Day 52 Commercial Law Summary Chapter 1-7

Commercial Law

Summary Chapter 1-7

Chapter 1 

The business law allows us to understand how to deal with risk and uncertainty. The law provides a framework to protect business from systematic risks, which is the risk cannot be controlled by the business and could ultimately destroy the system. In Australia, the laws are from two different sources: the parliament and the courts. The parliament includes the Commonwealth parliament as well as the various state parliaments. They both share the power to make binding laws. However, if there is a conflict between a federal law and a state one, the federal law prevails. This term is determined by the Commonwealth Constitution Act 109. These powers are separated into three different parts, to illustrate, the parliament makes the law which is the legislative power. The government administers the law, which is the executive power; and at last the judicial power is presented as courts interpret the law. When the courts are interpreting a statute, the golden rule means the courts adopt an interpretation that avoids the absurdity and gives effect to the intention of the parliament which passed the state. On the other hand,  the judge-made law or the common law operates in Commonwealth countries. In contrast, other countries apply civil laws. The common law is defined as those legally enforceable rules that have been fashioned and adapted by the courts throughout the ages. So it is based on the actual case in the past, instead of ad-hoc rules made by the judges. It implements the stare decisis or doctrine of precedent in its progress, hence a decision of a higher court must be applied by lower courts. The law in commerce is comprised with contracts, tort or similar statutory obligations and agency, partnerships, companies and trusts.

Chapter 2

The manufacturer of products has obligations to consumers and users of its products. That is the liability of defective products, and it also called liability of negligence. The snail in the ginger beer bottle was the most famous case on this topic. The Hose of Lords decided that liability for negligence did not depend on the contract, but as a reasonably foreseeable responsibility to take care of the user. Consequently, the determination of the defendant liable appears when the defendant owes a duty of care to the plaintiff but failed to exercise it. In addition, the closed was caused by this negligence, and the defendant supplies no further defense for it. The law states people must take reasonable care to avoid acts or omissions which likely to injure their neighbor. The neighbor test is the persons who are so closely and directly affected by your act that you ought reasonably to have them in contemplation as being so affected. Therefore, the manufacturers must take reasonable care not to injure their neighbor, and compensate any injuries and losses suffered as a result of the negligence. It is also defined by the Statute Trade Practices Act Pt VA. IT imposes certain obligations on manufacturers, importers and own branders of goods.

Chapter 3

The law will not allow a person to get away with sharp practices such as misleading others by word or conduct or by engaging in grossly unfair conduct. There is certain right arises from misrepresentation. For example, at common law, action for damages for fraud and action for damages for negligence could be rose. Under statute, Action for damages for breach of TPA s 52, Breach of contract and right of recission may be applied. The defendants will be liable with fraud when they make a false representation of fact in order to induce the plaintiff to act in some way. And their dishonestly or recklessly activities lead a loss to the plaintiff. The negligent misrepresentation is part of tort of negligence, which follows the same identification steps. Therefore, if the losses of the plaintiff were caused by the misrepresentation which defendant failed to exercise the required standard of care, then the defendant is held responsible. In addition, the Trade Practices Act s 52 introduce that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive. It is also stated in the Fair Trading Act 1999 Vic s9 with the similar sentence. It is important the corporation has conduct in trade or commerce for this act to apply. However, the use of exclusion clauses or disclaimers to against contract terms, negligence and innocent misrepresentation are very common, Even there is no misrepresentation, a transaction may be considered as unconscionable. Which is unfair, unscrupulous or unjust transactions. It occurs when one of the parties to the transaction was especially vulnerable and other party took unfair advantage of that. Thus the dealer should advise that party to obtain independent advice for their disadvantage.

