LAWS1100 Business Law

Final exam feedback

General comments:

In grading the LAWS1100 final exam answers, instead of looking for particular answers and
counting the marks, we graded each answer according to criteria. Specific notes about the
way each criterion could be satisfied are included in the criteria table after each question
below. There was some flexibility in the scheme in that if you used a novel approach to
solving a legal problem, but one which the marker thought had merit, you were graded
accordingly. You were not penalised for reaching a different conclusion to what is in the
answer guide, provided that your conclusion was well argued and you demonstrated you
understood, and applied, the law correctly.
Students were not expected to write lengthy answers to any question. The available writing
time was taken into account in marking the exam and students could still achieve high
marks through writing significantly less than that set out below.
For the problem style questions, the structure adopted by students in setting out their
answers was generally good for most questions. Nearly all students used the ILAC
framework and set out their argument according to appropriate headings. This was
important as students who failed to do this most often produced a confused answer and
failed to properly identify all of the necessary issues and legal principles in their response,
which impacted on their result.
The most significant and consistent error for the problem style questions was the failure to
apply the law to the facts in a careful and considered manner that explained and
established the basis on which the student was arguing the law should be applied to the
particular facts.
The common and significant errors for the short answer questions were not answering the
question that was asked and not addressing all of the issues raised by the question.
Students were marked on the basis of how well they answered the question that was asked
on the exam paper.

Specific feedback for each exam question follows:

QUESTION 1
Explain the reasons for the enactment of consumer protection legislation in common law
jurisdictions such as Australia. In your answer include a discussion of the protection provided to
consumers by the common law prior to the introduction of, the reasons consumers may need
protection in the form of, and any broader benefits to the community from consumer protection
legislation.
(10 marks)
General comments:

Many students were able to articulate some of the limitations of traditional common law
rules and at least one reason that consumers require protection but very few students
comprehensively explored these issues. A number of students simply discussed the
advantages of section 18 of the ACL, which is only a partial answer to the question.
Despite the question detailing a number of points that answers should address, a number
of students did not cover all of these points.
Few students expansively explained and explored the economic consequences of
information asymmetry.

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Answer outline:
The explanation of the limited protection provided to consumers under the traditional common law
rules of contract should have included the consequences of:
-
-
-
-

The principles of caveat emptor and freedom of contract which underpin the common law of
contract;
The limited application of mistake and misrepresentation;
The limited remedies for mistake, misrepresentation (particularly innocent
misrepresentation) and unconscionable conduct; and
The doctrine of privity of contract. Only those who are a party to a contract can sue for its
breach. At common law, there are very limited remedies for competitors and public interest
groups.

In discussing why consumers require protection, the significant disadvantage they have vis a vis
business in modern commerce needed to be explored, including:
- Significant information and resource power differentials with the businesses they contract
with due to, for example, complex products, internet purchases and the power of
multinational corporations; and
- Many companies also use standard form contracts such that business is conducted on a
take it or leave it basis.
Beyond the benefits to the community of a fairer relationship between business and consumers,
the economic consequences of information asymmetry are a key problem that the consumer
protection law seeks to address.
Marking criteria:
Score
8.5-10 (grade of
7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

Specific Criteria
You have demonstrated an
exceptional understanding of the
economic consequences of
information asymmetry, the relative
bargaining power of consumers and
business in the modern economy
and the limited protection provided
to consumers under the common
law of contract.

7.5-8 (grade of
6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated a very good
capacity to apply relevant
considerations and principles to the
issues in a persuasive manner.

You have identified but not explored

the issue of the economic
consequences of information
asymmetry as well as demonstrated
a very good understanding of the
relative bargaining power of
consumers and business in the
modern economy and the limited
protection provided to consumers
under the common law of contract.

6.5-7 (grade of
5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,

You have demonstrated a good

understanding of the relative
bargaining power of consumers and
business in the modern economy

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and demonstrated a good capacity

to apply relevant considerations
and principles to the issues.
5-6 (grade of 4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant
considerations and legal principles,
and demonstrated some capacity to
apply those considerations and
principles to the issues.

4.5 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

2-4 (grade of 2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant
considerations or legal principles.

