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Lecture 3: Introduction to Contract Law

Rule Acronym Case

Elements of a 1. Agreement AIC (Ay, I C)


contract 2. Intent to be bound
3. consideration
Other elements - legal capacity
- genuine consent
- legality of purpose
Rules in relation to 1. intention to be bound IFC (tower) Clarke v Earl of
offers 2. firm promise Dunraven
3. communication of offer
Carlil v Carbolic
Smoke Co
Statements that - invitation to treat Pharmaceutical
are not offers - requests for Society of GB v
information Boots Cash
Chemists

Harvey v Facey
Rules in relation to 1. strictly in response to SMA (suck my
acceptance the offer ass-ceptance)
2. must be communicated
3. unqualified, absolute,
unconditional

Termination Offeror must know offer


has been withdrawn before
there is acceptance
Postal rule offer by letter effective
when received by offerree
- acceptance effect as
soon as it is posted
- cancellation must
be received before
letter of acceptance
is posted
Rules in relation to 1. essential DR. LEVMMP Wigans case
consideration 2. must not be past (must (I think you cannot claim benefit
be present or future) should of contract if no
3. move from the CONSIDER a consideration
promisee DOCTOR) provided for
4. value promise
5. more than an existing
duty
6. definite
7. legal
8. referable

A practical benefit can be


good consideration
Insufficient - promise to perform Foakes v Beer
consideration duty already
imposed by contract
- part payment
- Moral obligations
or natural love
Promissory - Allows a promise to Central London
estoppel be enforced even Property Trust Ltd v
though the promise High Trees House
has not provided Ltd
good consideration
for that promise Waltons Stores
- It operates where it (Interstate) Ltd v
would be Maher
inequitable or
unconscionable for
the promisor not to
be held to their
promise
Lecture 4: Contract Law (contd)
Rule Acronym Case

Insufficient 1. Promise to perform duty


consideration already imposed by contract
2. Payment of a lesser sum (part
payment)
3. Moral obligations or natural
love
Promissory Allow a promise to be enforced
estoppel even though the promise has not
provided good consideration for
that promise
Brennan Js six- 1. Promisee (Maher) assumes (how) Waltons v Maher
point test existence of particular legal ARRIDU
relationship (brennan) Commonwealth
2. Promisor (waltons) of Australia v
responsible for this Verwayen
assumption
3. Promise acted / did not act in Giumelli v
reliance on that assumption Giumelli
4. Promisor knew what promise
intended for promisee to act
in this way
5. Promise will suffer loss or
detriment or harm if the
assumption is not fulfilled
6. Promisor did not take any
steps to warn promisee they
may not fulfil expectation and
unconscionability would
arise if promisor allowed to go
back on promise

Intention to create Must be evidence that the parties


legal relations intended to make a legally
enforceable contract
Subject to contract - Expressly no intention
- Subject to contract classes
show that the document is
not in its final form and it
subject to preparation of
written document

Presumed intention - Objectively determine


TRADITIONALLY whether parties intended
to be legally bound
- Social family:
o presumed NO
INTENTIONS
- Commercial:
o PRESUMED
INTENTION
- Relevant presumption
applied
- Presumption could be
rebutted by evidence
- Party without benefit of
presumption (e.g.
defendant in commercial
agreement) bears onus of
rebutting it
Intention Presumptions NOW Ermogenous v
ABOLISHED Greek Orthodox
Community of
Traditional approach NO SA
LONGER applies

Situation will DEPEND ON THE


FACTS OF A CASE

Intention: - Social:
Relationship of the o relationships made
parties between friends or
acquaintances
- Domestic:
o relationships
between family
members and
relatives
- Voluntary: parties
volunteer their services
Intention: domestic < use Cohen v Cohen
agreements textbook
Wakeling v
Ripley

Intention: < use Teen Ranch Pty


voluntary textbook Ltd v Brown
agreements
Ermogenous v
Greek Orthodox
Community of
SA

Intention: domestic Status of parties


/ social or voluntary - Type of relationship and
relationships degree of closeness
- Nature of relationship at
time of agreement
- Whether there is
agreement / consensus
between parties and extent
to which is defined as
DEFINITIVE
- Seriousness of conduct
- Expenses of
inconvenience or
substantial detriment
involved?
- Litigation for non-
performance?
- Agreement formal or
informal?
Intention: - Assumption parties Banque Brussels
commercial / intended to create legal Lambert SA v
business contractual relations Australian
- But: considered on a case National
by case basis Industries

Kleinwort
Benson Ltd v
Malaysian
Mining
Corporation Bhd

Contents of a 1. Non-contractual statement Oscar Chess v


contract: 2. Made-pre contract during Williams (pp.
representation negotiations 276 277)
3. Not intended to be legally
binding Bentley (dick)
4. If false, it is a Productions Ltd
misrepresentation v Harold Smith
5. Importance of truth of the (Motors) Ltd
representation
6. Reliance of innocent party on
representation
7. Time period between
representation and final
agreement
8. Omission of representation
from contract
9. Consider any special
knowledge or skills of person
who made representation
Representation: - How much time has pp. 275-277
objective tests lapsed between making of
statement and final
agreement?
- Was the innocent party
asked to check or verify
the statement /
representation?
- Was the statement /
representation made with
intention of presenting
other party from finding
any defects?
- What importance did the
parties attach to the
statement?
Representations - Parol = spoken
and the parol - If contract is in writing
evidence rule and the if the writing
appears to contain the
whole contract, it is
presumed that the writing
contains all of the terms of
the contract
- Courts are reluctant to
admit evidence of words
or representations made
prior to execution of
contract that might
contradict the written
contract
Terms of the - Express can be: oral,
contract written and both
- Implied can be: to give
the contract help to make
sense of the contract,
custom or business usage,
previous dealings,
intention of the parties,
courts to define the terms

