Foundations of Business Law - Assignment Example

Business Law xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Instructor xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Question 1 Kosmo wants to know what kind of legal action, if any, he might have against Gerry. As a Financial Advisor at “Tom and Gerry Ltd”, Gerry is in a professional contract with his paying client George and is under a duty of care not to issue reckless or negligent statements to him. The essential features of a valid contract include; an offer; acceptance; consideration; intention of the parties to create legal relations; certainity and capacity of the party’s t5o enter into a contract. Vitiating factors on the other hand are factors that if they operate at all. They operate to make a valid contract null and void (Beale&Tallon 2004). They include; Mistake, misrepresentation, undue influence, duress, illegality and unconscionable bargains. An offer refers to the terms that the maker of the contract (offeror) is willing to be bound by. Acceptance of the terms must be unconditional and must be communicated by the offerree(party entering into contract with the offeror) to the offerror.To understand whether Kosmos has a basis for legal action against Gerry we must understand the third essential feature of a valid contract which is consideration. In layman terms consideration is defined as “Quid Pro Quo” (something for something).Legally speaking consideration is the value exchanged by the parties to the contract as a motive for entering the contract. Lush J defined consideration in CURRIE V. MISA (1875) LR 10 Exch 153 as “... Interest, benefit, profit or right gained by one party or the loss, forbearance or detriment suffered by the other party to the contract.”(Gibson& Fraser 2005, P. 89 ) Consideration takes three forms; Past consideration, executed consideration and executor consideration.Executory consideration involves the making of a promise by one party which is dependent upon an act of the other party .Executory consideration on the other hand involves exchange of promises between the parties undertaking to perform an act in the future( Barron 2006 ). Past consideration on the other hand refers to a promise to do something in the past and it is not good consideration. The rules of consideration state that :Consideration must not be past; An existing contractual duty does not amount to valid consideration; Part payment of a debt is not valid consideration; An existing public duty cannot amount to valid consideration; and consideration must move from the promise to the promisor.( Beale& Tallon 2002, P.23 ).In this contract of provision of financial advice George is the promise while Gerry is the promisor. Consideration must therefore move from George to Gerry in the form of payment for financial advice. In TWEDDLE V. ATKINSON (1861) EWHC QB J57, a young man and a young woman were getting marries. The bride’s father and the groom’s father entered into an agreement that each of them would pay the couple certain of money. The bride’s father died without paying any money and the groom’s father also died before he could sue to enforce the agreement. The groom filed a claim against the executor of the estate of the bride’s father. The Queen ’s Bench rejected his claim and held that the claim failed because the groom was not party to the contract as the consideration did not move from him( Gibson & Fraser 2005 ). Similarly Kosmo has no claim against Gerry because he has not paid him for his financial services as the consideration(payment) moves from George. Furthermore under the doctrine of privity of contract, only bonafide parties to a contract have rights and obligations under a contract and only those parties can sue or be sued under the contract (Davenport & Perker 2011, P 132).In DUNLOP PNEUMATIC TYRE CO. V. SELFRIDGE (1915) AC 847, Dunlop, a tyre manufacturer had entered into an agreement with its dealers including Dew and Co. not to sell the tyres below the recommended retail price. Dew entered into an agreement of sale of tyres wit Selfridge. Selfridge sold the tyres below the recommended retail price, Dunlop moved to court seeking a claim of injunction and damages against Selfridge. The House of Lords held that Dunlop Pneumatic Tyre could not enforce the claim because it was a third party to the contract between Dew co and Self-Fridge. This is because Dunlop had not given furnished Selfridge with consideration. If any consideration had moved from Dew Co (the promise) to Selfridge (the promisor) (Barron 2006, P. 55). Kosmo does not therefore have any claim against Gerry. The only person who has a claim against Gerry is George for misrepresentation. Misrepresentation is one of the vitiating factors of a contract and has been defined as an untrue statement of law or fact which has the effect of inducing the other party to a contract. Misrepresentation is categorized into innocent misrepresentation, fraudulent misrepresentation and negligent misrepresentation. Fraudulent misrepresentation occurs when the person making the statement knows it to be false’ does not believe in its truth and the statement is made recklessly without caring whether it is false or true( Gibson & Fraser 2005, P.90 ).Negligent misrepresentation is made negligently without plausible grounds for belief in its truth. An innocent misrepresentation on the other hand exists where the person making the statement has reasonable justification for believing the statement to be true. As