29/02/12 8:31 AM

Business Law and Ethics Review Notes

Lecture 1Profit affect business decisions, but do we really have a free market to

conduct our business in?

Ethics: Concerned with how we should behave, and involves theories that

describe the ‘right’ way to make a decision.

Morality: Consists of what persons ought to do to conform to society’s

norms of behaviour, whereas ethical theory concerns the philosophical

reasons for and against aspects of social morality.

E.G.: Morally, society says that stealing is wrong. Ethical theory examines

and explains why.

Is ethics relevant to business? Some might argue that the concept of

‘business ethics’ is incompatible with a business’ goal of making a profit.

Others argue that businesses should be ethical because being ethical is

good for the bottom line (Harrison, p3), whilst others say that business

should be ethical because being ethical is the right thing to do (Harrison,

p3).

Kohlberg’s theory of moral development

Lawrence Kohlberg is famous for his theory of “cognitive moral reasoning

and development” in which he mapped out various stages in which

individuals pass through on their way to moral maturity.

BUSINESS DECISIONS

Internal ForcesType of

Business Structure

EthicsCSR

Corporate Governance

External (Legal) Forces

Contract LawAgency

Tort LawConsumer Law

External (Structural) Forces

Legal SystemDispute Resolution

Regulation

LEVEL 1: PRE-CONVENTIONAL

“An individuals’ focus at this level is exclusively self-centred such that

ethical decisions will only be made if they bring about a benefit. “

Stage 1: Act to avoid punishment: E.G. toddler will not draw on the wall

because he will be punished

Stage 2: Not wanting to miss out on good things: E.G.: Behaving in order

to get dessert after dinner

LEVEL 2: CONVENTIONAL

“Individuals at this secondary stage are increasingly concerned with

conforming and maintaining relationships within a community.”

Stage 3: Being a good boy: E.G. doing things that appear to be correct in

order to be socially accepted

Stage 4: Lives in accordance of the law: E.G. Not killing someone

because it is against the law

LEVEL 3: POST-CONVENTIONAL

“Individuals at this stage go beyond the mere compliance to the law and

are motivated by moral/ethical principles.”

Stage 5: Questioning the principles they follow: E.G. campaigning to

change the law because society will be better off

Stage 6: Able to give a rational defence of the moral principles that guide

our actions.

Ethical Theory

Ethical theories attempt to systematize ordinary moral judgments, and to

establish and defend basic moral principles. Ethical theory explains why

actions are right or wrong by providing a decision-making procedure for

resolving difficult cases. Ethical theory also makes it possible for an

individual to explain and justify his/her decision to others.

Egoism

“Everyone ought to act on the basis of self interest”

Don’t always ignore the interests of others, but act if it suits

one’s own interests to do so

Not always greedy or selfish, but motivation for acting will be to

gain self benefit

Utilitarianism

“Try and gain the best outcome for all the parties that are affected”

Good outcomes is not limited to happiness or pleasure, but also

friendship, knowledge and courage too

Utility is measured as a whole, choosing option that gives the

greatest good

Kantian Ethics

“One’s duty to do what is morally right and to avoid what is morally

wrong, regardless of the consequences”

Doing the right thing for the wrong reasons cheapens the result:

actions must come from sense of duty

Moral actions must be universally accepted, respecting others

and reversibility: would you like to be on the receiving end of

such action?

Virtue Ethics

“A set of personal characteristics that, if practised, will ensure that the

individual is likely to make the ‘right’ choice in any ethical dilemma they

are faced with”

Virtues are personal qualities that provide the basis for the

individual to lead a good life

If there were danger, a virtuous person would have to overcome

his fears but avoid acts of rashness to obtain best result.

Solving Ethical Dilemmas

Many people prefer to avoid the problem rather than confront and

acknowledge an ethical dilemma. E.G.: Everybody else does it/I was just

following orders/If we do not do it, someone else will.

Ultimately, a person’s decision will depend on their moral development

and which ethical theory they find more appropriate.

29/02/12 8:31 AMLecture 2

What makes a company a company:

Separate legal personality

Limited Liability

Transferable shares

Delegated management under a board structure

Investor ownership

A company is considered at law to be a separate legal entity. This means

that it is legally a different ‘person’ to all the people who own the

company (shareholders), the people who control the company (directors)

and the employees.

Another distinct feature of a company is that it has limited liability. This

means that the shareholders (the owners of the business) will only lose

the value of their investment if the company has too many debts. Any

creditors who are still owed money cannot claim from the shareholders’

personal assets. This is not the same for a sole trader or partnership

Corporate Governance

“Framework of rules, relationships, systems and processes within and by

which authority is exercised and controlled in corporations. It

encompasses the mechanisms by which companies, and those in control,

are held to account”

Influences how the objectives of the company are set and

achieved

Influences how risk is monitored and assessed

Influences how performance is optimised

With many collapses occurring, corporate governance has been

changed and edited. Ethics in business also has been looked at.

ASX Principles of Corporate Governance

These principles are not prescriptions; they are guidelines for practices.

Principle 1 – Lay solid foundations for management and oversight

Companies should establish and disclose the respective roles and

responsibilities of board and management:

Rec 1.1: Companies should establish the functions reserved to

the board and those delegated to senior executives and disclose

those functions

Rec 1.2: Companies should disclose the process for evaluating

the performance of senior executives

Rec 1.3: Companies should provide the information indicated in

the guide to reporting on principle 1

Principle 2 – Structure the board to add value

Companies should have a board of an effective composition, size and

commitment to adequately discharge its responsibilities:

Rec 2.1: A majority of the board should be independent directors

Rec 2.2: The chair should be an independent director

Rec 2.3: Roles of chair and chief executive officer should not be

the same person

Rec 2.4: Board should establish a nomination committee

Rec 2.5: Companies should disclose the process for evaluating

the performance of the board, committees and individual

directors

Rec 2.6: Companies should provide info indicated in the guide to

reporting on Principle 2

Principle 3 – Promote ethical and responsible decision-making

Companies should actively promote ethical and responsible decision-

making

Rec 3.1: companies should establish a code of conduct and

disclose it as to the practices necessary to: maintain confidence

in the company’s integrity, take into account their legal

obligations and expectations of shareholders, responsibility and

accountability of individuals for reporting and investigating

reports of unethical practices

Rec 3.2: Companies should establish and disclose the policy

concerning trading and company securities by directors, senior

executives and employees

Rec 3.3: Companies should provide the information indicating in

guide of Principle 3

Principle 4 – Safeguard integrity in financial reporting

Companies should have a structure to independently verify and safeguard

the integrity of their financial reporting

Rec 4.1: Board should establish an audit committee

Rec 4.2: Committee should be structured so that it consists only

of non-executive directors, majority of independent directors,

chaired by independent chairperson, and have at least 3

members

Rec 4.3: Committee should have formal charter

Rec 4.4: Companies should provide information indicated in

guide of principle 4

Principle 5 – Make timely and balanced disclosure

Companies should promote timely and balanced disclosure of all material

matters concerning the company:

Rec 5.1: Companies should establish written policies designed to

ensure compliance with ASX listing rules

Rec 5.2: Companies should provide information indicated in

guide of principle 5

Principle 6 – Respect rights of shareholders

Companies should respect the rights of the shareholders and facilitate the

effective exercise of those rights:

Rec 6.1: Companies should design a communications policy for

promoting effective communication with shareholders

Rec 6.2: Companies should provide information indicated in

guide of principle 6

Principle 7 – Recognise and manage risk

Companies should establish a sound system of risk oversight, risk

management and internal control

Rec 7.1: Companies should establish policies for the oversight

and management of material business risks and disclose a

summary

Rec 7.2: Board should require management to design and

implement risk management/internal control system to manage

company’s material business risks and report it

Rec 7.3: Board should disclose whether it has received assurance

from CFO and CEO

Rec 7.4: Companies should provide information indicated of

principle 7

Principle8 – Remunerate fairly and responsibility

Companies should ensure that the level and composition of remuneration

is sufficient and reasonable and that its relationship to performance is

clear:

Rec 8.1: The board should establish a remuneration committee

Rec 8.2: Companies should clearly distinguish the structure of

non-executive directors’ remuneration from that of senior

executives

Rec 8.3: Companies should provide information indicated of

principle 8

Collapses

Many companies can edit their books, and this can be done in many ways.

For example, failing to disclose short-term debts not only decreases

current liabilities, it also gives a more positive outlook for the business as

a whole.

Corporate Social Responsibility

Revolves around the key question:

Whose interests should business serve?

Companies have an economic responsibility to produce goods and

services, provide jobs, and make a profit. They also have legal

responsibilities.

“The concept of corporate social responsibility is often expressed as the

voluntary assumption of responsibilities that go beyond the purely

economic and legal responsibilities of business firms”

Examples of CSR:

Adopting quality and environmental standards

Providing benefits for employees and improving the quality of life

in the workplace

Using corporate resources to operate a program that addresses a

social problem

Stakeholder theory

Stakeholder: “Someone who holds an interest or ‘stake’ in how the

company acts.”

Business can be understood as a set of relationships among

groups which have a stake in the activities that make up the

business

This theory considers the company from a broader perspective

whereby the shareholder is only one of the many potential

stakeholder groups

This means that all of the stakeholders are impacted upon and

also impact on the company.

Companies can only achieve it’s goals with a full and detailed

understanding of the relationships it holds with the different

stakeholder groups

Business Law and Ethics Review Notes Matt EdgarLecture 3

Regulation

“the control of corporate and commercial activities through a system of

norms and rules which may be promulgated either by governmental

agencies (including legislatures and courts) or by private actors, or by

a combination of the two. The direct involvement of the state is not a

necessary condition for the existence of regulation in this sense, since

rules may be derived from the activities of industry associations,

professional bodies or similarly independent bodies.”

Theories of regulation

Should regulation exist?

Three theories:

o Public interest theories

o Private interest theories

o Institutionalist theories

Public Interest Theory

“Those responsible for regulation do so with the objective of promoting

the general welfare of the community”

2 parts:

o Welfare economics approach

o Political approach

Welfare Economics Approach

“Suggests that regulation is a response to imperfections in the market

(market failure)”:

Competition law is the government’s way of stopping anti-

competitive monopolies: E.G. stopping price fixing – if there is

only one company with no competition, the big boss can set the

price to a high as he/she wants, because there is no competition.

This is seen as bad for the public.

Government needs to step in because the market has failed!

Public Good

“Some goods/services are best provided for the whole community, and

market cannot regulate this.”

Consumption by one person does not leave less for others

No practical for suppler to exclude those who do not pay

E.G.: Defence Force:

o Required to protect everyone

o People would have no incentive to pay; and as a result

there would be free-riders

o Regulation needed to ensure people pay (taxes)

o This regulation is to stop market failure

Political Approach

“suggests that values such as social justice and redistribution are what

can justify regulation.”

E.G: pay more tax if you earn more – regulation

Doing whats right

Private Interest Theories

“regulation often benefits particular groups in society, and not always

those it was seemingly intended to benefit.”

This theory is sceptical of purity goals that those who regulate

seek to pursue

Assumes that regulation emerges from individuals or groups who

are motivated to maximise their self-interest

Regulation may or may not promote public interest, but if it does

it is a coincidence

Private interest theories stress the ease in which regulatory failure and

regulatory capture can occur

Regulatory Failure

“Collective costs of regulation outweigh the benefit of being regulated”

E.G.: jaywalking: accidents cost $100,000 a year, and regulating

it (more police enforcing rule) costs $200,000.

Regulatory Capture

“Officials within regulatory institutions who are charged with promoting

collective welfare develop such close relationships with those they

regulate that they promote the narrow interests of this group instead of

the broader community.”

E.G. Centrelink regulate unemployment, and this organisation

could become so attached to them, start promoting best self-

interest for this group, may even start arguing for this group.

“Regulation is not about the public interest at all, but is a

process, by which interest groups seek to promote their private

interest ... Over time, regulatory agencies come to be dominated

by the industries regulated.”

Public vs Private

Public interest theories stress market failure and the capacity of

regulation to correct such failures.

Private interest theories stress regulatory failure and the

tendency of the market to allocate resources efficiently.

Institutionalist Theory

Tripartism:

o This focuses on cooperation

o Public interest groups (eg community group, trade unions,

environmental groups) become a legitimate 3rd party in the

regulation process between the regulating agency and the

regulated.

o The public interest group has access to all information,

they have a seat at the negotiating table, and has the right

to take action to enforce the regulation just like the

regulator.

o It avoids the problems of cooperation between only two

parties leading to regulatory capture or corruption.

Regulators

Statutory authorities are established to administer particular Acts passed

by Parliament.

This administrative role essentially involves:

o Investigation and enforcement of the relevant legislation;

o Gathering information and complaints from the public;

o Disseminating information and educating the public.