0-1 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

and the limited protection provided

to consumers under the common
law of contract, but have failed to
identify and explain all the relevant
considerations.
You have demonstrated a
satisfactory understanding of the
relative bargaining power of
consumers and business the limited
protection provided to consumers
under the common law of contract.

QUESTION TWO
Lachlan has used Speedy Bike Couriers to send parcels on a number of occasions. Each time he
wishes to send a parcel with Speedy Bike Couriers, Lachlan sends an email to the manager, Gus,
and explains what he requires. The first time Lachlan used Speedy Bike Couriers, he received an
email from Gus stating the parcel would be delivered on the terms and conditions set out on the
Speedy Bike Couriers website (the Terms). As a result of Gus email Lachlan quickly read the
Terms but did not pay much attention to them.
Earlier this week Lachlan engaged Speedy Bike Couriers to deliver documents relating to an
important business transaction. He arranged for the pick up by sending an email to Gus. Gus did
not respond to Lachlans email but a Speedy Bike Couriers employee arrived to collect the
documents in accordance with Lachlans instructions. Unfortunately the Speedy Bike Couriers
employee lost the documents after he left Lachlans offices. As a result, the transaction did not
proceed and Lachlan lost a significant amount of money. Lachlan emailed Gus demanding that
Speedy Bike Couriers compensate him for the damage he has suffered as a result of the loss of
the documents. Gus has sent an email back to Lachlan stating that Speedy Bike Couriers is not
liable because clause 5 of the Terms states:
Speedy Bike Couriers is not responsible for any loss or damage to any customer that
results from the loss or damage of any parcels by Speedy Bike Couriers.

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Will clause 5 of the Terms protect Speedy Bike Couriers from a negligence or breach of contract
claim by Lachlan? You can assume for the purposes of your answer that there is a simple contract
between Lachlan and Speedy Bike Couriers for the delivery of the documents.
(15 marks)
General comments:

Most students identified the relevant issues and stated the law well, including case names.
Most students used the ILAC method, and at least attempted to apply the law to the facts.
A lot of students did not read the question carefully and discussed negligence, breach of
contract and whether or not a valid contract existed (ie. offer, acceptance, consideration
etc). This question clearly states that an assumption can be made that there is a simple
contract so no marks are awarded for consideration of the issue of whether a contract
exists. To address whether Speedy Bike Couriers will be protected by clause 5 does not
require consideration of whether there has been negligence or a breach of contract by
Speedy Bike Couriers so no marks are awarded for consideration of these issues.
Quite a few students discussed only one of the relevant issues, i.e. whether the exclusion
clause was a term of the contract, or discussed the contra proferentum rule, but did not
discuss both issues.
The application of some students was a bit confused in places. A number of students
reached a conclusion inconsistent with their argument in the application, for example, they
would argue that the clause had been implied as a result of prior dealings, but then
concluded that the clause was not part of the contract.
Some students applied the contra proferentum rule incorrectly and argued that the court
would apply the interpretation that favoured the courier company.

Answer outline:
Issue 1

Is the disclaimer a term of the contract between Lachlan and Speedy Bike
Couriers?

Law

A disclaimer is only a term of the contract if:

it is a term in a written and signed contract; or
it is brought to the attention of the other party by reasonable notice
before the contract is formed: Thornton v Shoe Lane Parking; or
it is implied into the contract as a result of prior dealing: Balmain New
Ferry v Robertson.

Application

The disclaimer is not contained in any written and signed contract between
Lachlan and Speedy Bike Couriers.
The disclaimer [was / was not] brought to Lachlans attention by
reasonable notice before the contract was formed because..
The disclaimer [is / is not] implied into the contract as a result of prior
dealing, because ... N.B. There is some basis to argue that the
disclaimer is a term of the contract by reason of prior dealings for a
previous contract, Lachlan received Speedy Bike Couriers terms and
conditions via email from Gus.

Conclusion

The disclaimer [is / is not] a term of the contract.

Issue 2

Will the disclaimer protect Speedy Bike Couriers from liability?

