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2010 Business Law

Revision Booklet
The Business Law final exam is 3 hours with 10 minutes of reading time.

HOW TO ANSWER CASE STUDY QUESTIONS


When answering this question students need to follow the format of:
(i)
(ii)
(iii)
(iv)

state the issue


state the law-this includes relevant legislation and cases
apply the law to the facts
state the conclusion

Key words used in questions:

Explain students need to provide a


definition and give reasons in their
answers. ie they must try to answer
the question why something happens
or give details of the cause of
something. An example will
demonstrate understanding.
Describe- Students need to write
detail about what they are being
asked. This will usually include a
definition and an outline of the
details.
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Distinguish-Define and compare two


things showing that are not the
same.
Advantage- Students write about the
benefits or the good things
Disadvantage-Students write about
the costs or the bad things.
How-Write about the way something
happens.
Example-Students provide a case
study or real life sample to help
explain their answer.

Major concepts and definitions to know and understand:


Write a short definition and include an example if possible to show understanding

Topics 1 - 4: Law Making


Main sources of law in Australia-common law and statute law

Civil and criminal law

Separation of powers

Concurrent law making powers

Exclusive law making powers

Residual law making powers

Section 109 of the Australian constitution

Statutory Interpretation

Delegated legislation

Court hierarchy state and federal court system

Precedent

Ratio decidendi

Topic 5: Business Structures


Characteristics of a sole trader- advantages and disadvantages

Elements of partnership

Features of a partnership

Features of a company- advantages

Types of company

Topic 6: Principal & Agent


Agency defined

Creation of Agency

Authority of an Agent

Duties of an Agent

Topic 7: Tort Law


Definition and examples of Tort law

Three requirements to prove negligence

Defences to negligence

Damages in negligence cases

Topic 8: Contract Law


6 elements of a simple contract

Express and implied contracts

Valid contract

Void contracts

Voidable contracts

Terms in a contract

Exclusion clauses in contracts

Remedies for breach of contract

Topic 12: Consumer Protection


The Trade Practices Act 1974

Unfair practices

Misleading and deceptive conduct: Section52

Australian Competition and Consumer Commission (ACCC)

Conditions implied into consumer contracts by the Act.

Summary of Agency Law


o Definition and features
o Principal
o Agent
o Third party
o Creation and authority of Agency
o Actual - Agent appointed-verbal or written
o Apparent - Person gives the impression they are the agent
Case: Tooth v Laws
o Implied - Position or circumstances of the person indicate agency
o Ratification - Approval by the principal after the agent has performed
an act
o Necessity
Person in control of another person property
An emergency or commercial necessity
Impossible to communicate with the owner of the property
Agent must act in good faith and the interests of the owner
Case: Great Northern Railway v Swafield
o Duties of an agent
o Obey instructions
o Act in person
o Act in the principals best interest
o Not make a secret profit or secret commission
o Take care of the property of the principal
o Keep separate and proper accounts
o Use reasonable skill and diligence
o Agents rights
o Remuneration
o Reimbursement
o Lien
o Stoppage in transit
o Types of Agents
o Special
o General
o Universal

