Business Law: Brambles Australia Ltd v British American Tobacco Australia Service Ltd - Assignment Example

Running header: Business Law Student’s name: Instructor’s name: Subject code: Date of submission 1 Facts The company develops a new drug that is expected to significantly reduce rheumatism disease. Because of this, the company expects to increasingly increase its profits. Though many tests have been conducted on the drug, tests on certain side effects of the drug have not been carried out. The board thus pays a number of scientists $500,000 each to conduct the tests on condition that the results are only disclosed to the board but kept confidential. The results indicate presence of side effects. The directors however agree to go on with the drug’s production after keeping information confidential. Issue: The issue is whether there are any ethical issues regarding the directors’ decision to go on with the drug’s production despite being aware of its side effects. Rule Section 21 of ACL refers to unconscionable conduct as actions that are much unreasonable as to defy good conscience and prohibits such behavior in business transactions1. To determine whether the company is involved in such behavior, the court considers a number of factors including failure by the company to disclose information to customers unreasonably and how this affects customers’ interests. In Cole v ACC, Cole has been forced to compensate its suppliers for dealing them in unconscionable manner by failing to treat them with transparency to their detriment2. In Vital Finance Corporation Pty Ltd v Taylor, the court held that the corporation acted unconscionably by setting the repayment rates so high knowing that the customer would not be able to afford paying such high rates3. Business ethical principles place the duty to act with care and diligence and honestly in the interests of the company on the directors. The directors ought not to act in the best interest of the company while failing to consider the interest of others. In the case of Brambles Australia Ltd v British American Tobacco Australia Service Ltd, the company was found guilty for its document retention policy where the company tended to destroy documents that confirmed that nicotine was a harmful substance and this was deemed unethical by any standards4. Analysis The fact that the directors decided to keep information on the harmful effects of the drug confidential and went on with the production is engaging in unconscionable conduct. By producing and releasing a product they knew and believed to be harmful to the customer’s health, the directors failed to act with care and diligence which is unethical. The directors have also failed on their duty to act in good faith and have been dishonest since the drug will be marketed as harmless to the customer’s health. The directors also acted selfishly and hence unethically since although they presented themselves as acting in the best interests of the company, they failed to consider the interest of other group’s such as customers. The directors should have acted honestly by disclosing all relevant information regarding the drug to the customers so that they can make informed purchase decisions. Better still; the directors ought to have observed with care and diligence by delaying the production of the drug and come up with ways of eliminating the side effects. Conclusion Based on relevant cases and principles as well as the facts of the case, it is clear that the shareholders were engaged in unconscionable act by withholding important information to the customer to their detriment and producing a harmful drug. Thus, they acted unethically by not acting with care and diligence and failing to act honestly. Question 2 Facts Bill promises to pay the year’s university fees for his 19 years old son Quentin on condition that the son works in his restaurant every Sunday of his university course. Quentin, a talented tennis player has been offered a tennis coach training scholarship to be held every second Sunday. However, Quentin chooses to work every Sunday in his father’s restaurant in reliance to his promise and foregoes the training. After completing first year, Quentin wants to take a year off study and travel overseas which upsets his father who refuses to pay the fees. Issue The issue is where the promise by Bill to Quentin and Quentin’s performance had the intention to create a binding contract or not and the effect this would have had if Quentin was 17 years old. Rule i) 19 year old The law of contract is clear that parties to a contract must have an intention to create legal relations as it signifies that parties fully intend to contract and be bound to the contractual obligations. It is assumed that in a purely domestic relationship, there is no intention to be legally bound. However, in domestic relationships where the agreement entails one party undergoing expense or career sacrifice, substantial detriment or inconvenience, courts have held that parties had the intention to create legal relations as was held in Todd v Nichol5 where a younger relative had given up her life and career in Scotland and came to look after an elderly relative in Adelaide. In addition, where parties have clearly spelt out their rights and obligations to each other, they will be deemed to have had intention to create legal relations6. ii) 17 year old One of the essential elements of a contract is the capacity to contract. Where contracts would benefit a minor, they would be binding on a minor. Such contracts of necessity include contracts on education. Analysis The relationship between Bill and Quentin is obviously domestic. However, the promise by Bill entails Quentin having to forego his tennis coach training in reliance to the promise that Bill will pay his university fees for the first year though the training is important to him as a professional tennis player. Furthermore, the parties have clearly spelt out their rights and obligations to each other. If Quentin was 17 years, he would not be bound by the promise since his father would be expected to meet the cost of his education regardless of whether or not he works in the restaurant. Conclusion Based on the above analysis of facts, relevant laws and principles, it is clear that the parties had intention to enter into legal relations. Also, not going overseas was not among what was agreed. Since Quentin has already performed his part (Consideration), Bill is legally bound to fulfill his promise. Case 3 Facts Samantha having advertised her Holden Monaro car for sale for $15,000, Terrance comes to see it and takes it for a test drive. He orally states that his friend has trouble with a similar car as it has rusted suspension asking whether this one has its suspension OK. After Samantha telling her it is OK, he signs a sales contract and pays $ 15,000. However, the contract is silent on the suspension. A week later, he discovers that the suspension is badly lasted Issue The issue is whether Terrace can rely on the oral statement by Samantha to sue her since the suspension is rusted despite her having stated that it is OK. Rule An important aspect of a contract is the offer where the person making the offer indicates his willingness to contract. However, an offer excludes mere puff which is referred to as an exaggerated statement by the offeror which act as an advertisement in inducing the other party to accept the offer. This was held in Mitchell v Valherie where the court held that nothing to spend meant that there were no serious faults7. Regarding acceptance, it should be noted that acceptance through righting would be deemed superior to the oral one as was held in Leitch v Natwest Bank Australia Ltd8. Analysis Samantha indicates to Terrace that the suspension is Ok. However, most likely this is mere puffery by Samantha and is expected to induce Terrace into accepting the offer. Bearing in mind that Terrace has even gone for test driving with the car, he had the chance of examining the suspension’s condition. Furthermore, though he deems it a necessary condition, he does not press for its inclusion in the final written contract. What has been signed is the offer that has been accepted and hence binding on both the parties. Conclusion Based on the above fact, it is clear that the statement by Samantha is mere puffery and Terrace had the chance to fully examine the cars condition. Furthermore, the condition about the suspension being ok has not been included in the final contract. As such, Terrace does not stand a chance of being compensated by Samantha. As such, I would advise him to repair the car instead of seeking damages as such a move is not likely to succeed. Read More