1

Commercial Law

Outline

4th Edition

2

Commercial Law Notes (Weeks 1-12)

TABLE OF CONTENTS

I. Business and the Law ................................................................................................. 4 A. The Nature of law .................................................................................................. 4

II. The Australian Legal System ..................................................................................... 5 A. Legal Systems........................................................................................................ 5 B. The Australian Constitution ............................................................................... 6

III. Politicians and Judges ............................................................................................ 8 A. Parliament in operation ....................................................................................... 8 B. The Australian court system ............................................................................ 10 C. The doctrine of precedent ................................................................................ 11

IV. Deliberately Causing Harm ................................................................................... 13 A. Tort Law ................................................................................................................. 13 B. Trespass ................................................................................................................ 13 C. Nuisance ................................................................................................................ 14 4. Defamation ................................................................................................................ 14 5. Deceit.......................................................................................................................... 14

V. Carelessly Causing Harm (Negligence, Misstatement) .................................... 15 A. Duty of Care .......................................................................................................... 15 B. Breach of duty of care ....................................................................................... 16 C. Harm ....................................................................................................................... 19 D. Consequences ..................................................................................................... 21 A. Duty of Care .......................................................................................................... 23 B. Breach of duty of care ....................................................................................... 25 C. Harm ....................................................................................................................... 25 D. Conclusion ............................................................................................................ 26

VI. Contract Law ............................................................................................................ 26 A. Forming a Contract (Elements: Agreement (Offer and Acceptance), Intention,

Consideration) ................................................................................................................... 26 i. Agreement (Offer + Acceptance) .................................................................... 26 ii. Intention ................................................................................................................. 31 iii. Consideration ................................................................................................... 34

B. Terms of a contract and Non-contractual Representations .................... 38 i. Express and implied terms ............................................................................... 38 ii. Parole Evidence Rule ......................................................................................... 46 iii. Collateral Contracts........................................................................................ 47 iv. Misrepresentation ........................................................................................... 47

C. Capacity, Legality, Consent (Factors that may make a contract unenforceable) ................................................................................................................. 48

i. Lack of capacity .................................................................................................. 48 ii. Lack of legality ..................................................................................................... 50 iii. Lack of consent (mistake, undue influence, duress, unconscionability) ...................................................................................................... 51

D. Remedies and Ending the Contract ............................................................... 55

3

(Elements: Rescission, Damages, Specific performance, Injunction, Frustration) . 55

i. Rescission ............................................................................................................ 55 ii. Damages ................................................................................................................ 57 iii. Specific performance ..................................................................................... 58 iv. Injunction .......................................................................................................... 59 v. Frustration ............................................................................................................ 59

VII. Dealing with Consumers ....................................................................................... 61 A. General Protections ........................................................................................... 61

I. Consumer protection against misleading conduct and unfair business practices ........................................................................................................................ 61

B. Specific Protections ........................................................................................... 68 i. Prohibitions against unfair practices ............................................................ 76 ii. Statutory guarantees in consumer transactions ........................................ 76

XI. Managing a Business ................................................................................................... 76 Business structures ....................................................................................................... 76 A. Sole trader ............................................................................................................. 76 B. Partnership ........................................................................................................... 79 C. Company ............................................................................................................... 84

4

I. Business and the Law

A. The Nature of law

1. Law is: the set of rules made by the state and enforceable by prosecution or litigation

2. Business law is: the set of rules regulating businesses and business activities made by the state and enforceable by prosecution or litigation

Law’s ideals: **CFAF** Certainty, Flexibility, Accessibility, Fairness 3. The purpose of law **RMPPSP**

a. Resolves disputes b. Maintains social order c. Preserves and enforces community values d. Protects the disadvantaged e. Stabilises the economy f. Prevents the misuse of power

4. Why laws change:

a. Political change b. Fixing a problem c. Changing values d. Lobby groups e. Changing technology