Law

If a disclaimer in a contract between a consumer and a business is

uncertain or ambiguous, it will be interpreted contra proferentum, that is,

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against the interests of the party that included the disclaimer: Elder Smith
Goldsborough Mort Ltd v McBride.
Application

The disclaimer explicitly refers to Speedy Bike Couriers not being

responsible for any loss or damage to any customer. It also refers to loss
or damage caused by the loss or damage of parcels by Speedy Bike. The
only real grounds for arguing there is any uncertainty here would be on the
basis that the disclaimer does not explicitly say that it covers loss or damage
however it is caused or loss or damage of any description. The contra
proferentum rule only applies if there is uncertainty or ambiguity in the
disclaimer.

Conclusion

The disclaimer [will/ will not] protect Speedy Bike Couriers from liability.

Marking criteria:
Score
13-15 (grade of
7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

11.5-12.5 (grade
of 6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated a very good
capacity to apply relevant
considerations and principles to the
issues in a persuasive manner.

10-11 (grade of
5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,
and demonstrated a good capacity
to apply relevant considerations
and principles to the issues.

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Specific Criteria
You have correctly explained the
three ways the disclaimer could
become a term of the contract
and the contra proferentum rule.
You have shown an exceptional
understanding of the relevant law
in your application, including an
outstanding application of the
contra proferentum rule to the
facts (exploring in detail whether
the disclaimer will protect
Speedy Bike Couriers) and an
excellent consideration of
whether the disclaimer is an
implied term of the contract by
reason of prior dealings.
You have correctly explained the
three ways the disclaimer could
become a term of the contract
and the contra proferentum rule.
You have shown a very good
understanding of the relevant law
in your application, including in
your application of the contra
proferentum rule, and you focus
on whether the disclaimer is an
implied term of the contract by
reason of prior dealings.
You have correctly explained the
three ways the disclaimer could
become a term of the contract
and the contra proferentum rule.
You have shown a good
understanding of the relevant law
in your application, including by
focusing on whether the
disclaimer is an implied term of
the contract by reason of prior
dealings.

7.5-9.5 (grade of
4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant
considerations and legal principles,
and demonstrated some capacity to
apply those considerations and
principles to the issues.

7 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

2.5-6.5 (grade of
2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant
considerations or legal principles.

0-2 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

You have correctly explained and

satisfactorily applied the three
ways a disclaimer becomes a
term of the contract and the
contra proferentum rule.

QUESTION 3
a) Discuss the policy considerations that underpin intellectual property law.
b) Explain what types of property and interests can be protected under Australian copyright,
trademark and patent legislation. Use examples to illustrate your answer.
(10 marks)
General comments:

Overall, question 3 was answered reasonably well, with a number of students receiving full
marks.
Part (a) was generally not well answered, however. Many students did not address this
aspect of the question. Those that did attempt to discuss policy considerations in their own
words did very well. Many students simply copied sentences from the textbook or their
notes. A handful of students wrote about contract law.
In contrast to part (a), part (b) was well answered. Most students explained copyright,
trademarks and patents well. Some were let down by not giving enough detail about the
law, and others by not providing examples despite being specifically asked to.

Page 6 of 16

Answer outline:
a)
Intellectual property law creates rights that enable the owner of intellectual property to protect and
exploit that property. A policy rationale is that those who use their intellectual effort to create
something should be able to benefit from it in a comparable way to those who create tangible
property. This is fair to the creators of intellectual property but it should also promote innovation
because people will be motivated to innovate because they can benefit from it.
In some cases, such as patent law, the law also promotes sharing of ideas and information for the
greater good others can build on these inventions to produce further developments.
b)
Copyright protects the expression of an idea in a material form including in a literary work, artistic
work, musical work or subject matter other than works. The protection it provides is in the form of
preventing others from copying all or a substantial part of that work. It does not prevent others
from independently coming up with the same idea.
TradeMark protects marketing tools such as logos, slogans, aspects of packaging, scents etc. It
only protects things that are:
- used or intended to be used; and
- capable of distinguishing one businesses goods and services from those of others.
A registered trademark owner can prevent others from using the trademark or something that is
deceptively similar to it usually only in relation to the sale of goods or services in the category
against which the trademark is registered. Alternatively, if the trademark is well known in Australia,
they can prevent anyone using it or something that is deceptively similar to it in relation to any
products.
Patent law protects novel or inventive manners of manufacture (inventions can include drugs and
medicine, machines, business systems or new ways of using an existing product BUT cannot be
something that occurs naturally) that are useful (not an abstract concept) but not in secret use. The
owner of the patent has the exclusive right to use the invention but can licence others to use it.
Marking criteria:
Score
8.5-10 (grade of
7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

