Legal Case Study

Published: 2021-09-11 10:30:09
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Overall, he suffered financial loss from the negligent misstatement. To succeed in a negligence action, the plaintiff must prove all of the following: •the defendant owes the plaintiff a duty of care •the defendant has failed to comply with the required standard of care •there has been material damage to the plaintiff •damage caused by the defendant is not too remote ?Duty of care As, for the first time, demonstrated in the case of Donoghue v Stevenson , negligence may exist despite there being no direct relationship between two parties.
After the Shaddock’s Case , the duty of care was extended to include the giving of information. In general, defendant will owe the plaintiff a duty of care if, at the time of making the statement, the defendant knows that: •the statement will be communicated to the plaintiff; and •the plaintiff will be very likely to rely on the statement in deciding whether to enter into a transaction; and •there is a risk that the plaintiff will suffer financial loss if the statement is incorrect.
In this case, The university owed Brad a duty of care. Firstly, Brad studied for two years in the University of Kew, which proves their close relationship. Secondly, Brad was attracted by the most important statement in the advertisement that he could become a CPA or CA as what the university alleged by entering the two-year accounting course. What he did — applied the course and took effort to complete the course was based on the statement of the university.
Meanwhile, there was a risk of the course being not accredited that would inevitably result in Brad’s financial loss. ?Breach of duty of care A person is negligent in failing to take precautions against a risk of harm if —- a. the risk was foreseeable; and b. the risk was significant; and c. in the circumstances, a reasonable person in the person’s position would have taken those precautions. This is the general principle for the test of duty of care, which derives from the Lord Oliver’s speech in the case of Caparo Industries plc v Dickman .
There exists a material risk of Brad being not able to become CPA or CA and being subject to economic loss, which is reasonably foreseeable due to the following reasons: •In the advertisement, it was indicated that the application of accreditation of the course was pending; and •The rejection to the application of accreditation of the course would undoubtedly lead to the failure of becoming CPA or CA as well as the loss of time and money. Since the material risk is foreseeable, the negligence calculus should come into play and this refers to what precautions the defendant should have taken to prevent the material risk from eventuating. The probability of the harm occurring: if the course was not accredited by professional bodies, it was likely to cause economic loss. •The likely seriousness of the harm: if Brad could not become CPA or CA through taking the course, the loss would be at least $460,000. •The burden of taking the precautions: reasonable persons would have made the advertisement only if they had got the accreditation. It’s easy for the university to take reasonable care in giving the warning and other necessary information to Brad to avoid the risk while making the advertisement.
Although footnote was made, further explanation should be provided because of the materiality of the risk. •The social utility of the conduct that created the risk : it is not only Brad who would suffer financial loss if the course was not accredited, but also other students would face the same situation; therefore, the total loss of all the students who enrolled in the course would be significant. ?Causation According to the case of Alexander v Cambridge Credit Corporation Ltd , laintiff needs to prove on the balance of probabilities that the loss would have been avoided if the plaintiff had not acted on the negligent misstatement. The university owed a liability to Brad because of the breach of duty of care and it is reasonable that the university should compensate Brad for the damage. If the university warned Brad that he might not become either a CPA or CA after his graduation when his application was accepted, Brad might not enrolled in the course and would not suffer from the loss of fees of and would not quit the job which was paid $200,000 each year. ? Remoteness
As Privy Council held in the case of “Wagon Mound (No 1)” that a party can only be held liable for damage that was reasonably foreseeable, the defendant should not be responsible for losses that are ‘too remote’ from the breach. It is obviously that the university could foresee that Brad have to quit his job to finish the degree and also need to pay for the fees. ?Damages The aim of damages resulting from negligence is to provide the plaintiff with a lump sum of money that will put the plaintiff in the position that the plaintiff would have been in had the plaintiff not been harmed by the defendant’s negligence.
If Brad did not enroll in the University, he did not need to pay for the tuition fees of $60,000 and could have earned the salary of $400,000 within two years for the same job. ?Contributory negligence to plaintiff Contributory negligence applies to cases where a plaintiff has, through his own negligence, contributed to the harm he suffered. In the case, the defendant, University of Kew has every reason to prove the negligence of Brad for following two reasons, leading to the reduction of the amount of damages.
