Law in Commerce

Full Title
Copyright
Preface
Table of Cases
Table of Statutes
Glossary
Table of Contents
	CHAPTER 1 LAW AND THE AUSTRALIAN LEGAL SYSTEM
		Objectives of this chapter
		Introduction and outline of chapter
		Why study business law?
		What is meant by the rule of law?
		Identifying the law
		Sources of law: parliamentary law
			A short history of government in Australia
			Federalism: sharing power between parliaments
			Changing the division of power between parliaments
			Finding and referring to parliamentary law
			The structure of parliaments in Australia
			The process of creating parliamentary law
			Administering the law: the doctrine of the separation of powers
			Interpreting a statute: the role of the courts
		Sources of law: case law (common law)
			Distinction between common law systems and civil law systems
			Doctrine of precedent (stare decisis)
			Finding case law
			Law reporting and the internet
			Common law and equity
			The process of extracting the law from a case
		The primacy of parliamentary law over case law
		An age of regulation
		Private law and public law
		Civil cases and criminal cases
		Dispute resolution
			Resolving disputes through the courts
			A hypothetical case
			Alternative dispute resolution
		Law in commerce
			Contracts
			Torts and similar statutory obligations
			Agency, partnerships, companies and trusts
		Business, law and ethics
			Introduction
			The role of ethics in business
			The psychology of ethical (or moral) behaviour
			The importance of the workplace culture
			Deciding what is the right or ethical thing to do
			Developing an ethical culture in the firm
		Risk management and the law
			What is risk management?
			What are the legal risks?
			Strategies for dealing with legal risks
			Compliance programs
		Questions
	CHAPTER 2 LIABILITY FOR DEFECTIVE PRODUCTS
		Objectives of this chapter
		Setting the scene: Could this happen in Australia?
		Introduction and outline of chapter
		Liability for negligence
			History of the negligence action
			Step 1: When is a duty of care owed?
			Step 2: What standard of care is owed?
			Step 3: Causation, remoteness of damage, amount of damages
			Defences
			Liability for another person’s acts
			Class actions
		Liability for safety defects under ACL Pt 3-5
			What is the purpose of Pt 3-5?
			What are the elements of a breach of Pt 3-5?
			What is a ‘manufacturer’?
			What is meant by the expressions ‘goods’ and ‘supply’?
			What is the meaning of ‘safety defect’ in relation to goods?
			Does Pt 3-5 compensate for all types of losses caused by a defective good?
			Damage must be caused by the defective good
			What are the defences under Pt 3-5?
			Can a manufacturer exclude liability?
			Other matters
		Other product liability laws
		Advice — Law in practice
		Questions
	CHAPTER 3 MISREPRESENTATION AND UNCONSCIONABLE CONDUCT: UPHOLDING THE BASIC NORMS OF COMMERCIAL CONDUCT
		Objectives of this chapter
		Setting the scene: Creative marketing or legal blunder?
		Introduction and outline of chapter
		Fraudulent misrepresentation
			Step 1: Was the representation a false statement of fact?
			Step 2: Did the representation induce the plaintiff to act in some way?
			Step 3: Did the representor know the misrepresentation was false?
			Step 4: Did the misrepresentation cause the plaintiff to suffer a loss?
		Negligent misrepresentation
			Step 1: When is a duty of care owed?
			Step 2: What standard of care is owed?
			Step 3: Remoteness of damage
		Misleading or deceptive conduct
			Outline of ACL s 18
			Conduct of directors, employees and agents
			Conduct must be ‘in trade or commerce’
			When is conduct misleading or deceptive?
			The role of exclusion clauses and disclaimers
			Remedies for breach of s 18
			Australian Securities and Investments Commission Act
			Corporations Act
		Unconscionable conduct
			Unconscionable conduct as part of judge-made law
			Unconscionable business transactions under the ACL
		Other unfair conduct
		Advice — Law in practice
		Questions
	CHAPTER 4 MAKING THE CONTRACT: OFFER AND ACCEPTANCE
		Objectives of this chapter
		Setting the scene: Pepsi loyalty rewards
		Introduction and outline of chapter
			The importance of contracts to business
			What is a contract?
			Standard of conduct expected when negotiating a contract
			Does a contract have to be in writing?
			The meaning of ‘intention’ in contract law
		Contractual remedies
			Termination of the contract
			Damages
			Specific performance
			Injunction
			Recovery of the contract price
			Agreed damages clauses
		Making the offer
			Meaning of ‘offer’
			An offer, or merely an indication of a present intention?
