Business Law and Ethics Lecture Reviews 1-6

Business Law and Ethics Review Notes
Lecture 1
Profit affect business decisions, but do we really have a free market to conduct our business in?
BUSINESS DECISIONS
Internal Forces
Type of Business Structure
Ethics
CSR
Corporate Governance
External (Legal) Forces
Contract Law
Agency
Tort Law
Consumer Law
External (Structural) Forces
Legal System
Dispute Resolution
Regulation

Ethics: Concerned with how we should behave, and involves theories that describe the ‘right’ way to make a decision.
Morality: Consists of what persons ought to do to conform to society’s norms of behaviour, whereas ethical theory concerns the philosophical reasons for and against aspects of social morality.
E.G.: Morally, society says that stealing is wrong. Ethical theory examines and explains why.

Is ethics relevant to business? Some might argue that the concept of ‘business ethics’ is incompatible with a business’ goal of making a profit.
Others argue that businesses should be ethical because being ethical is good for the bottom line (Harrison, p3), whilst others say that business should be ethical because being ethical is the right thing to do (Harrison, p3).

Kohlberg’s theory of moral development
Lawrence Kohlberg is famous for his theory of “cognitive moral reasoning and development” in which he mapped out various stages in which individuals pass through on their way to moral maturity.

LEVEL 1: PRE-CONVENTIONAL
“An individuals’ focus at this level is exclusively self-centred such that ethical decisions will only be made if they bring about a benefit. “
Stage 1: Act to avoid punishment: E.G. toddler will not draw on the wall because he will be punished
Stage 2: Not wanting to miss out on good things: E.G.: Behaving in order to get dessert after dinner

LEVEL 2: CONVENTIONAL
“Individuals at this secondary stage are increasingly concerned with conforming and maintaining relationships within a community.”
Stage 3: Being a good boy: E.G. doing things that appear to be correct in order to be socially accepted
Stage 4: Lives in accordance of the law: E.G. Not killing someone because it is against the law

LEVEL 3: POST-CONVENTIONAL
“Individuals at this stage go beyond the mere compliance to the law and are motivated by moral/ethical principles.”
Stage 5: Questioning the principles they follow: E.G. campaigning to change the law because society will be better off
Stage 6: Able to give a rational defence of the moral principles that guide our actions.

Ethical Theory
Ethical theories attempt to systematize ordinary moral judgments, and to establish and defend basic moral principles. Ethical theory explains why actions are right or wrong by providing a decision-making procedure for resolving difficult cases. Ethical theory also makes it possible for an individual to explain and justify his/her decision to others.

Egoism
“Everyone ought to act on the basis of self interest”
Don’t always ignore the interests of others, but act if it suits one’s own interests to do so
Not always greedy or selfish, but motivation for acting will be to gain self benefit

Utilitarianism
“Try and gain the best outcome for all the parties that are affected”
Good outcomes is not limited to happiness or pleasure, but also friendship, knowledge and courage too
Utility is measured as a whole, choosing option that gives the greatest good

Kantian Ethics
“One’s duty to do what is morally right and to avoid what is morally wrong, regardless of the consequences”
Doing the right thing for the wrong reasons cheapens the result: actions must come from sense of duty
Moral actions must be universally accepted, respecting others and reversibility: would you like to be on the receiving end of such action?

Virtue Ethics
“A set of personal characteristics that, if practised, will ensure that the individual is likely to make the ‘right’ choice in any ethical dilemma they are faced with”
Virtues are personal qualities that provide the basis for the individual to lead a good life
If there were danger, a virtuous person would have to overcome his fears but avoid acts of rashness to obtain best result.

Solving Ethical Dilemmas
Many people prefer to avoid the problem rather than confront and acknowledge an ethical dilemma. E.G.: Everybody else does it/I was just following orders/If we do not do it, someone else will.

Ultimately, a person’s decision will depend on their moral development and which ethical theory they find more appropriate.

Lecture 2
What makes a company a company:
Separate legal personality
Limited Liability
Transferable shares
Delegated management under a board structure
Investor ownership

A company is considered at law to be a separate legal entity. This means that it is legally a different ‘person’ to all the people who own the company (shareholders), the people who control the company (directors) and the employees.
Another distinct feature of a company is that it has limited liability. This means that the shareholders (the owners of the business) will only lose the value of their investment if the company has too many debts. Any creditors who are still owed money cannot claim from the shareholders’ personal assets. This is not the same for a sole trader or partnership

Corporate Governance
“Framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations. It encompasses the mechanisms by which companies, and those in control, are held to account”
Influences how the objectives of the company are set and achieved
Influences how risk is monitored and assessed
Influences how performance is optimised
With many collapses occurring, corporate governance has been changed and edited. Ethics in business also has been looked at.

