Laws20058 Australian Commercial Law Answers Assessment Answers

Answer:

India is the foreign country of choice with which the Australian legal system would be compared in the light of the various legal components given by Hart.

• Rule of Recognition

This implies that the sources of law for the legal system should be definite and defined so that any arbitrary authority cannot assume this power. This is clearly true for the Indian legal system as the following sources of law are prominent.

• Constitution – There is a written constitution document which highlights the key legal principles which are adhered to by all the law making bodies in the country.
• Legislation – For making the laws, there are legislatures which tend to makes laws known as stature law.
• Case law – This essentially refers to the system of judicial precedents which are adhered to by the hierarchical court structure.
• Customary Law – There are certain laws related to the personal sphere which are driven on the basis of value system and custom of Indian people.

The above aspect is also adhered to by Australia which has comparable sources of law. While the constitution, legislation and case law are important in Australian context as well. The only exception is that customary law does not play a role in Australian legal system.

• Rule of Change

In India, there is a particular procedure for rule change which is carried out with the action of legislature bodies at the state and centre whose role is to enact new laws and also simultaneously change old laws. Even the constitution can be amended and this procedure has also been clearly described in the constitution only. Therefore there are only dedicated bodies which in a defined mechanism can change the laws of the country. Therefore, the Indian legal system tends to adhere to this aspect also.

The above mechanism is quite similar to that in Australia considering that both India and Australia share common colonial ties with UK. As a result, the procedure for changing laws in these nations is quite defined and similar. However, the constitution in case of Australia is more rigid as compared to India.

• Rule of Adjudication

In the Indian legal system, the highest court of law is the Supreme  Court under which there are significant layers of courts which reach to the very lowest level of villages and districts. The powers to adjudicate of various courts have clearly outlined. Also, important matters especially involving the interpretation of Constitution is dealt by the Supreme court. Further, they also provide relief in case of power abuse by the other branches of the government. Hence, it would be correct to conclude that this particular aspect of the Hart’s legal system is also met.

In Australia also, for adjudication there is a dedicated judiciary with wide powers and independence from the other branches of the government. Additionally, the powers of these courts are well defined in accordance with the nature of dispute. Also, besides the court, there are other mechanisms such as administrative tribunals which also play a crucial rule in adjudication of various administrative complaints.

Relevant Law

One of the reasons why the innocent party may hold the contract void is fraudulent misrepresentation. Fraudulent misrepresentation refers to the situation where on purpose (i.e. knowingly) misrepresentation is done by the seller. Misrepresentation is used to highlight a situation where the seller makes false representations. However, for misrepresentation to lead to the contract potentially being declared void, the following two conditions need to be satisfied.

• The misrepresentation must be related to a factual statement being falsified

It is necessary that the seller should have stated factual information incorrectly. Stating of opinions incorrectly does not result in misrepresentations as it is difficult to disprove opinions along with the underlying intention. The silence on the part of seller about vital information would not be termed as misrepresentation. This is because misrepresentation takes place only when there is a lie on the part of the seller. A relevant case in this regards is Smith v Hughes where even though the seller did not convey a key information regarding the product but since the buyer did not ask the same, hence the contract was held as enforceable.

• The fact that has been misrepresented should be significant enough so as to exhibit significant influence on the representee with regards to contract enactment

The seller misrepresents information so that the buyer can enact the contract.  However, it is essential that when there is evidence present to verify the representations made by the seller, then the buyer must not act negligently as later the liability of seller in such cases does not arise. This has been highlighted in the Redgrave v Hurd case. The relevant facts indicate that for a firm, a solicitor was seeking a partner. He misrepresented the financial performance of the firm in order to lure the potential partner. He found an interested person and represented the financial records of the firm besides representing the revenue details falsely. The buyer declined reviewing the books of the firm even though they contained the correct revenue details. The buyer agreed to be partner but later came to know about the fraud in terms of incorrect representation of revenue and wanted to withdraw from the contract. However, the court decided that the buyer would have to enact the contract since the actual books were presented but he acted negligently.

