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.