Chapter 4

A contract is essentially an agreement between two or more persons, which will be enforced by a court of law. It can be written or oral. The contract has four fundamental elements: firstly, an offer must be made and represented in distinct term. When the offer is properly communicated, it must be accepted. After this, both parties must be intended to make the contract, that means the agreement is intended to be legally enforceable. At last, both sides have to provide something of value in order to enforce the agreement, and it is called consideration. An offer exists only where a reasonable person would conclude from the facts that the person was willing to be bound in a court of law. It must be distinguished with an invitation to treat. An advertisement is the particular invitation to treat. Once the offer is accepted( when intention and consideration are Satisfied), it will be finalised hence cannot be revoked. On the contrary, it can withdraw any time prior to the acceptance. The revocation of the offer must be communicated to the offeree. Moreover, the offer may lapse due to the death of offeror/offeree, time, or failure of a condition precedent(conditional offer).

Chapter 5

As discussed in previous chapter, the intention and consideration are the fundamental elements of establishing the contract. In most circumstances, the parties will make no express reference to bind the agreement in the sense of being enforceable by the court. Thereby an objective test that determines whether a reasonable person would conclude that the parties had intended to contract must be applied by the court. If the agreement is of a domestic nature, the courts are generally prepared to presume that the parties did not intend to contract. Which can be interpreted the parties did not intend it to be legally binding. In contrast, if the agreement is of a commercial nature, the courts presume the parties intended their agreement to be legally enforceable. Any party not wishing a commercial agreement to be legally enforceable should state it clearly. Letters of comfort or support are provided where the provider does not wish to give a formal guarantee, therefore it has a problematic nature that one party wants it to be binding and the other doesn’t. The deeds do not require consideration, but the simple contract does. The consideration only exists when both parties have provided something of value. An offer turns to being a gratuitous or bare promise if on party has not provided consideration. When the promise is made by the promissory to two or more persons jointly, only one of those persons need to provide consideration. The consideration may be of nominal value and sufficient.

Chapter 6

The terms that are expressly agreed by the parties in a contract are the express terms(clauses).The parol evidence presumption states that the courts will not permit one of the parties to subtract for, add to, vary or contradict the language of the written instrument. The courts will presume the written formal contracts to be a complete record of the agreements. Hence a party cannot be bound by additional terms made after the contract has been formed, unless fresh consideration provided. The Olley v Marlborough Court Ltd is a vivid example for the additional clause made after the contract. Generally,  people are bond by their signature. It applies even though they did not read the document. Consequently, a signature by a person is a strong evidence that support this person has agreed to be bound by the contract. However, the signature does not bind the person when the document did not appear to be contractual, there is a misrepresentation or condition precedents. Sometimes, a collateral contract exists corresponding to the main contract. It appears as a supplementary term which ordinary as an oral promise. It is a useful device for circumventing some of the difficulties associated with the inconsistent application of the parol evidence presumption. A collateral warrant must be promissory and consistent with the main contract. Which means the collateral contract cannot exist if it conflicts with the main contract. Furthermore, the reasonable person test is applied to determine the meaning of a term. When the contract is wholly in writing, the courts must judge the meaning of the document from the words of the document. Some terms are unenforceable because they are in contrast to the law itself. Exemption clauses are used to limit obligations, to illustrate: no warranty gives, no refund and no responsibility taken for lost goods are typical exemption clauses.

Chapter 7

Aside from express term stated in the contract, there are many implicit terms implied. These terms can be implied as a matter of law.  The common law is in the process of recognizing an implied duty of good faith. It applies both to the performance of obligations under the contract and to the exercise of contractual rights. For example, in contracts between professionals and their clients, the implicit term in that the professional person carries out his or her contractual duties with reasonable care and skills; In contracts for work and materials, the court will imply terms that the service be reasonably fit for the purpose for which it acquired; and for landlord and tenant agreements, the landlord impliedly warrants to give the tenant quiet enjoyment of the premises, which means he/she is not permitted to give access to any other persons or to make unscheduled inspections. In addition, terms can be implied by the courts as a matter of fact. Although courts are often reluctant to add to the express terms, sometimes both parties intend a term to bu included but failed to do so. That may because the term was too obvious that it was overlooked or each party assumed that it applied. The implied term, as a matter of fact, cannot be conflicted with the express term.  Another two form of implied terms are terms implied by the Trade Practice Act and  ASIC Act. Both of these are aiming to protect the customer from loss occurred due to the deficit goods or financial assets. The terms are justified on the basis of past dealings, customer or trade usage or to make the contract effective.