Bo1Blaw204 Business Law Answers Assessment Answers

a) Demonstrate a working knowledge and understanding of the principles of Australian Business Law within the context of the prescribed readings.
b) Identify and analyse relevant facts, problems and legal issues from a given scenario and develop an argument in response, discussing available options in the context of business law.
c) Interpret business law legislation and cases and complete questions based on that legislation and relevant case law in class.
d) Appreciate the role of compliance and the requirement that organisations and individuals must follow the laws that apply to their industry areas.
e) Understand and apply the law related to establishing, managing and controlling enterprises

Answer:

The question important in the relation between Jessica and Angela is if there existed a case of misrepresentation or not. The case that dealt with misrepresentation was Kalabakas v Chubb Insurance Company of Australia Ltd [2015] VSC 705 which held that misrepresentation is a false statement made by one party to the other thereby inducing him to enter an agreement. It is a landmark case dealing with misrepresentation where the court for the first time defined the scope and ambit of misrepresentation. The obiter dicta of the case held that misrepresentation shall mean any statement given by one party to another which is essentially a false statement. Bisset v Wilkinson [1927] AC 177 was another landmark judgment that held that to constitute misrepresentation, it is important to lay down three tests and the party has to abide by those tests to make a case of misrepresentation. The three elements of misrepresentation are as follows:

• Opinions do not constitute misrepresentation. To constitute misrepresentation, the party has to give a fact and not an opinion. The case of Esso Petroleum v Mardon [1976] QB 801 held that opinions do not constitute misrepresentation and only facts constitute misrepresentation.
• The statements made by the party to another party, inducing him to enter into the contract have to be factually false and there shall be no truth in the statement made by the party.
• It is important to prove that the party entering into the contract was induced into entering into the agreement by the false statements made by the party. The party has to show that he was induced into believing in the truthfulness of the statements.

The important thing to consider while accusing someone of misrepresentation is that the person to whom the statements were made should have the means to check the factual truthfulness of the statements. It can be shown that the party had the means to find out about the facts before entering into the contract then it shall not be held to be misrepresentation. This principle was held in the case of Smith v Land & House Property Corp (1884) 28 Ch D 7 where there was a statement made by the owner of a hotel that a tenant was most desirable and the seller made the statement which was further verified by the claimant. The court held that in this case, the claimant had the means to find out the truth about the tenant and therefore the court held that the statement made by the seller was not misrepresentation. Edgington v Fitzmaurice (1885) 29 Ch D 459 this case dealt with a company trying to raise money by illegal means, wherein the court held that the company was liable for misrepresentation as the purpose of receiving money was not for expanding business but was for the purpose of recovering the financial condition of the company. The company made false and deceptive statements on the prospectus. Horsfall v Thomas [1862] 1 H&C 90 is an important case for the factual scenario because court held that to claim a case of misrepresentation, the party has to prove that there was reliance on the statement made by the other party. That is, the party has to prove that he relied on the statements made by the party and thereafter entered into the contract. The Misrepresentation Act 1972 deals with the cases of misrepresentation in Australia.

A contract was entered into between Angela and Jessica for the purpose of purchasing a restaurant. Jessica told Angela that she is making profits in the tune of $1000 and also handed out the papers to Angela asking her to check. Angela did not check the total profits but only checked till 2007. For a case of misrepresentation, it needs to be proved that Jessica made a false statement and Angela relied on the statement made by Jessica to enter into the agreement. As was held in the case of Smith v Land & House Property Corp where the court held that to prove actionable misrepresentation, it is important to establish that the party had relied on the statements made by the seller. Angela had the opportunity to check and thereafter she relied on the statement made by Jessica to enter into the contract. Jessica was aware of the profits of her restaurant. As was held in Derry v Peek that the fraudulent intention of the party is important to establish a case of misrepresentation. Therefore, it can be said that Jessica had fraudulent intention.

Jessica is liable for misrepresentation and therefore Angela can claim damages for inducing Angela to enter into the agreement by making false statements.

