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Thursday, 1 June 2017

Introduction to business law

Introduction to Law
  The Importance of Law in Business
  ‘No-one can venture upon business activities, or undertake the tasks of professional advising for those who do, without at least a general grounding in the law.’ Hon Justice Michael Kirby (2003)
  ‘The law is not simply peripheral to commerce. The transactions and relationships that constitute commerce are embedded in the law. The entire fabric of commerce is woven from a complex legal regime.’ Terry and Guigni (2003)

A. What is Law?
  1. Some definitions:
  ‘Law is a body of rules by which both the affairs of a community are organised and the general order and well-being of the community are maintained’ Chisholm and Nettheim (1997)
  Law is ‘a complex system of social control essential to the orderly conduct of human affairs’...’a body of principles, standards and rules which the courts apply in the resolution of disputes brought before them.’ Turner (2001)
  ‘The principles and regulations emanating from a government and applicable to a people, whether in the form of legislation or of custom and policies recognised and enforced by judicial decision.’ Macquarie Dictionary
  ‘The law is the true embodiment
                Of everything that’s excellent
                It has no kind of fault or flaw
                And I, my lords, embody the law.’
Iolanthe, Sir William Gilbert
‘A set of rules, developed over a long period of time regulating people’s interactions with each other and that sets standards of conduct between individuals and other individuals, and individuals and the government and that are enforceable through sanction.’ Gibson and Fraser (2013),

2. The nature and role of law
  Legal system – it is the totality of laws that regulate a state (a legally organised community).

3. The purpose of law
  The need for rules in everything we do, e.g. Sport
  Most sports would not work without rules
  Also there is the need for somebody to interpret and apply those rules which apply to sports
  Sometimes the rules are not enforced rigorously, e.g. for example shirt pulling and diving in soccer (and everybody knows this).
  Or a rule has not been developed yet to deal with a situation, e.g. video evidence to determine whether a ball has crossed the goal line
  Sometimes rules come about because of custom and practice, e.g. passing the ball back to the opposition when the ball is kicked out because of an injury
   No ‘attacking’ other riders on the last day of the Tour De France or in circumstances where a pile up occurs during the race
  Sometimes players/clubs act outside of the rules and must be punished.
  Even within football there is a sense of the rule of law.
  However, you cannot always get justice with rules (rules and law are just tools that can be used by society):
  Justice is wider than the law
  It is unrealistic to expect the law to provide justice at all times and on all occasions

4. The ‘rule of law’
What does this mean?
  1. Equality before the law, i.e. every body must answer to the law no matter their station in life.
  2. Nobody can be punished unless they are charged with breach of a specific law that already exists, i.e. nobody is subject to the whim of, for example, a dictator. The law, not rulers, is supreme.
  3. Fundamental freedoms are protected by the courts, e.g. freedom of speech, freedom of assembly, the right to be brought before the court.
  The law is culture:
  ‘...law is a concentrated expression of the history, culture, social values and the general consciousness and perceptions of a given people. No two national legal systems are exactly alike. Law is a form of cultural expression and is not readily transplantable from one culture to another without going through some process of indigenization.’ Glendon, Gordon and Osakwe.

5. Classification of Law
  Public Law v Private Law
  Public law protects state interests, e.g. criminal law, taxation law, industrial law, constitutional law
  Private law protects private interests, e.g. contract law, tort law, employment law, property law, law of succession
  Criminal Law v Civil Law
  Criminal law-the body of legal rules that impose obligations on individuals and that is enforced by the state which imposes sanctions or punishments
  Civil law-the laws of a state or nation regulating ordinary private matters
Differences
  Criminal matters are brought by the state v. civil matters are brought in the name of the person seeking a remedy
  Criminal sanctions are in the from of penalties, e.g. gaol v. civil sanctions are in the form of compensation, e.g. damages
  The state bears the burden of proof beyond a reasonable doubt in a criminal matter v. the plaintiff bears the onus of proof on the balance of probabilities in a civil matter
  Substantive Law v Procedural Law
  Substantive law regulates the rights and duties that people have
  Procedural law consists of those legal rules constituting the machinery by which rights and duties are enforced, e.g. rules of evidence.

