Diploma of Financial Services (Banking)
FNSACCT404B
Make Decisions in a Legal Context
Part 1 (Lecture 1 to 8)
Introduction

Lecturer
◦ Name
◦ Contact details

Prerequisites
◦ Australian Business Law – Principles & Practice, Pearson, NSW Pendleton, W. and
Vickery, R, latest edition,
◦ Internet access
◦ Learner Guide
◦ Study discipline

Unit Overview
o
In Make Decisions in a Legal Context, students develop the competency to work
and make decisions within a legal context (covering areas such as the Australian
legal system, property, contract and agency).
 Term dates & lecture timetable
2
Unit of Competency
This unit requires the application of skills and knowledge required to make
decisions within a legal context. The unit encompasses identifying the main
roles and responsibilities of key bodies in the legal system, identifying
compliance requirements and developing procedures to ensure compliance.
The unit has application across all sectors of the financial services industry.
Identify the main roles and responsibilities of the key bodies in the legal
system

The functions of the courts and other regulatory bodies are identified

Implications of relevant legislation are identified and applied in regard to
making decisions

Implications of common law, including negligence and contract,
employment law and business structures, are identified and applied in
regard to making decisions
3
Unit of Competency
Identify compliance requirements
Requirements are interpreted accurately and within prescribed time limits
 Requirements are reviewed in a comprehensive manner
 Sources are constantly reviewed to remain informed of changes and
amendments to statutes and finance industry requirements

Develop procedures to ensure compliance
Procedures are developed in consultation with others to address all the
requirements to be met for compliance
 Compliance requirements are monitored to ensure that they are
adhered to by the organisation
 Timetables to meet compliance requirements are established to align with
statutory deadlines

4
Range Statement
Courts and regulatory bodies may include:

High Court

Federal Courts

State Courts

Industrial Relations Court

Australian Tax Office (ATO)

Australian Securities and Investments Commission (ASIC)

Stock Exchange

Australian Consumer And Competition Commission (ACCC)
Relevant legislation may include:

Financial Transactions Reports Act

Consumer Credit legislation

Taxation Act, Trade Practices Act, Stamp Duties Act, Privacy Act

Sale of Goods Acts
5
Range Statement cont.
Sources may include:

internet

government publications

industry journals

industry networks
Procedures may include:

operations manuals

internal control guidelines

computer system documentation
Compliance requirements may include:

statutory requirements

audits

policy and procedures

contracts
6
Learning & Assessment Guide
Learning Outcome 1
Revise the role of courts, tribunals and other regulatory bodies in the legal
system.
Learning Outcome 2
Revise the activities of business associations and the process for the
establishment of a sole trader, partnership, proprietary and public company.
Learning Outcome 3
Explain the operation of agency and partnership law in South Australia.
o
Distinguish between the rights and obligations of principals, agents
and third parties.
o
Identify factors to determine the existence of a partnership.
o
Explain the operation of partnership law in South Australia, including
the rights and obligations of the partners.
7
Learning & Assessment Guide
Learning Outcome 4
Recognise the relevance of tortuous liabilities in the business environment.
4.1 Explain and illustrate by example, the application of negligence in the
context of:

Negligent misstatement

Occupiers’ liability

Product liability

Vicarious liability

Highway authorities

Economic loss

Professional liability

Reduction of liability
4.2
Risk is assessed and procedures are put into place to reduce liability.
8
Learning & Assessment Guide
Learning Outcome 5
Describe and explain the formation, operation and termination of contracts as
they affect business activities.
5.1 - Examine and analyse general business contract documents, particularly in
relation to validity, form, retention of title and performance.
5.2 - Identify and explain the six essential elements of a valid contract:
 Intention to create legal relations
 Offer and acceptance
 Consideration and form
 Capacity
 Genuine consent
 Legality of purpose
5.3 - Explain how these elements of a contract relate to business decisions
and transactions.
5.4 - Explain how a contract may be discharged and the remedies available.
5.5 - Identify the e-commerce implication for the law of contracts.
9
Learning & Assessment Guide
Learning Outcome 6
 Demonstrate an understanding of the concept of property and the nature of
mortgages, including the rights and obligations of the parties.
 6.1
Explain the operation of the Torrens Title system in South Australia.
 6.2
Briefly explain the nature of mortgages, including the rights and
obligations of the parties (including a guarantor) to a mortgage.
Learning Outcome 7
Recognise the application of contractual principles to certain specialty contracts –
leases, franchises and insurance.
 7.1
Define a contract for lease, identify the elements necessary for a lease,
and explain the South Australian law relating to business leases.
 7.2
Define the franchise agreement and the relationship of franchisor and
franchisee.
 7.3
Briefly explain the purpose of the Franchising Code of Practice.
 7.4
Demonstrate an understanding of insurance law and explain the
common forms of business insurance.
10
Learning & Assessment Guide
Learning Outcome 8
Recognise the application of contractual principles to employment contracts.
 8.1
Describe the formation and operation of an employment contract.
 8.2
Describe the reasons for termination of contracts.
Learning Outcome 9
Demonstrate an understanding of workplace relations law.
 9.1
Define:
 An award
 An enterprise agreement
 A certified agreement
 An Australian workplace agreement and explain the procedures for making
them
 9.2
Explain the dispute resolution process within the workplace relations
system.
11
Learning & Assessment Guide
Learning Outcome 10
Recognise and describe the statutory provisions and principles relevant to the
sale of goods which accountants are required to apply in the course of
business.