Statute law in the form of Competition and Consumer Law, 2010 is also available to protect the interest of consumers. With regards to sale of motor vehicle for transport of goods, s.3(1) considers the buyer as consumer. For the consumer, various implicit consumer guarantees are available one of which is that the good sold should be free from any security. Additionally, s. 18(1) provides defence against use of misleading advertisement for bringing about sake of the product. The coverage of this is wider than common law as intention of deceiving the buyer is not necessary and also if there are chances that the customer can be deceived, this section would be applicable. However, for remedies under this section, it is essential that actual loss should have been incurred.

It can be highlighted from the given details that Angelo has misrepresented various relevant financial details about the grocery business particularly about the monthly revnue besides monthly expenses as well. Also, these incorrect facts were given to Barry with the intention of luring him into buying the grocery business at a high valuation. Additionally, there were no accounts of the grocery business that were presented by Angelo to Barry so that he may independently certify the same. Therefore, it is appropriate to conclude that fraudulent misrepresentation has been done by Angelo and Barry is the victim. As a result, the contract for grocery business sale would be termed as voidable provided Barry wishes to terminate the same.

Also, the advertisement which Angelo used to convey the details of his business was clearly deceptive and has resulted in actual loss to Barry. The other conditions are also satisfied in this regards. Also, failure to disclose the lease on van is also a violation of the implied consumer guarantee and hence relief can be potentially provided. Thereby, under the aegis of  ACL also, relief from financial damages and possible refund can happen.

The contractual terms are pivotal to the existence of a contract. These can be express in nature or implied. The key issue is with regards to identifying the implied terms since these tend to be derived from the various representations made by the seller. It is important to segregate the two since representations cannot be legally forced unlike terms which must be adhered by the contracting parties or a breach in contract would  be observed.

In order to distinguish a term from a representation, certain parameters are taken into cognizance. One of these is the parole evidence rule which highlights terms as only those that the written contract contains while those not highlighted in the written contract would more likely be representations as if they were significant to the contract, they would find mention in the written contract.  Another significant parameter which is ought to be taken into consideration is the representor’s expert knowledge relative to the representee. The thumb rule here tends to be that higher the expertise and associated knowledge, higher would be the reliance of the representee on the statement while making buying decision and hence the same is likely to be a term and not representation. A relevant case which highlighted the above understanding is Oscar Chess Ltd v Williams case.As per this case for the description of the product, there was reliance of the buyer on the seller owing to expertise and knowledge of the latter. Thus, the description of the product was considered to be a term by the honourable court and it was ruled that the seller has breached the contract.

Yet another factor of significance is the importance of the representation made by the representor. Term would be those representations for whom the significance attached by the representee is high. This can be illustrated with the example of Bannerman v White case. In this particular case, the buyer wanted hops but he was clear that these should be sulphur treated or else he would not make the purchase. This statement clearly highlights that sulphur treatment of hops is so vital for the buyer that it would eventually impact his decision to go ahead with the contract or not. As a result when the seller provided him hops without sulphur treatment, the seller was held liable for breach of the contract and it was declared void.

Application

As per the given circumstance, it would be appropriate to consider some of the representations as terms. This would be related to factual information related to business’s financials such as revenue, expenses etc. Also, the important aspect regarding this information is that Barry does not have any understanding of the business and hence needs to rely only on Angelo.  Besides, the financial details of the business would form implied terms in this case as Barry’s decision to buy the business and the price at which the deal would close would be contingent on the financial details given by Angelo. Also, if the actual details were given, it is highly likely that Barry would have refused to buy Angelo’s business. The significance of the financial performance for Barry can be derived from the fact that it was the financial numbers which first made Barry take interest in the business. Therefore, the financial details that Angelo provided about the business would be taken as implicit terms for the purposes of this contract.

Besides, there has been violation of express terms also since these were mentioned in the written contract that was executed between the two parties. In particular, it contained clauses about the value of van and loader which have proved to be false. This is because the value of the loader is practically zero considering that repair value is same as replacement value. Besides, the van is on lease and hence the ownership does not exist. Hence, on the basis of the above discussion, it is apparent that the express terms of the contract have been breached besides the violation of implicit terms. Thus, the contract would be considered as void if Barry desires so.

Conclusion

The contract has been breached owing to the violation of terms (i.e. implied and express). As a result, Barry can sue Angelo for recovering the underlying damages.

It would be fair to conclude that the given contract would become void at the instruction of Barry owing to presence of fraudulent misrepresentation. Also, relief would be provided to Barry under the ACL.