BSB 111 – BUSINESS LAW AND ETHICS NOTES
SEMESTER
LECTURE 1: ETHICAL DECISION-MAKING LECTURE NOTES What is ethics?
• Concerned with how we behave or “should” behave. • Theories that describe the ‗right‘ way to make a decision.
Business ethics
• refers to the conduct of parties in business
Law and ethics
Law is limited because:
o it is simply not possible to predict and therefore outlaw all situations that give rise to bad conduct. o law usually lags behind social trends because the law-making process is slow and reactive. o the law itself is sometimes viewed as deficient and for this reason should not be treated or seen as some sort of ethical or moral high ground (‗bad‘ law).
Ethics and morality
• Morality is concerned with social practices defining right or wrong
• Ethics is concerned with the theory as to why something is right or wrong • ―Ethical theory and moral philosophy point to reflection on the nature and justification of right actions‖
Personal morality
• Ethics requires reference to external sources (objective) in order to justify actions. If only purely personal (subjective) morals were considered, acts such as terrorism might be ethically justified because the offender personally believed they were doing the right thing.
Kohlberg‟s Moral development stages
LEVEL ONE: PRE-CONVENTIONAL
Summary note: an individuals’ focus at this level is exclusively self-centred such that ethical decisions will only be made if they bring about a benefit.
1. Individuals at this primary stage of maturity in ethical decisions will conduct themselves in an ethical manner in order to avoid punishment. It follows that if the perceived risk of detection is low and/or the punishment is low,
then individuals will take a course of action that minimises personal harm and maximises personal gain – irrespective of whether such action is ethical or not; or if it has an adverse impact on others.
2. At this stage, individuals will only conduct themselves in an ethical manner if in doing so brings about a benefit; and will only consider the interests of
others if there is a mutual benefit. These stages are mostly for young children
LEVEL TWO: CONVENTIONAL
Summary note: individuals at this secondary stage are increasingly concerned with conforming and maintaining relationships within a community
3. At this stage of maturity, individuals conduct themselves in an ethical manner to please or avoid being frowned upon by the immediate group of people around them such as family and friends.
4. The actions of individuals at this stage are motivated to conform to the norms and rules of the greater community in order to preserve and respect social harmony. In business, these individuals will be guided by company policies, codes of conduct, and the law.
Where most people are in these stages
LEVEL THREE: POST-CONVENTIONAL
Summary note: individuals at this stage go beyond the mere compliance to the law and are motivated by moral/ethical principles 5. Whilst individuals at this stage of maturity respect and follow laws, they will evaluate and question the appropriateness of the laws and seek change where they are inconsistent with ethical principles.
6. At this large stage of maturity, individuals make decisions based entirely on ethical principles.
Approaches to the study of ethics
• Terms to describe different focuses of study:
– Descriptive (Scientific) approach: scholars examine the actual moral practices of a society (eg anthropologists, sociologists)
– Conceptual approach: analysis of the meaning of key terms (concepts), eg: right, obligation, justice, good etc
– Prescriptive (Normative) approach: aims to determine what ought to be done, rather than what is done.
Normative theories of ethics
Egoism
• Involves looking at the outcome of a decision in terms of the effect it will have on you.
• Ethical egoism: Everyone ought to be motivated to act in their own self-interest.
• Psychological egoism: Everyone is always motivated to act in their own self-interest. It is really a descriptive claim, rather than normative theory. • A person should act in a way that maximises his/her own long-term self-interests.
• This does not mean that the egoist will always be greedy or selfish, but that the motivation for acting will be to gain benefit themselves. o may be by undergoing a short-term sacrifice or pain, or by doing
something that benefits another… o in the hope of reciprocation or gaining some intangible benefit like satisfaction, praise or fame – or to avoid the detriment of punishment
one needs to discern between their own self interest and that of others.
Utilitarianism
• People should act in a way that maximises the good (utility) of society. • ‗the greatest good for the greatest number‘ where good refers to happiness, pleasure, friendship, knowledge, courage
• Difficulties with utilitarianism come with measurement as there is limited practical value and as all types of good may not be valuable to all people
• Utility is measured as a whole – it advocates choosing the option that gives the greatest good
Kantianism
• Essence of this approach is that established rules, codes, responsibilities,
duties, principles etc should guide our behaviour. The process of making the decision (i.e. following the duties) is the important factor, not the outcome of the decision. Doing the right thing for the wrong reasons cheapens the result. Actions must come from a sense of duty.
Important factors from Kant’s theories:
• Universal acceptability – can the act be a rule performed by everyone without contradiction? E.g. if your
rule is ―I‘ll break promises when it suits me‖, this cannot be universal, because it would contradict the purpose of a promise.
• Respect for persons – we are all rational, independent beings. Treating a person exclusively as a means to some end fails to give them respect. • Reversibility – would you like to be on the receiving end of such action?
Duties
Are there duties we should always keep?
Virtue Ethics
• Would a ‗good‘ person (a person with good virtues / characteristics) do the act? • They are characteristics of moderation. Too much or too little of something is a vice (not a virtue).
TEXTBOOK NOTES – Chapter 1: Ethical Theory and Business Practice Morality and Ethical Theory
• Morality: social practises of defining right and wrong
• Ethical theory and moral philosophy point to reflection on the nature and justification of right actions. These words attempt to introduce clarity, substance and precision of argument into the domain of morality
Morality and Law
• Law is the public agency for translating morality into explicit social guidelines and practises for stimulating punishments for offences
• Law is not the sole repository of a society‘s moral standards and values even when directly concerned with moral problems. A law-abiding person is not necessarily morally sensitive or virtuous and the fact that something is legally acceptable does not mean it is morally acceptable
Approaches to the study of morality and ethical theory
Three approaches: o Descriptive –
scientific study of ethics
o Conceptual – study of significant terms such as right, obligation, justice, good, virtue o Normative – prescriptive study attempting to formulate and
defend basic norms, aimed at what ought to be down which should be
distinguished from what is practiced. Normative makes a value judgement, it delineates which standards or norms correctly determine right and wrong behaviour.
Egoism
• All choices either involve or should involve self-promotion as the sole objective • Ethical egoism: supreme principle is to promote one‘s well-being above all others – normative theory as it suggests people always ought to act on the basis of self-interest
Utilitarian Theories
• Moral worth of actions or practises is determined by the consequences
• It is right if it leads to the best possible balance of good consequences over bad consequences for all the parties affected
• Actions are right if they promote happiness or an absence of pain and wrong insofar as they tend to produce pain or displeasure
• Act utilitarianism: in all situations one ought to perform that act that leads to the greatest good for the greatest number
• Rule utilitarianism: rules are more significant in that they do not regard as
expendable on grounds that utility is maximised in a particular circumstance.
Kantian Theories
• Respect for human being is said to be necessary – sometimes called respect for persons
• Motives for actions is of high importance, in that it expects persons to make the right decisions for the right means
• Persons must act for the sake of obligation not merely in accordance with obligation
LECTURE 2: CORPORATE SOCIAL RESPONSIBILITY & CORPORATE GOVERNANCE LECTURE NOTES
Corporate Social Responsibility (CSR)
Focus: corporations (companies) - tend to be chosen by the larger businesses whose actions can impact greatly on society, and because companies have the additional arguments that come with the separation of ownership and control
Obligations of Business
Until relatively recent times, it‘s only obligation was to maximize profit, while staying within the confines of the law
Specific Problems with companies
• A company, or corporation, is considered at law to be a separate legal entity. This means that it is legally a different ‗person‘ to all the people who own the company (shareholders), the people who control the company (directors) and the employees.
• Another distinct feature of a company is that it has limited liability. This means that the shareholders (the owners of the business) will only lose the value of their investment if the company has too many debts. Any creditors who are still owed money cannot claim from the shareholders‘ personal assets. Consider company from stakeholder perspective not just shareholders
Corporate Social Reporting
• “triple bottom line” was coined in the 1990‘s. It refers to businesses reporting not just on their financial performance, but also on their environmental and social performance. • People planet profit
Corporate governance
• Companies having a set of in-built controls to make sure that the company is operating the way it‘s meant to.
• The system by which companies are directed and managed. It influences how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimized. (ASX) • Governance is concerned with all aspects of the direction and control of organisations. It is concerned with the respective rights and responsibilities of the key stakeholders, including staff, suppliers and the broader community. ―Management is about running the business. Governance is about making sure that it is being run right.‖
• ―Corporate governance is concerned with improving the performance of companies for the benefit of shareholders, stakeholders and economic growth. It focuses on the conduct of, and relationships between, the board of directors, managers and the company shareholders.‖
• ―Corporate governance generally refers to the processes by which
organisations are directed, controlled and held to account. It encompasses
authority, accountability, stewardship, leadership, direction and control exercised in the organisation.‖
Models of Corporate Governance
ASX Corporate Governance Principles and Recommendations
• Principle 1 – Lay solid foundations for management and oversight • Principle 2 – Structure the board to add value
• Principle 3 – Promote ethical and responsible decision-making • Principle 4 – Safeguard integrity in financial reporting • Principle 5 – Make timely and balanced disclosure • Principle 6 – Respect the rights of shareholders • Principle 7 – Recognise and manage risk
• Principle 8 – Remunerate fairly and responsibly
TEXTBOOK NOTES – Chapter 2: Corporate Social Responsibility and Corporate Governance Stockholder management vs. Stakeholder management
• Stockholders are the owners of the corporation – profits belong to them • Stockholders are entitled to their profits as a result of a contact among corporate stakeholders
Principles of governance for corporations
• Governance is decision-making in the exercise of authority and control • Occurs at all levels of authority and decision-making
• Governance practices can be evaluated on the basis of four elements:
1. Predictability o Both the processes and
outcomes of decision making o Requires rules and their consistent application
o Encompass well-defined rights and duties but for effective
governance, it is also necessary to have mechanisms for enforcing rules and settling disputes
o Stable system for creating and enforcing rules and regulations with not threat of change
2. Transparency o Availability of information to stakeholders and clarity of rules, decisions and outcomes o Necessary at the system
level to ensure clarity of laws and regulations affecting corporations o Requires disclosure
3. Accountability o Those with authority for decision-making are answerable to
stakeholders from which they derive their authority
o Applied to all participants, but primary focus on control and
management o Who is accountable, to whom are they accountable and for what are they accountable o Ensures adequate and reliable disclosure to facilitate monitoring by or on behalf of recognised stakeholders
4. Participation o Complements accountability
• Transparency facilitates accountability, participation and predictability. Accountability safeguards predictability and transparency.
Stakeholders in corporate governance
• Any party that has an interest in property, an action or undertaking, or a decision.
Approaches to corporate governance
• Good corporate governance exists when corporate decision-making necessarily reflects the rights and responsibilities of stakeholders
• Most likely to be achieved when governance is transparent, decision-makers are accountable to stakeholders with ensured participation rgiths and where these principles are protected by a predictable legal system.
Regulation
• Can be accomplished formally or informally across four primary mechanisms: o Stakeholder concentration to increase monitoring and control o Market discipline
o Formal contacting between stakeholders and the company o Law making
Stakeholder concentration
• Most commonly occurs with block shareholdings, large loans from financial institutions or block placement of bonds
• Constrains voting power by limiting shareholders, therefore concentrated ownership
Market discipline
• Primary mechanisms by which capital market disciplines decision making are capital availability, cost and takeovers
• Capital availability and cost is a function of both the debt and equity markets • Takeovers necessarily concentrate ownership of the company, thus they
provide acquirers with the ability to effectively direct or replace directors and management
LECTURE 3: REGULATION LECTURE NOTES What is regulation?
