Authorities

ContentsAuthorities....................................................................................................................1

Lecture 1 – Introduction, Ethics and Jurisprudence..............................................2Lecture 2 – The Sources of the Laws Governing Business......................................2

Federation.............................................................................................................2The Legislature......................................................................................................2The Executive.........................................................................................................3The Judicature.......................................................................................................3

Lecture 3: Legal Literacy for the Business Professional.........................................4Equity - Maxims.....................................................................................................4

Lecture 4: Structuring your business....................................................................5Business structures................................................................................................5Partnerships..........................................................................................................5Joint Venture.........................................................................................................6Companies.............................................................................................................6

Lecture 5: Contract – the keystone of business relationships................................8Intent.....................................................................................................................8Agreement.............................................................................................................8

Lecture 6: Three “C’s” and an “L”.......................................................................11Consideration......................................................................................................11Capacity...............................................................................................................11Consent................................................................................................................11Contractual Impediments....................................................................................11

Lecture 7: Contract – Content and Catastrophe..................................................13Content................................................................................................................13Termination of Contract......................................................................................13Remedies.............................................................................................................14

Lecture 8: The Law Protecting Consumers and Small Business............................16Definition of consumer........................................................................................16Protective implied terms......................................................................................16Manufacturers liability........................................................................................17Unfair Contracts..................................................................................................17

Lecture 9: Fairness & Ethics in Business Relationships........................................18Lecture 11: Measures to Avoid Liability in Business Relationships......................19

Duty of Care.........................................................................................................19Standard of care..................................................................................................19Damage...............................................................................................................19Defences..............................................................................................................19Negligence...........................................................................................................19Defamation..........................................................................................................20

Lecture 12: Risk Management in Business Relationships....................................21Agency.................................................................................................................21Insurance.............................................................................................................21

Lecture 13: Going Global....................................................................................22

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Lecture 1 – Introduction, Ethics and JurisprudenceNone. See Jurisprudence Notes

Lecture 2 – The Sources of the Laws Governing Business

Federation Australian Courts Act 1828 (UK)

o All English laws before this date are now official in NSW Commonwealth of Australia Constitution Act 1900 (UK)

o Federatingo Separation of Powers (judiciary, legislature and executive)

The Legislature

The Separation of powers Commonwealth of Australia Constitution Act 1900 (UK) S52

o Outlines exclusive powers of the federal government Commonwealth of Australia Constitution Act 1900 (UK) S51

o Outlines the concurrent powers of the federal governmento Important subsections:

Interstate and international trade (51(1)) Communications (51(xii, xiii)) Corporations (51(xx)) Insurance (51(xiv))

o This section also limits the powers of the commonwealth government

Expansion of federal Power Commonwealth of Australia Constitution Act 1900 (UK) S109

o In the case of an inconsistency between federal and state law, federal law prevails

Engineers Case (1920)o Constitution no to be read in the light of state’s implied power,

expansion of federal powers Uniform Taxations Case (1942)

o Federal taxes exclude state taxes on income expansion of federal powers

WorkChoices Legislation Case (2006) 231 ALR 1o Expansion of corporations power expansion of federal powers

Constitution, etc Commonwealth of Australia Constitution Act 1900 (UK) S92

o Interstate trade is absolutely free Commonwealth of Australia Constitution Act 1900 (UK) S116

o No laws can religious discriminate

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The Executive Commonwealth of Australia Constitution Act 1900 (UK) S61

o The governor general represents the queen in Australia Commonwealth of Australia Constitution Act 1900 (UK) S62

o The Cabinet as advisors to the Governor General Commonwealth of Australia Constitution Act 1900 (UK) S64

o All cabinet members must be members of parliament (different from the US)

The Judicature Per Griffith CJ in Huddart Parker and Co Pty Ltd v Moorhead [1909] HCA 36

o “the power [to]… decide controversies between its subjects … or itself”

Interpretation of legislation Acts Interpretation Act 1901 (Cth)

o Outlines the rules for statute interpretation, as well as standard definitions

Common Law Ruleso Literal Rule

Exact word meaningso Golden Rule

Exact word meanings + necessity for logico Mischief Rule

Looks at what “mischief” the law was trying to addresso Purposive approach

Literal within the context

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Lecture 3: Legal Literacy for the Business Professional

Equity - Maxims Delay defeats equity He who comes to equity must do so with clean hands Equity looks to intent, not form Derived from the exchequer

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Lecture 4: Structuring your business

Business structures Sole Trader Partnerships Companies/Corporations

o Covered by federal law (as per Constitution S51(xx)) Other

o Joint Ventureso Trustso Etc.