Australian Competition and Consumer Commission (ACCC)

Peak consumer protective and competition agency

Act in an anti-competitive way

Has a range of measures to ensure compliance and enforcement,

such as the use of educational campaigns, issuing infringement

notices and taking legal action

Australian Securities and Investment Commission (ASIC)

Corporate, markets and financial services regulator

Independent Commonwealth Government body. Use corporations

act

Regulates Australian companies, financial markets, financial

services organisations and professionals who deal and advise in

investments, superannuation, insurance, deposit taking and

credit

Role:

Corporate: maintaining a public register of all companies,

regulating internal administration of a company, activities such

as fundraising, financial reporting, market disclosure, shareholder

right

Market: Oversees the operation of the Australian Stock Exchange

Financial Services: Monitors financial services businesses (super,

managed funds, shares, securities, insurance)

Australian Taxation Office (ATO)

Government’s principal revenue collection agency

Manage and shape tax, excise and superannuation systems that

fund services for Australians

Wide powers to investigate the law

Publishes information to educate, but also publishes Tax Rulings.

Australian Prudential Regulation Authority (APRA)

Responsible for supervision of individual financial institutions and

for promoting financial system stability

Supervises authorised deposit taking institutions (banks, building

societies, credit unions). Insurance, superannuation funds.

29/02/12 8:31 AMLecture 4

Law

“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”

Legal Systems

The law operates within a legal system (i.e. structures set up to

allow the law to function effectively)

What makes a legal system effective?

o Certain: A system that is uncertain would traumatise us

o Flexible: Capacity of the law to adapt to change (e.g.

technology)

o Known: Publication of the law

o Fairness: Law must be fair, just and necessary

o Obeyed: Law must be obeyed and provide penalties for

those who don’t obey it.

Common Law system

Derived from case law and statute

Forms the basis of English law, can be found in countries like

Canada, Malaysia, Singapore, Australia and NZ

Courts operate in an adversarial manner

Civil Law system

Derived from Roman system of law

Complete code of written laws whose primary source of law is

legislation

Courts tend to operate in an inquisitorial manner

Forms the basis of the legal systems of most Western European

countries and other countries like Japan.

Classifying Law

Public vs Private

Criminal vs Civil (under common law system)

Case vs Statute

If there is a conflict, statute law wins

Common vs Equity

Fused together in 1873!

Australia’s Legal System

“System where the powers are divided by the Constitution between the

Commonwealth and the states.”

Specific powers were granted to the federal or Commonwealth

Parliament under the Constitution (eg customs, military forces,

currency) and residual powers either shared or remained with the

states.

Exclusive powers: only the Federal parliament can make laws in this area.

Eg: s114: military forces; s115: currency matters

Concurrent powers: both state and Federal parliaments can legislate in

these areas

S51: Banking, Insurance

A Federal law overrides a state law to the extent of any

inconsistency: s109 of the Constitution.

Residual powers: Anything else goes to the states

Eg: education, local government, transport

Constitution

The Constitution can only be changed by referendum, which is where a

proposed amendment is put to the people of Australia to vote on

To pass a referendum, an amendment needs a ‘double majority’

– the proposal must be approved by a majority of voters and

there is majority approval in a majority of states.

So more than 50% of the voters nationwide + a majority of

voters in at least four states must say ‘yes’.

One of the features of the Constitution is that it provides for separation

between the legislative, executive and judicial powers of the

Commonwealth.

This is known as the separation of powers doctrine, because only certain

bodies can exercise certain powers:

Legislature

Executive

Judiciary

Good Definitions

Legislature – legislative power is vested in the Federal Parliament

Executive – executive power vested in the Queen and is

exercisable by the Governor General with the Federal Executive

Council advising the Governor General

Judicature– vested in the High Court and such other courts as the

Parliament creates.

Functions:

Legislative function = making of the law through Parliament

Executive function = the formulation of policy and its

administration through the Cabinet of the elected

Commonwealth (or state) Government

Judicial function = interpretation, application and enforcement of

the law through the court systems

In theory the doctrine of the separation of powers means that no

one person or body shall exercise more than one power.

In reality, there is no strict separation of powers between the

executive and legislative functions of federal government in

Australia

Parliament

The primary function of parliament is to pass legislation (Acts,

Statutes).

Under the constitution, Federal (Commonwealth) parliament only

has limited power to make laws.

Should parliament make laws that are not covered by their

powers in the Constitution, the statute may be challenged in the

High Court because it is unconstitutional.

The Federal Parliament is bicameral, which means that it is

divided into two houses.

The Upper house (Senate), consists of 76 seats. Each state gets

12 senators and the two territories get 2 each.

The Lower house (House of Representatives) consists of 150

members who represent an electorate. These people are MP’s

(Member of Parliament).

Electorates are determined by population size, which is roughly

125,000 people (about 85,000 voters).

The Queensland Parliament is unicameral – it only has one house, and is

the only state to govern this way (although NT & ACT are also

unicameral). Qld’s upper house was controversially abolished in 1922.

The Lower house (Legislative Assembly) consists of 89 members

from electorates. These people are called MLA’s (Member of the

Legislative Assembly).

Functions of Parliament:

To pass legislation

To check and scrutinise government activities, such as the

spending of public money

To provide a platform from which government is formed. The

political party (or coalition of parties) that has a majority of seats

in the Lower house forms government).

To provide funds needed for government

To provide a forum in which MP’s can represent and provide a

voice for the people of their electorate.

The Executive, or realistically ‘Cabinet’ (an official forum comprising the

PM and senior ministers) decides on policy.

The minister responsible arranges for a Bill and Explanatory Memorandum

to be drafted.

The Bill is introduced into Parliament.

Parliament then consider the Bill, and if more than 50% vote in favour of

it, in EACH house, and the Bill receives Royal Assent, then the Bill

becomes an Act.

Delegated Legislation

Making legislation is a time-consuming process, and parliament

only sits at certain times of the year.

For this reason, Parliaments may delegate their right to make

legislation to other entities. This is permitted in accordance with

a long established convention. These entities could include:

o Government departments (Dpt of Education)

o Local Governments (Council)

Laws made this way go by such names as: subordinate

legislation, regulations, by-laws or orders-in-council.

These have the same effect as an Act of Parliament.

The delegation of power to the other body has to come from an

Act, so that there is an accountability mechanism.

Executive Government

“the power to administer the law, carry on the business of government

and maintain order and security.”

The Governor-General acts on the advice of the Federal

Executive Council consisting of the various ministers

Government is usually divided into ‘departments’ which allow

people with expertise to work together.

A Minister is a person who oversees a department. Australia uses

a system of responsible government which means that the

minister has to be a member of parliament, so that they are

accountable

Each minister is responsible for a particular portfolio and

government department

Ministers responsible for the more important portfolios are called

Senior Ministers and ministers responsible for the less important

portfolios are called Junior Ministers.

Senior ministers are members of Cabinet.

