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Negligence and Contract Law

Commercial Law (RMIT)

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ANSWERING NEGLIGENCE AND CONTRACT LAW PROBLEMS

(IRAC) MODEL

1.identify the relevant ISSUE(S)

2.relate the relevant RULES of the law

3.APPLICATION of the rules of law to the fact scenario

4.CONCLUDE

Back up any statement of the law with legal authority

a.case precedent b.section of an act

Negligence: a tort committed when one person fails to exercise reasonable duty of care and causes harm to
another person

1.That the defendant owed them a duty of care

2. the defendant breached the duty of care because the defendant’s conduct fell below the required standard
of care

3. that the breach of the duty of care caused the plaintiff damage that was reasonably foreseeable or not to
remote

4.consider any defences

1.Duty of care: if the relationship between the plaintiff and the defendant falls within an established
category of duty of care, the defendant owes the plaintiff a duty of care

some established duty of care includes

 Motorists to other road users

 Doctors to patients
 Solicitors to clients
 Manufacturers to people who use their products
 Architects to people who occupy the buildings they design
 Agents to company
 Employers to employees

If the relationship of the above is not established two things need to be proven duty of care. (prove the
following points)

1.reasonablly foreseeable that the defendants act or omission could cause harm to someone in the
plaintiff’s position (likelihood of damage or injury that a reasonable person should be able to anticipate in a
given circumstance) CASE LAW

2.that the salient features of the case are consistent with the existence of duty of care (the court will
consider the relationship between the parties and other features of the case and then compare those features
with the salient (relevant) features of other cases where a duty of care has been found to exist) CASE LAW

2.Breach of duty of care

The test is to ask whether the defendant has failed to exercise the standard of care of a reasonable person. If
the defendant has not met that standard, the there is a breach

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The court may consider relevant factors to determine whether defendant has breached the duty of care

These include:

 1.The probability of harm:

 2.Common practices
 3.The seriousness of the harm
 4.The cost of eliminating the risk/the burden of taking precautions
 5.The social utility test

All of these must be proved through case law

3.Harm caused by the breach of duty

It must be shown that damage was caused by the breach and it is appropriate to extend the defendant’s
liability to the harm

Factual Causation: The plaintiff must establish that the careless act caused either directly or indirectly the
harm. (CASE LAW)

It must be shown that the defendant’s carelessness was the sole cause of the harm. It is sufficient to show that
the carelessness was a contributing cause along with other causes

Scope of liability: the court must decide that it is appropriate for the scope of the defendant’s liability to
extend to the harm suffered by the plaintiff (CASE LAW)

It is necessary to see that the injury or loss must be a reasonably foreseeable consequence of the defendant’s
breach of the duty of care

LAST PART IS TO ESTABLISH ANY DEFENCES IF RELEVENT

Defences: Even if the plaintiff has established all three elements of the tort of negligence, the
defendant can still avoid liability, either completely or partially if they can establish the existence of
one or more defences

Voluntary assumption of risk: Is it can be established that the plaintiff was fully aware of the risk at
the time the harm was caused, and they voluntarily assumed that risk, the defendant is relieved of
all liability (CASE LAW)

Contributory Negligence: If it can be established that the plaintiff contributed I someway to their
own loss or injury, liability will be apportioned between the defendant and the plaintiff (CASE LAW)

Other defences

- Barrister’s immunity
- Volunteer’s immunity
- Emergency services provider’s immunity
- Compliance by professionals with the standard practice

Occupier’s liability: An occupier of premises owes a duty of care to all persons entering the premises
to ensure that the premises are safe (CASE LAW)

The occupier also owes a duty of care to people who are on their premises without their permission
(CASE LAW)

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Carelessly causing financial harm

Harm to the person or property of a third party: where the plaintiff suffers pure economic loss
because of harm caused by the defendant to the person or property of another person (CASE LAW)

Defective products: Negligently manufactured a defective product or provided a defective service

and the plaintiff suffers pure economic loss because of the defect (CASE LAW)

Negligent misstatement: the giving of careless advice that leads to economic loss
When a person is GIVING ADVICE, they owe a duty of care if

1. The advice is of a business or serious nature

2. They know or should know that the other person intends to rely on the advice
3. It is reasonable in the circumstances for the other person to rely on the advice

Contract formation answering formation

1.identify the relevant ISSUE(S)