10.1 Define and differentiate between:

Specific and unascertained goods

Sale and agreement to sell

Sale of goods and contract for work done and materials supplied

10.2 List the implied conditions and warranties in Sale of Goods
legislation and recognise when such terms are excluded in the case of a
sale being a “consumer sale”.
12
Learning & Assessment Guide
Learning Outcome 11
Describe and explain the principles of consumer protection legislation as it
applies to contract law and specifically the rights and duties in relation to
contracts with “consumers”.
11.1 - Recognise the significance of the Trade Practices Act for consumer
protection law and specifically apply the provisions of the Act in relation
to:
 Unfair practices
 Implied conditions and warranties
 Remedies under the Act
 Rights against manufacturers and importers
 The role of the Australian Competition and Consumer Commission
11.2 - Explain the operation of other statutes and common law relating to ecommerce, retailers and manufacturers.
11.3 - Explain risk management procedures which may be used in the
workplace to minimize liability.
13
Learning & Assessment Guide
Learning Outcome 12 - Describe the operation of the Trade Practices Act in relation to
restrictive trade practices.
 12.1 Differentiate between the roles of the Australian Competition and
Competition Council and the Federal Court.
 12.2 Describe the practices prohibited under Part IV of the Trade Practices Act.
 12.3 Outline the enforcement procedures for breaches of the restrictive trade
practices provisions of the Trade Practices Act.
 12.4 Explain risk management procedures which may be used in the workplace
to
minimize liability.
Learning Outcome 13 - Explain the types of legal protection available for intellectual
property.
 13.1 Define copyright, design, patent and trade mark.
 13.2 Outline the processes for protection of intellectual property.
 13.3 Briefly describe the remedies for breach of intellectual property legislation.
 13.4 Explain “passing off”.
 13.5 Discuss the elements in a common law action of breach of confidence in
relation to confidential information.
 13.6 Identify the e-commerce implication for the law regarding intellectual
property.
14
Learning & Assessment Guide
Learning Outcome 14 - Explain effective methods of debt collection.
Learning Outcome 15 - Explain the effect of bankruptcy.
 15.1 Outline the procedures when someone becomes bankrupt.
 15.2 Explain the consequences of bankruptcy.
 15.3 Briefly describe the alternatives to bankruptcy.
Learning Outcome 16 - Formulate procedures to ensure compliance with
applicable business law and to continually review legislation requirements.
 Identify sources of information:
 Websites
 Newsletters
 Industry journals
 Media releases
 Legislation
Note: Learning Outcome 16 should be covered throughout the subject.
15
Assessment
Summative

2 unsupervised assignments to cover all learning outcomes (may be provided as
one assignment)

2 open book supervised assessments (may be provided as one assessment)
Formative

Learning and group work activities

Application of case study principles to learning and group work activities
16
Grading
Fail


A grade for not meeting all performance criteria.
Does not demonstrate competence in all performance criteria in the unit.
Pass


A grade for meeting all performance criteria.
Demonstrates competence in all performance criteria in the unit (including employability skills)
Credit





A grade for consistent judgement and application of theory and concepts. To be awarded a credit grade,
the student must meet the criteria for pass, and further:
Appropriately relate the performance criteria to work situations and workplace standards
Meet all specified deadlines
Work with limited supervision
Assignments/assessments require no more than minor amendments only.
Distinction





A grade for consistent excellence in the areas of originality, attitude and independent application. To
be awarded a distinction grade, the student must meet the criteria for pass and credit grades, and further:
Demonstrate original and independent application of theory and practice
Demonstrate initiative and outstanding attitudes, approaches to learning and motivation
Where appropriate work with and lead a study group or demonstrate outstanding consultation skills
Assignments/assessments require no amendments
17
Timetable
Week
1 and 2
Topic
Revision of courts, tribunals and other regulatory bodies
Revision of business entities
Agency and partnership law
3
Negligence
4,5,6 and 7
Contracts – Formation, elements, discharge and remedies for breach
8
Property law, leases, franchises and insurance
Case Study assignment
9
Employment contracts
Workplace relations law
Give out presentation to students
10
Sale of Goods Act
11
Consumer protection
12
Presentations
Business and e-commerce transactions
13
Restrictive trade practices
14
Intellectual property
15
Debt collection and bankruptcy
16
Supervised assessment
17
Corrections/resits
18
Lecture 1
Revision
Legal System
Business Entities
Introduction to
Agency &
Partnership Law
19
Key Terms








Act of Parliament/Statute Law/Legislation
Arbitration (binding)
Civil Law
Committal Hearing
Common law (precedents, legal principle)
Conciliation (non binding)
Delegated Legislation
Equity (remedies eg injunction, account of
profits)
Australian Legal System

http://www.fedcourt.gov.au/aboutct/about
ct_videos.html#justice
Court Hierarchy
High Court of Australia
Full Court
Single judge
State Supreme Courts
Courts of Appeal/Full Courts
State Supreme Courts
Single judge
Intermediate courts
District Court
Magistrates Court
Courts and tribunals
of specialist jurisdiction
(EO), Residential Tenancies)
State Court Hierarchy
High Court of Australia
Full Court
Single judge
Supreme Court
Appellate Jurisdiction
Supreme Court
Single judge
District Court
Crim & Civil
Magistrates Court
- General Claims ($6K - $40K) ($80K PI)
- Minor Claims (up to $6K)
Courts and tribunals
of specialist jurisdiction
The Adversarial System






2 parties to dispute
(plaintiff/defendant/appellant/respondent)
Caseflow management (directions/status
hearings, conciliation/settlement conference)
Independent and impartial judge (jury if
criminal) (separation of powers)
Witnesses (in chief and cross examination),
expert witness only for opinion
Burden of proof
Standard of proof (criminal, civil)
In Court

http://www.fedcourt.gov.au/aboutct/about
ct_videos.html#courtroom
Courts administration
http://www.courts.sa.gov.au/
 District Court Act
 Supreme/District Court Rules
 Magistrates Court Rules
 Practice directions

ADR






Abandon the Claim (each party may bear own
costs)
Out of Court Settlement
Ombudsman – report on conduct of
government bodies towards public
Conciliation / Mediation – 3rd party facilitates
resolution – non legal - usually non binding
Arbitration – commercial/employment disputes
– legally qualified ‘umpire’
Commissions and Tribunals
◦ e.g. ACCC
◦ Immigration review
Delegated Legislation
Powers of Parliament ‘given’ to other
bodies
 Parliament does not have time or
expertise to make law
 Regulations, By-laws, Ordinances, or
Statutory Rules

Delegated Legislation

Powers of Parliament may be passed to:
◦ Executive Council – emergency situations
◦ Local Councils – eg rubbish collection
◦ Government Departments – operating
rules/procedures
◦ Statutory Authorities – eg Housing SA
Lecture 2
Revision of Business
Entities
Introduction to Agency
and Partnership Law
30
Business Entities

Sole Trader
- Owner/operator
- Advantages (low set up costs, control)
- Disadvantages (unlimited liability, limited
access to funds, tax, single expertise)
Business Entities

Partnerships
“the relation which exists between various persons carrying on a business
in common with a view of profit” – Partnerships Act (SA)
Key features:
- Each partner is principal and agent for other partners;
- Equal share in profits and losses;
- All participate in decision making;
- Each must act in best interests of partnership;
◦
◦
◦
◦
◦
Creation
Liability
Agency
Rights and duties
Distribution of assets
Business Entities

