Reading Guide Law in Commerce Second Edition by Brendan Sweeney and Jennifer O’Reilly
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Reading Guide Law in Commerce Second Edition by
A hypothetical dispute 13Law in commerce 16 Contracts 16 Torts and similar statutory obligations 16 Agency, partnerships, companies and trusts 17 Why study the law? 17 Questions 18 2 Making the Law — Liability for Defective Products 20 Liability for negligence 21 Donoghue v Stevenson [1932] 21 Step 1 — When is a duty of care owed? 22 Duty of care and liability for products — do manufacturers owe a duty to consumers? 23 Levi v Colgate-Palmolive Pty Ltd (1941) 23 Duty of care — do manufacturers owe a duty of care to third parties? 23 Duty of care — do distributors owe a duty of care? 24 Duty of care and liability for services 24 Duty of care and the obligations of property owners 24
Duty of care and failing to act 25 Modbury Triangle Shopping Centre Pty Ltd v Anzil [2000] 25 Club Italia (Geelong) Inc v Ritchie (2001) 26 Duty of care and the obligations of road users 26 Duty of care and liability for psychological injury (mental harm) 27
Duty of care and no physical damage — can a duty be owed for purely economic loss? 28 Hill (t/a R F Hill & Associates) v Van Erp (1997) 30 Perre v Apand Pty Ltd (1999) 30 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] 32 Step 2 — What standard of care is owed? 33 Balancing risks, consequences and costs 33 Romeo v Conservation Commission of the Northern Territory (1998) 34 Standard of care and the design of goods 35 O’Dwyer v Leo Buring Pty Ltd [1996] 35 Rasbora Ltd v J C L Marine Ltd (1977) 35 Standard of care and the production of goods 36 Grant v Australian Knitting Mills [1935] 36 Standard of care and the packaging of products 37 Adelaide Chemical & Fertiliser Co v Carlyle (1940) 37 Standard of care and the proper labelling of products 37 Standard of care and the distributor/retailer 38 Standard of care and the delivery of services 38 Woods v Multi-Sport Holdings Pty Ltd (2002) 38 Unexplained accidents — the doctrine of res ipsa loquitur 39 Step 3 — Causation, remoteness of damage, amount of damages 39 Causation 39 March v Stramare Pty Ltd (1991) 40 Chapel v Hart (1998) 40 Remoteness 41 Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd (The Wagon Mound No2) [1966 41 Assessing damages 41 Defences 42 Contributory negligence 42 The plaintiff assumed the risk 42
Statutory amendments 43 Liability for another person’s acts 44 Vicarious liability 44 Hollis v Vabu Pty Ltd [2001] 44 Non-delegable duties 45 Burnie Port Authority v General Jones Pty Ltd (1994) 45 Class actions 45 The Trade Practices Act — damages for defective goods 46 What is the purpose of Part VA? 46 What are the elements of a breach of Part VA? 47 Why does the defendant have to be a ‘corporation’? 47 What is a ‘manufacturer’? 48 What is meant by the expressions ‘goods’ and ‘supply’? 48 What is the meaning of ‘defective goods’? 48 Does Pt VA compensate for all types of losses caused by a defective good? 49 Damage must be caused by the defective good 49 What are the defences under Pt VA? 50
Can a manufacturer exclude liability for defective goods by putting a notice to that effect on the label? 51 Contributory acts or omissions 52 Other matters 52
Traditional actions for misrepresentation 56 Modern developments in the law of misrepresentation 57
Common law remedies 58 Statutory remedies 58
Elements of fraud 58 Step 1: Was the representation a false statement of fact? 59
