LAWS20058 Australian Commercial Law

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LAWS20058 Australian Commercial Law

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LAWS20058 Australian Commercial Law

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Course Code: LAWS20058
University: Central Queensland University

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Country: Australia

Questions: 
1.Identify the common law legal issues in dispute. What were the broad areas of contract law that are relevant here?2. Explain the principles of law, the rules that the court applied and which were relevant to deciding the issue.3. Apply the relevant law to the facts. Explain how the court applied the relevant law.

Answer:
In Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited [2008], the decision of High Court was found to be significant for the owners and the renters of property because it was supported by the court that owners of the property should be provided with the right to get hold of the damages such as loss of bargain damages following the termination of contract in case of violation of terms and conditions of the contract by the renters.    
Facts of Case
Transit Management Pty Ltd (Transit) was the owner of a grocery shop in a shopping complex, to which he leased to Duffy Bros Fruit Market Pty Ltd (Duffy) for 15 years in the year 1993. Due to financial losses in business since 1999, Duffy was not paying the rent timely to the owner. Owing to all this, Tansit and Duffy entered signed a deed that Transit would make efforts for sub-tenancy of the property but the rent of the property would be the liability of Duffy but the rent that was being paid by Duffy would reduce on this consideration. It was also agreed upon in the deed that in case of no further violations of lease by Duffy, he would not be held liable to pay full rent of the property. The terms of the lease were decided between the two and were confirmed. In 2001, Transit sold a part of the property to Gumland Property Holdings Pty ltd. (Gumland) but he did not document the lease till 2005. On the expiry of lease in 2002, with an intention of not to extend the lease, the sub-tenant entered into over-holding period and started paying 50% as decided under the process of sub-lease. Gumland claimed that Duffy did the violation of deed as well as lease and issued default notice against him and demanded for the arrears. Because of non-payment of lease, Gumland terminated the lease contract in the year 2003 and sought compensation of $2,096,514 along with interests from Duffy. 
Issue – Was the owner of the property liable to get compensation for loss of bargain damages?
Rule – The Supreme Court held that the sub-tenant was unable to pay rent which was considered to be as the violation of essential terms of ‘Lease and Deed’ under clause 4 of the Real Property Act of New South Wales. That is why, Gumland was allowed to recover the amount of compensation along with the damages for loss of bargain. 
The judgment of the Supreme Court was reversed when the Court of Appeal mentioned that it was not essential condition for violation of deed to pay or no to pay full rent and Gumland had terminated the lease contract because of which, he was  entitled only to recover the compensation and not the bargain damages.
Application –  It was the argument placed by Duffy that Gumland had not any right to terminate the lease contract as to pay the rent was not the essential term of the lease contract and right to take legal action was only possible when Duffy had not agreed to the terms of the contract that was not signed between them. Furthermore, the Contract Law of Australia also allows the innocent party to terminate the contract of lease and to recover the loss of bargain damages in case of violation of lease contract by the other party to the contract.
Conclusion – The High Court allowed the appeal by Gumland and all the damages sought were ordered to be compensated. Duffy was held liable to pay full rent after 7 days of due rent in accordance with the Clause 3.2 of the Act. As per the general contract principles, the innocent party is allowed to terminate the contract in case of violation by the other party to the contract, which enabled Gumland to recover the damages caused due to loss of bargain.  
Facts of Case
