commercial law

QUESTION ONE

ISSUE: Would Kevin be successful in a claim for Negligence against Jenny? RULE: Elements of negligence

• As established in Donoghue v Stevenson, to succeed in negligence a plaintiff must prove each of the three following steps: (a) that the defendant owed them a duty of care, (b) that the defendant breached the duty of care, and (c) that the breach of the duty of care caused the plaintiff damage that was reasonably foreseeable.

APPLY: Duty of care

• Does Jenny owe Kevin a duty of care?

• Existing duties; employers owe a duty of care to their employees: Paris v Stepney Borough Council.

• It is also worthwhile considering the two legal requirements to establish a duty of care. First, it is necessary to show that the risk of injury was reasonably foreseeable: Bourhill v Young. This follows from the Donoghue v Stevenson “neighbour” test, requiring reasonable foreseeability of injury to the plaintiff through the defendant’s failure to take care. This test defines neighbour as ‘anyone who is so closely and directly affected by my acts, that I ought reasonably to have them in contemplation as being so affected by my acts or omissions’. There is a foreseeable risk of injury to workers in Jenny’s farm when lifting heavy bags of potatoes.

• Secondly, as shown in Sullivan v Moody, the salient features of the case must justify the existence of a duty of care. Relevant factors here are Jenny’s control over the work conditions at her farm and Kevin’s vulnerability as to the work conditions. In these circumstances, there is a strong argument that Jenny owed a duty of care to Kevin.

Breach of Duty

• The question is whether Jenny has acted as a reasonable employer would in the circumstances. The reasonable person test was discussed in Imbree v McNeilly.

• The court will consider relevant factors to determine whether Jenny has breached the duty of care. These include the probability of harm (Bolton v Stone), the seriousness of the harm (Paris v Stepney Borough Council), common practice (Mercer’s case), and the cost of eliminating the risk (Latimer v AEC).

• Given the high probability of harm in lifting bags of potatoes, the seriousness of the potential harm having regard to his earlier injury in the same work, industry practice regarding work safety and the low cost of minimising the risk, Jenny’s employment of Kevin in this type of activity and/or her preventing him from lifting bags of potatoes is likely to be a breach of the duty of care.

Damage

• It must be shown that damage was caused by the breach and that it is appropriate to extend the defendant’s liability to the harm. For causation, the “but for” test is usually applicable: Yates v Jones and Chappel v Hart.

• But for Jenny’s breach of the duty of care, Kevin would not have suffered the back injury.

• Furthermore, the harm suffered by Kevin is a reasonably foreseeable consequence of Jenny’s carelessness Rowe v McCartney – it is not too remote or far-fetched (Overseas Tankship v Morts Dock & Engineering (The Wagon Mound No. 1)).

Defences

• Voluntary assumption of risk: As Kevin was fully aware of the risk of injury and as he continued to lift bags of potatoes despite Jenny’s warnings, Jenny may successfully use voluntary assumption of risk as a defence to avoid all liability: Rootes v Shelton.

• Contributory Negligence: Jenny may in the alternative successfully argue that Kevin contributed to his injury through his own actions as he chose not to use the machine provided. His damages will be reduced to the extent he contributed to his injury: Ingram v Little.

CONCLUSION: Having established the three elements of negligence (duty of care, breach and damage), Kevin may recover damages from Jenny for his back injury. However, his damages may be fully or partly reduced depending on the success of Jenny’s defence claims.

QUESTION TWO

ISSUE: The issue here is whether Lucy and/or Clara have contractual rights to Max’s car. RULE:

• To establish a binding contract three elements in the formation of contract must be proven: Agreement, intention and consideration.

APPLY: Offer

• Max wrote to his friend Lucy offering to sell her his car for $3,000. This is a definite statement undertaking both to sell and to be bound by that promise. It has been communicated. It is therefore a valid offer (Carlill v Carbolic Smoke Ball).

• However, even though Max promised to keep his offer open until August 19, he may revoke his offer at any time. His promise does not constitute an option as Lucy did not provide consideration to keep the offer open until August 19 (Goldsborough Mort v Quinn).

Acceptance

• Lucy posts a letter of acceptance on August 15. Under the postal rule, acceptance occurs on the sending of the letter of acceptance (Adams v Lindsell). Thus, acceptance occurs on August 15, even though Max did not receive the acceptance letter until August 19. As long as the other two elements for the formation of contract are fulfilled (intention and consideration, discussed below) there is a binding contract between Max and Lucy on August 15.

• Later on August 15, Max accepts Clara’s offer to purchase the same car for $4,000. As long as the other two elements for the formation of contract are fulfilled (intention and consideration, see below) there is also a binding contract between Clara and Max on August 15 for the same car.

• Immediately after accepting Clara’s offer Max purports to revoke his offer of sale to Lucy by leaving a message on Lucy’s answering machine. But an offer cannot be revoked if acceptance has already taken place. Max’s revocation of his offer is sent after Lucy has already accepted Max’s offer by post. As a revocation of offer is only effective when it is received (Byrne v Van Tienhoven), Max’s revocation of his offer is too late and thus ineffective.

Intention

• As Max and Lucy are friends, it may be argued that they do not intend to be contractually bound (Balfour’s case). However, the presumption that there is no intention to be bound when the parties are friends can be rebutted. The amount of money involved ($3,000) and the use of written communications when transacting suggests that Max and Lucy did intend to be contractually bound: Wakeling v Ripley.

• Intention is not an issue in Max’s transaction with Clara. They are in a boss-worker relationship and are presumably not close. It is therefore presumed the agreement was intended to be legally binding: Edwards v Skyways Ltd.

Consideration

• Consideration is the price paid for another’s promise: Carlill v Carbolic Smokeball. Max provided consideration to Lucy by way of a promise to sell Lucy his car in exchange for Lucy’s promise to pay him $3,000.

• In the other transaction, Clara promised to pay Max $4,000 in exchange for Max’s promise to sell Clara his car.

• In both transactions the parties have provided sufficient consideration: Thomas v Thomas.

CONCLUSION: Max has therefore entered into two contracts for the sale of his car, one with Lucy for $3,000 and one with Clara for $4,000. Max will be in breach of whichever of the contracts he fails to satisfy.