Number of
partners
- Generally 2 -20
people but
exceptions:Actuaries, medical
practitioners, sharebrokers or
stockbrokers
50
Architects, chemists, vets
100
Legal practitioners
400
Accountants
1000
Business Entities

a)
Creation
Written Agreement (partnership
agreement)
-
Highly recommended
Duties, responsibilities, rights
Easier to resolve disputes if agreement
Will override provisions of Partnership Act
Contains – details of partners, duration, duties,
details of keeping of accounts
Business Entities
b) Verbal agreement
- No written document, implications for
disputes.
c) Conduct (partnership by estoppel)
- Others led to believe partnership exists by
individuals conduct.
Business Entities
Liability of Partnerships
 Joint and unlimited liability for debts and
contractual obligations
 TORT – Joint and several liability

- All partners liable for a tort if act or omission
occurred when partner:-was acting in the ordinary course of the partnership business; or
- had actual or apparent authority from the other partners
Business Entities

Relationship to Third Parties
Provided they acted with authority,
“…all partners are as liable for the
actions of the partners as if they did
those acts themselves”.
(Vickery & Pendleton, 5th edition)
Business Entities

Actual authority
- real, clearly stated, all partners agree
Apparent authority
- Partner who appears to act with authority.
- 3rd party compensation on following bases:- Partner carrying out ordinary kind of business of firm;
- Partner’s actions carried out in usual way;
- 3rd party unaware that partner lacked authority to bind firm
Polkinghorne v Holland
(1934) 51 CLR 143
Advice given to client by junior solicitor re
investing in company
 Client argued junior solicitor was negligent and
sued senior partners
 High Court held that giving financial was within
the usual scope of business of a law firm and
client had reasonably believed junior partner
had fully authority =


ALL PARTNERS LIABLE
Business Entities

Implied authority
- Those dealing with the partnership are entitled to expect
that partners have following implied powers: Sell firms product;
 Employ staff;
 Purchase goods normally used;
 Receive payments;
 Issue cheques
◦ *should any of the above be removed, anyone doing
business with the partnership must be informed, otherwise
implied authority will apply and partnership be bound.
Novation

P29

Transfer of legal duties to another party

Example – Partner leaving business
Joint Venture
Assets – owned as tenants in
common
 Rights of creditors – against joint
adventurer
 Not separate legal entity
 Conduct of one not legally binding on
other

Companies – Legal Nature

Effect of Incorporation
- ‘registered’ s119 – incorporated body
- ‘artificial person’ – sue, be sued, hold property, own
liability
- Main difference to partnership, proprietorship
- Exception – murder, lifting ‘corporate veil’
- Members personal liability only to company
(guarantee, unpaid amount on shares) not to third
parties;
- Extent of liability to company depends on class
Incorporation – Key cases

Salomon v Salomon (1897)
Separate Legal Entity principle p157

Lee v Lees Air Farming (1961)
p158
The effects of incorporation
Separate legal
entity
Veil of
incorporation
Powers granted upon
incorporation s 124(1)
Functions of body
corporate
Can sue and be
sued
Perpetual
succession
Power to deal
with property :
s124(1)(d) (f)
Source: Butterworths, Corporations Law Tutorial Series,2001, p30
Powers of an
individual
Limited liability:
s516
Corporate Veil
Company separate from participants ‘veil
of incorporation;
 Court can lift corporate veil despite
Salomon;

- Common law
- Statute
Existing Legal Duty

eg ‘sole’ or ‘dominant’ purpose of doing
something which one of participants is
prevented from doing personally
◦ Gilford Motor Co Ltd

Veil pierced - obligations imposed on
individual now imposed on company
Perpetual Succession

Company continues regardless of changes
in membership;

Demise of original members etc;

Until deregistered
Types of Companies
Corporations
Companies registered
under the Corporations Act
Public companies
Other corporations
(eg incorporated associations,
statutory corporations)
Proprietary
companies
Limited by shares
Limited by shares
Limited by guarantee
Unlimited with share
capital
Unlimited with share
capital
No liability
Source: Hanrahan, Ramsay & Stapledon, Commercial Applications of Company Law, 2007, p64
Classes of Company
(nature of liability)
S112: Limited by shares

Limited by guarantee

Unlimited

No liability

Amount, if any, unpaid on
shares

Agreed to contribute on
winding up

No limited on liability

No liability to contribute
even if shares only partly
paid
Public v Private Company

Public (sec 9)
-
eg BHP Billiton
Shares to public
1 member minimum (no max)
3 directors, 2 to reside in Australia
Listed on ASX
Publishes financial statements – public accountability
Obligations imposed by Corporations Act
Public v Private

cont.
Private (sec 9 and 13)
- Propriety (Pty) – family members/friends
- Not a ‘no liability’ company
- By Constitution or Replaceable Rules:
- Option to restrict right to transfer shares;
- Min 1 member, max 50
- Cannot offer or invite members of public to
subscribe for shares or debentures
- Must contain ‘Pty’;
- At least 1 director resident of Australia
Small & Large Pty Co (Sec 45A)

Small Pty Co:- Sec 45A(2)
- If 2 out of 3 satisfied
Consolidated gross operating revenue for financial year
of company and entities it controls is
< $10 million*;
Value of consolidated gross assets at end of fin year
< $5 million*;
Company and entities it controls have fewer than
50 employees at end of fin year
*calculated as per accounting standards (Sec 45A(6))
Small Pty - Advantages
No obligation under Corporations Act to
prepare annual accounts (although
necessary for tax and loan applications);
 Need only prepare financial report and
directors’ report if:

- 5% voting shareholders request within 12
months after end of financial year;
- ASIC order
Advantages/Disadvantages

+s
- Separate legal entity;
- Business conducted in own name;
- Limited liability;

