PART B

QUESTION 1

Question 1 (i)

Chapter 8 of the Australian Constitution which is the Alteration of the Constitution, has

only one section. Section 128 is the section that describes a basic procedure for altering

the Australian Constitution. Under this section, the proposed amendments required to be

passed by the both the House of Representatives and the Senate in Australia with an

absolute majority votes. This has to be done in order for the approval at the national

referendum. A majority of the total commonwealth electorate and electors in major

number of states needs to approve the referendum.

Question 1 (ii)

One of the distinguishing features of the general law is that judges decide cases

according to the doctrine of precedent. This rule simply states that cases involving the

same essential or material facts is bound by the decisions of the higher courts or in the

same judicial hierarchy. This is called the doctrine of stare decisis. Therefore, the judge

of the Supreme Court in New South Wales is bounded by the decisions of the high court

in Australia. Although this is a simple enough rule to understand it is not in all

circumstances that one case will be a precedent for another. The High court is the highest

court in Australia. Hence, the decision

In general, there must be some key elements in presence before a case to be

decided a precedent for another case will be the following factors: (a) the material facts

must be the same; and (b) the court whose previous decision is relied upon must be a

higher court in the same legal system or hierarchy of courts as the court the present case

is before. That is, the doctrine of precedent is limited by the legal system a court is in.

Thus a court in one legal system generally must follow a decision of a higher court in the

same legal system or hierarchy of courts. Decisions of courts in one legal system may

well be persuasive but are not technically binding on a court in another legal system. For

example, while a single judge in the NSW Supreme Court will be bound by the NSW

Court of Appeal or Full Court of NSW but will not be bound to follow a decision of the

Full Court of the Victorian Supreme Court. In order to apply a precedent it is necessary to

find out what the precedent in each particular case is. It is not the whole judgment in a

case that creates a precedent. The precedent or ratio decidend (often simplified

to "ratio" ) in a case is the reason(s) that the judge gives for making the decision. It is

only this part of a case that creates binding law. Comments made by the judge on legal

principles that are not the deciding factor in the case are not binding - such comments are

called obiter dictum (singular) or obiter dicta (plural).

Question 1 (iii)

Australia is a federation and legislative power is distributed between the Commonwealth

and the States. Section 51 enumerates areas of Commonwealth power. These powers are

concurrent, and states can legislate on them, or on any topic not specifically prohibited

them by the Constitution. The concurrent powers are set out in the many “placita”

(singular is “placitum”) within section 51 of the Commonwealth of Australia. The

following are examples of the concurrent powers, in which both the Commonwealth and

the States may make laws.

Taxation - s.51(ii)

Corporations - s. 51(xx)

External Affairs - s. 51(xxix)

Defence - s. 51(vi)

Marriage - s. 51(xxi)

When a State and the Commonwealth each make a law, the one inconsistent with the

other, a mechanism is needed to resolve the conflict. Such conflict is dealt with in section

109 of the Constitution of the Commonwealth of Australia, which states as follows:

S. 109. "When a law of a State is inconsistent with a law of the Commonwealth, the latter

shall prevail, and the former shall, to the extent of the inconsistency, be invalid.”

In Clyde Engineering Ltd v Cowburn (1926) 37 CLR 466 at 500, Justice Higgins set out

three broad categories of “section 109 inconsistency”:

When it is impossible to obey both laws;

One law confers legal right and the other takes it away;

When the Commonwealth law evinces an intention to cover the whole field.

Each of these three situations requires a different kind of analysis. However, in each case,

to the extent of the inconsistency, the state law stops operating and the commonwealth

law is valid and applicable.

Question 1 (iv)

a) Federal Court of Australia

b) High Court

c) Small Claims Division of The Local Court

d) Supreme Court

Question 1 (v)

Civil law and criminal law have certain bedrock principles, but they also differ in various

ways. Some of the similarities involve the steps taken before and during a trial. However,

the processes leading to the trial are the most notable differences. Standard of Proof is

defined as the amount of evidence to be presented by the plaintiff to win the case. In civil

law the standard of proof is by preponderance of the evidence, which means that the

evidence presented creates one clear deciding factor for the judgment to be rendered. In

criminal law, the judge or jury must believe beyond a reasonable doubt that the defendant

was guilty of the act This means, there is almost no doubt that anyone else could have

committed the crime, but the defendant. The vast difference between the two standards is

because the punishment is far greater for the criminal act than the civil action.

QUESTION 2

1) Most states have laws (called "Statutes of Frauds") listing the types of contracts

that must be written in order to be enforceable. The purpose of the Statutes of

Frauds is to prevent fraudulent claims from arising. Although the laws vary from

state-to-state, the most contracts must be in writing in order to be enforced

legally.

2) A contract under seal (formal contract) derives its validity from the form in which

it finds expression; therefore, if the instrument is proved, the contract is proved,

unless it can be shown to have been executed under such circumstances as

preclude the formation of contract, or to have been delivered to a third person

under conditions which have remained unfulfilled, so that the deed is no more

than an escrow. A written contract not under seal (informal contract), however, is

not the contract itself, but only evidence of the contract, - a record of the contract.

