Authorities
Contents
Authorities ......................................................................................................................1
Lecture 1 – Introduction, Ethics and Jurisprudence ............................................. 2
Lecture 2 – The Sources of the Laws Governing Business .................................... 2
Federation............................................................................................................... 2
The Legislature........................................................................................................ 2
The Executive .......................................................................................................... 3
The Judicature......................................................................................................... 3
Lecture 3: Legal Literacy for the Business Professional ........................................ 4
Equity - Maxims ...................................................................................................... 4
Lecture 4: Structuring your business .................................................................. 5
Business structures ................................................................................................. 5
Partnerships ............................................................................................................ 5
Joint Venture........................................................................................................... 6
Companies .............................................................................................................. 6
Lecture 5: Contract – the keystone of business relationships .............................. 8
Intent ...................................................................................................................... 8
Agreement .............................................................................................................. 8
Lecture 6: Three “C’s” and an “L” ..................................................................... 11
Consideration........................................................................................................ 11
Capacity ................................................................................................................ 11
Consent ................................................................................................................. 11
Contractual Impediments ..................................................................................... 11
Lecture 7: Contract – Content and Catastrophe ................................................ 13
Content ................................................................................................................. 13
Termination of Contract ....................................................................................... 13
Remedies............................................................................................................... 14
Lecture 8: The Law Protecting Consumers and Small Business........................... 16
Definition of consumer ......................................................................................... 16
Protective implied terms ....................................................................................... 16
Manufacturers liability ......................................................................................... 17
Unfair Contracts.................................................................................................... 17
Lecture 9: Fairness & Ethics in Business Relationships....................................... 18
Lecture 11: Measures to Avoid Liability in Business Relationships ..................... 19
Duty of Care .......................................................................................................... 19
Standard of care ................................................................................................... 19
Damage ................................................................................................................ 19
Defences ............................................................................................................... 19
Negligence ............................................................................................................ 19
Defamation ........................................................................................................... 20
Lecture 12: Risk Management in Business Relationships ................................... 21
Agency .................................................................................................................. 21
Insurance .............................................................................................................. 21