-s
- High compliance costs;
- High establishment;
DUTIES OF DIRECTORS
Director regarded as fiduciary
Duties of loyalty and good faith
Duty to act
bone fide in the
interests of the
company
Duty to
exercise
powers for
prop purpose
Duty to exercise
powers in good faith
in the best interests
of the corporation
and for a proper
purpose
Duty to retain
discretions
Duties of care, skill
and diligence
Duty to act
bone fide in the
interests of the
company
Duty not to make
improper use of
information or
position for
advantage or cause
detriment: ss 182
and 183
Source: Butterworths, Corporations Law Tutorial Series,2001, p137
Duty to exercise the
degree of care and
diligence that a
reasonable person
would if they were a
director or officer
s 180(1)
Directors not liable
under s180 if they
make the judgment
in good faith for a
proper purpose, do
not have material
interest, reasonably
inform themselves
and rationally
believe it to be in
the best interests of
the company:
s180(2)
Shareholders
Part owner of company (Proprietary v
public company);
 Different types (classes) of shares,
different voting rights;
 Dividend out of profits only;
 Can sue in the name of the company

Questions

What type of companies are the following:
- ABC Ltd
- ABC Pty Ltd
- ABC NL
List the differences between a company limited by
shares and a company limited by guarantee
 What kind of company can comprise a single member
and be operated by a single director?
 Do small propriety companies have to lodge their
accounts with ASIC?
 Do public companies have to lodge their accounts with
ASIC?

Principal and Agency Law
Principal and Agent

Relationship where one person is appointed to
act as the representative of the other.

Agency = the relationship which exists
between two parties whereby one party,
the principal, authorizes another party,
the agent, to do on their behalf acts
which will bring the principal into legal
relations with a third party.
Contracts Involved
Two contracts involved
- one creating the agency, the internal
relationship,
- second where the agent contracts
on
behalf of the principal with a third
party, the external relationship.
AGENCY DISTINGUISHED from other
RELATIONSHIPS

Employer –employee relationships
◦ Employees usually lack the authority to make
contracts on behalf of their employers.
◦ No liability to third party (doctrine of vicarious
liability)
◦ the employment contract may specifically grant
contractual agency to an employee.

Independent contractor
◦ hired by a client to perform specific work.
◦ client has little control as to how the work is carried
out;
◦ less likely to be a contractual agent than an employee,
although there are exceptions.
TYPES OF AGENTS
Special agent
 General agent
 Universal agent (power
of attorney)

CAPACITY OF THE AGENT

An agent has the contractual capacity of
the principal due to the delegation of
contractual capacity by the principal to
the agent.

2 Cases
 Minor as principal
 Adult as principal
CREATION OF AGENCY

Expressly created agency
 Deed (contract under seal) - POA
 In writing (simple contract)
 Verbally

Impliedly created agency




Agency by necessity
By ratification
By estoppel
By position or status
EXTENT of AGENT’S AUTHORITY
Actual
AUTHORITY
Express
(verbal or writing)
(eg sell land)
Implied
(eg to negotiate)
Apparent
Caselaw

Polkinghorne v
Holland

Panorama
Developments v
Fidelis
(5th ed p229)
(6th ed p238)
(5th ed p199)
(6th ed p206)
THE DUTIES OF AN AGENT TO
THEIR PRINCIPAL





Duty to follow the principal’s lawful and
reasonable instructions
Duty to act personally
Duty to act in the principal’s best interests
Duty to exercise reasonable care, skill and
diligence
Duty to keep proper accounts of all money and
property received on behalf of the principal
Continued…
Duty to keep all money and property of
the principal separate from that of the
agent
 Duty of confidentiality
 Duty not to make a secret profit

RIGHTS OF AGENTS
Right to remuneration – to be paid as
agreed
 Right to indemnity and reimbursement
 Right to a lien over the principal’s
property in the agent’s possession until
the agent’s remuneration and expenses
are paid
 Right to redirect the goods in order to
possess and retain them

AGENT’S LIABILITY TO THE
PRINCIPAL

The agent will only be responsible to the
principal if the agent does not comply
with the principal’s instructions, or
breaches a duty owed, in which
circumstances, they will be responsible
for any loss.
AGENT’S LIABILITY TO A
THIRD PARTY
A third party who wishes to take legal action
over a contract that was arranged by an agent
usually only has rights against the principal.
 The principal and not the agent will be liable to
a third party for any torts committed by the
agent whilst acting within the scope of their actual
or apparent authority, even if the principal gained
no benefit from the agent’s conduct.
 However, an agent may be responsible to a
third party in the following situations:

Liability of Agent

The principal is disclosed and named but special
factors make the agent liable
◦ the named principal does not exist
◦ the agent agreed to be liable
◦ it is standard practice in a trade or industry that an
agent becomes liable
◦ the agent executed a deed or bill of exchange in their
own name instead of that of the principal
◦ the agent acts outside actual or apparent authority
(breach of warranty of authority)
Disclosure & Liability of Agent

Existence but not name of the principal is
disclosed
◦ No liability except when:
 agent acts outside actual authority
 agent specifically agrees to be liable

Existence of principal not disclosed
◦ third party can choose whether they sue the agent
or the principal, usually based on who will be more
able to pay any judgment sum.
◦ A third party who obtains a judgment against one
party, loses all rights against the other.
Breach of warranty of authority
◦ This action may exist where the agent has falsely
claimed to have authority they do not in truth
possess
◦ Thus, warranty of authority will be breached if
the agent;
 falsely claims to be acting with the principal’s authority –
the claim may be made directly or indirectly, fraudulently
or innocently;
 the claim of authority induced the third party to enter
into the subject contract with the principal;
 the third party was not aware of the lack of authority;
and
 the third party suffered loss.
Liability – Consumer Protection

The agent’s possible liability under
consumer protection legislation
 TPA – e.g. misleading and deceptive conduct
TERMINATION OF AGENCY
Performance of the agency contract as
agreed
 Mutual agreement
 Revocation of the agent’s authority
 Renouncement of authority by the agent
 Acceptance of secret commission

TERMINATION OF AGENCY Continued.
By operation of law
◦ lapse of a set time period for the life of the
agency
◦ death, bankruptcy or insanity of the agent or
principal
◦ frustration of the contract
◦ object of the contract becomes illegal
REMEDIES OF A PRINCIPAL
If breach by agent:-
rescission of the agency agreement;
 refusal to pay commission;
 damages;
 recovery of secret commission; and/ or
 criminal charges laid for accepting a secret
commission

TYPES of COMMERCIAL AGENTS
‘Factors’ or mercantile agents
◦ eg: sells on consignment

Del Credere agents
◦ Higher commission but guarantees payment upon sale
of goods (eg: livestock selling agents)
Real estate agents
 Partners
 Brokers