Specific Criteria
You have demonstrated an
exceptional understanding of all of
the policy considerations
underpinning intellectual property
law and the types of property and
interests protected by copyright,
trademark and patent legislation,
including using excellent
examples.

7.5-8 (grade of
6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated a very good
capacity to apply relevant
considerations and principles to the

You have demonstrated a very

good understanding of most of the
policy considerations underpinning
intellectual property law, including
identifying the broader public
benefit from some types of
intellectual property rights such as
patent law. You have provided a
very good explanation of the types
of property and interests protected

Page 7 of 16

issues in a persuasive manner.

6.5-7 (grade of
5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,
and demonstrated a good capacity
to apply relevant considerations
and principles to the issues.

5-6 (grade of 4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant
considerations and legal principles,
and demonstrated some capacity to
apply those considerations and
principles to the issues.

4.5 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

2-4 (grade of 2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant
considerations or legal principles.

0-1 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

by copyright, trademark and patent

legislation, with the support of
examples.
You have demonstrated a good
understanding of the key policy
considerations underpinning
intellectual property law, namely to
provide rights to the owners of
intellectual property. You have
also provided a good explanation
of the types of property and
interests protected by copyright,
trademark and patent legislation.
You have demonstrated a
satisfactory understanding of the
policy considerations underpinning
intellectual property law and the
types of property and interests
protected by copyright, trademark
and patent legislation.

QUESTION 4
A business that manufactures various products in Australia is currently owned and operated by a
partnership. The 4 partners are considering whether to change the business structure to a
corporation. Discuss the advantages and disadvantages of incorporation for the partners.
(10 marks)
General comments:

Students needed to especially concentrate on the advantages and disadvantages of using

a company. It was difficult to get a good mark by only considering
the advantages and disadvantages of a partnership.

Page 8 of 16

The question asked you to discuss. Simply putting a bare list of points did not satisfy this
requirement.
To receive a better mark, your discussion needed to try to tie the advantages and
disadvantages to the simple facts included in the question.

Answer outline:
Relevant considerations include:

To incorporate, they would need to create a company by registration with ASIC. They will
also have annual reporting obligations under the Corporations Act that are not required for
partners.
Separate legal personality - A partnership is not a separate legal entity. A company is a
separate legal entity from the participants so would own property, contract and owe other
debts and legal liabilities in its own right. Assets and contracts would need to be transferred
to the company.
Liability - Partners do not have limited liability, they have unlimited personal liability for the
debts and legal obligations of the partnership business. Owners of a company do have
limited liability. Forming a company can protect the partners personal assets from business
risks, unless any of the companys creditors require personal guarantees of the companys
debts from a partner. In practice small business operators who use a company are often
required to give these kinds of personal guarantees.
Agency - Partners are agents for each other with respect to the conduct of the business. The
owners of companies, frequently shareholders, are not agents of the company.
Management a partnership is run by the partners in accordance with their partnership
agreement. A company is run principally by its board of directors in accordance with the
company constitution and the Corporations Act. Shareholders have limited say in the
running of the company: they are limited to voting on matters at general meetings in
accordance with the company constitution and the Corporations Act (eg appointing and
removing directors, related party transactions).
Continuity - If the identity of the partners changes, the original partnership is dissolved and a
new partnership is formed. A company has continuity of existence.
Tax - Profits and losses generated by a partnership are taxed in the hands of the partners.
The company pays tax in its own right. Depending on the level of profits and company tax
rates you may find that you pay less tax through using a company.