• any method for controlling behavior
• self-regulation: from the internal company – based no social expectations. Can be influenced through demand (ie. Decreased demand and therefore profit) • control of corporate activities either by government agencies or by private
actors or a combination of the two eg. ATO/ACCC. Direct involvement from the state not necessary – may come from industry associations, profession bodies or similarly independent bodies law just one means
• can also come from: o self-regulation o industry codes of conduct o regulatory bodies
o the market
Theories of regulation
• three different theories: o public interest o private interest o institutionalist
theories
Public Interest Theories
• those responsible for regulation do so with the objective of promoting the
general welfare of the community – why is regulation good for society • Can be further subdivided on the basis of what is seen to be in the public
interest:
o Welfare economics approach:
suggests that regulation is a response to imperfections in the market
market supply is based on a profit motive
Correcting market failure increases the community‘s general
welfare and is thus in the public interest – about the allocation of resources
Why regulation in these situations? Prevent collusion, price fixing, anti-competitive monopolies, public goods eg. Goods only the Australian government should provide o Political approach NB: know how to explain both!
values such as social justice, redistribution or paternalism are what can justify regulation implement collective goals. Government regulates to sop unfair situations
Eg. Income tax laws to redistribute wealth from rich to poor Counter arguments: is there any such thing as a public interest? Who regulates the regulators?
Private Interest Theories
• that regulation often benefits particular groups in society, and not always
those it was intended skeptical of the purity of the public goals that those who regulate seek to pursue.
• •
•
It assumes that regulation emerges from individuals or groups motivated to maximise their self-interest. Stress the ease in which ‗regulatory failure‘ and ‗regulatory capture‘ occur. • Regulatory failure is where the collective costs of regulation outweigh the benefits
• Regulatory capture is when officials regulate so that they promote the narrow interests of this group instead of the broader community Carbon Pollution Reduction Scheme
Public vs. Private
• Public interest theories stress market failure and the capacity of regulation to
correct such failures.
• Private interest theories stress regulatory failure and the tendency of the
market to allocate resources efficiently.
Institutionalist Theories
• Tripartism: focuses on cooperation
• Public interest groups (eg community group, trade unions, environmental
groups) become a legitimate 3rd party in the regulation process between the regulating agency and the regulated
Who regulations NB: 1q on exam, know who, what they do and legislation relevant • Statutory authority – government creates a statute/act then create an
independent body to regulation this o Role involves investigation and enforcement of legislation, gathering information and complaints, disseminating information and educating the public
Statutory Authorities - ACCC
• ACCC is the Australian Competition and Consumer Commission • It regulates trade practices
• It was established by the Trade Practices Act 1974 (Cth),
• Aims of the ACCC would be to o protect business and consumers from
unconscionable and misleading or deceptive behaviour; o ensure businesses comply with product safety standards;
o ensure manufacturers and importers are held liable for defective goods; and o uphold the integrity of the market against anti-competitive behaviour such as abuse of substantial market power, price fixing, resale price maintenance, market sharing, and anticompetitive mergers or acquisitions.
Statutory Authorities – OFT
• Office of Fair Trading performs a similar function to the ACCC, but it is a state body
•
administers the Fair Trading Act 19 (Qld) - note different jurisdiction to the ACCC
Statutory Authorities – ASIC
• ASIC is the Australian Securities and Investment Commission • It was created by the Australian Securities and Investment Commission Act
2001 (Cth) administers is the Corporations Act 2001 (Cth) • Role of ASIC:
o Corporate regulator o Market regulator o Financial services regulator
Statutory Authorities – ATO
• Australian Taxation Office is the principal revenue collection agency for the Commonwealth Government and is part of the Treasury Department. • collects about 92% of the Commonwealth Government‘s revenue and
administers a range of taxation legislation.
• Has wide powers to investigate and enforce the law – theoretically, the most
powerful regulator.
Other Statutory Authorities
• Australian Prudential Regulation Authority (APRA) – responsible for the
regulation of financial institutions such as banks, societies, superannuation funds and insurance companies.
• Australian Securities Exchange Limited (ASX) – operates the Australian Stock
Exchange
• Director of Public Prosecutions (DPP) – responsible for criminal prosecution in
relation to Commonwealth law. The Queensland DPP is responsible for criminal prosecution in relation to Queensland law.
• Financial Reporting Council (FRC) - responsible for overseeing the process for
setting accounting standards in Australia.
• Reserve Bank of Australia (RBA) - responsible for monetary policy and the
stability of the financial system
LECTURE 4: INTRODUCTION TO THE LEGAL SYSTEM LECTURE NOTES Law
• Set of rules, regulating peoples (corporations,
government, individuals) interactions with each other which set standards of conduct enforceable through sanction
• Law and internet controls aren‘t well developed What makes a legal system effective? o Certain: A system that is uncertain would traumatise us o Flexible: Capacity of the law to adapt to change (e.g. technology) o Known: Publication of the law (accessible)
o Reasonable: Law must be fair, just and necessary (i.e. Rule of Law)
o Obeyed: Law must be obeyed and provide penalties for those who don‘t obey
it
Types of ‘Legal Systems’ – Common Law system
• Originates from English system of law • Source of law is both legislation from parliament and judge-made law
through cases • Courts operate in an adversarial manner (accusatorial ie. One party
accuses another) • System of law: Australia‘s system, source of law: judge made rule,
division of law
– Civil Law system
• Originates from Roman system of law • Source of law is mainly civil codes enacted by government • Courts tend to operate in an inquisitorial manner
Rule of Law
• No person must be punished except for a breach of the law.
• All persons are equal before the law irrespective of status or position • The rights or freedoms of citizens are enforceable in the courts. • Prevents absolute power or person‘s using it unfairly
Justice
• Procedural justice: outcome most important
• Substantive justice: everyone should be treated the same
Classifying Law
Constitution
• To pass a referendum, an amendment needs a ‗double majority‘
– Majority (>50%) of voters from all of Australia; and – Majority of states having a majority of voters.
• The constitution provides for three separate, independent arms of government. This is known as the separation of powers doctrine, because only certain bodies can exercise certain powers.
– Legislature (makes laws) – Executive (administers laws)
– Judicature (interpret/apply laws)
Parliament • Under the constitution, Federal (Commonwealth) parliament only has
limited power to make laws. – Exclusive powers: only the Federal parliament can make laws in this area.
– Concurrent powers: both state and Federal parliaments can legislate (eg Industrial Relations).
A Federal law overrides a state law to the extent of any inconsistency:
s109 of the Constitution. – Residual powers: Anything else goes to the states
Bicamerial – two houses: upper house and lower house. QLD is unicameral – only one house ( no upper)
Courts
• A role of the courts is to apply the law, and to interpret the meaning of statutes. • Sometimes words in statutes are ambiguous (not clear) and need to be interpreted
• How do judges do this?
– Judges rely on previous cases that have interpreted the legislation,
common law rules of statutory interpretation and the Acts Interpretation Act.
Interpreting a Statute
• To interpret law: refer to previous cases and look for precedent
• Literal Rule: The rule directs judges to give words in statutes their literal or exact meaning.
• Golden Rule: Courts can modify a literal interpretation of the statute to remedy an absurd or inappropriate result.
• Mischief Rule/Purpose Rule: Statute is interpreted with the primary aim of preventing the mischief the statute was designed to prevent. The judge determines this by looking at the purpose or intention of the legislation. • There is a federal Acts Interpretation Act (―AIA‖) and most states have a AIA.
• Section 15AA(1) of the Cth AIA says that courts must use the purposive approach to interpret statutes where possible. • Section 15AB of the Cth AIA allows courts to use extrinsic (outside) material when interpreting statutes.
TEXTBOOK NOTES – Chapter 1: Introduction to the Australian Legal System Definitions Common Law: part of English law, developed form the common custom of the
country as administered by common law courts. Can also mean judge-made law as distinct from statute law
Equity: fairness and justice. Originally operated alongside the common law and intended as a supplement to it, but now incorporated into a single system Injunction: discretionary order or decree issued by a court in its equitable
jurisdiction by which a party to an action is required to do, or refrain from doing, a particular thing. Either restrictive (preventive), mandatory (compulsory) and interlocutory (interim) or perpetual
Plantiff: one that brings a civil action against another Statute: an act of parliament, law passed by legislature
Writ: document in the name of the Queen issued by a court or officer of the crown commanding the person to whom it is addressed to do or stop doing a particular act.
Law
Set of rules developed over a long period of time regulating people‘s
interactions with each other and which sets standards of conduct between individuals and other individuals, and the government which is enforceable through sanction Common Law
• Created through decisions of courts/reported decisions of judged • Also known as: precedent or case law
• Developed from common application of law to the whole of England
Statute Law
• Created by parliament
Civil Law
• An action by one individual against another
• Mode of procedure is accusatorial and emphasis is on remedies
Criminal Law
• Action bought by the Crown against an individual
International Law
• Regulates conduct between nations
Municipal Law
• Domestic laws/states internal laws
Equity
• Emphasis on fairness and justice
• In the event of a conflict with common law, equity prevails
• Common law damages available as of right while equitable remedies only available when damages not an adequate remedy
Statute Law
• Overrides ALL other laws in the event of conflict
Commonwealth of Australia
• QLD is the only state iwth a uni-cameral parliament ie. Only one house • Exclusive powers of commonwealth prevail over state powers • Bulk of commonwealth powers are held concurrently with states
• Residual powers are those that are not exclusive or concurrent powers • Changing the constitution is difficult – requires a referendum
Separation of Powers
• In reality, there is little or no separation of powers between the executive and legislative functions in Australia
• Legislative powers: includes the queen and parliament (through house of representatives and the senate). Enactment of making of laws
• Executive function: queen, and governor general/state governors. Formulation of policy and its administration
• Judicial function: high court and other federal courts. Responsible for the interpretation, applicagtion and enforcement of law.
TEXTBOOK NOTES – Chapter 2: Legal Systems The Role of the Courts
• Role: administration of law
• Criminal jurisdiction – state brings action against accused
• Civil case – individual or organisation vs. Individual or organisation
Inferior (Magistrate/local) courts • Bottom of court hierarchy
• Criminal jurisdiction – summary offences (ie. Drink driving, shoplifting), minor indictable matters and committals
• Civil jurisdiction – restricted to minor matters
Intermediate Courts
• Original civil jurisdiction is generally set my money limit • Have limited appellate jurisdiction
Supreme Courts
• Unlimited civil jurisdiction
• Courts of record create precdent.
Federal Magistrates Court
• Hears minor matters concerning consumer protect under the TPA, bankruptcy and family law
Federal Court of Australia
• Jurisdiction all over other commonwealth matters
High Court
• Both a federal court and final court of appeal in state system • Special leave must be given by the High Court for appeal
LECTURE 5: INTRODUCTION TO THE LEGAL SYSTEM – COURTS AND DISPUTE RESOLUTION LECTURE NOTES Courts
• Courts exercise a judicial function: they interpret and apply the law.
• Hierarchy of Courts: The ranking of courts according to their ability to hear matters. Each level of the court system has a jurisdiction. • Jurisdiction: Authority of the Court to hear a case and make a decision. o Courts have a criminal and civil jurisdiction o Courts have an original and appellate jurisdiction
• Original jurisdiction: the power to hear a matter for the first time • Appellate jurisdiction: the power to hear appeals from the decisions of lower courts
Hierarchy of Courts
High Court of Australia
• Original jurisdiction: the High Court can hear the following disputes: – State Government and the Commonwealth Government – Two State governments
– Residents of different states – Foreign affairs matters
– Constitutional matters
– Indictable offences against the Commonwealth
• Appellate jurisdiction: the HC can hear appeals from State Supreme courts and the Full Court of the Federal and Family Courts.
– Special leave, must be granted to appeal a matter to the High Court
Federal Court of Australia
• Original jurisdiction: Federal court is divided into two areas: – The Industrial division;
– General division – matters such as bankruptcy, trade practices and administrative law.