Partnerships Partnership Act 1892 (NSW)

o All law regarding partnership (unless international or inter-state, where it falls under federal power)

o Three elements Carrying on a of a business In common With the view to make a profit

o Max Size 20 50 for actuaries, medical practitioners and stockbrokers 100 for architects, pharmacists and vets 400 for solicitors 1000 for accountants

o NB joint tenants have separate rights between themselves but are in the position of a single owner against the world.

o NB tenants in common, multiple owners against the world

Partnership Liability Partnership Act 1892 (NSW) s5

o Acts done in the course of business Partnership Act 1892 (NSW) s9

o A firm’s debts Partnership Act 1892 (NSW) s10

o Tort, Negligence Chen V Zacharia (1984) 158 CLR 178

o All partners have a fiduciary relationship of “trust and confidence” (slide 13)

Partnership Act 1892 (NSW) s28-30o Disclosure and non-competition

Polkinghorne v Holland & Whittington (1934) 51 CLR 143

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o When a junior partner acts fraudulently outside of actual authority, if there is reasonable apparent authority, the other partners are still liable.

Disagreements between parties Partnership Act 1892 (NSW) s32

o Termination Partnership Act 1892 (NSW) s35

o Termination of current partnerships Partnership Act 1892 (NSW) s25

o Expulsion

Joint Venture Difference between joint venture and partnerships

o Commonly formed for a single undertakingo Ad hoco Assets are usually held as individual

United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLRo A partnership can be seen to exist, notwithstanding a formal joint

venture agreement Canny Gabriel Castle Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd

(1974) 131 CLR 321o As above.

Companies The Corporations Act 2001 (Cth)

o Sets out the law regarding corporations The Corporations Act 2001 (Cth) S124

o Separate legal entity Salomon v Salomon & co Ltd [1897] AC 22

o That the company is a separate legal entity to the shareholder

Lifting the veil of incorporation Green v Bestobell Industries Pty Ltd [1982] WAR 1 Supreme Court of Western

Australiao The director breached his fiduciary duty, allowing the supreme court

the “lift the veil of incorporation”o Directors must not acquire for themselves a business opportunity

sought by the company they are a director

Corporate Officers The Corporations Act 2001 (Cth) S9 CA

o Corporate officers include; directors, secretaries, executives and shadow officers

ASIC v Gallagher (1993) 11 ACLC 286o Non-executive directors had a duty to inform themselves so that

they could make independent judgements

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The Director The Corporations Act 2001 (Cth) SS 180-184

o Director’s duties Reasonable care and diligence S180(1) Business judgement rule S180(2) Good faith S181 Not act recklessly or intentionally dishonest Criminal Liability

S184 The Corporations Act 2001 (Cth) SS 182-183

o All employees must not make improper use of their position S182o Make improper us of company information S183

The Corporations Act 2001 (Cth) SS 190-194o Disclosure of personal interest

Director’s Personal Liability The Corporations Act 2001 (Cth) S 588G

o Directors have a duty to prevent insolvent tradingo Director personally liable for company debts

ASIC v Rich [2003] NSWSC 85o Director’s liability also includes the skills which they bring to their

office, as well as reasonable director’s duties ASIC v Adler and 4 Ors [2002] NSWSC 171

o If you are director of more than one company, or a company and its subsidiary, you have a fiduciary duty to both

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Lecture 5: Contract – the keystone of business relationships Contracts are based, mainly, on Common law decisions Essential elements:

o Intentiono Agreement (offer and acceptance)o Considerationo Capacityo Consento Legality of object

Intent Business contracts are presumed to be binding

o Can be rebutted by the following Rose and Frank Co v Crompton and Bros Ltd [1925] AC445

o Business contracts are not presumed to be binding if the agreement has a clause specifically stating that it is not meant to be binding

Balfour v Balfour [1912] 2 KB 571o NB: social, domestic contracts are considered presumptively non-

binding Teen Ranch Pty Ltd v Brown (1995) 38AILR |P5-036

o Volunteer contracts are not meant to be bound Merritt v Merritt [1970] 2 A11 ER 760

o Presumption of domestic non-binding is not applicable when the parties are separated

Masters v Cameron (1954) 91 CLR 353o Agreements to agree can be binding, but, if they include review, they

are not binding as they are not in their final form Trevey v Grubb (1982) 44 ALR 20

o Lottery case, no formal contract made, and made in a social environment, but bill was split and there was considered intention to be bound, therefore valid.

