Case Study

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CASE STUDY

Ever since he was a little kid, Bob Wheelie has been in love with pushbikes. He started by using it to ride around his backyard for fun, then he rode it to school, and everywhere else he needed to go. As Bob grew older, he decided he preferred the off road type of bike. He became involved in mountain biking, his favourite track around Canberra was the Mount Stromlo track.

By the time Bob was 15 he had made a name for himself in the riding community. At 17, he participated in an extreme ride in Victoria’s High Country. Bob became so good that he was selected to compete at the World Cup in Lenzerheide, Switzerland.

When Bob finished his Sports Management degree at the University of Canberra, he worked for a variety of sporting organisations, and in his spare time, he continued to ride his beloved bike.

Following a disagreement with his boss, Bob decided that he’d like to work for himself and started looking around. Not long after his 30^th birthday, he saw an add that caught his eye. Mr Spoke, the owner of a bicycle store was retiring and needed to sell his store.

Bob saw this as a perfect opportunity. It would allow him to work for himself doing just what he loved. Not knowing much about running a business, Bob made enquiries with Mr Spoke regarding the sale. Mr Spoke made representations regarding the past and future profitability of the store.

Bob purchased the bicycle store on the basis of the historical figures presented by Mr Spoke in the form of historical accounts. These accounts were not an accurate representation, but were inflated by 55%. The figures were designed to induce Bob Wheelie to purchase the store, so that Mr Spoke could retire and travel overseas.

Bob was very excited about his new venture. He planned to not only sell bikes, but provide bike service, advice and some basic lessons. When Bob started to set up his new shop, he came across some old register tapes, cash receipts and tax documents. On closer inspection, he discovered that they were not as old as they seemed at first, going back the last three years.

Not knowing how to read these documents properly, Bob enlisted the help of a fellow enthusiast who studied accounting at Uni. Between them they discovered that the figures Mr Spoke gave Bob were false. The figures seemed to indicate that the shop was not in a good financial position, and that Bob’s new venture might cost him considerably more than he anticipated in order to make it work.

Understandably, Bob is very upset and comes to you for advice which you must base on common law only. Because Bob is considering taking Mr Spoke to court, your answer must be supported by relevant case law.

          The essay will identify the legal principle and classify each element within to prove that one between the two parties has breached the law. In Competition and Consumer Act 2010 –  Chapter 3 Division 1, s2,[1] defendant has right to sue for the remedies of the breach contract. Supporting by relevant case law, this assignment presents the argument of the fraudulent misrepresentation in Bob and Mr. Spoke’s case, which results in damages. Bob, who was the bike lover, saw the bike shop on sale in an advertisement and decided to communicate to the shop owner (Mr. Spoke). Mr. Spoke designed a wrong figure of the financial situation in order to get Bob into the contract. Realising he was cheated after register tapes, cash receipts, and the tax document were found, Bob was upset and went to seek advice based on the common law. Additionally, this essay will discuss the term of contract and its validity. At last, it will describe the remedies to the innocent party (Bob) who suffer from the monetary loss.

          Coelho v The Public Service Commission [1964] [2] case, by the obiter dictum, stated that agreement is valid when an offer is available to everyone in the world and the words are clearly presented.  The owner of the shop (Mr.Spoke) had offered the sale advertisement to attract the number of people on the retirement reason. Following his dream and his career, Bob immediately making the enquiry with Mr. Spoke regarding the sale. No longer wait; Mr. Spoke made the presentation about the past and future profitability. Bob who had never had experience in business, listened to Mr. Spoke’s advice. As the result, Bob accepted Mr. Spoke offer.

          The first element of the essay will examine the legal binding contract by taking the consideration within contract law. Dyer’s case [1414][3] established that the agreement forms the execute consideration when both parties promise to do something (an act) by providing good or service to each other. As the scenario has provided, Mr Spoke had intention to sell his shop. It is likely that Mr. Spoke wanted to induce Bob to get purchase his store, which it is believed to be the monetary value. Therefore, Bob also agreed to buy the shop from Mr. Spoke. In this case Mr. Spoke agreed to sell his shop to Bob expecting to get an amount of money in return. Bob was also expecting to get the store.

          The finding in Bisset v Wilkinson [1927][4] stated that the advices getting from the business owner is regarded as statement of fact or the personal opinion. In this circumstances, Bob has no right to sue for suffer of financial loss; however, under the Australian Consumer Law Legislation Act 2010, s2 has declared that a person who makes the false or misleading figure is faced to have the penalty as the result of fraudulent misrepresentation. The scenario provided that Mr. Spoke designed a false brand new figure by inflating 55% of the income to get Bob into the contract. Mr. Spoke who is likely to be a dishonest person also hid the cash receipt, tax documents, and registers tapes before getting into the contract with Bob. Instead of revealing the financial situation, Mr. Spoke was trying to hide and create the wrong figure, which led to the fraud. Bob who was the innocent, suffer a big financial loss. In this connection, Mr. Spoke has breached the contract, which could result in contract termination and penalty.

          The third element of this case study is the legal capacity. The legal capacity classifies the person who can get enter into contractual obligations. Bob and Mr. Spoke had completed all the criteria before the contract was made. First, Both parties were not the minors. They were able to understand the contract nature and they were aware to get into agreement. In addition, they were not part of any corporation. Last but not least, Mr. Spoke sold the business because of retirement reason not the bankruptcy. To sum up, both parties had met the requirements, which proves that law enforces this contract. [5]

          It is considered that the plaintiff (Bob) can receive the compensation from Mr. Spoke based on the Genuineness of consent affected by the fraudulent misrepresentation. Bob wouldn’t have got into the contract if Mr. Spoke revealed the past and current situation of financial statement of the bike selling business. Bob, who expected to run his dream business, spent his time on store purchasing, the solicitor fees, the financial loss on business, and other fees. At last, Bob has right to sue suffer of damage caused by the breach contract. Under Competition and Consumer Act (2010)- Chapter 4 Division 1, s2, the penalty of the misleading representation of (1) a body corporate is AUD 1,100,000 (2) the individual is AUD220,000.

          Supporting by relevant case law, this essay has established the necessary elements to argue the fraudulent misrepresentation and the misleading presentation under the Competition and Consumer Act. It can be seen that Mr. Spoke took the advantages of Bob’s favorite sport by presenting the false figure to get Bob into the contract. Bob is able to sue for the remedies of the breach contract because of the waste of time, the efforts and the financial loss. The contract was valid and enforced by law. First both parties had an agreement to purchase and sell the bike selling business. Second, both parties met all the criteria in legal capacity. In conclusion, Mr. Spoke is punished by the law under the Australian consumer law Act.

Bibliography

          Trade Practices Amendment (Australian Consumer Law) Act (No.2) 2010 (2016) Legislation.gov au

          https://www.legislation.gov.au/Details/C2010A00103

          Editors, All Business, What Must a Contract Contain To Be Legally Binding?

          AllBusiness.Com(2010) AllBusiness.com

          https://www.allbusiness.com/what-must-a-contract-contain-to-be-legally-binding-731-1.html

          Introduction to Business Law of Australia (Alexandra Otevrel, 2016)

Cases

          Coelho v The Public Service Commission [1964] M.L.J.12

          Dyer’s case [1414] 2 Hen. V, fol. 5, pl. 26

          Bisset v Willinson [1927] AC 177