Introduction to Australian Business Law Principles
Whether the contract amid Jessica and Angela is based on misrepresentation and thus Angela can terminate the contract?
In every contract it is very necessary that all contract elements must be present, that is, offer, acceptance, legal intention, consideration and capacity. It is also necessary that the basis of the contract is not any kind of deception amid the parties. One of the elements which if present renders the contract ineffective is misrepresentation. (Latimer 2011)
Misrepresentation is an act on the part of any of the party to the contract, under which one party to the contract makes some declaration which are not true and which the basis are of contract formation. in such situation, the aggrieved party can annul the contract and seek damages. So, to prove misrepresentation, the main elements include: (Barker et al, 2015)
- Statement of fact – It is very necessary that the wrongdoer must have made a statement or declaration to the aggrieved party and the same must be of some fact which is related to the statement and is held in Esso Petroleum v Mardon [1976]. Any lawful statement, opinions, expressions, past information has no relevance. It is necessary that a statement of fact must be made by wrongdoer and is held inSmith v Hughes (1871).
- The statement is false – That the statement of fact that is made by the wrongdoer to the aggrieved party should not be true; rather, a false statement is made by the wrongdoer and is held in Edgington v Fitzmaurice (1885).
- That the false statement that is made by the wrongdoer must be made by him with full intention so that the aggrieved party gets influenced from the same and gets ready to make a contract with the wrongdoer and is held in Nottingham Brick & Tile Co v Butler (1889).
- Aggrieved party is not aware of the truth of the statement – It is very necessary that the aggrieved party should not be aware of the truth of the statement. If the aggrieved has knowledge that the wrongdoer is making a false statement, then, there is no applicability of misrepresentation.
- Aggrieved party relying on the statement – To make the contract based on misrepresentation it is necessary that the aggrieved party after listening to the false statement must rely on the same and must base his decision of making the contract upon such false statement and is held in Horsfall v Thomas[1862].
When all the elements are fulfilled then the contract is based on misrepresentation and the aggrieved party can cancel the contract and ask for damages from the wrongdoer.
The law is now applied.
It is found that the contract that is made amid Jessica and Angela is based on misrepresentation mainly because:
- There were negotiations that are taken amid Jessica and Angela. Jessica wants to sell her restaurant to Angela. Jessica submitted that the annual profit is $10,000. So, this is a factual declaration that is made by Jessica and thus the first requirement of proving misrepresentation is comply with;
- This facial declaration is not true because the annual profits of $10,000 are only for 2007. In reality the annual profits of the restaurant is $2000.
- Angela is not aware of the truth of the statement.
- An opportunity is provided by Jessica to Angela that she can check regarding the annual profits by checking the receipt. But, Angela relied on the statement of Jessica and only check for year 2007 which was showing $10000. Jessica is aware that Angela is relying on the untrue statement made by her but did not disclose the truth of the statement;
- Angela agreed to make a contract with Jessica based on the untrue statement made by Jessica.
So, there is clear misrepresentation on the part of Jessica which is made upon Angela and which is the basis of the contract formation.
Conclusion
Thus, misrepresentation is incurred by Jessica by stating false statements of facts and thus inducing Angela. So, Angela has every right to cancel the contract with Jessica and claim and claim damages. She can also continue with the contract and reduce the payment of the restaurant.
Can Sandra and Andy sue Acme for the loss that is caused to them?
Negligence is a tort law which is very essential and develops a relationship amid the defendant and the plaintiff according to which the defendant is supposed to act in such manner so that no injury if any kind must be caused to the plaintiff if the defendant is taking any actions or inactions and is held in Donoghue v Stevenson [1932].
This law of negligence is developed in Donoghue v Stevenson (1932). The majority of the decision submitted that an obligation is imposed on the manufacturers of the product that if any product is produced by them and is supplied to the customer wherein the product is sealed and the manufacture intends that the product must reach the customer in the same manner as produced by the manufacturer with no opportunity of any examination, then, the manufacturer must make all reasonable efforts to avoid any act which might cause harm to the customer. This duty of avoiding injuries upon the consumer is also extended upon the retailers of the product and is held in Grant v Australian Knitting Mills (1935). (Lunne and Oliphant 2013)
Now, if the retailer is not able to make any compensation to the customer if any loss is incurred then the liability is shifted to the manufacturer and he must compensate the consumer for the loss so suffered because of the defective product. In Grant v Australian Knitting Mills (1935) the court submitted that both the manufacturer and the retailer are liable for the loss that is caused to the consumer if negligence is incurred on their part. (Lunne and Oliphant 2013)
Identifying Misrepresentation and its Elements
Now, it is not easy to prove negligence on the part of the manufacturer. There are number of elements that must be complying with to make any retailer or manufacturer liable under negligence:
- Duty of care is the first element. Every defendant has an obligation then whenever he is taking any acts/omissions, then, it is very necessary that because of such acts/omission there should not be any loss that is caused to the plaintiff and is held in Farr v Butters[1932]. But, the duty of protecting the plaintiff is only faced by the defendant provided the plaintiff is the neighbor of the defendant and must also be reasonable foreseeable. In absence of these two elements no duty of protection against the plaintiff can be imposed.