B. Sources of law in Australia
  The Development of Australia’s Legal System
  We will be looking at Australia’s legal system, i.e. the totality of laws that regulate Australia (a legally organised community)
  Practical difficulty: Australia is a Federation, therefore it has a number of legal systems

1.The Introduction of English Law into Australia
  Why Is English Law the Basis of Australian Law?
  a. The Distinction Between Settled and Conquered Places
  The doctrine of reception, i.e. English colonists carry with them the laws of England
  But note: the distinction between settled places and conquered places has to be made first

a. The Distinction Between Settled and Conquered Places
  In a settled place, i.e. one that is uninhabited or desert and uncultivated, English law is transplanted
  In a conquered or ceded place, the laws that are already in existence in that place remain but can be modified by the conquerors
  Australia was considered to be terra nullius, i.e. a settled place, e.g. Cooper v Stuart (1889) 14 AC 286

Important - What Law Was Inherited?
  “…such colonists carry with them only so much of English law as is applicable to their new situation and the condition of the infant colony…What shall be admitted and what rejected, at what times and under what restrictions, must in the case of dispute be decided in the first instance by their own provincial judicature, subject to the decision and control of the King-in-Council; the whole of their constitution being also liable to be newly modelled and reformed by the general superintending power of the legislature in the mother country.” William Blackstone
Importance of This Statement?
  It explains that English law was only the basis of our legal system
  English law could always be modified by the government in the settled place
  The British government had, in the beginning, a supervisory role as to what happened in the colonies

The Current Situation
  Concept of terra nullius rejected by the High Court decision of Mabo v Queensland (1992) 66 ALJR 408
  Current situation, Australia is now considered to be a conquered place
  Note: this has not had any practical affect to the basis of our law, only of theoretical importance.

Development of Australian Legal Systems
  Australia is, to all intents and purposes, an independent country
  The same argument could be made for the States of Australia
  Note again: We have a federal system of government
  Our only link to the United Kingdom is that the head of state for the Commonwealth and the States is the monarch of the United Kingdom

b. The Development of Legal Institutions in NSW
  Because NSW was a penal colony the Governor was the three arms of government, i.e. the legislature, the executive, and the judiciary (what is now known as the Westminster system of government)

The Westminster System
Legislature – (Parliament) Vested with function of law making.
The Executive – (Ministers)Vested with function of administering and carrying out the law. (administrative)
The Judiciary – (Court)Vested with the function of interpreting the law

b. The Development of Legal Institutions in NSW
  NSW’s legal history is the story of the change from one individual being the government to a fully fledged Westminster system of government. This transformation was accomplished by a series of Acts

b. The Development of Legal Institutions in NSW
  New South Wales Act 1823 (Imp).
  Legislature-created the Legislative Council (L.C) consisting of 5-7 members appointed by the Governor. Limited powers
  Executive-the Governor, special powers with regard to rebellion and insurrection. Laws had to agree with UK laws
  Judiciary-comprehensive court system established
  Australian Courts Act 1828 (Imp)
  Executive- Governor could no longer act alone. Had to act on the advice of an Executive Council
  Legislature-Legislative Council was increased to 15 members. No law could come into force unless the L.C. agreed with it
  *Judicature-English laws which existed as of 25 July 1828 were now the foundation of laws in NSW
  Australian Constitutions Act 1850 (Imp)
  Gave Legislative Councils of colonies the power to create local legislatures
  Legislatures could regulate the right to vote, grant membership of the councils and make laws for ‘peace, welfare and good government of the respective colonies.’
  Provided  a basic format for drawing up constitutions for NSW, Vic, SA and Tas
  Effected separation of Victoria from NSW
  NSW Constitution Act 1855 (Imp)
  Gave NSW its own Constitution. Provided a legislature, an executive, a judiciary.
  The beginning of responsible government
  N.b The United Kingdom still had links to each arm of government, e.g. UK parliament could pass laws specifically applicable to NSW, the Governor was appointed by the UK monarch, the highest NSW court of appeal was the Privy Council (a court in the UK)
  The Colonial Laws Validity Act 1865 (Imp)
  NSW parliament could not pass any laws that were inconsistent with UK laws that had been made to apply specifically to NSW
  Apart from that NSW parliament could pass any laws, e.g. they could even draw up a new Constitution
  Constitution Act 1902 (NSW)
  NSW parliament drew up a new constitution to create the sort of Westminster system of government we have today
  Australia Acts 1986-established independence from UK, e.g.
  Legislature-the UK could no longer pass laws with regard to NSW or other states after 3 March 1986
  Executive-the premier chooses the Governor of NSW. Situation the same in other states
  Judiciary-all appeals from NSW courts and other state courts to the Privy Council have been abolished