Firstly, the defendant is able to prove that: In the advertisement, it has been articulated that the accreditation application was pending and Brad should have noticed the content in the footnote. Moreover, when there was a rumour circulating among students and Brad’s friend warned him, Brad was supposed to question and check whether the course had been accredited by the accountancy professional. However, Brad ensured himself that there were no problems of the course.
Brad should have taken common and ordinary caution and corresponding actions to protect his rights: ask for confirmation from the university about the accreditation of the course and seek for potential damages as early as possible. Obviously, in this case, Brad should bear the contributory negligence. To sum up, Brad has the rights to successfully sue the University of Kew for negligence and obtain damages, compensating for the economic loss. However, Brad’s contributory negligence may result in the reduction of damages, which means he should partly be responsible for the loss.
Misleading and Deceptive Conduct–Negligent Misstatement Conduct by corporations in trade or commerce which is misleading or deceptive or is likely to mislead or deceive is prohibited in the law. This prohibition provides consumer protection to consumers in all situations with regard to trade and commerce. The negligent misstatement is one of the examples of conduct that is misleading or deceptive . Negligent misstatement relates to a representation of fact, which is carelessly made, and is relied on by another party to their disadvantage.
To test whether a conduct misleads or deceives or is likely to mislead or deceive in respect of the negligent misstatement requires the plaintiff prove that: •The defendant’s statement is misleading or deceptive •The plaintiff relied on the defendant’s statement • The plaintiff’s reliance is reasonable In this case, the university carelessly made the advertisement to attract any potential individual who is inclined to upgrade qualification and seeking to become CPA or CA.
The statement in the advertisement seemed to mislead the readers to perceive that any who wants to become CPA or CA is easy just by taking the course as a student for two-year study. The course had not been accredited at the time when the university making the advertisement. Therefore, the lack of information about the accreditation would make it ambiguous for the readers to recognize the possible risk and failure of becoming CPA or CA. Brad is one of those readers who were attracted by the advertisement.
Secondly, Brad relied on the statement to be determined to apply for the course and then quit the job for the full-time study. If he assumed that he could not become CPA or CA after the graduation from the university, as reasonable person, he would not take this course. As mentioned above that the reliance of the statement should be reasonable otherwise Brad or any other individual would not enter into the campus, quit the job and spend two years time just for a diploma which aids nothing, especially in the promotion of the job or any increase in salaries.
Since the statement is misleading, Brad had the rights to sue for damages. Action against University of Kew in contract ?The existence of the contract There is clearly a contract between Brad and the University of Kew based on the requirements of the contract. The advertisement issued by the university is an invitation to treat to any person who interest in the Doctor of Accountancy course. The offer was made by Brad when he submitted the application form to the university.
The university accepted the application and admitted Brad as a fee-paying student for the course. This process is regarded as the acceptance. In this agreement, Brad gave up $60,000 as the fee of course, meanwhile the university promised to provide educational services to him. Thus the agreement was made under the consideration. Although we can’t get complete details about the application form, no evidences prove that vague or uncertain terms are included. Thus the certainty of terms is met.
Because the university accepted Brad’s application and both parties signed the enrolment form, it means that both Brad and university intend to form a legal relationship. So all the requirements are met and the contract is enforceable when both parties signed the agreement. ?Breach of contract Firstly, actual breach of a contract means the defendant did not do what has been promised. Then to clarify what the contract promised is the crucial part to judge whether and how the contract was breached.
In the case, the statement made by the university in the advertisement should be the term of contract for the following reason. Whether a statement forms part of a collateral contract or just a representation depends on —- •Statement was intended to be relied on; and •Reliance by the party alleging the existence of the contract; and •An intention, on the party of the maker of the statement to guarantee it is true In the case, a reasonable person, like Brad, would rely on the advertisement to apply for this course to upgrade qualification.