The presence of proximity signifies that the defendant and the plaintiff should be in the relationship of closeness. The closeness must be such so that any act/omission that is undertaken by the defendant will hamper the plaintiff. There is closeness amid the parties. Thus, it is not every person who is the neighbor of the defendant but only those plaintiffs who might get affected by the acts of the defendant are considered to be the neighbor of the defendant and is held in Donoghue v Stevenson [1932].
It is also required that the plaintiff must be reasonably foreseeable by the defendant. If the defendant is not aware of the presence of the plaintiff, then there is no duty that must be furnished by the defendants against such plaintiff and is held in Annetts v Australian Stations Pty Ltd. (2002).
- It is now necessary that the duty of care that any defendant should fulfill should be not comply with. The duty is considered not to be complying with when the level or standard of care that is expected from a reasonable prudent man in the like situation is not met. The level of care is very different and varies depending upon the risk gravity etc that might occur in the given situations and is held in Harriton v Stephens[2006];
- When the duty is violated then it is very essential that there is some kind of loss that is caused to the plaintiff. The loss that is caused to the plaintiff should be incurred because of the breach of duty on the part of the defendant. This is the causation element and must be present. Also, the loss that is caused should be not too remote in nature and should be such which can be reasonable foresee by the defendant and is held in Rothwell v Chemicaland Insulating Co [2007] and is held in Dulieu v White [1901]. (Plunkett J 2018)
When all the elements are comply with then the defendant is held liable for incurring negligence on the plaintiff and must provide the loss that is suffered by the plaintiff because of the negligent actions of the defendant.
The law is no applied.
It is necessary to prove all the elements of negligence against Andy and Sandra in order to hold either the retailer or the manufacturer liable for the loss that is caused to them.
Sandra purchased a carton of cola from the local corner store. The store provided the same. Now, the store must provide the carton to Sandra and must make sure that no loss is caused to her because of the use of cola. There is duty of care upon the store because:
- Sandra is the neighbor of store as the consumption of the cola will directly affect her. Also, the cola is consumed by Andy (husband of Sandra) and Andy is also the neighbor of store as it is obvious that the carton so purchased by Sandra will be used by her family.
- Also, both Andy and Sandra are reasonably foreseeable by the store.
So, there is duty of care that must be provided by Store against Andy and Sandra.
This, duty of care was breached by the store mainly because Andy drink the bottle of cola. It was found that the bottle was containing cockroach remains. Thus, the cola that was provided by the retailer was not as per the quality that must be provided by the retailer/manufacturer. So, the level of care that is expected from the retailer fall short of what is expected from a reasonable prudent man and thus there is totally violation of duty of care.
Now, when Andy drink the cola which was containing the cockroach then because of the consumption he fell ill and he was hospitalized. Thus, the loss that to Andy was direct and thus there is causation. Also, the loss was not too remote. So, the retailer is liable for the hospital expenses that are faced by Andy.
But, there is no loss that is caused to Sandra because of the breach of duty against Sandra. The loss that is caused, that is, she was not able t go for work, is a very remote loss and also there was no causation. So, retailer is not liable to the loss of Sandra.
It is submitted that the retailer is said to be found to be bankrupt and is thus not in the position to pay for the losses that is incurred to Andy. Now, if negligence is proved which is caused o the consumer because of the consumption of the product, then, it is both the manufacturer and the retailer who are liable to provide relief to the consumer. As per Grant v Australian Knitting Mills (1935) since the local corner store is not in the position to pay for the losses that is caused to Andy, so it is acme that must provide compensation for the loss that is caused to Andy.
Thus, Andy can sue for the losses that are suffered to him.
Conclusion
Andy has full right under the law of negligence to sue Acme for medical expenses and the loss that is caused to him because of the negligent actions of Acme.
Reference List
Books/Articles/journals
Barker et al. (2015). Law of Misstatements: 50 Years on from Hedley Byrne v Heller. Bloomsbury Publishing.
Latimer, P. (2011). Australian Business Law 2012. 31st Edition. CCH Australia Limited.
Lunne and Oliphant. (2013). Tort Law: Text and Materials. OUP Oxford.
Plunkett, J. (2018). The Duty of Care in Negligence. Bloomsbury Publishing.
Case laws
Annetts v Australian Stations Pty Ltd. (2002) 191 ALR 449
Donoghue v Stevenson [1932] UKHL 100;
Dulieu v White [1901] 2 KB 669
Esso Petroleum v Mardon [1976] QB 801;
Edgington v Fitzmaurice (1885) 29 Ch D 459;
Farr v Butters [1932] 2 KB 606
Grant v Australian Knitting Mills (1935);
Harriton v Stephens [2006] HCA 15
Horsfall v Thomas [1862] 1 H&C 90
Nottingham Brick & Tile Co v Butler (1889) 16 QBD 778.
Rothwell v Chemical and Insulating Co [2007] UKHL 39
Smith v Hughes (1871) LR 6 QB 597
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