Partnership Legal Structure and Liability
Partnership legal structure is formed between two or more parties; these parties agree to run the operations of business together in order to generate profits. The Partnership Act 1892 provides regulations for governing partnership structure. As per the definition of a partnership, it defines the relationship between parties who have joined together to run a business in common with an objective to earn profit (Legislation, 2018). The parties who join a partnership have unlimited liability. It means that the court can use their personal assets to repay the debts of the business. A duty of partners is recognised in the Act as well based on which they can be held liable for the actions which are taken by one partner during the ordinary course of business. This duty is recognised under section 10 of the Act. As per this liability, the court provided a judgement in National Commercial Banking Corporation of Australia Ltd v Batty (1986) HCA 21 case. This is a relevant case in which a judgement was given that the partners are liable towards third parties for the actions of one partner which comes under the scope of the business activities. Furthermore, a fiduciary duty is also imposed on partners under this Act to ensure that they did not misuse their ability to enforce other partners. This duty was recognised in Birtchnell v Equity Trustees (1929) 35 ALR 273 case. It was held by Dixon J in this case that based on the fiduciary duty, partners can face legal consequences, if they did not act in good faith (Shankar, 2014).
In this case, all partners agreed that they would spend $20,000 on purchasing a Ute and the responsibility to make the purchase was given to Lance. Lance did not follow the agreement of partners, and he invested $25,000 in purchasing a Ute. Lynton, who sold the vehicle, was not aware of the fact that a limit of $20,000 is set by partners to purchase a Ute. This transaction of Lance comes within the scope of the ordinary course of business. Based on these two factors, the partnership is liable towards Lynton as given under section 10 of the Act and the judgement of National Commercial Banking Corporation of Australia Ltd v Batty case. Moreover, since Lance violated the fiduciary duty which he owed towards other partners, he can face legal consequences. As given in Birtchnell v Equity Trustees case, other partners have legal remedies to recover extra amount from Lance since he violated his duty.
Unconscionable Conduct and Contract Law
Partnership is liable for the transaction made by Lance with Lynton. Furthermore, legal remedies are available for other partners against Lance since he violated his fiduciary duties.
The first issue is whether Saqlaim is bound under the contract? The second issue is related to what remedies, if any, available for customers from protection against false advert?
Unconscionable conduct is a key element in contract law because a contract can be set aside by the court if it is formed based on unconscionable conduct of parties. In order to determine whether the contract is formed based on unconscionable conduct, the court evaluates the actions of the stronger party in the scenario. This element was highlighted in Commercial Bank of Australia v Amadio (1983) 57 ALJR 358 case. In this case, the defendant takes advantage of poor English skills of the claimant while forming a contract and the defendant hide crucial details related to the contract (Jade, 2018). The court set the contact aside based on unconscionable conduct. Moreover, the rights of consumers are protected under the Competition and Consumer Act 2010. The government has introduced various consumer protection provisions under this act which are focused on ensuring that customers are protected from dangerous products and unscrupulous business practices. Section 29 of the Australian Consumer Law is a good example. This section provides restrictions for parties who are making claims regarding their products or services which are misleading or deceptive or likely to do so while advertising or promoting them. The corporations cannot misguide consumers into purchasing a product by making any false claims. This principle was highlighted in ACCC v TPG Internet Pty Ltd (2013) HCA 54 case. In this case, the court provided that businesses which use ‘headline’ advertisement to make wrong claims regarding their products or services which mislead customers can be held liable for violating section 29 of this Act (John and Willekes, 2014).
In this case, Lance used his fast talking and fluent English speaking skills to confuse Saqlaim. Without giving appropriate details regarding the products, Lance signed a contract with Saqlaim to purchase the Ute. Since Saqlaim was not aware of the condition of the vehicle and terms of the contract, it can be set aside by the court based on unconscionable conduct as given in Commercial Bank of Australia v Amadio case. Moreover, Xiaojing wanted to sell the products of the company; therefore, she made a false claim regarding the product that it ‘slows the effects of ageing’. Customer rights are protected under the Australian Consumer Law, and it imposed restrictions on businesses that use false advertisement to sell their products or services. Therefore, customers have a remedy under section 29 of the Act based on which they can hold Xiaojing liable for making false claims regarding the products. Customers can claim damages from Xiaojing for violating section 29 as given in the judgement of ACCC v TPG Internet Pty Ltd case.