Lecture 13: Going Global .................................................................................. 22
1
Lecture 1 – Introduction, Ethics and Jurisprudence
None. See Jurisprudence Notes
Lecture 2 – The Sources of the Laws Governing Business
Federation
 Australian Courts Act 1828 (UK)
o All English laws before this date are now official in NSW
 Commonwealth of Australia Constitution Act 1900 (UK)
o Federating
o Separation of Powers (judiciary, legislature and executive)
The Legislature
The Separation of powers
 Commonwealth of Australia Constitution Act 1900 (UK) S52
o Outlines exclusive powers of the federal government
 Commonwealth of Australia Constitution Act 1900 (UK) S51
o Outlines the concurrent powers of the federal government
o Important subsections:
 Interstate and international trade (51(1))
 Communications (51(xii, xiii))
 Corporations (51(xx))
 Insurance (51(xiv))
o This section also limits the powers of the commonwealth
government
Expansion of federal Power
 Commonwealth of Australia Constitution Act 1900 (UK) S109
o In the case of an inconsistency between federal and state law,
federal law prevails
 Engineers Case (1920)
o Constitution no to be read in the light of state’s implied power,
expansion of federal powers
 Uniform Taxations Case (1942)
o Federal taxes exclude state taxes on income expansion of federal
powers
 WorkChoices Legislation Case (2006) 231 ALR 1
o Expansion of corporations power expansion of federal powers
Constitution, etc
 Commonwealth of Australia Constitution Act 1900 (UK) S92
o Interstate trade is absolutely free
 Commonwealth of Australia Constitution Act 1900 (UK) S116
o No laws can religious discriminate
2
The Executive
 Commonwealth of Australia Constitution Act 1900 (UK) S61
o The governor general represents the queen in Australia
 Commonwealth of Australia Constitution Act 1900 (UK) S62
o The Cabinet as advisors to the Governor General
 Commonwealth of Australia Constitution Act 1900 (UK) S64
o All cabinet members must be members of parliament (different from
the US)
The Judicature
 Per Griffith CJ in Huddart Parker and Co Pty Ltd v Moorhead [1909] HCA 36
o “the power [to]… decide controversies between its subjects … or
itself”
Interpretation of legislation
 Acts Interpretation Act 1901 (Cth)
o Outlines the rules for statute interpretation, as well as standard
definitions
 Common Law Rules
o Literal Rule
 Exact word meanings
o Golden Rule
 Exact word meanings + necessity for logic
o Mischief Rule
 Looks at what “mischief” the law was trying to address
o Purposive approach
 Literal within the context
3
Lecture 3: Legal Literacy for the Business Professional
Equity - Maxims
 Delay defeats equity
 He who comes to equity must do so with clean hands
 Equity looks to intent, not form
 Derived from the exchequer
4
Lecture 4: Structuring your business
Business structures
 Sole Trader
 Partnerships
 Companies/Corporations
o Covered by federal law (as per Constitution S51(xx))
 Other
o Joint Ventures
o Trusts
o Etc.
Partnerships
 Partnership Act 1892 (NSW)
o All law regarding partnership (unless international or inter-state,
where it falls under federal power)
o Three elements
 Carrying on a of a business
 In common
 With the view to make a profit
o Max Size
 20
 50 for actuaries, medical practitioners and stockbrokers
 100 for architects, pharmacists and vets
 400 for solicitors
 1000 for accountants
o NB joint tenants have separate rights between themselves but are in
the position of a single owner against the world.
o NB tenants in common, multiple owners against the world
Partnership Liability
 Partnership Act 1892 (NSW) s5
o Acts done in the course of business
 Partnership Act 1892 (NSW) s9
o A firm’s debts
 Partnership Act 1892 (NSW) s10
o Tort, Negligence
 Chen V Zacharia (1984) 158 CLR 178
o All partners have a fiduciary relationship of “trust and confidence”
(slide 13)
 Partnership Act 1892 (NSW) s28-30
o Disclosure and non-competition
 Polkinghorne v Holland & Whittington (1934) 51 CLR 143
o When a junior partner acts fraudulently outside of actual authority,
if there is reasonable apparent authority, the other partners are still
liable.
5
Disagreements between parties
 Partnership Act 1892 (NSW) s32
o Termination
 Partnership Act 1892 (NSW) s35
o Termination of current partnerships
 Partnership Act 1892 (NSW) s25
o Expulsion
Joint Venture
 Difference between joint venture and partnerships
o Commonly formed for a single undertaking
o Ad hoc
o Assets are usually held as individual
 United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR
o A partnership can be seen to exist, notwithstanding a formal joint
venture agreement
 Canny Gabriel Castle Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd
(1974) 131 CLR 321
o As above.