• Appellate jurisdiction: the full court of the FC hears appeals on decisions from:
– A single Federal Court judge; – A Federal magistrate
– A single judge of a State Supreme Court which is exercising federal
jurisdiction (e.g. in matters such as copyright, trade marks, taxation and bankruptcy). This is called ―cross-vesting‖ jurisdiction of the court.
Family Court of Australia • Original jurisdiction:
– all family law matters • Appellate jurisdiction:
– a single judge of the Family Court can hear appeals of family law decisions from the Federal Magistrates Court
Federal Magistrates Court
• Original Jurisdiction: primarily with – Family law matters, simple bankruptcy, administrative law and trade practices law matters up to $200,000.
• Appellate Jurisdiction: Hears some appeals from
– Federal Tribunals
Supreme Court of Queensland
• Highest court in the state – consists of the Trial Division and the Court of Appeal (superior courts) o Trial division = 1 judge o Court of appeal = full bench
• Original jurisdiction: a single justice of the SC hears o serious criminal matters such as murder o civil matters where the amount of compensation claimed is more than $250,000.
o completes about 600 criminal and 300 civil cases per year
• Appellate jurisdiction: the Court of Appeal (3 or 5 judges) hears appeals from the District Court, the Supreme Court (trial division) and many
tribunals. o Some appeals require leave of the court o There are 6 judges
who are Appeal judges o The top judge is called the President of the Court of Appeal.
• If you a guilty, choose a jury AND if you are innocent, choose a judge
• Considering removing juries – widens the gap between judges and society
District Court of Queensland • Original jurisdiction: – Civil claims between $50,000 and $250,000 – Moderately serious criminal matters
– Hears approx 8000 criminal and 1500 civil matters a year.
• Jury: A jury is used for criminal matters and for few civil claims. Same procedure as SC
• Appellate jurisdiction: DC judge may hear
– an appeal from the decision of the Magistrates Court. For example, the DC can overturn any finding of fact or any point of law decided by the magistrate and increase or reduce a penalty or jail sentence in criminal matters.
Magistrates Court
• Original jurisdiction: – Criminally, they hear summary (minor) offences (e.g. drunk and disorderly), and committal hearings
– civil matters where the amount claimed is less than $50,000.
– Approx 170,000 criminal and 100,000 civil cases are lodged each year. • Committal Hearings: A preliminary hearing on indictable (serious) offences such as murder, to determine whether the prosecution has sufficient evidence to indicate that the person charged could be found guilty. If so, the accused will be sent to a higher court for trial by a judge and jury.
Tribunals
• Tribunals (definition): A body established by statute to regulate specific matters.
• Why Tribunals?: Increasing number of cases in the court system and the need for specialisation.
• Key differences with a Court:
– Judges (i.e. former lawyers) preside over courts, often non-lawyers preside over tribunals;
– Courts have a wider jurisdiction to hear matters, Tribunals are limited to jurisdiction outlined in the statute which created them;
– Tribunals are not courts. Proceedings before the tribunals are not as formal as those before a court. They have limited scope – based on legisilation ie. What it can hear
• Therefore, tribunals are often quicker, cheaper and easier for those involved • Tribunals sit in executive arm of government – people administering are also the ones interpreting the law.
Small Claims Tribunal • Jurisdiction:
– Where the amount in question is $7,500 or less;
• Eg building work, disputes between landlords and tenants; fencing disputes, damage caused by car accidents etc • Operation of SCT:
– Proceedings are informal and the parties are not entitled to be legally represented unless both parties agree.
– Proceedings in the SCT are final. The loser can only appeal in
circumstances where the tribunal has acted in excess of its jurisdiction or where there has been a denial of natural justice.
Why have a hierarchy?
• Provides a system of appeals
• Allows for different forms of hearing according to the gravity of the case • Instrumental in building up precedent (what has gone before and should be followed – creates fairness as it suggests all situations should be treated the same)
Doctrine of Precedent
• Because it is desirable that our legal system has certainty, similar cases should be treated in a similar fashion.
• Like cases should be treated the same and the same decision/outcome achieved.
• Precedent is relevant to the hierarchy of Courts – a Court is bound to follow precedents set by superior courts in the same hierarchy. • Ratio Decidendi: The ratio is the reason for the judge‘s decision (i.e. the legal principle). This is what is followed. This is a binding decision.
• Obiter Dicta: Statements of law not necessary to decide a case. For example, observations made by judges about the future direction of the law, or that a different decision may have been reached if the facts were different. These are not binding, only persuasive.
Courts
• March = plaintiff, Stramere = defendant o Person who brings case is listed first
• CLR = high court case – only report and official of the high court • ‗And‘ is used in civil cases
• When [ ] are used, the year is relevant. When ( ) are used, year is irrelevant
Parties in a Court Case
• If it‘s the first time the case has come to court, the person bringing the case is the plaintiff. The person answering the case is the defendant.
• In a criminal case, the prosecution (the Crown) brings the case. This is often abbreviated in case citations as the letter ―R‖.
• If the case is an appeal from an earlier decision, the person bringing the appeal is the appellant and the person opposing the appeal is the respondent.
Winning the Case
• The onus (or burden) of proof is on the person who has to prove their case. In most instances the onus lies with the person bringing the case (i.e. the plaintiff or appellant) • The standard of proof is the level that the person must prove their case.
• In a civil case, that is on the balance of probabilities. • In a criminal case, the prosecution must prove their case beyond a reasonable doubt.
Dispute Resolution • Negotiation
• Is a process of communication between the disputing parties, hopefully reaching an agreement on the solution. Case appraisal
• information in relation to both parties‘ cases is given to an independent 3rd party and s/he then makes a recommendation about what would happen if the matter proceeded to court.
• Mediation and Conciliation
• Mediation is where a third party assists the disputing parties in reaching consensus by keeping them on track, allowing each party to speak their points etc.
• Conciliation is similar except that the 3rd party may also offer advice/suggestions on how to resolve the dispute etc.
• Arbitration
• Similar to conciliation, but the third party makes a binding decision at the end on how the dispute is to be fixed.
TEXTBOOK NOTES – Chapter 3: How Law is Made Definitions
Appellant: the party appealing the decision – may either be the plaintiff or the defendant from when the case went to trial the first time
Delegated legislation: regulations and by-laws passed by a subordinate authority eg. Municipal council, in reliance of some regulation-making powers conferred by an act of parliament upon it
Obiter dictum: a saying by the way – observation by a judge on a matter of law which is not essential to the decision before and therefore not part of the binding precedent established by the case
Precedent: judgement or decision of a court of law cited as an authority for deciding a similar set of facts in later cases. May be binding if it comes from a court in the same hierarch and on a higher level. Persuasive precedents are non-binding on courts if they are outside their court hierarch or from a court on a lower level. Ratio decidendi: the reason for a decision - binding
Redspondent: a person against whom an appeal is brought. They may be either the plaintiff or the defendant from when the case went to trial the first time. Statute: act of parliament, a law passed by legislation Traditional Law Reports
• Each report has its own abbreviation
• Date will either appear in round or square brackets o
Reference is not essential to find volume – date is placed in round brackets
Ratio Decidendi and obiter dictum Ratio = reason for deciding
Obiter = anything else said about law in the course of judgement which does not form part of matters at issue
Legal Cases as Precedent
• Precedent: Judgement or decision of a court of law cited as an authority for the legal principle embodied in its decision
• Following precedent = question should be resolved in a certain way today because a similar question was decided yesterday • Ensure people are treated equally and fairly Advantages Disadvantages Promotes consistency Precedent may not be relevant to today‘s circumstances but has to be followed Coherence Slow to respond to community changes Certainty May require an Act of Parliament to change Efficiency Justice – equity and fairness Binding precedent
• Only binds courts in same hierarchy
Persuasive precedent
• Can only influence courts
Statutes
• Law made by parliament • Supreme law in Australia • Prevails over common law
• Assume existence of common law • Modify or replace common law
• Often react faster to and better reflect current community needs than common law
LECTURE 6: AGENCY AND TYPES OF BUSINESS ORGANISATIONS LECTURE NOTES Agency
• someone who has the authority to act on behalf of another, called a ‗principal‘. • For example, an agent may enter contracts with third parties, on the principal‘s behalf. In this situation, it is the principal who is contractually bound with the third party, not the agent.
• Agency is a foundation of partnerships nb: firm means partnership • Arises from a contract
• Specify how long it lasts for, what pay rate is and what limits on agents authority are
Example Situation
• Principal = musician
• Agent = person who acts on principals behalf with 3rd parties, can enter into contracts
• 3rd party = contract between 3rd party and principal (not AGENT)
• In order to bind the Principal, the Agent must be acting with authority Actual Authority Apparent Authority (Ostensible)
Express Implied
Actual Authority
• Express Authority: the authority of the agent that is expressly agreed upon. • Implied Authority: The parties may not have expressed it, but it was their intention that the agent could perform certain tasks.
Apparent Authority
• It appears to the third party that the agent has actual authority (even though they may not); and
• The principal is responsible, to some degree at least, in creating this appearance.
• In this case, the third party is still able to enforce the contract with the principal.
Rights of an agent
– Remuneration
– Indemnity for liabilities and reimbursement for expenses incurred by the agent in the course of their duties.
Types of Businesses Sole Proprietor
• His or her own business for profit. • It is the simplest form of ownership
• Owner maybe the only person working in the business, or could have many employees
Advantages • Little formalities • Full ownership over profits Disadvantages • Unlimited liability • Limited capital source • No separate legal entity
Partnerships
• Partnership Act 11 (Qld) relation which exists between persons [2-20 persons]
o carrying on a business o in common
o with a view of profit
• partnership agreement = a contract/evidence. Not required. • Mutual agency – decisions of other partners can bind the business • Not a separate legal entity
Advantages • Little formalities • More people to contribute ideas • More capital Disadvantages • Unlimited liability • Lack of control • Mutual agency • Difficulty selling your interest • No separate legal entity
Joint Ventures
• work together for a certain purpose 0 not intending to be partners
• separate liability
Companies
• entity recognised by the law as a legal person with rights and liabilities • limited by shares • separate legal entity • limited liability
• A public company is one which has shares available to the public (e.g. by trading on the stock exchange).
o It is distinguished (usually) by the
abbreviation ‗Ltd‘ in the company name – need to have annual report
• A private (or proprietary) company is one where shares are not publically available. It is distinguished by ‗Pty Ltd‘.
o No annual reporting needed o Less rules
Advantages: – Limited liability
– Perpetual succession (unlimited life) – More sources of capital
– Expert managers to run the business
– Shares can be transferred (esp. in Public Co) Disadvantages: • Formalities and costs
• Limited rights as a owner
• Agency costs of making sure the directors are acting in the interests of the company. (Recall week 2 on corporate governance).
Trusts
• person (the settlor) grants ownership of property to a person (the trustee – has legal ownership for the benefits of the beneficiaries) to use for the benefit of certain other people (the beneficiaries). The settlor can be a trustee and one of the beneficiaries also.
• A trust is NOT a separate legal entity.
• The trustee has legal ownership of the property, but the beneficiaries have equitable/beneficial ownership.
• The trustee has a fiduciary duty to act in the best interests of the beneficiaries. • The trustee can be a company.
LECTURE 7: FORMATION OF CONTRACTS LECTURE NOTES Contracts
• Contract (definition): An agreement between two or more persons intended to be binding, which is enforceable at law. Types of Contracts
• Formal Contracts: Agreements made in writing which must follow strict requirements, but do not require consideration (e.g. Trust deed).
• Simple Contracts: Any contract other than a formal contract. Simple
contracts require consideration and unless required by law (e.g. sale of land), can be in writing, spoken or a combination of both.
Elements of a Simple Contract
1,2 ,3 = form an apparent contract
Formation 1 – Intention
• The court starts with 2 presumptions – Where the agreement between the parties is of a social or domestic nature, it is presumed that the parties do not intend to create legal relations – this means that the agreement is presumed to not be a binding contract.
