Commercial Law Notes

Issues e. g. whether there was a breach of duty * Principles e. g. Breach if burden of harm was not great * Authorities e. g. Woods v Multi sport holdings ltd * Applications e. g. The burden of using helmets was significant * Conclusion e. g. there is no breach Law of Contract Terms of the contract * Express terms * Terms stated and agreed to by parties * In simple cases, terms stated in offer * Eg, $ reward for cat * Major commercial contracts require signs from both parties. * Contract contains most terms * But, only needs to be written when statute requires Not necessarily written in 1 document. * Pre-contractual statements * If statement made during contractual negotiation is incorrect: * Breach of contract only if statement is term of contract. * 3 classifications i. Puffery (not K) a. Terms not taken seriously ii. Representations (not K) b. Statements which induce to contract, but not guaranteed. iii. Terms (K) c. Statements designed to be binding, guarantee of truth. * If terms breached, remedied for breach of contract. * However will depend on Intention * Oscar Chess v Williams [1957] * Intent to guarantee truth of statement?

Term/representation * Defendant had no intent to promise truth * No greater knowledge than purchaser, neutral language. * Reasonable person would not expect guarantee. * Factors which determine intention to bind * Language used (promise etc) * Savage v Blakney (1970) * Seller gives estimate as answer to q * No breach of k due to being estimate only * Time of statement (has time passed since statement to agreement? ) * Was it made in preliminary stage? * Content of statement (importance/likelihood of intention) * Van Den Esschert v Chappell [1960] Importance of the statement led to being breach * Existence of written memo * Was statement still present in written form? * Relative knowledge/expertise of parties * Statement made by party knowledgeable likely to be binding * Dick Bently Productions Ltd v Harold Smith Motors [1965] * Implied Terms * Not stated, but are included anyway. * Eg, implied duty not to share confidential info * Faccenda Chicken Ltd v Fowler [1986] * Binding on all employees and post-employment * Terms apply equally to written terms, but cannot contradict * Courts are reluctant to implied terms terms may be implied: * If parties have history in dealing, terms from earlier agreements * Depends on if consumer or commercial contract, and whether term found in similar contracts * Through custom * Implied through established custom * Established practice in workplace/market/trade etc * Sagar v H Ridehalgh & Son [1931] * Implied term due to custom held as term * Cannot contradict terms of contract * Summers v Commonwealth (1918) * Business Efficacy * Imply terms so that contract achieves what parties intended * Term must be: Reasonable * Necessary to give efficacy * Obvious * Clear * Cannot contradict any express terms.

* Terms implied by law * Common law implied as “a good idea” * Statute law implied term from legislation. * NSW sales of goods act 19(2) Classification of terms * Conditions * Terms which are vital to the contract * Breach causes fundamental change in contract * If a condition is breached, innocent party can terminate contract (and sue for damages) * Poussard v Spiers and Pond (1876) * Contract termination valid due to not performing contract. Conditions may be written as an express term however if not written may be constructed later * Warranties * Minor/non-essential terms * Does not allow termination of contract, only damages as contract can still be performed * Bettini v Gye (1876) * Could not terminate as was only warranty was breached * Determining whether a term is condition/warranty * Essentiality test * associated news papers Ltd v Bancks (1951) * Essentiality test allowed termination as breach condition, not warranty Ending the contract * Breach * Breaches occur through * Clear failure to perform * Defective performance Action by 1 party making performance impossible * 2 types of breach * Actual breach * Anticipatory breach * Foran v Wight * Upon breach of condition, innocent party can either * Sue for damages * Or elect to * Terminate * Continue * Decision must be clear * If termination is automatic (impossible to perform) no notice required * Frustration

* If performance of contract becomes impossible by external event * Event has to “radically change” parties rights/obligations * Neither party can have caused event/contemplated * Taylor v Caldwell (1863) * Would be unjust to hold parties to contract Contract is terminated * Misrepresentation * When representations are un-true * If made pre-contractually statements may become contractual term * If so, misrepresentation will be breach, claim for damages * Some cases where misrepresentation is not breach of contract but still actionable * To be actionable, misrepresentation must be: * False * Silence is not usually misrepresentation * Bell v Lever Bros * Statements which later become false must be disclosed * Half-truths, statements not representing whole truth are false * Statement of fact Excludes statement of opinion * Bisset v Wilkinson [1927] * Exception when opinion from person holding self as expert * Esso Petroleum [1976] * Excludes false promises which D will do in future * Exception where D never intended to carry out * Edgington v Fitzmaurice (1885) * Excludes puffery * Dimmock v Hallet (1866) * Addressed to the party which was misled * P must show he was recipient of representation * Cannot be induced by statement aimed at someone else. * Intended to induce, and did induce the party to the contract. Representation must be 1 of reasons contract was entered * Doesn’t need to be sole reason