This kind of statement could be seen as a promise. So the express terms of the contract will include the advertisement. Hence a term of the contract will be “Enroll in the Doctor of Accountancy course at the University of Kew and become a CPA or a CA”. When Brad finished this course he did not become either a CPA or CA. Then this term was breached by the University of Kew. Secondly, the implied terms of the contract indicates that in contracts which involve the provision of services, services will be performed with reasonable care and skill.
The reasonable skill, according to the case of Red Class Pty Ltd v Rivers Locking Systems Pty Ltd , means the service should fulfill the customer’s purpose. The High Court viewed this reasonable skill as an implied term which was breached by defendant. In the case, the reasonable skill offered by university is to help Brad upgrade his qualifications, so he can increase chances of earning a higher income. But after he finished this course, he did not upgrade his qualification or get a chance to earn higher income neither. The implied term is breached as well.
Finally, it might be hard to demonstrate the fact that terms above are breached, or the express term “Brad could become CPA or CA after he finished the course” might be not bound in the contract. Brad still could sue depends on Equitable Estoppel. As the case of Walton Stores (Interstate) Ltd v Maher (1988) , Stated by Brennan J, Equitable Estoppel requires that— •There is a clearly assumption that a legal relationship would exist between plaintiff and defendant; and •The defendant has induced the plaintiff to rely on the assumption; and •The defendant acts in reliance on the assumption; and The defendant knew or intended to do so; and •plaintiff’s action or inaction will occasion detriment if the assumption of expectation is not fulfilled; and •The defendant has failed to act to avoid the detriment In the case, there is an obvious assumption that between Brad and the University of Kew a legal relationship exists. The university acted and induced Brad to rely on the assumption. Otherwise, he would not quit the previous job to study. However, the university failed to act to avoid this detriment.
Therefore, Brad has the right to ask for remedy for detriment ? Exclusion clause is ineffective Based on Contra Proferentem Rule, courts interpret terms that purport to exclude or limit for breach of contract strictly, against the party that is seeking to rely on the term. In this case, after Brad’s application had been accepted, the contract was done. According to Parol Evidence Rule, after the contract is done, the written document is presumed to be complete and no outside document could be used to contradict or change the words of the document.
Even the exclusion clause was signed by Brad, it’s still too late to make it effective. ?Damages Because of the breach of contract, Brad can sue for damages and ask for compensate the loss. Firstly, Brad can be compensated for expectation damages. In the case of Howe v Teefy , when defendant breached the contract, plaintiff successfully compensated for the lost opportunity. It is more likely that Brad would have a chance to earn more salary yearly after becoming a CPA or a CA. However, the university breached the contract; Brad lost the opportunity to earn more.
Thus, Brad can sue for this kind of damage. And just like the case Howe v Teefy, such losses are difficult to estimate. The plaintiff must provide evidence to prove that such losses not too remote and clearly exist. Secondly, Brad can be compensated for reliance damages. Comparing with Commonwealth v Amann Aviation Pty Ltd , Amann was awarded only expenditure part which reasonably incurred in reliance on the defendant’s promise. There is no profit for Brad resulted from the performance of contract in this case.
Thus Brad is entitled to compensate the expenditure occurred during his 2-year study in University of Kew, which is tuition fee of $60,000. Otherwise, Brad began his studies at the cost of 2-year leave without pay from job. The potential expenditure is 2-year salary $400,000. Therefore the Brad can be compensated for two parts of reliance damages. Q2. Would your advice be different if Brad had had to pay a fee $30,000 for the course instead of a fee of 60,000? Explain The only difference is that Brad can sue for damage from breach of contract less.
He can be compensated for expectation damages of $43,000, not $46,000. There are no other effect on sue in negligence, breach of contract and misleading. The different tuition fee is only related to define consumer contract under Trade Practices Act 1974 (Cth) s 4B. However, in our case, the educational service provided by University of Kew is ordinarily acquired by Brad for his personal purposes, which is to upgrade his qualification. Thus no matter how much the Brad paid for the course, the contract is definitely a consumer contract. But there is no effect on our advice.

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