Step 2: Did the representation induce the contract? 60 Holmes v Jones (1907) 60 Redgrave v Hurd (1881) 61 Peek v Gurney [1873] 61 Step 3: Was the misrepresentation fraudulent? 62 Derry v Peek (1889) 62 Negligent misrepresentation 63 Step 1 — When is a duty of care owed for negligent advice? 63 A duty of care can be owed when giving advice or supplying information 63 L Shaddock and Associates Pty Ltd v Paramatta City Council (1981) 64 The critical importance of reliance 64 Tepko Pty Ltd v Water Board (2001) 64 Esso Petroleum Co Ltd v Mardon [1976] 65 To whom is the duty of care owed? – The spectre of indeterminacy 66 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 67 Lowe Lippman Figdor & Franck v AGC (Advances) Ltd [1992] 68 How do disclaimers affect the duty of care? 68 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] 69 Summing up the duty of care 69 Step 2 — What standard of care is owed? 70 Step 3 — Remoteness of damage 70 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 71 Misleading and Deceptive Conduct 71 The Trade Practices Act section 52 71 Financial services 72 The Fair Trading Acts 72 Firms are liable for conduct of directors, employees and agents 73 Conduct must be ‘in trade or commerce’ 73 Does section 52 require proof of fraud or negligence? 73 Yorke v Ross Lucas Pty Ltd (1983) 74 What kinds of conduct can be misleading or deceptive? 74 Collins Marrickville Pty Ltd v Henjo Investments (1987) 74 Silence as misleading conduct 75 Demagogue Pty Ltd v Ramensky (1992) 75 Forwood Products Pty Ltd v Gibbett [2002] 76 Metacorp Recyclers Pty Ltd v Metal Manufacturers Pty Ltd [2003] 76 General Newspapers Pty Ltd v Telstra Corporation (1993) 77 Opinions and section 52 77 RAIA Insurance Brokers Limited v FAI General Insurance Co Limited (1993) 78 Promises, predictions and section 52 78 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 78 Futuretronics International Pty Ltd v Gadzhis (1990) 79 Mere puffs 80 Exclusion clauses and disclaimers 80 Bateman v Slatyer (1987) 80 Remedies for breach of section 52 81 Damages are only awarded if the misrepresentation caused the loss 81 Sweetman v Bradfield Management Services Pty Ltd (1994) 81 Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd 82 The role of reliance in obtaining damages for deceptive conduct 82 Calculation of damages 83 Damages may be awarded against company’s employees or agents 83 Declaration that the contract is void 83
Varying the terms of the contract 84 Mr Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 84 Injunctions 84 Criminal misrepresentations 84
The scope of the rule 86 Commercial Bank of Australia v Amadio (1983) 86 Remedies for unconscionable conduct in equity 87 ACCC v CG Berbatis Holdings Pty Ltd [2003] 87 Unconscionable transactions and the Trade Practices Act 88 Pressure to strengthen unconscionable conduct provisions 88 Unconscionable conduct — consumer contracts 88 Unconscionable conduct — small business transactions 89 When is a transaction unconscionable? 89
Does a contract have to be in writing? 94 Intention 95
Termination of the contract 95 Damages 95 Specific performance 96 Injunction 96 Recovery of the contract price 96 Agreed damages clauses 96
Meaning of ‘offer’ 97 Harvey v Facey [1893] 97 An offer, or merely an indication of a present intention? 98 Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 98 Harris v Nickerson (1873) 98 Kelly v Caledonian Coal Co (1898) 98 An offer or an invitation to treat? 99 Partridge v Crittenden [1968] 99 Retail displays 99 Fisher v Bell [1960] 100 Pharmaceutical Society of Grest Britiain v Boots Cash Chemists [1953] 100 Catalogues 100 Grainger & Sons v Gough [1896] 101 Advertisements 101 Carlill v Carbolic Smoke Ball Co (1893) 102 Auctions — who makes the offer? 102 Tenders — who makes the offer? 103
Standing offers 104 Colonial Ammunition Co v Reid (1900) 104 An offer or merely part of the negotiations? 105 The fate of the offer 105 Withdrawing the offer 105 Can an offer be revoked after acceptance? 105 Can an offer be revoked before acceptance? 106
Is it necessary to tell the offeree about the revocation? 106 Byrne & Co v Van Tienhoven & Co (1880) 106 Who must tell the offeree that the offer has been revoked? 107 Is it possible to revoke a unilateral offer? 107 Is it possible to have an offer that cannot be revoked? 107 Goldsborough Mort & Co Ltd v Quinn (1910) 108 Rejecting an offer 108 What is the effect of rejecting an offer? 108 Offeree’s conduct may indicate rejection 108 Counter offer amounts to a rejection 108 Hyde v Wrench (1840) 109 Turner Kempson & Co Pty Ltd v Camm [1922] 109 Asking for clarification of the terms of the offer is not a counter offer 110 Acceptance of the offer 110 Only the offeree may accept 110 Acceptance must be final and unqualified 110
