Commercial Law Report: Analysis of Negligence and Misstatement Cases

This commercial law report presents an analysis of two distinct cases. The first case examines a scenario involving negligence, where a student, Norm, suffers personal injury and causes an accident after consuming sushi containing a cockroach. The report explores issues of negligence by the sushi bar, contributory negligence by Norm, and the potential for psychiatric injury claims by Norm's mother, Edna, who witnessed the aftermath. The second case involves a misstatement, where Max seeks advice from his friend Jack regarding the purchase of a restaurant. The report delves into the concept of negligent misstatement, Jack's potential liability for the advice given, and the relevant legal precedents such as Bisset v Wilkinson and Howard Marine v Ogden. The report concludes with an assessment of the legal positions of the parties involved in both cases, considering the principles of tort law and contract law.

Running Head: COMMERCIAL LAW 0
2018
Commercial Law
Student’s Name

COMMERCIAL LAW 1
Contents
Issues 1.............................................................................................................................................2
Rules................................................................................................................................................2
Application......................................................................................................................................4
Conclusion.......................................................................................................................................5
Issues 2.............................................................................................................................................6
Rules................................................................................................................................................6
Application......................................................................................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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Issues 1
In the provided case, Norm, a student was coming home from his lectures via his car in the
evening. On the way, he had a thought to buy some food for him and he went to Yokohama
Sushi Bar (Herein after referred as “Yokohama”) and purchased a packet of sushi from there.
After that he started to eat the said sushi in the mid of his way. While eating the same, he felt a
distinct taste and to check the matter he turned on the light of his car. He came to know that there
was a dead cockroach in that pack of sushi and he had taken a part of it. Due to this incident he
lost his control on his car and met an accident with car of another person named Paula. In this
accident both norm and Paula got injured.
In addition to above when Ms. Edna, Norm’s mother seen his son injured that night, she got
suffered from phobia towards sushi and cockroach as well in a manner that she won’t be able to
leave house.
Rules
As per the civil liability act of relevant jurisdiction, if a person becomes fail to show required
amount of care, where it was his/her duty to do so, such acts term as “Negligence”.
There is some relationship in between person, where one of them is liable to perform his/her duty
with due care as any ignorance of such person can affect the other one in a negative manner. This
negligence can be intentional as well as unintentional (Australian Law Reform Commission,
2018). If a person who was obliges to follow his/her duty with proper responsibility, become
fails to do so, he/ she have will be liable to pay compensation to other party of transaction.

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The said rule of negligence comes under the purview of Law of Tort. This law has been
developed to secure the interest of persons who are in fiduciary relationship with other person
and get suffer from negligence of the another person. Further, section 1 of Law Reform
(Contributory Negligence) Act, 1945 assert that if a person get suffered from any kind of
damage partly for his/her own fault, the same shall be entitled to get part damages in form of
compensation.
In Law of Tort, there are different types of damages. Such damages can be in the form of
personal injury or property loss or psychiatric injury (Legal Services Commission of South
Australia, 2018). Similarly, in a case of psychiatric injury, there can be two types of victims
which are categorized as “Primary Victims” and “Secondary Victims”.
Primary victims are the person is directly involved in an act, whereas secondary victims are the
person who is not directly immediately involved in an act but witnesses such events. Both such
victims are entitled to claim damages but for secondary victims there are some conditions
stipulated in law of tort.
That is as follow:
1. Such victims must have a bond of love and affection with primary
2. They must be self-witness of the relevant event.
3. They must get suffer from psychiatric injury.
4. Result of event in form of psychiatric injury must be quick and immediate.
If such victim fulfills all the mentioned conditions, then only he/she will be entitled to get
mages in compensation (e-lawresources, 2018a).

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In the case McLoughlin v O'Brian (1982) 2 WLR 982 it was declared that for secondary victims
it is necessary to comes very soon upon scene,
Application
In the studied case it was the liability of Yokohama to serve good quality food to it is customers.
By handing over sushi which had dead cockroach, Yokohama neglected it is duty. Norm, after
eating the said sushi, immediately fell ill. By this reason he lost control on his car and got injured
in an accident. Here, Norm has suffered from personal injury. But along with this is also
important to mention here that Norm has committed contributory negligence as he was eating
sushi during driving.
Ms. Eden, on the other hand experienced psychiatric injury as soon as she saw her injured son in
hospital and heard about the incident of bad quality food. A phobia has developed in her about
sushi and cockroach. She became unable to even go to outside of house. In this situation, she will
be called secondary victim against Yokohama.
As held in the case of McLoughlin v O'Brian, secondary victims must be informed immediately
about the event, here in the given case Ms. Edna saw her son at night whereas accident has
happened in evening. This time gap cannot be considered as “aftermath”.
Whereas, Paula met an accident with Norm’s car, he shall be treated as primary victim against
Norm. Being a driver on road, it was the duty of Norm to drive carefully considering health and
life of every other driver of that way. But here, Norm has neglected this duty by eating sushi
while driving.

