What is Common Law and how is it created?
Dsicuss about the Guide to Contract and Commercial Law Act.
Common law is one of the two primary sources of law in majority of nations, where the other form of creating the law is statutes. Common law is the one which is formed through the judicial precedents, i.e. the previous decisions of the judges. Common law comes into prevalence in such cases where the statute is unclear and requires proper interpretation by the court, or on leading disputes, which require clarity. This is the law which is created based on the situations prevalent in the nation, which results in disputing views. The court then analyses the entire case and applies the law as it was meant to be, where the principle of fairness and justice are upheld in giving the decision (Llewellyn, 2016).
When the decision is given by the judges, on the particular matter, it becomes a precedent for the other cases put before the court of lower hierarchy than the one where the judiciary gave set the precedent. So, when a similar dispute comes later on, the court is bound to give the reasoning adopted in the earlier decision. The idea under the common law is that where the facts are similar, it is but fair to apply the rulings or outcomes of such case to the other case as well. Though, where the disputes of two cases are fundamentally different, the precedent is not required to be followed. In such cases, often the judges give their opinion, where they highlight the variance between the two cases and the reasoning for the undertaken decision. It is thus not wrong to say that common law is basically that body of law which is made by the judges (Law Site, 2018).
Common law is different from the statutory law and it is contrasting from equal footing with statutes, as these are adopted by following the legislative process, where the regulations are promulgated through the executive. The principle regarding the cases to be decided as per the consistent principled rules, in terms of stare decisis, so that the like facts would gain like results, is the very basic foundation of the common law system. The common law has been developed by the judges over a number of years. Further, it can be developed or amended by the courts in order to meet with the changing situations. The majority of law of the nation is inherited from the English legal system, which includes the common law traditions of New Zealand (Courts of New Zealand, 2018). The Parliament has the power of repealing, modifying or developing the common law by passing a statute. For instance, the common law of contract has been modified in the nation through different legislations like the Contracts (Privity) Act, 1982 and Contracts Enforcement Act, 1956; and the torts have been now covered under Contributory Negligence Act, 1947, Accident Rehabilitation and Compensation Insurance Act, 1992 and Occupiers’ Liability Act, 1962 (Greville, 2011).
The elements of negligence
Section 3 of the Contract and Commercial Law Act, 2017 provides the purpose of this act. As per this section, this act is aimed at re-enacting some of the legislations in an accessible and up-to-date form. These legislations include the ones related to contracts, electronic transactions, sale of goods, carriage of goods, and the number of other commercial matters which include the bills of lading and the mercantile agents (Legislation, 2017). This legislation is aimed at clarifying and modernizing the language of the repealed statutes. With this legislation, the attempt is made at clarifying the law and making it easier to understand.
The Bill for Contract and Commercial Law Act, 2017 was introduced on 19th May, 2016 and it obtained the royal assent on 01st March, 2017 (Parliament, 2018). The act came into force from 01st September, 2017.
The bare act can be found at the official website of Parliamentary Counsel Office, where the New Zealand legislations and the link can be found simply by conducting a Google search.
Some of the legislations which were re-enacted through the Contract and Commercial Law Act, 2017 include Contractual Mistakes Act 1977; Frustrated Contracts Act 1944; Sale of Goods Act 1908; Contracts (Privity) Act 1982; and Illegal Contracts Act 1970, amongst the others (Oh, 2017).
Negligence refers to the duty of care being breached by the party which owed the duty of care to another, resulting in injury or harm to the other party. It is the conduct which generally deemed as being the conduct which is culpable as it falls short of what any prudent individual would have done in order to protect another person, from the risk of harm which was foreseeable (Martin & Lancer, 2013). There are different elements which have to be present in order to make a claim of negligence and these include duty and its breach, damage, remoteness and causation (Rennie Cox Lawyers, 2018).
The first requirement to make a case of negligence is to show that a duty of care had been owed by person D to person P. Without the duty of care being established, a case of negligence cannot even begin. In establishing duty of care, the case of Donoghue v Stevenson [1932] AC 532 is of utmost significance. In this matter, D had fallen sick after she drank the ginger beer from the bottle, which had a decomposed snail, and which had been manufactured by S. D sued S for negligence but S denied the presence of duty of care based on the bottle having being purchased by another in a cafe. However, the court took a different view and stated that the manufacturer owed a duty of care to the consumer due to the proximity between them. There is also a need to show that the owed duty of care had been contravened. Paris v Stepney Borough Council [1951] AC 367 proves to be of assistance in this matter. In this case, the court had concluded that the lack of the defendant in providing the plaintiff with necessary safety gear was a breach of duty of care.
