Introduction to Business Law - Question 1


Whether john is liable under tort. If yes, what are the payable damages.


1.Tort in Australia is dealt through the common law provisions and civil liabilities.

  1. The civil Liabilities Act 2002 (NSW)
  2. Law of negligence and limitation of liability Act 2008


  1. ‘Duty’ essentially means an obligation or burden, imposed by law, which requires a person to conform to certain standard of conduct. Negligence is the breach of a legal duty of care by an inadvertent act or omission, which injures another person. In the case of Dononghue v Stevenson[1], tort of negligence was established through the concept of neighbor’s principle. It stated that one must take reasonable care to avoid acts or omissions, which can be reasonably foreseen and are likely to injure others. In common law a duty of care plays an important role when the act committed or omitted by other person can cause foreseeable injury to another as in case of Caparo Industries plc v. Dickman.[2] If care would have been implement by other person to avoid any injury the duty would not be violated as provided by Vaughanv Menlove.[3] The civil Liabilities Act 2002 (NSW)[4] under section 5 provides that failure of a person to take reasonable care and exercised due skills is called negligence.. Section 10 of Law of Negligence and Limitation of Liability Act 2008 mentions the duty to warn of risk, meaning, there is a duty of care to warn or provide other information to any person to whom this duty of care is owed. If a person suffers injury due to the lack of care by another, he will be compensated. In the absence of reasonable foreseeability of harm, no liability for lack of care will arise. In Nova Mink v Trans Canada Airlines[5] the court held that as the defendant was aware that there would be harm caused, reasonable care must be taken.
  2. Negligence is a tort which attracts civil penalties in Australia. There are certain elements which have to be shown to be present by the person who makes the claim of negligence and included in these are foreseeable, duty of care and the relationship between the two parties. Under Australian law, Negligence has two elements; foreseeability and negligence-calculus. Foreseeability can be measured by answering the question of whether any reasonable person would have taken any measures against the rik and whether the defendant had any duty ,as a reasonable person, to take precautionary measures against such risk. Any person who would fail to perform his duty of taking precautionary measures would be rightly liable under tort. Broadly speaking, there are 4 elements of tort –
  3. There must be a duty towards another.
  4. There must be a breach of this duty.
  5. An injury must be cause to another person(s).
  6. Such injury must be cause due to the said breach of duty.

Duty of care is legal duty, which needs to be performed by an individual who can reasonably foresee that harm can be caused to another person(s). to examine whether there was a breach of duty, the court has to look into the standard of care that is taken in similar circumstance. The third, the court examines whether this breach has caused injury to another person. Here, in this case putting cautious signs is a precautionary measure that is taken in similar circumstance as a duty of care. Johnny did not do take any measures in order to warn his customers about the wet floor nor did he take any other precautionary measure to avoid a foreseeable injury that could’ve been caused because of the wet floor. As a result of which, Lily severely sprained her ankle.

In Harley v London Electric Board the appellant filed a case against the electric company for being negligent in carrying out their work on a public road due to which the claimant injured himself by falling into the pit dug by the defendant company. The defendant claimed that any ordinary person would have taken measure to avoid the hole that was so clearly visible. The judge ruled the case in the favor of the claimant making the defendant liable. The judgment stated that though even though the hole was prominent and it was a foreseeable situation the defendant should have taken precautionary measures keeping in mind that any person with disability would unknowingly fall into that pit. It was the duty of the defendant to take necessary precautionary steps, which he failed to do.

  1. Liability refers to legal responsibility of one person for their act or omissions. Tortious liability is the liability towards the other person when damage is cause due to wrongful acts that cannot be measured.. When a liability arising out of an act done in contrary to a person’s duty then the person suffering from such act would be eligible to claim tortious liability. A general promise of duty of care gives rise to such liability. The concept behind duty is that there is a distinction between act and omission. Obligation for positive acts of carelessness is well recognized, however risk of inability to act is dealt d differently with “duties affirmative action” being imposed only in outstanding circumstances such as the duty owed to employees by their employers. There is a purpose behind keeping up an obligation of care prerequisite as it permits social policy considerations to be taken into account. Here in this case, Johnny would be liable as he failed to perform his duty towards his customers. As far as the question of what damages are payable by him, authorities have in any cases stated that the extent of injury which is reasonably foreseeable will be taken into account. In essence, Lily spraining her ankle is a foreseeable injure that should be compensated. But, the monetary loss caused to her as she had to cancel her trip to Hawaii is not foreseeable and would not be compensated for.


In conclusion, duty of care is a duty imposed on every person by the State. Failure to perform such duty will amount to negligence under common law and is punishable. Johnny failed to warn and or in taking any other precautionary measure so as to avoid any forseeable injury to his customers about the wet floor and hence, the court may impose a liability on Johnny to compensate Lily for her injuries.

