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LST5CCL Company and Commercial Law

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You are sick with dread. You are worried that you have exposed your business, Lloyd Right Pty Ltd, to considerable legal risk. You are desperate to avoid negative publicity and wish to ‘make this go away’, as you put it.


  • Discuss what assistance/ financial compensation you would offer James if you are taking your responsibilities under contract into account. Use cases to support your recommendation but please exclude statutory law.
  • Discuss what assistance/ financial compensation you would offer James if you are taking your responsibilities under tort of negligent misrepresentation into account. Use cases and statutes to support your recommendation. Please note that you have not to consider building/ planning law etc., consider only the statutes that we have covered.
  • You start remembering our subject, ‘Foundations of Company and Common Law’ and the topics covered there. You decide to quickly and shortly sum up possible other legal risks that you might face. Take ONE other legal risk and explain how it might be applicable here. Also make ONE suggestion as to how ANY of the risks could be better managed in the future.

Answer:

Introduction

The report is related to the resolving of the case under the study. The case is related to the contract between James and Llyod regarding to make a provision of architectural designing of the restaurant established by James and taking permission from Council regarding the outside seating arrangement. The report covers the various legal compliances and recommendation that must be taken into consideration upon non-fulfilment of responsibilities as mentioned in the contract.

Assistance/ Financial Compensation Offered To James If Lloyd Is Taking Responsibilities Under Contract Into Account

A contract was established between James and Lloyd Right Pty Ltd regarding by which Lloyd was responsible for the interior and exterior design of the restaurant, ensuring the seating capacity and obtaining permits from the local council. For this James had paid $1500 for the services which Lloyd will be rendering to acquire permission from the Council. When the restaurant became operational, it was found that the seating capacity is only 80 instead of 120 as proposed. Due to which James was suffering a business loss of 40 customers per day. Additionally, the Council had denied permission to James to make seating arrangements outside. In this case, the Australian Contract Act 2010 will be applicable because the contract was established between both the parties in a written format. The contract did not mention about a number of seating arrangements but taking permission from the Council was mentioned. Australian Contract Act 2010 and Fair Trading Act 1987 (SA) of Section 156 will be applicable for not fulfilling the committed responsibilities by the parties. Lloyd had breached the contract and was responsible to pay James for the loss incurred by him due to less number of seating capacity.  Due to reduced number of customers, James has been suffered 40 customers per day and he also found the estimated loss per customer is 30 dollar in a day. Hence, Lloyd will be responsible to pay $1200 to James for the loss of customers that he is suffering each day. Secondly, Lloyd had accepted payment on behalf of the provision of services related to taking permission from the Council. However, Lloyd was not able to do so and James was not allowed to serve customers outside the restaurant area. Hence as per the Australian Contract Act 2010 and Fair Trading Act 1987 (SA) Section158, it is mentioned that wrongly accepting payment Lloyd is found to guilty and breaching the contract. Lloyd is liable to pay back the service amount of $ 15,000 had received from James on account of providing services that are related to the provision of permission from the council.  Hence it could be concluded that as per the Contract Law Lloyd can be held responsible to pay for the compensation for the loss of customers that James is experiencing each day in his restaurant. Lloyd is also accountable to pay for the service amount that had received from James on providing services from the Council. Hence, the total amount that Lloyd is accountable to pay James is $16200 (adding $15,000 and $12000) on non-fulfilment of the tasks allotted to it. 