Companies
 The Corporations Act 2001 (Cth)
o Sets out the law regarding corporations
 The Corporations Act 2001 (Cth) S124
o Separate legal entity
 Salomon v Salomon & co Ltd [1897] AC 22
o That the company is a separate legal entity to the shareholder
Lifting the veil of incorporation
 Green v Bestobell Industries Pty Ltd [1982] WAR 1 Supreme Court of Western
Australia
o The director breached his fiduciary duty, allowing the supreme court
the “lift the veil of incorporation”
o Directors must not acquire for themselves a business opportunity
sought by the company they are a director
Corporate Officers
 The Corporations Act 2001 (Cth) S9 CA
o Corporate officers include; directors, secretaries, executives and
shadow officers
 ASIC v Gallagher (1993) 11 ACLC 286
o Non-executive directors had a duty to inform themselves so that
they could make independent judgements
The Director
 The Corporations Act 2001 (Cth) SS 180-184
o Director’s duties
6
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Reasonable care and diligence S180(1)
Business judgement rule S180(2)
Good faith S181
Not act recklessly or intentionally dishonest Criminal Liability
S184
The Corporations Act 2001 (Cth) SS 182-183
o All employees must not make improper use of their position S182
o Make improper us of company information S183
The Corporations Act 2001 (Cth) SS 190-194
o Disclosure of personal interest
Director’s Personal Liability
 The Corporations Act 2001 (Cth) S 588G
o Directors have a duty to prevent insolvent trading
o Director personally liable for company debts
 ASIC v Rich [2003] NSWSC 85
o Director’s liability also includes the skills which they bring to their
office, as well as reasonable director’s duties
 ASIC v Adler and 4 Ors [2002] NSWSC 171
o If you are director of more than one company, or a company and its
subsidiary, you have a fiduciary duty to both
7
Lecture 5: Contract – the keystone of business relationships
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Contracts are based, mainly, on Common law decisions
Essential elements:
o Intention
o Agreement (offer and acceptance)
o Consideration
o Capacity
o Consent
o Legality of object
Intent
 Business contracts are presumed to be binding
o Can be rebutted by the following
 Rose and Frank Co v Crompton and Bros Ltd [1925] AC445
o Business contracts are not presumed to be binding if the agreement
has a clause specifically stating that it is not meant to be binding
 Balfour v Balfour [1912] 2 KB 571
o NB: social, domestic contracts are considered presumptively nonbinding
 Teen Ranch Pty Ltd v Brown (1995) 38AILR |P5-036
o Volunteer contracts are not meant to be bound
 Merritt v Merritt [1970] 2 A11 ER 760
o Presumption of domestic non-binding is not applicable when the
parties are separated
 Masters v Cameron (1954) 91 CLR 353
o Agreements to agree can be binding, but, if they include review, they
are not binding as they are not in their final form
 Trevey v Grubb (1982) 44 ALR 20
o Lottery case, no formal contract made, and made in a social
environment, but bill was split and there was considered intention
to be bound, therefore valid.
 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) WAR 101
o If the agreement to agree intends to be binding (e.g. “constitutes an
agreement in itself” than it is a binding agreement.
 A contract may include an express condition that deprives it of legal effect
 A clause cannot exclude the jurisdiction of the courts to rule whether or not
it is a contract
Agreement
 Agreement consists of 2 or 3 facets
o (invitation to treat)
o Offer
o Acceptance
8
Invitation
 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
[1953] 1 QB 401
o Price tags are invitations to treat, not offers
o The contract is only engages at the cash register, rather than when
the goods are taken off the shelf
Offer
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Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
o A deposit/other actions may amount to an intention for an offer to
be binding
o An offer may be made out to the world at large if there is worldwide
circulation and the intention to be bound
An offer can be terminated by failure of condition
o E.g. “subject to finance”, “this contract will end if X becomes unfit to
Y”
Harvey v Facey [1893] AC 552
o A specific price response is an offer to treat, rather than an offer,
unless specifically addressed
Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674
o Even nominal consideration formalises a contract for the period
outlined in the offer
Dickinson v Dodds [1876] 2 ChD 463
o Third party withdrawal of an offer, if brought to the attention of the
offeree, is valid
Byrne and Co v Leon Van Tienhoven & Co [1880] 5 CPD 344
o Withdrawal of an offer has to occur before the acceptance of an
offer to be valid
Hyde v Wrench [1840] 3 Beav 334
o A counter-offer implies rejection of previous offer
Acceptance
 Offer must be accepted to create an agreement
 Electronic Transactions Act 1999 (Cth)
o W e-commerce Dispatched by the sender
 i.e. when it enters info systems outside the control of the
sender
o received when it enters the server of the receiver
 Adams v Lindsell (1818) 106 ER 250
o The Postal Rule
 Empirnall Holdings Pty Ltd v Mark Machon Paull Partners (1988) 14 NSWLR
532
o If a the offeree acts as if the contract has been accepted, it is held to
be accepted
 Goodman Fielder v Cospack [2004] NSWSC 704
9
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Order form and offer are different, similarities are upheld by court
as agreed upon
R v Clarke (1927) 40 CLR 227
o Acceptance must be made in reliance of an offer
Felthouse v Bindley (1862) 142 ER 1037
o Acceptance must be communicated to the offeror
o Silence cannot imply acceptance
Powell v Lee (1908) 90 LT 284
o Acceptance must be made by the offeror or his agent
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Lecture 6: Three “C’s” and an “L”

Will talk about
o Consideration
o Capacity
o Consent
o Legality
Consideration
 Present or future, item moving from the promisee required for the contract
to be valid i.e. no past consideration
o Must be more than the performance of an existing obligation
o Must be possible, definite, legal and referrable
o Not required for formal contracts
 Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847
o Consideration must move from the promisee to show parties to a
contract
 Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
o Consideration must be valuable
 Central London Property Trust v High Trees House Ltd [1947] 1 KB 130
 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
o Promissory Estoppels
Capacity
 Legal authority to enter into a binding relation
 Minors (Property and Contracts) Act 1970 (NSW)
o Restricted authority of a minor
o Only able to enter a contract for his own benefit
 Corporations Act 2001 (Cth)
o Power of a corporation to enter into a contract
Consent
 There must be genuine informed consent between the parties as to the
contracts nature and scope
o Without consent, the contract is void or voidable
Contractual Impediments
Void
Voidable
Lack of Intent
Unilateral mistake of fact
Crucial mistake of identity Non-crucial mistake of identity
Common Mistake
Duress or Undue Influence
Illegality
Misrepresentation
Non Est Factum
 Lack of consent
 If so, contract VOID
11
Mistake
 Mistake of fact
 Mistake of identity
 Common mistake
o Contract is VOID
 Mutual mistake
o Contract is Void
 Taylor v Johnson (1983) 151 CLR 422
o If mistake of fact occurs, and the other party notices and does
nothing to correct it, contract is voidable in equity
 Shogun Finance v Hudson [2004] 1 AC 919
o In case of unilateral mistaken identity, contract is VOID
Misrepresentation
 A false statement that induces a person to make a contract
o If a mistake in term in the contract, then VOID
o If a mistake outside of the terms of the contract, then VOIDABLE
 Hedley Byrne Ltd V Heller & Partners Ltd [1964] AC 465
o Negligent misrepresentation
 Derry v Peek (1889) 14 App Cas 337
o Fraudulent misrepresentation
 Trade Practices Act 1974 (Cth), S52
o False and misleading advertising
Duress
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Physical
Economic
Goods
VOIDABLE if not already affirmed
Undue Influence
 Contract is Voidable
Illegality
 Statutory Illegality
 Common Law Illegality
o Attempts to oust the jurisdiction of the court
o In restraint of trade
 Nordenfelt v Maxim Nordenfelt Guns and Ammunition (1894)
o VOID unless in best interest of both parties and the public
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Lecture 7: Contract – Content and Catastrophe
Content
 Representation
Terms
 Express Terms
 Implied Terms
 L’Estrange v Graucob Ltd [1934] 2 KB 394
o Binding whether read or not
 Parole Evidence Rule
