Business Law Issues - Case Study Example

Business Laws Essay Name University Of Canberra Date Course Business Laws Essay Introduction Elvis inflated the historical figures of the cafe by 60% for the purposes of inducing Mr. Manfredi to make the purchase. Mr. Manfredi learnt later that the figures have been inflated after he came upon some documents. According to the Australian Consumer Law, business conduct is likely to break the law if it gives a misleading overall impression among the intended audience with regards to price, value or quality of goods and services1. The information that was presented to Mr. Manfredi was false as it was not a true representation of the value of the company. Trade Practices Act 1974 (Cth) is for the purposes of protecting the consumers against unlawful commercial practices. Section 52 of the Act prohibits deceptive and misleading conduct when carrying out a commercial activity. The contract law in Australia also prohibits the use of deceptive and misleading conduct or representation during a commercial activity2. Penalties may be imposed on the party that is found engaging in deceptive and misleading conduct. The party that faces loss or damages as a result of deceptive and misleading conduct has a right for compensation by the party that caused it. The paper thus discusses the case of Mr. Manfredi in relation to the common laws with a view of advising him. Discussion In the case of Robson Lindsay Timbs; David Bryce Stapleton and Cream Silver Holdings Pty Ltd v Birrell Management (Australia) Pty Ltd and Max Neville Birrell, the applicants were provided advice by the respondent with regards to the profitability of the business3. The applicants were also provided with a forecast with regards to the profitability of the company in future. However, the information turned out to be false as the company failed to make any profits. It was established that a false representation had taken place and that the conduct of the respondent was deceptive and misleading. This is an indication that providing a false representation of a company amounts to a deceptive or misleading conduct. This may lead to the party involved making looses and hence impacting negatively on the business operations. The contract law prohibits such a conduct in the commercial activities as it impacts negatively on one party. The contract between Mr., Manfredi and Elvis was base on a deceptive and misleading conduct since the historical financial figures were inflated by 60%. The inflation of the figures is an indication that a false representation of the café was portrayed and it amounts to a deceptive and misleading conduct. The inflated figures were for the purposes of inducing Mr. Manfredi to make the purchase decision. This indicates that Elvis was aware of the actual performance of the café and Mr. Manfredi may have not made the purchase decision had he been provided with the actual financial information of the café. According to the Australian Consumer law, it is unlawful for a business to make statements in trade and commerce that may lead to the misleading of a party involved in the contract4. A behavior that is likely to deceive or mislead is also prohibited. The Australian Consumer laws also makes it illegal for a party to fail to disclose relevant information, make promises, give opinions or provide predictions that are deceptive and misleading. In the case of Hardy v Your Tabs Pty Ltd, a restaurateur failed to provide adequate information with regards to the sale of the restaurant5. The sale of the restaurant took place since the owner feared that a new restaurant was set to be opened and thus increasing competition. It was established that the owner of the restaurant was engaged in a misleading conduct by failing to provide all the information with regards to the sale of the restaurant. In the case of Mr. Manfredi, Elvis failed to provide adequate information with regards to the sale of the café. Inflating the figures is an indication that adequate information was not provided. Mr. Manfredi was also able to discover an old tax document which is a further indication that the information that was provided to him was not only inflated but inadequate. The failure to provide adequate information during the purchase amounts to a misleading conduct. It is thus important to note that the Elvis has been engaged in misleading conduct contrary to section 52 of Trade Practices Act 1974 (Cth). According to the Australian consumer laws, quotations or statements that are false and are prepared for the purposes of inducing a party to make a purchase amounts to deceptive and misleading conduct6. It is unlawful to prepare statements that are false or failing to provide accurate information with regards to trade and commerce. In the case of Kizbeau Pty Ltd v W G & B Pty Ltd & McLean, the court ruled that there was a breach of section 52 of Trade Practices Act 1974 (Cth)7. This was after the appellant bought a motel and leasehold business through relying on false representation. The respondent had informed the appellant that the upstairs portion of the building could be used for seminars. However, the town planning permit had restricted the seminars to the breakfast and seminar room. The responded failed to mention this during the contract and it influenced the purchase decision. As a result of the contract, the applicant faced some losses in terms of lost revenue while the respondent continued collecting rental fees. In the case of Mr. Manfredi, false information was provided