Profitability of a Business Enterprise - Case Study Example

Student’s Name Instructor’s Name Course Date Issue Providing false information regarding the profitability of a business enterprise suffices to be one of the most common business cases in Australia. Following the advertisement placed by Mr. Spoke concerning the sale of his bicycle store and Bob's desire to work for himself, Bob found it necessary to purchase the store. There are some reasons that motivated Bob to buy the store. Firstly, the shop dealt in bicycles that sufficed to be his primary area of interest. Therefore, he regarded the opportunity as the best chance to advance his career and love for bicycles. Consequently, Bob initiated the purchase negotiations with Mr. Spoke with respect to the past and future profitability of the store. The fact that the historical figures presented by Mr. Spoke regarding the performance of the shop were appealing lured Mr. Bob to purchase it. It did not dawn on him that the financial accounts submitted by the seller represented a 55% inflation of the actual financial records. Rule According to section 18 of the ACL, it is unlawful for a business enterprise or individual to provide misleading or deceptive information to a consumer. It is also apparent that the section extends beyond the supply of goods and services to the economy-wide trading activities. Therefore, it is appropriate to state that selling the bicycle store is a trade activity that involves the buyer (Mr. Bob) and the seller (Mr. Spoke) with the shop being the commodity in question. Therefore, it is unlawful for the seller to provide deceptive information regarding the profitability of the store with the intention of convincing the buyer to purchase it. Therefore, any contravention of the law attracts injunctions, compensatory orders and damages as stipulated by Chapter 5 of the ACL. It is also evident that Mr. Scope exhibited unconscionable conduct in business and trade by providing misleading information to Bob to lure him to make the purchase of the store. The section also extends the prohibition of unconscionable conduct to business and consumer transactions (Sykes & Andrew 2006, p. 53). Section 37 of the ACL prohibits misleading or false representations regarding the risks, profitability and other aspects that concern business activities (ACL 2010, p. 12). With a reference to the section, it is appropriate to state that Mr. Spoke violated the statutes of the section by providing misleading information regarding the profitability of his bicycle store as a business activity. Analysis In the Supreme Court of Victoria, it has been common practice for judges to decide whether an individual or corporation has engaged in the provision of misleading information in commerce and trade or not. In The Great Australian Bite Pty Ltd v Menmel Pty Ltd (1996), the defendant did not disclose all the information pertaining the business. Deceptive claims of conduct suffice to be the mainstream law cases associated with commerce in the Federal Courts. The rulings for such cases encompass the existing statutory provisions regarding the misleading behaviour and the application, meaning and operation of the conduct (Clarke 2014, p. 1). Such litigious action emanates from different sources. For instance, plaintiffs may utilise the misleading activities as a "gap filler" in some situations that do not form part of the confines of the statutory law. Therefore, the claims guarantee some form of relief to the plaintiffs. Moreover, the claims against deceptive conduct have undergone a successful litigation exercise regarding a broad scope of trade and commerce activities. Moreover, the issue has witnessed increasing class actions that exhibit cases involving deceptive conduct in trade and commerce. Moreover, it has been in the public interest for the regulatory authorities such as the ASIC and ACCC to pursue the enforcement of the proceedings against the conduct. It is also apparent that there has been an unclear meaning of deceptive or misleading conduct. For instance, in the Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd, Gibbs CJ referred to the terms deceptive or misleading conduct as being tautologous. Consequently, the court had to discern principles that would yield a practical application of the terms in the court of law. According to Miller (2010), misleading or deceptive conduct occurs when an individual leads the other person to make an error. The definition does not provide distinct categories for misleading conduct. However, some contexts reveal issues whereas others do not. A good example suffices to be the anticipated case between Mr. Bob and Mr. Spoke regarding the decision of the latter individual to provide misleading information to the former so as to persuade Bob to purchase the bicycle store. In the event of substantial evidence regarding the cases against misleading or deceptive information provided by traders and sellers, contravention declarations and injunction preventions suffice to be the primary objectives of the judges. Usually, the jury tests the defendant's information about the imaginary individuals regarding the meaning conveyed by the advertising message to the buyer. A guarantee of relief is imminent in the event that the hypothetical individuals will affirm that the information is a valid proof of the deceptive or misleading information that could lead into error. Moreover, the possibility of deception on the part of the plaintiff should be real rather than being remote as evidenced by the Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd in 1984. However, in situations whereby the conduct in question pertains private or public statements, there is no guarantee of relief in the event that the statement intended to deter the plaintiff from entering the transaction. In the above case, it turns out that Mr. Spoke provided misleading information regarding the profitability of is bicycle store thus luring Mr. Bob into entering the transaction. Subsequently, it is imperative to determine the litigations that concern the sale of business operations. There are two major forms of the allegations against the litigations. The first aspect concerns the evidence of the provision