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Summary of Negligence Law


o Did the defendant owe the plaintiff a duty of care?
o Foreseeability Test
Was it predictable that the defendants conduct could injure or
cause harm to the plaintiff?
o Vulnerability and control test
Was the defendant able to control the plaintiff and was the
defendant aware of this ability to control?
Did the plaintiff rely on the defendant?
Was the defendant under a legal obligation to protect the
interests of the plaintiff?
o Did the defendant breach the duty of care?
o The risk of injury must be reasonably foreseeable
o The defendant must fail to do what a reasonable person would have
taken preventative measures against risk of harm.
Likelihood that harm would occur if care were not taken
Case: Bolton v Stone
Likely seriousness of the harm
Case: Paris v Stepney
The burden of taking precautions to avoid the risk of harm
The benefit of the activity that creates the risk of harm.
o Did the plaintiff suffer damage?
o Plaintiff must prove that the breach of the duty was an effective cause
of the damage. Did the defendant cause the harm?
But for the defendants action would the plaintiff have suffered
damage?-Is it appropriate for the defendant to be made liable?
o Remoteness
Is the damage caused too remote from the defendants act or
omission to act?
o Defences to negligence
o Contributory negligence
o Voluntary assumption of risk
o Categories of negligence relevant to business
o Pure economic loss
o Liability for defective products.
Case: Donoghue v Stevenson
Case : Grant v Australian knitting Mills
o Negligent misstatement
Case: Shaddock & Associates v Parramatta City Council
o Professional negligence
o Vicarious liability (for the conduct of others)
o Occupier liability
Case: Australian Safeway Stores v Zaluzna
Case: Hackshaw v Shaw
o Motor vehicle accidents

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o Damages
o Special damages
o General damages
o Nominal damages
o Punitive damages

Summary of Contract Law


o Formation of a contract
o Express contracts-written, verbal
o Implied contracts-by conduct
o Classification of contracts
o Valid-contains 6 elements
o Void- no contract
o Voidable-can be repudiated by one party
o Intention to create legal relations
o Social and domestic agreements no valid contract, can be rebutted
Case: Balfour v Balfour
Case: Wakeling v Ripley
o Commercial and business agreements
o Agreement
o Offer rules
Made in writing verbal or implied
Invitation to treat
Case: Boots Cash Chemists case
Offer to the world at large
Case: Carlill v Carbolic Smoke Ball Co
Terms must be communicated to the offeree
Supply of information is not an offer
Conditions in the offer must be followed
o Acceptance rules
Acceptance must be certain
Acceptance must be in reliance of the offer
Case: R v Clarke
Acceptance must correspond exactly with the offer
Can be communicated in writing, verbally or implied by
conduct
An offer can only be accepted by the person to whom the offer
was made
Acceptance through the post given when the letter is posted
o Consideration
o Exchange of mutual promises
o Must be of some value but it need not be adequate
o Consideration can be present and future but not past
Case: Roscorla V Thomas
o Capacity
o If there is no capacity then the contract is voidable
o Minors
Contracts for necessaries
Beneficial contracts of service

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o People affected by alcohol or drugs


Was the person capable of understanding?
Was that persons condition known by the other party
o Bankrupts

o Consent
o Misrepresentation
Innocent misrepresentation
Fraudulent misrepresentation
Negligent misrepresentation
o Mistake
Unilateral mistake
Mutual mistake
Common mistake
o Duress
o Undue influence
o Unconscionable conduct of the other part
o Legality
o Crime or tort on a third party-no contract
o Against public policy-no contract
o Terms and Representations
o Representations discussions before the contract
o Terms part of the contract
Express terms
Conditions essential term in the contract
Warranties minor importance to the contract
Implied terms
By the courts
By statute
By usage or custom
o Exemption clauses
o Limit or exclude the liability of a party for damage or loss to another
party
o Cannot be used if there is misrepresentation
o Cannot limit liability for negligence
o Could breach section 52 of the Trade Practices Act
o Termination of the contract
o Performance
o Agreement of the parties
o Operation of the law
o Frustration
o Breach of the contract
Actual breach obligations not performed
Anticipatory breach not going to perform in the future

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o Remedies for breach of contract


o Recission cancel the contract if breached
o Damages
General damage exact amount not certain
Special damage specified amounts
o Specific performance court directs a party to perform obligations
o Injunction courts stop a person from breaching a contract or
committing a wrong act.