A minister may be a member of either House of Parliament.

Members of the majority political party who are not allocated a

ministerial position are known as backbenchers.

Governor General – things he/she can do:

Can appoint or dismiss Ministers

Appoints judges

Decides when Parliament meets

Has final approval over legislation

Is the Commander-in-Chief of the defence forces

Dissolves Parliament and calls elections

Can remove government and appoint caretaker government

Courts

“A role of the courts is to apply the law, and to interpret the meaning of

statutes.”

Judges rely on previous cases that have interpreted the

legislation, common law rules of statutory interpretation and the

Acts Interpretation Act.

Interpreting a Statute

Literal Rule (common law rule of statutory interpretation):

The rule directs judges to give words in statutes their literal or

exact meaning.

Golden Rule (common law rule of statutory interpretation):

Courts can modify a literal interpretation of the statute to remedy

an absurd or inappropriate result.

Mischief Rule (common law rule of statutory interpretation):

Statute is interpreted with the primary aim of preventing the

mischief the statute was designed to prevent. The judge

determines this by looking at the purpose or intention of the

legislation.

29/02/12 8:31 AMLecture 5

Courts

Courts interpret and apply law

There is a hierarchy of courts

Jurisdiction: “Authority of the Court to hear a case and make a

decision.”

Courts have original and appellate jurisdiction:

Original jurisdiction: “The power to hear a matter for the first time.”

Appellate jurisdiction: “The power to hear appeals from the decisions of

lower courts.”

High Court of Australia

Highest court

7 members; one chief justice

Original jurisdiction: High Court can hear cases such as

constitutional issues

In an original jurisdiction, the High Court is usually presided by

one judge

Appellate Jurisdiction: The High Court can hear appeals from

State Supreme Courts and Full Court of Federal and Family Court

o Special permission must be granted to appeal a matter to

the High Court

Federal Court of Australia

1 Chief Justice, and other judges as appointed

Original Jurisdiction:

o Trade practices (restrictive trade practices, misuse of

market power);

o Federal taxation;

o immigration

Appellate Jurisdiction: Full Court of Fed Court (3 Judges) hear

appeals from:

o A single Federal Court judge;

o A Federal magistrate;

o A single judge of a State Supreme Court which is exercising

federal jurisdiction (e.g. in matters such as copyright, trade

marks, taxation and bankruptcy). This is called “cross-

vesting” jurisdiction of the court.

Family Court of Australia

Original Jurisdiction:

o All family law matters such as divorce, custody of children,

division of property, maintenance of spouse

Appellate Jurisdiction:

o a single judge of the Family Court can hear appeals of

family law decisions from the Federal Magistrates Court;

o the Full Court of the Family Court hears appeals from a

single judge of the Family Court.

Federal Magistrates Court

More simple and accessible alternative to litigation in federal and

family court to reduce their workload.

Supreme Court of Queensland

Highest court in state hierarchy

Consists of the Trial Division and Court of Appeal

Unlimited Jurisdiction: in theory can hear any matter.

Only really hears serious issues

o E.G. murder, manslaughter, drug offences

o Civil matters for than $750,000. Usually heard by a judge

alone, but where there is a jury, a judge will usually sit with

a jury of 4

Also has an appellate jurisdiction

Hears all appeals from Supreme and District Courts, and many

tribunals

Made up of 3 or 5 supreme court judges

COA can:

o Dismiss the appeal and uphold decision of lower court

o Allow the appeal, set aside the decision of the lower court

and make a different order in its place

Jury: “A jury is a group of ordinary citizens who decide questions

of fact.”

Jury is used for:

o criminal matters heard for the first time (12 people). Prior

to Sept 2008, the decision needed to be unanimous. Now

11-1 is acceptable

o Some civil cases (E.G. defamation) can be heard, with 4

judges, and 3 need to agree

For trials (other than murder), if the judge believes that a

unanimous decision will not be reached after 8 hours of

deliberation, the judge can see if a verdict can be reached from

11/12 jurors

The government also made provisions for judge-only trials [CC

s614 and 615]

Either side can apply for a judge-only trial, although if the

prosecution requests it, the accused person must consent to it.

Some factors considered in granting an application:

o (a) the trial, because of its complexity or length or both, is

likely to be unreasonably burdensome to a jury;

o (b) there is a real possibility that acts that may constitute

an offence under s119B [retaliation against a juror] would

be committed in relation to a member of a jury;

o (c) there has been significant pre-trial publicity that may

affect jury deliberations.

Factors against granting it: trial will involve a factual issue that

requires the application of objective community standards

including, for example, an issue of reasonableness, negligence,

indecency, obscenity or dangerousness

District Court of Queensland

Judges membership

Original jurisdiction:

o Civil claims between $150,000 and $750,000

o Moderately serious criminal matters

Jury: A jury is used for criminal matters and for few civil claims.

Same procedure as SC

Appellate jurisdiction: DC judge may hear an appeal from the

decision of the Magistrates Court.

Magistrates Court

Membership: Magistrates

Original jurisdiction:

o Criminally, they hear summary (minor) offences (e.g. drunk

and disorderly), and committal hearings

o civil matters where the amount claimed is less than

$150,000.

Committal Hearings: A preliminary hearing on indictable

(serious) offences such as murder, to determine whether the

prosecution has sufficient evidence to indicate that the person

charged could be found guilty. If so, the accused will be sent to a

higher court for trial by a judge and jury.

Tribunals – General

“A body established by statute to regulate specific matters”

Why Tribunals?: Increasing number of cases in the court system

and the need for specialisation.

Key differences with a Court:

o Judges (i.e. former lawyers) preside over courts, often non-

lawyers preside over tribunals;

o Courts have a wider jurisdiction to hear matters, Tribunals

are limited to deal with those matters over which they have

been given specific jurisdiction (usually outlined in the

statute which created them);

o Tribunals are not courts. Proceedings before the tribunals

are not as formal as those before a court.

Therefore, tribunals are often quicker, cheaper and easier for

those involved.

QLD Civil and Administrative Tribunal

QCAT decides and reviews matters relating to:

o residential tenancy disputes

o debt disputes

o consumer and trader disputes

o minor civil disputes

o other civil disputes

o guardianship for adults matters

o administration for adults matters

o building disputes

o children and young people matters

o anti-discrimination matters

o occupational regulation matters

o retail shop lease disputes

o administrative decisions

Court Hierarchy

System of appeals

Allows different forms or hearing according to gravity of the case

Instrumental in building up precedent.

A precedent has defined as ‘a judgment or decision of a court of

law cited as authority for the legal principle embodied in its

decision’ (text, p194).