5. Types of justice

a. Distributive justice: fair and proper distribution w/in a group/community. The law means to ensure such a fair and proper distribution i. Egalitarianism ii. Desert Theory iii. Utilitarianism

b. Retributive: fair and proper response to a wrongful act c. Procedural: fair hearing/trial is held. All persons being prosecuted for a crime or

civil lawsuit receives a fair hearing

6. Forms of government a. Monarchies b. Presidential systems c. Parliamentary republics d. Theocracies e. One party states

5

7. Categories of law

II. The Australian Legal System A. Legal Systems

1. Australian Legal system (6 -- LCCFSR)

a. Liberal democracy – laws are made by, and the executive government consists of, elected representatives who exercise their power subject to the rule of law and to the various Federal and the State constitutions

b. Common law legal system – our legal system is based on the British legal system, and can be contrasted with other forms of legal system such as the civil law legal system

Civil law made by judges legislation from codes, statues and constitutions

c. Constitutional monarchy – the Head of State of the Commonwealth of Australia of the various States is Elizabeth II, Queen of England

They hold the position according to the will of Aus. peeps expressed in Australian Constitution

d. Federation – in addition to be the national Federal (or Commonwealth) government there are various State governments that are not subordinate to the Federal government

Two levels of govt. are ‘partners’ and share power e. Separation of powers:

laws are made by a parliament administered by an Executive Council or Governor in Council interpreted and applied to particular cases by a court system

6

f. Responsible government – the Ministers comprising the executive are elected

representatives who are also member of and are answerable to the legislature

2. Division vs Separation of powers

o Division of power: division of law making power between Federal Government and State Government

o Separation of power: separation of L, E, and J power (works efficiently and effectively when SHARED)

B. The Australian Constitution

1. History a. The British settled Australia rather than conquered it because they did not

recognize the indigenous laws in place b. Doctrine of reception: British settlers brought British law with them

according to this c. Terra Nullius: gone to a place where is no law conquering a country

British settled in Aus. d. 1901 Commonwealth of Australia came into existence giving certain powers

to the federal government and at the same time retained their individual identities and legislative authority

e. Today Federal, State and Territory government are free from interference from British parliament

f. The final step is to become republic

2. Federal/State relations

Exclusive powers Concurrent powers Residual powers

Federal Parliament only

Federal and State Parliaments State Parliaments only

Examples Customs Defence Currency Territories

Examples Taxation Marriage Banking External affairs

Examples Education Property Crime Health

7

a. If the Federal Parliament has not legislated in relation to any of the matters

listed in s 51, then that matter remains within the regulatory authority of the States

b. If a State parliament has made a law in relation to one of these matters, and the Federal Parliament makes a law in relation to the same matter, then s 109 of the Australian Constitution provides that the latter shall prevail and the former shall, to the extent of the inconsistency, be invalid

3. Changing the Constitution

a. The proposed amendment must: i. Be passed by an absolute majority of both houses of parliament ii. Be put to the Australian voters in the form of a referendum and passers by

o A majority of voters

o A majority of states iii. 40 attempts only 8 have been successful

4. The executive government

a. Executive power – power to administer the law, i.e. carry on the business government and maintain order and security

b. According to the Australian Constitution: i. executive power of the Commonwealth is vested in the Queen (figure

head); and ii. exercisable by the Governor-General as Queen’s representative

c. Governor-General: to act on the advice of the Federal Executive Council consisting of the: i. various Ministers ii. members of Parliament appointed by the Governor-General (adviced by

the Prime Minister to administer the various departments of the Federal public service) (Governor-General takes advice)

d. State constitutions vest executive power in the Governor advised by the Premier and the Ministers, known collectively as the Governor in Council

e. Territories executive power is vested in the Administrator advised by the Chief Minister and the other Minsters, known collectively as the Executive Council

5. Public service a. The policies and decisions of the Executive Council/Governor in Council and of

the Cabinet are implemented by the various departments and agencies of the Federal, State or Territory public service

8

b. If a person is not happy with a decision made by a government department or

agency, they may be assisted by: The ombudsman representative of

people Freedom of information legislation The Administrative Appeals Tribunal Judicial review

6. Delegated legislation

a. Legislation made by a body other than parliament, and to whom the parliament has delegated law-making power.