by Elvis and it influenced the purchase decision. The use of false information is prohibited in the Australian Consumer Laws and it has been contravened by Elvis. The inflation of the figures amounts to false representation of the financial history of the business and hence contravening section 52. Elvis is thus liable for contravening section 52 of Trade Practices Act (Cth). Misleading and false representation has the potential of influencing a party to enter into a contract to their detriments. This is because of the reliance of the party on the information provided. On the other hand, some of the information that is provided during the purchase period may be difficult to verify and hence leading to the purchase decision by the customer. In the case of Gould v Vaggelas, Gould who was the plaintiff was made to believe that the business he was purchasing was profitable8. A false representation regarding the profitability of the company was provided and hence influencing his purchase decision. Through the false representation, he was made to believe that the business could make an annual profit of $500,000. However, the information was false as the appellant later discovered that the company was not profitable. False representation amounts to misleading conduct which is contrary to section 52 of Trade Practices Act (Cth). Mr. Manfredi was also provided with false information that resulted to the purchase decision. The inflation of the figures by 60% may have given the impression that the business was performing well and hence influencing the purchase decision. Elvis was engaged in false representation through the inflation of the figures and hence influencing the purchase decision of Mr. Manfredi. False misrepresentation amounts to misleading and deceptive conduct according to Trade Practices Act 1974. The involvement of Elvis in providing false information is an indication that he has breached section 52 and should be liable. Making false representations during a contract is an offense. The offense attracts a maximum fine of $220,000 for individuals and $1.1 million for corporate bodies9. The party that is found guilty of the offense may also be required to pay back the money that was involved during the contact or amount lost as a result of losses or damages. In the case of James Roycroft Frith and Betty Clarissa Frith v Gold Coast Mineral Springs Pty Ltd; Park Avenue Enterprises Pty Ltd; Brian Patrick Mcdermott, the responded was order to pay the applicant $30,000 for the losses suffered by the applicant after purchasing a drilling rig10. This was after the respondents made false representation with regards to the profitability of the company. The financial figures were inflated and it gave an impression that the company was making profits. However, it later turned out that the information was false and the applicants suffered losses as they were unable to secure any contract or profit. Mr. Manfredi may end up making losses as a result of purchasing the cafe based on false information about the company. However, he may also be refunded the amount paid incase he takes legal action. This will play an important role in reducing the chances of making losses as the financial information of the café had been inflated by 60% and hence providing a false representation. Elvis has been engaged in a deceptive and misleading conduct which is an offense. Conclusion The inflation of the historical accounts of the café by 60% amounts to deceptive and misleading conduct. It is advisable that Mr. Manfredi should take legal action for the purposes of ensuring that Mr. Elvis is held liable for contravening section 52 of Trade Practice Act 1974 (Cth). Mr. Manfredi made the purchase decision based on the information that was presented to him by Elvis. Misleading and deceptive conduct is prohibited and the evidence from the case laws indicates that Elvis has been engaged in the deceptive and misleading conduct through provision o false accounting information that has been inflated. The court is likely to make its decision based on the case laws. On the other hand, Mr. Manfredi will be required to produce the receipts and the cash register tapes to prove that Elvis inflated the historical accounting information of the company. Elvis is also likely to be penalized for engaging in a deceptive and misleading conduct. Mr. Manfredi is also likely to be refunded the money used to make the purchase and hence avoiding future losses. Bibliography Case laws Robson Lindsay Timbs; David Bryce Stapleton and Cream Silver Holdings Pty Ltd v Birrell Management (Australia) Pty Ltd and Max Neville Birrell [1990] FCA 102 (6 April 1990) Hardy v Your Tabs Pty Ltd (in Liq) [2000] NSW CA 150 Kizbeau Pty Ltd v W G & B Pty Ltd & McLean [1995] HCA 4 James Roycroft Frith and Betty Clarissa Frith v Gold Coast Mineral Springs Pty Ltd; Park Avenue Enterprises Pty Ltd; Brian Patrick Mcdermott [1983] FCA 28; (1983) 65 FLR 213 (28 February 1983) Gould v Vaggelas [1984] HCA 68 Legislation Trade Practices Act 1974 (Cth) Books and articles Corones, S, 2013, The Australian Consumer Law, Thomson Reuters, Lawbook Co. Griggs, L, 2011, The OECD Consumer Policy Toolkit: the companion to the Australian Consumer Law, Competition and Consumer Law News, 26(6), 66-70. Price, R, 2010, Causation, Contributory Negligence and Misleading and Deceptive Conduct–A Modest Proposal for Change, Australian Competition and Consumer Law Journal, 18(2), 93-118. Latimer, P, 2012, Australian Business Law 2012, CCH Australia Limited. Read More