The problem of the battle of the forms 112 Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 112 Reese Bros Plastics Ltd v Hamon-Sobelco (Australia) Pty Ltd (1988) 113 Acceptance must be communicated to the offeror 113 Communicating acceptance to a large company 113 Communicating acceptance over the internet 114 When is express communication of acceptance not necessary? 114 Acceptance and the postal rule 115 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 115 What evidence is required for the postal rule to operate? 115 The method and timing of the acceptance 116 Can acceptance be communicated by someone other than the offeree? 116 Powell v Lee (1908) 116 Lapse of offer 117 Lapse of an offer due to the death of offeror or offeree 117 Lapse of an offer due to time 117 Lapse of an offer due to the failure of a condition precedent 117 The agreement must be ‘certain’ 117 Whitlock v Brew (1968) 118 Is an ‘agreement to agree’ binding? 118 Is an agreement to negotiate binding? 119 Is an agreement made ‘subject to contract’ binding? 119 Other conditional agreements 119 Questions 120 5 Making the Contract — Intention and Consideration 122 Intention to contract 122 Domestic agreements 123 Todd v Nicol [1957] 123 Roufos v Brewster (1971) 123 Commercial agreements 124 Rose and Frank Co v J R Crompton & Bros Ltd [1923] 124 Edwards v Skyways Ltd [1964] 125 Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 125 Are letters of comfort binding? 126 Kleinwort Benson v Malaysia Mining Corp. Berhard [1988] 126 Banque Brussels Lambert SA v Australian National Industries (1989) 127 Are ‘Heads of Agreement’ and ‘Letters of Intent’ binding? 127 Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd [1985] 127 Coal Cliff Collieries v Sijehama Pty Ltd (1991) 128 Agreements ‘subject to contract’ 128 Plastyne Products Pty Ltd v Gall Engineering Co Pty Ltd (1988) 128 ‘Without prejudice’ agreements 129 Consideration 129 What is a deed? 129 Consideration 129 What is consideration? 130 Examples of consideration 130 Consideration must move from the promisee 131 Dunlop Pneumatic Tyre Co Ltd v Selfridge Co Ltd [1914] 131 The joint promisee rule 132 Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 132 Privity of contract 132 Exceptions to the privity of contract rule 133 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 133 Consideration may not be past 133 Roscorla v Thomas [1842] 134 An exception to Roscorla v Thomas 134 Casey’s Patents: Stewart v Casey, Re [1892] 134 Consideration doesn’t have to be adequate 135 Consideration must be sufficient 135 Illusory promises are not consideration 136 Dunton v Dunton (1892) 136 Settling disputes — giving up a legal claim may be consideration 136 Wigan v Edwards (1973) 137 Renegotiating contracts — promising to perform an existing contract is not good consideration 137 The traditional rule 137 Stilk v Myrick (1809) 138 A modern development? 138 Williams v Roffey Bros and Nicholls (Contractors) Ltd [1991] 139 Terminating a contract by agreement 139 Renegotiating a debt 139 Pinnel’s case (1602) 140 Exceptions to Foakes v Beer — compositions with creditors 140 Exceptions to Foakes v Beer — part payment by a third party 141
The promisor’s responsibility for the promisee’s assumption 144 Legione v Hateley (1983) 144 Why is detrimental reliance important? 145 Je Maintiendrai Pty Ltd v Quaglia (1980) 145 The leading case — Waltons Stores (Interstate) Ltd v Maher 146 What lessons should we learn from Waltons Stores (Interstate) Ltd v Maher? 147 Waltons Stores (Interstate) Ltd v Maher (1988) 146 The remedy in cases of estoppel 147 Parties to the contract 147 Minors 147 Nash v Inman [1908] 148 Persons with mental disabilities; intoxicated persons 148 Agents 148 Partnerships 148 Corporations 149 Assignment of contractual rights 149 Questions 149 6 Express Terms of the Contract 151 The problem stated 151 Ascertaining the relevant evidence 152 The parol evidence presumption 152 Statements made after contract is complete are not terms 153 Olley v Marlborough Court Ltd [1949 153 Past dealings may be important in determining the terms 154 The importance of a signature 154 L’Estrange v F Graucob Ltd [1934] 154 When is a person not bound by his or her signature? 155 The document didn’t appear to be contractual 155 D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] 155 Estoppel 155 Oral agreement to the contrary 156
