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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
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 30th 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
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,
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
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  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
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.
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
Trade Practices Amendment (Australian
Consumer Law) Act (No.2) 2010 (2016) Legislation.gov
Editors, All Business, What Must a
Contract Contain To Be Legally Binding?
Introduction to Business Law of
Australia (Alexandra Otevrel, 2016)
Coelho v The Public Service Commission
Dyer’s case  2 Hen. V, fol. 5, pl. 26
Bisset v Willinson  AC 177
 2 Hen. V, fol. 5, pl. 26: Dyer could sue the plaintiff for suffer
of damage as Dyer had agreement not to ship his trade in the same town whereas
plaintiff did nothing in return and was not bother to get into the court.