In its simplest form, ‘following a precedent’ means that a

question should be resolved in a certain way today because a

similar question was so decided yesterday (text, p194).

Doctrine of Precedent

Because it is desirable that our legal system has certainty,

similar cases should be treated in a similar fashion.

Precedent is relevant to the hierarchy of Courts – a Court is

bound to follow precedents set by superior courts in the same

hierarchy.

Ratio Decidendi: the legal reasoning upon which the decision in a

case was based. Only the ratio is capable of creating a binding

precedent.

Obiter Dicta: Statements of law not necessary to decide a case.

For example, observations made by judges about the future

direction of the law, or that a different decision may have been

reached if the facts were different. These are not binding, only

persuasive.

Ratio becomes unclear sometimes because judges may have

different reasons for arriving at the same conclusion, their

reasons may not be clear, or they made the correct decision for

quite the wrong reasons.

Rules of precedent:

o The decision of higher courts bind all lower courts in the

same court hierarchy.

o The decisions of lower courts are not binding on higher

courts in the same hierarchy

o Courts are not bound by decisions of courts in other

hierarchies.

o High Court does not feel bound to follow its own previous

decisions.

Recognising a court case

Hackshaw v Shaw (1984) 155 CLR 615

Parties – Plaintiff first!

Year in which the law report is published

Volume number in which the law report appears

Page number at which the case can be found

Parties in a court case

In reported cases, the party bringing the particular case is listed

first.

o If it is the first time the case has come to court, the person

bringing the case is the plaintiff. The person answering the

case is the defendant.

o In a criminal case, the prosecution (the Crown) brings the

case. This is often abbreviated in case citations as the

letter “R”.

o If the case is an appeal from an earlier decision, the person

bringing the appeal is the appellant and the person

opposing the appeal is the respondent.

There will be a judge presiding, and this is reported with a “J”,

example: Kirby J is Justice Kirby

Winning the Case

The onus (or burden) of proof is on the person who has to prove

their case. In most instances the onus lies with the person

bringing the case (i.e. the plaintiff or appellant)

The standard of proof is the level that the person must prove

their case.

o In a civil case, that is on the balance of probabilities.

o In a criminal case, the prosecution must prove their case

beyond a reasonable doubt

Dispute Resolution

The parties introduce arguments and evidence in court to support their

case. The court is presided by a magistrate or judge. The party that

presents the case the best wins

Main groups of participants in the adversary system are:

o the parties;

o the barristers & solicitors who will act on behalf of the

parties;

o judiciary who will preside over the court;

o jury (if there is one).

This is contrasted with the ‘inquisitorial system’, often used in

civil law countries. The role of the judge is more proactive and

controls the running of the case.

Alternative Dispute Resolution (ADR) mechanisms help cases be

settled out of court

o Because court is expensive, time-consuming, formal and

clogged enough already

ADR Methods

Negotiation: Facilitative process, involves voluntary discussion

between the parties to try to mutually resolve the dispute.

Mediation:

o Voluntary process, but an independent and neutral third

party (the mediator) will assist the parties to try and find a

way to resolve their dispute.

o It is particularly useful in complex matters where the

parties may have ongoing contract and/or the dispute

involves multiple parties because the parties with the

mediator’s assistance can find a solution that is

satisfactory to all parties.

o The mediator cannot impose a decision upon the parties.

Conciliation:

o The parties to a dispute, with the assistance of a neutral

third party (the conciliator) identify the dispute, develop

options, determine what alternatives are available and try

to reach an agreement.

o The conciliator may exercise an advisory role on the

content of the dispute and suggest options and possible

solutions.

Expert Determination:

o This is a process that provides for an independent expert to

be appointed by the parties to give a determination on

some disputed point of fact or law

o The process is advisory and is generally effective in settling

disputes that are simple in content, for example, what is an

accepted trade or industry practice, or technical in nature

Commercial Arbitration:

o involves the hearing of a dispute by an independent third

party (arbitrator). The arbitrator will be of the party’s

choosing and will be someone familiar with the professional

or technical background of the matters in dispute

o At the end of the hearing the arbitrator will make an award.

Unless the parties have expressed a contrary intention

when agreeing to arbitration, the award is final and binding

on the parties

29/02/12 8:31 AMLecture 6

Agency

“Foundation of partnerships: an agency relationship usually arises from a

contract. The parties would normally specify things like how long the

agency lasts for, what the agent will be paid, and importantly, what are

the limits on the agent’s authority.”

Agent: “Someone who has the authority to act on behalf of another,

called a ‘principal’.”

An agent must be acting with authority, in order to bind the

principal

Authority can be:

o Actual

Express

Implied

o Apparent

Authority

Express

Authority

“The authority of the agent that is expressly agreed upon by

the parties.”

Implied

Authority

“The parties may not have expressed it, but it was their

intention that the agent could perform certain tasks. A

common example is tasks that are necessarily incidental to

the agent’s express authority. Implied authority cannot

contradict express authority.”

Apparent

Authority

“It appears to the third party that the agent has actual

authority (even though they may not). The third party is still

able to enforce the contract with the principal. Obviously, if

the third party is aware (or should have been aware) of the

agent’s lack of actual authority, they can’t rely on apparent

authority.”

If the agent has neither actual nor apparent authority when

acting, the principal may choose to later approve the act if they

want to.

When there is no authority (either actual or apparent), the third

party may claim damages from the agent only (a breach of

warranty that the agent had authority), or take action in

misrepresentation.

Rights of an agent

Remuneration

Indemnity for liabilities and reimbursement for expenses incurred

by the agent in the course of their duties.

Duties of an agent

Duties of an Agent:

o To follow the principal’s instructions

o To act in person

o To exercise reasonable care and skill

Fiduciary duties

o To act in good faith and in the best interests of the

principal

o To make full disclosure of any personal interests

o To not make secret profits (see for eg reading 7, page 226)

Types of Businesses

Sole Proprietor

“A person who owns his or her own business for profit.”

Simplest form of ownership

Sole proprietor may be the only person working in the business,

or they could have many employees

Advantages

Very little formalities to comply with

Full ownership means the owner makes all decisions and gets all

profits

Disadvantages

Personally liable for any business debts (unlimited liability)

Limited sources of capital (apart from the 1 owner, the only way

is debt)

One person may not have all the skills needed to be successful

Partnership

“as the relation which exists between persons [2-20 persons];

carrying on a business,

in common,

with a view of profit”

can exist even if the parties do not realise it

Most common way to make a partnership is a contract

A contract is not required, the partnership act can fill in any gaps

If no partner rights, the partnership act governs parties:

o Partners share the profits and losses equally.

o Partners cannot introduce new partners without the

consent of all other partners

o Every partner may participate in the management of the

business

THESE CAN BE OVERRIDDEN BY AN AGREEMENT

Partners have mutual agency – decision made by one partner

binds the others

Not a separate legal entity, therefore each partner is liable for

any debts in the firm

Advantages

Very little formalities

More people to contribute ideas and skills

Greater source of capital

Disadvantages

Unlimited liability

Lack total control as an owner

Mutual agency, which combined with unlimited liability, makes it

important to only be a partner with people you trust.