Misrepresentation 156 Condition precedent 156 The document does not accurately record the agreement 156 Equitable doctrines 156
Is the document contractual in nature? 158 Oceanic Sun Line Special Shipping Company v Fay (1988) 158 Is the term unusual? 159 Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1988] 159 Were there any conflicting statements or promises? 159 Couchman v Hill [1947] 159 Ticket cases 160 When are oral representations binding? 161 Which statements are promissory? — The reasonable bystander test 161 Guidelines for applying the reasonable bystander test 162 State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 162 Was there a written document? 162 Van Den Esschert v Chappell [1960] 163 How much time lapsed between statement and contract? 163 How important was the statement to the deal as a whole? 164 What words were used? 164 Did either party have special knowledge? 164 Some examples of the reasonable bystander test 164 Oscar Chess Ltd v Williams [1957 164 Ross v Allis-Chalmers Australia Pty Ltd (1980) 165 Esso Petroleum Co Ltd v Mardon [1976] 165 Hospital Products Ltd v United States Surgical Corp (1984) 166 Collateral warranties 166 De Lasalle v Guildford [1901] 167 L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (A’asia) Ltd (1955) 167 When does a collateral contract apply? 168 A collateral warranty must be promissory 168 J J Savage & Sons Pty Ltd v Blakney (1970) 168 A collateral warranty must not be inconsistent with the main contract 169 Gates v City Mutual Life Assurance Society Ltd (1986) 169 Maybury v Atlantic Union Oil Co (1953) 170 The meaning of a term 170 The reasonable person test 170 The parol evidence rule 170 Hope v RCA Photophone of Australia Pty Ltd (1937) 171 Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd (1919) 171 The importance of a term 172 Unenforceable terms 172 Terms in restraint of trade 172 ICT Pty Ltd v Sea Containers Ltd (1995) 173 Peters (WA) Ltd v Petersville Ltd (1999) 173 Exemption clauses 173 How do the courts approach exemption clauses? 174 Step 1 — Is the exemption clause a term of the contract? 174 Post-contractual 174 A course of past dealings between the parties 175 An exemption clause contained in a signed document will often be binding 175 Curtis v Chemical Cleaning & Dyeing Co [1951] 175 An unsigned exemption clause will be binding if ‘reasonable notice’ has been given 176 Thornton v Shoe Lane Parking Ltd [1971] 177 Step 2 — Does the exemption clause cover the breach? 177 The ambiguity rule 177 Andrews Bros Ltd v Singer Car Co Ltd [1933] 178 Alex Kay Pty Ltd v General Motors Acceptance Corp Co. [1963] 178 The negligence rule 178 White v John Warwick & Co Ltd [1953] 179 Exemption clauses are to be understood according to their natural and ordinary meaning 180 Fundamental breach presumption 180 Photo Production Ltd v Securicor Transport Ltd [1980] 181 The four corners presumption 181 Sydney Corporation v West (1965) 182 Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) (1966) 183 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 183 Appendix — a sample of a written contract 185 Questions 186 7 Implied Terms 188 Terms implied by the courts as a matter of law 189 Terms implied into all contracts — co-operation and good faith 189 Burger King Corp v Hungry Jack’s Pty Ltd [2001] 190 Contracts between professional persons and their clients 190 Contracts for work and materials 191 Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 191 Helicopter Sales Pty Ltd v Rotor Works Pty Ltd (1974) 191 Other service contracts 192 