ASX Principles of Corporate Governance
These principles are not prescriptions; they are guidelines for practices.

Principle 1 – Lay solid foundations for management and oversight
Companies should establish and disclose the respective roles and responsibilities of board and management:
Rec 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions
Rec 1.2: Companies should disclose the process for evaluating the performance of senior executives
Rec 1.3: Companies should provide the information indicated in the guide to reporting on principle 1

Principle 2 – Structure the board to add value
Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities:
Rec 2.1: A majority of the board should be independent directors
Rec 2.2: The chair should be an independent director
Rec 2.3: Roles of chair and chief executive officer should not be the same person
Rec 2.4: Board should establish a nomination committee
Rec 2.5: Companies should disclose the process for evaluating the performance of the board, committees and individual directors
Rec 2.6: Companies should provide info indicated in the guide to reporting on Principle 2

Principle 3 – Promote ethical and responsible decision-making
Companies should actively promote ethical and responsible decision-making
Rec 3.1: companies should establish a code of conduct and disclose it as to the practices necessary to: maintain confidence in the company’s integrity, take into account their legal obligations and expectations of shareholders, responsibility and accountability of individuals for reporting and investigating reports of unethical practices
Rec 3.2: Companies should establish and disclose the policy concerning trading and company securities by directors, senior executives and employees
Rec 3.3: Companies should provide the information indicating in guide of Principle 3

Principle 4 – Safeguard integrity in financial reporting
Companies should have a structure to independently verify and safeguard the integrity of their financial reporting
Rec 4.1: Board should establish an audit committee
Rec 4.2: Committee should be structured so that it consists only of non-executive directors, majority of independent directors, chaired by independent chairperson, and have at least 3 members
Rec 4.3: Committee should have formal charter
Rec 4.4: Companies should provide information indicated in guide of principle 4

Principle 5 – Make timely and balanced disclosure
Companies should promote timely and balanced disclosure of all material matters concerning the company:
Rec 5.1: Companies should establish written policies designed to ensure compliance with ASX listing rules
Rec 5.2: Companies should provide information indicated in guide of principle 5

Principle 6 – Respect rights of shareholders
Companies should respect the rights of the shareholders and facilitate the effective exercise of those rights:
Rec 6.1: Companies should design a communications policy for promoting effective communication with shareholders
Rec 6.2: Companies should provide information indicated in guide of principle 6

Principle 7 – Recognise and manage risk
Companies should establish a sound system of risk oversight, risk management and internal control
Rec 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary
Rec 7.2: Board should require management to design and implement risk management/internal control system to manage company’s material business risks and report it
Rec 7.3: Board should disclose whether it has received assurance from CFO and CEO
Rec 7.4: Companies should provide information indicated of principle 7

Principle8 – Remunerate fairly and responsibility
Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear:
Rec 8.1: The board should establish a remuneration committee
Rec 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of senior executives
Rec 8.3: Companies should provide information indicated of principle 8

Collapses
Many companies can edit their books, and this can be done in many ways. For example, failing to disclose short-term debts not only decreases current liabilities, it also gives a more positive outlook for the business as a whole.

Corporate Social Responsibility
Revolves around the key question:
Whose interests should business serve?
Companies have an economic responsibility to produce goods and services, provide jobs, and make a profit. They also have legal responsibilities.

“The concept of corporate social responsibility is often expressed as the voluntary assumption of responsibilities that go beyond the purely economic and legal responsibilities of business firms”

Examples of CSR:
Adopting quality and environmental standards
Providing benefits for employees and improving the quality of life in the workplace
Using corporate resources to operate a program that addresses a social problem

Stakeholder theory
Stakeholder: “Someone who holds an interest or ‘stake’ in how the company acts.”
Business can be understood as a set of relationships among groups which have a stake in the activities that make up the business
This theory considers the company from a broader perspective whereby the shareholder is only one of the many potential stakeholder groups
This means that all of the stakeholders are impacted upon and also impact on the company.
Companies can only achieve it’s goals with a full and detailed understanding of the relationships it holds with the different stakeholder groups

Lecture 3

Regulation
“the control of corporate and commercial activities through a system of norms and rules which may be promulgated either by governmental agencies (including legislatures and courts) or by private actors, or by a combination of the two. The direct involvement of the state is not a necessary condition for the existence of regulation in this sense, since rules may be derived from the activities of industry associations, professional bodies or similarly independent bodies.”