Companies

“An artificial entity recognised by the law as a legal person with rights and

liabilities.” They are formed when someone (called a promoter) registers

them with ASIC.”

Several types, but most common are companies ‘limited by

shares’

Owned by people who have contributed to company’s capital –

called a share

Shareholders have limited rights with respect to the operation of

the company, restricted usually to voting in general meetings

and the right to a dividend from profits made.

Shareholders appoint directors to run the company. Directors act

as fiduciaries to the company, and therefore owe duties to the

company (eg to act in the best interests of the company and for

a proper purpose).

Company is a separate legal entity (unless it is set up for

fraudulent reasons)

Shareholders have limited liability, therefore are not personally

liable for company’s debts. Can only lose value of their

investment

Advantages

Separate legal entity

Limited liability

Perpetual succession (unlimited life)

More sources of capital

Expert managers to run the business

Shares can be transferred (esp. in Public Co)

Disadvantages

Costs of establishment and ongoing fees – can be expensive

Limited rights as a owner

Onerous administrative requirements

Reporting requirements

Legal responsibilities imposed on company directors

Public Company

“Company that has shares open to the public”

Distinguished by abbreviation ‘Ltd’ in company name

Normally have heavier requirements in relation to financial

statements and shareholder meeting

Must have at least 1 shareholder and 3 directors

Private (Proprietary) Company

“Company where shares are not publically available”

Distinguished by abbreviation ‘Pty Ltd’ in company name

Must have between 1-50 shareholders

At least 1 director

Trusts

“Is created when a person (the settlor) grants ownership of property to a

person (the trustee) to use for the benefit of certain other people (the

beneficiaries).”

Not a separate legal entity

Trustee has legal ownership of property, but beneficiaries have

beneficial ownership

Trustee has a fiduciary duty to act in the best interests of the

beneficiaries

Trustee can be a company

Different types of trusts:

o Discretionary trust: “Allow the trustee to distribute property

how they see fit.”

o Fixed Trust: “Beneficiaries get a set amount.”

Trusts usually used for distributing wealth to family members, or

tax effective way of running a business

There are significant formalities for the creation of a trust, as well

as the rights and obligations of a trustee.

29/02/12 8:31 AMPRACTISE TEST

This information relates to Questions 1, 2, and 3

Ben and Danielle, both Queensland residents, enter a contract.

Danielle does not perform her obligations under the contract, and

Ben wishes to take legal action. He estimates that the contract

was worth $800,000 to him.

QUESTION 1

What Court should Ben commence proceedings in?

(a) Supreme Court of Queensland

(b) District Court of Queensland

(c) Federal Court of Australia

(d) High Court of Australia

QUESTION 2

When the case comes to be heard:

(a) Ben will be the plaintiff and he will have to prove his case beyond a

reasonable doubt

(b) Danielle will be the plaintiff and she will have to prove her case on

the balance of probabilities

(c) Ben will be the defendant and he will have to prove his case on the

balance of probabilities

(d) Ben will be the plaintiff and he will have to prove his case on the

balance of probabilities

QUESTION 3

Continuing the facts above, Ben wins his case. Danielle decides to

appeal. This appeal case will be reported as: [read them

carefully! May need to refer to Q1]

(a) In the Supreme Court of Queensland, Court of Appeal

Between

Danielle (Appellant, Plaintiff)

And

Ben (Respondent, Defendant)

(b) In the Supreme Court of Queensland, Trial Division

Between

Danielle (Appellant, Defendant)

And

Ben (Respondent, Plaintiff)

(c) In the High Court of Australia

Between

Ben (Respondent, Plaintiff)

And

Danielle (Appellant, Defendant)

(d) In the Supreme Court of Queensland, Court of Appeal

Between

Danielle (Appellant, Defendant)

And

Ben (Respondent, Plaintiff)

(e) In the Supreme Court of Queensland, Court of Appeal

Between

Ben (Respondent, Plaintiff)

And

Danielle (Appellant, Defendant)

QUESTION 4

Which of the following statements is correct?

(a) Australia has a civil law system

(b) The Commonwealth Constitution provides the Commonwealth

parliament with the power to make laws about any topic.

(c) A proposed Bill only needs Royal Assent from the Governor-General

(without Parliamentary approval) in certain situations to become law

(d) None of the above statements are correct

QUESTION 5

Ranger Stacey from the Queensland Department of Animal

Welfare sees a tiger cub displayed for sale in a pet shop window.

The pet shop is owned by Bob. Ranger Stacey charges Bob under

the Dangerous Animals Act 2005 (Qld) which provides:- “Any

person who sells, lends or gives a dangerous animal to any other

person commits an offence”. Tigers were defined in the

legislation as a “dangerous animal”. The matter went to Court

and the Judge decided that Bob had not breached the Act because

Ranger Stacey did not purchase the tiger cub. The Judge most

likely relied on which rule in making the decision:-

(a) Purpose Rule under the Acts Interpretation Act;

(b) Purpose/Mischief Rule under common law;

(c) The Literal Rule

(d) The Golden Rule

QUESTION 6

A person who is at Stage 4 of Kohlberg’s Stages of Cognitive

Moral Development is motivated to act:

(a) to avoid punishment

(b) to conform to the expectations of their immediate peers

(c) to conform to the expectations of wider society

(d) in accordance only with ethical principles such as justice

This information relates to Question 7-9

For each question, from the statements (a)-(d), identify which

statement you believe is FALSE. If you believe that there are no

false statements in (a)-(d), then choose option (e).

QUESTION 7

(a) Milton Friedman argued against corporate social responsibility

because company directors are agents of the company and of

shareholders, but they had not been given authority to do things like

make charitable donations on shareholders’ behalf.

(b) Market-based schemes such as ‘carbon trading’ are one way of

trying to get companies to factor in environmental concerns into their

decision-making.

