LAW 2000 Business Law

1. Explain what the law is and the role that the law plays in wider society and in the business environment

 

2. Identify the role of contract law in business activity and explain the elements needed to create and enforce a valid contract

 

3. Define an agency relationship and explain the legal implications of such a relationship

 

4. Identify and define the different types of property including intellectual property and analyse the importance to business of such property and how the law protects such property

1. Jennifer aged 25 years is the granddaughter of Betty who lives by herself in Mount Gambier. Jennifer has just completed a degree in Psychology at the University of South Australia. Betty promises Jennifer that if she leaves Adelaide and moves to Mount Gambier to live with her she will transfer her house into Jennifer’s name. Jennifer leaves her mum and dad, boyfriend and a job she held at the Service to Youth Council. She arrives in Mount Gambier and cannot find any work as a psychologist but she obtains work part time as a waitress in a café. Betty refuses to honour her promise regarding transferring the house to Jennifer who wants to sue her grandmother for breach of contract. Advise Jennifer.

 

2. On 1 February 2015 Sanche writes to Richard offering to sell him his 1974 Holden Monaro for $60,000, ‘the offer will remain open until 5pm on 3 February 2015’. Richard receives the letter at 10 am on 3 February and tries immediately to phone Sanche. He does not answer and Richard leaves a message on his Message Bank saying he was interested in buying the Monaro but was only willing to pay $55,000. At 10.30 am the same morning, Richard changes his mind about how much he is willing to pay for the car. He sends an email to Sanche saying, ‘Disregard, my earlier phone message. I accept your offer to sell your 1974 Monaro car for $60,000’. Sanche does not check his email at all on the 3 February but does check his phone Message Bank. He listens to the voice message from Richard and immediately sells the petrol to Bradley who he has also been negotiating with. On 4 February at 9 am he opens his emails and reads Richard’s message.

3. Kevin is an antique dealer. He appoints Ravi to sell furniture on his behalf. One of the items Kevin wants sold is a twelve seater oak dining table. He instructs Ravi that he will not accept less than $7,000 for the table. Ravi places an advertisement in a local newspaper advertising the table for $7,000. Theresa responds to the advertisement. She has recently renovated a period home and the table would be perfect for the formal dining room.

4. Trevor composes music on his computer using a software program called ‘Sibelius’. He sometimes plays music he has composed to his friends before they are released for sale. After Trevor has composed music he sends it to a distributor who sells it in Europe. Trevor plays an unreleased composition to a group of friends including Declan. After hearing this composition, Declan goes home and composes a piece of music that sounds virtually identical to Trevor’s, particularly the chorus. Declan then sends it to a distributor who releases a CD in Europe. It is a huge hit and Declan makes a large amount of money from CD sales.

5. Clare runs a very successful hairdressing business on Unley Road in Adelaide. It has taken her five years to build up the business. She decides to sell the business and enters into a contract of sale with Maddie. There is a clause in the contract that states that: ‘Clare will not for a period of ten years from the date of this agreement set up any business in Adelaide’.

Answer 1

Legal Issue

The issue is to ascertain whether an enforceable contract exists between Jennifer and her grandmother Betty and whether Jennifer can sue Batty for not fulfilling the promise of transferring the house to Jennifer.

Applicable Law

Presence of valid offer, acceptance, and consideration are the key aspects that must present in any contract. Further, the capacity of the parties and intention of the parties to enact a contract is also imperative. The intention of the contractual parties will be a pivotal essential when the parties are connected in a domestic/social relationship. This is because in the lack or absence of intention on the part of the parties, no contractual liabilities would arise. In this regards, the breach of the contract would not provide any rights to the party to claim for the damages. Hence, In domestic/social contracts, it is essential that parties must conduct in a manner which highlights the intention to enter into legal relationship or else it would be assumed that the intention to enter into legal relationship is not present. The judgement of Jones v Padavatton case is the testimony of this aspect.

Application

It can be seen that Jennifer and Betty are connected parties and have enacted a contract. As per the contract, Betty has made a promise to Jennifer that she will provide the ownership of her house if Jennifer leaves Adelaide and moves to Mount Gambier. Jennifer has left the place, her family and job and started living in Mount Gambier with her grandmother Betty. It can be said that there is no evidence present in the case that reflects that parties have intention to enact a legal relationship. Hence, no enforceable contract has been formed between the parties due to the lack of intention to create legal relationship.  

Conclusion

Jennifer and Betty do not have the intention to create legal relationship and therefore, no enforceable contract has been formed between the parties. Hence, Jennifer cannot sue Betty for the act of non-transferring the ownership of house.

Question 2

Legal Issue

The central issue is to comment whether the parties Sanche and Richard are bound in an enforceable contract or not.

Applicable Law

A conditional acceptance is referred to as counter-offer. When the offeree has sent a counteroffer against the original offer to the offeror, then the original offer would no longer be available for the acceptance for offeree. The verdict of Entores Ltd v Miles Far East Corporation case is the evidence of the above fact. It is noteworthy that when the offeree has used electronic mode for communicating (fax, mail) the acceptance, then acceptance would be enforceable only when the respective mail or fax would have received by the offeror in the specified time period that the offer is still valid.