Even where statutory requirements for writing exist, as under the statute of frauds,

the writing is nothing more than evidence of the agreement. A written offer

containing all the terms of the contract, signed by the proposer, and accepted by

the other party by performance on his part, is enough to enable the latter to sue

under the statute of frauds. And where there is no such necessity for writing, it is

optional with the parties to express their agreement by word of mouth, by action,

or by writing, or partly by one and partly by another of these processes. It is

always possible, therefore, that a simple contract may have to be sought for in the

words and acts, as well as in the writing, of the contracting parties. But in so far as

they have reduced their meaning to writing they cannot adduce evidence in

contradiction or alteration of it. They put on paper what is to bind them, and so

make the written document conclusive evidence against them.

3) An invitation to treat is an action inviting other parties to make an offer to form a

contract. These actions may sometimes appear to be offers themselves, and the

difference can sometimes be difficult to determine. The distinction is important

because accepting an offer creates a binding contract while "accepting" an

invitation to treat is actually making an offer.

Advertisements are usually invitations to treat, which allows sellers to refuse to

sell products at prices mistakenly marked. Advertisements can also be considered

offers in some specific cases. Auctions are sometimes invitations to treat which

allows the seller to accept bids and choose which to accept. However, if the seller

states that there is no reserve price or the reserve price has been met, the auction

will be considered an offer accepted by the highest bidder.

4) In the case Walton v Maher, promissory estoppels operate to prevent a party from

breaking a promise without consideration if this would be a grossly unfair or a

promise believed the promise and will suffer loss. This is the issue that is faced by

Maher in this situation. Maher successfully won the case as he was able to use the

promissory estoppels to enforce a non-contractual obligation between him and

Waltons. Maher had reasonably relied on Waltons’ representations and had

suffered a significant loss as the lease agreement was not enforced. Therefore the

Court held that Waltons had an obligation to inform Maher within a reasonable

time after receiving the signed contract that it did not intend to proceed.

5) A party's genuine consent is an essential element of a legally binding contract.

Genuine consent to enter into a contract can be affected by a number of issues.

For example, during the contractual negotiations, there may have been undue

influence, mistake as to the terms and identity of the person, misrepresentation or

duress.

6) The trade of restraints is enforceable if they are reasonable in between the point of

view of parties and in the public interest. Otherwise it will be considered void.

The court will examine the clauses in order to:

Type of trade or business

Geographical extent

Duration

7) An exclusion clause is a clause in a contract which excuses a party to the contract

of liability in situations covered by the exclusion clause. This type of term in a

contract can be illegal in certain settings, while in other cases, it may be in

common and widespread use. If a contract has exclusion clauses, it is important to

get familiar with them before signing and to contest them, if necessary, before

agreeing to the contract.

In a simple example of an exclusion clause, an insurance company could say that

it will not provide coverage in the event of negligence. Someone who burns a

house down by leaving a lit candle on the table, for example, could not file a

claim because the insurance company would not be liable for the

damages. Exclusion clauses can be seen on home, business, car, and health

insurance, defining situations in which the insurer is not liable. These are deemed

legal uses of this type of clause because they protect the insurer from

unreasonable risk.

8) In a contract for the sale of goods, a warranty, once breached, gives rise to a claim

for damages, but not a right to reject the goods sold and treat the contract as

repudiated. A condition, however, is part of the root of the contract and allows the

injured party to rescind and/or seek damages.

9) Section 6 of the Act defines a contract for the sale of goods as: “a contract

whereby the seller transfers or agrees to transfer the property in goods to the

buyer for a money consideration called the price”. If a contract comes within the

above definition, then the buyer has the benefit of the following five implied

terms.

~ Title

-A condition that the seller has the right to sell the goods. This

right arises because the seller is the owner of the goods or

because the seller has the authority to sell the goods as the

owner’s agent. e.g. Rowland v Divall [1923] 2 KB 500, where a

seller sold a stolen motor vehicle.

-A warranty of quiet possession.

-A warranty that the goods are free from any encumbrances,

such as a charge or bill of sale.

~Description

- A condition that the goods shall correspond to their description or

if a sale by sample and description, shall correspond to the

description and that the bulk shall correspond to the sample. For

example see Beale v Taylor [1967] 3 ALL ER 253. For the

meaning of a “sale by description” see Ashington Piggeries Ltd. v

Christopher Hill Ltd [1972] AC 441.

10) Whether a person is an independent contractor or an employee generally depends

on the amount of control exercised by the employer over the work being done.

Dictating how a job is to be done or limiting the actions of the worker may

establish an employer-employee relationship.

~An independent contractor:

Operates under a business name

Has their own employees

Maintains a separate business checking account

Advertises their business' services

Invoices for work done

Has more than one client

Has their own tools and sets their own hours

Keeps business records

~An employee:

Performs duties dictated or controlled by others

Is given training for work to be done

Works for only one employer

QUESTION 3

The facts of the problem need to be considered in relation to the law of contract.

In detail, the main issue of the problem in the question is whether Toad, Rat, Badger and

Mole have legal intention to be legally bound in this agreement to form a lottery

syndicate. It is also a question whether Rat is liable in this situation or not.

According to the contract law, the workmates must have legal intention to be

bound legally bound by writing or expressing their intention to enter into the agreement.

According the problem stated in the question the four workmates have expressed their

intention to form a lottery syndicate. They also agreed to take turns to buy lottery tickets

each week and to share any winnings equally among the four of them. As time goes, they

won small amounts several times and did share the winnings equally. When Rat won an

amount of $2 million and he refuses to share, a dispute arises and the problem have to be

solved. The case can be solved by referring to the case, Simpkins v Pays [1909] 1 WLR

975. The facts of the case was the defendant, her granddaughter, and the plaintiff, a

paying lodger shared a house. They all contributed one-third of the stake in entering a

competition in the defendant's name. The entries were made in one name only. The entry

won a prize and the defendant, in whose name the entry was submitted, refused to share it

with the other two contributors claiming there was no intention to create legal relations.