(c) Businesses factor in externalities into their prices

(d) Stakeholders can include employees, suppliers and government

(e) None of the above statements are false

QUESTION 8

The character-based ethical theories:

(a) focus on what a person with good virtues would do

(b) state that a virtue is a ‘mean’ between vices of deficiency and

excess

(c) state that achieving the right result, but for the wrong reasons (eg

not acting out of a sense of duty) is not ethical

(d) can include virtues such as justice and care

(e) None of the above statements are false

QUESTION 9

A partnership:

(a) is usually limited to 20 people

(b) is not a separate legal entity

(c) is the relationship between people carrying on a business, in

common, with a view to profit

(d) does not give its owners ‘limited liability’

(e) None of the above statements are false

End of ‘Which statement is false section’

QUESTION 10

The normative study of ethics is about:

(a) what someone ought to do in certain situations

(b) what someone does in certain situations

(c) the real meaning of ethical concepts that people use

(d) all of the above

(e) none of the above

QUESTION 11

Which of the following statements is correct?

(a) Cabinet is part of the Legislative arm of government

(b) Senior government minister make up cabinet

(c) All Commonwealth ministers are part of the Federal Executive

Council

(d) Options (b) and (c) are correct

(e) Options (a), (b) and (c) are correct

QUESTION 12

Which of the following statements is correct?

(a) The party bringing a court case for the first time is termed the

appellant

(b) For a case citation where the case was heard for the first time, the

defendant is the party listed first

(c) The respondent is the party who responds to an appeal, and they

may be either the plaintiff or defendant

(d) All of the above

(e) None of the above

QUESTION 13

Under the public interest theory of regulation:

(a) using welfare economics approach, regulation is needed to address

market failure

(b) regulatory failure occurs if the costs of regulation exceed the

benefits, therefore advocating the removal of the regulation

(c) using a political approach, regulation can be used to give expression

to broader social aspirations, for example redistribution of wealth

(d) All of the above are correct

(e) Only options (a) and (c) are correct.

QUESTION 14

The Commonwealth of Australia:

(a) Is a federation of states

(b) Did not exist prior to 1901, as the land was made up of separate

English colonies

(c) Was established under the Constitution and Bill of Rights

(d) Both (a) and (b) are correct

(e) All of (a), (b) and (c) are correct

QUESTION 15

Which of the following is correct?

(a) Equity law was a harsher, procedure-focused area of English law

(b) Equity originated from the English Courts of Justice

(c) Equitable principles are no longer used since the two court systems

were combined

(d) Equitable remedies included specific performance and injunctions

QUESTION 16

An agent can only bind the principal to a contract with a third

party if the agent has:

(a) Express authority to act

(b) Implied authority to act

(c) Apparent authority to act

(d) Both (a) and (b) are correct

(e) All of (a), (b) and (c) are correct

QUESTION 17

Andy appoints Barb to be his agent. Barb is authorised to buy

products for Andy’s nursery business. Barb visits 2 suppliers

looking for ceramic pots. Charlie Co Ltd offers pots for sale at $5

each. Delta Bros Ltd offers similar pots to Barb for $7 each, but

says that if Barb signs the contract with them, they’ll throw in

some free pots for Barb to use in her own garden at home. She

signs with Delta Bros Ltd. Which of the following is correct?

(a) Barb can keep the free pots because as an agent she has a right to

remuneration

(b) Barb can keep the free pots because Andy will not find out about it.

(c) Barb has breached her fiduciary duty to Andy because she did not

act in his best interest by buying the more expensive option

(d) Barb has breached her fiduciary duty to Andy because she made a

secret profit from her position as an agent.

(e) Both (c) and (d) are correct

29/02/12 8:31 AMLecture 7

Contract:

“An agreement between two or more persons intended to be binding,

which is enforceable at law.”

Not necessary for a contract to be in writing to be enforceable

Some contracts however are required to be in writing

Most contracts are oral

Types of Contracts

Formal contracts: “Agreements made in writing which must follow strict

requirements, but do not require consideration.”

Simple contracts: “Any contract other than a formal contract. Simple

contracts require consideration and unless required by law (e.g. sale of

land), can be in writing, spoken or a combination of both.”

Intention

If parties agree, this does not necessarily mean a contract is

formed

Without the intention to form a contact or have it considered

under the law, it may still be an agreement, but not an

agreement that is legally enforceable by courts – because it is

not a contract

Intention can be determined by considering relevant context and

relationship between parties, and determining what inferences

can be drawn from that

Courts start with 2 presumptions:

o Social, family/domestic or voluntary agreements do not

intend to create legal relations – therefore contract is

presumed to not be a binding contract

o Commercial agreement do intend to create legal relations –

therefore contract can be binding

o NOTE: THESE ^ CAN BE REBUTTED!

Non-commercial agreement

o E.G.: Social (REBUTTED)

o Trevey v Grubb:

o A three-person syndicate won $218 000 in a lottery. The

ticket was in the name of the defendant, who refused to

share the prize with the plaintiff.

o Was this just a friendly arrangement so that it could be said

that there was never any intention on the part of the

parties to enter into legal relations?

o Held: High Court – even though this was a social

arrangement, there was a contract and the plaintiff was

entitled to a share of the winnings in proportion to her

contribution.

o E.G.: Husband and Wife

o Balfour v Balfour

o Facts: The husband promised to pay a monthly allowance

to the sick wife (who lived in UK) until the wife was able to

join him in Sri Lanka. The husband failed to pay and the

wife sued.

o Held: Parties had no intention to be legally bound

o E.G.: Domestic

o Parties were engaged in 1918, defendant promised to pay

his fiancee an annual dress allowance of 100 pounds to be

paid in quarterly sums of 25 pounds. After their marriage in

1918, defendant paid the plaintiff a quarterly dress

allowance until 1920. Parties separated in 1923. In 1928,

plaintiff commenced action to recover moneys she claimed

were outstanding – 278 pounds for her dress allowance

from the period 1921-1923.

o Held: domestic agreement, no intention to create legal

relations

o E.G. Husband and Wife (REBUTTED)

o Popiw v Popiw

o A husband had promised his estranged wife that if she

returned to live with him he would transfer the matrimonial

home, which was in his name, into their joint names. She

returned to live with him but the transfer never took place.

They subsequently separated. She then sought to enforce

her husband’s promise to transfer the home into their joint

names.

o Court held that there was intention to be legally bound. The

agreement was made after the parties had first separated

and also they had sought legal advice about the agreement

o NOTE: NOT RESTRICTED TO H&W, BUT FAMILY TOO:

PRESUMPTIONS CAN BE REBUTTED IF PROMISES ARE

SERIOUS FOR 1 PARTY.

o E.G.: Family

o A wealthy old man persuaded his sister and her family to

move to Australia from England on the basis that they

would get his house in his will. The plaintiff did move, but

after a year, the defendant changed his will after a falling

out.

o Court held that the presumption was rebutted, there was

ample evidence to indicate that the parties did intend to

enter into a binding and enforceable contract as ‘the

consequences for the plaintiffs were so serious…’

o E.G.: Voluntary

o Teen Ranch Pty Ltd v Brown

o B was a volunteer worker at a non profit Christian youth

centre. He received accommodation, food and the use of

camp facilities and was expected to obey camp rules, but

he received no wages. While working at the camp he was

injured and he claimed workers’ compensation.

o Held: no evidence of intention to create legal relations by

the parties so no contract of employment could be said to

exist. Brown’s work was voluntary and he was not entitled

to workers’ compensation.