			An offer or an invitation to treat?
			Auctions: Who makes the offer?
			Tenders: Who makes the offer?
			Internet transactions: Who makes the offer?
			An offer, or merely part of the negotiations?
		The fate of the offer
		Withdrawing the offer
			Can an offer be revoked after acceptance?
			Can an offer be revoked before acceptance?
			Is it necessary to tell the offeree about the revocation?
			Who must tell the offeree that the offer has been revoked?
			Is it possible to revoke a unilateral offer?
			Options: offers that cannot be revoked
		Rejecting an offer
			What is the effect of rejecting an offer?
			Offeree’s conduct may indicate rejection
			Counter offer amounts to a rejection
			Asking for clarification of the terms of the offer is not a counter offer
		Accepting the offer
			Only the offeree may accept
			Acceptance must be final and unqualified
			Acceptance completes the contract
			Acceptance must be communicated to the offeror
			Communicating acceptance to a large company
			Communicating acceptance over the internet
			When is express communication of acceptance not necessary?
			Acceptance and the postal acceptance rule
			The method and timing of the acceptance
			Can acceptance be communicated by someone other than the offeree?
		Lapse of offer
			Lapse of an offer due to the death of offeror or offeree
			Lapse of an offer due to time
			Lapse of an offer due to the failure of a condition precedent
		The agreement must be ‘certain’
			Is an ‘agreement to agree’ binding?
			Is an ‘agreement to negotiate’ binding?
			Is an agreement made ‘subject to contract’ binding?
			Other conditional agreements
		Overview of offer and acceptance
		Advice — Law in practice
		Questions
	CHAPTER 5 MAKING THE CONTRACT: INTENTION AND CONSIDERATION
		Objectives of this chapter
		Setting the scene: Young love and ‘good’ intentions ….
		Introduction and outline of chapter
		Did the parties intend to contract?
			Social or domestic agreements
			Commercial agreements
		Have the parties provided consideration?
			What is a Deed?
			Consideration is required in all simple contracts
			What is consideration?
			Examples of consideration
			Only parties to the contract can sue for breach of contract
			Consideration may not be past
			Consideration may be of nominal value
			Consideration must be sufficient
			Illusory promises are not consideration
			Settling disputes: giving up a legal claim may be consideration
			Renegotiating contracts: new consideration necessary
			Renegotiating contracts: merely promising to perform an existing contract is generally not good (valid) consideration
			Terminating a contract by agreement
			Renegotiating a debt: special problems
			Is promising to perform a contractual duty owing to a third party good consideration?
			Is performing a public duty good consideration?
		Promissory estoppel
			The rules of contract law can lead to unfair results
			How did promissory estoppel develop?
			Promissory estoppel and contract law
			When is promissory estoppel important?
			What are the elements of promissory estoppel?
			The leading case: Waltons Stores (Interstate) Ltd v Maher
			The remedy in cases of estoppel
			Minors
			Persons with mental disabilities; intoxicated persons
			Agents
			Partnerships
			Corporations
			Assignment of contractual rights
		Advice — Law in practice
		Questions
	CHAPTER 6 EXPRESS TERMS OF THE CONTRACT
		Objectives of this chapter
		Setting the scene: A Faustian plot
		Introduction and outline of chapter
		Ascertaining the relevant evidence
			The critical importance of the facts
			How courts approach different types of evidence
		Statements made after the contract is formed are not terms
		The importance of a signed document
			General rule: a person is bound by the contents of a document they sign
			When is a person not bound by a document they signed?
		Incorporating unsigned terms into the contract by notice
			The reasonable notice test
			What constitutes reasonable notice?
			Incorporating ‘terms and conditions’ by notice
		When are oral statements or representations binding?
			The statement must be promissory in nature
		Determining which oral statements are promissory: the reasonable bystander test
			Applying the reasonable bystander test: some guidelines
		Collateral contracts
		Meaning of a term
			Reasonable person test
			Courts must interpret the words of the contract as written
		Interpreting exemption clauses
			What is an exemption clause?
			What are the rules for interpreting exemption clauses?
