LAWS20058 : Australian Commercial Law : Incorporated Within the New Co

Answer:

Part A 

1(a)

A proposal for a new Constitution has been made in order to address the issues arising amongst the tribe members from their distinct dispute settlement procedures. The fundamental rule that has been proposed to be incorporated within the new Constitution is to ensure that the legal decision-making procedure is used more in order to resolve the issues compared to the other dispute settlement mechanisms. In the given scenario, it is observed that the decision taken by the eldest members of the tribe is contradictory to the former decisions taken by the elders of the tribe. The new Constitution that has been proposed must ensure that all the decisions taken by the elders shall be considered as consistent where the facts of the every case are identical. The facts of the scenario also stated that the elders are often bias while determining issues especially when their family members are involved in that issues. The new proposed Constitution guarantees to fill up these lacunae as it purports to introduce rules regarding equal treatment and determining issues impartially.

Further, the new proposed Constitution aims at introducing secondary rules to address the issues arising from primary rules. In order to ensure that the tribe members who participate in the decision-making process comply with such rules, the statutory provisions within the Constitution to establish an Executive body which will enforce the rules. It shall also include provisions that will permit amendment of rules from time to time based on the needs of the society. Since the eldest members of the tribe are responsible to take decisions to resolve any issues, a panel of judges shall be established who would be empowered to determine the veracity of the decisions made by such tribe members based on the evidence adduced with respect to the disputes.

The proposed Constitution that has been introduced to resolve the disputes reflects the presence of the tier-system devised by Professor Hart in his legal theory. This is evident as the proposed Constitution has incorporate the Hart’s rule of recognition in the form of the secondary rules, which purports to address the issues arising from the primary rules. The Constitution also stipulated provisions that incorporate the rule of change in the form modification of the rules as per the needs and changing circumstances of the society. Moreover, such modifications are required to be in conformity with the Constitution. Further, the provisions related to rules of change in the Constitution has led to the necessity to establish an Executive Body to enforce the decision of the decision-maker in the society and are empowered to make their own decisions while exercising their powers to settle the disputes. As Hart points out, there must be a close connection between the rules of change and the rules of recognition.

The provision related to the rules of adjudication has been incorporated within the Constitution that has been proposed before the tribe members. This is evident from the provisions set out in the proposed, which proposes to establish a judge panel only to ensure that the decision-makers of the tribes do not contravene the rules and act in accordance to the rules. The judges shall determine veracity of their decision-making based on the evidence adduced.

Similar to the provisions proposed to be incorporated in the Constitution for the tribe members, the legal framework of Australia also incorporates the three-tier legal system devised by professor Hart.  The provision in regards to the consistency in the decision-making is present within Australian legal framework as the decisions are made in compliance with the common law through precedents. The legal system of the nation considers every person as equal in the eyes of law. The Common Law principles are used to rectify the issues or any lacuna present within the statutory provisions as in case of contradiction between the Common laws and statutory laws, the principles of Common law shall supersede the statutory provisions. This is a statutory obligation as set out under Article [51] of the Constitution, which requires the statutory laws to comply with the common law, else they are rendered as invalid.

Part B

1). Issue

Is Barry entitled to certain rights before entering into a contract with Angelo?

Rule

In the given scenario, it is important to determine the importance of the free consent prior to the formation of a contract, particularly, when the person making an offer by misrepresenting the facts. In Smith v Land & House Property Corp. (1884) 28 Ch D 7, the court has defined misrepresentation as a false statement that is not a part of the contract and is made by offeror to offeree for inducing the offeree to enter into the contract with the offeror. Further, in Esso Petroleum v Mardon [1976] QB 801, the court pointed out an exception when the misrepresentation of a statement shall not entitle the innocent party to undertake action against the party making such misrepresentation. If a false statement is made with respect to any future event, the statement shall not amount to misrepresentation of facts and neither will it give rise to any legal action against the person making such false statement provided such terms forms an essential terms of the contract.

Furthermore, in order to succeed in making a claim for misrepresentation, it is important that the false statement made is related to the facts instead of being an opinion of the offeror with respect to his future intention. This requirement was upheld by the court in the Bisset v Wilkinson’s case [1927] AC 177.

Furthermore, it was stated in Solle v Butcher [1950] 1 KB 671, the court bars any action that is undertaken with respect to the existence of a law. Further, it is also said that if a statement that was otherwise, but for changes in circumstances, it became a false statement, the person who is aware of such change must inform the innocent party about the same, else such statement is likely to give rise to misrepresentation claims. Further, in Museprime Properties v Adhill Properties [1990] 36 EG 114, the court stated that such misrepresentation must be significant to the extent that it induces an innocent party to enter into the contract.

Furthermore, a misrepresentation claim can be brought only when the aggrieved person has relied on the misrepresentation of facts prior to the formation of a contract. In order to succeed with a claim of fraudulent misrepresentation, the aggrieved person shall have to establish that the party making such misrepresentation was aware of the facts being false but presented them as honest facts only to induce the aggrieved party to enter into the contract. In Derry v Peek [1889] 14 App Case 337, the court held that on establishment of the fact that the aggrieved party was induced to enter into a contract by deliberately providing false statements, it shall amount to fraudulent misrepresentation. It further stated the aggrieved party should be entitled to remedies in the form of termination of the contract as well as indemnification of the loss that he suffered due to the formation of a contract on misrepresentation grounds.