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) WAR 101o If the agreement to agree intends to be binding (e.g. “constitutes an

agreement in itself” than it is a binding agreement. A contract may include an express condition that deprives it of legal effect A clause cannot exclude the jurisdiction of the courts to rule whether or not

it is a contract

Agreement Agreement consists of 2 or 3 facets

o (invitation to treat)o Offero Acceptance

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Invitation Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd

[1953] 1 QB 401o Price tags are invitations to treat, not offerso The contract is only engages at the cash register, rather than when

the goods are taken off the shelf

Offer Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

o A deposit/other actions may amount to an intention for an offer to be binding

o An offer may be made out to the world at large if there is worldwide circulation and the intention to be bound

An offer can be terminated by failure of conditiono E.g. “subject to finance”, “this contract will end if X becomes unfit to

Y” Harvey v Facey [1893] AC 552

o A specific price response is an offer to treat, rather than an offer, unless specifically addressed

Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674o Even nominal consideration formalises a contract for the period

outlined in the offer Dickinson v Dodds [1876] 2 ChD 463

o Third party withdrawal of an offer, if brought to the attention of the offeree, is valid

Byrne and Co v Leon Van Tienhoven & Co [1880] 5 CPD 344o Withdrawal of an offer has to occur before the acceptance of an

offer to be valid Hyde v Wrench [1840] 3 Beav 334

o A counter-offer implies rejection of previous offer

Acceptance Offer must be accepted to create an agreement Electronic Transactions Act 1999 (Cth)

o W e-commerce Dispatched by the sender i.e. when it enters info systems outside the control of the

sendero received when it enters the server of the receiver

Adams v Lindsell (1818) 106 ER 250o The Postal Rule

Empirnall Holdings Pty Ltd v Mark Machon Paull Partners (1988) 14 NSWLR 532

o If a the offeree acts as if the contract has been accepted, it is held to be accepted

Goodman Fielder v Cospack [2004] NSWSC 704

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o Order form and offer are different, similarities are upheld by court as agreed upon

R v Clarke (1927) 40 CLR 227o Acceptance must be made in reliance of an offer

Felthouse v Bindley (1862) 142 ER 1037o Acceptance must be communicated to the offeroro Silence cannot imply acceptance

Powell v Lee (1908) 90 LT 284o Acceptance must be made by the offeror or his agent

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Lecture 6: Three “C’s” and an “L” Will talk about

o Considerationo Capacityo Consento Legality

Consideration Present or future, item moving from the promisee required for the contract

to be valid i.e. no past considerationo Must be more than the performance of an existing obligationo Must be possible, definite, legal and referrableo Not required for formal contracts

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847o Consideration must move from the promisee to show parties to a

contract Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87

o Consideration must be valuable Central London Property Trust v High Trees House Ltd [1947] 1 KB 130 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

o Promissory Estoppels

Capacity Legal authority to enter into a binding relation Minors (Property and Contracts) Act 1970 (NSW)

o Restricted authority of a minoro Only able to enter a contract for his own benefit

Corporations Act 2001 (Cth)o Power of a corporation to enter into a contract

Consent There must be genuine informed consent between the parties as to the

contracts nature and scopeo Without consent, the contract is void or voidable

Contractual Impediments

Void VoidableLack of Intent Unilateral mistake of factCrucial mistake of identity Non-crucial mistake of identityCommon Mistake Duress or Undue InfluenceIllegality Misrepresentation

Non Est Factum Lack of consent If so, contract VOID

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Mistake Mistake of fact Mistake of identity Common mistake

o Contract is VOID Mutual mistake

o Contract is Void Taylor v Johnson (1983) 151 CLR 422

o If mistake of fact occurs, and the other party notices and does nothing to correct it, contract is voidable in equity

Shogun Finance v Hudson [2004] 1 AC 919o In case of unilateral mistaken identity, contract is VOID

Misrepresentation A false statement that induces a person to make a contract

o If a mistake in term in the contract, then VOIDo If a mistake outside of the terms of the contract, then VOIDABLE