Implied terms - For terms to be implied, BROEC


they must (hey
o Be reasonable BRO(ec)
and equitable
o Be necessary to
give business
efficacy
o Be so obvious it
goes without
saying
o Be capable of clear
expression
o Not contradict an
express term of the
fact
Statutory implied - Add terms to contracts
terms where consumers are
involved
o E.g. Concerning
fitness for purpose
o Acceptable quality
o Compliance with
description

Types of terms - Condition Table 281


o Essential
o Allows injured
party to rescind
- Warranty
o Non-essential
o Allows injured
party to damages
Condition or < use Bettini v Gye
Warranty textbook
Poussard v Spiers

Uncertain terms - If there have been prior


dealings, courts may apply
appropriate terms
- Where there are o past
dealings, courts may be
forced to find contract
void for uncertainty

Meaningless terms - If the term has no


meaning, the courts will
sever it if possible and
leave the rest of the
contract valid
- If this is not possible, the
court will be void for
uncertainty

Ambiguous terms - If a term has more than


one meaning, the contract
will not necessarily be
void for uncertainty so
long as the term can be
given a meaning
- If it cannot be given a
meaning, the contract will
be void
Lecture 5: Contract Law (contd)
Rule Acronym Case
Exclusion clauses - Purpose to exclude or Olley v
limit liability of the Marlborough Ltd -
person inserting them Exclusion clause
- Effectiveness depends must be incorporated
on construction of into original contract
contract, taking into
account bargaining Thornton v Shoe
position Lane Parking -
- Notice of exclusion General fault of
must be given before customer for being
or at the time of unaware: exclusion
contract clause agreed to
- Not binding unless upon entrance of
properly inserted into contract
contract
Causer v Browne -
Terms must be
incorporated into
original contract

LEstrange v
Graucoub

Negligence rule Clear words must be used to White v John


exempt or limit liability for Warwick
negligence
Ambiguity / Contra Against the offeror / person Andar Transport v
Proferentem rule who drafted the clause Branbles
Four corners rule Exclusion clauses do not
apply to actions outside the
contract

Do not apply to situations


involving deliberate breaches
outside the objects of the
contract
Natural and Exclusionary clauses should
ordinary meaning be conducted according to
rule their natural and ordinary
meaning when read in view
of the contract, rather than
strictly construing them
Statutory Some statutory provisions S18 misleading or
modifications may render exclusion clauses deceptive
ineffective, particularly with
consumer protection and S29 prevents
insurance misleading
representation
S64 prevents
exclusion of implied
terms and warranties
in consumer
contracts
Terms and Collateral contract: a promise
collateral contracts in the main contract that gives
rise to a separate contract

NOT a term of the main


contract: it has an
independent existence to the
main contract (co-exists with
the main contract)

Main contract: between you


and the retailer

Collateral contract:
manufacturers contractual
promise to retailer

Terms of an existing contract


may be changed by:
- Completely
discharging existing
contract and
substituting it with
new contract
- Leaving existing
contract in place but
adding new terms or
changing existing
ones (can only happen
with the full
agreement of all
parties)
Capacity Presumption that everyone
has full legal capacity

Lack of capacity will


invalidate the contract

Subject to incapacity
- Minors
- Mentally ill
- Intoxicated
- Corporations /
companies
Consent There must be a genuine
agreement between the
parties to a contract as to its
nature and scope
Proper form Consider are there any
statutory procedural
requirements that need to be
satisfied

A lack of compliance with the


required formalities may
make the contract void or
unenforceable
Privity of contract Only a party to the contract
has any rights under the
contract

The contract only imposes


obligations on the parties to
the contract
Agency Exception to doctrine of
privity
- An agent: a person
who is authorized to
enter into contracts on
behalf of another
person, who is called
the principal
- The contract is
between the principal
and the third party, not
enforceable against
the agent

Agency: the legal relationship


between AGENT (A) having
authority to act and having
consented to act on behalf of
another PRINCIPAL (P) in a
contractual relationship with
TP
Created by:
- Agreement
- Operation of law
under doctrine
- Retrospectively by
ratification of the
agents acts done on
behalf of the principal
but without prior grant
of authority
Lecture 6: Contract Law (contd)
Rule Acronym Case
Mistake If a mistake operates, it
often renders a contract void
as if no contract ever
existed

Types of mistake Common mistake: both


parties make the same
mistake as to the existence
or identity of the subject

Mutual mistake: parties are


at cross-purposes, both
parties have made a mistake
but each party has made a
different mistake

Unilateral mistake: only on


o eft parties is mistake, and
the other is, or should be,
aware of this and does
nothing to correct the
mistake
Representation A representation is a
statement of fact made
either before or at the time
of contracting relating to an
existing face or a past event
which induces the contract
Misrepresentation - In contract
- In tort
- Misrepresentation
legislation (ACL)
- Statement of fact
- Communicated to
another
- An inducement

Minor non-contractual or mere


misrepresentation misrepresentation no
remedy for breach of
contract but may be
remedies under other heads
of law
Major actionable
misrepresentation misrepresentation
voidable allows innocent
party to cancel / rescind the
contract
Fraudulent intention to induce a person
misrepresentation to enter into a contract
voidable rescission and / or
damages

Innocent - Misstatement of a
misrepresentations matter of fact
- lack of intentional
deceit
- not known to be fault
- rescission
Misrepresentation S18: misleading or
and legislation deceptive conduct

S29: false representations


Illegal contracts - Contracts to commit
a crime
- Contracts that are
immoral
- Contracts to the
prejudice or of good
relations
- Contracts prejudicial
to the administration
of justice
- Contracts which
promote corruption
Duress Duress involves use of
violence or illegal threats to
force them to enter into a
contract against their will

Duress to the Actual or threatened


person violence to one contracting
party, or their immediate
family or near relatives
Duress to goods Wrongful threats to seize,
damage or destroy the goods
of one contracting party

Economic duress Economic pressure beyond


normal acceptable
commercial practices

Undue influence Improper use of a position


or power possessed by one
person over another in order
to induce that other person
to act for their benefit