o When in writing, contract is limited to what is written
o Exemptions
 Exemption/limitation of liability clause
o Court will rule in favour of the consumer
o Under literal meaning AND intention
 Trade Practices Act, Contracts Review Act 1980 (NSW)
o Exclusion as unfair and problematical where:
 Consumers
 Small business
Implied Terms
 Business Efficacy
 Custom or Trade Usage
 Sale of Goods Act 1923 (NSW) SS17-20
 Trade Practices Act 1974 (Cth) SS 69-72
o Statutory implied terms
 Doctrine of Privy Contract
o Contracts only affect those in it
o Exemptions
 Insurance
 A third party who intentionally induces a breach of contract
Termination of Contract
 Contract terminated by
o Performance
o Agreement
o Breach
o Law
o Frustration
 Through
o Mutual discharge
o Release
o Waiver
o Substituted agreement
13
Breach
 Breach Of warranty
o Contract continues but damages paid
 Breach Of condition
o Contract terminated and damages paid
o Innocent party can seek to consider the breach as warranty
Law
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Contract cancelled if:
o Bankrupt
o Alteration of contract without consent
o Illegality
Frustration
 Event outside of the control of t he parties involved
 Davis Contractors Ltd V Fareham Council [1956] 2 AII.E.R 145
o “without default of either party … become incapable”
 Frustrated Contracts Act 1978 (NSW)
o Not necessarily void, but also can be adjusted
Remedies
 Requiring Court
o Damages
 Compensation for loss of benefits
 Recover expenses
 Incl’d
 Ordinary
 Nominal
 Exemplary
 Liquidated
 Unliquidated
 Penalty
o Restitution
 Payment under influence or failure, illegality or failure of
consideration
o Injunction
 Court order to not do
o Specific Performance
 Court order to do
o Must be IN TIME TB p423
o Quantum Meruit
 Part performance, “as much as he deserves
 Leading Edge Investments Pty Ltd v Te Kanawa (2007) Aust Cont Reps 90-252
o E.g. Of Meruit see SL35
 Not Requiring court
o Rescission
14
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Breach of condition
Restore pre-contract condition
15
Lecture 8: The Law Protecting Consumers and Small Business
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Trade Practices Act 1974 (Cth) S2
o “advance the welfare of Australians by … consumer protection”
Consumer protection law includes
o Contract Law for g/s
o Tort of Negligence
o Manufacturers liability
 FTA (NSW)
 TPA (Cth)
o Implied terms
 SGA FTA (NSW)
 TPA(Cth)
o Unfair Practices
 FTA (NSW)
 TPA (Cth)
Because of S51XX of the constitution, fed is for companies, state is for other
business structures
These are governed by specific
o Motor Dealers Act 1974 (NSW)
o Trade Measurement Act 1989 (NSW)
and general legislations
o SoG 1923: FTA 1987: Contracts Review Act 1980 NSW
o TPA 1974
Definition of consumer
 Definition of Consumer under the TPA Cth
o Under $40000 but not used up
o Over $40000 but of a kind ordinarily acquired for business or
domestic use
o A commercial road vehicle
o If NOT “of a kind…” TPA S68(1)
 Than businesses may limit repair and replace liability
 Definition of Consumer under the FTA NSW
o Supplier to consumer, not for resupply or used up FTA S5
o Of a kind
Protective implied terms
 goods
o Seller must provide a title to goods SOG s17, FTA s40 0, TPA s69
 The goods must comply with description SOG s18, FTA s40p,
TPA s70
o Goods are reasonable fit for purpose when the buyer relies on the
seller’s skill SoG s19(1), FTA s40Q(2), TPA s71(2)
o Goods must be of merchantable quality SoG s19(2), FTA s40(q)1, TPA
s71
o Goods must comply with sample SoG s20, FTA s40R, TPA s72
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Services
o Due care and skill will be taken
o Fit for purpose, desired result achieved TPA s74, FTA s40
There are circumstances where implied conditions do not stand, e.g. where
the defect has been brought to the attention of the consumer
Manufacturers liability
 Supplier and manufacturer hold the same liability
 See slide 25, p5
 But also more
o Comply with express warranty TPA S74 (1) (g)
o Reasonable repair facilities and spare parts TPA s74, FTA s40Y
Unfair Contracts
 Commercial Bank v Amadio
o Unconscionable contracts can be voided by equity
 TPA Part IVA
o See p5 slide 30
 TPA Part V
o Unfair practices
 Contracts Review Act, NSW, 1980
o Not for business contracts
o Remedies available:
 Damages, criminal remedies prosecuted by ACCC, injunction
etc.