Theories of regulation
Should regulation exist?
Three theories:
Public interest theories
Private interest theories
Institutionalist theories

Public Interest Theory
“Those responsible for regulation do so with the objective of promoting the general welfare of the community”
2 parts:
Welfare economics approach
Political approach

Welfare Economics Approach
“Suggests that regulation is a response to imperfections in the market (market failure)”:
Competition law is the government’s way of stopping anti-competitive monopolies: E.G. stopping price fixing – if there is only one company with no competition, the big boss can set the price to a high as he/she wants, because there is no competition. This is seen as bad for the public.

Government needs to step in because the market has failed!

Public Good
“Some goods/services are best provided for the whole community, and market cannot regulate this.”
Consumption by one person does not leave less for others
No practical for suppler to exclude those who do not pay
E.G.: Defence Force:
Required to protect everyone
People would have no incentive to pay; and as a result there would be free-riders
Regulation needed to ensure people pay (taxes)
This regulation is to stop market failure

Political Approach
“suggests that values such as social justice and redistribution are what can justify regulation.”
E.G: pay more tax if you earn more – regulation
Doing whats right

Private Interest Theories
“regulation often benefits particular groups in society, and not always those it was seemingly intended to benefit.”
This theory is sceptical of purity goals that those who regulate seek to pursue
Assumes that regulation emerges from individuals or groups who are motivated to maximise their self-interest
Regulation may or may not promote public interest, but if it does it is a coincidence

Private interest theories stress the ease in which regulatory failure and regulatory capture can occur

Regulatory Failure
“Collective costs of regulation outweigh the benefit of being regulated”
E.G.: jaywalking: accidents cost $100,000 a year, and regulating it (more police enforcing rule) costs $200,000. * * Regulatory Capture
“Officials within regulatory institutions who are charged with promoting collective welfare develop such close relationships with those they regulate that they promote the narrow interests of this group instead of the broader community.”
E.G. Centrelink regulate unemployment, and this organisation could become so attached to them, start promoting best self-interest for this group, may even start arguing for this group.
“Regulation is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest ... Over time, regulatory agencies come to be dominated by the industries regulated.”

Public vs Private
Public interest theories stress market failure and the capacity of regulation to correct such failures.
Private interest theories stress regulatory failure and the tendency of the market to allocate resources efficiently.

Institutionalist Theory
Tripartism:
This focuses on cooperation
Public interest groups (eg community group, trade unions, environmental groups) become a legitimate 3rd party in the regulation process between the regulating agency and the regulated.
The public interest group has access to all information, they have a seat at the negotiating table, and has the right to take action to enforce the regulation just like the regulator.
It avoids the problems of cooperation between only two parties leading to regulatory capture or corruption.

Regulators
Statutory authorities are established to administer particular Acts passed by Parliament.
This administrative role essentially involves:
Investigation and enforcement of the relevant legislation;
Gathering information and complaints from the public;
Disseminating information and educating the public.

Australian Competition and Consumer Commission (ACCC)
Peak consumer protective and competition agency
Act in an anti-competitive way
Has a range of measures to ensure compliance and enforcement, such as the use of educational campaigns, issuing infringement notices and taking legal action

Australian Securities and Investment Commission (ASIC)
Corporate, markets and financial services regulator
Independent Commonwealth Government body. Use corporations act
Regulates Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit
Role:
Corporate: maintaining a public register of all companies, regulating internal administration of a company, activities such as fundraising, financial reporting, market disclosure, shareholder right
Market: Oversees the operation of the Australian Stock Exchange
Financial Services: Monitors financial services businesses (super, managed funds, shares, securities, insurance)

Australian Taxation Office (ATO)
Government’s principal revenue collection agency
Manage and shape tax, excise and superannuation systems that fund services for Australians
Wide powers to investigate the law
Publishes information to educate, but also publishes Tax Rulings.

Australian Prudential Regulation Authority (APRA)
Responsible for supervision of individual financial institutions and for promoting financial system stability
Supervises authorised deposit taking institutions (banks, building societies, credit unions). Insurance, superannuation funds.

Lecture 4

Law
“a set of rules, developed over a long period of time regulating people’s interactions with each other and that sets standards of conduct between individuals and other individuals, and individuals and the government, and that are enforceable through sanction”

Legal Systems
The law operates within a legal system (i.e. structures set up to allow the law to function effectively)
What makes a legal system effective?
Certain: A system that is uncertain would traumatise us
Flexible: Capacity of the law to adapt to change (e.g. technology)
Known: Publication of the law
Fairness: Law must be fair, just and necessary
Obeyed: Law must be obeyed and provide penalties for those who don’t obey it.
Common Law system
Derived from case law and statute
Forms the basis of English law, can be found in countries like Canada, Malaysia, Singapore, Australia and NZ
Courts operate in an adversarial manner
Civil Law system
Derived from Roman system of law
Complete code of written laws whose primary source of law is legislation
Courts tend to operate in an inquisitorial manner
Forms the basis of the legal systems of most Western European countries and other countries like Japan.