Consumer Protection and False Advertising
Conclusion
Saqlaim is not bound by the contract with Lance, and he can set aside such contract based on the element of unconscionable conduct. Customers have a legal remedy under section 29 of the Australian Consumer Law to hold Xiaojing liable for the false advert.
The issue, in this case, is related to whether any right is available for Felix to claim $100 from Xiaojing?
A contract is a legally binding agreement, and parties have to comply with its terms in order to avoid legal consequences. People can make promises to third parties based on their legal contractual rights which they did not intend to comply with. Therefore, the victim parties can rely on the doctrine of promissory estoppel in order to stop parties from turning back after making promises based on their legal contractual rights. The parties have to prove that certain elements are present in order to rely on the principle of promissory estoppel. In Brikom Investments Ltd v Carr (1979) QB 467 CA case, the first element of promissory estoppel was explained by the court (Charman, 2013). It was held that a pre-existing contractual relationship must be present between the parties who are relying on the promise. The legal obligation which arises in the pre-existing contract must be modified based on the promise. The promise made by the party must be clear and unequivocal as given in the case of Legione v Hateley (1983) 57 ALJR 292. Another key element was provided by the court in Alan v El Nasr (1972) 2 WLR 800 which provide that for applying the principle of promissory estoppel, the position between the parties must change after the promise (Russell, 2012). Lastly, the key element is that it must be inequitable for the party to let the defendant go back to the promise or not complying with the same as given in D & C Builders v Rees (1966) 2 WLR 28 case.
In this case, Felix was working for Xiaojing as a casual, and he received $25 in cash per bag of lavender which he picked. By getting impressed from his work, Xiaojing told him that she would give him extra $100 for the work he did yesterday cleaning garden beds. Later, she refused to fulfil her promise and denied the payment of $100 to Felix. He can recover the amount based on the principle of promissory estoppel. All the elements must be present to rely on this principle. A pre-contractual relationship exists between the parties because Felix was working as a casual worker for Xiaojing and this relationship was modified by the promise (Brikom Investments Ltd v Carr). Xiaojing clearly provided in her promise that she wanted to pay $100 for the good work of Felix (Legione v Hateley). The position of the parties changed because Xiaojing now owes $100 to Felix (Alan v El Nasr). It is inequitable to allow Xiaojing to go back on her promise because Felix is doing a good job, and he should be compensated for the same (D & C Builders v Rees). Therefore, Felix can claim $100 from Xiaojing.
Conclusion
Felix can rely on the principle of promissory estoppel in order to recover $100 from Xiaojing.
References
ACCC v TPG Internet Pty Ltd (2013) HCA 54
Alan v El Nasr (1972) 2 WLR 800
Birtchnell v Equity Trustees (1929) 35 ALR 273
Brikom Investments Ltd v Carr (1979) QB 467 CA
Charman, M. (2013) Contract law. Michigan: Willan.
Commercial Bank of Australia v Amadio (1983) 57 ALJR 358
Competition and Consumer Act 2010
D & C Builders v Rees (1966) 2 WLR 28
Jade. (2018) Commercial Bank of Australia Ltd v Amadio. [Online] Available from: https://jade.io/article/67047 [Accessed 20/11/2018].
John, R. and Willekes, A. (2014) Consumer law: Deceptive advertising: Is it a question of audience?. Law Society Journal: the official journal of the Law Society of New South Wales, 52(3), p.42.
Legione v Hateley (1983) 57 ALJR 292
Legislation. (2018) Partnership Act 1892 No 12. [Online] Available from: https://legislation.nsw.gov.au/#/view/act/1892/12/historical2004-10-05/full [Accessed 20/11/2018].
National Commercial Banking Corporation of Australia Ltd v Batty (1986) HCA 21
Partnership Act 1892
Russell, C.A. (2012) Opinion Writing In Contract Law. Abingdon: Routledge.
Shankar, T. (2014) The Place of the Dishonest and Fraudulent Design Requirement in Accessorial Liability for Assisting in a Breach of Trust or Fiduciary Duty. Monash UL Rev., 40, p.793.
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