The issue was is there an understanding between the parties that their agreement

amounted to a contract? The court held that. It was a joint enterprise to which each

contributed in the expectation of sharing any prize that was won. There was a contract.

Referring to the case which has an almost same situation as the problem stated in

the question, the defendant is liable and have to share the winning amount equally among

the three of them as there was a contract formed even though it was not a written

agreement but the intension have been expresses by three of them. Whereas in the

problem given in the question, the workmates also expressed their intention and agreed to

form a lottery syndicate. They also agreed consciously to share the winnings equally and

did share certain small amounts that was won a several times after the agreement. When

Rat, one of the workmates won a large sum of $2million he refused to share it equally

among the four of them. A dispute arises in between four of them.

Comparing the problem with the case facts of Simpkins v Pays [1909] 1 WLR 975

which is loosely based on, in social agreements there is a presumption that the parties did

not intend to be legally bound. The court would most probably hold that the presumption

is rebuttable as the court has enforced lottery syndicates between friends and workmates.

QUESTION 4

Part 1

If a contract cannot be completed due to circumstances beyond the control of

either party, it will be considered discharged by means of frustration. Frustration occurs

in cases where an unanticipated event makes the contract impossible to perform or it is

something fundamentally different from that envisaged. The contract may then be set

aside. The key case is Krell v Henry (1903) (2 KB 740). The plaintiff let a flat to the

defendant on a particular day so that he could watch the coronation of Edward VII. The

procession was cancelled and the plaintiff sued for the rent. It was held that, despite the

fact the room was available, the cancellation of the coronation fundamentally affected the

basis of the contract and the defendant did not have to meet the claim. The contract was

frustrated. When a contract is found to be frustrated, each party is discharged from future

obligations under the contract and neither party may sue for breach. The allocation of loss

is decided by the Law Reform (Frustrated Contracts) Act 1943.

Offer and acceptance analysis is a traditional approach in contract law used to

determine whether an agreement exists between two parties. Agreement consists of an

offer by an indication of one person (the "offerer") to another (the "offeree") of the

offerer's willingness to enter into a contract on certain terms without further negotiations.

A contract is said to come into existence when acceptance of an offer (agreement to the

terms in it) has been communicated to the offerer by the offeree and there has been

consideration bargained-for induced by promises or a promise and performance.

The offer and acceptance formula, developed in the 19th century, identifies a moment of

formation when the parties are of one mind. This classical approach to contract formation

has been weakened by developments in the law of estoppel, misleading

conduct, misrepresentation and unjust enrichment.

In some cases, a contract become unenforceable, impossible to perform, illegal or

futile due to unexpected or unforeseen event that happened after the contract was made.

This is known as a frustration. Frustration is an act outside the contract that makes it

completion impossible, a good example of this is in marine contracts where a delivery is

specified for a certain date and time but the crossing is so bad that the delivery cannot be

made on time. This would be an example of frustration of that part of the contract and no

breach would be held as long as the goods were delivered at the nearest possible time.

Frustration of a contract and what it constitutes is usually seen via exclusion clauses, such

as advising that liability will not be held for incomplete contracts or damage due to acts

of God, nature etc. Other examples of what may frustrate a particular contract may also

be present also, i.e. unforeseen acts, third parties etc.

When Sophie ordered wood from Great Choppers, her suburb was still not

announced as a smoke free area, but after a few days of ordering the local council

declared her suburb a smoke free area which was an unforeseeable event and beyond the

control of both parties. Due to the presence of a sudden frustration the contract have been

discharged and hence Sophie is not legally obliged to take the delivery of the wood and

pay for the order. Therefor the Great Choppers cannot sue Sophie for what has happened.

Part 2

My answer would still remain the same even though its recorded in an answering

machine and have been recorded in the order book by the Great Choppers because the

situation have been frustrated as the local council announced Sophie’s suburb as a smoke

free area out of a sudden. It is beyond the control of Sophie.

Great Choppers also did not inform Sophie before writing down in their order book.

Hence Sophie will still not be liable in this situation too. Great Choppers will still not be

able to sue Sophie for damages.

Question 5

Under Minors (Property and Contracts) Act 1970 (NSW), Section 8 defines a

minor as a person under 18 years of age. As a general rule a minor is not bound by a

contract except as provided by the Act (s 17). Beneficial acts are presumptively binding

(s 19). Minors may also affirm acts when attaining the age of capacity (s 30). A Court

may also confirm contractual capacity on a minor (s 26). It is a presumption at law that

every person is entitled to enter into a contract unless an exception applies. One of those

exceptions is for minors. The age of contractual capacity for individuals is the age of 21

at common law, however this was reduced to the age of 18 in 1969 by Act of Parliament.

Reaching the age of 18 is known as attaining 'majority'. Minors are those who have not

attained the age of 18.

Minors are permitted to enter into contracts for limited purposes, and the test is

one that focuses on the nature of the transaction, and whether the minor is of an age such

that they capable of understanding it.

The general law states that contracts entered into by children that are for

'necessaries' are binding on children, as are those for apprenticeship, employment,

education and service where they are rightly said to be for the benefit of the child.

