Rule of Recognition
Discuss about the Australian Commercial Law for Rule of Adjudication.
For the purpose of this task, India has been chosen as the requisite foreign country whose legal system would be critically analysed in wake of the Hart’s legal system requirements.
With regards to the Indian legal system, there are well defined law sources which include the following.
- Constitution – A written constitution exists which tends to act as the highest source of law and any law which violates the key principles enshrined is declared invalid.
- Legislation – These are essentially statute laws as they are enacted by the law making bodies comprising of people’s elected representatives.
- Case law – This takes into consideration the judicial precedents
- Customary Law – These are derived in accordance with the Indian society’s values and customs.
- Rule of Change
The laws can be changed and there is a defined procedure for the same. New laws are formulated by the parliament (both at the centre and state) while old laws are repealed. Also, the law making power of the state and centre government is highlighted in the constitution. Further, the procedure for amendment has also been clearly highlighted in the Constitution itself. Thus, a well-defined system exists in place to deal with change in laws.
In wake of disputes and their consequent resolution, a well-established judiciary exists in India. There are courts at various levels which have their well-defined jurisdiction. This judicial system is headed by the Supreme court which has wide power in adjudication and resolves disputes of high significance. Additionally, administrative tribunals and other such forums also provide dispute resolution mechanism.
In wake of the above discussion, it would be appropriate to conclude that Indian legal system tends to comply with the three part Hart legal system description. The system also seems quite comparable to that of Australia since it also boasts of well-defined law sources which tend to overlap with that in India. The only exception is customary law, however, even in Australia, the traditions, customer and belief is also indirectly reflected through laws made on various subjects. Further, the procedure for the law change is similar in both India and Australia considering a written constitution and legislative power divided between the state and Federal level. Also, the rule of adjudication is also adhered to in Australia since it also has an elaborate network of courts as part of a hierarchical judicial system. Further, just like India, in Australia also, the interpretation of the Constitution is carried out by the highest court.
It needs to be opined if the underling contract between Barry and Angelo is void or not taking into consideration common law and statute law.
Misrepresentation refers to a situation where false representations are made to the buyer by the seller so as to ensure that a contract is enacted. The type of misrepresentation refers to the underlying intention of the representor. In case, the representor is aware that misleading information is passed on, then such cases would be fraudulent misrepresentation. In such cases, the contract would be voidable and also damages can be claimed by the plaintiff.
Rule of Adjudication
To establish misrepresentation, it is essential that two major conditions listed below have to be complied with.
- A factual statement should have been represented falsely by the seller
The first condition for misrepresentation is that the seller or representor should have falsely stated a given fact. It is imperative that falsification is required for factual information and opinion would not be included in the ambit of misrepresentation. Further, as highlighted in the Smith v Hughes case, the silence on the part of the seller cannot be equated with misrepresentation. For misrepresentation to be present, it is essential that the representation given by the seller must be false. If no representation is made, then obviously misrepresentation cannot be present.
- It is imperative that buying ought to be lured by the misrepresented fact
This requirement has been added so as to ensure that for a misrepresentation claim, the fact stated incorrect should be significant with regards to the contract execution. This ensures that misrepresentation claims are not made to incorrectly stated facts which are not key to the decision made. Also, it is imperative that in cases involving misrepresentation claims, if evidence was made available to the buyer with regards to verifying the representation, then the buyer should not be negligent regarding the same. This is apparent from Redgrave v Hurd case since even though there was misrepresentation but the verdict was against the representee and not the representor as the former had been negligent in the conduct and ignored the evidence which was provided.
Further, the statute law in the form of Australian Consumer Law can also be applicable in such cases. The relevant section dealing with deceptive conduct is s.18(1) , CCL. For the conduct to be considered deceptive or misleading under this given section, the following conditions ought to be satisfied.
- The underlying transaction has to be commercial in nature since domestic transactions are excluded.
- It is not essential the deception actually has occurred and mere chances of being deceived are sufficient
- As indicated in the Perre v Apand Pty Ltd, it is not essential that there needs to be presence of intent to deceive. Partial advantage from deceiving is good enough.