– Where the agreement between the parties is of a commercial nature, it is presumed that the parties do intend to create legal relations – this means that the agreement can be a binding contract.
BUT, These are only presumptions
Social/Domestic Nature
Presumed NOT to have intent
Case Examples:
• Balfour v Balfour (1912)
– Facts: The husband promised to pay a monthly allowance to the sick wife (who lived in UK) until the wife was able to join him in Sri Lanka. The husband failed to pay and the wife sued.
• Held: Parties had no intention to be legally bound.
– Merritt v Merritt (1970): The husband had separated from his wife. He promised to give her his share of the house. It was held that the
presumption did not apply to parties who were separated. – Wakeling v Ripely (1951): A wealthy old man persuaded his sister and her family to move to Australia from England on the basis that they would get his house in his will. The plaintiff did move, but after a year, the defendant changed his will after a falling out. Court held that the presumption was rebutted, as the plaintiffs had acted in reliance on the promise, expecting it to be enforced. This could be seen by their willingness to risk serious consequences on moving to a new country. • This case was more than a social/domestic issue – as it had serious monetary consequences for the plantiff.
Broad categories of rebutting this presumption
• The nature of the document (if any) may indicate intention (eg if drafted by a solicitor)
• The agreement may expressly state that it creates legal relations (Rose & Frank Co v J R Crompton & Bros Ltd (1925))
• The surrounding circumstances may indicate intention (eg Merritt v Merritt) • One party may have changed position significantly in reliance on the
agreement - the consequences are sufficiently serious (eg Wakeling v Ripley)
Commercial Nature
• Presumed TO have intention to be bound
Case Examples
• Case example: Edwards v Skyways Ltd (19)
– During an industrial dispute, an airline company promised employees that they would make an ex gratia payment to anyone made redundant. The company later refused to pay a redundant employee. The court held that as the agreement was commercial, it was presumed to have intention.
• Examples of when the presumption has been rebutted (see textbook)
– Rose & Frank Co v J R Crompton & Bros Ltd (1925)
– This was an example of an ‗honour clause‘ where the parties agreed that their deal was binding in honour only
• Advertisements/Promotions where advertising can have invention but there is a line where it becomes a ‗puff‘
– Carlill v Carbolic Smoke Ball Co (13): Facts: an advertisement was placed in several magazines by CSBC. CSBC manufactured a ‗carbolic smoke ball‘ that allegedly prevented the user from contracting influenza or a cold - an offer of £100 was made to any reader who contracted a cold after using the smoke ball three times a day for two weeks. The ad also stated that the company had deposited funds in a London bank as an indication of its good faith. Mrs. Carlill purchased the smoke ball and used it as directed. However, she caught influenza - The company
refused to pay her. The court held that there was a clear intention to create legal relations, as indicated by setting aside money in the bank to pay.
– Leonard v Pepsico Inc (2000): As part of a promotion, Pepsico offered a Harrier fighter jet to anyone who collected 7,000,000 points from Pepsi products. The plaintiff collected the required points, but the court held the advertisement to be an attention-grabbing joke, an advertising ‗puff‘.
• Letters of comfort: statements of current inventions for the future of current policy – provide comfort not assurance and are not promissory in nature
– Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad [1981]. A subsidiary company wanted a loan from a merchant bank, and to help gain this, the parent company gave a ‗letter of comfort‘ to the bank stating ―It is our policy to ensure that the business of [subsidiary] is at all times in a position to meet its liabilities to you under the above arrangements‖. After the loan was made, the market in which the subsidiary operated crashed and the company wound-up with heavy
losses. The bank sued the parent company for a breach of contract, but it was held that there was never an intention to create legal relations.
• Anyone wishing to rebut the commercial presumption bears a heavy onus of proof (Edwards v Skyways Ltd [19])
Formation 2 – Agreement
• Agreement means that there has been a valid offer made and that it has been accepted.
• Agreement is the manifestation by two or more persons of the substance of the contract (i.e. not every single detail has to be agreed upon in order to form a contract).
• In deciding whether agreement was reached, the courts use an objective test • Agreement can be shown by the parties‘ conduct – you don‘t need express words
• The person making the offer is called the offeror, and the person receiving the offer is the offeree
Rules of Agreement - Offer:
Rule 1: Offers must be distinguished from an invitation to treat or request for information.
• Invitation to treat (definition): An invitation to another person to make an offer. The invitation to treat can specify the form the offer must take (e.g. in writing and/or made before a certain date).
• Advertisements/catalogues: Invitation to treat, unless there are specific terms in the advertisement which demonstrate an intention to make an offer (case example: Carlill v Carbolic Smoke Ball Co.) • Display of goods: Invitation to treat
Case Example: Pharmaceutical Society v Boots Cash Chemists.
– Facts: Boots Cash Chemists, which operated a pharmacy, had certain medicine displayed on their shelves which could only be sold under prescription.
– Issue: Did the display of the medicine constitute an offer to sell the medicine or an invitation to treat?
– Held: As a matter of common sense and commerce, the display of goods is an invitation to treat.
Responding to a question does not itself create an offer: – Harvey v Facey [13] (G&F p271) – The plaintiffs asked the defendant what was the lowest cash price for
some property. When the defendant replied, the plaintiff took it as an offer and purported to accept it. However, the court said that the
defendant was merely indicating their minimum price if they decided to sell, and weren‘t actually offering to do so.
Rule 2: Offers must be communicated to the person or persons for whom it was intended • The offer must be communicated to the offeree for them to be able to accept it.
Rule 3: An offer may be made to a particular person, to a class of persons or to the whole world • An offer may be made to a particular person, to a class of persons or to the whole world. – Carlill v Carbolic Smoke Ball Co [13]
The defendants had shown their intention to make an offer to the whole world, or rather those people who came forward and bought the product. The terms of the advertisement were specific enough to make it an offer.
Rule 4: Offers may be terminated at any time prior to its acceptance • May be terminated before acceptance takes place (or else an agreement has been reached) • Terminates by
– Revocation (ie the offer is withdrawn by giving notice to offerees). This can happen even if the offeror had promised that the offer would remain valid for a certain period of time, so long as the offeree has not paid anything for that promise. Cases:
• Dickinson v Dodds (offer revoked)
• Byrne & Co v Leon Van Tienhoven & Co (revoked too late) – Rejection: offeree says no – Counter-offer: offeree makes a counter-offer. This is seen as a rejection of the original offer.
Case: Hyde v Wrench [1840] (see textbook p191)
– Lapse of time: either at a time specified by the offeror, or else a ‗reasonable‘ time:
• Ramsgate Victoria Hotel Co Ltd v Montefiore [1866]
An offer to buy shares from a company took over 5 months to be accepted. The offeror refused to pay. The court said that the acceptance was not within a reasonable time, and therefore the offer had lapsed.
– Lapse by death: Depends on whether contract was of a personal nature. Carter v Hyde (1923) (textbook p192)
– Lapse by failure of a condition: A ―condition precedent‖ is a condition
that must happen before the agreement can become a contract. If the condition doesn‘t happen, the offer lapses & no contract is ever formed. (A ―condition subsequent‖ is a condition that must happen after the contract has been formed. If it doesn‘t happen, the contract is ended.)
Rules of Agreement – Acceptance:
• Rule 1: Acceptance must be in reliance on the offer • This matches up with the rule that an offer must be communicated to the offeree. Obviously, a person cannot accept something that they don‘t know about. • Case Example:
R v Clarke (1927): a person charged with murder gave information to authorities that led to someone else (the true offender) being arrested instead. He later tried to claim a reward being offered for information. He could not accept the offer, because when he gave the information, he did not know about it.
• Rule 2: Unless dispensed with, acceptance must be communicated to the offeror, by the offeree.
• General rule that ‗silence cannot be acceptance‘. • Case Example:
Felthouse v Bindley (1862): Felthouse wrote to his nephew, offering to buy his horse, and added that if he heard nothing, he‘d consider the proposal acceptable. Held: no acceptance took place.
• Silence can be acceptance where the offeree says they‘ve accepted if nothing further is communicated by a certain time. That is, the offeree volunteers to take on a positive duty to reject the offer.
• Unilateral contracts – (promise for an act). Eg: Promising a reward for finding a lost dog where Communication of acceptance is not necessary, doing the required act is the acceptance (as well as the consideration/payment).
• Acceptance must be communicated in the prescribed form (if any) • Postal Acceptance Rule (PAR):
If acceptance by post was contemplated by the parties, acceptance
occurs when the letter is posted, not when it is actually received – Case example: Adams v Lindsell (1818) (textbook p198)
• It only applies to the post (& telegraph), and only to acceptances. And only where post was contemplated (eg if the offer was made by post, or that post was specified as being okay). The risk should lie with the offeror because they have control over the form of acceptance, and the offeree loses control of the acceptance once posted.
• the PAR is more of an exception than a rule. Instantaneous forms of
communication (phone, fax etc) require actual receipt of the acceptance.
• Electronic Communication • The Acts say that the time an electronic communication is received is
the time it enters an information system designated by the addressee to receive such information. If no information system has been
designated, then the time is the time that comes to the addressee‘s attention. The parties can agree otherwise though. • What does this mean? If an offer is made to a person and they are
told to accept via a certain email address, the acceptance occurs when the email arrives at that address. But if an offer is made by fax, and the offeree just decides to accept by email, the acceptance will be when the email is actually seen.
• Rule 3: Must be absolute and unqualified • Acceptance with a condition attached is not acceptance…―I‘ll accept if you do this‖. It may amount to a counter-offer or create a collateral contract (this is explained in next topic – Consideration). • Case Example:
Masters v Cameron (1954) (text p196): Unless the parties intended to be bound immediately, an agreement reached ‗subject to contract‘ is not a binding agreement until the actual contract is signed.
• Rule 4: Cannot be revoked • Once the offeree accepts the offer, an agreement has been reached. • An offeree cannot change their mind after accepting, unless the offeror agrees to release them from the contract (and this would require consideration).
• This matches the rule for offerors not being able to revoke the offer once it‘s been accepted.
TEXTBOOK NOTES – Chapter 11: Introduction to Contracts Definitions Bilateral contract: promise for a promise
Consideration: may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given or undertaken by another
Contract: agreement that gives rise to legal rights and obligations between parties which will be enforced by contracts
Executed contract: fully completed or carried out by both parties
Executor contract: one or both parties agree to perform contractual obligations in the future
Formal contract: contract which is signed, sealed and delivered and does not require consideration
Simple contract: a contract that is not special and requires consideration to be valid unlike contracts that are described as formal or under seal
Unenforceable contract: a contract which is not valid because of technical faults. Unilateral contact: contract consisting of an exchange of an act for a promise.
Contracts
• Courts try to give effect to the intentions of the parties through the application of an objective test based on what a reasonable person would conclude from looking at the words and conduct of the parties and whether they intended to be legally bound
• Contract is a legally enforceable agreement
• An agreement must contain a promise and be intended to be legally enforceable
• The agreement must contain a promise and must have been intended by the parties to be legally enforceable in the court
• A promise is seen as a commitment or undertaking by a person that something will or won‘t happen
• Person who makes the promise is called the promisor and person to whom promise is made is the promise
• A contract can be defined as an agreement containing promises made between two or more parties with the intention of creating certain legal rights and obligations and enforceable in the court of law.
• Failure to perform a contractual promise incurs a legal liability
Classification of Contracts
• Bilateral: both parties have to perform their promises
• Unilateral: offeree still has to perform their part of the bargain
Classification according to enforceability • Valid: one that the law will enforce
• Voidable: contract remains valid and binding unless and until its repudiated • Void: no legal rights or obligations from outset • Unenforceable: no legal action be brought on it
• Illegal: purpose of contract contravenes statute law, therefore void and illegal
• Formal contracts: may not be the result of agreement or require consideration • Simple contracts: must have consideration
• Parol evidence rule: contracts wholly in writing a presumed to be complete
• Contracts that must be evidenced in writing by statute are unenforceable if not
TEXTBOOK NOTES – Chapter 12: Intention to Create Legal Relations Is there intention?