Negligence defines a situation where the act or actions of one individual causes harm or injury to the other. Therefore, when one party has owed a duty of care to the other existing party who has been hurt then it will constitute negligence. It can result in the breach of a legal duty for taking care of the parties who existed in the act. Negligence is a tort where an individual who is injured has not played any role in it. The concept of duty of care is the most common element of negligence. Thus, if all the elements or constituents are present including duty of care, causation, remoteness and breach of duty of care it will result in negligence. When not all the mentioned elements are present or involved in the occurrence of negligence then the plaintiff cannot claim that there was a negligence on the part of the plaintiff and the defendant. The concept and rule of duty of care, which identifies when the parties have engaged in the case are considered to be neighbors of each other was established in the case of Donoghue v Stevenson [1932] AC 562. If the individual has foreseen the actions of the person who has caused damaged to the other party, it will result to be a duty of care. It was noticed in this scenario that when a person has been hurt or suffered injury while consuming drinking cola at a café. He suffered the injury or loss because while he was having the drink, a snail existed in that bottle of drinks. Due to which, the person got injured and suffered losses. Hence, he asked a claim from the manufacturer. On the other hand, the manufacturer stated that no valid contract was formed between them and thus, he cannot ask for any kind of claim from the manufacturer. Thereafter, the Court stated that there was a duty of care that gave a right to the individual for forming the claim when negligence was occurred in the situations. The Court that the plaintiff can ask for the claim from the manufacturer for the loss or injury that he had suffered due to his negligence decided it. A scenario similar to this was observed in Taylor v Haileybury [2013] VSC 58.

Duty of care forms the theory of negligence but it also needs the constituent of breach of duty of care. Under the provisions of civil liability and common law, 2002 can be applied in this particular scenario. There was a test held for indentifying the duty of care for the existing provisions. The first and foremost step is to evaluate or examine, which can also be breached. In the case of The Uniting Church v Takacs 2008 NSWCA 141 the above mentioned situation was observed. Thus, the standard of care must be considered to be as instances for avoiding the probability of the injury that was related to the harm caused. Negligence is therefore a tort that can be initiated for compensating the parties engaged who has suffered injuries because of the actions of the other parties. Negligence cannot be created if there is no contractual relationship between the parties. For identifying the duty, the test was taken and proved in the case of Weaver v Endeavour Foundation [2013] QSC 93. Therefore, the Court had held that as per the test it was observed that the party involved had a probability for having a duty of care in their relationship. The application of this test was observed in the case of Smoldon v Whitworth & Nolan [1997] PIQR P133. In this particular case, one party to the other foresaw the injury that was caused for the purpose being that the duty of care should exist.

Hence, it can be stated that negligence can be claimed or asked for only when there is a chance of breach of duty, which will result in some kind of a loss. However, when there is a breach of duty the element of causation is needed. The application of the ‘but for’ test can be done in this scenario.

Application

From the above discussed facts of the case, it was observed that Sandra had purchased a carton of cola from a local restaurant. The cola was consumed by Sandra’s husband and hence he fell ill. They suffered a huge amount of medical expenses due to the illness. Whereas, it was provided by the local store that due to bankruptcy, cola ran out of business. The case of Donoghue v Stevenson is applicable in this particular situation. This is because similar facts were observed in this case as well. The major element was the breach of duty of care. However, there was no contract based on which the parties can ask for compensation for the negligence. It can be said that there was a breach of duty of care that was caused by the manufacturer. If negligence was not caused by the manufacturer while allocating the drinks then it will not result in constituting negligence. The claim can only be treated to be successful when the constituents of negligence are proved. Breach of duty of care and causation of the injury should be a part of it. Therefore, the application of the neighbor principle should be made in this scenario. According to the legislation, the damages caused can be recovered only when there have been remoteness in the case. If the damages are considered to be too remote and not observed then they cannot be recovered. In terms of negligence it will be treated to be as foreseen. However, even if a reasonable individual had witnessed the cockroach in the cola and if the medical expenses show this then it might result in the loss of an employment for the manufacturer. According to these elements, the manufacturers have a few responsibilities and duties that was owed to the husband of Sandra. Hence, the case that has been discussed above will be applied in this situation.

The reason for this is in the given case, the manufacturer had provided a drink, which was defective and caused injury to Sandra’s husband that he had consumed it. This same situation has occurred and it was observed that there was a breach of duty to care on the part of the manufacturer. This injury was noticed as the cockroach was found in the drink. Thus, it can be stated that the duty of care was breached by Acne. If the manufacturer were not negligent then Sandra’s husband would not have suffered the injury or medical expenses. If the cockroach did not exist in the drink then the loss would not have suffered by Sandra’s husband. However, the manufacturer will be held liable for committing negligence and Sandra can make a claim for the damages that were caused by her husband against Acne.

Conclusion

It can be concluded stating that the damages that were caused to Sandra, Acne Cola can therefore be charged for the injury and loss.

References

Derry v Peek (1889) 5 T.L.R. 625

Donoghue v Stevenson [1932] AC 562

Edgington v Fitzmaurice (1885) 29 Ch D 459

Horsfall v Thomas [1862] 1 H&C 90

Misrepresentation Act 1972 (SA)

Smith v Land & House Property Corp (1884) 28 Ch D 7

Smoldon v Whitworth & Nolan [1997] PIQR P133

Taylor v Haileybury [2013] VSC 58

The Uniting Church v Takacs 2008 NSWCA 141

Weaver v Endeavour Foundation [2013] QSC 93