- The buyer needs to suffer real financial loss and not only potential loss
As per the details of the representations made in the case, it becomes clear that Angelo has made incorrect representation about factual information such as presence of competitor, monthly revenue along with expense detail. Also, it is evident that this was instrumental in making the deal attractive for Barry. This is because the profit figure can be obtained by subtracting the expense from the revenue. The fair valuation of the business would be derived from the underlying profits that the business produces. In the given case, the consideration of $ 200,000 has been agreed by Barry assuming a profit of $12,000 on a monthly basis whereas the actual profits earned are considerably lower. Also, Barry did not had any means to verify the representation made by Angelo as no books pertaining to the financial performance of the business were presented. Therefore, Barry had to act in accordance with the representation given by Angelo. Therefore, it is apparent that Angelo has indulged in fraudulent misrepresentation due to which the contract would be voidable if Barry intends that.
Relevant Law
Also, it is apparent that the advertisement displayed by Angelo could be termed as deceptive as outlined in s.18(1) of Australia Consumer Law The advertisement clearly pertained to a commercial transaction. Also, irrespective of intention, Angelo did rely on the deception to bring interested parties for the business. Further, on account of the false claims, Barry has suffered actual financial losses since business has already been purchased.
Conclusion
In line with the discussion above, it would be appropriate to conclude that the given contract will be termed as voidable since fraudulent misrepresentation is present. Also, Barry can argue that through the misleading advertisement, Angelo has deceived Baary and can demand to be compensated.
Assuming the contract cannot be nullified, the key issue is to outline if in wake of the given contract for the sale of business, there has been any breach of contract or not.
The key component of contract refers to the contractual terms which need to be adhered by the contracting parties so as to avoid any breach of contract. Some of these terms are expressly stated in contract. However, there are others which are not captured in the written form and are not explicit and are known as implied terms. Further, it is noteworthy that terms are derived on the basis of various representations made by the seller during the negotiation phase of the contract. Considering these representations, it needs to be determined as to which of these qualify as terms. This process is significant since unlike representations, terms are legally binding on the contracting parties.
There are certain factors which ought to be considered to determine if a particular representation can be taken as a contractual term or not. One of these is the parole evidence rule which tends to rely on the understanding that representations that are able to find place in the written contract are terms while those which remain in oral form are ere representations. The second parameter which is crucial is the representor’s expertise in the context of the given situation. As per the decision pronounced in Oscar Chess Ltd v Williams case, it has become evident that a representor with greater expertise making a representation would be quite often considered a term . This is particularly the case when owing to limited knowledge the representee tends to rely on the expertise of the representor for the product’s description and functionality.
.Yet another factor which is of relevance is the significance attached to the representation made by the representee. The more significant the representation, the higher is the likelihood of the underlying representation being classified as a contractual term. In this context, the Bannerman v White case assumes relevance as for the purpose of making beer, the buyer had demanded hops which were treated with sulphur. However, the seller provided hops that were devoid of sulphur treatment. During this transaction, the buyer had stated that he would not buy hops which were not sulphur treatment. This reflects on the importance of hops being sulphur treated and hence court ruled that the sulphur treatment of hops was a term for the given contract.
In accordance with the relevant rule discussed above, it may be appropriate to conclude that those representations which have had a critical bearing on the decision of Barry to buy the business would be considered terms besides those which are stated in the written contract. The case description clearly states that Barry became first interested in the business by the financial numbers and further the value of the business has also been linked to the financial performance of the business. Therefore, the representations regarding the monthly revenue and corresponding expense would be considered terms of the contract considering their significance to the contract. Also, in terms of this information, Barry was essentially relying on expertise of Angelo who had been running the business and hence would be aware of the relevant financial details. Besides, it is possible that had the correct financial figures made known to Barry before the enactment of contract, he would not have bought the business or surely the payment for the business would have been considerably less.
Besides, in the written contract also, there are two terms linked to the value of loader and van. The value of the van has been recorded as $ 15,000, however, the van is only leased and not owned by the business of Angelo. Further, there are additional liabilities for the business in terms of outstanding lease payments for the van which Angelo has not disclosed. Hence, it is clear that the conduct of Angelo has led to terms of the contract for the sale of business. Thus, Barry can initiate legal proceeding against Angelo for demanding damages on account of breach of contract.
Conclusion
It is evident form the discussion carried out above that the various terms in the contract have been breached and hence damages can be recovered from Angelo if Barry decides to initiate legal action against him.
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