Contracts for minors are generally necessaries like supply of food, medicines,

accommodation, clothing, amongst other things but generally it excludes supplies of

convenience, and products and services for comfort or pleasure. Commercial or 'trading'

contracts are excluded. These latter contracts are voidable at the option of the minor, and

whether the minor may avoid the contract depends on the nature of the contract.

Contracts where the minor may avoid the effect of the contract are for the

acquisition of a legal or equitable interest in property of a permanent nature, such as

shares, land, marriage and partnerships. Other contracts require positive ratification in

order to be enforceable, which includes contracts for debts and the sale of goods that are

not for necessaries. The ratification must take the form of an acknowledgement that the

debt is binding after attaining the age of 18. Fresh consideration is not required for the

ratification to be complete. Restraints of trade may be unenforceable against a minor,

even if they would be enforceable against an adult.

Referring to the Sections and Act above, the court would most probably held that

Archie who is a 16 year old boy is not a major yet. Hence STAR-fone should be aware

that Archie is still a minor and does not have a legal capacity to enter into contract that

does not benefit the minor. As a minor, an IPhone is not a necessity for him and does not

benefit him from a reasonable person’s point of view. In the age of 16, Archie may be

lack of necessary understanding because of his youth, too. Therefore, Archie is not

legally liable to pay the huge debt to STAR-fone as the contract formed between Archie

and STAR-fone is void.

QUESTION 6

Contracts Review Act, 1988 (NSW) provides that a court can grant relief in

relation to a consumer contract if it finds the contract or a provision of the contract to

have been unjust in the circumstances relating to the contract at the time it was made. The

CRA operates concurrently with the Uniform Consumer Credit Code. “Unjust” is defined

as include[ing] unconscionable, harsh or oppressive. Sub-section 9(1) of the CRA sets out

the matters which the court must consider in determining if the contract or a term is

unjust: the public interest and … all the circumstances of the case, including such

consequences or results as those arising in the event of:

a. compliance with any or all of the provisions of the contract, or

b. non-compliance with, or contravention of, any or all of the provisions of the

contract. The court, where relevant, under sub-section 9(2) is also to have regard

to procedural issues such as material inequality of bargaining power; relative

economic circumstances; educational background; literacy of the parties; any

unfair pressure; whether or not legal or expert advice was sought; but also

substantive issues such as:

c. whether or not any provisions of the contract impose conditions which are

unreasonably difficult to comply with or not reasonably necessary for the

protection of the legitimate interests of any party to the contract; and

d. where the contract is wholly or partly in writing, the physical form of the contract,

and the intelligibility of the language in which it is expressed.

The CRA is not limited to “standard” terms although whether a term was negotiated

or not is a consideration for the court. Sub-sections 9(2) (c) and (d) in particular lean

towards the substantive. A person’s rights under the Act cannot be excluded or restricted

in any way. Where the court finds a contract or a provision of a contract to have been

unjust, it may, if it considers it just to do so, and for the purpose of avoiding as far as

practical an unjust consequence or result: refuse to enforce any or all of the provisions of

the contract; declare the contract void, in whole or in part; vary any provision of the

contract, in whole or in part (effective from the time of the making of the contract unless

otherwise specified); or require execution of an instrument that varies or terminates a

land instrument (section 7). When making an order under section 7 it may also make

orders, inter alia, for the disposition of property; the payment of money (whether or not

by way of compensation) to a party to the contract; the compensation of a person who is

not a party to the contract and whose interest might otherwise be prejudiced by a decision

or order under the CRA; and the supply or repair of goods or the supply of services.

For example in the case of Commercial Bank of Australia Limited v Amadio

(1983) 151 CLR 447, The Amadios guaranteed their son's debt to the Commercial Bank

by providing the bank with a mortgage over one of their properties. When their son's

business collapsed, the bank tried to enforce the guarantee but the Amadios claimed that

the guarantee was unconscionable and therefore unenforceable. The court took the view

that it was unconscionable for the bank to rely on the guarantee on four grounds.

First, because the Amadios understood little English; second, the bank hadn't

encouraged them to seek independent advice; third, the bank knew that the son's business

was faltering and they also knew that the Amadios were not aware of this fact; fourth, the

bank did not tell the Amadios that there was no limit on their liability under the

guarantee. The principle established in this case was that relief on the ground of

unconscionable conduct will be allowed when unfair advantage is taken of an innocent

party. In this instance, the courts will set aside the contract or refuse to order specific

performance of it.

Unconscionability or unconscientious dealings is a term used in to describe a

defense against the enforcement of a contract based on the presence of terms that are

excessively unfair to one party. Typically, such a contract is held to be unenforceable

because the consideration offered is lacking or is so obviously inadequate that to enforce

the contract would be unfair to the party seeking to escape the contract.

In and of itself, inadequate consideration is likely not enough to make a contract

unenforceable. However, a court of law will consider evidence that one party to the

contract took advantage of its superior bargaining power to insert provisions that make

the agreement overwhelmingly favor the interests of that party. Usually for a court to find

a contract unconscionable the party claiming unconscionability will have to prove both

that there was a problem with the substance of the contract and the process through which

that contract was formed. The substantive problem will usually be the consideration, but

could also be the terms, interest payments, or other obligations the court finds unfair.

Procedural issues that a court could consider include a party's lack of choice, superior

bargaining position or knowledge, and other circumstances surrounding the bargaining

process. Upon finding unconscionability a court has a great deal of flexibility on how it

remedies the situation. It may refuse to enforce the contract, refuse to enforce the

offending clause, or take other measures it deems necessary to have a fair outcome.