• Parties must intend that their agreement is to have legal force
• Social/domestic/voluntary – assume parties do not intend legal relations. • Business or commercial agreements – parties do intend to create legal relations
• Advertisements are generally taken as legal relations and are not intended
TEXTBOOK NOTES – Chapter 13: Agreement Between the Parties Definitions
Condition precedent: delays the vesting of the right until the happening of the event Condition subsequent: destroys the right upon the happening of an event Offeree: the one to whom an offer is made Offeror: the one who makes the offer.
• Requirement that there is an offer by one party (offeror) to be bound on certain terms and unqualified acceptance of that offer communicated by the other party (offeree) to the offeror. Agreement can arise from conduct
• Rules of agreement: o There must be an intention or willingness to be bound or it may be an invitation to treat o It must be a firm promise or it may be a request for information o It must be communicated
o It may be made to one person, a group or the world at large o It may be kept open if supported by consideration
o All terms must brought to the notice of the offeree and followed exactly o It may be terminated
• Invitation to treat- an offer to consider offers eg. Catalogues, price lists, goods placed on shop windows o Auction with reserve is an invitation to treat o Auction without reserve may be an ofer
• Request for information does not destroy offer The offer must be communicated
• All terms must be brought to the offeree‘s notice • Conditions must be exactly followed
• Rejection by words, conduct or counter-offer, terminates the original offer o A request for information generally does not cause the offer to lapse
• Where no time is specified, offer lapses within a reasonable time – where reasonable means depends on the circumstances of each case
Rules as to acceptance A contract:
• Must be made in reliance of the offer
• Must be strictly in accordance with the terms of the offer • Must be communicated to the offeror • Cannot be a cross-offer
• Can only be accepted by the party to whom to offer was made • Must be absolute and unqualified
• Cannot be revoked without assent of offeror
• Acceptance contains two elements – willingness to take what is offered and agreement on the ‗price‘ Agreement on this, converts promise by offeror into an agreement.
• Offeree must intend to respond to offer
• Acceptance must be strictly in accordance with terms of offer
• Acceptance must be communicated by some positive act by the offeree • Cross-offers do not amount to agreement
• Only the person to whom the offer is addressed can accept
• Acceptance must be absolute and conditional o A conditional asset is not an acceptance
• Instantaneous communication – acceptance effective when received • Under postal rule, acceptance affective on posting
LECTURE 8: FOMATION OF CONTRACTS LECTURE NOTES Consideration
• There must be consideration - this is the ‗price‘ of the contract.
• Act or promise by one party in exchange for an act or promise by another party ie. ‗Something for something‘
• Contract is made when a promise is formed
• Contract performance = doing what was promised
Factors of consideration
1. Consideration must be present in every simple contract.
• No consideration = gift, not a contract, therefore not enforceable. • Formal contracts don‘t need consideration
• Consideration IS REQUIRED in every simple contract
• Remember that we‘re talking about contract formation. Consideration means an act is done, or a promise to act is made, at the time of contracting.
2. Consideration must be definite, legal and possible of performance
• Consideration that is too vague, illegal or impossible is not valid consideration. • Case example White v Bluett (1853): A father promised not to sue his son over an unpaid debt. The son in return promised to cease complaining to his
father about not receiving the same advantages as his brothers. This was not good consideration.
• Too vague and uncertain
• Too hard to work out what the son is offering
3. Consideration must move from the promisee
• The promisee is the person receiving the promise - They have to do something (consideration) in return for that promise. Note only has to move from the promisee, not necessarily to the promisor. • privity of contract – only the parties to the contract can enforce it. 4. ‗Past consideration is no consideration‘
• Consideration may be present (executed – ie the act is done at the time of the promise) or future (executory – ie the act is promised to be done later) but may not be past. • Cannot mreply on past consideration for present or future contract • Case example Roscorla v Thomas [1842] (in textbook)
Facts: Roscorla purchased a horse from Thomas – after the sale,
Roscorla requested from Thomas an assurance that the horse was sound – Thomas gave the promise – in fact the horse was ―vicious and ferocious in manner‖ – Roscorla sued Thomas for breach of contract. Held: Thomas‘ assurance was made after completion of the contract and
therefore Roscorla‘s promise to buy the horse in return for the assurance was past consideration. The assurance was a new promise which required fresh consideration.
Lampleigh v Braithwait (1615) (in textbook) about when acts are
performed at the promisor‘s request, before any promise of payment is made. A contract can exist if there was an implied understanding that complying with the request would be ultimately paid for once completed.
5. Consideration must be sufficient (not adequate)
• Sufficient means that is must have some value (even if tiny). The court is not concerned with whether that value is objectively adequate (equal) to support the promise. Adequacy is a subjective element, i.e. for the parties to decide.
• Doesn‘t have to be of equal value • Case Example Example: Chappell & Co Ltd v Nestle Co Ltd [1960]
As a promotion, Nestle gave consumers a music record if they sent in 1 shilling and sixpence partial cost of a record) plus 3 wrappers from Nestle chocolate bars. Chappell owned the copyright to one of the records, so Nestle had to pay them a statutory royalty of 6.5% of what they were making from the record sales. Nestle calculated their percentage on the money they received for the record (i.e. 1 shilling and sixpence).
Chappell argued that the consumers provided more than the money as consideration for the record the 3 wrappers. While the wrappers
themselves were virtually worthless, they were part of the consideration that Nestle had deemed necessary. The court held therefore that the cost of buying 3 chocolate bars should also be added to the calculations. • Performing an existing duty is not sufficient consideration. This means that a person can not offer as consideration only what is obliged of them by law or an existing contract. If you‘re already legally obliged to do something, you cannot offer it as consideration. • Existing duty imposed by law: see Glasbrook Bros Ltd v Glamorgan County Council [1925] in textbook. Also Collins v Godefroy: court ordered Collins to give evidence in a matter involving Godefroy. C alleged that G agreed to pay him for his court appearance. It was held that there was no consideration because C‘s attendance was a public duty imposed by law.
The law also fails to recognise the performance of moral obligations
(eg caring for your child) as consideration. See Eastwood v Kenyon (1840) in textbook
• Existing contractual duty: see Stilk v Myrick [1809] Facts: Stilk was a crew member of a boat. During a voyage, two men deserted. M, the
captain promised the remaining crew that if they worked on the ship back to London, he would share the wages of the deserters amongst them. The crew successfully brought the ship back to London - M went back on
his promise. The contract signed by crew members before they started indicated that they had promised to do all that they could in case of an emergency during the voyage. Held: the desertion of two crew persons was an emergency under the contract and therefore by working the ship back to London, the crew members were only doing what they were contractually bound to do. Where if the contract already exists, you can not offer it again
Part Payment of Debt
• Part payment of a debt is not sufficient consideration to discharge the debt. If you‘ve promised to pay an amount, and then later ask to pay less and the
other party agrees, you have provided nothing of value to support the variation of the contract.
– You can still accept less at the time but you have the right to sue later on • This is known as ‗the rule in Pinnel’s case‘ – ―payment of a lesser sum on the day in satisfaction of a greater, cannot be satisfaction for the whole, because it appears to the Judges that by no possibility, a lesser sum can be satisfaction to the plaintiff for a greater sum...‖
– Ie giving something different in kind is acceptable • Also see Foakes v Beer (1884) in textbook
• Part payment is acceptable if something else is provided (remember that consideration need not be adequate!).
– Pinnel‘s case continued: ―…but the gift of a horse, hawk or robe etc in satisfaction is good…[as] more beneficial than the money‖
• Part payment is acceptable if paid before the debt is due (Pinnel’s case)
• Part payment is acceptable if paid in a different place or in different currency • Part payment is acceptable if paid by a third party. See Hirachand Punamchand v Temple [1911]
• Basically, if the person who owes money wants to pay less, they must do something different than just paying less money on the due date.
Genuine Consent
• If Intention, Agreement & Consideration are present, we have a prima facie contract
• If consent is not genuine, this may affect the validity of such a contract. • The following will vitiate (invalidate) consent:
– Misrepresentation – Mistake
– Unconscionability
• There are 2 possible outcomes for contracts that lack consent:
– Void contract: A contract that does not exist, it is void ab initio (from the beginning) eg. Never had the right to sell a bike.
– Voidable contract: A contract where the innocent party has the right to terminate it. This is called rescission. Rescission is not available after an unreasonable time delay or when restitution
(‗restitutio in integrem’ - returning the parties to their pre-contract position) is impossible (for example, once innocent 3rd parties gain an interest in the property).
Misrepresentation
• Representation = a statement of fact • Generally not:
– Statement of law
– Statement of future intention – Statement of opinion
– Statements of a highly exaggerated nature (ie. An advertising ‗puff‘) – Silence
• A representation is not part of the contract itself (ie not a contractual term), but may for example have been a statement made in the lead-up to a contract being formed.
• A misrep then is a false statement of fact that induces the contract (therefore consent is not genuine) • There are 3 categories of misrep
– Innocent: statement-maker does not know that the representation is false
– Negligent: statement-maker is under a duty of care, and carelessly makes a false statement
– Fraudulent: statement-maker knowingly or recklessly makes a false statement intending it to induce the contract.
• Remedies for misrep:
• Innocent: Rescind (cancel) the contract
• Negligent: Rescind the contract, damages are available in the tort of
negligence (we‘ll look at this in week 11 & 12)
• Fraudulent: Rescind the contract, damages in the tort of deceit
• Because these contracts are voidable, they remain valid until set aside by the injured party. Remember that the right to rescind is a discretionary remedy and can be lost.
Innocent Misrepresentation Case Example • Whittington v Seal-Hayne (1900)
The plaintiff, who ran a poultry-breeding business, leased premises from the defendant on the basis that they were in a sanitary condition. The defendant genuinely believed that they were sanitary, but were found to be unsanitary after the plaintiff moved in. The plaintiff sued in misrep.
Held: This was an innocent misrep, which entitled the plaintiff to rescind the lease. He could get a refund of the rates and repairs he‘d paid (restitution). He
could not claim lost profits because of missing the breeding season, as damages are not available for innocent misreps.
Fraudulent Misrepresentation Case Example • Derry v Peek (18) – in textbook
The defendants, who were directors of a tramway company, had issued a prospectus stating that the company had a legal right to use steam to run its trams. At the time of publication, the company had not received consent to use steam and in fact never did receive it. In reliance on the statement in the prospectus, the plaintiff subscribed for shares from an original allottee on the open market. The company was subsequently wound up, and the plaintiff sued alleging fraudulent misrep.
Held: While the representation was certainly false, it was not made to induce this plaintiff into entering a contract – he was not an original allottee.
Mistakes
• Mistake of Fact – makes a contract void – Common mistake (both parties make same mistake) • Both parties make the same mistake
• For it to be ‗operative‘ (valid), the mistake must be about the existence or identity of the subject matter of the contract. • Generally, mistakes as to the quality, nature or value of the subject matter will not affect the contract at common law. They may, at the Court‘s discretion, be voidable in equity.
• Example: Leaf v International Galleries Facts: L purchased from IG a painting entitled ―Salisbury Cathedral‖ which both parties
honestly believed was painted by Constable. However, Constable was not the painter.
Leaf sought to have the contract declared void for common mistake. Held: There was no common mistake because the parties agreed to the subject matter of the sale, being the painting. The mistake was
one of quality and therefore not operative.
– Mutual mistake (both parties make different mistake) • Both parties make different mistakes…they are at ‗cross-purposes‘.