Hedley Byrne Ltd V Heller & Partners Ltd [1964] AC 465o Negligent misrepresentation

Derry v Peek (1889) 14 App Cas 337o Fraudulent misrepresentation

Trade Practices Act 1974 (Cth), S52o False and misleading advertising

Duress Physical Economic Goods VOIDABLE if not already affirmed

Undue Influence Contract is Voidable

Illegality Statutory Illegality Common Law Illegality

o Attempts to oust the jurisdiction of the courto In restraint of trade

Nordenfelt v Maxim Nordenfelt Guns and Ammunition (1894)o VOID unless in best interest of both parties and the public

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Lecture 7: Contract – Content and Catastrophe

Content Representation

Terms Express Terms Implied Terms L’Estrange v Graucob Ltd [1934] 2 KB 394

o Binding whether read or not Parole Evidence Rule

o When in writing, contract is limited to what is writteno Exemptions

Exemption/limitation of liability clauseo Court will rule in favour of the consumero Under literal meaning AND intention

Trade Practices Act, Contracts Review Act 1980 (NSW)o Exclusion as unfair and problematical where:

Consumers Small business

Implied Terms Business Efficacy Custom or Trade Usage Sale of Goods Act 1923 (NSW) SS17-20 Trade Practices Act 1974 (Cth) SS 69-72

o Statutory implied terms Doctrine of Privy Contract

o Contracts only affect those in ito Exemptions

Insurance A third party who intentionally induces a breach of contract

Termination of Contract Contract terminated by

o Performanceo Agreemento Breacho Law o Frustration

Througho Mutual dischargeo Releaseo Waivero Substituted agreement

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Breach Breach Of warranty

o Contract continues but damages paid Breach Of condition

o Contract terminated and damages paido Innocent party can seek to consider the breach as warranty

Law Contract cancelled if:

o Bankrupto Alteration of contract without consento Illegality

Frustration Event outside of the control of t he parties involved Davis Contractors Ltd V Fareham Council [1956] 2 AII.E.R 145

o “without default of either party … become incapable” Frustrated Contracts Act 1978 (NSW)

o Not necessarily void, but also can be adjusted

Remedies Requiring Court

o Damages Compensation for loss of benefits Recover expenses Incl’d

Ordinary Nominal Exemplary Liquidated Unliquidated Penalty

o Restitution Payment under influence or failure, illegality or failure of

considerationo Injunction

Court order to not doo Specific Performance

Court order to doo Must be IN TIME TB p423o Quantum Meruit

Part performance, “as much as he deserves Leading Edge Investments Pty Ltd v Te Kanawa (2007) Aust Cont Reps 90-252

o E.g. Of Meruit see SL35 Not Requiring court

o Rescission

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Breach of condition Restore pre-contract condition

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Lecture 8: The Law Protecting Consumers and Small Business Trade Practices Act 1974 (Cth) S2

o “advance the welfare of Australians by … consumer protection” Consumer protection law includes

o Contract Law for g/so Tort of Negligenceo Manufacturers liability

FTA (NSW) TPA (Cth)

o Implied terms SGA FTA (NSW) TPA(Cth)

o Unfair Practices FTA (NSW) TPA (Cth)

Because of S51XX of the constitution, fed is for companies, state is for other business structures

These are governed by specific o Motor Dealers Act 1974 (NSW)o Trade Measurement Act 1989 (NSW)

and general legislationso SoG 1923: FTA 1987: Contracts Review Act 1980 NSWo TPA 1974

Definition of consumer Definition of Consumer under the TPA Cth

o Under $40000 but not used upo Over $40000 but of a kind ordinarily acquired for business or

domestic useo A commercial road vehicleo If NOT “of a kind…” TPA S68(1)

Than businesses may limit repair and replace liability Definition of Consumer under the FTA NSW

o Supplier to consumer, not for resupply or used up FTA S5o Of a kind

Protective implied terms goods

o Seller must provide a title to goods SOG s17, FTA s40 0, TPA s69 The goods must comply with description SOG s18, FTA s40p,

TPA s70o Goods are reasonable fit for purpose when the buyer relies on the

seller’s skill SoG s19(1), FTA s40Q(2), TPA s71(2)o Goods must be of merchantable quality SoG s19(2), FTA s40(q)1, TPA

s71

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o Goods must comply with sample SoG s20, FTA s40R, TPA s72 Services

o Due care and skill will be takeno Fit for purpose, desired result achieved TPA s74, FTA s40