III. Politicians and Judges A. Parliament in operation

1. Legislative power: is the power to make law, and in Australia is exercised by the

Federal Parliament and the various State and Territory parliaments 2. Structure of parliament

a. Bicameral: two houses Upper and Lower house b. Territory parliaments: only one house

3. Lower House—Federal Parliament

a. The House Representatives is the ‘people’s house’, providing equal representation for the people of Australia

b. Australia is divided into electorates—about 150-with roughly equal numbers of voters, each of which elects a representative

c. The political party with the majority of members in the House of Representatives forms executive government

d. Prime Minister member of the lower house

4. Upper House—Federal Parliament a. The Senate is the ‘States’ house’; it protects the rights of the States b. There is an equal number of Senators from each State (12) in order to protect the

interests of the less populous States; the Territories are represented by 2 Senators each.

c. The founders of the Constitution recognised the danger that the Lower House would favour those States, and the composition of the Upper House addressed that risk by giving other States the opportunity to oppose any biased legislation

5. Parliament in Operation a. Parliament process

i. Proposal

In relation to Administrative matters Administrative justice: administrative law

9

ii. Drafting of Bill iii. Lower house iv. Upper house v. Royal assent vi. Commencement

b. Bill readings

i. First reading ii. Second reading and debate iii. Committee iv. Third reading

c. A Bill that has been successfully passed by both Houses of Parliament is not law

until it receives the Royal Assent of the Crown Representative d. Crown Representative acts on the advice of the executive government e. The Act will commence:

i. From the date specified in the Act, or ii. A date to be fixed by proclamation, or iii. If the Act is silent as to its commencement:

- From the date of Royal Assents (State acts), or - 28 days after Royal Assent (Federal acts)

f. Parliament has the power to declare an Act to be retrospective, but this power is used sparingly

g. In relation to the Federal Parliament, s 57 of the Australian Constitution provides that: i. If the Upper House fails to pass a Bill passed by the Lower House, and ii. After three months the Bill is once again passed by the Lower House and

rejected by the Upper House h. The Governor-General is empowered to dissolve both Houses, known as a

double dissolution i. If after the new Parliament is appointed the deadlock reoccurs, the Governor-

General can convene a joint sitting of both Houses. j. Double dissolutions rare k. Types of legislation

i. 5 types of Act: a) Original Acts: Passed for the first time, taking over regulation/completely

replacing a previous Act b) Amendment Acts: Act that changes an existing Act

c) Repealing act: Abolishes and existing Act superseded (replaced) d) Consolidating or reported Acts: brings all the statute law (in a particular

area) into a single Act e) Reviving Acts: revised legislation that was previously been

6. Pressures to change the law

a. Law reform body b. Media c. Courts d. Government policy e. Lobby groups f. Public servants

10

B. The Australian court system

1. The judiciary a. Judicial power: the power to interpret the law and to apply it in the resolution of

particular disputes - exercises by the courts (common law)

Courts (highest to lowest) Original Jurisdiction Appellate jurisdiction

High Court 5-7 Justices

Disputes relating to: the interpretation of the Aus. Constitution, constitutional validity of Federal legislation, between the States

Matters in which the Commonwealth is suing/being sued

3, 5, 7 justices

Hears appeals from the decisions of:

State and Territory Supreme Courts, Federal and Family Court, any High Court Justice exercising original jurisdiction

Federal Court of Aus. Single judge

Deals with matters relating to Federal legislation:

Consumer protection, competition regulation, intellectual property disputes, bankruptcy

Full Court (3 judges)

Hears appeals: Decisions of single Federal Court judges/Federal Circuit Court

Family Court of Aus. Single judge

Hears matters: Divorce process, property settlements, maintenance and custody of children

Full Court

Hears appeals: Single judge of the Family Court, Federal Magistrates Court, State and Territory magistrates

Federal Circuit Court of Aus.