c. The Development of Legal Institutions for the Commonwealth of Australia
  N.b the development of the Commonwealth’s Government is separate to the State Governments development
  Why necessary?
                  unified defence, customs and excise, railways etc.
  Created by
                  -Commonwealth of Australia Constitution Act 1900 (Imp)
  Severing of the Commonwealth Arms of Government From UK
  Legislature - Statute of Westminster Adoption Act 1942 (Cth) adopted the Statute of Westminster Act 1932 (Imp)- retrospective to 3 September 1939
  Executive - This arm of government did not have to be severed from the UK, s.61 Constitution
  Judiciary
  Privy Council (Limitation of Appeals) Act 1968 (Cth)-appeals from the High Court on federal (Commonwealth) matters not allowed
  Privy Council (Appeals From High Court) Act 1975 (Cth)-all appeals from the High Court to the Privy Council not allowed
*N.B The Australia Acts 1986 did not affect the Commonwealth Government






CONTRACTS

CONTRACTS
n  A. Introduction to Contract
n  What Is a Contract?
n  A simple definition is: A contract is a legally enforceable agreement between two or more people
n  The crucial element of a contract is that it can be enforced by a court of law
TWO TYPES OF CONTRACT
n  Formal Contract?
n  A deed
n  Deed poll
n  Power of attorney
REQUIREMENTS OF A FORMAL CONTRACT
n  Must be in writing
n  Must be signed by the party or parties to be bound
n  Must be independently witnessed
n  Formerly had to be sealed and delivered
n  N.b. They do not require consideration
OTHER TYPES OF CONTRACT
n  Bilateral contract:
n  A contract in which two parties assume obligations, e.g. one party promises to pay, the other party promises to deliver
n  Unilateral contract:
n  A contract in which only one party assumes obligations, e.g. Carlill v Carbolic Smokeball Company [1892] 2 QB 484
MAKING A CONTRACT
n  A Simple Contract - Requirements
n  Agreement, i.e. an offer and an acceptance
n  An intention to create legal relations
n  Consideration
Formalities
n  General rule: contracts do not have to be in writing
n  Exceptions:
n  1. Formal contracts (deeds, contracts under seal)
n  2. Some contracts are required by legislation to be in writing, e.g. cheques, bills of exchange, promissory notes, contracts assigning copyright, contracts for marine insurance, contracts transferring shares
1. AGREEMENT
n  Definitions:
n  Offeror: the person who makes the offer
n  Offeree: the person who receives the offer
n  Traditional Analysis
n  Need to establish an offer and an acceptance
1. The Offer
a. What Is an Offer?
n  An offer may be described as the indication by one person to another of his willingness to enter into a contract with him on certain terms. ... an offer does have legal significance in that it creates in the offeree a power subsequently to create a contract by his own unilateral action... (Carter & Harland, Contract Law in Australia, Butterworths, 1991, p 23.)
n  Another definition: a promise to do, or refrain from doing something (usually) upon condition that the other party agrees to do or refrain from doing something else
b. Rules as to Offers
n  How does a court determine whether or not an offer has been made?
n  Test: What would a reasonable person think in the circumstances.
                Authority: Carlill v Carbolic Smokeball Company [1892] 2 QB 484
                N.b. This is an objective test
Arguments in Carlill’s Case
n  1. That the advertisement was a puff (i.e. a statement that no reasonable person would take seriously)
n  2. That the terms of the offer were too vague to be a definite offer because
n  A. No time limit was fixed
n  B. The terms of the ad were too vague
n  C. It was an attempt to contract with the world
n  D. The use of the smokeball could not be checked.
Rules as to Offers
n  i. To Whom Can an Offer be Made?
n  To an individual
n  To a group of people
n  To the whole world