Marking criteria:
Score
8.5-10 (grade of
7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

Specific Criteria
You have demonstrated an
outstanding understanding of the
legal differences between the
partnership and company
business structures, including
considering factors relevant to a
manufacturing business, and
discussed the requirements for the
creation of a company.

7.5-8 (grade of
6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to

You have demonstrated a very

good understanding of most of the
legal differences between the
partnership and company
business structures. You have

Page 9 of 16

relevant case law or legislation),

and demonstrated a very good
capacity to apply relevant
considerations and principles to the
issues in a persuasive manner.

also discussed the requirements

for creation of a company.

6.5-7 (grade of
5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,
and demonstrated a good capacity
to apply relevant considerations
and principles to the issues.

You have demonstrated a good

understanding of the key legal
differences between the
partnership and company
business structures, including in
terms of management, legal
liability of owners and the legal
entity operating the business.

5-6 (grade of 4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant
considerations and legal principles,
and demonstrated some capacity to
apply those considerations and
principles to the issues.

You have demonstrated a

satisfactory understanding of the
key legal differences between the
partnership and company
business structures, including in
terms of management, legal
liability of owners and the legal
entity operating the business.

4.5 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

2-4 (grade of 2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant
considerations or legal principles.

0-1 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

Page 10 of 16

QUESTION 5
Mandy wishes to sell a house that she owns in St Lucia in Brisbane. She has appointed Brian, a
real estate agent, to sell the house for no less than $1 million. Explain the sources and nature of
the obligations and duties that Brian owes to Mandy.
(5 marks)
General comments:

Most students identified the principal/agent relationship between Brian and Mandy. However,
some students incorrectly identified the relationship as either an employer/employee
relationship or a partnership.
Many students did not consider the agency relationship in the context of the particular
circumstances of the question. Better answers included the particular circumstances of the
question.
Many students failed to properly answer the actual question regarding the sources of the
obligations and duties ie the contractual source (flowing from the particular contract entered
into between Brian and Mandy) and fiduciary source (as a consequence of the trust and
confidence in the relationship). Some students set out, as the source, the different types of
agency ie express, implied and apparent. These particular types of agency are not the actual
source of the obligations and duties of the principal/agent relationship. The source of the
obligations and duties remains the particular terms of the contract entered into between
Brian and Mandy and the fiduciary relationship between them. Some students identified
statutory sources for the obligations and duties. Consequently, the better answers addressed
the actual question.
Identification of any statutory source of obligations and duties was not required but those
students who did so were rewarded accordingly.
Some students considered negligent misstatement in answering the question. Although it is
acknowledged that potentially an issue of negligent misstatement might arise in the context
of the particular circumstances of the question, negligent misstatement is not the source of
the obligations and duties that arise between Brian and Mandy.

Answer outline:
Brian will owe obligations and duties to Mandy as a result of:
1. Any contractual obligations that arise by reason of direct contract between them.
2. Fiduciary obligations as a result of relationship of trust and confidence in the agency
context. These obligations are imposed by equity. They include duties to:
o follow instructions from the principal;
o act with due skill and care;
o avoid a conflict of interest;
o account for any monies received on behalf of the principal;
o not to make secret profit;
o act in person; and
o keep and render accounts.

Page 11 of 16

Marking criteria:
Score
5 (grade of 7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

Specific Criteria
You have identified that an agent
owes duties as a fiduciary and
must comply with any contractual
obligations. You have discussed
and explored in detail the
obligations of a fiduciary and why
an agent is a fiduciary.

4 (grade of 6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated a very good
capacity to apply relevant
considerations and principles to the
issues in a persuasive manner.

You have identified that an agent

owes duties as a fiduciary and
must comply with any contractual
obligations and you have correctly
explained the duties that an agent
owes as a fiduciary. You have
focused on the obligations of a
fiduciary.

3.5 (grade of 5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,
and demonstrated a good capacity
to apply relevant considerations
and principles to the issues.

You have identified that an agent

owes duties as a fiduciary and
must comply with any contractual
obligations and you have correctly
explained the duties that an agent
owes as a fiduciary.

2.5-3 (grade of
4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant
considerations and legal principles,
and demonstrated some capacity to
apply those considerations and
principles to the issues.

