Issues Raised in the Situations

Discuss about the Business Law for Intention and Capacity of the Parties.

The two major issues that are raised in the given situations are:

1. To analyze the validity of contract entered amid Bill, Jill and Dodgy Pty. Ltd?
2. Can the contract be terminated by Bill and Jill as the same is based upon misrepresentation?

• Whether the restrain clause made part of the contract is valid?

Every valid contract requires presence of contract essentials, that is, offer, acceptance, consideration, intention and capacity of the parties. If any of the elements is not present then such contract is not valid in law. (The Law handbook, 2016)

Further, the parties must be capable to make a valid contract. The capacity of the parties requires that they must be major and mentally capable (Nash v Inman (1908). But, a minor can make a valid contract if the same is for the necessity, employment or benefit of minor. (J Clark, 2013)

But, every valid contract can be cancelled if the same is based on misrepresentation. When one party makes a statement of factual nature which are not true, with a hope that the other party will rely on such untrue statement and will make a contract with him and the relying party actually makes a contract, then, there is presence of misrepresentation and the aggrieved party then has right to terminate the contract and claim damages (Smith v Land & House Property Corp. (1884) & Lambert v Co-Operative Insurance Society [1975]. (The law Teacher, 2016)

Also, when a restrain clause is made part of the contract wherein one party is prohibited to carry on the similar business or a certain time period the clauses are valid when they protect the legitimate interest, goodwill and confidentiality of the party who is relying on the clause. But, if the clause is against public policy or for long duration then the same is invalid. In AGA Assistance Australia Pty Ltd v Tokody (2012) duration up to two years is considered to be valid and any restrain beyond that is invalid unless legitimate interest is proved. (Hopgoodganim, 2016)

The law is now applied to the facts.

It is submitted that Jill is 22 years old and is thus major. But, Bill is 15 years old and is a minor. Thus, a contract amid Dodgy Pty. Ltd and Bill can be held valid when the contract is for necessity, employment or benefit of Bill. It is assumed that the contract is for necessity/employment/benefit of Bill and thus the contract with Dodgy Pty. Ltd is valid in nature.

But, Dodgy Pty. Ltd while selling his café to Bill and Jill has made factual statements that the weekly taking of the café is $10,000 (since last five years) and the cost is $3000 per week. But, the statements are false as the weekly taking was on an average $2000. Thus, false factual statements are made to persuade Bill and Jill to make a contract and the contract was actually made by them. Thus, Bill and Jill can terminate the contract based on misrepresentation and claim damages from Dodgy Pty. Ltd.

Law of Contracts and Validity

Further, the restrain on Dodgy Pty. Ltd is for five years which is very lengthy and can be considered as valid only when Bill and Jill can prove that the clause is required for the protection of their legitimate interest, goodwill and confidentiality of the business.

Conclusion

Thus, Bill and Jill can rescind the contract based on misrepresentation and the restrain clause is valid only when the same protects the legitimate interest of Bill and Jill.

The major issues that are raised in the given situation are:

1. Can Hugh and Theo be held liable for the injuries that are caused to the customers after consuming the stale and out of date ingredients?
2. What legal remedies can be provided by the court to the aggrieved parties?

The law of negligence is a very important piece of legislation. The law of negligence emphasis that every person must indulge in such actions or omission because of which no injury is caused to any other person. This duty of avoidance of harm is captured under the law of negligence. In Donoghue v Stevenson [1932]  the concept and the elements of the law of negligence were established. The same are: (P Latimer, 2012)

1. Duty of care – Every defendant is imposed with a legal duty of protection. The law of negligence establishes that whenever any defendant is pursuing any act or omission then he must make sure that no harm is caused to any person because off his actions or inactions. But, this duty of care can only be imposed upon the defendant when the plaintiff is closely connected to him, that is, the effect and impact of the defendant’s acts/omission will fall upon the plaintiff directly. There must be proximity between the two and the plaintiff is considered to be the neighbor of the defendant (Grant vAustralian Knitting Mills (1936). Also, the duty is also imposed only then the harm which may be caused to the plaintiff because of defendants actions or inaction are reasonably foreseeable by the defendant and thus he is under duty to avoid such harm by not availing the actions or inactions he is indulged in (Chapman v Hearse (1961).