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 192 Hire contracts 193 Employment contracts 193 Landlord/tenant 193 Terms implied by the courts as a matter of fact 193 Terms implied on the basis of a course of past dealings 194 Henry Kendall & Sons v William Lillico & Sons Ltd [1968] 194 Terms implied as a result of custom or trade usage 194 British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] 195 Terms implied in order to make the contract effective 196 Moorcock, The, Re (1889) 196 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 196 BP Refinery (Wetsernport) Pty Ltd v President, Councillors and Ratepayers of Shire of Hastings (1977) 197 Services — implied terms under the Trade Practices Act 198 Implied terms at common law 198 When does the Trade Practices Act apply? 199 Step 1 — Is the service provider subject to the Trade Practices Act? 199 Step 2 — Who is a consumer under the Trade Practices Act? 200 Step 3 — Were the services supplied in the course of business? 200 What is the meaning of services? 201 Is the contract one for the supply of services or goods? 201 ‘E’ v Australian Red Cross Society (1992) 201 What are the implied warranties under the Trade Practices Act? 202 Read v Nerey Nominees Pty Ltd [1979] 230 Can the implied terms be excluded? 204 Can the service provider limit liability? 204 Special rule for recreational services 205 Remedies 205 The Australian Securities and Investments Commission Act 2001 (Cth) 206 What is a financial service? 206 Is the financial service provider subject to the ASIC Act? 206 Is the financial service acquirer a consumer? 207 Were the financial services supplied in the course of a business? 207 What terms are implied? 207 Can the terms be excluded, or liability limited? 208 Remedies 208 Appendix 209 Questions 209 8 Contracts for Sales of Goods 211 Introduction 211 Development of legislation designed to protect consumers 211 The Trade Practices Act 1974 (Cth) 212 When does the Trade Practices Act apply? 212 Step 1 — Is the seller subject to the Trade Practices Act? 212 Step 2 — What is a consumer contract under the Trade Practices Act? 212
Step 3 — Was the sale in the course of business? 214 Step 4 — Was the sale at auction? 215
Correspondence with description 215 Merchantable quality 216 Fitness for a particular purpose 216 Carpet Call Pty Ltd v Chan (1987) 217 Correspondence with sample 218 Remedies for breach of implied terms 218 Damages 218 Can the buyer return the goods? 218
Correspondence with description 223 Fitness for purpose 223 Merchantable quality 224 Frank v Grosvenor Motor Auctions Pty Ltd [1960] 224 Correspondence with sample 225 Can the seller exclude or limit liability for breach of the implied terms? 226 What are the remedies? 226 Merchantable Quality 227 The tests for merchantable quality 227 B S Brown & Son Ltd v Craiks Ltd [1970] 227 The indicators of merchantable quality 228 H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd [1921] 228 Bartlett v Sidney Marcus Ltd [1965] 229 Grant v Australian Knitting Mills [1935 229 How is merchantable quality affected by the buyer’s inspection of the goods? 230 Fitness for a particular purpose 230 David Jones v Willis (1934) 230 The buyer must rely on the seller’s skill and judgment 230 Griffiths v Peter Conway Ltd [1939] 231 Buyer’s purpose may be a matter of inference 231 Godley v Perry [1960] 231 The buyer’s reliance must be reasonable 232 Teheran-Europe Co Pty Ltd v S T Belton (Tractors) Ltd [1968] 232 Correspondence with description 232 Description is not a reference to product quality 232 When are goods sold by description? 