Summary of actual case studies


The facts of the case, the area of law and the decision are given. You must give
reasons for a decision in the exam.
These case names can be used where relevant in your exam to support your
answers.
The decisions represent a precedent which will be used in other cases where the
legal principles (ratio decidendi) are the same but the facts may be different.
NEGLIGENCE Case law
Case: Great Northern Railway v Swafield
Facts: The plaintiff company agreed to transport the defendants horse to a particular railway station.
On arrival there was no one to take possession of the horse. The plaintiff company sent the horse to a
commercial stable to be cared for. The service required payment.
Decision: The court held an agency of necessity had been created, and the owner of the horse had to
pay. The 4 conditions of an agency of necessity had been met.

Case: Tooth V Laws


Facts: The defendant had been the licensee of a hotel. He allowed new owners to keep his name over
the door even though he had sold the business. The new owners were supplied with beer by Tooth and
Co. This company sued the defendant for the cost of the beer.
Decision:This a case of apparentcreation of agency andapparent authority of agency. The court held
that the defendant was liable and could not deny that the new owners were doing so as his agents
because the sign on the door held that the defendant was the principal.

Case: Donoghue v Stevenson


Facts: A ginger beer manufacturer sold a bottle of ginger beer to a retailer. It was sold to a customer
who gave it to a friend to drink. The drink contained a dead snail which had come from the
manufacturer. The friend became ill and sued the manufacturer for negligence.
Decision: The court held that the manufacturer owed her a duty of care to make sure there was nothing
in the drink that would cause harm even though there was no contractual relationship with the
manufacturer. The defendant was negligent and liable to pay compensation. The manufacturer is liable
for defective products.
The 3 conditions for negligence had been created by the court in this decision.

Case : Grant v Australian knitting Mills

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Facts: The plaintiff had bought some underwear from a shop. It was contaminated with a chemical that
caused him to develop a severe rash. The plaintiff sued the shop as well as the manufacturer.
Decision: The court held that the manufacturer was liable for defective products and owed a duty of
care which was breached.
The 3 conditions for negligence were involved in this case.

Case: Bolton v Stone


Facts:The plaintiff was struck by a cricket ball that was hit from a cricket ground while a cricket match
was being played. The ball passed over a fence and struck him.
Decision: The court held that the defendant liable for damages caused by a ball struck out of the ground
over a high fence. There was only a slight possibility of harm. The ball going out of the ground was a
very rare event. A reasonable person would ignore any risk of being hit.Duty of care was not
breached.

Case: Paris v Stepney Borough Council


Facts:The plaintiff was employed by the defendant council. He had sight in only one eye. The
employer knew this but failed to supply protective glasses for work the defendant was doing where
there was a risk of injury. The plaintiff suffered an accident while working and lost the sight in his
good eye.
Decision: If an employer knows that the plaintiff is suffering from a disability that would increase the
gravity of injury, should an injury occur, then precautions need to be taken to avoid injury. Duty of
care was breached because precautions were not taken due to the gravity of the possible injury.

Case: Shaddock & Associates v Parramatta City Co


Facts: A solicitor, acting on behalf of Shaddock, contacted the Parramatta Council to ask if a property
was affected by a road widening proposal. The council employees issued a form and made other
statements that wrongly showed the property was not affected. Shaddock later purchased the property
and suffered losses when road widening took place. He sued the council for negligent misstatement.
Decision: Shaddock received compensation. The court held that the council gave information to a
person whom they knew would rely upon it and they were under a duty of care to make sure the
information was correct.

Case: Australian Safeway Stores v Zaluzna


Facts: The plaintiff, a shopper, slipped on the tiled floor of a Safeway supermarket on a wet morning.
Decision: This is the standard of care owed by an occupier of premises to those entering the
premises. The court said that the plaintiff was a lawful entrant to the shop and that the defendant owed
a duty of care to avoid the risk of injury to all persons entering the premises. The duty was breached.

Case: Hackshaw v Shaw


Facts: A farmer shot at a car which was on his property. A person in the car was stealing petrol and the
reason for the shooting was to stop the car. It was dark and the thief was standing next to the car. A
passenger in the car was hit by a bullet and injured.
Decision: This is about occupier liability and their duty of care. The farmer was held to be liable for
negligence to the passenger. Shooting at the car created a danger of injuring a person in the vehicle,
which would have been reasonably foreseen by the farmer.

