Negligence and Negligent Misstatement - Case Study Example

PROBLEM SOLVING: BUSINESS AND FINANCE LAW Name Institution Problem Solving: Business and Finance Law Question ONE: Negligence and Negligent Misstatement Issue a) Is Jo-Anne liable in negligence for Kate’s loss? b) Is Herb Accounting Ltd liable for Kate’s loss? Law This case or issue can be discussed and solution provided under the use of tort laws of negligence and negligent misstatement. A tort can be described as a wrongful act, also referred to as omission, what results in a civil action in a court of law against the party that has acted.12 To succeed in establishing a claim for negligence that has caused a damage, there is need for the plaintiff to prove that the damage is actually a pure economic loss, as in it is in this case. Upon being able to prove the purity of the economic loss, the plaintiff must then prove the claim based on the three elements of tort of negligent misstatement; there should be an establishment that the defendant was subject to duty of care to the plaintiff, which implies that the defendant breached his or her duty hence resulting in material loss by the plaintiff.3 Civil Liability Act 2002 (NSW) s 5B(1) states that breach of duty by a person upon whom the plaintiff relied occurs if the risk was foreseeable, significant, and a reasonable person would have taken precautions. Further, there is need to establish the standard of care whilst a breach of duty is a concern in the court of law. In this perspective, Civil Liability Act 2002 (NSW) requires that the plaintiff should prove that the defendant is or was a professional then, acting in his or her professional capacity. However, the defendant is not liable if his or her actions were in a manner that is vastly accepted in Australia by professionals of his or her kind.4 Another element of tort that is looked at in the court of law is the causation of the pure economic loss upon which the plaintiff is basing his or her claims. In this stage, the court determines if the causation passes the ‘but for’ test and its application and whether the defendant is actually liable for the causation of the loss.5 In Amaca & Ors v Ellis [2010] HCA 5 and Woolworths v Strong [2010] NSWCA 282 demonstrate established that a causation must comprise such elements as being factual and it that is appropriate for the scope for the defendant’s liability to extend to harm in concern as highlighted in Civil Liability Act 2002 (NSW) s 5D. Also, there is need to establish the auditor’s liability to the third parties in the event of occurrence of a pure economic loss, which the plaintiff is claiming to have caused his or her damages, as it is in this case scenario. In this aspect, if the defendant can prove that the actions by a the third party contributed to the causations of his or her damages of loss as outlined by Civil Liability Act 2002 (NSW) s 19, which argue that the defendant is entitled for a compensation if the third party’s actions gave wrong information that contributed to the causation of the economic loss.67 Therefore, in order to succeed in a claim of pure economic loss concerning negligence and tort negligent misstatement, there need for prove of duty of care, care standard, breach of duty, causation, and remoteness of the causation. Application In this case, Kate has suffered a loss due the decreased demand for the services or products offered her newly acquired resort. However, this aspect is not the point of liability concern. Claim of pure economic loss foreseeable in court comes at the point where she decided to sell the resort in fear of making further losses due to low demand. In this aspect, it is evident that Kate has incurred pure economic loss from the sale of the resort, which was valued for $1.5 million and previously bought for $4.3 million. Based on the fact that Jo-Anne was a professional and reasonable person who was acting at her professional capacity whilst advising Kate to buy the resort, but failing to mention that the perceived booming business was as a result of the Australian Championships held in that year, she can be argued to be liable under the Civil Liability Act 2002 (NSW). Form her advice, Kate agreed to buy the resort for the state amount, which is evidently higher than its actual value. In the same perspective, Herb Accounting Ltd, as a third party, contributed to Kate’s loss by providing false information that contributed to the causation of the loss. With their incorrect statements about the profits, Kate paid higher price than the actual value of the resort. Both Jo-Anne and Herb Accounting Ltd are professional, hence reasonable, but have misstated or neglected information that a person in their status would have doe otherwise.89 Conclusion Based on the negligence to provide with information that contributed to the perceived high profits, and being a professional, Jo-Anne is liable for Kate’s loss. Similarly, Herb Accounting Ltd misstated information about profits, which contributed to Kate paying high for the resort. Therefore, the company is also liable of Kate’s loss. Question TWO: Contracts Issue a) Is the mortgage contract between the bank and Stella enforceable? b) Is there a contract between Stella and Angelo for the supply of tomatoes? Law A contract is defined as a promise or set of promises that are legally binding.10 In this aspect, the parties involved agree on certain terms that they deem to support their interest form the