Unconscionable or Contract set aside as unfair Commercial Bank


unfair contracts where the defendant has v Amadio
(and elements) abused their superior - Commercia
bargaining position in their l bank knew
dealings with the plaintiff amadio
could not
- They were in a speak
position of special English
disability or special - Used
disadvantage bargaining
- That substantially power to
affected their ability get him to
to protect themselves sign a
- The defendant knew, contract
or ought to have
known, of the
plaintiffs disability
and should not have
taken advantage of it
- The actions of
defendant were
unconscionable
Restraint of trade Anything contrary to
clauses freedom to engage in trade,
employment or consume
without undue restrictions is
a restraint of trade

Generally will be
unenforceable unless the
restraint is reasonable
Reasonable - Geographic extent
restraint of trade - Time period
involved
- Nature of the
business and the
activity being
restrained
- Whether the restraint
is reasonable, both in
the interests of the
parties and the
public
Valid A contract which the law
Enforceability will enforce

Valid but Due to a formal defect


unenforceable
enforceability

Voidable The contract remains valid


enforceability and binding unless and until
it is rescinded by the injured
party
Void enforceability No legal rights or
obligations from the outset

Illegal The purpose of the contract


enforceability contravenes a statue or the
common law, and generally
treated as void

Breach of contract Remedies


- Common law
termination of
contract
- Damages

Equity
- Rescission
- Restitution
- Ratification
- Specific
performance
- injunctions
Common law Total breach: Performance: Re
termination of - where one of the Moore & Co Ltd
contract parties does not and Landauer & Co
perform the contract
at all Frustration:
Codelfa
Constructions Pty
Ltd v State Rail
Authority
Partial breach: - where one of the
parties does not
perform the full
requirements of the
contract
By performance: - contract usually ends
when each party has
performed its
contractual
obligations
o obligations
under a
contract must
be performed
exactly
o near enough
is not good
enough

By agreement - contractual
obligations can be
discharged by
agreement between
the parties

By operation of law - bankruptcy, death,


material alteration of
a written document
without consent,
merger of contract
terms into one
document

By lapse of time - when contract


stipulates a time
period after which it
will expire and
parties allow this
time to lapse or
expire

By frustration - after formation of


the contract,
performance may
become impossible if
something
unexpected happens
over which neither
party has control
- significant or radical
change to nature of
contractual rights
and obligations by
an unexpected event
- neither party caused
the unexpected event
- neither party
contemplated the
unexpected event
when the contract
was entered into
- unjust to hold the
parties to the
originally agreed
contract

Common law Main purpose of damages is Hadley v


damages to enable the innocent party Baxendale: too
to receive monetary remote contract to
compensation for injury or be breached
loss suffered because of the profits loss were
breach too remote for
baxendale to have
Damages are calculated on caused loss
the basis of looking at what
the position of the plaintiff
would have been if the
contract had been properly
formed
Causation in The loss or damage that the
damages plaintiff has suffered was
caused by the defendants
breach the loss or damage
would not have been
suffered but for the
defendants breach

The plaintiff must show that


the breach of contract by the
defendant was the cause of
the loss there must be a
connection between the
breach and the loss suffered

Is the loss suffered usual and


reasonably direct
consequence of the breach?
Remoteness in Only those losses that are Victoria Laundry
damages reasonable direct from the (Windsor) Ltd v
consequence Newman Industries
Ltd reasonable
Compensation will not be foreseeability
awarded for damages that
are too remote

If an additional factor
unconnected with the
defendants breach breaks
the casual chain

Losses which flow naturally


from the breach

Special losses made known


to defendant when the
contract was made
Damages Damages for special losses
- the plaintiff made
known the special
circumstances or the
defendant ought
reasonable to have
contemplated them
at the time the
contract was made
- of so, the defendant
will be taken to have
accepted the risk by
default
Amount of the aim of damages is to put
damages the injured party back as
close to the position they
would have been in had the
breach never occurred

damages are recoverable for


economic loss as well as for
- distress and
disappointment
- upset / anxiety
- discomfort
- mental distress

Mitigation of Mitigation is a question of


damages fact

The defendant to show that


the innocent part did nothing
to mitigate the loss

Innocent party has duty to


take reasonable steps to
minimize their loss

General damages Compensation for loss


suffered by the plaintiff as a
result of the breach

Nominal damages Defendant breached contract


but plaintiff has not suffer
any actual loss
Exemplary Punitive and may be
damages awarded for non-economic
loss

Liquid damages Awarded where a plaintiff is


able to sue for a specific
sum (specified in the
contract) which must be a
genuine or bona fide pre-
estimate of the actual loss
that will flow from the
breach

Unliquidated Damages that have to be


damages calculated according to
injured partys actual losses
the party makes submisses
as to quantum and the court
decided the amount

Penalty Only enforceable if amount


is a genuine pre-estimate of
the loss from the breach of
contract

Must not be extravagant or


unconscionable

Must not be designed to


apply pressure or intimidate
the other party

Must be transparent: based


on responsible criteria and
clear evidence information
as to how the amount is
calculated
Equitable The court orders the return
remedies: of property or the payment
restitution of money

Based on the concept of


some unjust enrichment

Can be used where there


has been:
- mistake of law
- duress
- element of
compulsion

Plaintiff must establish:


- defendant obtained a
benefit or
enrichment
- benefit was at
plaintiffs expense
- it would be unjust to
allow defendant to
keep benefit or
enrichment
- defendant has no
defenses (estoppel,
incapacity, illegality)
to rely on
Equitable Setting aside an agreement
remedies: and restoring parties to their
rescission: pre-contractual relations

Cancellation by right
Court order setting aside
contract, to restore parties to
pre-contractual position

May be granted because


- mistake
- misrepresentation
- undue influence
- duress
- unconscionability
Equitable The court corrects a written
remedies: document
rectification
Court order requiring
correction of mistake / error
to bring document in line
with correct agreement
between parties
Specific Court order requiring a party
performance to specifically perform their
contractual obligations
Injunctions Court order prohibiting a Lumley v Wagner
party from doing something Curro v Beyond
Productions Pty
Court order requiring or Ltd
compelling a party to do
something
Lecture 7: Consumer law
Rule Acrony Case
m
Consumer - Prevent businesses from
protection harming consumers
- Promoting fair
competition between
businesses
- Preventing business from
gaining an unfair
advantage in the market
at the expense of
customers and
competitors
Competition and - Regulates restrictive
Consumer Act trade practices to
(CCA) produce greater
competition and
efficiency in the market
- Protects the interests of
consumers against unfair
practices

