FNSBANK401A Small Business Portfolio Management

Diploma of Financial Services (Banking)FNSACCT404B

Make Decisions in a Legal ContextPart 1 (Lecture 1 to 8)

1IntroductionLecturer NameContact details

PrerequisitesAustralian Business Law Principles & Practice, Pearson, NSW Pendleton, W. and Vickery, R, latest edition, Internet accessLearner GuideStudy discipline

Unit OverviewIn Make Decisions in a Legal Context, students develop the competency to work and make decisions within a legal context (covering areas such as the Australian legal system, property, contract and agency).

Term dates & lecture timetable2

2Unit of CompetencyThis unit requires the application of skills and knowledge required to make decisions within a legal context. The unit encompasses identifying the main roles and responsibilities of key bodies in the legal system, identifying compliance requirements and developing procedures to ensure compliance. The unit has application across all sectors of the financial services industry.

Identify the main roles and responsibilities of the key bodies in the legal system

The functions of the courts and other regulatory bodies are identifiedImplications of relevant legislation are identified and applied in regard to making decisionsImplications of common law, including negligence and contract, employment law and business structures, are identified and applied in regard to making decisions

3

3Unit of CompetencyIdentify compliance requirementsRequirements are interpreted accurately and within prescribed time limitsRequirements are reviewed in a comprehensive mannerSources are constantly reviewed to remain informed of changes and amendments to statutes and finance industry requirements

Develop procedures to ensure compliance

Procedures are developed in consultation with others to address all the requirements to be met for complianceCompliance requirements are monitored to ensure that they are adhered to by the organisationTimetables to meet compliance requirements are established to align with statutory deadlines

4

4Range StatementCourts and regulatory bodies may include:High CourtFederal CourtsState CourtsIndustrial Relations CourtAustralian Tax Office (ATO)Australian Securities and Investments Commission (ASIC)Stock ExchangeAustralian Consumer And Competition Commission (ACCC)

Relevant legislation may include:Financial Transactions Reports ActConsumer Credit legislationTaxation Act, Trade Practices Act, Stamp Duties Act, Privacy ActSale of Goods Acts5

5Range Statement cont.Sources may include:internetgovernment publicationsindustry journalsindustry networksProcedures may include:operations manualsinternal control guidelinescomputer system documentationCompliance requirements may include:statutory requirementsauditspolicy and procedurescontracts

6

6Learning & Assessment Guide7

Learning Outcome 1Revise the role of courts, tribunals and other regulatory bodies in the legal system.

Learning Outcome 2Revise the activities of business associations and the process for the establishment of a sole trader, partnership, proprietary and public company.

Learning Outcome 3Explain the operation of agency and partnership law in South Australia.Distinguish between the rights and obligations of principals, agents and third parties.Identify factors to determine the existence of a partnership.Explain the operation of partnership law in South Australia, including the rights and obligations of the partners.

7Learning & Assessment Guide8

Learning Outcome 4Recognise the relevance of tortuous liabilities in the business environment.

4.1 Explain and illustrate by example, the application of negligence in the context of:Negligent misstatementOccupiers liabilityProduct liabilityVicarious liabilityHighway authoritiesEconomic lossProfessional liabilityReduction of liability4.2Risk is assessed and procedures are put into place to reduce liability.8Learning & Assessment Guide9

Learning Outcome 5Describe and explain the formation, operation and termination of contracts as they affect business activities.5.1 - Examine and analyse general business contract documents, particularly in relation to validity, form, retention of title and performance.5.2 - Identify and explain the six essential elements of a valid contract:Intention to create legal relationsOffer and acceptanceConsideration and formCapacityGenuine consentLegality of purpose5.3 - Explain how these elements of a contract relate to business decisions and transactions.5.4 - Explain how a contract may be discharged and the remedies available.5.5 - Identify the e-commerce implication for the law of contracts.

9Learning & Assessment Guide10

Learning Outcome 6Demonstrate an understanding of the concept of property and the nature of mortgages, including the rights and obligations of the parties.6.1Explain the operation of the Torrens Title system in South Australia.6.2Briefly explain the nature of mortgages, including the rights and obligations of the parties (including a guarantor) to a mortgage.Learning Outcome 7Recognise the application of contractual principles to certain specialty contracts leases, franchises and insurance.7.1Define a contract for lease, identify the elements necessary for a lease, and explain the South Australian law relating to business leases.7.2Define the franchise agreement and the relationship of franchisor and franchisee.7.3Briefly explain the purpose of the Franchising Code of Practice.7.4Demonstrate an understanding of insurance law and explain the common forms of business insurance.

10Learning & Assessment Guide11

Learning Outcome 8Recognise the application of contractual principles to employment contracts.8.1Describe the formation and operation of an employment contract.8.2Describe the reasons for termination of contracts.

Learning Outcome 9Demonstrate an understanding of workplace relations law.9.1Define:An awardAn enterprise agreementA certified agreementAn Australian workplace agreement and explain the procedures for making them9.2Explain the dispute resolution process within the workplace relations system.

11Learning & Assessment Guide12

Learning Outcome 10Recognise and describe the statutory provisions and principles relevant to the sale of goods which accountants are required to apply in the course of business.

10.1Define and differentiate between:Specific and unascertained goodsSale and agreement to sellSale of goods and contract for work done and materials supplied

10.2List the implied conditions and warranties in Sale of Goods legislation and recognise when such terms are excluded in the case of a sale being a consumer sale.