The next element required to establish a case of negligence is damage. For a case of negligence to be made, it is crucial to show that the aggrieved party had suffered damages. There is a need for the plaintiff to show that a duty of care was owed, which was breached and which resulted in damages being caused to the plaintiff owing to such breach. For instance, in Paris v Stepney Borough Council, the plaintiff getting blind was seen as incurring damages. The third element required to establish a negligence case is causation. The plaintiff has to show that the damages resulted from the wrong caused by the defendant. In this context, the “but for test” needs to be applied, which had been given in Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. This test requires to be shown that the damage would not have been caused if the defendant had not undertaken the breach of duty of care.
Whether a case of negligent misstatement can be made against Ace Consulting & Accounting by Prudent Investment or not?
Misrepresentation is a vitiating factor under the contract law, which has the capacity of rendering a contract void. It refers to the false statement of fact or law made by the party to another party just to induce them in the contract (Cartwright, 2012). Famous cases include Bisset v Wilkinson [1927] AC 177 and Esso Petroleum v Mardon [1976] QB 801. There are different types of misrepresentation, one of which is negligent misstatement. Negligent misstatement refers to such a situation where information is provided in an honest manner, but turns out to be an inaccurate one. In such cases where a case of negligent misstatement can be shown to be present, the aggrieved party can claim damages from the breaching party (Gibson & Fraser, 2013). A leading case in this context is Caparo Industries Plc v Dickman [1990] 2 AC 605, where the test for economic loss was give.
In Hedley Byrne & Co v Heller [1963] 3 WLR 101, it was provided by the judges, that in order to make a claim of negligent misstatement, the parties were required to show that there was a presence of relationship between the two parties of trust and of confidence; there is also a need to show that the party which provided or made the information available had assumed the risk of providing such information in a voluntary manner; and lastly, there is a need to show that the party receiving this information, had placed reliance on such information.
In the present instance, a possible claim of negligent misstatement has to be analysed in favour of Prudent Investment as against Ace Consulting & Accounting. For this purpose, there is a need to apply the criteria given under Hedley Byrne & Co v Heller. In this case, the information regarding the financial position of ADL had been from Ace Consulting & Accounting. There was a relationship of trust between the information provider of this case, i.e. Ace Consulting & Accounting and between the information takers of this case, i.e. Prudent Investment. A trust and confidence was placed on the work done by Ace Consulting & Accounting in terms of preparing prospectus and analyzing financial position of ADL by Prudent Investment. So, the first condition of the quoted case is satisfied.
The next requirement was to show that a voluntary risk was assumed by Ace Consulting & Accounting when they provided the information in the prospectus after conducting a due diligence on the financial statement of ADL. Ace Consulting & Accounting were professional advisers and it was expected from them to deploy the standard of care, as any professional would apply in undertaking their work. So, when they provided any information, they voluntarily assumed the risk of such information due to their professional position resulting in enhanced standard of duty of care. Lastly, Prudent Investment had made full reliance on the information provided by Ace Consulting & Accounting regarding ADL and had purchased a block of shares of ADL. However, the information provided by Ace Consulting & Accounting proved to be wrong and Prudent Investment lost its investment.
Conclusion
Thus, on the basis of analysis undertaken here, it can be concluded that for a case of negligent misstatement raised by Prudent Investment against Ace Consulting & Accounting, Prudent Investment would be successful and as a result of this, Ace Consulting & Accounting would have to compensate Prudent Investment for the losses sustained by them.
Whether father of Jose would be successful in an action against Jose for unconscionable conduct, or not?
Unconscionable conduct is a situation in which one of the contracting parties is overwhelmed by the other contracting party, due to the latter holding a higher bargaining power and this is deemed as being against the good conscience (Latimer, 2012). It basically refers to the weaker party being taken advantage of by the dominating party. Where any contract is drawn on the basis of such conduct, the weaker party can get the contract rescinded, for the reasons of being treated in an oppressive and harsh manner (Australian Contract Law, 2018a).
A landmark case in unconscionable conduct is Commercial Bank of Australia v Amadio (1983) 151 CLR 447. In this case, Amadio had signed a mortgage for securing loan for their son but as they were Italian, they did not understand the terms of the mortgage. When the bank attempted to seize the mortgage, Amadio challenged the validity of it. The court gave ruling in favor of Amadio due to the concept of unconscionable conduct (Australian Contract Law, 2018b). Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 is another case where the relationship was taken advantage of, resulting in unconscionable conduct (Australian Contract Law, 2018c).