ACL - Consumer law dealt with


by ACL
- Schedule 2 of CCA
- Ss20-22:
unconscionable conduct
- S18: misleading or
deceptive conduct
- S29: false
representations
- ACCC responsible for
administering the CCA
- Primary responsibility:
to ensure individuals and
business comply with
commonwealth
consumer protection and
practices law

A consumer is a person who


acquires goods:
- Up to 40k s3(1)(a)
- More than 40k used for
personal, domestic or
household purposes

A consumer is NOT: a person


who purchases products for
resupply for use in the
manufacture or repair

Unconscionable - Unconscionability Commercial Bank of


conduct provisions provide Australia v Amadio
consumers with
protection from ACCC v Keshow:
unconscionable conduct taken advantage of
Where one party to a lack of commercial
transaction is at a and educational
disadvantage because of experience of
- Age residents when
- Illiteracy selling educational
- Financial needs (etc.) material
- Sickness
- Lack of explanation ACCC v Excite
where required Mobiles: false and
- language misleading conduct
in selling phone
The plaintiff has to establish contracts on
- They were in a position commercially nave
of special disadvantage consumers
- That substantially
affected their ability to
protect themselves
- The defendant knew or
ought to have known of
the plaintiffs disability
and not taken advantage
of it
- Actions of defendant
were unconscionable
Unconscionable Defines unconscionability
conduct: section - A person must not in
20 trade or commerce,
engage in conduct that is
unconscionable
- Applies the common law
principles from Amadio
Case

Unconscionable Prohibits statutory


conduct: section unconscionability in connection
21 with the supply or acquisition of
goods or services
Unconscionable - relative bargaining
conduct: section positions of the parties
22 - did the consumer have to
comply with conditions
that were not reasonably
necessary?
- Did the consumer
understand the
documentation?
- Was there any undue
influence, pressure or
unfair tactics?
- Could the consumer have
obtained the same goods
or services elsewhere?
Misleading or Misleading or deceptive Mcwilliams Wines
deceptive conduct conduct, misrepresentation and Pty Ltd v McDonalds
unconscionable conduct in System of Australia
relation to financial services are not a breach becomes
looked at by ASIC the reasonable person
would not mistake
Conduct wines / hamburger
- Statements of opinion
- Broken promises and Parkdale Custom
false predictions Built Furniture Pty
- Statements that are Ltd v Puxu proper
literally true but which labelling similar
create a false impression product manufacturer
- Pre-contractual responsibility
statements
- Silence

But puffery in advertising


cannot be taken literally will not
be taken to infringe s18

What is NOT misleading or


deceptive
- More confusion or
causing uncertainty will
not amount to conduct
that is misleading or
deceptive
Misleading or A person shall not in trade or
deceptive conduct: commerce engage in conduct
section 18 that is misleading or deceptive
or is likely to mislead or deceive

Conduct is misleading if it will:


- Lead a consumer astray
- Lead a consumer into
making an error

Misleading or Elements
deceptive conduct: - Conduct by a person
s18 ELEMENTS - In the activity of
supplying goods or
services in trade or
commerce
- Who has engaged in
misleading or deceptive
conduct or conduct that
is likely to mislead or
deceive

Misleading or Test: Taco Company of


deceptive conduct: - It would lead one Australia v Taco Bell
s18 TEST ordinary member of the used for
public determining what
- Who is likely to read the conduct is misleading
statement or be - Identify
influenced by it relevant
- Into error sections of
public
Objective test to determine what - Determine
is misleading: effect of
- Whether a reasonable conduct
person would be misled - Decide
or deceived whether
conduct was
The standard should be set by capable of
reference to section of public being
exposed to relevant conduct misleading
- Decide
whether
conduct cause
misconceptio
n
Silence - Silence may be Henjo Investment PL
misleading or deceptive v Collins
- Conduct may be Merrickville there
misleading or deceptive is a duty to disclose
if failure to communicate relevant facts: silence
a relevant fact may cause was used as
the true representation of misleading for the
another fact to be sale of the business
misleading
-
False Breach of s29 will result in
representation: - Prosecution by the
s29 ACCC for criminal
offence
- Or the injured party
being provided with civil
remedies
The section prohibits the making
of false representations in
connection with the promotion
and supply of goods and
services
False 1a no false representation
representation about the standard, degree of
sections: s29 quality, value, grade,
composition, style, model,
history of previous use of goods

1b no false representations
regarding services

1c no false representations that


good or services have been
ordered

1e/f- regarding testimonials


relating to goods or services

1g about performance
characteristics, accessories use
or benefits of goods or services

1h regarding sponsorship
approval or affiliation
Unfair practices: a person prohibited from
Bait advertising advertising of goods or services
S35: at a special price where it does
not intent to offer those goods or
services for a reasonable period
in a reasonable amount

Both the promoter and


participants trying to recruit
others in the scheme are caught
under this section
Unfair practices: knowing you will not or cannot
No wrongly supply the promised goods /
accepting payment services
S36:
Unfair practices: a person shall not induce a
Referral selling consumer to enquire goods or
s49: services by representing that the
consumer will benefit after the
contract is made by providing
names of prospective customers

Unfair practices: no use of pressure tactics or


No harassment physical force or coercion
and coercion s50:

Unfair practices: a trading scheme in which a


Pyramid selling promoter offers to sell a
s44-46: particular product or service and
has the right to introduce others
into the scheme in the same way
Unfair practices: prohibits the sending of
Unsolicited credit unsolicited credit or debit cards
cards s39: to a person unless they were
requested

Unfair practices: prohibits a business pushing a


Unsolicited goods right to payment for unsolicited
or services s43: goods or services