12Learning & Assessment Guide13

Learning Outcome 11Describe and explain the principles of consumer protection legislation as it applies to contract law and specifically the rights and duties in relation to contracts with consumers.11.1 - Recognise the significance of the Trade Practices Act for consumer protection law and specifically apply the provisions of the Act in relation to:Unfair practicesImplied conditions and warrantiesRemedies under the ActRights against manufacturers and importersThe role of the Australian Competition and Consumer Commission11.2 - Explain the operation of other statutes and common law relating to e-commerce, retailers and manufacturers.11.3 - Explain risk management procedures which may be used in the workplace to minimize liability.

13Learning & Assessment Guide14

Learning Outcome 12 - Describe the operation of the Trade Practices Act in relation to restrictive trade practices.12.1Differentiate between the roles of the Australian Competition and Competition Council and the Federal Court.12.2Describe the practices prohibited under Part IV of the Trade Practices Act.12.3Outline the enforcement procedures for breaches of the restrictive trade practices provisions of the Trade Practices Act.12.4Explain risk management procedures which may be used in the workplace to minimize liability.Learning Outcome 13 - Explain the types of legal protection available for intellectual property.13.1Define copyright, design, patent and trade mark.13.2Outline the processes for protection of intellectual property.13.3Briefly describe the remedies for breach of intellectual property legislation.13.4Explain passing off.13.5Discuss the elements in a common law action of breach of confidence in relation to confidential information.13.6Identify the e-commerce implication for the law regarding intellectual property.

14Learning & Assessment Guide15

Learning Outcome 14 - Explain effective methods of debt collection.

Learning Outcome 15 - Explain the effect of bankruptcy.15.1Outline the procedures when someone becomes bankrupt.15.2Explain the consequences of bankruptcy.15.3Briefly describe the alternatives to bankruptcy.Learning Outcome 16 - Formulate procedures to ensure compliance with applicable business law and to continually review legislation requirements.Identify sources of information:WebsitesNewslettersIndustry journalsMedia releasesLegislationNote: Learning Outcome 16 should be covered throughout the subject.

15AssessmentSummative

2 unsupervised assignments to cover all learning outcomes (may be provided as one assignment)

2 open book supervised assessments (may be provided as one assessment)

Formative

Learning and group work activities

Application of case study principles to learning and group work activities

16

16GradingFailA grade for not meeting all performance criteria.Does not demonstrate competence in all performance criteria in the unit.PassA grade for meeting all performance criteria.Demonstrates competence in all performance criteria in the unit (including employability skills)CreditA grade for consistent judgement and application of theory and concepts. To be awarded a credit grade, the student must meet the criteria for pass, and further:Appropriately relate the performance criteria to work situations and workplace standardsMeet all specified deadlinesWork with limited supervisionAssignments/assessments require no more than minor amendments only.DistinctionA grade for consistent excellence in the areas of originality, attitude and independent application. To be awarded a distinction grade, the student must meet the criteria for pass and credit grades, and further:Demonstrate original and independent application of theory and practiceDemonstrate initiative and outstanding attitudes, approaches to learning and motivationWhere appropriate work with and lead a study group or demonstrate outstanding consultation skillsAssignments/assessments require no amendments

17

17Timetable18

18Lecture 1RevisionLegal SystemBusiness Entities

Introduction to Agency & Partnership Law19

19Key TermsAct of Parliament/Statute Law/LegislationArbitration (binding)Civil LawCommittal HearingCommon law (precedents, legal principle)Conciliation (non binding)Delegated LegislationEquity (remedies eg injunction, account of profits)

20Australian Legal Systemhttp://www.fedcourt.gov.au/aboutct/aboutct_videos.html#justice

21Court HierarchyHigh Court of AustraliaFull CourtSingle judgeState Supreme CourtsCourts of Appeal/Full CourtsState Supreme CourtsSingle judgeCourts and tribunalsof specialist jurisdiction(EO), Residential Tenancies)

Intermediate courtsDistrict CourtMagistrates Court

22State Court HierarchySupreme CourtSingle judge

Courts and tribunalsof specialist jurisdiction

District CourtCrim & CivilMagistrates Court- General Claims ($6K - $40K) ($80K PI) - Minor Claims (up to $6K)Supreme CourtAppellate Jurisdiction

High Court of AustraliaFull CourtSingle judge

23

The Adversarial System 2 parties to dispute (plaintiff/defendant/appellant/respondent)Caseflow management (directions/status hearings, conciliation/settlement conference)Independent and impartial judge (jury if criminal) (separation of powers)Witnesses (in chief and cross examination), expert witness only for opinionBurden of proofStandard of proof (criminal, civil)

24In Courthttp://www.fedcourt.gov.au/aboutct/aboutct_videos.html#courtroom

25Courts administration http://www.courts.sa.gov.au/ District Court ActSupreme/District Court RulesMagistrates Court RulesPractice directions

26ADRAbandon the Claim (each party may bear own costs)Out of Court SettlementOmbudsman report on conduct of government bodies towards publicConciliation / Mediation 3rd party facilitates resolution non legal - usually non bindingArbitration commercial/employment disputes legally qualified umpireCommissions and Tribunalse.g. ACCCImmigration review

27Delegated Legislation Powers of Parliament given to other bodiesParliament does not have time or expertise to make lawRegulations, By-laws, Ordinances, or Statutory Rules

28Delegated Legislation Powers of Parliament may be passed to: Executive Council emergency situations

Local Councils eg rubbish collection

Government Departments operating rules/procedures

Statutory Authorities eg Housing SA

29Lecture 2Revision of Business Entities

Introduction to Agency and Partnership Law

30

30Business EntitiesSole TraderOwner/operatorAdvantages (low set up costs, control)Disadvantages (unlimited liability, limited access to funds, tax, single expertise)

31Business EntitiesPartnershipsthe relation which exists between various persons carrying on a business in common with a view of profit Partnerships Act (SA)

Key features: - Each partner is principal and agent for other partners;Equal share in profits and losses;All participate in decision making;Each must act in best interests of partnership;

CreationLiabilityAgencyRights and dutiesDistribution of assets

32Business EntitiesNumber of partnersGenerally 2 -20 people but exceptions:-

Actuaries, medical practitioners, sharebrokers or stockbrokers50Architects, chemists, vets100Legal practitioners400Accountants1000

33Business EntitiesCreationWritten Agreement (partnership agreement)Highly recommendedDuties, responsibilities, rightsEasier to resolve disputes if agreementWill override provisions of Partnership ActContains details of partners, duration, duties, details of keeping of accounts

34Business Entitiesb) Verbal agreementNo written document, implications for disputes.

c) Conduct (partnership by estoppel)- Others led to believe partnership exists by individuals conduct.