Classifying Law
Public vs Private

Criminal vs Civil (under common law system)

Case vs Statute

If there is a conflict, statute law wins

Common vs Equity

Fused together in 1873!

Australia’s Legal System
“System where the powers are divided by the Constitution between the Commonwealth and the states.”
Specific powers were granted to the federal or Commonwealth Parliament under the Constitution (eg customs, military forces, currency) and residual powers either shared or remained with the states.
Exclusive powers: only the Federal parliament can make laws in this area.
Eg: s114: military forces; s115: currency matters
Concurrent powers: both state and Federal parliaments can legislate in these areas
S51: Banking, Insurance
A Federal law overrides a state law to the extent of any inconsistency: s109 of the Constitution.
Residual powers: Anything else goes to the states
Eg: education, local government, transport

Constitution
The Constitution can only be changed by referendum, which is where a proposed amendment is put to the people of Australia to vote on

To pass a referendum, an amendment needs a ‘double majority’ – the proposal must be approved by a majority of voters and there is majority approval in a majority of states.
So more than 50% of the voters nationwide + a majority of voters in at least four states must say ‘yes’.

One of the features of the Constitution is that it provides for separation between the legislative, executive and judicial powers of the Commonwealth.
This is known as the separation of powers doctrine, because only certain bodies can exercise certain powers:
Legislature
Executive
Judiciary

Good Definitions
Legislature – legislative power is vested in the Federal Parliament
Executive – executive power vested in the Queen and is exercisable by the Governor General with the Federal Executive Council advising the Governor General
Judicature– vested in the High Court and such other courts as the Parliament creates.
Functions:
Legislative function = making of the law through Parliament
Executive function = the formulation of policy and its administration through the Cabinet of the elected Commonwealth (or state) Government
Judicial function = interpretation, application and enforcement of the law through the court systems

In theory the doctrine of the separation of powers means that no one person or body shall exercise more than one power.
In reality, there is no strict separation of powers between the executive and legislative functions of federal government in Australia

Parliament
The primary function of parliament is to pass legislation (Acts, Statutes).
Under the constitution, Federal (Commonwealth) parliament only has limited power to make laws.
Should parliament make laws that are not covered by their powers in the Constitution, the statute may be challenged in the High Court because it is unconstitutional.

The Federal Parliament is bicameral, which means that it is divided into two houses.
The Upper house (Senate), consists of 76 seats. Each state gets 12 senators and the two territories get 2 each.

The Lower house (House of Representatives) consists of 150 members who represent an electorate. These people are MP’s (Member of Parliament).
Electorates are determined by population size, which is roughly 125,000 people (about 85,000 voters).

The Queensland Parliament is unicameral – it only has one house, and is the only state to govern this way (although NT & ACT are also unicameral). Qld’s upper house was controversially abolished in 1922.
The Lower house (Legislative Assembly) consists of 89 members from electorates. These people are called MLA’s (Member of the Legislative Assembly).

Functions of Parliament:
To pass legislation
To check and scrutinise government activities, such as the spending of public money
To provide a platform from which government is formed. The political party (or coalition of parties) that has a majority of seats in the Lower house forms government).
To provide funds needed for government
To provide a forum in which MP’s can represent and provide a voice for the people of their electorate.

The Executive, or realistically ‘Cabinet’ (an official forum comprising the PM and senior ministers) decides on policy.
The minister responsible arranges for a Bill and Explanatory Memorandum to be drafted.
The Bill is introduced into Parliament.
Parliament then consider the Bill, and if more than 50% vote in favour of it, in EACH house, and the Bill receives Royal Assent, then the Bill becomes an Act.

Delegated Legislation
Making legislation is a time-consuming process, and parliament only sits at certain times of the year.
For this reason, Parliaments may delegate their right to make legislation to other entities. This is permitted in accordance with a long established convention. These entities could include:
Government departments (Dpt of Education)
Local Governments (Council)
Laws made this way go by such names as: subordinate legislation, regulations, by-laws or orders-in-council.
These have the same effect as an Act of Parliament.
The delegation of power to the other body has to come from an Act, so that there is an accountability mechanism.

Executive Government
“the power to administer the law, carry on the business of government and maintain order and security.”
The Governor-General acts on the advice of the Federal Executive Council consisting of the various ministers

Government is usually divided into ‘departments’ which allow people with expertise to work together.
A Minister is a person who oversees a department. Australia uses a system of responsible government which means that the minister has to be a member of parliament, so that they are accountable

Each minister is responsible for a particular portfolio and government department
Ministers responsible for the more important portfolios are called Senior Ministers and ministers responsible for the less important portfolios are called Junior Ministers.
Senior ministers are members of Cabinet.
A minister may be a member of either House of Parliament. Members of the majority political party who are not allocated a ministerial position are known as backbenchers.