There are circumstances where implied conditions do not stand, e.g. where the defect has been brought to the attention of the consumer

Manufacturers liability Supplier and manufacturer hold the same liability See slide 25, p5 But also more

o Comply with express warranty TPA S74 (1) (g)o Reasonable repair facilities and spare parts TPA s74, FTA s40Y

Unfair Contracts Commercial Bank v Amadio

o Unconscionable contracts can be voided by equity TPA Part IVA

o See p5 slide 30 TPA Part V

o Unfair practices Contracts Review Act, NSW, 1980

o Not for business contractso Remedies available:

Damages, criminal remedies prosecuted by ACCC, injunction etc.

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Lecture 9: Fairness & Ethics in Business Relationships TPA, 1974 S52

o NO DEFENCE FTA 1987 S42

o “a corporation [person FTA] shall not in trade or commerce engage in conduct which is misleading or deceptive”

TPA for: Corporations Individuals by phone, fax, etc Individuals interstate

FTA for Direct for individuals

In trade or commerce Engage in conduct

Positively Negatively By omission

That is misleading or deceptive Taco Co of Australia v Taco Bell Pty Ltd (1982)

o Indentify target marketo Identify defendant as conduct w regards to the whole marketo Decide whether misleadingo Decide whether misleading was made by company

TPA S75 AZCo Criminal sanctions can be applied

Country of origino Strict test for “product of”, not so strict for “made in”

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Lecture 11: Measures to Avoid Liability in Business Relationships

Donoghue v Stevenson 1932o Basis of tort lawo Snail in the bottle

Stuart v Kirkland-Veenstra [2009] HCA 15o Where there is no duty, there cannot be tort

Civil Liability Act, 2002 (NSW)

Duty of Care Civil Liability Act, 2002 (NSW) S5b/c

o Forseeabilityo Significanceo Probabilityo Seriousness of harmo The burden of taking precautions

Standard of care Civil Liability Act, 2002 (NSW) S5b(1)c

o Reasonable etc

Damage Civil Liability Act, 2002 (NSW) Div 3

o Actual damageo Causation, established with the “but-for” test

Civil Liability Act, 2002 (NSW) o 15% most extreme caseso Economic loss is capped at $450 000 annuallyo Legal costs for recovery claim <$100 000, lawyer should be sure,

$10000

Defences Contributory negligence Civil Liability Act, 2002 (NSW) Division 4

o Voluntary assumption of risk If obvious 5G Defined in 5B Or if in a dangerous recreational activity Div5

Negligence Professional negligence S5 0 Negligent misstatement

o Shaddock & Assoc P/L v Parramatta CC (1981) Duty of care with statement

Product liabilityo Donoghue v Stevenson 1932

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“the manufacturer … owes a duty to take reasonable care” Statutory liability

o S75AC (1)&(2)

Defamation Hulton v Jones

o Innuendo and implied identification are defamatory Capped at 280,550 Defences

o Truth Defamation Act, NSW (2005) S25o Absolute Privilege S27o Qualified privilege S30o Fair comment S31

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Lecture 12: Risk Management in Business Relationships

Agency 3 types

o Limitedo Generalo Universal (power of attorney)

Authorityo Actualo Apparento Operation of lawo Ratification

Dutieso Fiduciary

Misconduct is criminalo Criminal Code Act, 1995 (Cth) Schedule Part 7.6

Gov’t ppso Crimes Act, 1900 (NSW) s249B

All other The company is vicariously liable UNLESS Sweeny v Boylan Nominees Pty Ltd [2006] HCA 19

o Agent is contracted

Insurance Insurance Contracts Act 1984 (Cth)

o Insurable Interest S17o Utmost Good Faith S26

Includes duty of disclosure S21 Or contract is void S28 (2) (fraudulent) Reduced (innocent) S28(3)

o Indemnity o Subrogation

Step into the shoes of the insured

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Lecture 13: Going Global Law which is applied is written into the contract

o Can be invalid If the court thinks that it has been made to deliberately evade laws

Vienna Convention applies in either country has subscribedo Excluding: consumer transactionso Shareso Question of the validity of contract

International contractso FOBo CIF

All inclusive Regie National des Usines Renault SA v Zhang (2002)

o Australian courts will only hear a tort if it is a tort in the country where it is committed

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