Lecture 3
Torts and Negligence
81
Torts

Civil Wrong

Protects against infringement of rights against
 A person
 Property
 Reputation

Not necessary that tortfeasor to have intended
to cause harm.
Torts

Trespass

Nuisance

Negligence

Occupiers Liability

Defamation
Trespass / Nuisance

Interference with quiet enjoyment / land rights

Noise, waste, other discomfort to others
property
Negligence

Duty of Care is Owed

Breach of that Duty of
Care

Loss / Injury as a result
of Breach of Duty of
Care
Duty of Care

Good Neighbour Principle
 Donoghue v Stevenson
Duty of Care

Situations where a Duty of Care exists:
 Certain professional business r/ships - adviser role
(principal/agent, accountant/client, solicitor/client, financial
planner)
 Occupier of premises to entrant (occupiers liability)
 Manufacturer (product liability)
 Road Users (CTP insurance)
 Schools
 Councils
 Cigarette Companies
Breach of Duty of Care

Likelihood of injury

Gravity of injury

Effort required to remove the risk

Social utility of defendants conduct
Damage as a Result of Breach of Duty

Remoteness of damage

Assessment of damage
Defences

Contributory Negligence

Voluntary Assumption of Risk

Vicarious Liability
Vicarious Liability

Not a tort

Employer responsibility for employee actions

Hollis v Vabu
Product Liability

No direct contract between manufacturer and
consumer;

Manufacturer responsibility for negligence:◦ Knowledge of defect and releases product; or
◦ Inherently dangerous product with no
adequate warning;
◦ DOC – breach DOC - Damages
DOC principle applied to:
Any person that goods could foreseeably
harm;
 Applies to all classes of goods;
 Property damage + personal injury;
 Applies also to repairers, importers, retailers,
hirers etc

5 important points:1.
2.
3.
4.
5.
Intention to reach consumer in same form;
Intermediate Examination;
Standard of Care;
Facts speak for themselves;
Avoidance of liability and contributory
negligence
Occupiers Liability

Duty to all entrants to the premises
Negligent Misstatement





No contractual relationship;
Professional advice;
DOC owed to individual seeking advice
Breach of DOC;
Eco loss suffered
Caselaw

Hedley Byrne v Heller (1964)
◦ Owed duty of care when giving advice based on
reasonable foreseeability of reliance;
◦ Disclaimer on advice = not liable

MLC v Evatt (1968)
◦ DOC owed when advice given in ‘serious
circumstances’
◦ Discount social occasion?
Shaddock v Parramatta Council (1981)
Established modern tests for negligent
misstatement in Aust.
 Flow chart p108

Liability of auditors to third parties
◦ V & P p111
◦ Caparo Industries Plc v Dickman [1990]
◦ No DOC owed to potential shareholders
Defamation

complex area of law;

“…publication of a statement that tends to lower a
person in the estimation of right thinking members
of society generally; or that tends to make them
shun or avoid that person” (Winfield and Jolowicz
on Tort)

Protection of reputation from comments
affecting that reputation
Defamatory statements

Written, spoken, drawing, film, sign;

‘publication’ – communicated to others;

Libel & Slander;
Libel – defamation in permanent form eg film,
writings etc
Slander – transient form – gesture or speech;
DEFAMATION ACT 2005

S7—Distinction between slander and libel
abolished
(1)
The distinction at general law
between slander and libel is abolished.
(2)
Accordingly, the publication of
defamatory matter of any kind is actionable
without proof of special damage.
Elements:
1.
Must be defamatory (eg injurious to
reputation, third party reactions);
2.
Refer to plaintiff (reasonable person would say
statement about plaintiff);
3.
Published;
4.
Unable to rely on valid defence
Defences





Consent of plaintiff to publication
(complete defence)
Justified (substantial truth)
Fair comment on matter of public interest
(success only if based on true facts)
Absolute privilege – made in course of
parliamentary, court, solicitor/client
Qualified privilege – maker of statement
has, “interest or a duty, legal, social or moral
to make it to the person to whom it is made,
and the person to whom it is so made has a
corresponding interest or duty to receive it”
Lectures 4 to 7
Contracts




Formation
Elements
Discharge
Remedies for Breach
104
Formation of a contract
LOGICAL
 Legal capacity
 Offer and
Acceptance
 Genuine Consent
 Intention
 Consideration
 And
 Legality
Classification
Simple v Formal
Simple
 Oral or written
 Must have consideration
 No witnesses required
Formal
 Specific requirements to be a valid contract
 Contract of record
 Contract under Seal
 Do not require consideration
 Written
Validity
P71 workbook
◦
◦
◦
◦
◦
Valid
Void
Voidable
Unenforceable
Illegal
1. Intention
Domestic
◦
Assumption - no legal effect
◦
Assumption can be
overridden by evidence
Intention
Business
◦
Assumption - legal effect
◦
Assumption can be overridden by
evidence
Offer and Acceptance
Offer
◦
◦
◦
Must be communicated
Whom made – person, class, world.
Not an invitation to treat
Offer and Acceptance
Offer
◦
◦
◦
◦
Not a request for
information
May be conditional
Revocation must be
before acceptance
May lapse
Offer and Acceptance
Acceptance
◦
◦
◦
Response and reliance on offer
Unconditional and unqualified
Only offeree (s) can accept
Offer and Acceptance
Acceptance
◦ Acceptance not able to be revoked
unless have consent of offeror
◦ Must be communicated
◦ Must be communicated in manner
specified in offer
◦ Made in time frame or reasonable time
◦ POSTAL RULE exceptions (V&P p290)
CONSIDERATION
Consideration is essential to the validity of
every simple contract
 Consideration is the exchange of a benefit and
burden by parties to a contract.
 Consideration is therefore the bargained for
price. Consideration is something of value
promised, given or foregone.

CONSIDERATION
Consideration may be:
 A promise for a
promise.
 An act for a promise
 Forbearance – ie

CONSIDERATION

As long as
consideration exists,
the court is not
concerned with its
adequacy
CONSIDERATION
Consideration must not
be unlawful.
 Consideration must be
possible to perform.
 Consideration must not
be too vague or
indefinite.

Legal Capacity

There are certain classes of people who are
considered at law to lack full capacity to
contract.