Governor General – things he/she can do:
Can appoint or dismiss Ministers
Appoints judges
Decides when Parliament meets
Has final approval over legislation
Is the Commander-in-Chief of the defence forces
Dissolves Parliament and calls elections
Can remove government and appoint caretaker government

Courts
“A role of the courts is to apply the law, and to interpret the meaning of statutes.”
Judges rely on previous cases that have interpreted the legislation, common law rules of statutory interpretation and the Acts Interpretation Act.

Interpreting a Statute
Literal Rule (common law rule of statutory interpretation):
The rule directs judges to give words in statutes their literal or exact meaning.
Golden Rule (common law rule of statutory interpretation):
Courts can modify a literal interpretation of the statute to remedy an absurd or inappropriate result.
Mischief Rule (common law rule of statutory interpretation):
Statute is interpreted with the primary aim of preventing the mischief the statute was designed to prevent. The judge determines this by looking at the purpose or intention of the legislation.

Lecture 5

Courts
Courts interpret and apply law
There is a hierarchy of courts
Jurisdiction: “Authority of the Court to hear a case and make a decision.”

Courts have original and appellate jurisdiction:
Original jurisdiction: “The power to hear a matter for the first time.”
Appellate jurisdiction: “The power to hear appeals from the decisions of lower courts.”

High Court of Australia
Highest court
7 members; one chief justice
Original jurisdiction: High Court can hear cases such as constitutional issues
In an original jurisdiction, the High Court is usually presided by one judge
Appellate Jurisdiction: The High Court can hear appeals from State Supreme Courts and Full Court of Federal and Family Court
Special permission must be granted to appeal a matter to the High Court

Federal Court of Australia
1 Chief Justice, and other judges as appointed
Original Jurisdiction:
Trade practices (restrictive trade practices, misuse of market power);
Federal taxation; immigration Appellate Jurisdiction: Full Court of Fed Court (3 Judges) hear appeals from:
A single Federal Court judge;
A Federal magistrate;
A single judge of a State Supreme Court which is exercising federal jurisdiction (e.g. in matters such as copyright, trade marks, taxation and bankruptcy). This is called “cross-vesting” jurisdiction of the court.

Family Court of Australia
Original Jurisdiction:
All family law matters such as divorce, custody of children, division of property, maintenance of spouse
Appellate Jurisdiction: a single judge of the Family Court can hear appeals of family law decisions from the Federal Magistrates Court; the Full Court of the Family Court hears appeals from a single judge of the Family Court. * * Federal Magistrates Court
More simple and accessible alternative to litigation in federal and family court to reduce their workload.

Supreme Court of Queensland
Highest court in state hierarchy
Consists of the Trial Division and Court of Appeal
Unlimited Jurisdiction: in theory can hear any matter.
Only really hears serious issues
E.G. murder, manslaughter, drug offences
Civil matters for than $750,000. Usually heard by a judge alone, but where there is a jury, a judge will usually sit with a jury of 4 *
Also has an appellate jurisdiction
Hears all appeals from Supreme and District Courts, and many tribunals
Made up of 3 or 5 supreme court judges
COA can:
Dismiss the appeal and uphold decision of lower court
Allow the appeal, set aside the decision of the lower court and make a different order in its place *
Jury: “A jury is a group of ordinary citizens who decide questions of fact.”
Jury is used for: criminal matters heard for the first time (12 people). Prior to Sept 2008, the decision needed to be unanimous. Now 11-1 is acceptable
Some civil cases (E.G. defamation) can be heard, with 4 judges, and 3 need to agree
For trials (other than murder), if the judge believes that a unanimous decision will not be reached after 8 hours of deliberation, the judge can see if a verdict can be reached from 11/12 jurors

The government also made provisions for judge-only trials [CC s614 and 615]
Either side can apply for a judge-only trial, although if the prosecution requests it, the accused person must consent to it.
Some factors considered in granting an application:
(a) the trial, because of its complexity or length or both, is likely to be unreasonably burdensome to a jury;
(b) there is a real possibility that acts that may constitute an offence under s119B [retaliation against a juror] would be committed in relation to a member of a jury;
(c) there has been significant pre-trial publicity that may affect jury deliberations.
Factors against granting it: trial will involve a factual issue that requires the application of objective community standards including, for example, an issue of reasonableness, negligence, indecency, obscenity or dangerousness

District Court of Queensland
Judges membership
Original jurisdiction:
Civil claims between $150,000 and $750,000
Moderately serious criminal matters
Jury: A jury is used for criminal matters and for few civil claims. Same procedure as SC
Appellate jurisdiction: DC judge may hear an appeal from the decision of the Magistrates Court.