You have identified that an agent

owes duties as a fiduciary and
must comply with any contractual
obligations.

2.35 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

1- 2.35 (grade of
2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant

Page 12 of 16

considerations or legal principles.

0-1 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

QUESTION 6
As part of her research into starting a real estate agency, Susan recently paid Expert Property
Analysts Pty Ltd (EPA) to write her a report outlining the trends in property values over the past 5
years in the western suburbs of Brisbane. Susan wanted to review the trends as part of her
decision regarding whether or not to start her new real estate business. EPA wrote a report for
Susan which set out the very positive trends concerning the consistent increase in property values
over the past 5 years. Although Susan had specifically said to EPA that she wanted the report to
assist her to decide whether or not to start her new business, Susan did mention to EPA that she
might also show it to a friend who was also thinking about starting up his own real estate agency.
After receiving EPAs report, Susan gave it to her friend, William, who used it in his decision to start
his own real estate agency. Does EPA owe William a duty of care?
(10 marks)
General comments:

Most students were able to identify that the principal issue was whether or not a duty of
care was owed by EPA to William. Most students also correctly identified that the question
was focused on the law of negligent misstatement.
Most students correctly stated legal principles relevant to determining when a duty of care
will be owed for negligent misstatement. However, many students failed to appreciate that
there was a three party, indirect relationship between EPA and William. Most students did
not discuss the legal principles set out in the decision of Esanda Finance v Peat Marwick
Hungerfords, relevant to circumstances where a third party seeks to establish the existence
of a duty. Many students relied instead on the principles laid down in Hedley Byrne v
Heller, relating to a duty of care arising between an advisor and an advisee in the absence
of any third party involvement. Some students who considered the Hedley Byrne v Heller
principles did not properly state the law.
A few students who correctly identified the relevance of the Esanda Finance decision did
not properly state the conditions necessary for the establishment of a duty of care.
Some students recognised that the question dealt with negligence but did not discuss the
law with respect to negligent misstatement and focused on whether William was owed a
duty of care by reason of a recognised relationship. Several students wrongly considered
that EPA owed William a duty as it was a manufacturer or, alternatively, an occupier of
premises.
A number of students did not discuss negligence at all and focused on whether or not there
was a contractual relationship between EPA and William. A few students erroneously
identified the issue as whether EPA owed a duty to Susan. A few students wrongly
considered that the issue was whether there was an agency relationship between EPA and
William.
Most students who relied on the Hedley Byrne v Heller principles were able to apply that
law to the facts.
Some students correctly stated the Esanda Finance principles and adequately applied
these to the facts. A few students did an excellent and thorough application and a couple

Page 13 of 16

of students went even further, pointing out that EPA would have benefited from the
inclusion of a disclaimer in the report.
Most students employed the ILAC method of solving legal problems. Most students
reached a firm conclusion and many discussed the consequences of that conclusion.
Some students did not properly apply the law to the facts, making bald statements without
explaining the conclusions reached.

Answer outline:
Issue: Whether a duty of care is owed by EPA to William?
Law:
The High Court of Australia decision in Esanda Finance v Peat Marwick Hungerfords (1997) 188
CLR 241 provides the basis for the relevant law for the question.
For a defendant to owe a plaintiff (third party) a duty of care, the plaintiff must prove that:
1. The defendant knew or ought reasonably to have known that the information or advice
would be communicated to the plaintiff or a class of which the plaintiff is a member; and
2. The information or advice would be very likely to lead the plaintiff to enter into a transaction
of the kind that the plaintiff usually enters into; and
3. It would be very likely that the plaintiff would enter into such a transaction in reliance on the
information or advice and thereby risk suffering economic loss.
Application:
Susan paid EPA for a report outlining the trends in property values but importantly, Susan told EPA
at the time that she might also show it to a friend who was also thinking about starting up his own
real estate agency. The question does not indicate that Susan specifically named William as a
person who would be shown EPAs report but she clearly indicated to EPA that the report might be
shown to someone considering starting a real estate agency. Arguably, because of what Susan
said to EPA, EPA ought reasonably to have known that its report would be communicated to
someone such as William who, in the circumstances, is in the class of persons who might consider
starting a real estate agency.
Because Susan told EPA about possibly showing the report to someone who was considering
starting a business that was the specifically addressed in EPAs report, arguably it was very likely
that someone like William would start a real estate agency on the basis of the very positive trends
set out in the report. However, there is a requirement that the transaction (ie the starting of the real
estate agency) is of a kind that the plaintiff usually enters into. The question does indicate
whether William has had prior experience in starting real estate agencies ie whether it is the kind of
transaction that he usually enters into. More information is, therefore, required in this regard. If
William has had prior experience then arguably, this part of the relevant law is satisfied. If William
has not had prior experience in starting real estate agencies, then arguably this part of the relevant
law is not satisfied.
If William has had prior experience in starting up a real estate agency, it is also very likely that
someone like William would, in the particular circumstances outlined in the question, act in reliance
of the report and thus risk economic loss if the contents of the report were not correct. If William
has not had prior experience then arguably, this part of the relevant law would not be satisfied.
Conclusion
Whether or not EPA owed William a duty of care depends on whether William has had prior
experience in starting real estate agencies.