Application

Offeror Sanche has made an offer to offeree Richard in regards to sell Holden Monaro car. He has also stated that the consideration amount is $60,000 and this offer will be valid for acceptance until 5 pm on February 3, 2015. The very same day, Richard has got the offer and has sent a counter offer through message by saying that he can purchase the Holden Monaro car for the consideration of $55,000.  It is apparent that due to counter offer, the original offer gets revoked and hence, will not be available for acceptance for Richard. Hence, Richard cannot enact a contract with Sanche on the account of original offer.

Conclusion

There is no contract has been enacted between Richard and Sanche because Richard has made a counter offer against the original offer and acceptance from Richard would not be termed as valid acceptance because the original offer gets terminated due to original offer.

Answer 3

Legal Issue

The issue is to determine whether the contract enacted by agent with the third party would be binding on principal or not.

Applicable Law

In law of agency, the authority would be given to a person called agent on the part of principal to enact contract with external parties. Any contract which is enacted by the agent with a  third party would be held as binding and enforceable on the principal irrespective of the fact that the agent was authorised to enact such an agreement or not. This is in line with the principle of vicarious liability where there is obligation on the superior party (i.e. employer) for compensating any negligence or fraudulent act conducted by inferior party (i.e. employee) .

An exception to the above principle arises under the scenario when there exists reasonable suspicion in the mind of the third party or there is information regarding agent not being authorised to enact the contract. It is noteworthy that the damages suffered by the principal on account of such contracts where the agent lacks the authority, can be recovered from the agent owing to breach of fiduciary duty.

Application

Based on the given facts, the principal is Kevin while Ravi acts as the agent responsible for sale of furniture. As per instruction from Kevin, the dining table must not be sold for an amount lower than $ 7,000. Ravi floats an advertisement for the same and attracts a potential buyer Theresa willing to pay $ 6,500 for the table. This offer is accepted by agent (Ravi). During the delivery of the table, Theresa notices a scratch on the table which earlier went unnoticed and hence she demand her money back which Ravi refuses. In accordance with the agency law and vicarious liability principle the amount of $ 6,500, would be returned by Kevin to Theresa since she entered the contract is good faith without knowing that the true owner of the table was Kevin. For recovering his loss, Kevin can sue Ravi.

Conclusion

It is apparent based on the above discussion that the refund would be given to Theresa. Also, Kevin can sue Ravi for violation of fiduciary duties.

Answer 4

Property law (Intellectual Property)

Legal Issue

The central issue is to ascertain if a copyright infringement has occurred owing to Declan’s actions.

Applicable law

In relation to music and other related creations, there is granting of copyright so that the creator can enjoy the benefits by protecting the intellectual property rights. The definition of copyright refers to “exclusive and assignable legal right” for the original creator so as the creator may use the same in the manner that he/she deems fit. Copyright Act 1968 contains the legal provisions through which the copyright tends to be protected. As per this Act, copyright infringement is not permissible and only authorised users are allowed the usage of the same. Further, usage for commercial purpose when the requisite consent is lacking results in damages to be provided to the creator for financial losses occurred owing to royalty loss.

Application

A per the relevant details, it is clear that Trevor has composed music with the use of a given software. However, before selling this music, he share this with his friends one of whom is Declan. After listening to Trevor’s music, Declan goes home and composes a song that has a chord very similar to that of Trevor. This is evidence of copying on part of Declan as he made the composition only after listening to Trevor’s composition. Declan also sells this to a company and hence earns money from the same. Since the original creator is Trevor, hence the copyright should also be possessed by him. Hence, compensation would be provided by Declan for sales that Trevor lost in Europe due to copyright infringement. Also, Declan cannot continue selling his pirated music.

Conclusion

From the above, it is evident that copyright infringement has happened owing to Declan and hence compensation would be payable to Trevor. Also, Declan would have to stop his music selling or an injunction order would be given.

Answer 5

Property law (Real Property)

Legal Issue

The central issue is to highlight whether the restraint of trade clause would be applicable and hence legally enforceable or not.

Applicable law

As per Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd case, the validity of restraint of trade clause depends on whether any of the underlying parties can highlight that it is reasonable. For this clause to be reasonable, it must safeguard the legitimate business interest of the buyer who purchased the business. Additionally, the above factor is not considered in isolation rather in conjunction with supporting factors like nature of constraints, business type and relative bargaining power at the time of the enactment of the clause.

Application

Based on the given scenario, it is evident that Maddie is the buyer for the hairdressing business and has enacted the restraint of trade clause so as ensure that Clare (seller) cannot conduct business in Adelaide for the next 10 years. The clause enacted is clearly unreasonable as it bars Clare from doing any businesses for 10 years and does not limit only to hairdressing business. Further, 10 years seems an unreasonably long time considering the type of business sold. Besides, Maddie in the given case is posing objections to opening a café which is unreasonable considering that it is unrelated with the hairdressing business.

Conclusion

Hence, no breach of the restraint clause has occurred in this case owing to the unreasonableness of the same.

Bibliography

Davenport, Shayne & Parker, David, Business and Law in Australia, (LexisNexis Publications, 2^nd ed., 2014)

Gibson, Andy & Fraser, Douglas, Business Law, (Pearson Publications, 8^th ed., 2014)

Latimer, Paul, Australian business law, (CCH Australia Ltd, 24^th ed., 2005)

Pendleton, Wayne & Vickery, Roger, Australian business law:  principles and applications, (Pearson Publications, 5^th ed., 2005)

Pathinayake, Athule, Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014)

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