Carlill v Carbolic Smokeball Company[1892] 2 QB 484

ii. Offers v Invitations to Treat
n  Invitation to treat:
n  Statements made to others inviting them to make an offer to you.
n  An offer to offer
n  An offer to negotiate

Is The Circulation of a Price List an Offer?
n  Grainger v Gough [1896] AC 325-said no on the facts in that case

Are Advertisements Offers?
n  Normally they are invitations to treat (Partridge v Crittenden [1968] 2 All ER 421)
                But c.f. Carlill’s Case
Is the Display of Goods for Sale an Invitation to Treat?
n  Fisher v Bell [1961] 1 QB 394 says yes
n  Pharmaceutical Society of Great Britain v Boots (Cash Chemists) Ltd [1952] 2 QB 795
n  Issue: when was the offer and contract made? At the shelves or at the cashier’s counters?

Is the Provision of Information an Offer?
n  Harvey v Facey [1893] AC 552
n  Telegram from Harvey to Facey ‘Telegraph lowest cash price for Bumper Hall Pen?’
n  Telegram from Facey to Harvey ‘&900’
n  Telegram from Harvey to Facey ‘We agree. Send us your title deeds.’
Conclusion: no contract
Rule:
n  An offer must be communicated to be effective

Issue: How Can an Offer be Terminated?
By withdrawing or revoking the offer at any time prior to acceptance
                Routledge v Grant (1828) 130 ER 920
n  But note the situation with an option contract, Goldsborough Mort Ltd v Quinn (1910) 10 CLR 674
n  Revocation must be actually communicated to the offeree-Byrne v Van Tienhoven [1874-80] All ER Rep 1432
n  But communication of a revocation to a reliable source will be sufficient - Dickinson v Dodds (1876) 2 ChD 463

Termination of Offer
n  b. An offer will terminate after a reasonable time, e.g. Ramsgate Victoria Hotel Co Ltd v Montefiore [1866] LR 1 Exch 109
n  Factors that the court will take into consideration
n  The nature of the subject matter
n  The means used to communicate the offer
n  Circumstances at the time the offer was made

n  c. The offer will terminate if the offeror or offeree dies
n  d. An offer will terminate if the offer depends on a particular state of affairs which ceases to exist prior to the offer being accepted
                Financings Ltd v Stimson [1962] 3 All ER 386
e. If the offer is rejected, e.g. counter offer.
                An offer will be rejected by a counter-offer.
                Definition: a counter-offer is an offer that changes the terms of the original offer.
                Effect: the original offer is no longer capable of being accepted.
                Hyde v Wrench (1840) 49 ER 132
Note: A request for information is not the same as a counter-offer, Stevenson Jaques v McLean (1880) 5 QBD 346

f. ‘The Battle of the Forms’
n  Butler Machine Tool v Ex-Cell-o Corp [1979] 1 WLR 401

Final Comments on Offers
n  Offers may be express or implied.
n  Calling something an offer does not necessarily mean it is an offer in the legal sense.
n  A revocation is ineffective if the offeree has accepted by part performance.

The Acceptance
n  a. What is an Acceptance?
n  Acceptance of an offer creates contractual relations. An acceptance is a communication to the offeror of an unqualified assent to both the terms of the offer and to the implied invitation in every offer that the offeree commit himself or herself to a contract. Acceptance may be by way of a counter-promise or promises or by way of performing acts which are specified in the offer. The former is called bilateral and the latter unilateral contract. (Cheshire & Fifoot, p 59)
n  “An acceptance is a final and unqualified expression of assent to the terms of an offer actually communicated  to the offeror” Gjergia v Cooper [1987] VR 167
Rules as to Acceptance
n  i. Acceptance must be unqualified and complete. If it is not it is in danger of becoming a counter offer, e.g. Hyde v Wrench (1840) 49 ER 132
n  A conditional acceptance is not acceptance
                -A conditional acceptance is an acceptance with ‘strings attached”
                -It cannot be an acceptance because it is not final
n  ii. Acceptance must be made in reliance of the offer
                R v Clarke (1927) 40 CLR 227
n  iii. Acceptance must be made in conformity with the offer
                e.g. as to time, place, or mode
                                Eliason v Henshaw (1819) 4 Wheaton 225
n  iv. The general rule is that acceptance must be communicated to the offeror
n  silence cannot be specified as acceptance, Felthouse v Bindley (1862) 142 ER 1037
n  Powell v Lee (1908) 99 LT 284

