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NICK JAMES BUSINESS LAW FIFTH EDITION JAMES | THOMAS © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page i — #1 i i i i i i Business law FIFTH EDITION Nickolas James Pdf_Folio:i © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page ii — #2 i i i i i i Fifth edition published 2020 by John Wiley & Sons Australia, Ltd 42 McDougall Street, Milton Qld 4064 Typeset in 10/12pt Times LT Std © Nickolas James 2010, 2012, 2014, 2017, 2020 The moral rights of the author have been asserted. Reproduction and Communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of 10% of the pages of this work or — where this book is divided into chapters — one chapter, whichever is the greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the educational institution (or the body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL). Reproduction and Communication for other purposes Except as permitted under the Act (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher. 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Terry Burkitt (Director, Publishing and Course Development), Mark Levings (Executive Publisher), Kylie Challenor (Senior Manager, Knowledge & Learning Content Management), Jess Carr (Production Editor), Emily Echlin (Publishing Coordinator), Emily Brain (Production Assistant), Renee Bryon (Copyright & Image Research Supervisor), Delia Sala (Cover Design) Cover image: © Travel mania / Shutterstock.com Typeset in India by diacriTech Printed in Singapore by Markono Print Media Pte Ltd 10 9 8 7 6 5 4 3 2 1%%%%% Pdf_Folio:ii © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page iii — #3 i i i i i i BRIEF CONTENTS Preface ix About the author xii How to use this text xiii Abbreviations xvi Cases xx Statutes xxvi PART 1 Foundations 1 1. Business and the law 2 2. The Australian legal system 27 3. Politicians and judges 63 4. How to find, understand and use the law 110 PART 2 Legal consequences 155 5. Deliberately causing harm 156 6. Carelessly causing harm 189 7. Contract law: formation of the contract 220 8. Contract law: terms of the contract 254 9. Contract law: enforcement of the contract 286 10. Contract law: working with agents 316 11. Dealing with consumers 343 12. Dealing with competitors 388 13. Protecting IP 417 PART 3 Managing a business 463 14. Managing a business: start-up 464 15. Managing a business: business ownership 496 16. Managing a business: companies and corporate governance 532 17. Managing a business: making payments and recovering debts 566 18. Managing a business: insurance and taxes 597 19. Managing a business: employing workers 618 20. Managing a business: closing down 643 Index 676 Pdf_Folio:iii © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page iv — #4 i i i i i i CONTENTS Preface ix About the author xii How to use this text xiii Abbreviations xvi Cases xx Statutes xxvi PART 1 Foundations 1 CHAPTER 1 Business and the law 2 Introduction 3 1.1 Law and the business person 4 Law and personal life 4 Law and business 4 Law in the media 5 Law in popular culture 5 1.2 The nature of law 5 Defining law 6 The purpose of law 7 The categories of law 11 The changing law 14 1.3 Justice, ethics and politics 15 Law and justice 15 Law, ethics and morality 17 Law and politics 19 Too much law? 20 Summary 23 Quiz 23 Exercises 24 Key terms 25 Acknowledgements 26 CHAPTER 2 The Australian legal system 27 Introduction 28 2.1 The Australian legal system 29 Key characteristics of the system 29 The history of the system 35 2.2 The Australian Constitution 42 Structure of the Constitution 42 Constitutional conventions 44 Federal and State relations 44 Regulating the Territories 47 Changing the Constitution 48 2.3 The executive government 49 The Governor-General and the State Governors 50 The Executive Council and the Cabinet 51 Challenging the executive government 52 Delegated legislation 55 Summary 58 Quiz 58 Exercises 59 Key terms 60 Acknowledgements 62 CHAPTER 3 Politicians and judges 63 Introduction 64 3.1 The legislature 65 The nature of parliament 65 3.2 Parliament in operation 69 How laws are made 69 Resolving deadlocks 72 Types of legislation 74 3.3 The judiciary 75 The Australian court system 76 Court processes 84 3.4 The doctrine of precedent 96 Do judges make law? 96 Precedent 97 Common law and equity 99 3.5 Alternative dispute resolution 100 Summary 103 Quiz 103 Exercises 104 Key terms 105 Acknowledgements 109 CHAPTER 4 How to find, understand and use the law 110 Introduction 111 4.1 Finding the law 112 Legal research 112 Primary legal materials 113 Secondary legal materials 116 4.2 Reading the law 116 The relevant elements 117 Interpreting the law 123 4.3 Thinking like a lawyer 137 Inductive and deductive reasoning 138 How to solve a legal problem 138 4.4 Writing like a lawyer 142 Legal writing 142 Drafting a letter 143 Drafting a simple contract 145 Summary 149 Quiz 149 Exercises 150 Key terms 152 Acknowledgements 153 Pdf_Folio:iv © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page v — #5 i i i i i i PART 2 Legal consequences 155 CHAPTER 5 Deliberately causing harm 156 Introduction 157 5.1 Causing harm 157 Criminal liability 158 Tortious liability 159 Contractual liability 159 Statutory liability 160 Vicarious liability 160 5.2 Deliberately causing harm to person or property 161 Criminal liability 161 The tort of trespass 163 The tort of nuisance 168 The tort of defamation 170 5.3 Deliberately causing financial harm 174 Criminal liability 175 The tort of deceit 176 The tort of passing off 177 The tort of intimidation 178 The tort of interference with contractual relations 178 5.4 The consequences of causing harm 179 Criminal consequences 179 Civil consequences 180 Summary 184 Quiz 184 Exercises 185 Key terms 186 Acknowledgements 188 CHAPTER 6 Carelessly causing harm 189 Introduction 190 6.1 Carelessly causing harm to person or property 190 The tort of negligence 191 6.2 Carelessly causing financial harm 211 Harm to the person or property of a third party 211 Defective products 212 Negligent misstatement 212 Summary 216 Quiz 216 Exercises 217 Key terms 219 Acknowledgements 219 CHAPTER 7 Contract law: formation of the contract 220 Introduction 221 7.1 Contracts 222 7.2 Requirement 1: agreement 222 Offer 223 Acceptance 227 Conditional agreements 231 7.3 Requirement 2: intention 232 Presumptions 232 Preliminary agreements 234 ‘Mere puff’ 234 7.4 Requirement 3: consideration 235 Consideration need not be adequate 236 Consideration must be sufficient 237 Deeds 240 Practical benefits test 240 Promissory estoppel 240 7.5 Formalities 243 7.6 Capacity to contract 244 Minors 244 Persons lacking intellectual capacity 246 7.7 Legality 247 Illegality under common law 247 Statutory illegality 248 Summary 250 Quiz 250 Exercises 251 Key terms 252 Acknowledgements 253 CHAPTER 8 Contract law: terms of the contract 254 Introduction 255 8.1 Express terms 256 In writing and signed 256 Reasonable notice before the contract is formed 257 8.2 Terms implied by the court 260 8.3 Statutory terms 262 Contracts for the sale of goods 263 Terms that protect the buyer 264 Ownership, delivery, payment and acceptance 268 8.4 Disclaimers 272 Do disclaimers work? 272 8.5 Unenforceable terms 274 Terms limiting the court’s jurisdiction 275 Terms imposing an unreasonable restraint of trade 275 Pdf_Folio:v CONTENTS v © John Wiley & Sons Australia, Ltd. Not for resale or distribution. Any unauthorised distribution or use will result in legal action. i i “FMPrelims_print” — 2019/8/21 — 9:49 — page vi — #6 i i i i i i 8.6 Non-contractual representations and promises 276 Parol evidence rule 277 Breach of collateral contract 278 Misrepresentation 278 Breach of the ACL 279 Unenforceable promises 280 Summary 282 Quiz 282 Exercises 283 Key terms 284 Acknowledgements 285 CHAPTER 9 Contract law: enforcement of the contract 286 Introduction 287 9.1 Entitlement to enforce 287 Privity of contract 287 Time limits 289 9.2 Unenforceable contracts: lack of consent 290 Mistake 290 Duress 293 Undue influence 295 Unconscionability 296 9.3 Remedies 299 Rescission 299 Damages 303 Equitable remedies 305 Statutory remedies 306 9.4 The end of the contract 307 Agreement 307 Frustration 307 Summary 311 Quiz 311 Exercises 312 Key terms 313 Acknowledgements 315 CHAPTER 10 Contract law: working with agents 316 Introduction 317 10.1 Getting someone else to do it 317 10.2 Scope of authority 320 Express actual authority 320 Implied actual authority 322 Apparent authority 323 Agency of necessity 324 Authority by ratification 326 10.3 The agent’s duties 326 Duty to follow instructions 327 Duty to communicate information 328 Duty to act personally 328 Duty of care 328 Duty to act in the best interests of the principal 329 Duty of confidentiality 330 Duty to account 330 10.4 The agent’s entitlements 331 Remuneration 331 Indemnity 332 Lien 332 10.5 Liability of agent and principal 333 Personal liability of agent 333 Vicarious liability of principal 334 10.6 Concluding the agency 335 Termination by the parties 335 Automatic termination 335 Summary 337 Quiz 337 Exercises 339 Key terms 340 Acknowledgements 342 CHAPTER 11 Dealing with consumers 343 Introduction 344 11.1 Protecting consumers 344 11.2 Dealing with consumers 347 Consumer protection regulation 347 General protections 350 Specific protections 361 11.3 Consequences of contravention 372 Offences and penalties 372 Defences 373 Enforcement 373 General remedies 374 Consumer guarantees 375 Codes of conduct 376 Industry ombudsman 376 11.4 Consumer privacy 377 What is information privacy? 377 Information privacy protection 377 Summary 384 Quiz 384 Exercises 385 Key terms 386 Acknowledgements 387 CHAPTER 12 Dealing with competitors 388 Introduction 389 12.1 Protecting competition 389 12.2 Dealing with competitors 390 Competition regulation 390 Key concepts 392 Pdf_Folio:vi vi CONTENTS © John Wiley & Sons Australia, Ltd. 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