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CO5119 Business Law (MBA/MPA)

Assessment Task 2 – Research Task

There are three parts to this assignment.

Part 1: Discussion board posts (satisfactory/unsatisfactory)

Part 2: Topic questions (10%, 600 words maximum)

Part 3: Statutory interpretation (20%, 900 words maximum)

Note: parts 2 & 3 are to be submitted into LearnJCU as a single DOCX file.

The Question

You are a senior associate in a small law firm.  You have been tasked with advising a new client, Adam Abacan.

Adam’s dispute with Benedict Balmores

Adam Abacan had always been interested in the paranormal.  He is an avid watcher of spooky television serials, hosts séance parties with friends, and seeks out haunted areas in North Queensland to explore.  He is known amongst his friends and family to be cheerful, and kind, but somewhat dim-witted.

Six months ago, he was contacted by Benedict Balmores, a person that Adam knows to be an expert in paranormal matters.  Benedict has an art business and buys and sells old paintings regularly.  Benedict meets Adam and tells him enthusiastically about the “psychomatter potential” of his house and the collection of 18th-century paintings contained within.  Adam is intrigued by this and invites Benedict to perform séance sessions and to bring people into his house.  This occurs several times and Adam tells Benedict that he is eager to learn about how to ‘contact’ spirits.  Benedict gives him some advice and they jointly run several sessions together. 

Approximately three months ago, Benedict mentioned that Adam’s house and the paintings were unique and that if he sold them to him, he could increase the “critical mass of psychomatter”.  Adam was very keen to do this.  Benedict said to him that he needed to make sure “everything was okay legally” and gave him the business card of his own lawyer, Clarissa Cadiz.  Benedict also said that the “psychomatter potential” was fluctuating and that he had to go away for a month so that it might be a good idea to do the sale before he leaves later that week.

The house and paintings had a market value of $300,000 and $200,000 respectfully.  The next day, Benedict drafted a contract to purchase the house and painting for $150,000 and $100,000 respectfully.  Benedict drove Adam to Clarissa’s office, but Adam refused to get out of the car, saying that he had full faith in Benedict and that he did not need a lawyer.  Benedict and Adam signed the contract that day.

Three weeks after transferring the house, Adam went to visit and has found to his horror that Benedict has already sold it to another person in the group of séance regular participants for $500,000.  Benedict has also sold the paintings for $400,000 through his art business.

On the given facts, draft a letter of advice to Adam.  You must only analyse how the Australian Consumer Law applies and not any cause of action in the general law.  However, you will need to explain the terms “undue influence”, “unconscionable”, as well as the defences to both in order to answer this problem satisfactorily.

Answer:

Topic 2

The colonization of Australia was different from the rest of the world because, British invaded Australia in a different manner. The British empire had first started its expansion in the form of setting up of prison colonies. The post colonization inhabitants of Australia were the convicts and criminals left behind by the British and the original inhabitants were pushed to the marginal lands and the waste lands. The other countries such as Canada, India, Jamaica were colonized differently as they were invaded by establishing trade agreements and trading relationships. India, Jamaica, Canada was like markets for the British and Australia on the other hand was a prison colony where they would ship their criminal as the British prisons were overflowing. Mabo v Queensland [No 2] (1992) 175 CLR 1 was an important case in the history of Indigenous population rights in Australia because the case recognized the special right

that indigenous people have with their land. The Murray Islanders along with the members of the Miriam community in the year 1982 had sued the State of Queensland and the Commonwealth in the High Court and it was held that after annexation the islands had become the waste lands of the Crown. The case inserted the principle of native rights in the Australian jurisprudence.

  Topic 3The very famous case of Amos v Monsour Pty Ltd [2010] FCA 741 had observed that in a contract to be enforceable it is not necessary to have mutual obligations however, what is necessary is the meeting of minds or consensus among the parties. This meeting of minds must shed light upon the arrangements and understanding between the parties. There lies a substantial difficulty with this notion in the contract law because it gets very difficult to prove that the parties agreed on the same things in the same sense (Mitchell, 2018). In the case of Top Performance Motors Pty Ltd v Ira Berk (Q) Pty Ltd  24 FLR 286 the judges have

noticed that the difficulty arises in proving the manner in which a particular understanding was to be executed by each party in a contract. The instances of misunderstanding and incapacity to interpret are very common in contract litigations which gives the parties a bracket to back out from their obligations under the contract. In addition to this, if the terms of the contract are not written properly and there is any kind of ambiguity (Hutchison, 2017), the courts rules out in the favour of the party who is at a lesser advantage in the deal.

 Topic 4

Yes, according to me the exclusion clauses should not be interpreted as the power relationship in a contract. The role of determining this should be left to the courts and not the parliament. In the case of Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 3 the court has interpreted that the terms of exclusion contract should be interpreted independent of the balance of parties or on the terms of the contract as a whole. An exclusion clause is a part of the whole contract and not an independent contract within a contract. Exclusion clauses are a common occurrence of the insurance policies and hence should be interpreted in light of the whole contract or policy and not just on power relationship basis.