17
Lecture 9: Fairness & Ethics in Business Relationships
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TPA, 1974 S52
o NO DEFENCE
FTA 1987 S42
o “a corporation [person FTA] shall not in trade or commerce engage
in conduct which is misleading or deceptive”
 TPA for:
 Corporations
 Individuals by phone, fax, etc
 Individuals interstate
 FTA for
 Direct for individuals
 In trade or commerce
 Engage in conduct
 Positively
 Negatively
 By omission
 That is misleading or deceptive
Taco Co of Australia v Taco Bell Pty Ltd (1982)
o Indentify target market
o Identify defendant as conduct w regards to the whole market
o Decide whether misleading
o Decide whether misleading was made by company
TPA S75 AZC
o Criminal sanctions can be applied
Country of origin
o Strict test for “product of”, not so strict for “made in”
18
Lecture 11: Measures to Avoid Liability in Business
Relationships
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Donoghue v Stevenson 1932
o Basis of tort law
o Snail in the bottle
Stuart v Kirkland-Veenstra [2009] HCA 15
o Where there is no duty, there cannot be tort
Civil Liability Act, 2002 (NSW)
Duty of Care
 Civil Liability Act, 2002 (NSW) S5b/c
o Forseeability
o Significance
o Probability
o Seriousness of harm
o The burden of taking precautions
Standard of care
 Civil Liability Act, 2002 (NSW) S5b(1)c
o Reasonable etc
Damage
 Civil Liability Act, 2002 (NSW) Div 3
o Actual damage
o Causation, established with the “but-for” test
 Civil Liability Act, 2002 (NSW)
o 15% most extreme cases
o Economic loss is capped at $450 000 annually
o Legal costs for recovery claim <$100 000, lawyer should be sure,
$10000
Defences
 Contributory negligence
 Civil Liability Act, 2002 (NSW) Division 4
o Voluntary assumption of risk
 If obvious 5G
 Defined in 5B
 Or if in a dangerous recreational activity Div5
Negligence
 Professional negligence S5 0
 Negligent misstatement
o Shaddock & Assoc P/L v Parramatta CC (1981)
 Duty of care with statement
 Product liability
o Donoghue v Stevenson 1932
 “the manufacturer … owes a duty to take reasonable care”
19
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Statutory liability
o S75AC (1)&(2)
Defamation
 Hulton v Jones
o Innuendo and implied identification are defamatory
 Capped at 280,550
 Defences
o Truth Defamation Act, NSW (2005) S25
o Absolute Privilege S27
o Qualified privilege S30
o Fair comment S31
20
Lecture 12: Risk Management in Business Relationships
Agency
 3 types
o Limited
o General
o Universal (power of attorney)
 Authority
o Actual
o Apparent
o Operation of law
o Ratification
 Duties
o Fiduciary
 Misconduct is criminal
o Criminal Code Act, 1995 (Cth) Schedule Part 7.6
 Gov’t pps
o Crimes Act, 1900 (NSW) s249B
 All other
 The company is vicariously liable UNLESS
 Sweeny v Boylan Nominees Pty Ltd [2006] HCA 19
o Agent is contracted
Insurance
 Insurance Contracts Act 1984 (Cth)
o Insurable Interest S17
o Utmost Good Faith S26
 Includes duty of disclosure S21
 Or contract is void S28 (2) (fraudulent)
 Reduced (innocent) S28(3)
o Indemnity
o Subrogation
 Step into the shoes of the insured
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Lecture 13: Going Global
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Law which is applied is written into the contract
o Can be invalid If the court thinks that it has been made to
deliberately evade laws
Vienna Convention applies in either country has subscribed
o Excluding: consumer transactions
o Shares
o Question of the validity of contract
International contracts
o FOB
o CIF
 All inclusive
Regie National des Usines Renault SA v Zhang (2002)
o Australian courts will only hear a tort if it is a tort in the country
where it is committed
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