Exceptions
n  waiver of the need for communication, e.g. unilateral contracts (refer to Carlill’s Case)
n  the postal acceptance rule

What Is the Postal Acceptance Rule?
n  Acceptance is effective at the time of posting, not when communication is actually received, Adams v Lindsell (1818) 106 ER 250
Qualifications
n  N.b. The postal acceptance rule can only be applied when it is reasonable to do so, i.e. when it was reasonably within the contemplation of the parties that it would apply, Henthorn v Fraser [1892] 2 Ch 27
n  Rule may be excluded by terms of the offer itself – Holwell Securities Ltd v Hughes [1973] 1 WLR 757
When Is It Reasonable to Use the Post?
n  When the offer is made by post
n  It may depend on the subject matter
n  Are there other buyers in the market?
n  What if there is a postal strike?
n  What if there is a time limit?

Does the Postal Acceptance Rule Apply to Faxes, Email, Telephones?
n  Entores Ltd v Myles Far East Corporation [1955] 2 QB 327
n  Brinkibon Ltd v Stahag Stahl etc [1982] 1 All ER 293
n  Answer: it depends

Other Ways of Ascertaining Agreement
n  Test – do the facts, when viewed as a whole and objectively in light of the surrounding circumstances show, from the point of reasonable persons on both sides, a concluded agreement has been reached
n  Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110
n  By conduct
n  Brogden v Metropolitan Railway Co [1877] 2 App Cas 666
n  Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153




Business contract question

The frog and the princess

In olden times there lived a king’s daughter who used to play, on warm days, by the side of a deep well under an old gum tree in the bush that surrounded the king’s castle.

Her favourite plaything was a golden ball which the king had given her, with strict instructions to look after it with the utmost care, for if she lost it she would be punished most severely, and have a miserable life for the rest of her days.

Her favourite game was to throw the ball up high and catch it.  Now it so happened that one afternoon the golden ball did not fall into the little hand which she was holding up for it, but into the well.  She was terrified, and began to cry, and cried louder and louder.  And as she thus lamented, a voice was heard: “What ails you, king’s daughter? You weep so that even a stone would show pity.”  She looked round and saw a frog stretching forth its big, ugly head from the water. 

“Ah! old water-splasher, is it you?” said she, and explained that she was weeping for her golden ball which had fallen into the well.
 
“Be quiet, and do not weep”, answered the frog, “I can help you, but what will you give me if I bring your plaything up again?”  “I’ll give you whatever you want, dear frog”, said she, “my clothes, my pearls and jewels, even the golden crown which I am wearing.” The frog answered: “I do not care for your clothes, pearls and jewels, but if you will let me be your companion and sleep in your little bed – if you will promise me this I will go down below, and bring up your golden ball again.”
 
“Oh yes”, said she, “I will give you all you wish, if you will but bring me my ball back again.”  But she thought: “How the silly frog does talk! He can be no companion to any human being!”  And, remembering that the palace was quite some distance away, and that the sun was low in the sky,  she said: “By the way, you will have to be at the palace before sunset!”  The frog did not reply to this, but disappeared beneath the water and in a short while came swimming up again with the ball in his mouth, and threw it on the grass.   The king’s daughter was delighted, and picked it up and ran away with it.  “Wait, wait,” said the frog, “Take me with you.  I can’t run as you can.”  But she ran on until she got back to the castle.

Sunset came and went, and the frog did not appear.   But at eleven o’clock that night, as the princess was preparing to go to bed, there was a soft noise at her door.  It was the frog, somewhat out of breath.  “I am here to share your bed”, he said, “as you promised me by the well.”

The princess, although she had been hoping that the frog would not turn up at all, was not wholly unprepared for this moment.   “You are welcome to sleep in my little bed”, she said.  “As for me, I have decided to move into another wing of the palace.  Good night.”


The frog has come to you for legal advice.   He wants to know whether he has a case for breach of contract against the Princess.  Advise him.

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