Application

On the facts here, the contract entered between Barry and Angelo regarding purchase of Angelo’s vegetable and fruit shops, satisfied the essential elements of a contract such as offer, acceptance and consideration, which makes a contract enforceable in law. Prior to the formation of the contract, Angelo stated in his sale advertisement that the business do not have any competitors and that the turnover of the business for each month is $20000. Nevertheless, subsequent to the formation of the contract Barry realized that these facts about the competition and monthly turnover were false stated only to induce him to enter into the contract with him, which amounts to fraudulent misrepresentation.

In regards to the requirement that a statement must be material to induce an innocent party to form a contract, the statement made by Angelo was reasonably of material nature as it induced Barry to purchase the shop. Hence, the requirement set out in Museprime case is established. Further, the other requirement of reliance was also established because Barry relied upon the misrepresentations that were made by Angelo in his advertisement which cause Barry to purchase the shop.

Further, it can be clearly assumed that Angelo was aware of these facts and even then, he falsely stated them only to induce the innocent party like Barry to enter into the contract. This satisfies the third requirement to establish occurrence of fraudulent misrepresentation. Hence, under such circumstances, Barry has a right to terminate the contract as well as compensate for all damages that he has suffered due to the contract.

Conclusion

The statements made by Angelo regarding his business turnover and the absence of competitor of his business were false and despite being aware of it, he represented the same to Barry inducing him to enter into the contract. He is liable for committing fraudulent misrepresentation and liable for damages to Barry.

2). Issue

Whether Barry is entitled to claim for breach of contract

Rules

The Sale of Goods Act 1954 is a statute that governs the disputes regarding the sale of goods in Australia. This law is applicable to any goods that are purchased within the country. As per section [19] of the SoGA, the suppliers are obligated to provide quality goods to the consumers even in the absence of any sale agreement with respect to the goods. This is known as implied terms, which are considered fundamental and must be complied with in order to render a contract as valid. It is implied that suppliers will provide quality goods to the buyer that is also fit for its purpose. Unlike the express terms, the implied terms are considered as obligations that shall be performed by the suppliers obviously and need not be mentioned in the contract.

In the Moorcock [1889] 14 PD 64 case, the court held that an implied term is important enough to enable the parties to carry out the contractual obligations. The other way in which implied terms are considered as important ad incorporated within the contract is through customs and operations of law within the commercial industry. However, in the event of non-compliance with the implied terms of a contract, the aggrieved party is entitled to several remedies stipulated under the statutory provisions as well as under the Common law principles.

Amongst all the remedies, the most common of the include specific performance of the contract, rescission of the contract, indemnification of the damages and injunction. In the case of Addis v Gramophone [1909] AC 488, the court established the legal principle that any person who suffers injury due to breach of the contact shall be entitled to remedies against the breaching party in either of the above-mentioned forms. These remedies will place the parties to the original position that they were in, prior to the breach of the contract.

Application

Barry and Angelo had entered into a contract to purchase the shop of Angelo, which included a van and a loader. After purchasing of the shop, Barry found the loader to be disputed and the Van was taken on lease. Additionally, to continue with the van, Barry shall have to incur expenses by paying to the person who has given the van on lease to Angelo. The business turnover was comparatively too less than what was stated by Angelo in his advertisement. Angelo stipulated that the business turnover was $20000 per month whereas Barry later found that it was only $13000 per month.

These statements made by Angelo amounts to fraudulent misrepresentation, which entitles Barry to several remedies, like compensation or specific performance or rescission of the contract.  Further, it is an implied term that the supplier shall provide goods of acceptable quality and that it should be fit for the purpose for which it was purchased. Now, the loader and the van was purchased to conduct business but the loader was damaged and required to be replaced otherwise it cannot be used for its purpose. In the absence of such implied terms, the contract shall not be able to be carried out.

Now, as per Moorcock’s case, the fitness and quality of goods shall be used as an implied term of the contract in this case, which is necessary and obvious for continuing with the contract. The significance of the implied terms is also promoted under section [19] of the SoGA. Therefore, the function of the loader was to load goods to the van but since it was damaged, it cannot be said that it serve its purpose. In addition, extra expenses were required to be incurred to fix the loader. Under these circumstances, Barry may claim to indemnify for incurring such additional expenses to fix the loader as was stated under Addis v Gramophones case.

Here, it can be stated that Angelo was aware that the business turnover was less, the loader was damaged, the van was taken on lease as well as the business had competitors. he deliberately made such statements in the advertisement which induced Barry to enter into the contract with him. This clearly amounts to fraudulent misrepresentation wherein Angelo falsely misrepresented the facts before Barry with the knowledge of the facts being false.

Conclusion:

Therefore, it can be stated that Barry is legally entitled to claim damages for the additional expenses that he had to incur to fix the loader and payment of the lease for the van. In addition, he may either claim compensation or withdraw the contract for the breach of the contract.

References:

Addis v Gramophone [1909] AC 488

Bisset v Wilkinson’s case [1927] AC 177.

Bridge, Michael G. The International Sale of Goods. Oxford University Press, 2017.

Campbell, Tom D. The legal theory of ethical positivism. Routledge, 2016.

Corones, Stephen G. Competition law in Australia. Thomson Reuters Australia, Limited, 2014

Derry v Peek [1889] 14 App Case 337

Esso Petroleum v Mardon [1976] QB 801

Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business, 2016.

Moorcock [1889] 14 PD 64

Museprime Properties v Adhill Properties [1990] 36 EG 114

Sale of Goods Act 1954 at section [19]

Smith v Land & House Property Corp. (1884) 28 Ch D 7

Wacks, Raymond. Understanding jurisprudence: An introduction to legal theory. Oxford University Press, 2017.