The researcher says to because the courts are the ones dealing with the interpretation and the facts of a contract. The legal sanctity of the contract is to be determined by the courts. There cannot be a strait jacket formula to be applied on all cases (Giancaspro, 2017). Therefore, it is right to let the courts to determine the exclusion clauses in the light of the power relationship or other principles of legal conformity.

 Statutory Interpretation

Adam is an enthusiast for the paranormal activities. The passion of Adam can be seen from his activities where he executes séance sessions regularly. He is always on the lookout for haunted places and is keen to explore the paradigms of the spiritual world. He is contacted by Benedict an arts dealer. Benedict knew the tendency of Adam towards paranormal activities and an unusual attraction and interest in such activities. taking advantage of this knowledge, Adam was duped by Benedict to sell his house and paintings worth, $300,000 and $200,000 respectively for a half price of $150,000 and $100,000. The goods were later sold for $500,000 and $400,000 respectively. In the backdrop of these facts, the advice is advanced to the client as follows-

Firstly, it is assessed that the case falls under the realm of the Australian Consumer Law because-

  1. The deal took place after November 2016.
  2. It is a standard form of contract as it is related to sale of domestic building and the contract is for the sale or the supply of goods (paintings and the house)
  3. One of the parties of the deal was a small business owner (Benedict)

Therefore, the postulates of the Australian Consumer Law are applicable to the given case. The deal executed executed between Adam and Benedict is voidable at the option of Adam because it is a clear violation of Australian Consumer Law (Bourova et al., 2020).

Adam can seek the remedy of declaring the sale transaction as unfair. The term unfair has been described under section 24 of the Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)), and the unfair terms of a contract are void as per section 23 of the Australian Consumer Law. The three tests of unfair term iterated by the courts of Australia are-

The terms lead to a significant imbalance in the rights and obligations of the parties to the contract

It is not reasonably necessary to aid the advantageous party under such type of contract

It will cause significant damage and detriment to the disadvantages party. Benedict had drafted unfair terms and condition for the sale of the house and the paintings.

The client has acted under the undue influence of Benedict and thus, the entire deal is voidable at the option of Adam. In the case of  Johnson v Buttress (1936) 56 CLR 113 at 126, the term undue influence has been defined as a case where the contract results from the undue pressure and not of independent and free judgment. In the present case, Adam did not take a free judgement regarding his property (Van Der Westhuizen & Evans, 2019). Benedict lured him in the deal saying that if he sold his house, the critical mass of the psychomatter of his house and the paintings will be increased. Taking Benedict’s word to be true Adam executed the deal for a meagre sum of $150,000 and $100,000 for the house and the paintings. Undue influence is applicable here because –

  • Benedict knew the tendency of Adam to incline towards the activities related to the paranormal world.
  • He lured Adam by saying that selling the house will increase the critical mass of the psychomatter
  • He used the terms like psychomatter because he knew that Adam will be attracted to the deal because of the presence of an element of paranormal activity attached to the whole deal
  • There was an inequality of power between the contracting parties and hence the plea of undue influence is available to Adam

Sections 20 and 21 of the Australian Consumer Law, prohibit and unconscionable act in acquisition and supplying a good in trade and commerce. The term unconscionable act is not defined in the laws, because it is the intention of the Parliament to include all the laws written or unwritten to the word unconscionable to protect the interests of justice, equity and good conscience (Burdon, 2018).

The defences that Benedict may take under the litigation can be that he had suggested Adam to conduct and verify things legally and Adam refused the same because he trusted Benedict completely. Benedict had offered the help of his counsel Clarissa for Adam to ensure Adam that all the things were legally sound. In addition to this, Benedict even drove Adam to Clarissa’s office but Adam refused to get out of the car and trusted Benedict blindly. Therefore. Benedict may say that the act was not unconscionable as he had offered legal solicitation for Adam. However, Adam can plead that Clarissa was Benedict’s lawyer and hence her advice was of no consequence or importance to Adam as her loyalty lied with the interests of Benedict and even if Adam would have met Clarissa she would not have given him a sound legal advice for the entire deal and transaction.

 References

Bourova, E., Ramsay, I., & Ali, P. (2020). A’Damaging Loophole”Long Overdue’for Closing: Extending Consumer Protections Against Unfair Contract Terms to insurance. Competition and Consumer Law Journal, 27(3), 264-294.

Burdon, T. (2018). When the company line is unlawful: An overview of systemic unconscionable conduct. Bulletin (Law Society of South Australia), 40(9), 22-23.

Giancaspro, M. (2017). Is a ‘smart contract’really a smart idea? Insights from a legal perspective. Computer law & security review, 33(6), 825-835.

Hutchison, A. (2017). Relational theory, context and commercial common sense: views on contract interpretation and adjudication. South African Law Journal, 134(2), 296-326.

Mitchell, C. (2018). Interpretation of contracts. Taylor & Francis.

Van Der Westhuizen, C., & Evans, P. (2019). ACL Unfair Contract Terms and Standard Construction Contracts. U. Notre Dame Austl. L. Rev., 21, 1.

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