35Business EntitiesLiability of PartnershipsJoint and unlimited liability for debts and contractual obligationsTORT Joint and several liabilityAll partners liable for a tort if act or omission occurred when partner:--was acting in the ordinary course of the partnership business; or- had actual or apparent authority from the other partners

36Business EntitiesRelationship to Third Parties

Provided they acted with authority, all partners are as liable for the actions of the partners as if they did those acts themselves.(Vickery & Pendleton, 5th edition)

37Business EntitiesActual authority - real, clearly stated, all partners agreeApparent authority- Partner who appears to act with authority.3rd party compensation on following bases:-Partner carrying out ordinary kind of business of firm;Partners actions carried out in usual way;3rd party unaware that partner lacked authority to bind firm

38Polkinghorne v Holland (1934) 51 CLR 143Advice given to client by junior solicitor re investing in companyClient argued junior solicitor was negligent and sued senior partnersHigh Court held that giving financial was within the usual scope of business of a law firm and client had reasonably believed junior partner had fully authority =ALL PARTNERS LIABLE

39Business EntitiesImplied authority- Those dealing with the partnership are entitled to expect that partners have following implied powers:-Sell firms product;Employ staff;Purchase goods normally used;Receive payments;Issue cheques*should any of the above be removed, anyone doing business with the partnership must be informed, otherwise implied authority will apply and partnership be bound.

40NovationP29

Transfer of legal duties to another party

Example Partner leaving business

41Joint Venture Assets owned as tenants in commonRights of creditors against joint adventurerNot separate legal entityConduct of one not legally binding on other

42Companies Legal NatureEffect of Incorporationregistered s119 incorporated bodyartificial person sue, be sued, hold property, own liabilityMain difference to partnership, proprietorshipException murder, lifting corporate veil- Members personal liability only to company (guarantee, unpaid amount on shares) not to third parties;- Extent of liability to company depends on class

43Incorporation Key casesSalomon v Salomon (1897)Separate Legal Entity principle p157

Lee v Lees Air Farming (1961)p158

44The effects of incorporation

Functions of body corporateCan sue and be suedPerpetual successionPower to deal with property : s124(1)(d) (f)Powers of an individual Limited liability: s516Separate legal entityVeil of incorporationPowers granted upon incorporation s 124(1)Source: Butterworths, Corporations Law Tutorial Series,2001, p30

Corporate VeilCompany separate from participants veil of incorporation;Court can lift corporate veil despite Salomon;Common law Statute

46Existing Legal Dutyeg sole or dominant purpose of doing something which one of participants is prevented from doing personallyGilford Motor Co LtdVeil pierced - obligations imposed on individual now imposed on company

47Perpetual SuccessionCompany continues regardless of changes in membership;

Demise of original members etc;

Until deregistered

48Types of Companies

CorporationsCompanies registered under the Corporations ActOther corporations(eg incorporated associations, statutory corporations)Public companiesProprietary companiesLimited by sharesLimited by guaranteeUnlimited with share capitalLimited by sharesUnlimited with share capitalNo liabilitySource: Hanrahan, Ramsay & Stapledon, Commercial Applications of Company Law, 2007, p64

Classes of Company(nature of liability)S112:-Limited by shares

Limited by guarantee

Unlimited

No liabilityAmount, if any, unpaid on shares

Agreed to contribute on winding up

No limited on liability

No liability to contribute even if shares only partly paid

50Public v Private CompanyPublic (sec 9)eg BHP BillitonShares to public1 member minimum (no max)3 directors, 2 to reside in AustraliaListed on ASXPublishes financial statements public accountabilityObligations imposed by Corporations Act

51Public v Private cont.Private (sec 9 and 13)Propriety (Pty) family members/friendsNot a no liability company By Constitution or Replaceable Rules:Option to restrict right to transfer shares;Min 1 member, max 50Cannot offer or invite members of public to subscribe for shares or debenturesMust contain Pty;At least 1 director resident of Australia

52Small & Large Pty Co (Sec 45A)Small Pty Co:-Sec 45A(2)If 2 out of 3 satisfiedConsolidated gross operating revenue for financial year of company and entities it controls is < $10 million*;Value of consolidated gross assets at end of fin year < $5 million*;Company and entities it controls have fewer than 50 employees at end of fin year*calculated as per accounting standards (Sec 45A(6))

53Small Pty - AdvantagesNo obligation under Corporations Act to prepare annual accounts (although necessary for tax and loan applications);Need only prepare financial report and directors report if:5% voting shareholders request within 12 months after end of financial year;ASIC order

54Advantages/Disadvantages+sSeparate legal entity;Business conducted in own name;Limited liability;-sHigh compliance costs;High establishment;