Consumer Regarding title and right to


guarantees: s51 dispose of the goods

Consumer Undisturbed possession


guarantees: s52

Consumer Freedom from undisclosed


guarantees: s53 securities

Consumer Goods are of acceptable quality


guarantees: s54

Consumer Goods are fit for purpose


guarantees: s55

Consumer Goods match their description


guarantees: s56
Consumer Goods match the sample or
guarantees: s57 demonstration model

Consumer Repairs and spare parts will be


guarantees: s58 available

Defenses - Reasonable mistake of


fact
- Breach caused by a third
party or due to some
cause beyond control of
the defendant
- Defendant took
reasonable precautions
and exercised due
diligence of the
defendant
- Publishers defense:
reliance on information
supplied by another
person, information
received in the ordinary
course of business and
publisher had no reason
to suspect that
publication would breach
the ACL
Enforcement and - Part VI: contains
remedies provisions which enable
ACCC to institute
enforcement proceedings
Remedies for - Injunction
misleading or - Damages
deceptive conduct Deceptive or misleading conduct
must have caused the loss or
damage suffered
Enforcement and - Penalties (except for s18)
remedies: - Up to 1.1m
consumer law - 220k per offence
provisions - undertakings
- substantiation notices
- public warning notices
- infringement notices
- injunctions
- damages
other orders
- carrying or refusing to
enforce a contract
- refund money or return
property
- specific performance
- community service
- corrective advertising
- compliance programs
Enforcement and Penalties
remedies: - 10m
competition law - three times illegal benefit
provisions - 10% of turnover in
preceding 12 months
Individuals: 500k per offence
Cartel conduct: criminal
penalties

- s80: injunctions
- s81: divestiture
- s82: damages
- punitive and non-
punitive orders

Lecture 9:
Competition law
Rule Acronym Case
Competition - cartel offences
laws: types of - anti-competitive
conduct agreements
- misuse of market power
- exclusive dealing
- resale price maintenance
- mergers
The tests - competition test
o what is the effect or
likely effect on
competition in a
market?
- per se test
o speeding offence

Competition test Does the conduct have the


purpose, effect or likely effect of
substantially lessening
competition in a market?
- Anti-competitive
agreements (except
agreements that contain an
exclusionary provision)
- Exclusive dealings (except
third line forcing)
- Mergers
Anti-competitive - A corporation shall not ACCC v
arrangements make an arrangement or Liqourland
arrive at an understanding breached s45 for
if it has the purpose would misusing legal
have the likely effect of right to impose
lessening competition anti-competitive
- Contract, arrangement or agreements
understanding against
- Purpose competitors
- Effect or likely effect
- Substantially lessening
competition
Exclusive dealing - Forms of exclusivity TPC v Legion
include: Cabs legion
o Product exclusivity entered into
Minimum exclusive dealing
quantity where saying had
contracts to purchase
Requiremen minimum amount
t contracts of shell product
o Customer otherwise be
exclusivity penalized
o Territorial
exclusivity
- Such arrangements may be
imposed by either supplier
or acquirer

Mergers - A corporation must not ACCC v pioneer


directly or indirectly international Ltd
- Acquire shares in the and pioneer
capital of body corporate building prodicts
- Or acquire any assets of a (qld) pty ltd
person acquired
If the acquisition would have the competitor
effect or likely effect of without seeking
substantially lessening the ACCC approval
competition and market was
saturated and
Look for: competition
- Level of Import lessened
competition
- Barriers to entry to market
- Level of concentration
- Countervailing power in
market
- Likelihood of acquirer able
to increase prices or profit
margins
- Substitutes in market
- Characteristics of market
- Removal from the market
of a vigorous and effective
competitor
- Vertical integration in the
market (where
manufacturer owns its
supplier / distributor)
Per se test - Impact on competition does
not matter
- If you engage in the act in
the conduct, you are in the
breach of the act
Prohibitions
- Cartel conduct
- Contract containing
exclusionary provisions
- Third line forcing
- Resale price maintenance

Cartel conduct - Corporations must not ACCC v Roche


make effect to a contract, Vitamins Australia
arrangement or penalties
understanding that contains imposed on
a cartel provision multinational
- When businesses agree to companies for
act together instead of price fixing
competing
- Designed to drive up ACCC v Leahy
profits with illusion of Petroleum Pty Ltd
competing two price fixing
- Provision relating to cases against
o Price-fixing petrol companies
o Restricting outputs
in production or
supply train
o Allocating
customers suppliers
or territories
o Bid-rigging
Exclusionary - Corporations shall not McCarthy v
priovisions / make a contract or Australian Rough
primary boycotts arrangement or arrive at an Riders
any understanding if it Association
contains an exclusionary ARRA boycotted
provision Mccarthy from
- Provision of contract, other rodeos
arrangement or (breach s45)
understanding
- Purpose of preventing, News Limited v
restricting, limiting Australian Rugby
Football League
loyalty agreement
forced teams to
not participate in
super league
Third line forcing - Occurs where A forces B to Castlemaine
deal with C Tooheys Ltd v
- A supplies B on condition Williams and
that B acquires from C Hodgson
- PER SE TEST Transport Pty Ltd
Tooheys used
QRX and was
favored not third
line forcing

Resale price - An agreement between Ron Hodgson Pty


maintenance manufacturer and relater Ltd v Westco
not to sell a product beyond Motors
a certain price (Distributors) Pty
Conduct Ltd to establish
- Making it known resale price, must
- Inducing show discounting
- Agreement not to sell or practices were
resupply below specific reason for
price cancelling
- Withholding supplies for franchise
purpose of maintaining
price
- Use of price statement
likely to be understood as
minimum price
Misuse of market - Corporation with Queensland Wire
power substantial degree of Industries v The
market power Broken Hill
- Taking advantage Proprietary Co
- For a proscribed purpose Ltd BHP abused
o Eliminating market power by
competition refusing to sell to
o Deterring other competition
competition
o Preventing ACCC v
competition Australian
Safeway stores
pty ltd safeway
attempted to
misuse market
powet to
determine price of
bread