232 Varley v Whipp [1900] 233 Beale v Taylor [1967] 233 Moore & Co Ltd and Landauer & Co, Re 233 The buyer must rely on the description 234 Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1990 234 Correspondence with the sample 235 Other matters affecting sales of goods 235 Ascertaining the contract price for the goods 235 ANZ Banking Group v Frost Holdings [1989] 236 Delivery and payment 236 Acceptance 236 Passing of property in the goods 237 Passing of risk in the goods 237 Appendix 1 — Summary of the Acts 238 Appendix 2 239 Appendix 3 — Comparative Table 241 Questions 243 9 Remedies in Contract Cases 245 In what ways may a contract be brought to an end? 245 Termination 246 Termination by performance 246 Termination by agreement 246 Termination by a term of the contract 246 Termination by frustration 246 Taylor v Caldwell (1863) 247 Davis Contractors Ltd v Fareham Urban District Council [1956] 247 Termination for breach of contract 248 When is a term a condition? 248 Associated Newspapers v Bancks (1951) 249 A term may be made a condition by the words used 249 Wickman Machine Tool Sales Ltd v L Schuler AG [1974] 250 Statutory implied conditions 250 Time clauses in mercantile contracts 250
Time clauses in other contracts 251 Bettini v Gye [1874] 251 Time can be made a condition by serving a notice 251 Terms referring to quality are normally warranties 251 Where damages are an adequate remedy, the term is often a warranty 252 Termination for serious breach of an intermediate term 252 When is a breach of an intermediate term a serious breach? 252 Hong Kong Fir Shipping Ltd v Kawasaki Kisen Kaisha Ltd [1962] 252 Cehave NV v Bremer Handelsgesellschaft mbH (The Hansa Nord) [1976] 253 Termination for repudiation 253 What is meant by a ‘substantial repudiation’? 254 Termination for anticipatory breach 254 National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] 255 Anticipatory breach — no termination 255 The procedure for termination 255 Foran v Wight (1989) 256 The effect of an election to terminate 256 The effect of an election to affirm the contract 257 Rescission 257 Rescission for misrepresentation 257 What is the effect of rescission on the contract? 258 What is the difference between rescission of the contract and termination of the contract? 258 How is a contract rescinded? 258 Rescission is not permitted if the contract has been affirmed 258 Rescission is not permitted if substantial restitution is not possible 259 Academy of Health & Fitness Pty Ltd v Power [1973] 260 Rescission is not permitted if the legal rights of an innocent third party will be adversely affected 260 Car & Universal Finance Co Ltd v Caldwell [1965] 260 The rule in Seddon’s case 261 Rescission for unconscionable conduct 261 Blomley v Ryan (1956) . 261 Rescission for duress 262 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 262 Cockerill & Ors v Westpac Banking Corporation (1996) 263 Mitchell v Pacific Dawn Pty Ltd [2003] 263 Rescission for undue influence 264 Presumption of undue influence in special relationships 264 O’Sullivan v Management Agency & Music Ltd [1984] 264 Presumed undue influence in confidential relationships 264 Lloyd’s Bank Ltd v Bundy [1974] 265 Actual undue influence 265 Rescission for mistake 265 Rescission for common mistake 266 Rescission for unilateral mistake 266
Contracts can be void for unilateral mistake 266 Cundy v Lindsay (1878) 267 Non est factum 267 Petelin v Cullen (1975) 267 Contracts Review Act 1980 (NSW) 268 West v AGC (Advances) Ltd (1986) 268 Unfair terms in consumer contracts — Victoria 268 Recovery of the contract price 269 Hoenig v Isaacs [1952] 269 Sale of goods 270 Damages 270 What is the purpose of damages? 270 Losses must be caused by a breach of the contract 271 Agreed damages 271 Plaintiff has a duty to mitigate losses 272 Damages must not be too remote — the rule in Hadley v Baxendale 272 The first limb of the rule in Hadley v Baxendale 272 Koufos v C Czarnikow Ltd [1969] 273 Hadley v Baxendale [1854] 273 The second limb of the rule in Hadley v Baxendale 273 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 274 Calculating the amount of damages 274 Damages for expectation losses 274 McRae v Commonwealth Disposals Commission (1951) 275 Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 276 Damages for personal injuries 276 Damages for disappointment, distress, discomfort etc 276
The agent’s express actual authority 294 The agent’s implied actual authority 294