Assistance/ Financial Compensation Lloyd Would Offer James If Taking Responsibilities Under The Tort Of Negligent Misrepresentation Into Account

As per the contract that was established between James and Lloyd Right Pvt. Ltd. mentioned that Lloyd will be responsible for the taking the permission from the Council for making seating arrangements outside of the restaurant in order to carrying out activities related to interior and exterior designing. The contract did not mention the number of consumer seats to be arranged in the restaurant inside or outside in a written manner. As per Tort of Negligent and Misrepresentation Act 1967 which include section 2(2), Lloyd is responsible to pay for the misconduct or non- fulfilment of responsibility related to taking permission from the Council. As per the Tort Misrepresentation Act under Company and commercial law, Lloyd could not be held responsible for the loss of business or not fulfilled seating arrangement provision as it was not mentioned in the contract in a written manner. Hence, Lloyd will only be accountable to pay back the amount that is $15,000 which had received from James for providing services towards the attainment of permission from the Council. Lloyd will not be summoned under Tort Misrepresentation Act nor responsible to pay for the loss of revenues that James could earn from 40 customers not included in the seating arrangement.  Hence it could be concluded as per the Tort Negligent Misrepresentation Law that Lloyd is responsible to pay for the compensation charges that are mentioned in the contract established between Lloyd and James. Lloyd is not accountable to pay for any charges or compensation that is not mentioned in the written contract.

Example

In Goodman v. Wenco Foods, 333 N.C. 1, 19-20, 423 S.E.2d 444 (1992) Goodman was a supplier to Winco Foods and responsible for the supply of hamburger patty to Wenco Foods as mentioned in contract established between them. When Wenco Foods sued Goodman on the quality of hamburger patty which was supplying. Goodman denied the charges that it was not responsible for validating the quality of the products and was accountable for supplying as it received from the third party. As per the Tort, Negligent Misrepresentation Act Goodman under section 2c Goodman was found to be guilty on account of lack of negligence in regards to inspecting and supplying the products prior to delivery. Further, Goodman was responsible to pay Wenco Foods for the compensation amount which it has to render upon causing damage to the goodwill and consumer baseline of Wenco Foods.

Possible Other Legal Risks That Lloyd Might Face

Lloyd might face the financial risk and reputation risk charges from James. The financial risk may arise due to the payment of compensation that Lloyd had to make James on account of not fulfilling the requirements of the written contract. Lloyd may also be charged for reputation loss as the restaurant established by James may suffer losses due to eluding the seating arrangements from outside the restaurant. James considered outside seating features to the main point of attraction for the customers and establishing goodwill for the restaurant. On non-allowance of this facility, James might suffer from loss of goodwill and reduction in customers.

Suggestion for reducing financial risk

The financial risk could be reduced by making necessary changes in the designing of the restaurant such that the needs and requirements that were mentioned by James get covered and resolved to a maximum extent. 

Suggestion for reducing reputation risk

For reducing reputation risk Lloyd could promote James restaurant in a positive manner so that the loss which James was suffering due to losing customers, reduced customers and restricting of outside service to customers might get reduced.

Conclusion

The report discussed the different features of the case and found that Lloyd Right Pvt. Ltd was responsible for not conducting its responsibilities in a proper manner. Hence, if Lloyd is penalized and charged for compensation it would be rightly done and Lloyd is ought to pay for the negligent behaviour conducted by its side. The concerned parties Lloyd Right Pvt. Ltd and James are bided to follow the rules that are mentioned in the Australian Contract Act as the restaurant is located in Melbourne and the law related to Australian governing bodies will be followed.

References

Robert RUDLOFF, Plaintiff, v. WENDY'S RESTAURANT OF ROCHESTER, INC., Moyer Packing Company, Inc., Defendants [June 08, 2006]

Full Federal Court - price fixing and agency, ACCC v ANZ Ltd [2013] FCA 1206 (18 November 2013)

Trade Practices Act 1974 (Cth) s 45, 45A, 76, 80, Australian Competition & Consumer Commission v ABB Power Transmission Pty Ltd [2004] FCA 819

Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238

Anti-competitive agreements, misuse of market power (penalty judgment 2016), (ACCC v v Cement Australia Pty Ltd [2017] FCAFC 159)

Australian Competition and Consumer Commission v KingIsland Meatworks and Cellars Pty Ltd [2012] FCA 859.

Australian Competition and Consumer Commission v UNJ Millenium Pty Ltd [2012] FCA 1123.

Australian Competition and Consumer Commission v Keshow [2005] FCA 558.

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