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Conclusion
This case can be concluded as Mr. Norm is entitled to claim partial compensation from
Yokohama as he done contributory negligence by eating sushi while driving. Ms. Edna is not
authorized to demand compensation for Yokohama as she did not meet out with the required
criteria to make a claim being secondary victim. Further, Paula will be entitled to sue Norm for
negligent conducted by him while driving.

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Issues 2
Max wanted to purchase a restaurant Parramatta and he found a Lebanese restaurant named
“Kebabs Galore” for sale. Max did not know anything about restaurant industry so he went to his
friend jack who was already the owner of a successful restaurant business in the same locality.
Jack advised Max to purchase that restaurant and said that it is almost guaranteed to earn profit
from that restaurant even in first year of purchase. Max purchased “Kebabs Galore” with his
brother Cameron. But after that restaurant did not work well for Max and Cameron and they
faced a situation of bankruptcy after a year of purchasing of that restaurant.
Rules
Where a person enters into a contract or transaction on the basis of another person’s advice or
statement, and later on faced loss then such advisor shall be liable for such loss subject to some
conditions. Such false statement must be about law or facts. In case where statement made was
neither about facts nor law, but was only general advice or opinion, intention and availability of
information with advisor decides his/her liability (e-lawresources, 2018b).
It was held in the case of Bisset v Wilkinson [1927] AC 177 that if any person generally advises
without having professional knowledge and without knowing the facts in actual to other person,
such advisor shall not be held liable for loss accrued to other person. An innocent misstatement
does not attract any liability.
Further, as per the case Smith v Land and House Property Corp (1884) 28 Ch D 7 if a person
make a misstatement knowing the actual fact, such misstatement termed as “Fraudulent

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misstatement” and the person who made such statement becomes liable for loss of another cause
of such misstatement.
In conjunction to above, one more type of misstatement is there, where a person has proper base
to believe upon something and by the reason of that belief he /she provide advice to others
without any fraudulent intention. Such misstatement is known as “Negligent Misstatement”
(Stephen Wawn, 2018).
In the case Howard Marine v Ogden [1978] QB 574, it was held that if a person cannot have
correct and accurate information about something, he/she can believe on the information that is
available with his/her.
Application
In the given case, jack advised to Max to purchase Kebabs Galore. He did not make any
misstatement about law or fact. He generally advised to Max and he was also not aware about the
popularity and profitability of said restaurant. As according to case Bisset v Wilkinson he made
an innocent misstatement as he had no malafide intention behind giving such advice.
Similar to case Howard Marine v Ogden , jack had believed about a sound condition of Kebabs
Galore and for this reason he advised to Max. Here, Jack did not make any false statement
knowing the corrected one alike the case Smith v Land and House Property Cor.
But in this case as jack also had a restaurant in the same locality, he should be aware about the
circumstances of relevant industry. Here Although Max asked for advice to jack for free, he was
expecting a professional device rather than general. It was the duty of Jack to advice carefully
after a proper research but he failed to do so (Rowberry Morris Solicitors, 2018).

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Conclusion
After the detailed study of provided case, it can be concluded as that Jack has made negligent
misstatement by advising Max to purchase Kebabs Galore. As on the basis of his advice Max
along with his brother purchased that restaurant and faced heavy loss, they can initiate action
against him.
Here jack can claim the remedy available in cases of negligence misstatement and can say in
defense that he was not aware with the facts. But as jack had professional skills in restaurant
sector, he was expected to advise wisely after a required research, which he has not done so his
defense would not be an appropriate one.

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References
Australian Law Reform Commission. (2018) Fault. [online] Available from:
https://www.alrc.gov.au/publications/7-fault/negligence[Accessed on 17/05/18]
Bisset v Wilkinson [1927] AC 177
e-lawresources. (2018a) Negligently inflicted psychiatric injury. [online] Available from: http://e-
lawresources.co.uk/Negligently-inflicted-psychiatric-harm.php[Accessed on 17/05/18]
e-lawresources. (2018b) Misrepresantation [online] Available from: http://e-
lawresources.co.uk/Misrepresentation.php [Accessed on 18/05/18]
Howard Marine v Ogden [1978] QB 574
Law Reform (Contributory Negligence) Act, 1945
Legal Services Commission of South Australia. (2018) Negligence. [online] Available from:
https://www.lawhandbook.sa.gov.au/ch01s05.php[Accessed on 17/05/18]
McLoughlin v O'Brian (1982) 2 WLR 982
Rowberry Morris Solicitors. (2018) The perils of giving (and receiving) advice to friends [online]
Available from: http://www.rowberrymorris.co.uk/site/library/rowberry_morris_news/the-perils-
of-giving-and-receiving-advice-to-friends [Accessed on 18/05/18]
Smith v Land and House Property Corp (1884) 28 Ch D 7
Stephen Wawn & Assocaites. (2018) Pure economic loss caused by Negligent Misstatement and
the Duty of Care [online] Available from: http://www.stephenwawn.com.au/commercial-law-

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litigation-disputes/pure-economic-loss-caused-by-negligent-misstatement-and-the-duty-of-care/
[Accessed on 18/05/18]