In Donohue case, this duty of care is imposed upon the manufactures so that no manufacturer should produce any product which may cause harm to the consumer berceuse consumers are his ultimate customers are in proximate relationship with him.

1. Violation of duty of care – when the defendant is imposed with the duty of care then it is his duty to cater such duty with all adequate means. But, when the defendant is not able to provide the level of care that is needed in a particular situation, then, the duty is considered to be breached. The level of care increases with the increase of risk and vice versa (Blake v Galloway (2004)

• Injuries because of such breach of duty of care – it is necessary that when the defendant is not able to cater with his duty of care then there must be some kind of injuries that are sustained by the plaintiffs. Any breach without any injury is not a negligent act in the law of negligence (Carroll vFearon (1999)

Once a defendant is held out to be negligent, then, the plaintiff has every right to sue such defendant under the law of negligence and claim damages in the form of money. If the damage is extreme then penal actions can also be undertaken.

Further, The law of partnership is also applicable. A partnership is said to exist when two or more than two person’s intent to carry out a business of a continuous nature with the main motive of earning profits, once a partnership is established, then, the act of one partner will make the other partner liable under the law of agency (Smith v Anderson (1880). (Sydney, 2016)

Thus, the applicable law is now applied.

In the given situation, High runs a pizza service and later appoints his son Theo to use his car for deliveries. The service of Hugh was not registered but they have advertised it in the name of UberPizzaDelivery. In ……………….it was held that a manufacturer is under a duty of care towards his consumers as they are their ultimate neighbors. However, both Theo and Hugh are making pizza for the ultimate consumption of the customers. Thus, they have a duty to make the pizzas of such a quality is that no harm is caused to the consumer by consuming the pizzas. But, this duty is violated when Hugh advertised that fresh ingredients are used for the formation of pizza but in reality stale and outdated ingredients are used for the production of pizza. Thus, the level of care that is expected from the manufactures of pizza, that is, Hugh, is violated which has resulted in many injuries to his customers and death of one of his customer. Thus, the level of

Thus, the level of care that is expected from Hugh is not met and hence he is in violation of his duty which has caused losses to his customers. So, Hugh must be held liable under the law of negligence. The customers can take both civil and criminal actions against Hugh.

Also, Hugh and Theo are working not as a registered business but the intention of both of them is to run the business in continuity with the aim to earn profit. Thus, there is a presence of partnership amid the two and an act of one will make the other liable. So the actions of Hugh will also make Theo accountable for the same and hence Theo can also be held under the law of negligence.

Conclusion

Thus, both Theo and Hugh are liable under the law of negligence as both of them are partners and thus the actions of one will make the other liable. 

Reference List

Books/Articles/Journals

P Latimer. 2012. Australian Business Law 2012. CCH Australia Limited.

Case laws

AGA Assistance Australia Pty Ltd v Tokody (2012).

Blake v Galloway (2004).

Carroll v Fearon (1999)

Chapman v Hearse (1961).

Donoghue v Stevenson (1932).

Grant v Australian Knitting Mills (1936).

Nash v Inman (1908).

Lambert v Co-Operative Insurance Society [1975].

Smith v Land & House Property Corp. (1884).

Smith v Anderson (1880).

Online material

Julei Clark. 2013. Capacity to contract.  Online. Available at: https://www.australiancontractlaw.com/law/formation-capacity.html#minors. [Viewed on 24th September 2016].

Hopgoodganim. 2016. Restrain clause. Online. Available at: https://www.hopgoodganim.com.au/page/Publications/Industrial_and_Employment_Law_Alert_Recent_court_case_provides_clues_to_successfully_enforcing_non-compete_restraint_obligations_-_31_Aug_2012/. [Viewed on 24th September 2016].

Sydney. 2016. Partnership.  Online. Available at: https://webcache.googleusercontent.com/search?q=cache:rKTyb6YyI70J:sydney.edu.au/lec/subjects/associations/notes/Summer%25202010-11/Topic%25203%2520-%2520Partnership.doc+&cd=1&hl=en&ct=clnk&gl=in. [Viewed on 24th September 2016].

The Law Hand Book. 2016. Elements of a contract. Online. Available at: <https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/. [Viewed on 24th September 2016].

The law teacher. 2016. Misrepresentation. Online. Available at: https://www.lawteacher.net/lecture-notes/contract-law/misrepresentation-lecture.php. [Viewed on 24th September 2016].