Ostensible authority depends on the principal’s holding out 297 Freeman & Lockyer v Buckhurst Park Properties Ltd [1964] 296 Cases on ostensible authority 298 Director of Posts and Telegraphs v Abbott (1974) 298 First Energy (UK) Ltd v Hungarian International Bank Ltd (1993) 298 A person with ostensible authority cannot create ostensible authority in another person 299 Was the third party aware of the agent’s actual authority? 299 Ratification 299 The rules applying to ratification 300 Keighley, Maxted & Co v Durant [1900] 300 Who can sue whom? 301 Third party suing the principal 301 Principal suing the third party 302 Third party suing the agent 302 Liability of an agent known to be an agent 302 Liability of agent where the principal is undisclosed 303 The agent acted without authority 303 Breach of warranty of authority 303
Fiduciary duty to account honestly 305 Fiduciary duty to avoid a conflict of duty and interest (rule against
Fiduciary duty not to make secret profits, accept secret commissions or take bribes 306 Fiduciary duty not to use principal’s property or information for self gain 306 A principal’s duties to an agent 306 Termination of agency 307 Questions 307 11 Partnerships 309 Choosing the appropriate business structure 309 Types of business organisations 309 Advantages and disadvantages of various business organisations 310 Naming the business 311 Creation of a partnership 311 Are any formalities required to create a partnership? 311 Definition of a partnership 312 Carrying on business 312 A business or a hobby? 312 Ferguson v Federal Commissioner of Taxation (1979) 312 Federal Commissioner of Taxation v Walker (1985) 313 Carrying on business or a single venture 313 Canny Gabriel Castle Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 313 Carrying on a business in common 314 The problem stated 314 Mutuality of rights and obligations 315
The Partnership Act 1958 (Vic) s 6 — the statutory rules 316 Cox v Hickman (1860) 317 Plummer v Thomas [2002] 318 Megevand: Ex parte Delhasse, Re 319 Carrying on business in common with a view of profit 319 Partnerships are contractual relationships 319 Steckel v Ellice [1973] 320 Rules governing partners’ relationship with each other 320 The contract between the partners 320 The Partnership Act 321 Partners’ duties of good faith 322 Kak Loui Chan v John Zacharia (1984) 322 United Dominions Corp Ltd v Brian Pty Ltd (1985) 322 Duty to make disclosure 323 Duty to account for benefits derived from dealings with partnership 323 Duty to account for use of partnership assets 323 Duty not to compete with partnership 324
What does joint liability mean? 327 What are the firm’s debts and obligations? 328 Commercial partner’s normal authority 328 Young v Lamb & Ors [2001] 329 Goldberg v Jenkins (1889) 330 Ratification 330 Oppenheimer, Re (1872) 330 The proviso to section 9 330 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 331 Mercantile Credits Co Ltd v Garrod [1962] 331 Joint and several liability for wrongful acts 333 What are wrongful acts or omissions? 333 When are acts in the ordinary course of the business of a partnership? 334
Liability is joint and several 335 Joint and several liability for misapplication of money or property 335 Liability by holding out (estoppel) 336 D & H Bunny Pty Ltd v Atkins and Naughton [1961] 336 Leaving the partnership 337 Tower Cabinet Co Ltd v Ingram [1949] 337 Elders Pastoral Ltd v Rutherfurd (1990) 338 Debts incurred after death or bankruptcy of partner 338 Debts incurred before resignation or admission of a new partner 338
Section 124(1) powers 349 Types of companies — general classification 350 Proprietary company 350 Public company 350
Companies limited by shares 351 Companies limited by guarantee 351 Unlimited companies 351 No liability companies 352