Magistrates Court
Membership: Magistrates
Original jurisdiction:
Criminally, they hear summary (minor) offences (e.g. drunk and disorderly), and committal hearings civil matters where the amount claimed is less than $150,000.
Committal Hearings: A preliminary hearing on indictable (serious) offences such as murder, to determine whether the prosecution has sufficient evidence to indicate that the person charged could be found guilty. If so, the accused will be sent to a higher court for trial by a judge and jury.

Tribunals – General
“A body established by statute to regulate specific matters”
Why Tribunals?: Increasing number of cases in the court system and the need for specialisation.
Key differences with a Court:
Judges (i.e. former lawyers) preside over courts, often non-lawyers preside over tribunals;
Courts have a wider jurisdiction to hear matters, Tribunals are limited to deal with those matters over which they have been given specific jurisdiction (usually outlined in the statute which created them);
Tribunals are not courts. Proceedings before the tribunals are not as formal as those before a court.
Therefore, tribunals are often quicker, cheaper and easier for those involved.

QLD Civil and Administrative Tribunal
QCAT decides and reviews matters relating to: residential tenancy disputes debt disputes consumer and trader disputes minor civil disputes other civil disputes guardianship for adults matters administration for adults matters building disputes children and young people matters anti-discrimination matters occupational regulation matters retail shop lease disputes administrative decisions

Court Hierarchy
System of appeals
Allows different forms or hearing according to gravity of the case
Instrumental in building up precedent.
A precedent has defined as ‘a judgment or decision of a court of law cited as authority for the legal principle embodied in its decision’ (text, p194).
In its simplest form, ‘following a precedent’ means that a question should be resolved in a certain way today because a similar question was so decided yesterday (text, p194).

Doctrine of Precedent
Because it is desirable that our legal system has certainty, similar cases should be treated in a similar fashion.
Precedent is relevant to the hierarchy of Courts – a Court is bound to follow precedents set by superior courts in the same hierarchy.
Ratio Decidendi: the legal reasoning upon which the decision in a case was based. Only the ratio is capable of creating a binding precedent.
Obiter Dicta: Statements of law not necessary to decide a case. For example, observations made by judges about the future direction of the law, or that a different decision may have been reached if the facts were different. These are not binding, only persuasive.
Ratio becomes unclear sometimes because judges may have different reasons for arriving at the same conclusion, their reasons may not be clear, or they made the correct decision for quite the wrong reasons.

Rules of precedent:
The decision of higher courts bind all lower courts in the same court hierarchy.
The decisions of lower courts are not binding on higher courts in the same hierarchy
Courts are not bound by decisions of courts in other hierarchies.
High Court does not feel bound to follow its own previous decisions.

Recognising a court case
Hackshaw v Shaw (1984) 155 CLR 615
Parties – Plaintiff first!
Year in which the law report is published
Volume number in which the law report appears
Page number at which the case can be found

Parties in a court case
In reported cases, the party bringing the particular case is listed first.
If it is the first time the case has come to court, the person bringing the case is the plaintiff. The person answering the case is the defendant.
In a criminal case, the prosecution (the Crown) brings the case. This is often abbreviated in case citations as the letter “R”.
If the case is an appeal from an earlier decision, the person bringing the appeal is the appellant and the person opposing the appeal is the respondent.
There will be a judge presiding, and this is reported with a “J”, example: Kirby J is Justice Kirby

Winning the Case
The onus (or burden) of proof is on the person who has to prove their case. In most instances the onus lies with the person bringing the case (i.e. the plaintiff or appellant)
The standard of proof is the level that the person must prove their case.
In a civil case, that is on the balance of probabilities.
In a criminal case, the prosecution must prove their case beyond a reasonable doubt

Dispute Resolution
The parties introduce arguments and evidence in court to support their case. The court is presided by a magistrate or judge. The party that presents the case the best wins

Main groups of participants in the adversary system are: the parties; the barristers & solicitors who will act on behalf of the parties; judiciary who will preside over the court; jury (if there is one).
This is contrasted with the ‘inquisitorial system’, often used in civil law countries. The role of the judge is more proactive and controls the running of the case.

Alternative Dispute Resolution (ADR) mechanisms help cases be settled out of court
Because court is expensive, time-consuming, formal and clogged enough already

ADR Methods

Negotiation: Facilitative process, involves voluntary discussion between the parties to try to mutually resolve the dispute.