55DUTIES OF DIRECTORS

Director regarded as fiduciaryDuties of loyalty and good faithDuties of care, skill and diligenceDuty to act bone fide in the interests of the companyDuty to exercise powers for prop purposeDuty to retain discretionsDuty to act bone fide in the interests of the companyDuty to exercise powers in good faith in the best interests of the corporation and for a proper purpose Duty not to make improper use of information or position for advantage or cause detriment: ss 182 and 183Duty to exercise the degree of care and diligence that a reasonable person would if they were a director or officer s 180(1)Directors not liable under s180 if they make the judgment in good faith for a proper purpose, do not have material interest, reasonably inform themselves and rationally believe it to be in the best interests of the company: s180(2)Source: Butterworths, Corporations Law Tutorial Series,2001, p137

ShareholdersPart owner of company (Proprietary v public company);Different types (classes) of shares, different voting rights;Dividend out of profits only;Can sue in the name of the company

57QuestionsWhat type of companies are the following:ABC LtdABC Pty LtdABC NLList the differences between a company limited by shares and a company limited by guaranteeWhat kind of company can comprise a single member and be operated by a single director?Do small propriety companies have to lodge their accounts with ASIC?Do public companies have to lodge their accounts with ASIC?

58Principal and Agency Law

59Principal and AgentRelationship where one person is appointed to act as the representative of the other.

Agency = the relationship which exists between two parties whereby one party, the principal, authorizes another party, the agent, to do on their behalf acts which will bring the principal into legal relations with a third party.

60Contracts InvolvedTwo contracts involved - one creating the agency, the internal relationship, - second where the agent contracts on behalf of the principal with a third party, the external relationship.

61AGENCY DISTINGUISHED from other RELATIONSHIPSEmployer employee relationshipsEmployees usually lack the authority to make contracts on behalf of their employers.No liability to third party (doctrine of vicarious liability) the employment contract may specifically grant contractual agency to an employee.Independent contractorhired by a client to perform specific work. client has little control as to how the work is carried out; less likely to be a contractual agent than an employee, although there are exceptions.

62TYPES OF AGENTS Special agent General agentUniversal agent (power of attorney)

63CAPACITY OF THE AGENT An agent has the contractual capacity of the principal due to the delegation of contractual capacity by the principal to the agent.

2 CasesMinor as principalAdult as principal

64CREATION OF AGENCY Expressly created agencyDeed (contract under seal) - POAIn writing (simple contract)Verbally

Impliedly created agency Agency by necessity By ratification By estoppelBy position or status

65EXTENT of AGENTS AUTHORITY AUTHORITYImplied(eg to negotiate)ApparentActualExpress (verbal or writing)(eg sell land)

66CaselawPolkinghorne v Holland

(5th ed p229)(6th ed p238)

Panorama Developments v Fidelis

(5th ed p199)(6th ed p206)

67THE DUTIES OF AN AGENT TO THEIR PRINCIPAL Duty to follow the principals lawful and reasonable instructions Duty to act personally Duty to act in the principals best interestsDuty to exercise reasonable care, skill and diligence Duty to keep proper accounts of all money and property received on behalf of the principal

68ContinuedDuty to keep all money and property of the principal separate from that of the agent Duty of confidentiality Duty not to make a secret profit

69RIGHTS OF AGENTS Right to remuneration to be paid as agreed Right to indemnity and reimbursement Right to a lien over the principals property in the agents possession until the agents remuneration and expenses are paid Right to redirect the goods in order to possess and retain them

70AGENTS LIABILITY TO THE PRINCIPAL The agent will only be responsible to the principal if the agent does not comply with the principals instructions, or breaches a duty owed, in which circumstances, they will be responsible for any loss.

71AGENTS LIABILITY TO A THIRD PARTY A third party who wishes to take legal action over a contract that was arranged by an agent usually only has rights against the principal.The principal and not the agent will be liable to a third party for any torts committed by the agent whilst acting within the scope of their actual or apparent authority, even if the principal gained no benefit from the agents conduct.However, an agent may be responsible to a third party in the following situations:

72Liability of AgentThe principal is disclosed and named but special factors make the agent liable the named principal does not existthe agent agreed to be liableit is standard practice in a trade or industry that an agent becomes liablethe agent executed a deed or bill of exchange in their own name instead of that of the principalthe agent acts outside actual or apparent authority (breach of warranty of authority)

73Existence but not name of the principal is disclosedNo liability except when:agent acts outside actual authorityagent specifically agrees to be liable

Existence of principal not disclosed third party can choose whether they sue the agent or the principal, usually based on who will be more able to pay any judgment sum. A third party who obtains a judgment against one party, loses all rights against the other.

Disclosure & Liability of Agent74Breach of warranty of authority This action may exist where the agent has falsely claimed to have authority they do not in truth possessThus, warranty of authority will be breached if the agent;falsely claims to be acting with the principals authority the claim may be made directly or indirectly, fraudulently or innocently;the claim of authority induced the third party to enter into the subject contract with the principal;the third party was not aware of the lack of authority; andthe third party suffered loss.

75Liability Consumer ProtectionThe agents possible liability under consumer protection legislation

TPA e.g. misleading and deceptive conduct

76TERMINATION OF AGENCYPerformance of the agency contract as agreed Mutual agreement Revocation of the agents authority Renouncement of authority by the agent Acceptance of secret commission

77TERMINATION OF AGENCY Continued.By operation of law lapse of a set time period for the life of the agencydeath, bankruptcy or insanity of the agent or principalfrustration of the contractobject of the contract becomes illegal

78REMEDIES OF A PRINCIPAL If breach by agent:-

rescission of the agency agreement;refusal to pay commission;damages;recovery of secret commission; and/ orcriminal charges laid for accepting a secret commission

79TYPES of COMMERCIAL AGENTS Factors or mercantile agents eg: sells on consignmentDel Credere agentsHigher commission but guarantees payment upon sale of goods (eg: livestock selling agents)Real estate agents Partners Brokers

80Lecture 3Torts and Negligence

81

81TortsCivil Wrong

Protects against infringement of rights against A personPropertyReputationNot necessary that tortfeasor to have intended to cause harm.