In the present instance, Jose was the dominating party and his father was the weaker party. The relationship between was such that Jose was able to manipulate their relationship and got the loan slip signed based on Louth v Diprose. Where the bank claims money from Jose’s father, they can stop them based on Commercial Bank of Australia v Amadio; and based on Louth v Diprose Jose’s father can claim his money back. Due to such unconscionable conduct, there was a lack of intention to create legal relations between the two.
Conclusion
Thus, father of Jose would be successful in an action against Jose for unconscionable conduct and would be able to get his money back.
Whether or not Mandy would be successful in his actions against Jose based on elements of contract?
In order to create a contract, it is important for the contract to have certain crucial elements. These include offer, acceptance, intention, consideration, capacity, legality and consent. The intention to create legal relations shows that the parties do want to enter into legal relations, which would result in legal rights and liabilities being created (Miller & Gerbic, 2014). However, where the parties provide that they do not want the arrangement to be deemed as formal or legal agreement, it would be deemed as lack of intention required for creating legally binding agreement, as was seen in Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. (1925) A.C. 445 (New Age Publishers, 2018).
The facts of this case resemble Rose and Frank Co. v. J.R. Crompton and Bros. Ltd. In both the cases, it was provided that the agreement would not be enforceable in courts and that it is not a formal legal agreement. This would be deemed as a lack of intention for creating legally binding contract. This means that a contract was not formed in this case.
Conclusion
Thus, from the discussion undertaken in the previous segments, it can be concluded that a legally binding contract was not formed between Mandy and Jose, due to lack of intention element. This would disallow Mandy from being successful in their action against Jose.
References
Australian Contract Law. (2018a). Unconscionable Conduct. Retrieved from: https://www.australiancontractlaw.com/law/avoidance-unconscionable.html
Australian Contract Law. (2018b). Commercial Bank of Australia v Amadio. Retrieved from: https://www.australiancontractlaw.com/cases/amadio.html
Australian Contract Law. (2018c). Louth v Diprose. Retrieved from: https://www.australiancontractlaw.com/cases/louth.html
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Bell Gully. (2017). A Guide to the Contract and Commercial Law Act 2017. Retrieved from: https://www.bellgully.com/Shared%20Documents/Contract-and-Commercial-Law-Act-2017.pdf
Bisset v Wilkinson [1927] AC 177
Caparo Industries Plc v Dickman [1990] 2 AC 605
Cartwright, J. (2012). Misrepresentation, Mistake and Non-disclosure (3rd ed.). London: Sweet & Maxwell.
Commercial Law Act, 2017
Courts of New Zealand. (2018). Our court system. Retrieved from: https://www.courtsofnz.govt.nz/about-the-judiciary/overview
Donoghue v Stevenson [1932] AC 532
Esso Petroleum v Mardon [1976] QB 801
Gibson, A, & Fraser, D (2014). Business Law 2014 (8th ed.). Melbourne: Pearson Education Australia.
Greville, M. (2011). An Introduction to New Zealand Law & Sources of Legal Information. Retrieved from: https://www.nyulawglobal.org/globalex/New_Zealand.html
Hedley Byrne & Co v Heller [1963] 3 WLR 101
Law Site. (2018). Common Law New Zealand. Retrieved from: https://www.lawsite.co.nz/common-law
Legislation. (2017). Contract and Commercial Law Act 2017. Retrieved from: https://www.legislation.govt.nz/act/public/2017/0005/21.0/DLM6844033.html
Llewellyn, K. N. (2016). The common law tradition: Deciding appeals (Vol. 16). London: Quid Pro Books.
Martin, J., & Lancer, D. (2013). AQA Law for AS Fifth Edition (5th ed.). Oxon: Hachette UK.
Miller, L., & Gerbic, P. (2014). Understanding Commercial Law (8th ed.). New Zealand: LexisNexis NZ Limited.
New Age Publishers. (2018). Law of Contracts. Retrieved from: https://www.newagepublishers.com/samplechapter/001048.pdf
Oh, A. (2017). New Zealand: Contract and Commercial Law Act 2017. Retrieved from: https://www.mondaq.com/NewZealand/x/619840/Contract+Law/Contract+and+Commercial+Law+Act+2017
Paris v Stepney Borough Council [1951] AC 367
Parliament. (2018). Contract and Commercial Law Bill. Retrieved from: https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/00DBHOH_BILL69058_1/contract-and-commercial-law-bill
Pilcher, S. (2017). Where did all the statutes go? The Contract and Commercial Law Act 2017. Retrieved from: https://www.adls.org.nz/for-the-profession/news-and-opinion/2017/7/7/where-did-all-the-statutes-go-the-contract-and-commercial-law-act-2017/
Rennie Cox Lawyers. (2018). Negligence. Retrieved from: https://renniecox.co.nz/commercial-lawyers-auckland/tort/negligence/
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