Commercial agreements

o E.G. Commercial

o Edwards v Skyways Ltd

o During an industrial dispute, an airline company promised

employees that they would make an ex gratia payment to

anyone made redundant. The company later refused to pay

a redundant employee.

o The court held that as the agreement was commercial, it

was presumed to have intention.

o So the employees were entitled to the ex gratia payment.

o THIS PRESUMPTION CAN BE REBUTTED BY:

Letters of comfort

Binding in honour only

Shall not be attended by or give rise to any legal

relationships

o E.G.: Letter of comfort

o Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad

o A subsidiary company wanted a loan from a merchant

bank, and to help gain this, the parent company gave a

‘letter of comfort’ to the bank stating “It is our policy to

ensure that the business of [subsidiary] is at all times in a

position to meet its liabilities to you under the above

arrangements”. After the loan was made, the market in

which the subsidiary operated crashed and the company

wound-up with heavy losses.

o The bank sued the parent company for a breach of

contract, but it was held that there was never an intention

to create legal relations.

o E.G. Honour Clause

o Jones v Vernon’s pools Ltd

o ‘It is a basic condition of the sending-in and acceptance of

this coupon that it is intended and agreed that the conduct

of pools...shall not be attended by or give rise to any legal

relationships, rights, duties or consequences whatsoever or

be legally enforceable...but all such arrangements,

agreements and transactions are binding in honour only’

Agreement

Agreement is where an offer has been made and accepted

Courts use objective test – what would a reasonable person think

when looking and the words and conduct of the parties?

Offeror: “Person who makes the offer.”

Offeree: “Person who receiving the offer.”

Rules for offers:

o Rule 1 : Offers must be distinguished from an invitation to

treat or request for information.

Some things may look like offers, but under the law

are not.

Invitation to treat: Goods on shop shelves, goods

advertised, price lists and catalogues.

Shop shelfs: Pharmaceutical Society v Boots

Cash Chemists

Advertising: Partridge v Crittenden

Catalogue: Grainger & Sons v Gough

Rebutted: Carlill v Carbolic Smoke Ball

Requests for information: Responding to a question is

not an offer

Harvey v Facey

The plaintiffs asked the defendant what was

the lowest cash price for a property. When the

defendant replied, the plaintiff took it as an

offer and purported to accept it. However, the

court said that the defendant was merely

indicating their minimum price if they decided

to sell, and weren’t actually offering to do so

Advertising puffs: A statement that is stupid/silly, and

not meant to be taken as true

E.G.: The Lynx adverts: where you spray and

the women run after you: this is a puff!

o Rule 2 : Offers must be communicated to the person or

persons for whom it was intended.

Offer must be communicated with offeree for them to

be able to accept it

o Rule 3 : An offer may be made to a particular person, to a

class of persons or to the whole world.

E.G. Carlill v Carbolic Smoke Ball Co

The defendants had shown their intention to make an

offer to the whole world, or rather those people who

came forward and bought the product. The terms of

the advertisement were specific enough to make it

an offer.

o Rule 4 : Offers may be terminated at any time prior to its

acceptance.

Offer can be withdrawn by giving notice to offerees,

even if the offer was promised to be open for a

period of time (unless the offeree has paid something

for the promise)

E.G.

Goldsborough Mort v Quinn

Quinn granted the plaintiff company the

following option:

I John Quinn, in consideration of the sum of five

shillings paid to me hereby grant to

Goldsborough Mort & Co the right to purchase

the whole of my freehold...lands...within one

week from this date...

Before the end of the week and before the

plaintiff had accepted, Quinn told the company

that he was withdrawing his offer. The

company went ahead and accepted the offer

within the option time and sued for specific

performance.

Held that the option was enforceable, the

company’s acceptance was good and a binding

contract was made which was enforced through

an order of specific performance. Note court is

not concerned about the amount of the

consideration (its adequacy).

An offer can be rejected by offeree through words or

conduct

A counter offer from the offeree can then be rejected

by the offeror, which also means a rejection of the

original offer – Hyde v Wrench

A request for more information is not a counter offer

– Stevenson Jacques v Mclean

Lapse of time; either at a time specified by offeror or

a reasonable time – Ramsgate Victoria Hotel v

Montefiore

Rules for acceptance

o Rule 1 : Acceptance must be in reliance on the offer

A person cannot accept an offer he/she does not

know about

E.G. R v Clarke

a person charged with murder gave information to

authorities that led to someone else (the true

offender) being arrested instead. He later tried to

claim a reward being offered for information. He

could not accept the offer, because when he gave the

information, he did not know about it.

o Rule 2 : Unless dispensed with, acceptance must be

communicated to the offeror, by the offeree.

Acceptance must be communicated by words or

conduct

Silence is not sufficient

If offeror specifies a specific method of acceptance, it

must be followed. If not, acceptance is not effective.

Post Acceptance Rule explains that acceptance

occurs when letter is posted NOT received

Many businesses now try to get rid of PAR:

“acceptance is only effective when we receive it”

Instantaneous forms of communication require actual

receipt of acceptance (phone,fax) – therefore

acceptance occurs when received by offeror

Email and Internet are not instantaneous – electronic

acts (Federal and Queensland) allow for situations

where contracts must be in writing but over the

internet/electric stuff – email, fax, websites, texts

o Rule 3 : Must be absolute and unqualified

Acceptance must be I accept

“I’ll accept if you do this” is a counter-offer

o Rule 4 : Cannot be revoked

After acceptance, neither side can revoke

One party would have to willingly agree to release

the other party from the contract.

29/02/12 8:31 AMLecture 8

Consideration

Essential to the validity of contract (Rann V Hughes)

Consideration must be definite, legal and possible of

performance (White V Bluett)

Consideration must move from the promisee - They have to do

something (consideration) in return for that promise, but this

consideration does have to move from the promisee, but not

necessarily move to the promisor – (Dunlop pneumatic Tyre Co

Ltd V Selfridge)

Consideration must not be past – if promise is given after act has

be performed, this is not enforceable (Roscorla V Thomas)

Consideration must be sufficient