CONTRACT Case Law


Case: Balfour v Balfour

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Facts: The defendant was a civil servant working in Ceylon (Sri Lanka). When he was home on leave
in England, it was agreed his wife would remain in England while he would return to Ceylon and he
promised to pay her money each month for living expenses. The defendant breached this agreement
and his wife sued him, alleging breach of contract.
Decision: The court held that there was no intention to create legal relations due it being a domestic
agreement. There was no contract.

Case: Wakeling v Ripley


Facts: Ripley was a bachelor who lived in Sydney. The plaintiffs were Ripleys sister and her husband,
who was a university lecturer in England. Ripley tried to convince his sister to move to Australia. He
promised to give a home and living if they moved to Australia. And that he would leave all property to
his sister on his death. The sister and her husband agreed. They sold their house and the husband
resigned from his job.
After being in Australia for a year, the parties had a serious fight and Ripley sold his house and cut the
sister out of his will. The plaintiffs sued for breach of contract.
Decision: The court held there was intention to create legal relations despite the fact it was made
between family members. The plaintiffs had sacrificed a lot by leaving a job and moving to Australia.
Therefore they could sue for a breach of contract.

Case: Boots Cash Chemists case


Facts:Boots chemists opened up a self service chemist shop. Customers could choose medicines and
take them to the cash register. Previously medicines were always kept behind the counter. The
pharmaceutical society argued that the display of medicines was an offer that was accepted when the
customer selected one of them. This was before they could be checked by the pharmacist. They argued
that this breached regulations saying that medicines need to be checked by the pharmacist.
Decision: Goods on display were an invitation to treat. An offer is made when the customer takes the
goods to the pharmacist for checking and then to the register for payment.

Case: Carlill v Carbolic Smoke Ball Co


Facts: An advertisement was placed in several magazines offering a sum of money to any reader who
contracted a cold or flu from using the companys carbolic smoke ball three times a day for two weeks.
The offer was made to anyone reading the advertisement.
Decision: The court held this was an offer to the world at large and that the plaintiff had a right to
claim the money as she had accepted the offer.

Case: R v Clarke
Facts: A reward was offered for information leading to the arrest and conviction of persons responsible
for the murder of two policemen. On June 6 two persons X and Y were arrested and charged with
murder of the policemen. On June 10 Y gave evidence leading to the conviction of X and another
person Z. for the murders. Y was released and claimed the reward.
Decision: The court found that Y had only produced information to the police in order to escape the
murder charge. Y did not accept in reliance of the offer when he gave information so there was no
acceptance of the offer of a reward. He could not claim the reward.

Case: Roscorla V Thomas


Facts:Roscorla purchased a horse from Thomas. After the contract was completed, Roscorla demanded
a promise from Thomas that the horse was healthy. The promise was given and later it was found that
the horse was sick. Roscorla sued for breach of contract.
Decision: There was no consideration because the contract had already been completed before the
promise was made. Therefore it was past consideration. There was no breach of contract because the
promise was not a valid consideration

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Sample Revision Questions


Section A
This section consists of 20 multiple choice questions.
Advice
In the 10 minutes reading time, students can decide most answers and answer
questions quickly when the writing begins.
Students choose the best answer. If they dont know an answer they should
eliminate stupid answers that are definitely wrong and by a process of elimination
they will be left with the correct answer.
If students cant do a question they should leave it and come back to it before
completing the exam.
Multiple Choice questions
. 1. A key feature of a partnership is:
(a) mutual agency
(b) limited liability
(c) separate legal entity
(d) all of the above
2. Negligence is :
(a) a criminal wrong
(b) an offence punishable by imprisonment and/or a fine
(c) an offence punishable by imprisonment
(d) a civil wrong
3. Exemption clauses are used in contracts to:
(a) limit liability
(b) exclude liability