Introduction to Business Law - Question 2


Whether a contract exists between Lame Duck Restaurant and Li. If so, what will be the liability if Lame Duck Restaurant fails to perform their duty.


Australian contract law is governed by common laws.


 First question that need to be answered is whether Lame Duck restaurant and Li have entered into a binding contract. Contract, under common law, is an agreement that is legally enforceable. For a contract, to be legally enforceable, there should be intent of the parties to create a legal relationship[6]. There should be an agreement (offer[7] and acceptance), and consideration between the parties capable of forming a contract. It is to be noted that when a commercial relationship is established between the parties, any agreement made will be presumed to be made with an intent to create a legal relationship. The main elements that need to be in place to form a contract are - offer, acceptance and consideration. There must be proper communication between the parties to agreement[8] and there must be a consideration involved. The condition of offer, acceptance and consideration are fulfilled but between Summer and Li. Summer being a sales and marketing representative of Lame Duck Restaurant mistakenly accepts the booking, asking Abu from accounts to accept the deposit and finalize the invoice. Li calls, accepts the quoted price, pays the deposit and books the date for the wedding. Here, acceptance to offer is done and the consideration is made on behalf of the parties fullfiling all the requisites of a valid contract. There is a binding legal contract between Lame Duck Restaurant and Li. This comes under the concept of vicarious liability. Vicarious liability is a common law principle, which imposes liability on any person for the failure or performance of another person who was entrusted to perform such task. Examples of vicarious liability are; liability of contractor on failure of completion of job by their subcontractors; parents being liable for their children in performance of the acts which causes substantial damage; the most common example associated with vicarious liability is the liability of an employer on behalf of their employees. It is to be noted that so long as the employees are doing any act in the furtherance of their duty, the employer will be liable for such act. Vicarious liability is a liability for negligence of another person. It is a strict liability, meaning, that this liability occurs even without proof of fault. In this case, Summer made a mistake of accepting the booking at different rates but Lame Duck Restaurant will not be free of the contract that now binds them even though he did not know about such a booking took place. A similar situation occurred in Carlill v Carbolic Smoke Ball Co. where the changes in the reward policy were done at a later stage[9].

A mistake of accepting the booking was made by Summer when the booking came with an offer of their previous rates being payable. For this mistake, Lame Duck Restaurant will be liable. Contractual liability is different from tortious liability in terms of the parties involved. Contractual liability concerns only those people who are actually involved in a legal contract. In terms of tortious liability one party is fixed and there can be any other party and they are not involved in any contract whatsoever. In Contractual liability, the amount for which the party will be liable is equivalent to consideration mentioned in a contract. As there is no consideration involved in Vicarious Liability, the compensation paid cannot be calculated. There are certain rights and duties of parties to a contract. The law requires the parties to abide by those rights and duties. Duty of any service provider is to provide the service with care and skill or technical knowledge taking all the necessary steps for the purpose of which the contract was made. On the other hand, the duty of customer is to pay the consideration decided for the service provided. The law provides that on failure of performance of these duties the party who breaches the terms of contract will be held liable to pay compensation to the other party.


In conclusion, any employer who delegated a task to one of its employee will be liable for any damages caused by such an employee in the course of discharge of his duty. As Summer is the employee who manages sales of Lame Duck Restaurant she was acting within her course of employment and hence, Lame Duck Restaurant will be liable to fulfill the terms of contract entered into by Summer and Li and will compensate Li on failure to fulfill such terms.

References for Introduction to Business Law

The Civil Liabilities Act 2002 (NSW)

Law of negligence and limitation of liability Act 2008

Donoghue v Stevenson [1932] AC 562

[1990] 2 AC 605

(1837) 3 Bing.N.C.467

The civil Liabilities Act 2002 (NSW)

[1951] 2 D.L.R. 241

Household Fire & Accident Insurance Company (limited v Grant (1879)LR 4 Ex D 216 at 220

Smith v Hughes (1871) LR 6 QB 597

Sahin V National Australia Bank Ltd [2011] VSCA 64

Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.)

[1] Donoghue v Stevenson [1932] AC 562

[2] [1990] 2 AC 605

[3] (1837) 3 Bing.N.C.467

[4] The civil Liabilities Act 2002 (NSW)

[5] [1951] 2 D.L.R. 241

[6] Household Fire & Accident Insurance Company (limited v Grant (1879)LR 4 Ex D 216 at 220

[7] Smith v Hughes (1871) LR 6 QB 597

[8] Sahin V National Australia Bank Ltd [2011] VSCA 64

[9] Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.)

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