Mr and Mrs. Newsland entered in a contract with a property developer in the year 2007 for constructing a three storey housing property for them along with sanitation and other interiors to be left. After the construction completed by the property developer, Newslands found that there were various structural flaws and they sued the developer in Victorian Civil and Administrative Tribunal (VCAT). In 2010, VCAT ordered the developer to pay compensation amount of $400,000 to Newslands. Later on in 2010 itself, Newslands sold out their property to Mr. Kalabakas on discounted rate on the basis of incomplete construction. Mr. Kalabakas get the property insured with Chubb Insurance Company and got it renewed in 2011. However, the process of insurance was done by the broker of Mr. Kalabakas who took all essential information from him over phone. In 2012, the property was destroyed due to fire and Mr. Kalabakas claimed for insurance of amount &1.4 million. Also, he claimed for contents and demolition mentioned in the policy but the claim was denied by the insurance company on the basis of fraudulent misrepresentation and non-disclosure of facts by the claimant.
Issue – Was the Insurance Company liable to compensate to the claimant?
Rule – According to Section 21(1) of the Insurance Contracts Act 1984, it is the liability of insurance holder to disclose all the information in knowledge before the insurer and which is essential to be in knowledge of the insurer to take decisions regarding risk acceptance. In a similar manner, Section 26 of the Act states that when the statements made by a person related to the insurance contract are found to be false knowingly and that it would affect the decision of the insurer regarding insurance facility to the insurance holder or the risk acceptance after the factual revelation of the information. The consequences of the false misrepresentation and non-disclosure are discussed under Section 28(2) of the Act. This section enables the insurer to terminate the contract in such conditions., 
Application – The insurer appealed that claimant did not disclose the information knowingly and violated Section 21(1) because the information provided by him would have been the decisive factor for the insurer whether to accept the risk or not. The information that should have been disclosed by the insurance holder were that the construction was incomplete till the initiation of the policy, property under dispute due to structural flaws, lack of resolution of the structural flaws, and lack of legal residence certificate. Section 28(2) of the Act considered such kind of non-disclosure as fraud and thus, policy renewal was annulled.
Conclusion – The Court gave the decision that the liability of the insurer becomes zero when the disclosure information is not appropriately provided by the insurance holder. In order to decide whether to accept the risk or not, insurer needs appropriate disclosure of information even of it is misrepresentation or not, if it is improper, the liability of the insurer become zero as mentioned under Section 28(3) of the Act. This case implies that accusations of fraud must be pleaded in an appropriate manner and there should be sufficient documentary evidence to support the plea.  
Facts of Case
Two retailers Pedro and Lisa used to sell French jewellery in Melbourne. At the time of selling entire business to Pedro, Lisa made a contract with Pedro that she would not carry on or engaged in the trade of imported French jewellery for two years from the date of initiation of contract all across the Australia. After a period of 1 year to the contract, Lisa got into a new retail business of selling imported French jewellery in Cairns situated in Queensland.
Issue- Can Pedro impose contractual promise on Lisa?
Rule – In this case, there is applicability of the Contract Law of Australia which provides rules and provisions regarding contract established between contracting parties. The Australian Contract Law requires consideration at the time of formation of contract between the contracting parties. Although, there are various other requirements for the contract formation but consideration is must. 
The Common Law requires the agreement between the parties to the contract to be obligatory. The promise must be followed by a certain type of consideration which might be a certain amount of money as a promise. The consideration in the form of cost determined by the promisor can be utilized in a wider perspective such as it is not essentially to be monetary, however, it must include certain kind of disadvantage by the promisee in case of non-fulfilment of the promise. Thus, there is extreme significance of consideration for the formation of contract which could be anything taken into consideration in a lawful manner. In addition to it, all the other terms and conditions essential for the formation of contract are considered to be as binding for parties entering into a contractual relationship, all of which is referred to as terms of contractual promise between the contracting parties. The parties to the contract violating any of these terms and conditions are considered to be as breaching the contract. 