		Unenforceable contracts
			In general
			Unenforceable terms in standard form consumer contracts
			Terms that involve an unreasonable restraint of trade
		The importance of a term
		Advice — Law in practice
		Appendix: Sample of a written contract
		Questions
	CHAPTER 7 IMPLIED TERMS IN CONTRACTS
		Objectives of this chapter
		Setting the scene: The not-so-burglar-proof door
		Introduction and outline of chapter
		Implied terms of cooperation and good faith
			Implied term of cooperation
			Implied term of good faith
		Terms implied into specific types of contracts
			Contracts between professional persons and their clients
			Contracts for work and materials
			Other service contracts
			Hire contracts
			Employment contracts
			Landlord/tenant
		Terms implied as a matter of fact
			Terms implied on the basis of a course of past dealings
			Terms implied as a result of custom or trade usage
			Terms implied in order to make the contract effective
		Sales of goods contracts
			Background to sale of goods legislation
			Consumers have special protections under the Australian Consumer Law
			What terms are implied by the sale of goods legislation?
			Correspondence with description
			Fitness for purpose
			Merchantable quality
			Correspondence with sample
			Excluding, or limiting liability for breach of, the implied terms
			Remedies
			Other matters affecting sales of goods
		Advice — Law in practice
		Appendix: Comparative table of sale of goods legislation
		Questions
	CHAPTER 8 REMEDIES IN CONTRACT CASES
		Objectives of this chapter
		Setting the scene: The sensitive side of heavy metal
		Introduction and outline of chapter
		Terminating the contract
			Termination by performance
			Termination by agreement
			Termination by a term of the contract
			Termination by frustration
			Termination for breach of a condition of the contract
			Termination for serious breach of an intermediate term
			Termination for repudiation
			Termination for anticipatory breach
			Termination: process and consequences
		Recovery of the contract price
			In general
			Sale of goods
		Damages
			What is the purpose of damages?
			Losses must be caused by a breach of the contract
			Agreed damages
			Plaintiff has a duty to mitigate losses
			Damages must not be too remote: the rule in Hadley v Baxendale
			Calculating the amount of damages
			Contributory negligence
		Specific performance
		Injunction
		Rectification of the contract
		Restitution
			Quantum meruit and partially performed contracts
		Rescission
			Introduction to rescission
			Grounds for rescission in equity
			The nature of rescission in equity
			Statutory rescission
		Advice — Law in practice
		Questions
	CHAPTER 9 CONSUMERS’ RIGHTS AND THE SUPPLY OF GOODS AND SERVICES
		Objectives of this chapter
		Setting the scene: A timely lesson
		Introduction and outline of chapter
		Consumers’ rights against the suppliers of goods
			Introduction
			Supply to a ‘consumer’
			What are the statutory guarantees relating to the supply of goods?
			When is a supply in trade or commerce?
			Supply by way of sale by auction
			Guarantee of acceptable quality
			Guarantee of fitness for any disclosed purpose
			Guarantee that goods correspond with description
			Guarantee that goods correspond with sample
			Guarantees may not be excluded
			Liability may be limited in certain circumstances
			Remedies for breach of statutory guarantees relating to goods
			Retailers’ right of indemnity against the manufacturer
		Consumers’ rights against the manufacturers of goods
			The manufacturers’ obligations to the consumer
			Defences available to the manufacturer
			Manufacturer may repair or replace goods provided it has given an express warranty to that effect
			Measuring the amount of damages
		Consumers’ rights against the suppliers of services
			Supply of services must be to a ‘consumer’
			Supply must be in trade or commerce
			Meaning of ‘services’
			Services not covered by the ACL
			Distinguishing services from sales of goods
			What are the statutory guarantees relating to the supply of services?
			Guarantees may not be excluded
			Limiting liability
			Terms that limit or exclude liability in recreational services contracts
			Remedies for breach of statutory guarantees relating to services
		Advice — Law in practice
		Questions
	CHAPTER 10 AGENCY
		Objectives of this chapter
		Setting the scene: Stuck with an unwanted contract
		Introduction and outline of chapter
		What is an agent?
			What are the indicators of an agency relationship?
		The functions of an agent
			An agent may make contracts on behalf of the principal
			An agent may receive moneys on behalf of the principal
			An agent may pay moneys on behalf of the principal
			An agent may make representations on behalf of the principal
			An agent may receive representations on behalf of the principal
		Some common commercial relationships and agency
			Employer–employee
			Independent contractor
			Bailor–bailee
			Supplier–buyer
			Franchisor–franchisee
		How is an agency created?
			Agency may be created by express agreement
			Agency may be created by implied agreement
			Agency may be created by estoppel
			Agency may be created in cases of necessity
			Agency may be created by cohabitation
		The agent’s authority
			The agent’s actual authority
			The agent’s ostensible authority
		Principal may ratify agent’s unauthorised acts
			Meaning of ratification
			Rules applying to ratification
		Who can sue whom?
			When can the third party sue the principal?