This may have serious consequences for the
party with whom they have entered into an
apparent contract.
Minors

Governed by both common law and statute
law;

Age of Majority (Reduction) Act (SA) – 18
yrs

It is the responsibility of the adult party to
ensure the capacity of the party with whom
they are dealing.
Minors – Common Law Position

Valid contracts:◦ cash contracts (cash sales);
◦ contracts for necessaries;
◦ Beneficial contract of service

See V & P p317
‘necessary’ – (a) minor must not already have an
adequate supply of the goods;
(b) food, clothing, transportation, medical and
hospital
Nash v Inman and Bojczuk v Gregorcewicz
Beneficial Contracts of Service

Contract of service or apprenticeship
◦ Provide minor with means of livelihood;
◦ Or to acquire skills; and

Benefit the minor
◦ Court assesses all terms of contract;
◦ De Francesco v Barnum (1890) 45 Ch D 430
Voidable Contracts

Permanent/continuous contracts:◦ eg: lease of land;
◦ Purchase of shares;
◦ Partnership;

Regarded initially as valid and binding;

Can be repudiated (rejected) any time prior to
18 or ‘reasonable time’ after 18
Void Contracts

Contracts for:◦ purchase of non necessary items;
◦ ‘trading’ contracts (eg hire purchase)

Minor simply not bound unless ratification
(adopts) within ‘reasonable time’
Insanity and Intoxication



Contract voidable when person can show that
she or he did not understand what they were
doing as a consequence of their condition; and
the other party was aware of that condition;
and
they withdraw from the contract within a
reasonable time of their regaining their sanity
or sobriety.
Bankruptcy

A declaration of bankruptcy does not
deprive a person of their capacity to
enter into contracts.

Bankruptcy Act 1966 (Cmth) provides that
a bankrupt:
◦ must disclose their bankruptcy if –
◦ business is carried on in other than the
bankrupt’s name or
◦ credit in excess of $3360 is sought.
Corporations

Corporations are separate legal persons.

It can sue, be sued and own property but
cannot enter a contract for personal
service.
Hostile Aliens

An alien is any person who is not an
Australian citizen

‘Friendly’ aliens – no restrictions on
contractual capacity

Hostile aliens – eg: war time – cannot
enter into contract or exercise
rights/remedies
Reality of Consent
Genuine consent - all parties to the
contract honestly and genuinely agree
to the terms of the contract.
 ‘Meeting of minds’.
 Absence of genuine consent due to:
◦
◦
◦
◦
◦
◦
Mistake of fact;
Non est factum;
Fraudulent/innocent misrepresentation;
Undue influence;
Duress;
Unconscionable conduct
Genuine Consent
Mistake of fact
a) Common Mistake
- both parties make same
mistake
b) Mutual Mistake
- both parties make different
mistake
c) Unilateral Mistake
- one party makes mistake of fact,
other party knows/ought
‘reasonably’ to have known
- does not inform other party
Non est factum

‘Not my deed’ – eg: mistake regarding nature of
document (guarantee v mortgage)

Arguable if: document fundamentally different
 unable to read owing to blindness or
illiteracy
 must not have been careless or negligent in
signing the document.
Misrepresentation
-
Statement of fact (not opinion)

fraudulent (deliberate)
misrepresentation

innocent misrepresentation, and

negligent misrepresentation.
Statement of fact prior to contract
categorised as:
Term
(ends up in contract)
Innocent
Fraudulent
Negligent
Misrepresentation
(statement of fact
which is untrue)
Not known to be false
Intention other party relies
No intent to deceive
Contract entered
Damage suffered
Known to be false
Intention other party relies
Intent to deceive
Contract entered
Damage suffered
False statement of
fact/advice/opinion
person claiming skill/expertise
Contract
entered
Damage suffered
Distinguish from statement
of law
Opinion
Puff
Remedy: 1) rescission;
2) Damages (Misrep Act)
Remedy: 1)rescission;
2)Damages (tort of deceit)
Remedy: 1) rescission;
2) Damages (tortious action)
Duress

Physical duress

Duress to goods

Economic duress
Undue Influence

Legally recognised relationship exists
◦
◦
◦
◦
◦
◦




parent and child,
trustee and beneficiary,
doctor and patient,
solicitor and client,
guardian and ward
and priest and followers
Position of dominance
Presumption of undue influence
Rebuttable by evidence proving plaintiff understood
and entered voluntarily
If no, then voidable at option of innocent party
Unconscionable Conduct

party in a superior bargaining position has
gained an unfair advantage

Commercial Bank of Australia v Amadio
LEGALITY OF OBJECT

The object of the contract must be legal to support a
valid and enforceable contract.

Illegal under CL:
- To commit tort, crime or fraud on third party eg agreement
to have someone assaulted;
- Contracts to defraud revenue;
- Restraint of trade – eg employment, sale of business or
contract to regulate trade;
- Restraints of trade are prima facie void as being contrary to public
policy; however
- Restraints perceived as being reasonable may be enforced
- (‘reasonable’ – facts of case but no more than is necessary to
promote legitimate interests)
Illegal under statute

In restraint of trade barred by TPA;

To pay secret commissions;

Various contracts which require licences if have
not been obtained
Contracts in restraint of trade

Employment

Sale of business
CONTENTS OF CONTRACT





A condition is a term of fundamental and vital
importance
Breach = damages & right to rescind (treat as
never existed)
A warranty is a term of less importance
Breach = damages but no right of rescission
Luna Park (NSW) Ltd V Tramways Advertising Pty Ltd
Parol Evidence Rule



Usually, statements not included in contract will be
representations;
Parol Evidence = verbal statements will not be
taken into account where effect is to vary, add or
contradict written agreement;
However, exceptions:◦ Custom and usage;
◦ Where evidence that written agreement only contains part of
the agreement;
◦ Statement amounted to separate contract made prior to written
one;
◦ Statement clarifies or correct ambiguous language within written
contract;
◦ Where true intentions of parties not expressed in written
contract
Implied terms

Implied by the court

Implied by statute
◦ eg: TPA – fitness for purpose

Implied by custom or trade usage
◦ established practice
Exclusion clauses

Usually written clauses stating a party will bear no
responsibility for something which happens;
◦ Eg gym not responsible for injury to members;
◦ Car park not responsible for loss or damage to cars

Validity – need to be included in contract
- Eg clause; or
- Signs posted with exclusion before contract is made