Damages are usually not awarded.

Referring to the discussions above, Mr. and Mrs. Wings will not be liable as the

guarantor as both of them have been misled by their 25 year old son. They are not liable

because neither parent had a good understanding of English language nor they did receive

any independent legal advice from a legal person. Therefore they did not fully understand

the extent of their liability under the guaranty given by them to their son. The court

would most probably grant them a relief based on the above reasons. The court took the

view that it was unconscionable for the bank to rely on the guarantee on certain grounds.

First, because the pair have no good understanding in English; second, the bank

hadn't encouraged the couple to seek independent advice from a legal person; third, the

bank did not tell Mr. and Mrs. Wings that there was no limit on their liability under the

guarantee. The principle established in this case was that relief on the base of

unconscionable conduct will be allowed when unfair advantage is taken on the innocent

parties. In this situation, the court would highly set aside the contract or refuse to order

specific performance of it.

QUESTION 7

A breach of contract occurs when a party to a contract fails to perform precisely

and exactly, his obligations under the contract. This can take various forms for example,

the failure to supply goods or perform a service as agreed. Breach of contract may be

either actual or anticipatory. Actual breach occurs where one party refuses to form his

side of the bargain on the due date or performs incompletely. Anticipatory breach occurs

where one party announces, in advance of the due date for performance, that he intends

not to perform his side of the bargain. A breach of contract, no matter what form it may

take, always entitles the innocent party to maintain an action for damages, but the rule

established by a long line of authorities is that the right of a party to treat a contract as

discharged arises only in three situations.

Renunciation occurs where a party refuses to perform his obligations under the

contract. The second repudiatory breach occurs where the party in default has committed

a breach of condition. The third repudiatory breach is where the party in breach has

committed a serious (or fundamental) breach of an innominate term or totally fails to

perform the contract. A repudiatory breach does not automatically bring the contract to an

end. The innocent party has two options: He may treat the contract as discharged and

bring an action for damages for breach of contract immediately.

In common law, damages is the basic remedy available for a breach of contract.

It is a common law remedy that can be claimed as of right by the innocent party. The

object of damages is usually to put the injured party into the same financial position he

would have been in had the contract been properly performed. Sometimes damages are

not an adequate remedy and this is where the equitable remedies (such as specific

performance and injunction) may be awarded. The major remedy available at common

law for breach of contract is an award of damages. This is a monetary sum fixed by the

court to compensate the injured party. In order to recover substantial damages the

innocent party must show that he has suffered actual loss; if there is no actual loss he will

only be entitled to nominal damages in recognition of the fact that he has a valid cause of

action.

In making an award of damages, the court has two major considerations. One of

them is remoteness are for what consequences of the breach is the defendant legally

responsible? The measure of damages are the principles upon which the loss or damage is

evaluated or quantified in monetary terms. The second consideration is quite distinct

from the first, and can be decided by the court only after the first has been determined.

In equity law, the equitable remedies are Equitable remedies are available if there

has been a breach of contract that cannot be adequately compensated by a legal remedy.

They are also available to prevent unjust enrichment. Equitable remedies look at how the

defendant acted, how the plaintiff acted, and what each person's state of mind and

behavior was. The judge then uses his discretion to decide what is and isn't fair. Another

good example of an equitable remedy is equitable estoppel which means that the

defendant may be stopped or prevented from doing something if it wouldn't be fair. There

are also several other remedies considered equitable. Specific performance, which

mandates that the terms of a contract actually be fulfilled, is another example of

an equitable remedy. Generally, the remedies are any non-monetary or non-

criminal remedies or penalties imposed by the judge to try to make the situation right.

See for example the case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145

(1854). The facts of the case was that a shaft in Hadley’s (P) mill broke rendering the mill

inoperable. Hadley hired Baxendale (D) to transport the broken mill shaft to an engineer

in Greenwich so that he could make a duplicate. Hadley told Baxendale that the shaft

must be sent immediately and Baxendale promised to deliver it the next day. Baxendale

did not know that the mill would be inoperable until the new shaft arrived.

Baxendale was negligent and did not transport the shaft as promised, causing the mill to

remain shut down for an additional five days. Hadley had paid 2 pounds four shillings to

ship the shaft and sued for 300 pounds in damages due to lost profits and wages. The jury

awarded Hadley 25 pounds beyond the amount already paid to the court and Baxendale

appealed.

The issue of the case was what is the amount of damages to which an injured

party is entitled for breach of contract?

The court held that the usual rule was that the claimant is entitled to the amount he or she

would have received if the breaching party had performed; i.e. the plaintiff is placed in

the same position she would have been in had the breaching party performed. Under this

rule, Hadley would have been entitled to recover lost profits from the five extra days the

mill was inoperable.

The court held that in this case however the rule should be that the damages were those

fairly and reasonably considered to have arisen naturally from the breach itself, or such as

may be reasonably supposed to have been in the contemplation of both parties at the time

the contract was made.

The court held that if there were special circumstances under which the contract

had been made, and these circumstances were known to both parties at the time they

made the contract, then any breach of the contract would result in damages that would

naturally flow from those special circumstances.

Damages for special circumstances are assessed against a party only when they

were reasonably within the contemplation of both parties as a probable consequence of a

breach. The court held that in this case Baxendale did not know that the mill was shut

down and would remain closed until the new shaft arrived. Loss of profits could not fairly

or reasonably have been contemplated by both parties in case of a breach of this contract

without Hadley having communicated the special circumstances to Baxendale. The court

ruled that the jury should not have taken the loss of profits into consideration.