• Objective Test: Would a reasonable person consider that there was an agreement between the parties? This test is used to determine whether the contract is void or not. • Example: Raffles v Wichelhaus (18)
Facts: W had agreed to purchase a quantity of cotton from R, to arrive by a ship called ‗Peerless‘, sailing from Bombay. There were actually 2 ships of that name sailing from
Bombay, one arriving in October (which W meant), and one arriving in December (which R meant).
Held: The contract was void ab initio because a reasonable person could not tell which ship the parties meant.
– Unilateral mistake (one party makes a mistake) • Only one party is mistaken and the other party knows or should know of the mistake.
• To be operative, the mistake must be: • Mistaken identity of other party
• Mistake as to nature of the document (non est factum)
• Mistaken Identity: The law presumes that the mistaken party (A) intended to enter into a contract – so it shouldn‘t matter who the other party is. However, this presumption may be rebutted by A (the offeror) proving: A intended to deal with B and no one else – the actual identity of the party is a matter of paramount importance. A never intended to deal with C and A took reasonable precautions to check C‘s identity. C knew of A‘s intentions
• For more info, see Boulton v Jones (1857); Cundy v Lindsay (1878); and Phillips v Brooks Ltd (1919) – all in textbook • Mistake as to the nature of the document • Non est factum – ‗not my deed‘
• To be operative, need to show: • The document signed was
‗fundamentally and radically different‘ to what the plaintiff thought they were signing
• The plaintiff is within the class of persons entitled to rely on the defence (blind, illiterate or must rely on others)
• The plaintiff was not careless in looking after their own interests. • See Petelin v Cullen (1975); and Foster v MacKinnon (1869), both in textbook
• Mistake of Law is less clear.
– usually does not void a contract because ignorance of legal rights and obligations
• Under Common Law, a mistaken K is void. There was never a contract, and any property transferred will have be returned to the true owner.
• Even if not void under common law, there are some situations where a contract could be voidable in equity (remembering that this right can be lost)
Unconscionable Conduct
• Test:
– ‗Special Disadvantage‘ and – ‗Unconscientious Advantage‘ – Contract is voidable • Plaintiff is under a ‗Special Disadvantage‘
Result:
– ―…poverty or need of any kind, sickness, age, …,
infirmity of body or mind, drunkenness, illiteracy or lack of
education, lack of assistance where assistance or explanation is necessary.‖ – Case example:
Blomley v Ryan (1956) And defendant takes ‗Unconscientious Advantage‘ of that. Involves the stronger party taking unfair advantage of the weaker party‘s
disadvantage. Hence, it would seem that knowledge of the other‘s disadvantage is needed
Commercial Bank of Australia Ltd v Amadio [1983] Facts: A‘s guaranteed their son‘s debt to the Commercial Bank. A‘s
signed certain documents which provided the bank with a mortgage over a building which they owned. When the son‘s business failed, the bank sought to enforce the guarantee and sell off the building. In their defence, the A‘s asserted that the guarantee was unenforceable because it was unconscionable.
• The evidence showed that:
– The parents had little literacy in written English
– They had not received independent legal advice nor did the bank suggest that they obtain independent legal advice
– At the time the guarantee was signed, the bank was aware of the son‘s poor financial position and knew that the A‘s would not be made aware of the situation.
– The bank did not advise the A‘s that there was no limit on their liability under the guarantee. The A‘s believed that the liability was limited to $50,000.
• Held: Unconscionable for the bank to rely on the guarantee. Court set the guarantee aside. Bank possessed the bargaining power and took unfair advantage of that bargaining power to the detriment of the A‘s. Love a ‗Special Disadvantage‘? Louth v Diprose [1992] – Diprose, a twice-divorced middle-aged male solicitor, was ‗completely in love‘ with and infatuated by Louth. Believing that L and her children were to be evicted from their rental property, D paid some $60,000 so that L could buy a house. The HC found that at the time, D was under a special disadvantage, and that L had exploited the ―atmosphere of crisis‖ – Held: Louth had acted unconscionably, taking advantage of Diprose‘s emotional dependence, and the house was transferred to Diprose
Summary Consideration
– Required in every simple contract – Must be definite and possible – Must not be past
– Must be sufficient (exist), not adequate (equal) – Doing an existing duty is not good consideration
– Part payment of debt is not good consideration, unless something different is also done.
Consent
– Misrepresentation is a false statement of fact which reduces a contract – Make a contract voidable (resend and restitution) – Can be innocent, negligent or fraudulent
TEXTBOOK NOTES – Chapter 14: Consideration Definitions
Consideration: consideration may consist either in some right, interest, profit or benefit accruing to the other party or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by another or an action or forbearance of one party of the promise thereof which is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.
Consideration
• What each contracting party bargains for and gives in exchange for the return of
a promise or performance of the other party • Rules
1. Essential in all simple contracts
2. Should be present or future but not past 3. Must move from the promise
4. Must have some value, although court is not concerned with adequacy
5. Must be something more than the promise of an existing obligation 6. Must be possible of performance 7. Must be definite 8. Must be legal
9. Must be referable to the other party‘s promise
• Present consideration – act done in return for a promise • Future consideration – parties exchange promises
• Past consideration – promises after the act are generally not enforceable
When past consideration can be good consideration
Past consideration can be good consideration if it was provided at the request of the promisor and can be shown that
• The act was done at the promisor‘s request
• The parties understood that the act would be remunerated either by payment or
the conferment of some other benefit
• The promise would have been enforceable if it had been promise in advance of
the act in question
• The person who wants to enforce the promise must pay for the promise they
receive
• Consideration must have some value
• No legal detriment in repeating an existing duty owed by law
• No legal detriment in repeating an existing duty owed to the promisor • Acts beyond those agreed to by the parties would be enforceable • Payment of a lesser sum will not usually discharge a debt • Part-payment by a third party can discharge a debt
• Forbearance to sue and compromise can be good consideration • Promissory estoppels must provide relief to an innocent party
TEXTBOOK NOTES – Chapter 16: Genuine Consent Definitions
Duress: threats of or use of force that deprives innocent party of free will Misrepresentation: a false statement of fact – may be intentional or unintentional Representation: a statement of fact
Consent Mistake
• Mistakes of fact – can void a contract • Mistake of law does not void a contract Types of Mistakes Description Effect Common Mistake Agreement but common Contract may be void at error as to existence or common law identify of subject matter voidable at equity Mutual mistake A mistake made by both Contract void parties concerning a material fact that is important to the subject matter of the contract, so no genuine agreement Unilateral mistake Only one party is mistaken Contract maybe void or about a material fact voidable regarding the subject matter of the contract, so no genuine agreement Non est factum Mistake is in nature of Contrast may be void or agreement, so no genuine voidable agreement
• Common mistake – agreement by absence of existence or identity of subject matter o Fundamental assumption as to the existence or identify of the subject matter o Must involve the existence or identify of the contract‘s subject matter o Equity may provide relief
• Mutual mistake – no real agreement as the parties are talking about different tings
• Unilateral mistake – only one party mistaken, so lack of agreement o May involve existence or content of a term
• Non est factum – it is later discovered that the signed document is originally different from what it was thought to be
• Where parties meet face to face, presumption is contract is intended to be concluded
• Dealing through the post is easier to establish P only indented to contract with addressee
Misrepresentation
• Where no third party is involved, P can please either unilateral mistake or misrepresentation as the result will be the same • Representation = statement of fact • Types of misrepresentation Type Description Remedy Fraudulent A false statement of fact The remedy is not in made knowingly or without contract but in tort of belief in its truth, or deceit recklessly, or carelessly as to whether it is true or false, with the intention to induce a person to enter into a contract and which did induce the contract causing the innocent party to suffer loss Innocent The maker of a statement No remedy in tort – right in of fact believes it to be true equity – there is a lack of intentional deceit Negligent The maker of the Remedy in tort negligence statement innocently but carelessly makes a false statement which the innocent party relies on and suffers loss
• Fraudulent misrepresentation – intentional deceit
• Innocent misrepresentation – lack of intentional deceit
• Statement may be both collateral contract or warranty and a negligent misrepresentation LECTURE 9: TERMS OF THE CONTRACT LECTURE NOTES Contents of a Contract
Once formed, only can look at what the contract actually says
Express Terms
• A contract is made up of TERMS, which may be express (agreed on by the parties) or implied (by trade custom, at common law or by statute).
• A term may be classed as a condition or warranty – these have a significant say in the remedy
• If terms are not followed, they are said to be breached
• Keep in mind that a contract can be written, oral or a combination
What is NOT part of a the contract? • Representations:
– Pre-contractual statements of fact that induce a contract. No action for breach of contract
• Puffs:
– Mere sales-talk that is never intended to be taken seriously. No remedy at common law if untrue.
Term or Representation
• objective test – what would a reasonable person, aware of the circumstances of the case, believe to be the parties intention in regard to the statement • Objective factors:
o Time lapse between statement and final agreement
o Did the maker of the statement indicate that the other party should make his or her own efforts to verify its accuracy?
o How important was the truth of the statement? Would the aggrieved party have contracted without it?
o Did the party making the statement possess special skill or knowledge which the party relying on the statement did not have?
o Was the oral statement followed by a written document that does not include the statement? These factors decide where a term or a representation
• Case Examples: o Dick Bentley Productions Ltd v Harold Smith Motors Ltd o Oscar Chess v Williams
Written vs. Oral Terms
• The Parol Evidence Rule: For a contract wholly in writing, other evidence (eg an oral statement) is not allowed to add to, vary or contradict the written document. Exceptions:
• Other evidence may be used if the written contract does not reflect the ―whole of the agreement‖.
• Other evidence can be used to show that a ―collateral contract‖ existed. • Other statements that are considered terms may form a collateral contract and avoid the PER • A collateral contract is another contract in addition to the main one. The consideration provided for the collateral (extra) promise is to enter the main contract.
• Case Example: De Lassalle v Guildford [1901] • To enforce a collateral contract
• the statement must be promissory. See JJ Savage and Sons Pty Ltd v Blakney (1970), where a statement about the estimated speed of a boat did not form a collateral contract • the collateral contract must be consistent with the main contract (Hoyt’s Pty Ltd v Spencer (1919)). Because of this, a ‗whole of the agreement clause‘ will also stop this exception. (If inconsistent, this is useless) • Case Example • Van Den Esschert v Chappell [1960]
• Many contracts now contain ―whole of the agreement clauses‖ to try to prevent this exception from being used. This overrides anything else which has been said. Any other communication is perecieved as irrelevant – may have been part of the negotiation process
Condition or Warranty
• Once a statement is found to be a term, and it is admissible to the contract, the next step is to work out whether the term is a:
– Condition: an essential term of the contract. If it is breached, the innocent party has the option of termination (i.e. to end the contract).
• Case Example: Associated Newspapers Ltd v Bancks (1951) – Warranty: a non-essential term. The only remedy is damages for breach (i.e. the contract remains valid)
• Case Example: Bettini v Gye [1876] (in textbook) and Poussard v Spiers &• This is determined objectively
• A collateral promise is always a warranty
Implied Terms
• may contain both express terms and implied terms.
• Implied terms - Terms of a contract that are not expressly included in the contract. Purpose of implied terms is to ensure that the contract reflects the parties‘ intentions. Implied terms may also be classed as conditions or warranties
• A term may be implied by a statute, or by the courts on the basis of custom or trade usage, prior dealings, or business efficacy.
By the courts
• The test for when terms will be implied by the courts comes from the Privy Council in BP Refinery v Shire of Hastings [1977]:
– The term must be reasonable and equitable
– The term must be necessary to give business efficacy to the contract, so that no term of the contract will be implied if the contract is effective without it;
– The term must be so obvious that it ―goes without saying‖; – The term must be capable of clear expression; and
– The term must not contradict any express terms of the contract.