82TortsTrespass

Nuisance

Negligence

Occupiers Liability

Defamation

83Trespass / NuisanceInterference with quiet enjoyment / land rights

Noise, waste, other discomfort to others property

84NegligenceDuty of Care is Owed

Breach of that Duty of Care

Loss / Injury as a result of Breach of Duty of Care

85Duty of CareGood Neighbour Principle

Donoghue v Stevenson

86Duty of CareSituations where a Duty of Care exists:

Certain professional business r/ships - adviser role (principal/agent, accountant/client, solicitor/client, financial planner)Occupier of premises to entrant (occupiers liability)Manufacturer (product liability)Road Users (CTP insurance)SchoolsCouncilsCigarette Companies

87Breach of Duty of CareLikelihood of injury

Gravity of injury

Effort required to remove the risk

Social utility of defendants conduct

88Damage as a Result of Breach of DutyRemoteness of damage

Assessment of damage

89DefencesContributory Negligence

Voluntary Assumption of Risk

Vicarious Liability

90Vicarious LiabilityNot a tort

Employer responsibility for employee actions

Hollis v Vabu

91Product LiabilityNo direct contract between manufacturer and consumer;

Manufacturer responsibility for negligence:-Knowledge of defect and releases product; orInherently dangerous product with no adequate warning;DOC breach DOC - Damages

92DOC principle applied to:Any person that goods could foreseeably harm;Applies to all classes of goods;Property damage + personal injury;Applies also to repairers, importers, retailers, hirers etc

935 important points:-Intention to reach consumer in same form;Intermediate Examination;Standard of Care;Facts speak for themselves;Avoidance of liability and contributory negligence

94Occupiers Liability Duty to all entrants to the premises

95Negligent MisstatementNo contractual relationship;Professional advice;DOC owed to individual seeking adviceBreach of DOC;Eco loss suffered

96CaselawHedley Byrne v Heller (1964)Owed duty of care when giving advice based on reasonable foreseeability of reliance;Disclaimer on advice = not liable

MLC v Evatt (1968) DOC owed when advice given in serious circumstancesDiscount social occasion?

97Shaddock v Parramatta Council (1981)Established modern tests for negligent misstatement in Aust.Flow chart p108

Liability of auditors to third partiesV & P p111Caparo Industries Plc v Dickman [1990]No DOC owed to potential shareholders

98Defamationcomplex area of law;

publication of a statement that tends to lower a person in the estimation of right thinking members of society generally; or that tends to make them shun or avoid that person (Winfield and Jolowicz on Tort)

Protection of reputation from comments affecting that reputation

99Defamatory statementsWritten, spoken, drawing, film, sign;

publication communicated to others;

Libel & Slander;Libel defamation in permanent form eg film, writings etcSlander transient form gesture or speech;

100DEFAMATION ACT 2005 S7Distinction between slander and libel abolished

(1) The distinction at general law between slander and libel is abolished.

(2) Accordingly, the publication of defamatory matter of any kind is actionable without proof of special damage.

101Elements:Must be defamatory (eg injurious to reputation, third party reactions);

Refer to plaintiff (reasonable person would say statement about plaintiff);

Published;

Unable to rely on valid defence

102DefencesConsent of plaintiff to publication (complete defence)Justified (substantial truth)Fair comment on matter of public interest(success only if based on true facts)Absolute privilege made in course of parliamentary, court, solicitor/clientQualified privilege maker of statement has, interest or a duty, legal, social or moral to make it to the person to whom it is made, and the person to whom it is so made has a corresponding interest or duty to receive it

103Lectures 4 to 7Contracts

104

FormationElementsDischargeRemedies for Breach

104Formation of a contract LOGICAL

Legal capacityOffer and AcceptanceGenuine ConsentIntentionConsiderationAndLegality

105Classification Simple v Formal

106SimpleOral or writtenMust have considerationNo witnesses required

107Formal Specific requirements to be a valid contract

Contract of record

Contract under Seal

Do not require consideration

Written

108Validity P71 workbook

Valid VoidVoidableUnenforceableIllegal

1091. Intention Domestic

Assumption - no legal effect

Assumption can be overridden by evidence

110IntentionBusiness

Assumption - legal effect

Assumption can be overridden by evidence

111Offer and Acceptance Offer

Must be communicatedWhom made person, class, world. Not an invitation to treat

112Offer and AcceptanceOffer

Not a request for informationMay be conditional Revocation must be before acceptance May lapse

113Offer and AcceptanceAcceptance

Response and reliance on offerUnconditional and unqualifiedOnly offeree (s) can accept

114Offer and AcceptanceAcceptanceAcceptance not able to be revoked unless have consent of offerorMust be communicatedMust be communicated in manner specified in offerMade in time frame or reasonable timePOSTAL RULE exceptions (V&P p290)

115CONSIDERATION Consideration is essential to the validity of every simple contractConsideration is the exchange of a benefit and burden by parties to a contract.Consideration is therefore the bargained for price. Consideration is something of value promised, given or foregone.

116CONSIDERATIONConsideration may be:A promise for a promise. An act for a promiseForbearance ie

117CONSIDERATIONAs long as consideration exists, the court is not concerned with its adequacy

118CONSIDERATIONConsideration must not be unlawful.Consideration must be possible to perform. Consideration must not be too vague or indefinite.

119Legal CapacityThere are certain classes of people who are considered at law to lack full capacity to contract.

This may have serious consequences for the party with whom they have entered into an apparent contract.

120MinorsGoverned by both common law and statute law;

Age of Majority (Reduction) Act (SA) 18 yrs

It is the responsibility of the adult party to ensure the capacity of the party with whom they are dealing.