2.relate the relevant RULES of the law

3.APPLICATION of the rules of law to the fact scenario

4.CONCLUDE

Remember

 Analyse the legal effect of the facts of the problem as they arise in order of time
 Deal with the facts of the legal problems chronologically
 Use legal authority (cases) or statutes (sections)

Contract: an agreement between two or more persons that is legally enforceable

Three things needed for an CONTRACT: AGREEMENT, INTENTION AND CONSIDERATION

Agreement: a meeting of minds and exists when two or more people share understanding and intention

This occurs with an OFFER and an ACCEPTANCE

OFFER: A person makes an offer when they express a willingness to immediately enter into a contract with
the person to whom the offer is directed, which can be via written, verbal or indicated through conduct

The offer can be:

A) accepted by the offeree

B) rejected by the offeree or

C) revoked by the offeror

The offeror is entitled to revoke their offer even if they have promised to keep the offer open for a period,
unless the offeree has paid for the promise to keep the offer open such as paying a deposit.

An Advertisement is usually not an offer: instead is it invitation to treat (CASE LAW)

Offer is different from mere request for information. advertisements and auctions (CASE LAW)

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Acceptance: when the offeree indicates by words or by actions that they are willing to immediately enter into
legally enforceable contract with the offeror on the terms offered they are said to accept the offer

Counter offer: a response to an offer that modifies the terms of the offer and is therefore itself a new offer

Unilateral contract: a contract where acceptance of the offer and performance by the offeree are achieved by
the same act

Postal rule: An offeree’s acceptance is effective, and a contract is formed as soon as the offeree posts the
letter of acceptance (applies even if the post is late) (CASE LAW)

The acceptance must be unqualified, otherwise it is a counter-offer

• Acceptance must be communicated to the offeror.

• The offeror can waive the requirement that communication be accepted, but they cannot insist that a
failure to respond is acceptance.

• If the offer is accepted, an agreement (and possibly a contract) comes into existence from that
moment.

• If the offer has not been accepted or rejected, the offeror is entitled to revoke their offer.

• CASE LAW (example of acceptance)

• (CASE LAW)- communication but without authority and thus invalid

2)INTENTION= parties come to agreement must intend the agreement to be legally enforceable

The court also checks the conduct of the parties form the perspective of an objective observer and asks
whether the parties intended the agreement to be legally enforceable. To check this there are two important
presumptions

1. Social or domestic agreements

In family circumstances the agreement is assumed to not be legally enforceable such as the case (CASE LAW)

However, this can be rebutted with the case of (CASE LAW)

2. Commercial agreements (CASE LAW)

in commercial or business contexts the court will presume that it was intended to be legally enforceable

• A promise made to customers in a business context will not be enforceable if the promisor can show
that the promise was clearly not intended to be taken seriously by customers.

• Mere puff will not have the required intention.

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3.CONSIDERATION: an agreement is not a contract unless both parties to the agreement have paid, or
promised to a price

A price can be from

 Payment of money
 Provision of goods
 Provision of a service
 Undertaking of an onerous obligation
 Refraining from doing something (agreeing not sue)
 And a promise to do any of these things

The price given does not need to be fair but only of some legal value. (CASE LAW)

a consideration must be sufficient and not

 A vague promise (CASE LAW)

 Past consideration: consideration paid by the promise before the promise is made (CASE LAW)
 Performance of a prior legal obligation =something that the promise was already legally obliged to
do (CASE LAW)
- if the promise does something beyond their legal or contractual duty the consideration will no
longer be insufficient, and the promise will be enforceable (

• A promisee will have provided sufficient consideration for a promise to waive the balance of the debt
if:
– they make the part payment earlier than the originally agreed due date,
– they make the part payment in a different currency,
– they accompany the part payment with additional consideration such as the provision of a
service, or
– the part payment is made by a third party rather than the promisee.
–
• The promise will also be enforceable if:
– the agreement to waive the balance is in the form of a deed, or
– the doctrine of promissory estoppel is applicable to the situation (CASE LAW)

Formalities
• Legislation requires certain contracts to be in writing and signed to be effective and enforceable,
including:
– arbitration agreements,
– cheques,
– consumer credit contracts,
– real estate contracts, and
– transfers of shares.
• Even when a contract is not required by law to be in writing or signed by the parties, such formalities
may still be desirable:
• to encourage deliberation and reflection and to emphasise that the transaction has significant legal
consequences,
– to ensure the availability of reliable evidence about the existence of the contract,
– to ensure the availability of reliable evidence about the terms of the contract, and
– to indicate that the agreement was intended to be legally enforceable.

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