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(c) increase liability


(d) limit or exclude liability
4. In an agency there are:
(a) two main parties
(b) four main parties
(c) three main parties
(d) five main parties
5.. A business established to carry out a single once-only project is likely to be a:
(a) partnership
(b) joint venture
(c) sole trader
(d) company

Section B
This section has 10 short answer questions, each worth 2 marks for a total of 20
marks.
Advice
To distinguish between two things means to find the differences between them. A
good word to use when distinguishing concepts is whereas. This allows you to
connect the two concepts in one sentence and show the difference between the two.
eg. Question: Distinguish between a lease of land and a licence to use land.
Answer: A lease gives someone exclusive possession and use of the land whereas a
licence does not allow exclusive possession of the land.
In some cases the differences are obvious from providing the basic definitions but
try to show any differences between the concepts in your answers.
1. Distinguish between common law and statute law

2. Distinguish between a binding precedent and a persuasive precedent.

3. Distinguish between actual authority and apparent authority.

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4. Explain the difference between vicarious liability and occupiers liability.

5. Distinguish between innocent misrepresentation and negligent misrepresentation.

Case Study Questions


Advice
Follow the formula when answering case study questions in Section C.
1. State the issue
2. State the law- include relevant case law.
3. Apply the law to the facts
4. State the conclusion
Sample Case study question and answer
Lizzie who is aged 16 years enters an apprenticeship agreement with Bobs pies Pty Ltd. She is training
to be a baker. The apprenticeship is to last one year. During that time she will learn all aspects of bread
making. She is given an allowance of $30 per week, free accommodation and meals. She must work 10
hours a day, 6 days a week and must get permission from her employer if she wishes to go out at night.
She decides to leave the apprenticeship. The owners of Bobs pies Pty Ltd are angry and want to sue
Lizzie for breach of contract. Advise Bobs pies Pty Ltd.

1. The issue here is whether there is a valid contract or not. It concerns the
capacity to contract and whether there is an enforceable contract between Lizzie
and Bobs pies Pty Ltd.
2. The area of law is to do with contracts for minors that are beneficial contracts for
Service. Minors can enter into contracts where there is some benefit for service.
If there is a benefit the contract will be enforceable.

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Include a relevant case study by name. (inthis answer there isnt one we use but
in other case questions there is usually a case you can mention)
3. There is a contract for service as this is an apprenticeship agreement. But is it a
beneficial agreement? The advantages are learning about bread making, free
accommodation and meals. However the money is poor, hours of work are harsh
and the need for permission is harsh and unrelated to her duties.
Disadvantages out weigh the advantages.
4. This is not a beneficial contract of service. There is no breach of contract and she
is free to leave.
1. Sally while walking past K-Mart spotted a dress in the window priced at $9. She
walked into the shop and intended to buy the dress. The shop assistant told her it
was a mistake. The price should be $90. Advice Sally of her rights.

2. Aaron returns a lost cat to its owner. The cat was in his backyard and had a
tag showing its name and address. While walking home, Aaron sees a
reward for the cat on a power pole.
Is Aaron entitled to the reward? Why or why not?

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3. Angie was very drunk when she boarded a tram in Melbourne. She
demanded a ticket to nowhere. The conductor reeled at the breath and sold
her a monthly unlimited travel pass for $200. She got off the tram two stops
later. The following morning Angie found the pass and could remember the
incident. She never uses trams normally and doesnt want the ticket. What can
Angie do?

4. Dunstan and Jenkin entered into a contract whereby Jenkin was to load
grain in an Italian port. War was suddenly and unexpectedly declared between
Australia and Italy prior to the performing of the contract, which meant that Jenkin
would be involved in trading with an enemy nation. When he refused to do so,
Dunstan sued for breach of contract. Would he be successful? Why/Why not?

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