In the problem given, there was a contract formed between the both parties

Ledger and Co and Maurice. It was breached by Maurice. He refused to carry on with the

public seminar he was supposed to present on 12 of August. Not only that, he also

accepted the offer from the rival party on the same day itself which was August 12. Due

to the refusal from Maurice, the accounting firm has to refund the amount paid for the

tickets. Apart from that, the company also lost a large sum of money by hiring a theatre

and advertising in the newspaper for the seminar. Moreover, the reputation of Ledger &

Co also been effected because of the breach contract by Maurice. Hence, Ledger and Co

can apply an injunction to prohibit Maurice from attending the same seminar on 12

August for the rival accounting firm. On the other hand, the court would most probably

held that Maurice can be sued for damages as he breached the contract and the damages

that was suffered by Ledger and Co. is foreseeable by a reasonable person.

QUESTION 8

Part 1

Issues like negligence, duty of care, breach and damage have to be discussed in

order to answer whether the Shopping Centre in Sydney is liable or not in this situation.

The facts of the problem in the question are Sarah slipped down on the wet floor when

she was trying to chase her two years old daughter who was trying to run away. She

slipped and suffered from a fractured leg due to the wet floor.

Every person is responsible for injury to the person or property of another, caused

by his or her negligence. Negligence is the failure to use reasonable care. Negligence may

consist of action or inaction. A person is negligent if he fails to act as an ordinarily

prudent person would act under the circumstances. What constitutes negligence will

depend on the facts of each individual case. Generally, a trier of fact needs to determine

what a "reasonable" person would do or not do in the given situation.

In some instances, negligence is defined by statute, referred to as negligence per

se. In such cases, negligence is determined by failure to comply with the statutory

requirements. Negligence per se may also be declared when a person does or omits to do

something which is so beyond reasonable behavior standards that it is negligent on its

face.

Courts often construe general indemnity provisions as granting protection to

people only from damages caused by their "passive negligence." Passive negligence is

usually defined as mere failure to act, such as failing to discover a dangerous condition or

to perform a duty imposed by law. "Active negligence," however, occurs when someone

has personally participated in an affirmative act of negligence, known about or complied

in negligent acts, or failed to perform a precise duty which he/she agreed to perform.

The duty of care required by the occupier of the premises to avoid or minimise the

risk of injury to occupiers depends on the particular circumstances of the case. Relevant

considerations include the nature of the premises, the number of people using the

premises, the frequency with which spillages occur or the place gets wet due to rain, the

existence or extent of any cleaning system, the gravity of the danger, the size of the area

to be supervised and any explanation (or absence thereof) by the occupier. There is no

liability in negligence unless there is a duty to take care. This establishes the necessary

link between the claimant and the defendant. Such duties are widely recognised. In cases

of doubt the modern test is whether there was foreseeability and proximity and it was fair,

just and reasonable to impose the duty. Damages is that the plaintiff must suffered loss

or damages, whether personal harm or property. If there is no damage, then the plaintiff

should not sue in tort of negligence.

The Civil Liability Act 2002 has modified the way in which liability for negligence is

determined in many cases. The Act is complex. Briefly, some of the main changes are the

Act contains statements of general principle on matters that the court has to take into

account and that may excuse someone who might otherwise have been liable there may

be no liability where the risk of injury was obvious, an injury occurred as a result of ‘the

materialisation of an inherent risk of injury’ (that is, something happened that could not

be avoided by the exercise of reasonable care and skill) there may be no liability where

the person was involved in a recreational activity and the risk of injury in the activity

was obvious, or a warning of the risk was given. There are a number of other provisions

in the Act that may be relevant in deciding whether someone can be sued for negligence

in a particular personal injury case.

An example of case that coincides with the situation is Scott v Patterdale Pty

Ltd (Queensland District Court, 27 November 2000). The Defendant was the occupier

of the Pialba Place Shopping Centre at Hervey Bay. The Plaintiff slipped not far inside

the automatic doors giving entry from the outside car park to the concourse of the

shopping centre at about 8.20am on a Monday. The floor was polished terrazzo of

creamy colour which it was agreed would be slippery when wet. Water was also not

easily detectable on this type of floor. No one at the time was able to identify any

substance or particularly slippery area on the floor which might have explained the

accident. Ultimately the Court accepted that the Plaintiff had slipped on water which had

been walked into the centre. It was raining outside at the time.

· The Court held that:-

“In wet weather water would get on to the floor inside the automatic doors through

which the Plaintiff entered and give rise to a risk of customers slipping, which had to be

guarded against. The precautions available included constant mopping of the floor (to

the extent that the Defendant on some days might engage a person over and above the

ordinary cleaning staff to attend to it), placement of at least one of the now familiar

yellow cones which warn of a slipping hazard, and replacement or supplementation of

the usual 1. 2m x 1.7m mat placed to straddle both sides of the automatic door with long

runners hired from a local dry-cleaner. The likelihood of water being “tracked” onto

the terrazzo floor in all kinds of ways including by shopping trolleys and by

dripping ,from customers clothing and umbrellas was well known to the Defendant

and furthermore I would think is notorious generally”.

The Court found against the Defendant shopping centre owner that the Defendant

issued third party proceedings against the cleaners asserting a failure by the cleaners to

comply with their contractual obligations as cleaners of the Centre to keep the Centre in

such condition as to be safe for the use of members of the public.