			When can the principal sue the third party?
			When can the third party sue the agent?
		The undisclosed principal rule
		Duties of an agent
			General duties
			Fiduciary duties
		Duties of the principal
		Termination of agency
		Advice — Law in practice
		Questions
	CHAPTER 11 PARTNERSHIPS
		Objectives of this chapter
		Setting the scene: Choose your partner carefully
		Introduction and outline of chapter
		Choosing the appropriate business structure
			Types of business organisations
			Factors that determine the choice of business organisation
		Naming the business
		Creation of a partnership
			Are any formalities required to create a partnership?
		Definition of a partnership
			Carrying on business
			Carrying on a business in common
			Carrying on business in common with a view of profit
			Partnerships are contractual relationships
		Rules governing partners’ relationship with each other
			The contract between the partners
			Partnership Act 1958 (Vic)
			Partners’ duties of good faith
		Partnership property
			What is partnership property?
			What right does each partner have to the partnership property?
		Liability of partners to third parties
			Limited partnerships
			Joint liability for a firm’s debts and obligations
			Joint and several liability for wrongful acts
			Joint and several liability for misapplication of money or property
			Liability by holding out (estoppel)
		Assignment of a partnership interest
		Termination of a partnership
			Termination by the partners
			Termination by operation of law
			Termination by supervening illegality
			Termination by the courts
			Partners remain jointly liable for debts even after dissolution of a partnership
			Distribution of assets on dissolution
		Advice — Law in practice
		Appendix: Comparative table of Partnership Acts
		Questions
	CHAPTER 12 INTRODUCTION TO COMPANY LAW
		Objectives of this chapter
		Setting the scene: Understanding the nature of your debtors
		Introduction and outline of chapter
		Sources of companies
		The nature of a company
			The powers of a company
			Types of companies: general classification
			Types of companies which may be registered
			Consequences of the principle of separate identity
		Registering a company
			Steps for registration of a company
			The company’s constitution and rules
			Implications of the certificate of registration
		Managing a company
		Comparison of companies and partnerships
		How does a company create contracts?
		How does a company sign a contract?
			When is a company bound by the actions of its agents?
			People having dealings with a company may make certain assumptions
			When do the assumptions not apply?
		Advice — Law in practice
		Questions
	CHAPTER 13 DUTIES OF COMPANY DIRECTORS AND OTHER OFFICERS
		Objectives of this chapter
		Setting the scene: Directorships can be a burdensome role
		Introduction and outline of chapter
		What are the functions of a director?
		The source of directors’ duties
		Duties also owed by officers
		Reasonable care and diligence
			The business judgment rule
			Is any particular level of skill required of a director?
			The level of attendance required
			The importance of being informed
			The role of reliance
		The duty to act in good faith and for a proper purpose
			The duty to act in good faith
			Directors’ duty to exercise power for proper purposes
		The duty not to misuse the position
			Contracts with the company
			The duty imposed on directors to disclose certain interests
		The duty not to use information improperly
			What kind of information must not be used?
		The consequences of a breach of statutory duty
			Civil consequences
			Criminal consequences: s 184
		Directors’ duties at common law
		The insolvent trading rule
			When is a company insolvent?
			What remedies or sanctions may apply?
			Defences to s 588G
			Sections 588G and 588H in action
		Complying with the rules of the company
		Further statutory obligations
		Who will sue the directors for a breach of duty?
			Exceptions to the rule in Foss v Harbottle
			A shareholder’s right to take personal action
		Advice — Law in practice
		Questions
	CHAPTER 14 INTRODUCTION TO TRUSTS
		Objectives of this chapter
		Setting the scene: Conducting business through a trading trust
		Introduction and outline of chapter
		What is a trust?
			Definition
			The essential elements of a trust
			Parties to the creation of an express trust
			Duration of a trust
			Trusts compared with other entities
		Types of trusts
			Discretionary trusts
			Fixed trusts
			Operation of a trading trust
		Trustees’ powers
			Express powers
			Implied powers
			Statutory powers
		Trustees’ duties, rights and liabilities
			Duty of prudence, diligence and honesty
			Personal liability for debts
			The right of indemnity
			Insolvent trading by corporate trustee: directors’ liability
		Beneficiaries’ rights and liabilities
			Personal right of action against the trustee (‘right in personam’)
			Proprietary right of action in respect of the trust property (‘right in rem’)
			Beneficiaries’ liability to creditors
			The position of creditors in regard to a trading trust
		Termination of a trust
		Advice — Law in practice
		Questions
Index