• Convince the court of these 5 elements and then the court will imply terms into thec ontract
• Case example: Bournemouth & Boscombe Athletic FC v Manchester United
Under Statute
• Common implied terms under statute which relate to business are those of the Trade Practices Act and the Sale of Goods Act
Exclusion Clauses
• Exclusion clauses are common terms in a contract. They are used to limit or exclude liability for certain events. Sometimes known as ‗disclaimers • Use to protect the service provider
• Need to show a breach of contract terms to sue
• But exclusion cause needs to be removed to allow you the prove the breach
• Damages = compensation
• Steps when examining exclusion clauses:
1. The exclusion clause must be incorporated into (part of) the contract 2. The exclusion clause must be interpreted to be wide enough to cover the legal breach
3. The nature and extent of the exclusion clause must not have been misrepresented to the innocent party 4. The clause cannot exclude certain statutes (ie. Implied terms of TPA)
Incorporation into the contract
3.1.1 Signature rule: L’Estrange v Graucob Ltd [1934] o Terms contained
in a signed document will normally be part of the contract, regardless of whether they have been read or not
3.1.2 If no signed document, go through Reasonable Notice factors –
reasonable steps must be taken, before the contract is concluded a) Reasonable steps must be taken to bring the clause to the attention of the other party.
– This might be explicitly telling them the term or telling them to read it – Otherwise, the nature of the document should be contractual. Generally tickets, vouchers and receipts may be non-contractual. Case Example: Causer v Browne [1952] – How much is reasonable?
o Case Example: Thompson v London o Constructive notice: where you aren‘t told something but you should know it. o Case Example: Interfoto Picture Library Ltd v Stilleto Visual Programmes Ltd [1988] (in textbook)
b) the notice must be before the contract is concluded. That is, the person must have the opportunity to reject the terms.
– Agreement occurs when offer and acceptance occur
– Case Example: Olley v Marlborough Court Ltd [1949] and also Thornton v Shoe Lane Parking Ltd
3.1.3 If reasonable notice was not given, has the term been incorporated by prior dealings? o Case Example: Balmain New Ferry Co Ltd v Robertson (1906)
– Once a clause is part of the agreement, we need to work out what it‘s meant to cover (i.e. what it means)
– Different approaches exist as to interpreting or construing exclusion clauses.
– ‗Contra Proferentum‘ rule states that a strict construction will be applied against the person seeking to rely on the clause. Any ambiguity will be read in favour of the injured party.
o See White v John Warwick & Co Ltd [1953]
– ‗4 corners‘ rule: a rule of interpretation that states that only breaches within the normal operation (the ‗4 corners‘) of the contract are covered by an exclusion clause.
– Actions that are outside the ‗4 corners‘ might be a deliberate breach or performing the contract in a way not anticipated by either party: o City of Sydney Council v West (1965)
– Where the nature or extent of the clause is misrepresented, the clause is not effective, even when signed.
o Curtis v Chemical Cleaning & Dyeing Co
• Some sections of the Trade Practices Act 1974 (Cth) CANNOT be excluded by clauses in contracts.
Remedies
• Termination • Equity remedy
• The right to terminate a contract arises when a condition has been breached. • Damages
• Common law remedy
• The purpose of damages is to place the injured party, so far as money can do it, in the same position as if the contract had been performed. Contract damages are said then to be an ‗expectation‘ measure. • Specific Performance • Equity remedy
• A court order requiring the party who breached the contract to carry out their contractual obligations.
• Specific performance is unavailable if damages is an adequate remedy or in contracts for personal services • At the courts discretion • If damages is inadequate • Injunction
• Equity remedy
• A court order which prohibits a party either from doing an act, continuing to do an act or repeating an act • At the courts discretion • If damages is inadequate
TEXTBOOK NOTES – Chapter 18: Construction of the Contract Definitions Causation: the connection between the breach and the loss suffered by the plantiff Condition precedent: delays the vesting of the right until the happening of the event Condition subsequent: destroys the right upon the happening of an event
Exclusion clause: a contractual term which attempts to limit or exclude the liability of person inserting them into a contract
Parol evidence rule: the rule of evidence which state that additional oral evidence is not considered by the courts to either contract, vary, add to or subtract from its terms when a contract is complete on its face Warranty: term of lesser importance to the main purpose of the contract, which if breached, only allows the injured party to claim damages.
Representations
• Not part of contract even though they are enforceable by law
• Pre=contractually misleading or deceptive – action lies under statute law • Term forms part of the contract and is legally binding
LECTURE 10: CONSUMER LAW LECTURE NOTES Trade Practises Act
A consumer is someone who acquires goods
or services : o of less than $40,000; or
o of a kind ordinarily acquired for personal, household or domestic use and are not used up in business; or o a road vehicle
Implied Terms
• Implied terms (definition): Terms of a contract that are not expressly included in the contract. Purpose of implied terms is to ensure that the contract reflects the parties‘ intentions. Implied terms may also be classed as conditions or warranties
• Common implied terms under statute which relate to business are those of the Trade Practices Act and the Sale of Goods Act.
• Some of these are implied conditions, meaning if breached, the innocent party can end the whole contract, as well as get damages.
• Others are implied warranties, meaning that if breached, the innocent party can sue for damages, but must continue with the contract. Title
• It is an implied condition that the seller has title to the goods, and therefore the right to sell them (TPA
s69). You can recover from someone who sells you stolen goods, because they
don‘t have title.
Description • Where goods are sold by description (i.e. the buyer is relying on the seller‘s description of the product), it is an implied condition that the goods will correspond with their description (TPA s70; SOGA s16) • Example: Varley v Whipp [1900] Merchantable Quality
• There is an implied condition that the goods will be of a merchantable quality (TPA s71(1); SOGA s17). This applies to any supply of goods (except via auction)
• To determine what‘s ‗merchantable‘, courts have looked at the price of the goods, the description used, whether the seller knew of the buyer‘s purpose, and any other relevant circumstances.
• If the buyer has examined the goods, and a reasonable examination would have revealed the defect, then this section doesn‘t apply
• If the goods have more than one purpose, and they are of merchantable quality for one of those purposes, then this section has not been breached. Fitness for Purpose
• Where a buyer explicitly or impliedly makes known their purpose for a particular product, and the seller knows that the buyer is relying on their
judgement, there is an implied condition that the goods are reasonably fit for their purpose (TPA s71(2); SOGA s17)
Services
• There is an implied warranty that services will be rendered with due care and skill, and that any materials supplied in connection with the service will be reasonably fit for their purpose. (TPA s74)
• MAJOR DIFFERENCE: s68 of the TPA states that the implied terms in that Act CANNOT be excluded by agreement. SOGA terms CAN be (SOGA s56).
Manufacturer‟s Liability
• As well as being able to recover from the retailer under the contract, a consumer can also take action against a manufacturer.
• Part V of the TPA has similar obligations as the implied terms on a retailer. Remember though that there is technically no contract between customer and manufacturer.
– s74B: Fitness for purpose
– s74C: Correspondence with description – s74D: Merchantable quality – s74E: Sale by sample
– s74F: Must ensure there is a reasonable availability of repair facilities and spare parts. – s74G: Failing to comply with an express warranty about the goods.
• These apply when a corporation (the manufacturer) supplies goods to another person (the retailer) for the purpose of re-supply to a consumer
• Customer could therefore choose to either sue the retailer or manufacturer. The choice is important to protect consumers, especially if the retailer is not in a position to compensate properly, or if the manufacturer is an overseas company.
• If retailer is sued, they could seek indemnity from the manufacturer if the problem is their fault (s74H)
• Manufacturers and importers are liable to anyone for personal injury or property damage caused by defective products • Defective means that the safety of the product is not to the level that is generally expected (s75AC).
• It covers injury to the owner (s75AD), injury to innocent third parties (s75AE), damage to personal/household/ domestic goods (s75AF) and to land/buildings (s75AG).
– Eg a defective toaster catches fire, injuring the user, damaging a wall and destroying a nearby microwave.
Misleading or Deceptive Conduct • TPA s52:
– ―(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive.‖ – Does NOT require conduct to be intentional – Only civil penalities apply
• FTA s38: replicates this, except ―person‖ not ―corporation‖ • A corporation: see earlier slide as to who that can include
• must not in trade or commerce: must have a ‗trading or commercial
character‘, i.e. something to do with advertising or selling goods or services. • engage in conduct: doing or refusing to do any act. It has been held to include false statements, predictions, promises, silence and statements that are literally true but which create a false impression.
• that is misleading or deceptive: an objective test for the court to
decideSection 52 is a very wide ‗catchall‘ provision. It relates to common law misrepresentation, but goes further, in that it can cover:
– Statements of opinion
– Silence (see Henjo Investments v Collins Marrickville in the textbook) – Statements that are literally true but which create a false impression – Puffs (in theory – although wildly exaggerated, fanciful or vague claims such as ―Best food in town‖ are unlikely to be objectively considered misleading or deceptive).
Disclaimers and Fine Print
• Businesses may use disclaimers in their advertising (such as ‗conditions apply‘ or asterisks *) as long as they are specific, clear, and highly visible. • asterisks and fine print should be prominent enough to form part of the audience‘s overall impression of the advertisement. • It is not acceptable for the important facts—the real terms and conditions of the offer—to be hidden in fine print.
• The advertiser should clearly direct the audience‘s attention to significant terms and conditions.
Unconscionable Conduct TPA s51AA
• ―(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.‖ It does not apply if the conduct is covered by s51AB or s51AC.
• adds on to the common law through s51AB and s51AC
• s51AB: applies to unconscionable conduct by corporations in the supply of goods or services to consumers o Case Example: ACCC v Lux Pty Ltd [2004]
• s51AC applies to unconscionable conduct in business transactions. o A company must not be unfair when it makes deals with any person or non-publicly-listed company
o A person must not be unfair when it makes deals with a non-publicly-listed company o This section excludes deals done in excess of $10 million. o Case Example: Thorne v Literacy Circle Pty Ltd [2009] and Cannon Australia Pty Ltd v Pattton [2007]
TEXTBOOK NOTES – Chapter 23: Consumer Protection Legislation Definitions Consumer: a person who purchases goods or services under $40000 or of a kind ordinarily acquired for personal, domestic or household use or consumption. Corporation: includes a foreign, financial or trading corporation.
In trade or commerce: conduct that is an aspect or element of activities or transactions which of their nature, bear a trading or commercial character.
Trade Practises Act
• That state fair trading acts catch intra-state activities
• TPA prohibits restrictive trade practises and protects consumer interests • Some implied rights against suppliers and manufacturers only apply to consumers
• Section 51AA: o A corporation must not, in trade or commerce engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories
Aims to redress teh imbalance in bargaining power between buyers and sellers
• Section 52: used as an alternative to an action of passing off not only by consumers but also by trade rivals
• Whether conduct is misleading or deceptive is determined by an objective test
LECTURE 11: NEGLIGENCE LECTURE NOTES Introduction to Torts
A tort is a civil wrong. It is an act or omission not authorised by law which affects a person‘s rights.
Test for Negligence
– The def. owes a duty of care to the pl. – The def. breaches that duty (by not displaying the required standard of care) – The breach causes recognised damage to the pl. This establishes negligence, but also…
– The def. has no defences
Duty of Care
• Duty of Care is dealt with under Common Law rules! • Case example: Donoghue v Stevenson [1932]
• How to prove a duty of care?
(a) Easiest way is by precedent. If there have been cases before where duties have been established, then use that.
o Case example of occupier/entrant: Hackshaw v Shaw (1984) and Australian Safeway Stores Pty Ltd v Zaluzna (1986)
• b) If this is a ‗novel case‘ (i.e. no precedent), go to first principles from Donoghue v Stevenson
1. Reasonable Foreseeability: An objective test – would a reasonable person have foreseen that the plaintiff may suffer harm as a result of the defendant‘s actions?; and
• would a reasonable person have foreseen that the plaintiff may suffer harm as a result of the defendant‘s actions?