121Minors Common Law PositionValid contracts:-cash contracts (cash sales);contracts for necessaries;Beneficial contract of service

See V & P p317necessary (a) minor must not already have an adequate supply of the goods;(b) food, clothing, transportation, medical and hospitalNash v Inman and Bojczuk v Gregorcewicz

122Beneficial Contracts of ServiceContract of service or apprenticeshipProvide minor with means of livelihood;Or to acquire skills; and

Benefit the minorCourt assesses all terms of contract;De Francesco v Barnum (1890) 45 Ch D 430

123Voidable ContractsPermanent/continuous contracts:-eg: lease of land;Purchase of shares;Partnership;

Regarded initially as valid and binding;

Can be repudiated (rejected) any time prior to 18 or reasonable time after 18

124Void ContractsContracts for:- purchase of non necessary items; trading contracts (eg hire purchase)

Minor simply not bound unless ratification (adopts) within reasonable time

125Insanity and Intoxication Contract voidable when person can show that she or he did not understand what they were doing as a consequence of their condition; andthe other party was aware of that condition; andthey withdraw from the contract within a reasonable time of their regaining their sanity or sobriety.

126BankruptcyA declaration of bankruptcy does not deprive a person of their capacity to enter into contracts.

Bankruptcy Act 1966 (Cmth) provides that a bankrupt:must disclose their bankruptcy if business is carried on in other than the bankrupts name orcredit in excess of $3360 is sought.

127CorporationsCorporations are separate legal persons.

It can sue, be sued and own property but cannot enter a contract for personal service.

128Hostile AliensAn alien is any person who is not an Australian citizen

Friendly aliens no restrictions on contractual capacity

Hostile aliens eg: war time cannot enter into contract or exercise rights/remedies

129Reality of ConsentGenuine consent - all parties to the contract honestly and genuinely agree to the terms of the contract.Meeting of minds.Absence of genuine consent due to:-Mistake of fact;Non est factum;Fraudulent/innocent misrepresentation;Undue influence;Duress;Unconscionable conduct

130Genuine ConsentMistake of factCommon Mistake - both parties make same mistakeb) Mutual Mistake - both parties make different mistakec) Unilateral Mistake - one party makes mistake of fact, other party knows/ought reasonably to have known- does not inform other party

131Non est factum Not my deed eg: mistake regarding nature of document (guarantee v mortgage)

Arguable if:-document fundamentally different unable to read owing to blindness or illiteracy must not have been careless or negligent in signing the document.

132MisrepresentationStatement of fact (not opinion)

fraudulent (deliberate) misrepresentation

innocent misrepresentation, and

negligent misrepresentation.

133Statement of fact prior to contractcategorised as:Term(ends up in contract)Misrepresentation(statement of fact which is untrue)Distinguish from statement of lawOpinionPuffInnocentFraudulentNegligent

Not known to be falseIntention other party reliesNo intent to deceiveContract enteredDamage suffered

Known to be falseIntention other party reliesIntent to deceiveContract enteredDamage suffered

False statement of fact/advice/opinionperson claiming skill/expertiseContractenteredDamage sufferedRemedy: 1) rescission;2) Damages (Misrep Act)Remedy: 1)rescission;2)Damages (tort of deceit)Remedy: 1) rescission;2) Damages (tortious action)

134Duress Physical duress

Duress to goods

Economic duress

135Undue Influence Legally recognised relationship exists parent and child,trustee and beneficiary,doctor and patient,solicitor and client,guardian and wardand priest and followers Position of dominancePresumption of undue influenceRebuttable by evidence proving plaintiff understood and entered voluntarilyIf no, then voidable at option of innocent party

136Unconscionable Conduct party in a superior bargaining position has gained an unfair advantage

Commercial Bank of Australia v Amadio

137LEGALITY OF OBJECT The object of the contract must be legal to support a valid and enforceable contract.

Illegal under CL:To commit tort, crime or fraud on third party eg agreement to have someone assaulted;Contracts to defraud revenue; Restraint of trade eg employment, sale of business or contract to regulate trade;Restraints of trade are prima facie void as being contrary to public policy; howeverRestraints perceived as being reasonable may be enforced- (reasonable facts of case but no more than is necessary to promote legitimate interests)

138Illegal under statuteIn restraint of trade barred by TPA;

To pay secret commissions;

Various contracts which require licences if have not been obtained

139Contracts in restraint of trade Employment

Sale of business

140CONTENTS OF CONTRACT A condition is a term of fundamental and vital importance Breach = damages & right to rescind (treat as never existed)A warranty is a term of less importance Breach = damages but no right of rescissionLuna Park (NSW) Ltd V Tramways Advertising Pty Ltd

141Parol Evidence RuleUsually, statements not included in contract will be representations;Parol Evidence = verbal statements will not be taken into account where effect is to vary, add or contradict written agreement;However, exceptions:-Custom and usage;Where evidence that written agreement only contains part of the agreement;Statement amounted to separate contract made prior to written one;Statement clarifies or correct ambiguous language within written contract;Where true intentions of parties not expressed in written contract

142Implied terms Implied by the court

Implied by statute eg: TPA fitness for purpose

Implied by custom or trade usage established practice

143Exclusion clausesUsually written clauses stating a party will bear no responsibility for something which happens;Eg gym not responsible for injury to members;Car park not responsible for loss or damage to cars

Validity need to be included in contractEg clause; orSigns posted with exclusion before contract is made

Car park ticket exclusion for liability before taking ticket (as when contract formed)

