The Law of Tort - Essay Example

Introduction to Business LAW Name The Law of Tort The law of tort is a part of civil law or the law of obligation. A tort is defined as a civil wrong and therefore the law of tort provides a remedy in instances where civil wrongs are committed1. Although there are different types of torts, the most common is negligence. Negligence is breaching the legal duty to take care, which results in damage to someone else2 The claimant must show that the defendant had a relationship with him which put him under obligation to use care in that particular instance3. This paper looks at a business case and analyzes it against the provisions of the law of tort in a bid to establish whether any action could be taken on the case. The Legal issue The issue to grapple with is whether Charlie and/ or Harley can be able to take any action against Max. Charlie wanted to purchase a restaurant. He located one for sale, Bruno’s, which is situated just around the corner from his friend Max’s restaurant, The Hercules. Given that he had not worked in the industry before, He sought advice from his friend Max who indicated that Bruno would be a success and almost guaranteed him that he would make profit in the first 12 months. Upon this advice Charlie decided to purchase the restaurant with his brother Harley. Unfortunately, one year later they are almost running bankrupt because as it turned out, the restaurant was neither popular nor profitable as per their expectations. The restaurant’s turnover has gone down since they took it over. The question to contend with is whether the law contains provisions under which Charlie and/ or Harley would take action against Max. The Law of Tort: Negligence The law of tort is of an ethical nature based on responsibility. Its components include protected interest on the plaintiff’s side, sanctioned conduct on the defendant’s side and the remedy for the tort4. This means that, tort of negligence has elements three elements to be considered. First, there must be proof that the defendant owes the claimant a duty of care. Secondly, the defendant must be found to have breached the duty of care. Finally, the claimant must suffer damage as a result5. Donoghue v Stevenson (1932) has been attributed to be the origin of negligence, a part of the tort law. In that case Mrs. Donoghue sued the manufacturer of a ginger beer she had consumed and became ill.6 The House of Lords found the manufacturer to have breached the duty of care which they owed to the consumer of their products. His failure to achieve the obligatory standard of care must also be shown and finally that that failure caused damage7. A good example is the Shaddock v Parramatta City Council (1981)8 case in which the council advised Shaddock on a piece of land he wished to buy for redevelopment but left out important details.9 Most of the losses that result from tort are economic.10. As Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 espouses, a remedy for economic loss could be provided if the loss incurred was as a result of things the defendant said or advice that they gave11. The House of Lords in Hedley Byrne case put in place requirements to be satisfied by the claimant. First, that there existed a special relationship between the claimant and the defendant. Secondly, the defendant assumed the responsibility to care. Thirdly, the claimant relied on that advice to make decisions. Fourthly, it was reasonable for the claimant to have relied on the advice. Finally, that the economic loss suffered by the claimant was as a result of the advice given. The Analysis To determine whether Charlie and/or his brother Harley can take action against Max, there should be enough proof that Max owed them a duty of care and whether he breached it. Like in Shaddock v Parramatta City Council (1981), the information given is being relied on to make business decisions12. Max in regard to giving out of advice has set himself a centre in giving the advice since he is in the restaurant industry and in this case could be viewed as an expert given that Charlie knew nothing about the industry. Secondly, it can be shown that it is normal for someone like Charlie to seek for advice in his situation because. Since Max was already in the business, he had the necessary capacity to offer advise bearing in mind their close relationship. The second requirement that Harley has to satisfy is that the defendant assumed the responsibility to care. Max being a friend and an expert per se in the restaurant industry owed Charlie the responsibility to care. However, it is not clear that max knew that Bruno was not going to bear profitable outcomes or not. His business was doing well and it he could be right to assume that another similar business in close proximity with his own could do better. One cannot fully proof misstatement negligence. Max may claim of being cautious when giving the advise since he said that Charlie was “almost” assured of making profit. This statement may be clear him of the accusation just like in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 46513 where the client defended himself of negligent misstatement by explaining that he had exercised caution when making his statement. The other requirement that Harley would have the burden of proofing is that the claimant relied on the advice given by the defendant to make the business decision. In Charle’s case, it is apparent that he decided to buy Bruno based on the advice given by Max. Fourthly, Charlie has to prove that it was reasonable to rely on the advice given by Max to buy Bruno. Max, being a friend and working in the same business as the one Charlie intended to venture into could be a good reason to act on the advice given. However, a reasonable person is expected to seek more advice from experts. Charlie should see Max as a business competitor given the close proximity of the location of the two restaurants. Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 case would apply more relevantly to determine whether Charlie and his bother can take any legal action against Max. They will have to bear the burden of proof to satisfy that there existed a special relationship between the claimant and the defendant. In this case it is clear that Max and Charlie were friends and that is why Charlie shared with max about his plan to purchase a restaurant. However, on that point Harley cannot proof that he had a relationship with Max since he is a third party. Although in the Donoghue v Stevenson (1932) AC 562 case Mrs. Donoghue, a third party, sued the manufacturer, Harley cannot sufficiently show that he made the decision to purchase the restaurant with his brother based on the advice Max gave. Finally, Charlie has to proof that the economic loss suffered was a result of the advice given by Max. Lord Pearce in Hedley Byrne (1964) AC argued that in a situation where both parties understand the seriousness of the issue in discussion, a duty of care can be considered to have been placed regardless of whether decisions are made based on non-formal discussion. In this case, Charlie and Harley cannot proof that since the business outcomes dwindled after they took over the business. There could be other reasons like of expertise in the restaurant business or even other business principles that could have resulted in the lack of profitability. Conclusion Should Charlie decide to take legal action against Max, he cannot fully satisfy the requirements set out by the law and therefore Max would not take liability of misstatement negligence. Harley cannot proof that Max owed him the duty of care as he is a third party. The case between Charley and Harley against Max is not therefore actionable. References Beever, A. (2009). Rediscovering the Law of Negligence. Oxford: Hart Publishing. Best, A. & Barnes, D. (2003). Basic Tort Law: Cases, Statutes and Problems. New York. Aspen Calhan, A. (2003): A Revisionist History of Tort Law. Durham. N. C.: Carolina Academic Press Donoghue v. Stevenson [1932] AC 532 Elliott, Catherine; Quinn, Frances (2007). Tort Law. Longman. Herrmann and Another v Withers LLP [2012] EWHC 1492 (Ch) Latimer P. (2011). Australian Business Law. Sydney: CCH. Shaddock & Associates PTY. LTD. v. Parramatta City Council (No. 1) [1981] HCA 59; (1981) 150 CLR 225 Simon, D, Johnston, A & Markesinis, B (2003). Markesinis and Deakin's Tort Law. Oxford University Press. Trindade, F. Cane, P & Lunney, M. (2007) .The Law of Torts in Australia. New York: Oxford University Press. Read More