Car park ticket – exclusion for liability before taking
ticket (as when contract formed)
NB Trader cannot contract out of statutory obligations
Typical Exclusion Clauses
The Trade Practices Act 1974
All other conditions and warranties, statutory or
otherwise and whether express or implied, are
hereby excluded, and no guarantee, other than
that expressly herein contained, applies to the
product to which the guarantee relates, or any
accessory or part thereof.
Conditions and warranties implied and the
rights and remedies created by the Trade
Practices Act 1974 (Cth), [s.68A] cannot be
excluded. Any attempt to do so is made void
by the terms of the Act, and makes the
company liable to prosecution under the Act.
The company accepts no responsibility for loss or
damage through any cause whatsoever.
Under Section 74, contracts for the supply of
services to consumers contain an implied
warranty that the services will be rendered
with due care and skill. This warranty cannot
be excluded, so the clause is void.
We exchange goods or give credit but do not
refund money.
If a company supplies goods directly to
consumers, those consumers have a nonexcludable right under the Section 75A to
return the goods and obtain a refund where
there has been a breach of a condition
implied by the Act.
Service will not be available under this warranty
unless the form below is completed and returned
to the registered office of the company within
fourteen days from the date of purchase.
Under Section 68, failure to return the
registration card does not extinguish a
consumer's statutory rights.
New products are covered by this warranty for a
period of 12 months.
Consumer's rights under Section 71 extend
beyond the stated warranty period and may
be exercised if there are, for example,
inherent defects which appear after the
expiration of that period.
CONCLUSION or DISCHARGE of a
CONTRACT





by performance
by agreement
by frustration
by operation of law
by breach
Remedies for breach
Breach of Condition:
1. Damages – monetary compensation if breach
and loss/damage occurred;
- Put party back into position if not for breach;
- Mitigation issues;
- Liquidated, unliquidated, nominal; AND
2. Rescission – injured party elect to affirm or
rescind (no longer bound by contract)
 Breach of Warranty:
Damages only, not right of rescission.
Remedies cont…..

Injunction
◦ Prohibitory or mandatory
- Equitable – only granted if damages
inadequate

Specific Performance
- Equitable – only if damages inadequate
- Not granted if causes hardship
Lecture 8
Property Law
Case Study Assignment
Real Property
Mortgages
Leases
Franchises
Insurance
149
Property

Physical things you can own, such as land or
furniture
and

the rights you can exercise over physical and
non-physical things
Real Property

Real property refers to land and anything which
is fixed or attached to the land

Those items which have become fixed to the
land are referred to as fixtures
Personal Property
Personal property may also be referred to as
chattels
 leases over land (chattels real)
 tangible objects such as cars, books and
furniture (choses in possession)
 intangible things, such as shares in a company or
intellectual property rights (choses in action)

Fixtures or Non-Fixtures
For what purpose has the item been attached?
 In what manner is the item attached?
 What damage if any will be caused by the
removal of the item?

Ownership and Possession
Ownership = title over that property
◦ transfer ownership or possession
 Possession = physical control
◦ intention to assert exclusive control over
the property

Interests in Land
Doctrine of Tenure

No person can be the absolute owner of the
land because all land is owned by the Crown

Instead, land owners have an estate in the land
Estates in land


An estate in land describes the type of interest a
person has in real property
Freehold estates
- Fee simple – continues as long as heir;
- may be transferred during
owner’s
lifetime; or
- devised after death as per will
- Life estate - interest in land created only for
life
of particular person
Leasehold Estates

A lease gives the lessee exclusive possession of
real property for a fixed period in exchange for
rent.
 Fixed term – eg 1 year lease (in SA has to be in
writing);
 Periodic – eg weekly, monthly (can be after
fixed term);
 Tenancy at will – Tenant remains in possession
by agreement but no rent paid. Either party to
terminate at any time;
 Tenancy at Sufferance – After expiration of
tenancy, tenant remains in possession without
landlord permission and without paying rent
Title to Land
Old System Title
- Proved by ‘paper trail’ of documents;
- Possibility of fraud, or document missing or failure to
register mortgage;
- System flawed – difficult to prove ownership
 Torrens Title
 1858 – SA – Robert Torrens;
 Certificate of Title – original CT – LTO, duplicate with
owner/ mortgagee;
 Registration of every dealing;
 State Govt - guarantee of owner shown on title –
‘indefeasibility of title’ – therefore, not necessary
to show paper chain.
Priority – registered over unregistered even at later date

Legal and equitable interests in land
Legal mortgage = eg registered mortgage;
◦ Subsequent registered mortgages ‘queue’
behind on default;
◦ If default - priority on registration
Equitable mortgage = unregistered mortgage;
◦ Protection via caveat;
◦ If default – priority on creation
◦ Caveat protection may be lost if reasonable
notice of earlier mortgage
Joint Ownership of Property

Joint tenants
 right of survivorship
 four unities (possession, interest, title and
time)

Tenants in common
Mortgages Over Real Property

“a contract whereby one person (the
mortgagor) borrows money from another
and gives rights over real property to the
lender (mortgagee) as security for the
repayment of the loan”
Torrens System Mortgage

The mortgagor retains the registered title to
the property.

The mortgagee receives a statutory charge or
right to payment over the property.

Mortgagee’s Remedies




The power to sue for breach of contract
The power to appoint a receiver
The power of sale
The power to seek an order for disclosure
Torrens System Mortgage

Mortgagor’s rights
◦ to sell or lease property

Equitable mortgages
◦ unregistered mortgage;
◦ Protection needed against subsequent
registered mortgage;
◦ Unregistered Mortgagee needs to lodge
caveat.
Priorities – Unregistered Mortgages
Date of execution Priority
14 July 2006
1st
14 December 2006 2nd
Priorities – Registered Mortgages
Date
executed
21 May 2006
Date
Priority
Registered
21 June 2006
2
1 June 2006
1 June 2006
1
Specialty Contracts
LEASES

A contract in which an owner of property (the
lessor) grants another person (the lessee) the
right to exclusive possession of the property
for a specific period of time in return for
consideration
Lease v Licence
Lease – one party (landlord) grants exclusive
possession to other party (tenant) for amount
of time;
 Interest created and therefore registrable;
 Licence - gives a person permission to use the
land but does not grant exclusive possession (eg
to drive across)
 No interest in land created, therefore not
registrable on title

Types of Leases

Fixed Term Tenancy - amount of time;