of deceptive information regarding the profitability of the business so as to convince an individual or corporation to purchase the business activity. The second case involves a violation of the terms of the contract. Section 18 of the ACL prohibits a person from engaging in deceptive or misleading conduct that has a likelihood of deceiving or misleading in commerce and trade. It is important to note that the section contains the provisions of Section 52 of the former Trade Practices Act (TPA) (Bearup 2014). Therefore, it is common practice for purchasers of businesses to file cases against their sellers of the enterprises in the event that they cannot realise the stated profits as provided by the sellers. Their arguments encompass complaining that the sellers misled them into making the purchases. The above scenario suffices to be one of the cases. It is proper for Mr. Bob to allege that Mr. Spoke misled him regarding the purchase of the bicycle store. The arguments of the complainant in the case reveal that he could have made an alternative acquisition in the event of availability of the truthful information regarding the business. It suffices to state that the above case represents a breach of Section 18 of the Australia Consumer Law. However, the determination of whether the court ruling will favour the plaintiff depends on the context of the misleading words stated in the misleading advertisement. Prior to taking any legal action, it is proper for the complainant to consider the available oral evidence concerning the misleading information. In our case, the existence of recent tax documents and cash registers may act as valid documents refuting the profitability of the store as claimed by the seller. McLelland CJ affirms that using oral statements provided by an individual as proof regarding the provision of misleading statements proves to be difficult on the part of the court in regard to showing that the information presented by the plaintiff is true or false. In Watson v Foxman (1995), it is evident that allegations concerning the provision of misleading information require the plaintiff to state the alleged conduct as the first step. The second step entails an analysis of the circumstances that rendered the conduct misleading. In the above case, it is imperative that Mr. Bob should prove with the highest level of precision the oral communication that prevailed between the parties before the settling of the contract. The accuracy of the words spoken by Mr. Spoke should convince the court that indeed the statements were misleading under the stated circumstances. It is evident that the court will determine the subtle nuances regarding the use of the words of the misleading statement. The presence or absence of some qualifying conditions, phrases or words will also form the other area of interest for the court prior to making the ruling. Moreover, there exists proven the fallibility of human memory regarding the statements of a past conversation. In fact, the level of frailty increases with the increase in time between the conversation and the commencement of the case against the misleading statement. The conscious considerations of what the seller could utter in the conversation and the seller’s personal interests also form part of the critical aspects of the analysis of the case prior to making the ruling. Therefore, the Federal Court requires the direct presentation of oral communications rather than the use of the affidavit. It is mandatory for the plaintiff to provide all the evidentiary documents presented by the defendant at the time of the conversation. The court ascertains the reading of the documents to their entirety with respect to the issue in question as seen in Milner v Delita Pty Ltd (1985). It is also appropriate for the plaintiff to acknowledge the fact the statements made towards the end of the contract overrule those made at the beginning of the contract negotiations. In Vitek v Estate Homes Pty Ltd (2010), the existence of the following conditions affirms that the contract statements were not misleading. Lam v Austintel Investments Australia Pty Ltd (1989) also claim the necessity of disclosing pertinent business information. The existence of extensive negotiations between the parties to the contract prior to the settling of the contract imply that the statements were not misleading. The argument arises from the fact that the lengthy negotiations provided a room for affirming the validity of the seller's statements. Secondly, the representation of the parties by solicitors disqualifies the claims since solicitors understand the proceedings of the business transactions. Finally, the existence of special conditions governing the terms of the contract also invalidate the case against the provision of misleading or deceptive information. Conclusion In light of the provisions of Section 18 of the ACL, it suffices to state that Mr. Spoke violated the law by providing misleading or deceptive information to Mr. Bob to lure him to make the purchase of the store. Therefore, it is proper for the complainant to take a legal action against the Spoke since the contract did not involve lengthy prior discussions, there were no solicitors involved and there were no special conditions governing the contract. However, it is imperative that he should provide substantial evidentiary documents to affirm the validity of his claims. Works Cited Bearup, Nicollete. “Misleading or Deceptive Conduct in Sale of Business transactions”. (2014). Clarke, Q C & Graeme, S. “Misleading or Deceptive Conduct Cases in the Supreme Court of Victoria”. (2014). Commonwealth of Australia. “The Australian Consumer Law: A Guide to Provisions”. (2010). Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Lam v Austintel Investments Australia Pty Ltd, (1989) Miller. 241 CLR 357 at 368 [15] per French CJ and Kiefel J (2010). Milner v Delita Pty Ltd, 61 ALR 557 at 574 (1985). Sykes, Andrew N. "Unfair Results and Unfair Doctrines: Structuring the Application of the Equitable Doctrines of Undue Influence and Unconscionable Dealing." eLaw J. 13 (2006): 46. The Great Australian Bite Pty Ltd v Menmel Pty Ltd, ATPR 41-506 (1996). Vitek v Estate Homes Pty Ltd, NSWSC 237 (2010). Read More