NB Trader cannot contract out of statutory obligations

144Exclusion Clauses and the Trade Practices Act

Typical Exclusion ClausesThe Trade Practices Act 1974All other conditions and warranties, statutory or otherwise and whether express or implied, are hereby excluded, and no guarantee, other than that expressly herein contained, applies to the product to which the guarantee relates, or any accessory or part thereof.Conditions and warranties implied and the rights and remedies created by the Trade Practices Act 1974 (Cth), [s.68A] cannot be excluded. Any attempt to do so is made void by the terms of the Act, and makes the company liable to prosecution under the Act. The company accepts no responsibility for loss or damage through any cause whatsoever.Under Section 74, contracts for the supply of services to consumers contain an implied warranty that the services will be rendered with due care and skill. This warranty cannot be excluded, so the clause is void. We exchange goods or give credit but do not refund money.If a company supplies goods directly to consumers, those consumers have a non-excludable right under the Section 75A to return the goods and obtain a refund where there has been a breach of a condition implied by the Act. Service will not be available under this warranty unless the form below is completed and returned to the registered office of the company within fourteen days from the date of purchase.Under Section 68, failure to return the registration card does not extinguish a consumer's statutory rights. New products are covered by this warranty for a period of 12 months.Consumer's rights under Section 71 extend beyond the stated warranty period and may be exercised if there are, for example, inherent defects which appear after the expiration of that period.

145CONCLUSION or DISCHARGE of a CONTRACT by performanceby agreementby frustrationby operation of lawby breach

146Remedies for breachBreach of Condition:1. Damages monetary compensation if breach and loss/damage occurred;- Put party back into position if not for breach;- Mitigation issues;- Liquidated, unliquidated, nominal; AND2. Rescission injured party elect to affirm or rescind (no longer bound by contract)Breach of Warranty:Damages only, not right of rescission.

147Remedies cont..InjunctionProhibitory or mandatory- Equitable only granted if damages inadequate

Specific PerformanceEquitable only if damages inadequateNot granted if causes hardship

148Lecture 8Property Law

Case Study Assignment

Real PropertyMortgagesLeasesFranchisesInsurance

149

149PropertyPhysical things you can own, such as land or furniture

and

the rights you can exercise over physical and non-physical things

150Real PropertyReal property refers to land and anything which is fixed or attached to the land

Those items which have become fixed to the land are referred to as fixtures

151Personal PropertyPersonal property may also be referred to as chattelsleases over land (chattels real)tangible objects such as cars, books and furniture (choses in possession)intangible things, such as shares in a company or intellectual property rights (choses in action)

152Fixtures or Non-FixturesFor what purpose has the item been attached? In what manner is the item attached? What damage if any will be caused by the removal of the item?

153Ownership and Possession Ownership = title over that property transfer ownership or possessionPossession = physical control intention to assert exclusive control over the property

154Interests in LandDoctrine of Tenure

No person can be the absolute owner of the land because all land is owned by the Crown

Instead, land owners have an estate in the land

155Estates in landAn estate in land describes the type of interest a person has in real propertyFreehold estatesFee simple continues as long as heir; - may be transferred during owners lifetime; or - devised after death as per willLife estate - interest in land created only for life of particular person

156Leasehold EstatesA lease gives the lessee exclusive possession of real property for a fixed period in exchange for rent.

Fixed term eg 1 year lease (in SA has to be in writing);Periodic eg weekly, monthly (can be after fixed term); Tenancy at will Tenant remains in possession by agreement but no rent paid. Either party to terminate at any time;Tenancy at Sufferance After expiration of tenancy, tenant remains in possession without landlord permission and without paying rent

157Title to LandOld System Title Proved by paper trail of documents;Possibility of fraud, or document missing or failure to register mortgage;System flawed difficult to prove ownershipTorrens Title 1858 SA Robert Torrens;Certificate of Title original CT LTO, duplicate with owner/ mortgagee;Registration of every dealing; State Govt - guarantee of owner shown on title indefeasibility of title therefore, not necessary to show paper chain. Priority registered over unregistered even at later date

158Legal and equitable interests in land Legal mortgage = eg registered mortgage;Subsequent registered mortgages queue behind on default;If default - priority on registration

Equitable mortgage = unregistered mortgage;Protection via caveat;If default priority on creationCaveat protection may be lost if reasonable notice of earlier mortgage

159Joint Ownership of PropertyJoint tenants right of survivorshipfour unities (possession, interest, title and time)

Tenants in common

160Mortgages Over Real Propertya contract whereby one person (the mortgagor) borrows money from another and gives rights over real property to the lender (mortgagee) as security for the repayment of the loan

161Torrens System MortgageThe mortgagor retains the registered title to the property.

The mortgagee receives a statutory charge or right to payment over the property.

Mortgagees Remedies

The power to sue for breach of contractThe power to appoint a receiverThe power of saleThe power to seek an order for disclosure

162Torrens System MortgageMortgagors rights to sell or lease property

Equitable mortgages unregistered mortgage;Protection needed against subsequent registered mortgage;Unregistered Mortgagee needs to lodge caveat.

163Priorities Unregistered MortgagesDate of executionPriority14 July 20061st14 December 20062nd

164Priorities Registered MortgagesDate executedDate RegisteredPriority21 May 200621 June 200621 June 20061 June 20061

165Specialty ContractsLEASES

A contract in which an owner of property (the lessor) grants another person (the lessee) the right to exclusive possession of the property for a specific period of time in return for consideration

166Lease v LicenceLease one party (landlord) grants exclusive possession to other party (tenant) for amount of time;Interest created and therefore registrable;Licence - gives a person permission to use the land but does not grant exclusive possession (eg to drive across)No interest in land created, therefore not registrable on title

167Types of Leases Fixed Term Tenancy - amount of time;

Periodic Tenancy eg week to week

Tenancy at Will no fixed duration, not paying rent, consent of landlord

Tenancy at Sufferance not paying rent, no LL consent

168Lease Covenants Tenants covenants under common law

To pay the agreed rent.To keep and deliver up the premises to the landlord at the end of the term in their state of repair at the commencement of the lease.To permit the landlord to enter and inspect the premises, (usually reasonable notice is required).To refrain from conducting any illegal activity on the premises.To refrain from subletting or assigning the lease without the prior consent of the landlord.To pay rates and taxes if the lease is commercial.

