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Business Law

Question 1


Ron owns a fruit shop in a shopping centre and has his staff look at the floor four times a day to make sure there is no spillage or material on the floor that a customer might slip/trip on.


Lizzy came to the shop to buy some fruit but forgot to wear her glasses. As she walked around the shop, she did not see a lettuce that had rolled off the shelf some ten minutes earlier. She fell near the lettuce and broke her ankle and said to the staff “I forgot my glasses and did not see the lettuce”


Please advise Ron on the following


  1. Does Ron owe Lizzy a duty of care? Please explain the legal principles and the cases that establish those principles.
  2. Advise Ron whether Lizzy may be successful suing Ron’s fruit shop for negligence. Fully explain your answer including legal principles established in similar cases.
  3. Explain what further measures a court may find Ron should or could have taken to reduce the risk of injuries to customers
  4. Are there any defences for Ron to argue that may reduce Lizzy’s claim?




a) Johnny does owe Kylie a duty of care. According to the facts of this case, Johnny was the one driving the car and hence he owed Kylie a duty of care as his fellow passenger. As per the tort law provisions, reliance could be put on Johnny’s actions while determining the cause and nature of damage and injury suffered by Kylie.


b) Johnny did breach his duty of care. To explain this further, to establish the breach of duty, it is essential to establish the reasonable foreseeability of the defendant's action and the injury caused to it. In the case of Caltex refineries v Stone, this case establishes and broadens the perspective of duty of care and inculcates features such as foreseeability of harm, nature of the harm, reliance on the defendant’s action by the plaintiff etc., which helps us to establish that Johnny breached his duty of care he owed Kylie.


c) Johnny could take the following defence to negligence, including voluntary assumptions of risk and contributory negligence. Contributory negligence can be established when the plaintiff does something or fails to do something that a reasonable person would have done in a similar circumstance. We can refer to the reasoning in the case of Pangello v Smith and Insurance Australia Limited, trading as NRMA Insurance. The supreme court of the Australian Capital Territory had held that a person, before claiming negligence from the other, must make sure that they had taken reasonable steps to ensure their safety. In the present scenario, kylie knew that Johnny was drunk. Hence, any reasonable person would understand that driving along with an intoxicated person is risky. There could be potential injuries or the risk of meeting with an accident is significantly higher due to the intoxication. However, knowing all well of Johnny’s intoxication Kylie still sat in his care proves that she did not take due care or did not ensure her complete safety first. Additionally, Johnny can also take to the defence of Voluntary assumption of risk, to ascertain this claim, one must establish that the plaintiff had the knowledge and a full understanding of the risk, and they voluntarily chose to take that risk. In the present scenario, it is pertinent to mention that Kylie knew that Johnny was intoxicated and there was significant risk riding in a car with him being the driver. However, she assumed the risk and then sustained injuries for the same.


d) Yes, if a driver had forced Johnny off the road, that would change the answer significantly. As per the current scenario, the damages caused and suffered by the parties were due to the parties themselves, i.e., Kylie and Johnny. However, in the alternate scenario, the damages suffered, and the injuries sustained would be because of the actions of the third party. To further explain this, in the alternate scenario, the injuries suffered by kylie and Johnny are not because of either of their actions but due to the driver's actions, driving the car on the wrong side. Here, the fact that Johnny was drunk would be superseded by the other driver's driving in the wrong direction. Further on, the other driver could take the defence of contributory negligence by stating the fact that Johnny was intoxicated. However, if the driver fails to prove that the intoxication was a contributory reason in the accident and that the intoxication did not impair their capacity of Johnny to take reasonable care, he will lose his claim and would still be liable for negligence and the injuries and damages sustained by Johnny and Kylie.


Question 2


Hugh was a very wealthy married businessman who had a mistress named Stormy Knight. Hugh bought an apartment for her for $800,000 some three years ago. He also had been giving her $200,000 a year for her living expenses over the past ten years.


Unfortunately, Hugh suddenly died and had not left anything in his will for Stormy Knight.


Stormy Knight claimed against the estate saying that Hugh had promised her $200,000 a year for the rest of her life. The relatives of Hugh say there is no such valid contract.


Stormy knight has a scribbled note from Hugh promising $200,000 a year. (5 marks each)


  1. What factors would the court consider in determining whether there was an enforceable contract for the $200,000 a year?
  2. What are the cases that assist your explanation?
  3. If there is an enforceable contract are there any additional arguments that the relatives could use alleging the contract is invalid?




  1. There was an agreement to formulate a valid contract. There are cases where silence is sufficient to constitute a valid agreement, one of them being where the acceptance has been communicated through conduct. It is necessary to establish that the conduct was so that a reasonable person would conclude that such an act amounts to acceptance of the contract. Furthermore, the idea of promissory estoppel can also be applicable here based on the promise between the parties, as, one party performed an act and now the other party shall be held liable for the promise. In the present scenario, Willy Gates continued to work on the task given to him by David and this conduct established the acceptance of the agreement.
  2. In the case of Brambles v Bathurst City Council, the court held that a party’s conduct in accepting the new fees indicated the agreement had been accepted by the other party (Brambles) and there was a legally enforceable agreement. In the present scenario, the conduct of Willy Gates was proof enough that he was acting on the promise to David. Further on there is implied consent on behalf of Willy Gates since he did an act in furtherance of a pledge made by David that he would pay him $400 if he did Willy Gates also invoiced the requisite task and David according to the renewed pricing of $400 instead of the original fee of $200. As the facts as mentioned earlier state that Willy “failed to implement a new faster online system within the six months” and the invoice of $400 raised on David, proves that there was performance, although inadequate, of the contract on behalf of Willy Gates.
  3. There are six essentials required to establish a contract: -
  • Agreement between the parties
  • Consideration
  • Intention to create legal relations
  • Legal capacity
  • Valid Consent
  • Legality of purpose


To explain the above points, an agreement between the parties requires for there to be an offer and a valid acceptance. Offer is the specific need presented forth by one party and accepted by the other party based on which the parties will enter into the agreement.

Consideration is essential for every contract; it is something of value given by one party to another for the performance of the contract.


Intention to create legal relations means that the parties agree to make their contractual relationship legal, i.e., in case there is a dispute between the parties, they can take legal action.

Both the parties to the contract are required to be in their legal capacity as mentioned in the law, to enter into a valid contract.


Valid consent of both the parties is to be established to ascertain that the contract was not entered through unlawful means. Lastly, the purpose of the contract shall be legal.

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