Periodic Tenancy – eg week to week

Tenancy at Will – no fixed duration, not paying
rent, consent of landlord

Tenancy at Sufferance – not paying rent, no LL
consent
Lease Covenants
Tenant’s covenants under common law
◦
◦
◦
◦
◦
◦
To pay the agreed rent.
To keep and deliver up the premises to the
landlord at the end of the term in their ‘state of
repair’ at the commencement of the lease.
To permit the landlord to enter and inspect the
premises, (usually reasonable notice is required).
To refrain from conducting any illegal activity on
the premises.
To refrain from subletting or assigning the lease
without the prior consent of the landlord.
To pay rates and taxes if the lease is commercial.
Lease Covenants
Landlord’s covenants
◦
◦
◦
◦
To allow the tenant quiet possession of the
premises.
To refrain from conduct which would
render the premises unfit for their purpose.
To repair the premises.
To pay rates and taxes if the lease is
residential.
Termination of a Lease under Common
Law
By expiry of time
By breach of a covenant
By surrender – LL agrees to release tenant
By frustration - cont. impossible due to
unforeseen event
 By a notice to quit
◦ the length of the notice must be
commensurate to the length of the tenancy
(ie 1 yr = 6 months)
 By forfeiture – tenant loss of right due to
breach of condition




Residential Tenancies

Residential Tenancies Act 1978 which varies the
common law rights and obligations of landlords
and tenants.

Refer to Notes (p130)
Commercial Tenancies
premises predominantly used for carrying on
business;
 (if not retail tenancy), tenancy regulated by
common law, lease agreement and possible
statutes (implying conditions);
Differences between commercial and residential:
◦ Commercial - all or proportion of rates and
taxes paid by tenant;
◦ Regular rent increases permitted – CPI;

Retail Tenancy


If lease for premises from which retail business
operates then Retail Shop Leases Act (SA) 1995;
Retail premises = ‘wholly or predominantly for the carrying
on of a business involving the hire or sale of goods or
services’ (Barron p 311);
◦ Tenants to be given copy of lease otherwise can
terminate;
◦ If landlord fails to rectify a plant/equipment failure,
then landlord has to compensate tenant;
◦ Landlord must give tenant 3 months notice before
the term of the lease is due to expire if lease is not
to be extended by way of an option for the tenant to
renew the lease;
Hire Purchase Agreements

The key element is that ownership in the
goods does not pass to the hirer until the final
payment on the agreement has been made.
Franchise Agreements

A contract made between the franchisor and
the franchisee.
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The franchisor is the supplier of a product or
service, or an owner of a copyright or
trademark and the franchisee is the reseller of
that property, wishing to do business under the
franchisor’s name.
Types of Franchise
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Product – eg: Wendys (Ice creams)
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System franchise – Jim’s Mowing
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Process or manufacturing franchise
Regulation of Franchises
Agreement to contain terms re:
 the key intellectual property involved,
 rights and obligations of each party;
 franchisor’s degree of control over marketing,
equipment and fixtures;
 duration of the agreement and its geographical
location;
 rights of a franchisor to inspect the accounts of
the franchisee;
 the conditions of termination.
Franchising Regulation cont.

Trade Practices (Industry Codes – Franchising)
Regulations 1998, forming part of the Trade
Practices Act.
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Refer to notes (p133)
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Franchising Policy Council
INSURANCE

The insurer agrees to compensate or
indemnify the insured for any loss or damage
suffered on the happening of a certain event.
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Cover notes
Common law doctrines of insurance
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insurable interest
utmost good faith
indemnity
subrogation
proximate cause
Insurable Interest

A person will have such an interest if they will
benefit from the property being
preserved and suffer detriment if the
property is damaged or destroyed.
Utmost Good Faith
Owed by insured to insurer & vice versa;
 Insured required to:- disclose all material facts; and
- make truthful representation about material
facts;
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Common Law remedies
 If breach of good faith fraudulent – insurer
avoid contract and refuse claim payment;
 If innocent – payout reduced
When does duty arise?

During negotiations;

Prior to renewal, extension, variation or
restatement of contract;

During policy lifetime
Duty of disclosure

Applies to insured and insurer;

Material fact = relevant fact ;
- Number and value of previous claims;
- Rejected claims;
- Previous refusals to cover;
- Criminal records
Breach of duty

If insured fails to disclose a fact that they know, or
reasonably should know, is material (relevant);
What facts do not have to be disclosed?
S21(2) – Insurance Contracts Act 1984
- Less the risk eg fire extinguishers;
- Commonly known eg Darwin subject to
cyclones;
- Insurer knows or ought to know – eg assessor
inspected premises prior to accepting policy;
Breach by agent of insured
Non disclosure of material facts by agent = same
as if insured breached

eg: Lindsay v CIC Insurance Ltd
Insurer’s Obligations
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To be prompt in admitting liability and paying
claims.
To inform the insured in writing and in plain
English about the general nature and effect of the
duty of disclosure before the contract is made.
To provide consumers with notices about their
rights at pre-sale, point of sale and post sale.
To allow consumers a 14 day cooling off period
before formally entering a contract of insurance.
To avoid unconscionable conduct. The TPA
provides remedies in this regard
Indemnity

The purpose of an indemnity policy is to
restore the insured to the position they
occupied prior to the actual loss specified in the
policy
Subrogation

Subrogation is the substitution of one person
or thing for another

The same rights and duties attached to the
original person or thing attach to the
substituted person or thing. One person
‘stands in another’s shoes’
◦ eg: insurer pays claims in full;
◦ Right to take over legal rights of insured in regard to
loss;
◦ Right to sue in insured’s name to recover loss from
third party
Proximate cause

The proximate cause is the initial cause of
loss which may lead to a chain of events.

In order to claim on an insurance policy, the
claimant must be insured for the initial cause.
eg: riot – fire – house – not proximate cause
Insurance Agents / Brokers

Insurance Agents
- Act for insurer (principal)
◦ Paid by commission deducted from premiums
◦ Duties of Agents
◦ Liabilities of Agents

Insurance Brokers
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Act for those seeking insurance
Receive % of client’s premium from insurer
Duties of a Broker
Liabilities of a Broker
Property insurance
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Fire and extraneous risks
Loss of profits
Burglary
Theft
Fidelity guarantee
Cash in transit
Engineering
Multi-risks
Liability insurance
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Public Liability
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Product Liability
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Professional Indemnity
Motor vehicle insurance
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Compulsory Third Party
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Property Damage(Comprehensive)
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Third Party Property
Other Insurance Types
Life insurance
Accident and sickness insurance