169Lease CovenantsLandlords covenants

To allow the tenant quiet possession of the premises.To refrain from conduct which would render the premises unfit for their purpose.To repair the premises.To pay rates and taxes if the lease is residential.

170Termination of a Lease under Common Law By expiry of time By breach of a covenant By surrender LL agrees to release tenantBy frustration - cont. impossible due to unforeseen eventBy a notice to quitthe length of the notice must be commensurate to the length of the tenancy (ie 1 yr = 6 months)By forfeiture tenant loss of right due to breach of condition

171Residential Tenancies Residential Tenancies Act 1978 which varies the common law rights and obligations of landlords and tenants.

Refer to Notes (p130)

172Commercial Tenancies premises predominantly used for carrying on business;(if not retail tenancy), tenancy regulated by common law, lease agreement and possible statutes (implying conditions);Differences between commercial and residential:Commercial - all or proportion of rates and taxes paid by tenant;Regular rent increases permitted CPI;

173Retail TenancyIf lease for premises from which retail business operates then Retail Shop Leases Act (SA) 1995;Retail premises = wholly or predominantly for the carrying on of a business involving the hire or sale of goods or services (Barron p 311);Tenants to be given copy of lease otherwise can terminate;If landlord fails to rectify a plant/equipment failure, then landlord has to compensate tenant;Landlord must give tenant 3 months notice before the term of the lease is due to expire if lease is not to be extended by way of an option for the tenant to renew the lease;

174Hire Purchase Agreements The key element is that ownership in the goods does not pass to the hirer until the final payment on the agreement has been made.

175Franchise Agreements A contract made between the franchisor and the franchisee.

The franchisor is the supplier of a product or service, or an owner of a copyright or trademark and the franchisee is the reseller of that property, wishing to do business under the franchisors name.

176Types of Franchise Product eg: Wendys (Ice creams)

System franchise Jims Mowing

Process or manufacturing franchise

177Regulation of Franchises Agreement to contain terms re:the key intellectual property involved,rights and obligations of each party;franchisors degree of control over marketing, equipment and fixtures;duration of the agreement and its geographical location;rights of a franchisor to inspect the accounts of the franchisee;the conditions of termination.

178Franchising Regulation cont.Trade Practices (Industry Codes Franchising) Regulations 1998, forming part of the Trade Practices Act.

Refer to notes (p133)

Franchising Policy Council

179INSURANCE The insurer agrees to compensate or indemnify the insured for any loss or damage suffered on the happening of a certain event.

Cover notes

180Common law doctrines of insurance insurable interestutmost good faithindemnity subrogationproximate cause

181Insurable Interest A person will have such an interest if they will benefit from the property being preserved and suffer detriment if the property is damaged or destroyed.

182Utmost Good Faith Owed by insured to insurer & vice versa;Insured required to:-- disclose all material facts; and- make truthful representation about material facts;

Common Law remediesIf breach of good faith fraudulent insurer avoid contract and refuse claim payment;If innocent payout reduced

183When does duty arise?During negotiations;

Prior to renewal, extension, variation or restatement of contract;

During policy lifetime

184Duty of disclosureApplies to insured and insurer;

Material fact = relevant fact ;Number and value of previous claims;Rejected claims;Previous refusals to cover;Criminal records

185Breach of dutyIf insured fails to disclose a fact that they know, or reasonably should know, is material (relevant);

What facts do not have to be disclosed? S21(2) Insurance Contracts Act 1984Less the risk eg fire extinguishers;Commonly known eg Darwin subject to cyclones;Insurer knows or ought to know eg assessor inspected premises prior to accepting policy;

186Breach by agent of insuredNon disclosure of material facts by agent = same as if insured breached

eg: Lindsay v CIC Insurance Ltd

187Insurers Obligations To be prompt in admitting liability and paying claims.To inform the insured in writing and in plain English about the general nature and effect of the duty of disclosure before the contract is made.To provide consumers with notices about their rights at pre-sale, point of sale and post sale.To allow consumers a 14 day cooling off period before formally entering a contract of insurance.To avoid unconscionable conduct. The TPA provides remedies in this regard

188IndemnityThe purpose of an indemnity policy is to restore the insured to the position they occupied prior to the actual loss specified in the policy

189Subrogation Subrogation is the substitution of one person or thing for another

The same rights and duties attached to the original person or thing attach to the substituted person or thing. One person stands in anothers shoes eg: insurer pays claims in full;Right to take over legal rights of insured in regard to loss;Right to sue in insureds name to recover loss from third party

190Proximate cause The proximate cause is the initial cause of loss which may lead to a chain of events.

In order to claim on an insurance policy, the claimant must be insured for the initial cause. eg: riot fire house not proximate cause

191Insurance Agents / Brokers Insurance Agents - Act for insurer (principal) Paid by commission deducted from premiumsDuties of AgentsLiabilities of Agents

Insurance Brokers Act for those seeking insuranceReceive % of clients premium from insurerDuties of a BrokerLiabilities of a Broker

192Property insurance Fire and extraneous risksLoss of profitsBurglaryTheftFidelity guaranteeCash in transitEngineeringMulti-risks

193Liability insurance Public Liability

Product Liability

Professional Indemnity

194Motor vehicle insurance Compulsory Third Party

Property Damage(Comprehensive)

Third Party Property

195Other Insurance Types Life insurance

Accident and sickness insurance

196