With regard to the third party claim the Court said:-

“It seems to me to have been established that during the relevant day shift,

only one cleaner was to be provided. What he or she could achieve was

necessarily limited, given the large size of the Pialba Centre. While there might have

been an expectation that cleaning staff would get to the Hunter Street entrance roughly

every 15 minutes, the exigencies of the job, such as spills or messes elsewhere, might

preclude this. I do not think the third party was in any sense guaranteeing or committed

to achieving a Pialba Centre which was safe for the public. 1 think the deficiency which

leads to the Defendants liability was in its system and that it, and not the third party,

bears responsibility for the deficiencies”.

According to the case that has been cited above the defendant which is the owner

of the Shopping Centre in Sydney has also been negligent in carrying own his duty. He

owes duty of care towards all the customers that enters his shopping centre. In a nut shell,

the court would most probably hold that the owner of the shopping centre owes a duty of

care towards Sarah who is a customer because it is reasonably foreseeable that the

negligence would likely to injure the plaintiff. Besides that, the owner of the shopping

centre is also liable and negligent as a proper step reasonable care had not been taken to

avoid a foreseeable risk in this issue. However, the shopping centre did not owe a higher

duty of care towards Sarah because as a customer she was a invitee to the shopping

centre.

Part 2

One of the significant reform (change) to the common law introduced by the Civil

Liability Act, 2002 (NSW) is reduced damages amounts and legal costs. Second is to

reduce rights for criminals, intoxicated persons and nervous shock claimants.

Third is saying “sorry” will not make you liable. Lastly is reduced liability for specific

group and occupations.

QUESTION 9

Part 1

As stated in the problem that given in the question, to identify whether Enrico is

liable or not in this situation, the topic of negligent misstatement have to be raised and

discussed. A false statement of fact made honestly but carelessly. A statement of opinion

may be treated as a statement of fact if it carries the implication that the person making it

has reasonable grounds for his opinion. A negligent misstatement is only actionable in

tort if there has been breach of a duty to take care in making the statement that has caused

damage to the claimant. There is no general duty of care in making statements,

particularly in relation to statements on financial matters. Responsibility for negligent

misstatements is imposed only if they were made in circumstances that made it

reasonable to rely on them. If a negligent misstatement induces the person to whom it

was made to enter into a contract with the maker of the statement, the statement may be

actionable as a term of the contract if the parties intended it to be a term or it may give

rise to damages or rescission under the Misrepresentation Act 1967.

A negligent misstatement action is brought at common law in tort and may be brought

provided a statement is made carelessly and the relationship between the parties is such

that it gives rise to a duty of care on the part of the representor.

The case that can be cited for this problem is the Shaddock v Parramatta City

Council the duty was extended to giving information as well as advice and it was held

that "the person giving the information to another whom he knows will rely on it in

circumstances where it is reasonable for him to do so, is under a duty to exercise

reasonable care that the information is correct." The Plaintiff must belong to a limited

class of people to whom the defendant owed a duty of care. It is not necessary that the

statement was made in response to a specific request for information. It is sufficient if the

representation is made with the intention of inducing members of the class of which the

plaintiff is one, to act in reliance on the representation. Reliance is an essential

element Given the fairly narrow ambits of both fraud and negligent misstatement to give

relief to plaintiffs, it was only a matter of time before Parliament acted to give statutory

protection to consumers for misrepresentations in the form of the Trade Practices

Act ("TPA") which was enacted in 1974 for the protection of corporations acting in trade

and commerce and later the Fair Trading Act in 1987 for the protection of non-corporate

traders. Section 2 of the TPS provides: the object of this Act is to enhance the welfare of

Australians through the promotion of competition and fair trading and provision for

consumer protection." S 52 (1) of the TPA provides: "A corporation shall not, in trade or

commerce, engage in conduct that is misleading or deceptive or is likely to mislead or

deceive." S 42 of the Fair Trading Act, 1987 is in identical terms and applies to non-

corporate traders. The ambit of this section is much broader than either fraudulent or

negligent misrepresentations. Similarities Fraud, negligent misstatements and breaches of

s.52 all involve false statements. Fraud and breaches of s 52 also involve

misrepresentation by conduct. In both fraud and breaches of s 52 the misrepresentation

can occur by silence. In all cases it is necessary that the plaintiff relied on the

misrepresentation and was induced to pursue a particular course of conduct as a result of

that reliance. The fact that the person to whom the misrepresentation was made was

careless and could have discovered the truth does not absolve the make of the

misrepresentation from liability under s 52. In all cases the plaintiff must have suffered

damage as a result of acting upon the misrepresentation.

Comparing the problem with the case cited above, the court would most probably

that Enrico is liable as he gave a statement negligently and he owes a duty of care

towards the club members. The club members suffered damages and lost a large sum of

money. Hence Enrico is liable in this case and he may be sued for damages.

Part 2

Civil Liability Act does not specifically deals with negligent misstatement. Section

5O possesses Standard of care for professionals. The first one, person practising a

profession ( "a professional") does not incur a liability in negligence arising from the

provision of a professional service if it is established that the professional acted in a

manner that (at the time the service was provided) was widely accepted in Australia by

peer professional opinion as competent professional practice. However, peer professional

opinion cannot be relied on for the purposes of this section if the court considers that the

opinion is irrational. The fact that there are differing peer professional opinions widely

accepted in Australia concerning a matter does not prevent any one or more (or all) of

those opinions being relied on for the purposes of this section. Peer professional opinion

does not have to be universally accepted to be considered widely accepted.