Melway
Publishing Pty Ltd
v Robert Hicks
did not take
advantage of
market
segmentation

Authorization - Can give an authorization


to agreements affecting
competition if benefit
outweighs any
incompetency
- ACCC can authorize
o Anti-exclusionary
provision
o Anti-competitive
agreement
o A secondary
boycott
o Exclusive dealing
o Resale price
maintenance
o mergers
Notification - exclusive dealing
notification
- businesses may obtain
immunity for conduct that
breaches exclusive dealing
by lodging a notification
Remedies for - penalties 10m
misleading - three times illegal benefits
deceptive - 10% of turnover
conduct:
competition law
Lecture 10: tort
law
Rule Acronym Case
Tort Civil wrong

Torts concern the safety,


property, reputation and
business and economic
interests of their neighbors
- matter of cause and
effect
- duty to compensate
Enforces duty of care

Found in common law and


statute law (civil liabilities
act 2002)
Liability Tort Is concerned with
remedies and provides
compensation for the injured
party and operates the basis
of remedies to persons
Negligence 1. duty of care: that the Donoghue v
defendant owes the Stevenson
plaintiff
2. breach of duty / Civil Liabilities
negligent conduct Act 2002
(the defendant
breaches their duty
by failing to reach
the standard of care
expected of them)
3. causation (the
defendants breach of
of duty factually
causes the plaintiffs
loss or damage)
4. remoteness (the
defendants breach of
duty legally causes
the damage. The
plaintiffs damages
must not be too
remote)
5. defenses
1. is there a Donoghue v
duty of Stevenson
care?
Grant v Australian
Knitting Mills
Flow chart of 1. does D owe P a duty
negligence of care?
a. Was it
reasonably
foreseeable
that Ds
conduct could
injure P
b. Was there a
vulnerable
relationship
(position of
reliance)
c. Any policy
consideration
s preventing
D to be liable
2. Has the defendant
breached the duty of
care?
a. Was the risk
foreseeable
b. Was the risk
not
insignificant
c. Would a
reasonable
person in Ds
position have
taken
precautions?
3. Has P suffered
damage?
a. Has P
suffered
actual loss or
actual
damage
b. Was damage
cased by D
breach of
Duty of care
4. Have any defense?
a. Contributory
negligence
b. Voluntary
assumption of
risk
Donoghue v 1. Supply of ginger
Stevenson: beer to shopkeeper
general principle 2. Sale of ginger beer
for Donoghue friend
3. Donoghue has drink,
no contract, therefore
tort

Ratio decidendi Intends them to reach the


of Donoghue v ultimate consumer in the
stevenson form in which they left him
with absence of reasonable
care in the preparation or
putting up of the products
will result in an injury to the
consumers life or property
owes a duty to the consumer
to take reasonable care

Neighbor test You must take reasonable


care to avoid acts or
omissions which you can
reasonably foresee
Is there a duty of Donoghue v
care? Stevenson

Grant v Australian
Knitting Mills
underwear with
chemicals,
manufacturer at
fault

Established Established categories


categories and - Authorities
salient features - Builder and client
- Drivers and
passengers
- Suppliers and
wholesalers
- Occupier and visitor

Salient features
- Foreseeability of
harm
- Degree of control
able to be exercised
by patient
- Vulnerability of
plaintiff from
defendants conduct
- Reliance by the
plaintiff upon
defendant
- Any assumption of
responsibility by the
defendant
- Proximity of
nearness in a
physical, temporal or
relational sense of
the plaintiff to the
defendant
- Any potential
indeterminacy of
liability
- Existence of
conflicting duties
arising from other
principles of law or
statute

Non-delegable The special duty requires the Norhtern


duty of care person owing the non- sandblasting pty ltd
delegable duty of care not v harris family
only to exercise reasonable sued landlord for
care for the functions it third party being
carries out himself but also negligent
ensure that reasonable skill landlord owed a
and care are taken in relation non-neg duty of
to those functions it leaves care
to others

Basically, a non-deleg duty


of care performance of an
obligation that cannot be
delegated to a third party

2. Is there a - The risk is


breach of foreseeable
the duty of - The risk is not
care? insignificant
(improbable)
- A reasonable person
in the defendants
position would have
taken precautions to
guard against the risk
of harm
A is the risk - A risk of harm of
foreseeable which the person
knew or ought to
have known

B is the risk not - Means not


significant improbable
- A serious risk of
harm

C would a - A probability of the Paris v Stepney


reasonable harm: probability of Borough Council,
person have harm would occur if Rogers v Whittaker
taken precautions care were not taken
(5b2a) Agar v Hyde
- The likely plaintiff knows
seriousness of the about the harm and
harm (5b2b) the risk removes
- The burden of the defendant from
taking precautions liability
to avoid the risk:
balance the extent of
the harm (size and
probability of harm)
against the costs of
taking preventative
measures (5b2c)
- The social utility of
the relevant
activity: social
utility of the activity
that creates the risk
of the harm

3. Causation - Must be some casual Strong v


connection between Woolworths
breach od duty of woolworths
care and damage negligent and owes
suffered duty of care
- Did the defendants
conduct cause the Yates v Jones act
plaintiffs injury not attributable to
- But for: the defendants,
defendants breach, causation by heroin
the damage would
not have occurred

Negligence has to be a
necessary of the occurrence
of the harm
4. remotenes - the defendant is not S5d1b a
s always liability for determination that
all the damage negligence cause
- only foreseeable particular harm
damage is comproses the
recoverable following elements
- damages cannot be - factual
too remote, causation
sometimes referred - that it is
to as legal or appropriate
attributive causation for the
- one based on scope of the
common sense negligent
- need connection persons
between breach and liability to
duty of damage extent the
o was the harm so
damage the caused
cause of the
breach
o was the
damage such
a kind that a
reasonable
person would
have foresee
- the test for
remoteness is
reasonable
foreseeability