Application – As found Pedro and Lisa were in a contractual relationship made between them at the time of Lisa selling her entire business to Pedro. She agreed upon under the contract that she would not perform or be involved in the trade of imported French jewellery for two years from the date of initiation of contract all across the Australia. The promise she made in the contract was a type of consideration as termed for contract purpose. Lisa established her own retail business within a year of the contract and that too of selling French jewellery in Cairns i.e. in Australia. It is evident that she breached the terms of contract or the promise or consideration she agreed upon, at the time of formation of contract. She had entered into contractual promise with Pedro not to perform or engage into business of French jewellery for two years and she broke the promise. It was her obligation to be bound to the contractual terms till the completion of the contract.
Conclusion – Lisa broke her promise and Pedro can impose contractual promise on Lisa but only through court. Pedro can sue Lisa in the court because there was existence of valid enforceable contract between the two contracting parties. The court will order compensation to be given by Lisa to Pedro because of financial loss faced by him due to Lisa. So, Pedro should take the matter to the court and should demand compensation for the financial loss caused to him.  
References
ACCL. (2016). Australian Contract and Consumer Law. Retrieved from Australiancontractlaw.com: https://www.australiancontractlaw.com/
ACCL. (2018). Contracts & agreements. Retrieved from Accc.gov.au: https://www.accc.gov.au/consumers/contracts-agreements
Austlii. (2017). Real Property Act 1990. Retrieved from Austlii.edu.au: https://classic.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/
Austlii. (2018). Conveyancing Act 1919 – SECT 117. Retrieved from Austlii.edu.au: https://classic.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/s117.html
Australian Contract Law. (2016). Australian Contract and Consumer Law. Retrieved from Australiancontractlaw.com: https://www.australiancontractlaw.com/
Clarke, J. (2015). Consideration. Retrieved from Australiancontractlaw.com: https://www.australiancontractlaw.com/law/formation-consideration.html
Estes, C. J. (2009). Contract: A Promise or an Agreement? Washington University Law Review, 11(4).
Gumland Property v Duffy Bros Fruit, S395/2007 (High Court of Australia March 27, 2008).
High Court of Australia. (2008). Gumland Property Holdings Pty Limited And Duffy Bros Fruit Market (Campbelltown) Pty Limited & ORS. Retrieved from Hcourt.gov.au: https://eresources.hcourt.gov.au/downloadPdf/2008/HCA/10
Hodges, K. (2015). Non-disclosure and misrepresentation: Underwriting records prevail Ð Kalabakas v Chubb Insurance Company of Australia Ltd [2015] VSC 705. Retrieved from mccabecurwood.com.au: https://mccabecurwood.com.au/non-disclosure-and-misrepresentation-underwriting-records-prevail-kalabakas-v-chubb-insurance-company-of-australia-ltd-2015-vsc-705/
Kalabakas v Chubb Insurance Company of Australia Ltd, S CI 2013 02801 (Supreme Court of Victoria December 11, 2015).
LaMance, K. (2018). What Are Contract Obligations? Retrieved from Legalmatch.com: https://www.legalmatch.com/law-library/article/contract-obligations.html
Lavan. (2018). Contractual promises – are they binding? Retrieved from Lavan.com.au: https://www.lavan.com.au/advice/property_leasing/contractual_promises_are_they_binding
Law Teacher. (2018). Introduction to Contract Law. Retrieved from Lawteacher.net: https://www.lawteacher.net/modules/contract-law/
Lethlean, J. (2008). Australia: A Landlord´s Right To Recover Loss Of Bargain Damages. Retrieved from Mondaq.com: https://www.mondaq.com/australia/x/62514/landlord+tenant+leases/A+Landlords+Right+To+Recover+Loss+Of+Bargain+Damages
Monash University. (2017). Commercial law: Contract law. Retrieved from Lib.monash.edu: https://guides.lib.monash.edu/commercial-law/contract-law
Probert, A., & Boughton, L. (2016). Australia: Fraudulent non-disclosure and misrepresentation in property claim successfully proven. Retrieved from Mondaq.com: https://www.mondaq.com/australia/x/480002/Insurance/Fraudulent+nondisclosure+and+misrepresentation+in+property+claim+successfully+proven
Rule of Law Institute of Australia. (2018). Case Note – Contract Law. Retrieved from Ruleoflaw.org.au: https://www.ruleoflaw.org.au/contract-law/
The Free Dictionary. (2018). Contracts. Retrieved from thefreedictionary.com: https://legal-dictionary.thefreedictionary.com/Nature+and+Contractual+Obligation
Thomson Reuters. (2018). When Will a Promise or Statement Be Considered a Binding Contract? Retrieved from Findlaw.com: https://smallbusiness.findlaw.com/business-contracts-forms/when-will-a-promise-or-statement-be-considered-a-binding.html

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