QUESTION 10

Part 1

owners of a partnership have unlimited personal liability. In general, each partner

in a partnership is jointly liable for the partnership's obligations. Joint liability means that

the partners can be sued as a group. Several liability means that the partners are

individually liable. In some states, each partner is both jointly and severally liable for the

damages resulting from the wrongdoing of other partners, and for the debts and

obligations of the partnership. Three rules for liability in a partnership are every partner is

liable for his or her own actions. Secondly every partner is liable for the actions of the

other partners. Thirdly every partner is liable for the actions of the employees of the

business.

As an example to illustrate liability in a partnership, suppose there is a partnership

formed by partners A, B, and C. If partner A accidentally runs over somebody while

driving on a personal trip to the grocery store one weekend, then A alone has unlimited

personal liability. If partner A accidentally runs over somebody while making a delivery

for the partnership, then A still has unlimited personal liability, but all three partners

would be jointly and severally liable. If the victim wins a judgement of $1 million against

the partnership, and only partner B has the money, then B would have to pay the

judgement. Partner B could assert a right of contribution against partner A, but if A has

no money it would not be worth the effort. If an employee of the partnership, let’s say

employee E, accidentally runs over somebody during the course of the work, then the

partnership is liable since the employer is responsible for the actions of an employee

within the scope of business. If the accident happened while the employee stopped for

something personal, then the employer would not be responsible (frolic and detour).

Hence Claude and Jacky have unlimited liability towards each other’s action.

Whereas in the Authority of the partners there is an agency Relationship

between them. When entering into a contract to carry out the business, each partner is

acting as the agent of all the partners are the actual authority of a partner is set out in the

partnership agreement. The apparent authority is set out in s5 PA 1890. S5 PA 1890

states that every partner is the agent of the firm and of the other partners. This means that

each partner has the power to bind all partners to business transactions entered into within

their actual or apparent authority.

For example the case of Polkinghorne v Holland (1934). Mrs. Polkinghorne was a

client of a solicitor’s firm and received advise from one of the partners about an

investment in which the partner was financially interested. This investment was a failure

and Mrs. Polkinghorne incurred heavy losses and brought an action claiming damages.

The main issue was whether the two innocent partners were liable for her loss. The HC

stated at 156-157:

“ If, in assuming to do what is within the course of that business, he is guilty of a

wrongful act or default, his partners are responsible, notwithstanding that it is done

fraudulently and for his own benefit: Lloyd v Grace Smith & Co. But, to make his co-

partners answerable, it is not enough that a partner utilizes information obtained in the

course of his duties, or relies upon the personal confidence won or influence obtained in

doing the firm’s business. Something actually done in the course of his duties must be the

occasion of the wrongful act.”

It was held that the giving of financial or investment advise was within the usual

course of business of that firm of solicitors. Firms may be liable to a transaction entered

into by a partner notwithstanding that the firm does not enter into transactions of that

type, this is usually where the transaction is of a kind that is usually entered by other

firms in the same industry.

Part 2

As with any business structure, there are certain advantages and disadvantages

and the benefits of a proprietary limited set-up will depend on your individual

circumstances. Advantages can include the following statements. The liability of

shareholders is limited to the share capital they have subscribed and any debts which they

may have personally guaranteed. Shareholders and directors can be employed by the

company under normal salary and wage conditions and their income taxed at personal

rates. Shareholder's personal assets are not under threat if the company incurs financial

loss and debts.

Company taxation is at a fixed rate. A company's income tax is calculated as a

percentage of the taxable income earned by the company during the financial year. The

current rate is 30 percent. Compared with other business structures, the transfer of

company ownership can be relatively simple. The company does not have to be wound

up in the event of the death, disability or retirement of any on the persons involved.

Disadvantages can include the following statements. Forming a proprietary

company can be a complicated task and with the level of legal paperwork required, can

take up to six weeks. There are greater regulations to adhere to under the Corporations

Act and through the Australian Securities and Investment Commission. Increased record-

keeping is required.

Part 3

Errors and omissions insurance is commonly sought (and often required) in

financial industries, while deferred compensation indemnity insurance has become

popular as a way for company executives to protect future money owed to them, even if

the company has filed for bankruptcy. Health indemnity insurance is sometimes used

when a person is in between health plans, and will cover some (but not all)

expenses. This insurance policy aims to protect business owners and employees when

they are found to be at fault for a specific event such as misjudgment. Typical examples

of indemnity insurance include professional insurance policies such as malpractice

insurance, and errors and omissions insurance, which indemnify professionals against

claims made in the workplace.

In the insurance market, the doctrine of utmost good faith requires that the party

seeking insurance discloses all relevant personal information. For example, if you are

applying for life insurance, you are required to disclose any previous health problems you

may have had. Likewise, the insurance agent selling you the coverage must disclose the

critical information you need to know about your contract and its terms. A minimum

standard that requires both the buyer and seller in a transaction to act honestly toward

each other and to not mislead or withhold critical information from one another. The

doctrine of utmost good faith applies to many common financial transactions.

The covenant of good faith and fair dealing implied in every contract of insurance requires an insured to answer honestly all questions on an application for insurance and if the insured learns of a change in circumstance before the policy is issued the insured has a duty to inform the insurer of the change. Failure to do so will provide the insurer with a ground to declare the policy void.