australian Consumer Law have been contravened in this
case by Bert, or not? Whether he has any defences available to him from the claims made
by Alan and Bing, or not?

Rule
As has been explained in the preceding segment, Australian Consumer Law is a
substantial piece of consumer protection legislation in Australia (Miller, 2016). In order to
make a claim under the Australian Consumer Law, there is a need to show that the person
was a consumer based on section 3 of this act. As per this section, a person would be
deemed to be a consumer only when the good or services purchased are used for
household, domestic or personal use purposes and the value of such good/ service is less
than $40,000 (Austlii, 2017).
Under section 18 of the ACL, the businesses have an obligation of not indulging in
any such conduct which can be considered as misleading or deceptive. In the case of
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] FCAFC 37,
the court held that TPG had been engaged in misleading and deceptive conduct. The
company had, in this case, claimed in its advertisement that a single amount had to be paid
for the product being offered by the company. However, in reality, consumes were required
to pay hidden which led to a price being paid, which was higher than the advertised price.
Since TPG had purposely withheld these amounts, the court held TPG liable for misleading
the consumers (High Court of Australia, 2013).
As per section 29 of the ACL, the businesses are not to indulge in false or misleading
representations. Under section 29(1)(i) it has been stated that the businesses are to refrain
from engaging in such conduct when the services or products offered by the company
through the promotion, particularly when such promotion can be deemed as false,
misleading or unfair representation with regards to the value of the products. In Australian
Competition and Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263, the court
held the defendant liable for being engaged in false representation when they were

promoting their services to the consumers, particularly due to the falsely represented drip
pricing (Jade, 2015).
In case the consumer gets a defective service, the consumer has the option for
asking for the defective services to be remedied, claiming damages and terminating the
service contracts where the response is not satisfactory (Singh & Kaur, 2011). Section 268
provides that when a major failure takes place in context of services, such claim can be
made. So, where the services are not of state, condition, quality or nature as had been
promised, this claim can be made. However as a remedy, the service provider can avoid a
claim being made against them by responding to the defective service through another
proper service (Hobart Community Legal Service, 2013). A defence can also be claimed in
the context of having deployed the due care and skill based on section 60 of the ACL. A key
defence available under the ACL is to show that the act was the fault of other person, which
was not in control of the defendant and that the reasonable precautions and due diligence
had been undertaken by the defendant to avoid such breach (Clayton UTZ, 2012).
Application
In the given case study, with regards to the claim of Alan and Bing against Bert,
different claims and defences can be made. In the matter of the tour of Great Wall, Bert has
the option of citing the defences available under ACL and stating that he had taken due care
regarding the services offered by him and that it was not his fault that the tour was
cancelled as the same was done owing to the incompetence of the local bus driver, which
could not have been foreseen by him. However, in the case of public holiday, this defence
would not work for Bert, as he failed to fulfil the due care that was required on his party as a
provision of ACL.

With regards to having being promised a flight in Qantas and instead having to be
flown in Thai Airlines, Bing and Alan can make a case against Bert on the basis of Australian
Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited¸ for
breach of sections 18, 29 and 33 as Bert mislead about the goods being offered. With
regards to the ‘all-inclusive’ price quote, it would be deemed as misleading conduct on the
basis of Competition and Consumer Commission v TPG Internet Pty Ltd, and false
representation on the basis of Australian Competition and Consumer Commission v Jetstar
Airways Pty Ltd. This is because the conduct of Bert was to mislead Alan and Bert, and in this
regard, his advertisement covered false and misleading representations, thus breaching the
quoted sections. And as a result of this, Bing would be liable for breaching different
provisions of Australian Consumer Laws.
Conclusion
Hence, the provisions of Australian Consumer Law have been contravened in this
case by Bert; and he has defence available to him only in context of the first claim made by
Alan and Bing. Thus, for the remaining two claims, Bert would be liable.

List your references here
References
Austlii. (2017). Competition and Consumer Act 2010 - Schedule 2. Retrieved from:
http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html
Bonell, M.J. (2009). An International Restatement of Contract Law: The Unidroit Principles of
International Commercial Contracts (3rd ed.). New York: Transnational Publishers, Inc.
Burrows, M. (2015). Update to Australian Competition and Consumer Commission v Coles
Supermarkets Australia Pty Limited [2014] FCA 634. Retrieved from:
https://www.dundaslawyers.com.au/update-to-australian-competition-and-
consumer-commission-v-coles-supermarkets-australia-pty-limited-2014-fca-634/
Carter, J W. (2007). Contract law in Australia (5th ed.). Sydney: LexisNexis Butterworths.
Clarke, P. & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.).
South Melbourne: Oxford University Press.
Clayton UTZ. (2012) The Australian Consumer Law. Retrieved from:
https://www.claytonutz.com/ArticleDocuments/178/Clayton-Utz-The-Australian-
Consumer-Law-An-Essential-Guide-For-Product-Manufacturers-And-Suppliers-
2012.pdf.aspx?Embed=Y
Coorey, A. (2015). Australian Consumer Law. London, United Kingdom: LexisNexis
Butterworths.
Corones, S.G. (2012). The Australian Consumer Law. New South Wales: Lawbook Company.
Greene, B. (2013). Course Notes: Tort Law. Oxon: Routledge.

High Court of Australia. (2013). Australian Competition and Consumer Commission V TPG
Internet Pty Ltd (M98/2013). Retrieved from:
http://www.hcourt.gov.au/assets/cases/m98-2013/M98-2013.pdf
Hobart Community Legal Service. (2013). What remedies are available?. Retrieved from:
http://www.hobartlegal.org.au/tasmanian-law-handbook/consumers-money-and-
debts/australian-consumer-law/what-remedies-are-available
Jade. (2015). Australian Competition and Consumer Commission v Jetstar Airways Pty
Limited [2015] FCA 1263; (2016) ATPR 42-523. Retrieved from: https://jade.io/j/?
a=outline&id=418609
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia
Limited.
Lunney, M., & Oliphant, K. (2013). Tort Law: Text and Materials (5th ed.). Oxford: Oxford
University Press.
Mau, S.D. (2010). Contract Law in Hong Kong: An Introductory Guide. Hong Kong: Hong Kong
University Press.
Miller, R.V. (2016). Miller's Australian Competition and Consumer Law Annotated. St,
Pyrmont NSW: Thomson Reuters Australia.
Singh, J., & Kaur, G. (2011) Australian Consumer Law. Düsseldorf Germany: Lambert
Academic Publishing.
Strong, S.I., & Williams, L. (2011). Complete Tort Law: Text, Cases, & Materials (2nd ed.).
Oxford: Oxford University Press.
Treitel, G H. & Peel, E. (2015). The Law of Contract (14th ed.) London: Sweet & Maxwell.

Turner, C. (2013). Unlocking Torts (3rd ed.). Oxon: Routledge.

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