Proving - onus is on plaintiff


negligence - person must establish
o he or she was
owed a duty
of care
o the duty was
breached
o the breach
caused the
damage
o the damage
suffered was
a foreseeable
consequence
of that breach
Foreseeability - duty of care ?
plaintiff
- breach of duty > risk
of harm
- remoteness >
damage
Defences to - contributory
negligence negligence
- voluntary assumption
of risk
- vicarious liability

Contributory - contributory Imbree v mcneilly


negligence negligence is the
plaintiffs failure to S5r and s5s
take care for their - same
own safety principles
- the plaintiffs apply to
negligence must help determining
cause the damage contributor
y
negligence
as apply to
determining
negligence
s5r1
- standard of
care is that
required of
a
reasonable
person in
the position
of a
plaintiff
s5r2
- liability can
be reduced
thus
defeating
the claim
for
damages
Voluntary - no injury is done to
assumption of the one who consents
risk - voluntary assumption
of risk is a complete
defense
- defendant must
prove plaintiff had
o precise
knowledge of
the risk
o full free
understandin
g and
appreciation
of particular
risk
o voluntarily
accepted the
risk

No liability for:
- inherent risk
(something that
cannot be avoided)
- obvious risks of
dangerous
recreational activity
- recreational activity
where warning was
given
Other exemptions - s57: no lability for a
person who, in good
faith and without
expectation of
payment or reward,
voluntarily assist a
person who is
apparently injured or
at risk injured
- s61: a volunteer does
not incur any
personal liability
when acting in good
faith in community
work, organized a
community
organized or, as an
office holder of ac
community
organization
- plaintiff engaged in
criminal activity
- plaintiff under the
influence of using
drugs
- peer professional
advice
- caps and thresholds
for personal injury
and damages

Vicarious liability - secondary liability:


one person is
responsible for the
wrongful act of
another person
because of the legal
relationship between
them
- employer / employee
- employer is liable to
third parties for acts
of employees within
the actual or apparent
scope of employee
- employee may be
personally liable for
actions outside the
scope of their
authority
Lecture 11: Tort
law (contd)
Rule Acronym Case
Main remedies in - injunctions
tort - damages
Damages in tort 1. should be awarded to
put the plaintiff back,
as near as possible to
the same position
2. should be awarded
once and forever
(CLA 2002 allows for
periodic payments)
3. buden lies on the
plaintiff to prove the
injury or loss
4. plaintiffs have a duty
to mitigate their loss
Mitigation of - applies to all civil
damages proceedings
- defendant needs to
plead a failure to
mitigate and bears
onus of proviing a
failure to mitigate
- recoverable as a part
of damage
Heads of 1. property / person
damages 2. economic / non-
economic
Damages - purposes of damages
property in compensation
- only person who
owns or has an
interest in the items at
the time they were
damages can sue for
property damage
- losses for property
damage can be
insured
Damages - damages for personal
personal injury injry actions can
involve
- economic
- non-economic
Damages - economic loss: can be
personal injury estimated in $ terms
and may include
o loss of
earning
capacity
o medical
expenses
o rehabilitation
expenses
- non-economic loss
o pain and
suffering
o loss of
amenities

Economic loss - consequential: upon


personal injury or
property damage
- pure economic loss:
only loss is
economic, not the
result of physical
damage to plaintiffs
person or property
Pure economic - due to damage to a Caltex oil v the
loss third partys property dredge
- without damage to
person or property
- duty of care the key
issue for negligence
claims for pure
economic loss
The problem of - harder to recover Hedley Byrne &
pure economic damages for pure Co Ltd v Heller
loss economic loss and Partners
because of
o indeterminacy
of loss
o lesser concern
of economic
interests
Hedley Byrne Special relationship Revise this
and Co v Heller - defendant voluntarily
gave advice in
response to a request
- where it ought to
have realized that the
plaintiff was
reasonably relying on
to exercise care
- defendant assumed
responsibility
The barwick test - a representor gives
information or advice
on a serious or
business matter,
intended thereby to
induce the
representee to act on
it, representor is
under a duty of care
- if the representor
realizes or ought to
realize that the
representee will trust
in his special
competence
- it would be
reasonable for the
representee to accept
and rely
- it is reasonable
foreseeable that the
representee is likely
to suffer loss

Duty of care is owned if


1. Ds advice was on a
serous business
matter
2. D intended to induce
P to act on the advice
3. D realized or ought to
have realized that P
was trusting in Ds
especial competence
to give the advice
4. Ps acceptance and
reliance on Ds
advice was
reasonable
5. It was reasonably
foreseeable that P
would suffer loss if
the advice turned out
to be incorrect
Esanda v Peat - Mere foreseeability
Marwick of possibility that
o Advice might
be
communicate
d to someone
other than the
client
o That person
might enter
into a
transaction
and suffer loss
- Not sufficient
establish duty of care
between auditor and
third party

Duty owed if:


- The adviser knew or
ought reasonable to
have known that the
information or advice
given its client would
be communicated to a
third party
- The information or
advice would be
communicated for a
purpose that would
very likely lead the
third party to enter
into some transaction
- It would be very
likely the third party
entered into such a
transaction in reliance
on the information or
advice from the
adviser so risk
incurring economic
loss if the advice is
untrue or unsound
Negligent - Breach of duty s5b1
misstatement CLA
causing pure - Causation s5d1a
economic loss - Remoteness s5D1b
remaining
elements
Statutory 1. A professional does
defences s50, not incur a liability in
CLA negligence arising
from the provision of
a professional service
if it is established that
the professional acted
in a manner that was
widely accepted by
peer professionals
2. Peer professional
opinion cannot be
relied on if the court
that the opinion is
irrational
3. That there are
differing peer
professional opinions
does not prevent any
one or more of those
opinions being relied
4. Does not have to be
universally accepted
to be considered or
widely accepted
Section 5O does not impose
a standard of care, its simply
a defense for professional
opinion
How to avoid - Exercise reasonable
negligent skill and diligence to
misstatement make sure
information is
accurate
- Be sensitive to the
use of the information
or advice asked for
- Standard of care must
be related to nature of
inquiry
- Disclaimer of liability
- appropriate?
- Make clear if the
advice interim advice
or conditional advice
- Make clear if legal or
other independent
advice necessary
- Clearly express any
doubts about
reliability of
information
Lecture 12: Choice
of Business
Structure
Rule Acronym Case
Types of business - Sole proprietor
structures - Trusts
- Partnerships
- Joint ventures
- Franchises
- companies
Choosing a - how will business
business structure raise operating
capital?
- Owning Business
and assets
- What name will it
operate under
- Day-to-day
operations
- Who is
responsible for
liabilities
- Who is entitled to
profits
- How will profits
be taxed
Sole trader - No legal
distinction
between trader
and business
- Sole traders
acquire all rights
and liabilities
- Sole trader can
contract but
contract exists
between sole
trader personally
and supplier
- Profits belong to
sole trader
Trusts - Trust (settlor)
transfers property
or money to
trustee to hold the
trust property on
behalf of
beneficiaries
- Trust is not an
entity, but a set of
relationships
- Trustee has
fiduciary duty
- Main advantage
income from the
business can be
distributed easily
and has tax
advantages

