Business Law Issues - Assignment Example

Law Case Scenario Question 1 Issue Does Gerry’s financial advice towards George who then advices Kosmo based on same premises constitute negligent mispresentation by Gerry? Should Gerry be held responsible for negligent misstatement or otherwise suffered by third parties, in this case Kosmo? Relevant Law In the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, the court held that “I consider that it follows and that it should now be regarded as settled that if someone possessing special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise” (Gillies, 2004). Application of the law Misrepresentation is defined in contract law as untrue statements made by a party to another for purposes of influencing their judgment, and there are several forms of this (Turner, 2008). Negligent misrepresentation on the other hand is defined as “a statement made without reasonable grounds for belief in its truth” (Turner, 2008). A precedent case of, Hedley Byrne & Co Ltd v Heller & Partners Ltd which is relevant to our case scenario regards a negligent misrepresentation in which the court in setting current precedent regarding this form of misrepresentation that leads to economic loss for the first time provided for “liability for pure economic loss not arising from a contractual relationship, introducing the idea of assumption of responsibility” (Turner, 2008). The implication of this premise in our case scenario is that the law will ordinarily allow Kosmo to sue Gerry for acts that amounts to negligent misrepresentation, despite the fact that Kosmo and Gerry were not directly in any form of contractual relationship. Indeed, in their summation during the ruling, the supreme court judges also stated inter alia that “..a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise” (Gillies, 2004). This effectively means that such persons, where negligent misrepresentation has been found to be the case, are also by default liable to economic losses suffered by third parties as a result of their bad advice. So far, what this means is that on this basis alone Kosmo does indeed have a strong case against Gerry if he was to sue him. However, as in many matters of law, this is not the only thing to consider in this case. While setting this precedent the court also provided several conditions which should be met for negligent misrepresentation to be found to have been present; (1) “a special relationship exists between the parties which gives rise to duty of care, (2) the defendant accepted responsibility in the circumstances of the advice, (3) the representation in question must be untrue, inaccurate or misleading, (4) the representor must have acted negligently in making said representation and (5) the plaintiff relied upon the misrepresentation resulting to damages” (Gillies, 2004). Now based on the case scenario circumstances, let us determine if this was the case. First, it is probable that the court will find that a “special relationship” existed between Gerry and Kosmo based on the test of proximity between these two parties. Regarding the second condition it is unclear if Gerry provided disclaimer when giving advice to George as is mostly the case especially where third parties are involved; if this was the case then such a disclaimer would have effectively protected Gerry from financial losses suffered by third parties as a result of his advice. On the third condition, the plaintiff is required to demonstrate that the advice given was untrue and inaccurate which does not appear to have been the case in this instance simply because Gerry gave advice which for all intents and purposes appears to have been sound financial advice. In any case Facebook Initial Public Offer, like many such IPO’s was largely anticipated to be profitable probably in the long-run if not in the short-run. Fourth, there is no evidence yet that Gerry in giving the advice acted in a manner that can be deduced to be negligent, which the law defines as actions that no prudent person can ordinarily do. But, on the same breadth, the law might find Gerry negligent in failing to disclose to George the downside of this investment option, which also includes financial loss, if he didn’t do so at the time. Finally, it must be demonstrated by Kosmo that it is the reliance to this advice that led to his financial loss. This will be extremely difficult to demonstrate mainly because of the nature of share values which tends to fluctuate based on market trends and time, so Kosmo cannot really claim financial loss after trading for only 1 month especially since the same shares have the potential to appreciate in value in the future. So strictly speaking, Kosmo cannot even claim financial loss yet as this will depend on the investment period initially planned, which we unfortunately don’t know. Conclusion Kosmo has a very slim chance of winning any sort of damages from George assuming he was to sue him. Question 2 Issue Do Kosmo’s actions under the circumstances amount to negligence? Can Newman effectively lodge a suit against Kosmo on the basis of negligence and consequently claim monetary compensation as a result of damages suffered? Relevant law A relevant case that has since set the precedent for arbitrations involving negligence cases is that of Donoghue v Stevenson [1932] UKHL in which the court held that; the rule that you are to love your neighbor becomes in law, you must not injure your neighbor; and the lawyer's question, Who is my neighbor? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question (Turner, 2008). Application of the law Negligence is described as a behaviour or demeanour which is thought to have contributed to the injury of the plaintiff and involves direct or indirect jeopardy that endangers a person life (Lillywhite, 2011). In accordance with tort laws, negligence can be determined to have occurred in an accident through inference alone and without necessarily being directly linked to the cause of the accident. In order to determine whether negligence liability applies in a given case the court will rely on a set of four conditions that must be satisfied to have been present at the time of the accident. One, that the accident wouldn’t have occurred without the element of negligence, which implies that a duty of care was owed but which was neglected by the defendant, two, that negligence is the probable cause, three, that an instrument controlled by the defendant resulted to the accident and finally that the plaintiff did not contribute at all to the accident (Lillywhite, 2011). So, consistent with these conditions let us apply the circumstances of the case scenario to the facts of the law. In the first condition, the injury that Kosmo caused Newman will pass the first test of negligence acts since it is clear that the resulting injuries would not have occurred had it not been because of Kosmo banging the door on the face of Newman. But even so, it will remain to be shown that Newman who was also rushing in did not in any way be said to have contributed to the injury as well. The implication here is that Kosmo owed a duty of care to all passersby including Newman, but despite this neglected this duty. Secondly, that all other factors being constant, the most likely cause of the injuries suffered by Newman were as a result of negligence on the part of Kosmo; this indeed is the most probable causative factor based on the case scenario. The third condition requires that an instrument controlled by the defendant be the cause of the injury. Regarding this, we can only infer that the court will probably consider the door which in this case was the “factor” that caused the injury to be the instrument, and this instrument was at the time controlled by Kosmo. Finally, the law will consider if the plaintiff actions at the time contributed to the injuries suffered by whichever degree that this can be deduced. After this is done the court will arrive at a judgment, and based on the facts of this case scenario it is most probable that Kosmo will be found guilty of negligent acts which led to Newman injuries. So then, the question will be how much damages should be payable to Newman. Once negligent has been established in law to have been the cause of an accident or an injury, the court will almost always award damages consistent with the injuries suffered. Where such damages also involve loss of income, the court will almost certainly also require that the defendant compensate the plaintiff accordingly. Finally, the court might apportion the blame between the defendant and the plaintiff proportionally, where it has been established that the defendant also contributed to the injury suffered or incurred as is probably the case. Conclusion Kosmo will most likely be found guilty of causing injuries to Newman through negligence; additionally, he will most likely be required to also pay Newman damages including his loss of income now that he will not be able to participate in the final Adelaide Pétanque Club Championship which should have earned him a sum of $40,000. References Gillies, P. 2004. Business Law. Federation Press: Annandale. Lillywhite, B. 2011. The Extent of Res Ipsa Loquitur. The Modern Law Review, 22(1), pp. 82-83. Turner, C. 2008. Australian Commercial Law, 27th edn. Thomson Reuters. Victoria: Read More