* Edgington v Fitzmaurice * Induction can be rebutted by showing P already knew facts, or did not rely on representation * Gould v Vaggelas (1985) * Types of misrepresentation * Fraudulent * Involves deliberate untruth. (also careless to whether true/false) * Derry v Peek * Remedies: rescind (end while restoring to previous state) contract or seek damages under tort deceit * Innocent False representation, however not fraudulent honestly believed statement * Leaf v International galleries [1950] * Remedies: rescind contract only * Negligent * Innocent misrepresentation can be negligent * Applies when false statements given carelessly by person with duty of care * Remedies: rescind contract or seek damages under tort negligence * Duty of care exists when: * D knows he is being trusted to give advice on serious matter * It is reasonable for P to rely on that advice shaddock & associates Pty Ltd v Parramatta city council (1981) * Limitations on rescinding contract. * Cannot rescind if parties cannot be restored to pre-contract positions. * Vigers v Pike (1842) * Lapse of too much time * Leaf v IG [1950] Misleading or deceptive conduct * Consumer and competition Act 2010 (cth) schedule 2 sec 18(1) * A person must not, in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive * Nothing in other sections (3-1) limits implications of above. Cannot be excluded by exclusion clause

* Covers silence, opinions, future events * Applies in cases where there are * Misrepresentation * Comparative advertising (untruthful downgrading of competitor’s product) * Colgate-Palmolive v Rexona (1984) * Passing off cases protecting face, character, name, etc * 20th century fox v south Australian brewing co (1996) * infringement of copyright * Remedies * Injunctions * Damages/compensation * Any order which court deems appropriate * Target audience * Determines what standard will be applied Capacity to mislead depends on target audience * Audience exposed may be wider than intended group * it is considered whether the conduct is misleading to the group exposed * however this is not always the case * Surge licencing inc v Pearson (1991) * Who was the relevant audience? * If children, may not be misleading as they will not understand character merchandising or marijuana * If general public (held as so) is misleading * This was due to flow on effect from children to parents * Also market was attended by public at large Misleading or deceptive conduct, relevant standards * One there is an affected class, the conduct must be assessed based on that class * An appropriate minimum standard to be expected from that class is unclear * There are 3 alternate approaches to establish the standard * Approach A * The impact of the conduct on “reasonable” members of the class, reasonable person test * Approach B * The impact on all purchasers including “uneducated, inexperienced, gullible. Those who make decisions based on “appearance and general impressions”

* Approach C Test on “less than average intelligence and background knowledge”, though not “quite unusually stupid” * Approach B and C offer more consumer protection than A (reasonable persons test) * Make sure to use all 3 approaches * objective test * Evidence that a person has been misled is relevant, but not essential * Eg, expert survey on likelihood to mislea * Nor is it conclusive * Court determines for self as test is objective * Additional principals * Causation * Conduct must be likely to cause error * Australian Taco company v Taco Bell * Predictions Predictions of the future which may be misleading/deceptive unless firm has reasonable grounds to believe these are true at time of statement * Exclusion clauses + disclaimers * General clauses are ineffective eg, “purchaser acknowledges that he has not relied on representation of vendor” * However if a disclaimer is capable of removing chance of error, may avoid liability * No need for knowledge/intention of defendant * Mcdonalds v mcwilliams’s wine * Not mere confusion/uncertainty The law of negligence * Introduction * Established in 1932 Donohue v Stevenson [1932] * Neighbour principal * You must not injure your neighbours * Classified as persons who are directly affected by act Duty of care * Current approach to novel cases in determining duty of care * Foreseeability of harm to general class of persons * Salient features of each case (relation etc) * Established categories * Alternate way to establish duty of care, points to past precedents * Cases established in that particular relationship * In most cases DOC is established, question is whether it has been breached * Manufacturers/consumers Trade practices act/Sales of goods act (remember both manufacturor and seller owe duty) * Donoghue v stevenson [1932]