Mediation:
Voluntary process, but an independent and neutral third party (the mediator) will assist the parties to try and find a way to resolve their dispute.
It is particularly useful in complex matters where the parties may have ongoing contract and/or the dispute involves multiple parties because the parties with the mediator’s assistance can find a solution that is satisfactory to all parties.
The mediator cannot impose a decision upon the parties. *
Conciliation:
The parties to a dispute, with the assistance of a neutral third party (the conciliator) identify the dispute, develop options, determine what alternatives are available and try to reach an agreement.
The conciliator may exercise an advisory role on the content of the dispute and suggest options and possible solutions. *
Expert Determination:
This is a process that provides for an independent expert to be appointed by the parties to give a determination on some disputed point of fact or law
The process is advisory and is generally effective in settling disputes that are simple in content, for example, what is an accepted trade or industry practice, or technical in nature *
Commercial Arbitration: involves the hearing of a dispute by an independent third party (arbitrator). The arbitrator will be of the party’s choosing and will be someone familiar with the professional or technical background of the matters in dispute
At the end of the hearing the arbitrator will make an award. Unless the parties have expressed a contrary intention when agreeing to arbitration, the award is final and binding on the parties

Lecture 6

Agency
“Foundation of partnerships: an agency relationship usually arises from a contract. The parties would normally specify things like how long the agency lasts for, what the agent will be paid, and importantly, what are the limits on the agent’s authority.”

Agent: “Someone who has the authority to act on behalf of another, called a ‘principal’.”

An agent must be acting with authority, in order to bind the principal
Authority can be:
Actual
Express
Implied
Apparent

Authority

Express Authority | “The authority of the agent that is expressly agreed upon by the parties.” | Implied Authority | “The parties may not have expressed it, but it was their intention that the agent could perform certain tasks. A common example is tasks that are necessarily incidental to the agent’s express authority. Implied authority cannot contradict express authority.” | Apparent Authority | “It appears to the third party that the agent has actual authority (even though they may not). The third party is still able to enforce the contract with the principal. Obviously, if the third party is aware (or should have been aware) of the agent’s lack of actual authority, they can’t rely on apparent authority.” | *
If the agent has neither actual nor apparent authority when acting, the principal may choose to later approve the act if they want to.
When there is no authority (either actual or apparent), the third party may claim damages from the agent only (a breach of warranty that the agent had authority), or take action in misrepresentation.

Rights of an agent
Remuneration
Indemnity for liabilities and reimbursement for expenses incurred by the agent in the course of their duties.

Duties of an agent
Duties of an Agent:
To follow the principal’s instructions
To act in person
To exercise reasonable care and skill
Fiduciary duties
To act in good faith and in the best interests of the principal
To make full disclosure of any personal interests
To not make secret profits (see for eg reading 7, page 226)

Types of Businesses

Sole Proprietor
“A person who owns his or her own business for profit.”
Simplest form of ownership
Sole proprietor may be the only person working in the business, or they could have many employees

Advantages
Very little formalities to comply with
Full ownership means the owner makes all decisions and gets all profits
Disadvantages
Personally liable for any business debts (unlimited liability)
Limited sources of capital (apart from the 1 owner, the only way is debt)
One person may not have all the skills needed to be successful

Partnership
“as the relation which exists between persons [2-20 persons]; carrying on a business, in common, with a view of profit”

can exist even if the parties do not realise it
Most common way to make a partnership is a contract
A contract is not required, the partnership act can fill in any gaps
If no partner rights, the partnership act governs parties:
Partners share the profits and losses equally.
Partners cannot introduce new partners without the consent of all other partners
Every partner may participate in the management of the business
THESE CAN BE OVERRIDDEN BY AN AGREEMENT

Partners have mutual agency – decision made by one partner binds the others
Not a separate legal entity, therefore each partner is liable for any debts in the firm

Advantages
Very little formalities
More people to contribute ideas and skills
Greater source of capital
Disadvantages
Unlimited liability
Lack total control as an owner
Mutual agency, which combined with unlimited liability, makes it important to only be a partner with people you trust.

Companies
“An artificial entity recognised by the law as a legal person with rights and liabilities.” They are formed when someone (called a promoter) registers them with ASIC.”
Several types, but most common are companies ‘limited by shares’
Owned by people who have contributed to company’s capital – called a share
Shareholders have limited rights with respect to the operation of the company, restricted usually to voting in general meetings and the right to a dividend from profits made.
Shareholders appoint directors to run the company. Directors act as fiduciaries to the company, and therefore owe duties to the company (eg to act in the best interests of the company and for a proper purpose).