a player in the financial industry Gerry ought to have analyzed the viability of The Face book IPO and given credible advice to his client George. He therefore made a negligent misrepresentation to George. However George cannot claim any damages from Gerry because he did not invest in The Face book IPO and therefore has not suffered any loss. Question 2 Newman wants to know what kind of legal action, if any, he might have against Kosmo. When Kosmo slams the door on the face of Newman and injures him, he commits the tort of negligence. Negligence refers to lack of exercising the care that is expected of a prudent or reasonable man in similar circumstances. If Newman is able to prove that he has suffered harm as a result of Kosmo’s actions then he is entitled to compensation in the form of damages. To prove negligence the claimant must establish existence of a duty of care; breach of the duty to take care; and injury or harm suffered as a result of the breach of the duty to take care (Buckley 2005).The duty to take care was established by Lord Atkin in the case of DONOGHUE v. STEVENSON (1932) AC 532.In the case Miss Donoghue drank ginger ale beer that had been manufactured by Stevenson. As she was drinking the beer she discovered remains of a decomposed slug at the bottom. Lord Atkin ruled that Stevenson as the manufacturer owed a duty of care to consumers. He established the neighbor principle whereby he stated that, “A neighbor in law is a person who is directly and closely affected by your actions that you ought to have them in contemplation before directing your mind to such omissions or acts.”(Tingle 2002, P.154).It emerges from the case that harm that is foreseeable must be compensated. Kosmo should have contemplated the effect of slamming the door on oncoming persons and since he failed to do so he was negligent in injuring Newman. In CAPARO v. DICKMAN(1990) 2 AC 605, the House of Lords established a three-way test for the duty of care and stated that harm must be reasonably forseeable;There must be a proximate relationship between the defendant and the plaintiff; and it must be just, fair and reasonable to enforce liability. The test of whether breach of duty to take care has occurred is the test of the prudent or reasonable man in a similar situation. Contrary to popular opinion, breach of a duty to take care is not limited to learned professions. Every member of society is under a duty to take care towards other people and their property. A person who engages in reckless behavior that poses risk of harm or injury breaches that duty (Tingle 2002, P. 34).In slamming the door, Kosmo breached his duty to take care not to harm his “neighbours” For Kosmo to be held liable, Newman must also prove that the injury or harm suffered is the result of the act of Kosmo slamming the door. This is to avoid the risk of being held liable for remote damages or damages that are not a proximate cause of the injury suffered. In R V CROYDON HEALTH AUTHORITY (1997) CA, the defendant x-rayed the plaintiff as part of her routine as a nurse. She however failed to inform the plaintiff and her doctor that the plaintiff was suffering from a heart condition. The plaintiff became pregnant and had a child. On learning that she had a heart condition she became depressed because she would not be around to take care of the child for long. She sued the nurse. The court held that the damages were too remote as the nurse could not have foreseen the pregnancy (Tingle 2002, P.38). Similarly in BOLTON V. STONE (1951) AC 850, The House of Lords ruled that a defendant cannot be said to be negligent if the harm that occurred to the plaintiff was not foreseeable as a consequence of his actions. The facts of the case were that the plaintiff was hit by a cricket ball while she was standing outside her home. Cricket balls were not usually hit to reach a distance as far as where she was standing. The court ruled that though she was injured, she could not be compensated because the danger was not reasonably foreseeable (Barron 2006). There is no way Kosmo could have foreseen that the person who would be hit by the door was the three-time champion of The Adelaide Petanque Club Championship who had walked away with $ 40,000 for the past three years. Neither is there no guarantee that if Newman had participated in this year’s tournament he would have won. The damages are too remote and cannot be anticipated. Newman can therefore only make a claim of the special damages resulting from the direct injury he suffered upon being hit by the door that kosmo slammed. He must specifically prove the pecuniary loss he suffered as a result of the injury in order to be awarded general damages in compensation. References Barron, M. (2006). Fundamentals of business law. North Ryde, N.S.W., McGraw-Hill, PP 53-56 Beale, H. G., & Tallon, D. (2002). Contract law. Oxford [England], Hart Pub., PP 21-26 Buckley, R. A. (2005). Buckley : the law of negligence. London, LexisNexis Butterworths, PP 94-97. Davenport, S., & Parker, D. (2011). Business and law in Australia. Pyrmont, N.S.W., Thomson Reuters (Professional) Australia, PP 131-134. Gibson, A., & Fraser, D. (2005). Business law 2013. Frenchs Forest, N.S.W., Pearson Australia, PP 89-94 Staunton, P. J., & Chiarella, M. (2008). Nursing & the law. Marrickville, N.S.W., Elsevier, PP 63-73 Tingle J. (2002). Clinical negligence and causation and remoteness of damage. British Journal of Nursing (Mark Allen Publishing). 11, 12-2003, PP 33-38 Read More