Partnership - Two or more


persons
- Formalities are
not essential
- Partnerships are
regulated by state
legislation
- Not more than 20
members
- Once this number
is exceeded, must
be incorporated
- Partnerships may
trade under its
own name not a
separate legal
entity
- Partners acquire
the legal rights
and liabilities
- Each partner is
jointly liable for
debts and other
obligations
- Partners
contribute the
necessary assets
- Profit made are
shared between
partner or as
agreed
- Fiduciary duty
- Must not
compete with the
partnership
- Continues until
ended
- At the end of an
agreed period or
all goals have
been met,
partners wish to
dissolve, partners
die or becomes
insolvent, assets
are used to satisfy
debts
Joint ventures - Created by
contract
- Parties agree to
take on a project
for a specific
period of time
- Venture carries
out their own
agreed tasks at
their own
expense
- Contribute equity
and will receive
entitlements as
agreed from
contract
Franchises - A franchise is a
contract between
two independent
business
proprietors who
work together
under a common
brand and system
- ACCC
Franchising code
of conduct
- Commercial
relationship but
separate
contracting
parties
- Franchisor allows
franchisee to: use
franchisors
business name
and trade mark,
manufacture or
sell franchisors
products and, use
franchisors
business system.
Franchisee pays
franchisor a fixed
fee or percentage
of profits
Franchise - Ability to benefit
advantages from an existing
and successful
name
- Less chance of
business failure
- Access to track
record
- Access to finance
- Compete with
national and
international
firms
- Collective group
marketing
- Access to
business systems
- Access to
manager support
Franchise - Locked into a
disadvantages binding
agreement with
control by
franchisor
- Business
downturn
- Franchisor
appointing other
franchises in
same area
- Franchisor
charging
excessive prices
- Inadequate
assistance
- Misrepresentatio
n from franchisor
- Uncertainties at
end of franchise
Companies - An artificial legal
person created by
registration
- Registered either
as public
companies or
private
companies
- Made up of its
members
- Individuals
become members
by buying shares
in company
- They contribute
to capital
- Members are
collectively the
owners of the
company
Proprietary - Subject to certain
companies limitations such
as:
- Cannot have
more than 50
members
- Only offer their
shares in limited
circumstances
- Subject to less
regulation than
public companies
- Identifies itself as
such bt having
Pty
- Can be converted
into a public
company if that
becomes
appropriate
- Law it is possible
to have a
proprietary
company with a
single member
shareholder, who
is also the
director
- Responsibility
rests with the
persons who are
appointed by
members as
directors of the
company
- Directors are
agents of the
company
- Use their own
judgment and
discretion in
managing the
company
- Fiduciary duty
- As
representatives of
the company,
entire into legal
transactions on
its behalf, so that
the company as
principal acquires
the relevant
rights and duties
- Legal identity
separate from
that if its
members
- Acquire legal
rights and duties
in its own name
- Company pays
own taxes
- Shareholders of a
company are
potentially liable
for its debts but
this can be
limited through:
- The most
important
example is a
company limited
by shares where
the members are
only liable for
company debts to
the extent of the
amount they have
agreed to pay for
shares
- Once this share
capital is
exhausted, the
creditors have no
further recourse
against the
members
- Companies
limited by shares
identify
themselves by
having Ltd
- A company that
is unable to pay
is insolvent
- A company can
be wound up in
certain ways:
voluntary
winding up or
compulsory
winding up
- The task of
winging up is
carried out by a
liquidator who
collects assets
and pays debts
- When insolvent
company is
wound up,
carious creditors
get paid in
accordance with
rules by law
- Creditors of a
company seek to
obtain security
for debt owed to
them
Public companies - Public companies
must
- Have three
directors and a
company
secretary
- Appoint an
auditor
- Lodge financial
reports with
ASIC
- Annual GM
Risk management - Risk management
deals with
accountability
and best prices
- Market risk
- Credit risk
- Reputation risk
- Legal risk

Organizations need to:


- Identify different
types of risk
- Assess the impact
of those risks
- Manage the risk
- Communicate the
risk
Compliance - Identifies all the
obligations and
then uses risk
management to
prioritize the
response
- Training
- Monitoring
- Implementing
- Reporting
- Allocation
- Comply with the
law
- Better business
management

Consequences of
compliance
- Cost of not
complying
- Adverse publicity
A culture of compliance
should:
- Aim to prevent
identify and
respond to
breaches of laws
- Promote a culture
of compliance
within the
organization and
- Assist the
organization in
remaining and
becoming a good
corporate citizen
Due diligence - Process is a
complete and
comprehensive
effort to
determine what
could happen to
cause a business
venture to go
wrong and the
various negative
effects that could
occur if a venture
does not preform
as planned or
actually fails
- Applies to and
business venture
- Have all
reasonable
inquires been
made
- Did the person
believe on
reasonable
grounds that took
all reasonable
care to avoid a
contravention