The rule in Salomon’s Case 352 Salomon v A Salomon & Co Ltd [1897] 352 Lee v Lee’s Air Farming Ltd [1961] 353 Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1987) 353 Registering a company 354 Steps for registration of a company 354 The company’s constitution and rules 354 Implications of the certificate of registration 355 Managing a company 355 Comparison of companies and partnerships 355 How does a company create contracts? 356 How does a company sign a contract? 357 When is a company bound by the actions of its agents? 357 People having dealings with a company may make certain assumptions 358 Compliance with the constitution and replaceable rules 359 Reliance may be placed on ASIC records 360 Holding out 360 Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 360 Customary powers 361 Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 361 When do the assumptions not apply? 362 Bank of New Zealand v Fiberi Pty Ltd (1994) 362 Questions 362 13 Duties of Company Directors and Other Officers 364 What are the functions of a director? 364 The source of directors’ duties 365 Reasonable care and diligence 366 State of South Australia v Clark (1996) 366 Circle Petroleum (Qld) Pty Ltd v Greenslade (1998) 366 The business judgment rule 367 Is any particular level of skill required of a director? 367 The level of attendance required 368 The importance of being informed 368 The role of reliance 368 The duty to act in good faith and for a proper purpose 369 The duty to act in good faith 369 Walker v Wimbourne (1976) 369 Directors’ duty to exercise power for proper purposes 370 The duty not to use inside information improperly 370 What kind of information must not be used? 370 Cranleigh Precision Engineering Ltd v Bryant [1965] 371 Green & Clara Pty Ltd v Bestobell Industries (1982) 371 The duty not to mis-use the position 372 Cummings v Claremont Petroleum N L (1993) 372 Contracts with the company 373 The duty imposed on directors to disclose certain interests 373 The consequences of a breach of statutory duty 373 Civil consequences 374 Criminal consequences: s 184 374 Directors’ duties at common law 374 Kinsela v Russell Kinsela Pty Ltd (in liq.) (1986) 375 The insolvent trading rule 375 When is a company insolvent? 376 What remedies or sanctions may apply? 376 Defences to section 588G 376 Defence under section 588H(2) 377 Defence under section 588H(3) 377 Defence under section 588H(4) 378 Defence under section 588H(5) 378
Trustee 387 Trust property 387 Beneficiary 387 Duration of a trust 388 Trusts compared with other entities 388 Types of trusts 388 Discretionary trusts 389 Fixed trusts 390 Unit trusts 390 Operation of a trading trust 391 Trustees’ powers 391 Express powers 392 Implied powers 392 Statutory powers 392 Trustees’ duties, rights and liabilities 392 Duty of prudence, diligence and honesty 392 Bartlett v Barclay’s Bank Trust Co Ltd [1980] 393 Personal liability for debts 394 The right of indemnity 394 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in Liq) [2002] 395 Insolvent trading by corporate trustee — directors’ liability 395 Beneficiaries’ rights and liabilities 396 Personal right of action against the trustee (‘right in personam’) 396 Proprietary right of action in respect of the trust property (‘right in rem’) 396 Foskett v McKeown and Ors [2000] 397 Beneficiaries’ liability to creditors 398 Hardoon v Belilios [1901] 398 Landsales Ltd v B Pty Ltd 399 The position of creditors in regard to a trading trust 399 Termination of a trust 399 Questions 400 Directory: academic academic -> Chapter Thirteen: The Emergence of Modern Texas Politics academic -> Chapter 12: Sixties Freedom On December 1, 1955, Rosa Parks academic -> Hi-Tech and Alternative Medicine: The Role of the New Middle-Class in the Globalisation of Culture Student: Nicolas John Supervisor: Dr. Eva Illouz academic -> Subject Matter Knowledge (smk) Requirements Matrix Academically Advanced, PreK-8 academic -> Cumulative Essay Questions from Past ap exams academic -> Pros and Cons of Dropping Atomic Bomb pro academic -> Experience: 2006- present Assistant Provost for Academic Quality academic -> Legal History: Research & Resources March 5, 2014 11: 30 a m academic -> Directions: You are to answer the following question. You should spend 5 minutes organizing or outlining your essay Share with your friends:
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