A duty of care

Solution 6

Issue

1. Whether egeeay Supermarket owes a duty of care to Barbara?
2. Is duty of care breached by Egeeay Supermarket?
3. What would be the consequence if Barbara had slipped on some grapes in the fruit section of the store?

Rule

A duty of care arise only when there is rationality to expect that the specified person may be injured if the person owing the duty act or behave having lack of care (5). Whether a duty of care exists is decided by courts in relation to question of reasonable proximity, public policy and foreseeability. In order to decide the existence of duty of care, courts consider the following – The type of injury caused to the plaintiff, moral as well as ethical considerations, the extent of control executed by the defendant and the nature of relation between plaintiff and the defendant (1). If a particular organization follows an established system which is followed widely in the sector, it is not likely that it would fail to execute a reasonable degree of care.

It is said that a duty of care be breached if:-

• There is injury to the person due to action or inaction of other person.
• It is foreseeable reasonably that the action or inaction may involve risk of injury to the plaintiff (5).
• A reasonable person has not acted in a reasonable way.
• The injury risk is not apparently immaterial one.

Generally, the element of the duty of care being breached is established by way of showing the requirement of appropriate duty of care as well as the action of the defendant falling short of the given standard (5). If plaintiff is injured, the defendant is presumed by the court to have breached the duty of care.

Application

1. Whether the customer is regular or not, the Supermarket legally owes duty to every customer. If any customer incurs any loss visiting the Supermarket, it is the responsibility of the Supermarket to indemnify such loss. The shop is accountable to the safety of the customer and for the further treatment of the customer in case of injury.
2. A slip can occur to anyone and much of time but no one need to be blamed. But if a person slips and get injured due to the carelessness of someone else, it is possible to call for compensation (6). In the given case, Barbara slipped on grapes in pet-food section in aisle 3 and got her ankle broken. The presence of grapes on the floor of pet-food section shows the carelessness of the store manager as the store manager was not sure how long the grapes had been there on the floor. Hence, it amounts to breach of duty of care.
3. It is very much clear from the given case that the policy of store is to check every 15 minutes of the floor in the fruit section and the store manager is not sure how the grapes got there and how long they had been on the floor. If the store manager can prove to the court that the checks were reasonable and as per the policy of the store, there would not be any question regarding the breach of duty of care at all.

Conclusion

1. Yes, duty of care is owed by Egeeay Supermarket to Barbara.
2. Yes, the duty of care is breached by Egeeay Supermarket.
3. If the Barbara would have slipped on some grapes in the fruit section of the store, the answer would be the same. The duty of care would still be breached by the store.

Solution 7

Issue

Has Brown any remedy available to him against the retailer, Underwear Galore, under the Australian Consumer Law? Whether Brown would be successful in his contention?

Rule

Under section 54 of the Australian Consumer Law, if goods are supplied by a person to a particular customer, the goods should possess acceptable quality. The goods being supplied to a customer are treated as having acceptable quality if the following conditions exist – fit for purposes for which the same kind of goods are ordinarily supplied, free from any type of defects, durable and safe and acceptable in apparent and finishing. There is requirement by the court for the application of an objective test of the reasonable customer for the determination of the acceptable quality of the goods (7). The factors to be considered which deciding the same – The nature of the goods, the statement stated on the label of the goods, the supplier’s representation made about the goods etc.

If it is guaranteed by the customer that the “acceptable quality” specified as per section 54 is not present, the court will authorize the customer to ask for compensation from the supplier. Acceptable means goods must be reasonable for the purposes described by them. It is immaterial whether the article is sold under brand name or patent name, the requirement of acceptability must be fulfilled.

If a product is sold to a consumer that does not fulfil any of the guarantees of the consumer, he is permitted to a compensation of either to repair or to replace or to refund along with compensation for any resultant loss which depends upon circumstances (7).

If the defect in the goods cannot be fixed, it is at the option of the customer to both refuse the defective goods and ask for the refund of money or retain the goods with him and ask for the difference in the value of defective and non-defective goods as compensation. A good is considered to have major problem if – it suffers such a defect which would have changed the decision to buy if consumer would know the same, the defect cannot be fixed in a reasonable time period, it is not safe to be used (7). The seller is also not allowed to refuse to entertain the customer regarding returned good and tell him to ask the manufacturer for the same.

However, a customer is not entitled to ask for remedy if he discovers he could have bought the goods cheaper form somewhere else or has damaged the goods through using the same in an unreasonable manner (7).

Application

In the given case, Brown purchased underpants from the store of Underwear Galore and when he wore the same, he contracted dermatitis. Bisulphite of soda left in the underpants during the manufacturing process which was not noticed on a reasonable inspection by both Brown as well as Underwear Galore. Since the underwear is not safe, it cannot be treated as having acceptable quality. It is not reasonable for the purposes of Brown.

Conclusion

Since underwear is unsafe to be used and caused injury to Brown, he may reject underwear and ask for the refund or replacement of the same along with the compensation. Brown has to prove that such underwear has caused dermatitis to him and he should provide sufficient material to investigating team in order to enable them to come at the conclusion that the underwear indeed contracted dermatitis.