* Grant v AKM [1936] * Suppliers of dangerous goods * McCabe v BAT Aust (2002) * Firearms/pharmaceuticals * Motorists/road users * Employer/employee * Paris v Stepney Borough Council (1950) * Prison authority/prisoner * School/pupil * Hospital patient (medical negligence leading to death) * Doctor/patient * Rogers v whitaker (1992) * Occupier of land/entrants * Australian safeway stores v Zaluzna (1987) * Hackshaw v shaw (1984) (farmer tress pass) Nagle v rottnest island authority (1993) (quadriplegic case) * Nervous shock and 3rd parties * Jaensch v Coffey (1984) (car accident, wife shock) * General principals * A person is not negligent in failing to take precautions against a risk of harm unless * The risk was foreseeable * The risk was not insignificant * A reasonable person would have taken these precautions * To determine this the court considers: * The probability the harm would occur if precautions not taken * Likely seriousness of the harm The burden of taking precautions against the harm * The social utility of the activity causing the harm Breach of duty of care * In determining breach, must determine standard of care * Defendant who falls below this standard is negligent * Standard of care * Standard which “reasonable prudent person” would observe * What a reasonable man would, in circumstances, do in response to the foreseeable risk * Cook v Cook (1986) * 2 Issues * Would a reasonable person in defendant’s position foresee that their conduct involved risk to injury? Was the injury not farfetched? And was the risk not insignificant? * Civil liability act, s9, something more required than remote possibility * Once the risk was established as foreseeable and not insignificant, need to determine if a reasonable person would have taken precautions in those circumstances * 3 pronged test * Probability that harm would occur if care not taken * If probability is high, standard of RP is high * Bolton v Stone [1951] (risk low RP would disregard)

* Likely seriousness of the harm Paris v Stepney Borough Council (1950) (eye injury, bolt) * Employer in breach as consequence was serious risk, RP standard high * Confirms even when risk low, if potential damage high RP is high * Burden of taking precautions to avoid risk of harm * Woods v Multi-sports holdings (helmets indoor cricket) Causation * Once negligence proven plaintiff must prove defendant was responsible for causing injuries * D’s conduct must have caused the damage (casual connection between breach/damage) * Civil liabilities act 2002 (NSW) If damage would have happened even if care was taken, then negligence is not cause of damage * Known as the “but for test” * Barnett v Chelsea Hospital [1969] * Common sense principals (important where there are multiple causes as but-for is inadequate) * Remoteness of damage (say which category damage falls into) * Recognized categories * Physical damage/injury * Damage to property * Economic loss * Nervous shock * Damages must be reasonably foreseeable by reasonable person * Damages must be not be too remote and risk be ‘very likely’ or ‘real’ * The wagon mound no. [1961]/no. 2 [1962] respectively Defences (under civil liabilities act 2002) * Contributory negligence

* Partial defence, P contributed to damages through own negligence * Apportioned damages * Voluntary assumption of risk * Complete defence, consent to do activity with knowledge of risk * Knowledge of risk must be obvious, must be aware Vicarious liability * Makes employer responsible for negligence of employee * Two main issues * Issue 1: Was person who committed negligent act an employee or contractor? Assuming person was employee, was negligent act in course of employment? * Distinguishing between employee and contractor * Control test * Zuijs v wirth bros (1955) * Can the employer control the employee? (does not have to be, but can they? ) * If so employee (eg work hours, place of work) * multi-factor test employed more recently, used in Hollis v Vabu(2001) * If employee factors dominate worker = employee, vice versa * However no one indicator is decisive * Labels are meaningless, (if all features are rooster, can’t call duck) Issue 2: was the negligent act committed in the course of employment? * Employer only responsible for torts committed by employee in acts within course of employment * Not liable for acts while employee is ‘on frolic of their own’ * Employee is personally liable * Deatons P/L v Flew (1949) * Barmaid threw beer glass, blinding customer, not vicarious as not within course of employment (only serve glasses) * Courts examine motivation behind act * Acts motivated by personal grievance are not usually vicarious

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