contract. For a valid contract or agreement, elements that include: agreement, considerations of terms, intentions of the parties, capacity of terms, and formalities towards completion must be present.11 Australian law of contract enforces such promises or agreements in legal capacities. For the formation of a contract between parties, it must be an agreement between parties, but not a unilateral one.12 It is in this aspect that offer and acceptance of the offer occurs between the involved parties. One party must make the offer with its conditions and expectations, upon which considerations and acceptance by the other party would be based. By making an offer, the offeror agrees to get into an agreement with the offeree upon the acceptance of terms in place. By accepting the offer and its terms, the offeree; on the other hand; demonstrates his or her intentions of forming an agreement with the offeror based on the agreed terms and considerations. However, not all contracts are enforceable in court; there must be certain factors that have to be considered for an enforceable contract. In this aspect, an offer of a proposed contract may be in writing, verbally or by conduct; however, the offer has to be communicated to the offeree.13 According to the Australian laws of contract, acceptance must be made by the offeree, which must also be a response an offer. It can either be communicated by words in verbal or written form or by an act. Carlill v Carbolic Smoke Ball Co and Barry v Davies demonstrate how offeree can accept an offer simply by signing a document with terms and conditions of the offer.1415 Another element or principle of legal contracts is the presence of a genuine consent. There are various factors that impact the idea and practice of genuine consent in an agreement. Undue influence existing between the parties involved in the contract, which implies inequality in power between the offeror and offeree in the agreement. This would result in one of the parties entering into the contract out of domination of the other party.16 Misrepresentation is another factor that would impact the enforceability of a contract in a legal basis. In this aspect, one of the parties provides false information to the other party with an intention of gaining over the other. Application In this case, there is a tender for supplying tomatoes that has resulted in an agreement between Stella and Angelo. As demonstrated in Harvela Investments Pty Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207, a tender can be an enforceable contract if an invitation to the tender clearly states it would be accepted within its highest or lowest limits.17 In this case, Angelo takes advantage that his mother has mild mental problem and would agree to his manipulations, hence dominates the terms of the agreement. Based on undue influence between the parties, Stella has agreed to the offer due to Angelo’s dominance. Additionally, Angelo has misrepresented himself, promising that he would make the arrangement to be a legal contract, which he did not. Concerning the mortgage issue, the bank made an offer to Angelo with terms of having a security for in predicament where the business fails to pay its outstanding loan. It can be argued that Angelo accepted the offer by action through a signed mortgage binder. Even though it would be an enforceable contract between the parties, Angelo did not properly seek a genuine consent from Stella who is the owner of the mortgage. Due to her unfortunate situation of inability to read, Angelo made her sign the mortgage agreement, thinking that it is a about the tomatoes contract. Conclusion The contract between Stella and Angelo about the supply of tomatoes is enforceable since it is a tender accepted at its lowers rates, not to mention that Stella was ready to sigh in agreement to it of Angelo did not use the mortgage signing in its place. However, the contract between the bank and Stella is not a legal contract since her genuine connect was not obtained. Reference List Christian, Writing, ‘Tort law, policy and the High Court of Australia’ (2007) 31(2) Melbourne University Law Review, 569 David, Miller, Gavin Creighton & Debbie Kaminstkas, A user’s guide to the Civil Liability Act 2002 (NSW). Retrieved from: https://www.cbp.com.au/insights/2013/january/a-user-s-guide-to-the-civil-liability-act-2002-(ns G. H. L. Fridman, ‘Negligent misrepresentation’ (1976) 22(1) McGill Law Journal, Retrieved from: http://lawjournal.mcgill.ca/userfiles/other/3655574-01.pdf J W Carter, Contract Law in Australia (LexisNexis Butterworths, 6th ed, 2013) Lindy Willmott, Sharon Christensen, Des Butler and Bill Dixon, Contract Law (Oxford University Press, 4th ed, 2013)  Lisa, Spagnolo, ‘Law wars: ‘Australian contract law reform vs. CISG vs. CESL’ (2013) 58 Villanova Law Review 623. Retrieved from: https://www.cisg.law.pace.edu/cisg/biblio/spagnolo2.pdf Pauline Sadler, ‘Liability for negligent misrepresentation in the finance industry’ (2009) 11 Legal Issues in Business 17-25 Vyalan, Nguyen & Pelma Rejapakse, ‘Am analysis of the auditor’s liability to third parties in Australia’ (2008) 37(1) Common Law World Review 9-44 Laws Civil Liability Act 2002 (NSW) Cases Hedley Byrne & Co v Heller & Partners [1964] AC 465 Amaca & Ors v Ellis [2010] HCA 5 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Barry v Davies [2001] 1 All ER 944 (R&G (C)[4.4]) Harvela Investments Pty Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 Read More