Shares jurisdiction with Fed and Family courts about

Mostly Family law, but could be about any other than this

Supreme Courts Single judge Civil: jury of 4, 6, 12 Criminal: compulsory jury of 12

Unlimited civil and criminal jurisdiction (w/in State or Territory)

Three judges

Hears appeals: Other courts lower in the court hierarchy in the same State/Territory, lower courts on points of law, intermediate courts on all issues

Intermediate courts (District Courts)

Civil: relevant financial limit (option jury of 6) Criminal: indictable offences other than the most serious crimes (e.g. murder) dealt with by the Supreme Courts (compulsory jury of 12)

Hears appeals: Lower courts in criminal matters issues relating to the sentences and questions of fact

Lower courts Most common type of court in Australia

Also hear:

11

Civil: relevant financial limit Criminal: minor offences (e.g. shoplifting, traffic offences)

Worker’s compensation claims

Application for restoration, cancellation or suspension of driver licenses

Bail applications

Committal proceedings

2. Jurisdiction a. refers to the scope of the court’s authority b. Original and appellate jurisdiction

i. Original jurisdiction: court of first instance (decided for the first time) ii. Appellate jurisdiction: the jurisdiction of the court to hear appeals from

other courts that are lower in the hierarchy

c. Criminal and civil jurisdiction i. Criminal trials: breached criminal law (summary and indictable offences) ii. Civil trials: person suing each other under the civil law

d. Specialised courts

i. tribunals and decision-making bodies

3. Court processes a. The system of dispute resolution used in modern Australian courts is called the

adversarial system b. The parties ‘fight it out’ until one of them is declared a winner by an impartial

referee in the form of a judge c. Within strict rules of procedure and evidence the parties have complete

responsibility for the conduct of their case d. The judge observes and listens to the proceedings, ensures that all rules of

procedure and evidence are applied fairly and consistently, allows both parties to be heard and, unless there is a jury, decided the case

e. The adversarial system can be contrasted with the inquisitorial system in courts in civil law countries (used commonly in Europe)

C. The doctrine of precedent

1. The doctrine of precedent (stare decisis) a. The decisions of most courts are recorded and published, leading to the creation

of a second source of law: case law

b. Binding precedent: previous decision about a question of the law that the judge must follow

- EXAMPLE: judge in the District Court of Victoria is obliged to follow a decision made by the Supreme Court of Victoria, but they are not obliged to follow a decision made by the Victorian Magistrates Court/decision made by the Supreme Court of New South Wales.

- binding downwards

12

c. Persuasive precedent: previous decision about a question of law that a judge

may follow - EXAMPLE: judge in the Victorian District Court is not obliged to follow a

precedent from the Supreme Court of New South Wales, but since the New South Wales and a Victorian legal systems are so similar, the precedent from the Supreme Court of New South Wales will be highly persuasive.

- appealing upwards

d. Decisions of courts outside the particular hierarchy are not binding but may be persuasive

e. A court may also reject or overrule precedent about questions of law f. Within the extremely large body of case law that has developed, two important

categories can be identified: common law and equity

2. Alternative dispute resolution a. Negotiation b. Mediation c. Conciliation d. Arbitration

3. Case reports

a. ratio decidendi (‘reason for the decision’) – part of a judge’s decision which sets out the legal principle upon which the decision was based, and which is binding precedent (FINAL JUDGEMENT)

b. obiter dicta (‘saying by the way’) – part of a judge’s decision other than the legal principle upon which the decision as based, including the identification of the relevant evidence, and discussion of alternative legal principles, alternative decisions if the facts had been different and the historical development of the legal principles used in reaching the final decision (HYPERTHETICAL JUDGEMENT)

c. First instance – the first time this matter has been seen at any court

4. Rules of interpretation