Solution 8

In order to consider buying a franchisee, it is essential to know the advantage and disadvantage to become a franchisee. The main merits as well as demerits are:-

Advantages

• Franchisee provides a greater degree of independence which may not be achieved while working as an employee.
• A person buying franchisee is not required to build the brand or establish the system for running the business efficiently.
• Franchising companies offer training, support, process and managerial support whenever asked by the person buying franchisee. The franchising company merely want to get assured as to the success of its formula (4).
• A franchise has departments which are responsible for innovations for the benefit of all the franchisees and hence, franchisees don’t have to involve in the same.
• It has also a better exit plan. If a franchisee want to exit this business, others who would like to take franchise route are desirable to acquire the business.

Disadvantages

• In case of franchise business, initial fees, marketing fees and royalties asked by franchising company are very huge.
• Following the rules of franchising agreement may cause lack of flexibility to the franchisee and thus restrict growth in some area (4).
• In case of the expiry of franchise contract, all the goodwill will go to the franchisor. Hence, franchisee will not get benefit of any goodwill.
• Profit margin of the franchisee can be hampered by the fees relating to franchise agreement.

A person considering going into business the first time should chose franchisee rather than independent start-ups. Franchisee is a part of that system which has given benefits by way of both stability and profitability. They are aware of the fact that franchisee has the more capability of returning the investments made by them. A person has to do due diligence as well as investigate the franchise as a whole before making decision to buy it. In case, he is well suited for a franchise business operation and chooses the correct one, he will succeed fast in the business.

Solution 9

The significance of conclusion in Salomon case can be considered to have two aspects. The first one is the principle of separate corporate personality which is distinct from its shareholders. The company is to be treated as different entity having separate rights as well as obligations. The second principle is that the limited liability of the shareholders is guaranteed in decision of Salomon case. The decision in this case is the one on which modern company law is dependent (3).

The concept of corporate veil originated from the Salomon principal wherein the rights as well as obligations of the company and the rights and obligations of shareholders as well as directors are separate from each other. Corporate veil refers to metaphoric veil having the company on one side and on the other side there are the shareholders and directors but the liability does not pass through the veil (2). The lifting of corporate veil describes the situation in which the separate entity concept of the company might be treated as unfair and also the decisions might be taken by the court contradictory to the above stated principle based of various grounds. The corporate veil may be lifted by the court if the substantial injustice is created in its presence. The corporate façade is looked behind by the lifting of corporate veil and the fact of the transaction is recognized. It may be lifted to protect the creditors, shareholders and directors in the presence of fraud (3). The court may also lift the corporate veil when it is essential to protect the interest of the revenue and it is required to protect the public policy and for the prohibition of transactions which are opposed to public policy.

Solution 10

Member refers to a person the name of whom is recorded in the member’s register of a company. Member also includes each person who holds the company’s shares and the name of whom is recorded as the beneficial owners in the register whereas a shareholder refers to an individual who owns the shares of a company. A person who subscribe for the shares of a company cannot be treated as the shareholder unless he is allotted shares of the company (8). In general, both the terms are used alternatively.

The minimum age for a person to be member of a corporation is not specified under the Corporations Act 2001. However, a company may decide at its option regarding the minimum age to become a member. All companies must have minimum one member. In case of proprietary companies, the number of members may be the maximum of 50 whereas no limit is there to the number of members that may be maximum in case of public company (8).

There are number of ways of admitting a person as the company’s member:-

• A person can be entered as a company’s member in the register while the company is registered. He must give his written consent to become a member before making an application for registration.
• A person may agree to be a member of existing corporation. A person’s name is entered in the member’s register after a person has given written consent to the company.
• A person having already a guarantee company’s member may become a member of a company on its conversion to a limited company by its shares.

Some of the ways in which a person ceases to be a member of a company is – He sells all of the shares held by him in the company and the company registers the same, all the shares of a person is bought back by the company, the registration of a company is cancelled by ASIC.

Reference

1. "Duty Of Care (Vic) - Go To Court Lawyers", Com.Au(Webpage, 2020) https://www.gotocourt.com.au/civil-law/vic/duty-of-care/
2. "The Corporate Veil | Gibson Sheat", Com(Webpage, 2020)
3. "The Doctrine Of Separate Legal Entity: A Case Of Salomon Vs Salomon & Co Ltd – The Writepass Journal", The Writepass Journal
4. "What Are The Advantages And Disadvantages For The Franchisee?", Co.Uk
5. "What Is Duty Of Care?", Slater And Gordon
6. Donald M. Wilkinson, "Negligence: Duty Of Care: Determination Of Plaintiff's Status Under Guest Statute" (1953) 51(5) Michigan Law Review.
7. "Consumers' Rights & Obligations", Australian Competition And Consumer Commission
8. "Company Shareholders | ASIC - Australian Securities And Investments Commission", Gov.Au