Page 14 of 16

Marking criteria:
Score
8.5-10 (grade of
7)

General Criteria
You have clearly identified all of the
relevant issues, demonstrated an
exceptional understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated an outstanding
and insightful capacity to apply
relevant considerations principles
to the issues in a highly persuasive
manner.

7.5-8 (grade of
6)

You have clearly identified most of

the relevant issues, demonstrated a
very good understanding of the
relevant considerations and legal
principles (with reference to
relevant case law or legislation),
and demonstrated a very good
capacity to apply relevant
considerations and principles to the
issues in a persuasive manner.

6.5-7 (grade of
5)

You have clearly identified the

major issues, demonstrated a good
understanding of the relevant
considerations and legal principles,
and demonstrated a good capacity
to apply relevant considerations
and principles to the issues.

5-6 (grade of 4)

You have identified the major

issues, demonstrated a satisfactory
understanding of the relevant

Page 15 of 16

Specific Criteria
Identification of the three-party,
indirect relationship in the context
of negligent misstatement; and (2)
Esanda Finance as the relevant
law.
Exceptional understanding of the
relevant law through a clear and
correct statement of the relevant
legal principles from Esanda
Finance.
Outstanding and insightful
application of each element of the
relevant law to the particular
circumstances including
identification of the importance of
whether or not William had
previously had experience in
starting real estate agencies and
consideration of arguments for and
against a duty of care being owed
on the basis of whether William
had prior experience in this regard.
Identification of the three-party,
indirect relationship in the context
of negligent misstatement; and (2)
Esanda Finance as the relevant
law.
A very good understanding of the
relevant law through a clear and
correct statement of the relevant
legal principles from Esanda
Finance.
Very good application of each
element of the relevant law to the
particular circumstances including
identification of the importance of
whether or not William had
previously had experience in
starting real estate agencies.
Identification of the three-party,
indirect relationship in the context
of negligent misstatement; and (2)
Esanda Finance as the relevant
law.
A good understanding of the
relevant law through a statement
of the relevant legal principles
from Esanda Finance.
A good application of each
element of the relevant law to the
particular circumstances.
Identification of the three-party,
indirect relationship in the context
of negligent misstatement; and (2)

considerations and legal principles,

and demonstrated some capacity to
apply those considerations and
principles to the issues.

4.5 (grade of 3)

You have recognised some of the

relevant issues, but demonstrated
either (a) minimal knowledge of
relevant considerations or legal
principles; or (b) little or no
application of relevant
considerations or legal principles to
the issues.

2-4 (grade of 2)

You have failed to identify a

significant issue and demonstrated
little or no knowledge of relevant
considerations or legal principles.

0-1 (grade of 1)

You have failed to identify any

relevant issues and demonstrated
little or no knowledge of relevant
considerations or legal principles.

Page 16 of 16

Esanda Finance as the relevant

law.
A satisfactory understanding of the
relevant law through a statement
of the relevant legal principles
from Esanda Finance.
A satisfactory application of each
element of the relevant law to the
particular circumstances.