• Case example: Chapmax v Hearse and Hay v Young [1943] 2. Some form of control test: as RF is pretty easy to establish, the courts need to limit potential duties. The had used a concept called ‗proximity‘, but now that is out of favour.
The court seems to be favouring something called ‗salient features‘ Salient means prominent • Some examples of salient features
– Vulnerability of the pl (can they protect
themselves from the harm?) Perre v Apand Pty Ltd (1999)
– What level of control over the situation does the def have? (Frost v Warner (2002); also Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000))
Breach of Duty
• Once a person owes a duty of care to another, the next step is to
determine whether the duty was breached. • This involves finding the objective ‗standard of care‘, or what the
law expects a reasonable person to have done in the circumstances. • The standard of care (a reasonable person) is flexible to a certain
extent. It will be higher for a person with special skills, and lower for a child. • The CLA establishes that there is no breach of duty unless:
1. The risk (of the harm) was foreseeable (section 9(1)(a)). The risk is what the defendant knew or ought to have known based on an objective test (i.e. reasonable person); and
2. The risk was not insignificant (section 9(1)(b)). (The common law term used was ‗not far-fetched or fanciful‘. It‘s not totally clear if there is a practical difference); and
3. A reasonable person in the position of the Defendant would have
taken the precautions against the risk of harm (section 9(1)(c)). In deciding this issue, the Court considers the following factors (s9(2)):- • The probability that the harm would occur if care were not taken; • The likely seriousness of the harm; • The burden of taking precautions to avoid the risk of harm; and • The social utility of the activity that creates the risk of harm
These factors were also identified under common law in the case of Wyong Shire
Council v Shirt
(1980). Sometimes termed the ‗negligence calculus‘.
• Case Example: Wyong Shire Council v Shirt (1980) and Paris v Stepney Borough Council [1951] and
Bolton v Stone [1951] and Romeo v Conversation Commission of NT (1998), Agar v Hyde [2000], McHale v Watson (1966), Imbree v McNeilly [2008]
• Different standards of care (cont): o Professionals or people with special skills have a higher standard of care than those without the skills. This includes people holding themselves out as having those skills. Therefore the standard of care is the reasonable person with the same skills, knowledge etc. (Rogers v Whitaker (1992))
• Changing Standards of Care:
o Community expectations influence the standard of care. What was considered reasonable 30 years ago may not be now.
Damage
• There are 2 issues with damage:
– It must be caused by the breach – It must not be too remote Must be able to show that breach caused the damage.
• Causation is determined by CLA s11.
(1) A decision that a breach of duty caused particular harm comprises the following elements--
(a) the breach of duty was a necessary condition of the occurrence of the harm (factual causation);
(b) it is appropriate for the scope of the liability of the person in breach to extend to the harm so caused (scope of liability).
• Case Example: Barnett v Chelsea and Kensington Hospital Management Committee, Shorey v PT Ltd (2003)
• Remoteness is whether the particular damage suffered is too remote – the
actual harm suffered must be a foreseeable consequence of the breach. • The CLA calls this ‗Scope of Liability • Case example: State Rail Authority v Wiegold • Novus Actus Interveniens (‗a new intervening act‘) is where something not foreseeable happens that breaks the ‗chain‘ of causation. • Case example: Yates v Jones (1990)
Defences
• 2 defences to negligence:
– Volenti (Voluntary assumption of risk) – Contributory negligence
Voluntary Assumption of Risk
– From the phrase ‗volenti non fit injuria’ meaning ―no wrong is done to the person who consents‖. – It is a complete defence
– At CL, the defendant had to prove that the plaintiff: • Was fully aware of the specific risk; and • Freely consented to it
– Under the CLA, ss13-19, the term ‗obvious risk‘ is used. This is a risk that would have been obvious to a reasonable person in the position of
the plaintiff. It includes risks that might only have a low chance of
occurring. It does not include the risk that the defendant has not properly maintained something. (s13)
– s14 states that a person is presumed to be aware of an obvious risk unless they can prove otherwise. (This essentially reverses the onus of proof for this part of the defence) – Case Example: Insurance Commissioner v Joyce [1948]
Contributory Negligence
– The plaintiff was negligent in looking after their own interests – Before CLA, it was a partial defence
– Under CLA, it is possible to be 100% CN (s24)
– The court calculates the total damages, and then reduces it by a percentage.
– s23 states that the same factors apply to the plaintiff as for the normal standard of care in s9 for the defendant.
– s47 creates a presumption of CN if a person was injured while intoxicated, and s48 creates a presumption of CN if a person was injured while relying on the skill of someone known to be intoxicated – Case Example: Joslyn v Berryman (2003)
TEXTBOOK NOTES – Chapter 6: Introduction to the Law of Tort Definitions Negligence: a tort, actionable at the suit of a person suffering damage as a result of the defendant‘s breach of duty to take care to refrain from doing those acts which a reasonable person could reasonably foresee as being likely to injure them Tort Law
• Concerned with remedies
• Statutory compensation maybe available
• Tort is mainly concerned with accidental injury to person or property • Intentional torts are based on trespass action
• Unintentional torts ie. Negligence are based on action on the case
TEXTBOOK NOTES – Chapter 7: The Tort of Negligence Negligence and harm
A person is only liable for harm that is the foreseeable consequence of their actions
Elements of Negligence
• Negligence consists of three elements: duty, breach and damage
• P must establish a duty of care owed by D – a question of law for the judge to decide.
• Failure to act generally will not create a situation
• Negligence consists in failure to take care against unreasonable risk of foreseeable injury
• Duty of care is based on obvious risk
• Reasonable person is someone of normal intelligence Standard of care is objective and a question of fact
• Two part test: o Foresee ability of risk
o Precautions a reasonable person may have taken
• The greater the risk, the greater the demand for precautions • If cost of removal of risk is low, it should be taken
• Contributory negligence: the principles applicable are the same as for determining the negligence LECTURE 12: NEGLIGENCE – DAMAGES, VICARIOUS LIABLITY AND NEGLIGENT MISSTATEMENT LECTURE NOTES Remedies
• The main remedy for negligence is damages • Can be classified under ‗heads of damages‘:
• Pecuniary loss (i.e. can be accurately quantified):
– Medical expenses (past and future). Could include hospital bills, rehabilitation expenses, cost of a carer etc – Loss of income (past and future)
• Non-pecuniary loss (i.e. have to be estimated) – Pain & suffering
– Loss of amenity (‗lifestyle‘ – e.g. if negligence caused a person to lose a part of their body) – Loss of a chance
Vicarious Liability
• Employee / Employer Relationship: Courts apply the Control test: does the employer have the right to exercise control over not only what the employee does but also the manner in which the employee does it? If not, the person is an independent contractor and an employer is not vicariously liable for their actions.
• Case Example: Hollis v Vabu Pty Ltd (t/a Crisis Couriers) (2001) • In the course of employment: An employee acts in the course of employment when performing tasks that he or she was employed to do or tasks which are related to his or her employment, even if the employee‘s task is being carried out in an unauthorised manner.
• Case Example: Century Insurance v Northern Ireland Road Transport Board • An employer will not be vicariously liable for an employee‘s actions unrelated to his or her employment (known as ―frolics‖)
• Case Example: Deatons Pty Ltd v Flew (1949)
Negligent Misstatement
• Incorrect statements, negligently made, causing purely economic loss to the Plaintiff
• Eg. Make a statement which is relied upon and economic loss is suffered as a result of this
• Misrepresentation = overlap between contract and tort law • No physical injury involved – just lose of money
Terminology
• Overlap between negligent misrepresentation (owing a duty and carelessly making a statement that induces a contract) and the negligence action for negligent misstatement. • negligent misrep implies that a contract was entered into with the statement-maker, and that contract can therefore be rescinded.
• Damages in negligence can be sought whether there had been a contract or not. • Also remember that where advice is being paid for, contract and tort often can run concurrently, for example because there may be implied terms to take reasonable care when performing the service.
Test for Negligent Misstatement
• Reasonable Foreseeability – D v S • Salient Features
• Serious or business nature
• Assumption of responsibility (defendant)
• Reliance was reasonable – objective test (plaintiff)
Case Example
• Hedley Byrne & Co v Heller and Partners [19]
• MLC v Evatt [1971] – important case!!! Rejected the test in Hedley Byrne & Co v Heller and Partners
• L Shaddock & Associates Pty Ltd v Parramatta City Council (1981)
• San Sebastian P/L v Minister Responsible for Administering the Environment Planning & Assessment Act 1979 (1986) • Tepko Pty Ltd v Water Board (2001)
Use the term ‗special relationship‘ in the exam answers
How to establish a duty
– Is it reasonably foreseeable that a failure to take care could cause the type of harm (i.e. pure economic loss) to the type of defendant?
AND
Special salient features for misstatement:
– „Reasonable reliance‟
• Special skills of the advisor
• How the advice was given – eg emphatic, repeated, recorded in writing, formal occasion, serious or business matter • Length of relationship between the parties
• Whether a reasonable person would rely solely on the advice. – „Assumption of Responsibility‟
• Did the advisor hold themselves out as an expert? • Did the advisor encourage reliance?
• This only proves a duty of care was owed. May still need to go through
– Breach (s9)
– Causation (s11) Discussed in Lecture 11 – Defences (ss13,14,23,47,48)
Liability to 3rd Parties
• What happens if a recipient of information passes it on to others?
• A typical example of a plaintiff who is not the immediate recipient, but rather a third party to information or advice, is found when an accountant audits company accounts.
• Courts are yet to provide a decisive answer as to when an auditor is liable to third parties.
• Case Example: Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997)
• For example: cannot sut a 3rd party ie. Party A provides information to party B which is then also used by party C. Party C cannot sue A even if the
information given by Party A was incorrect or resulted in economic loss of Party C.
Generally, it seems that the rule is:
• The advisor must know or ought reasonably know that the information given would be communicated to the specific third party, and
• The advice would be very likely to lead that third party to enter into a transaction
TEXTBOOK NOTES – Chapter 8: Applications of Negligence to Business Definitions
Non-delegable duty: duty that cannot be passed on or delegated to another person to try and avoid responsibility or liability
Negligent misstatement: a statement of fact, advice or opinion made in business that is relied upon by another but which is inaccurate or misleading
Occupier’s liability: the liability of those people who have control over their land or premises to anyone who comes onto their property to ensure they are not exposed to danger and risk of injury Strict liability: liability without fault
Vicarious liability: where the actions of one person render another person liable eg the actions of an employee in their course of employment
Occupier‟s Liability
• Occupiers because of their control over their premises owe a duty of care • In some cases, this is non-delegable to anyone (even trespassers) who come
onto their property to ensure they are not exposed to danger and risk • Where risk is obvious, farfetched or fanciful the duty is minimal but care
should be exercised.
o Case Example: Hackshaw v Shaw •
•
• • •
•
Establishing owner‘s liability: o to establish a case, a plaintiff must establish that
the defendant has occupation or control of the land
the hazard was in the nature of a ‗trap‘ and not obvious
the defendant was negligent in not putting some protection in place or giving a warning.
It is not sufficient to establish that a person has been injured on the premises. It has to be established that the defendant was responsible for the injury or ought to have know that there was a real risk and nothing was done about it. Onus on P to establish D has occupation or control of land/structure Where the risk is obvious, the duty is minimal
Test – is the risk real and what would a reasonable person do about it? Where the danger is unnatural or hidden, a public authority owes a duty of care to warn persons using the area of foreseeable risks.
Where a non-delegable duty is owed, there is a more onerous duty on D: the duty is to ensure all reasonable care is taken
因篇幅问题不能全部显示，请点此查看更多更全内容
Copyright © 2019- aiwanbo.com 版权所有 赣ICP备2024042808号-3
违法及侵权请联系：TEL:199 18 7713 E-MAIL:2724546146@qq.com
本站由北京市万商天勤律师事务所王兴未律师提供法律服务