Company is a separate legal entity (unless it is set up for fraudulent reasons)
Shareholders have limited liability, therefore are not personally liable for company’s debts. Can only lose value of their investment

Advantages
Separate legal entity
Limited liability
Perpetual succession (unlimited life)
More sources of capital
Expert managers to run the business
Shares can be transferred (esp. in Public Co)
Disadvantages
Costs of establishment and ongoing fees – can be expensive
Limited rights as a owner
Onerous administrative requirements
Reporting requirements
Legal responsibilities imposed on company directors

Public Company
“Company that has shares open to the public”
Distinguished by abbreviation ‘Ltd’ in company name
Normally have heavier requirements in relation to financial statements and shareholder meeting
Must have at least 1 shareholder and 3 directors

Private (Proprietary) Company
“Company where shares are not publically available”
Distinguished by abbreviation ‘Pty Ltd’ in company name
Must have between 1-50 shareholders
At least 1 director * * Trusts * “Is created when a person (the settlor) grants ownership of property to a person (the trustee) to use for the benefit of certain other people (the beneficiaries).”
Not a separate legal entity
Trustee has legal ownership of property, but beneficiaries have beneficial ownership
Trustee has a fiduciary duty to act in the best interests of the beneficiaries
Trustee can be a company

Different types of trusts:
Discretionary trust: “Allow the trustee to distribute property how they see fit.”
Fixed Trust: “Beneficiaries get a set amount.”
Trusts usually used for distributing wealth to family members, or tax effective way of running a business
There are significant formalities for the creation of a trust, as well as the rights and obligations of a trustee.

PRACTISE TEST

This information relates to Questions 1, 2, and 3
Ben and Danielle, both Queensland residents, enter a contract. Danielle does not perform her obligations under the contract, and Ben wishes to take legal action. He estimates that the contract was worth $800,000 to him.

QUESTION 1
What Court should Ben commence proceedings in?

(a) Supreme Court of Queensland
(b) District Court of Queensland
(c) Federal Court of Australia
(d) High Court of Australia

QUESTION 2
When the case comes to be heard:

(a) Ben will be the plaintiff and he will have to prove his case beyond a reasonable doubt
(b) Danielle will be the plaintiff and she will have to prove her case on the balance of probabilities
(c) Ben will be the defendant and he will have to prove his case on the balance of probabilities
(d) Ben will be the plaintiff and he will have to prove his case on the balance of probabilities

QUESTION 3

Continuing the facts above, Ben wins his case. Danielle decides to appeal. This appeal case will be reported as: [read them carefully! May need to refer to Q1]

(a) In the Supreme Court of Queensland, Court of Appeal
Between
Danielle (Appellant, Plaintiff)
And
Ben (Respondent, Defendant)

(b) In the Supreme Court of Queensland, Trial Division
Between
Danielle (Appellant, Defendant)
And
Ben (Respondent, Plaintiff)

(c) In the High Court of Australia
Between
Ben (Respondent, Plaintiff)
And
Danielle (Appellant, Defendant)

(d) In the Supreme Court of Queensland, Court of Appeal
Between
Danielle (Appellant, Defendant)
And
Ben (Respondent, Plaintiff)

(e) In the Supreme Court of Queensland, Court of Appeal
Between
Ben (Respondent, Plaintiff)
And
Danielle (Appellant, Defendant)

QUESTION 4
Which of the following statements is correct?

(a) Australia has a civil law system
(b) The Commonwealth Constitution provides the Commonwealth parliament with the power to make laws about any topic.
(c) A proposed Bill only needs Royal Assent from the Governor-General (without Parliamentary approval) in certain situations to become law
(d) None of the above statements are correct

QUESTION 5
Ranger Stacey from the Queensland Department of Animal Welfare sees a tiger cub displayed for sale in a pet shop window. The pet shop is owned by Bob. Ranger Stacey charges Bob under the Dangerous Animals Act 2005 (Qld) which provides:- “Any person who sells, lends or gives a dangerous animal to any other person commits an offence”. Tigers were defined in the legislation as a “dangerous animal”. The matter went to Court and the Judge decided that Bob had not breached the Act because Ranger Stacey did not purchase the tiger cub. The Judge most likely relied on which rule in making the decision:-

(a) Purpose Rule under the Acts Interpretation Act;
(b) Purpose/Mischief Rule under common law;
(c) The Literal Rule
(d) The Golden Rule

QUESTION 6
A person who is at Stage 4 of Kohlberg’s Stages of Cognitive Moral Development is motivated to act:
(a) to avoid punishment
(b) to conform to the expectations of their immediate peers
(c) to conform to the expectations of wider society
(d) in accordance only with ethical principles such as justice

This information relates to Question 7-9
For each question, from the statements (a)-(d), identify which statement you believe is FALSE. If you believe that there are no false statements in (a)-(d), then choose option (e).

QUESTION 7
(a) Milton Friedman argued against corporate social responsibility because company directors are agents of the company and of shareholders, but they had not been given authority to do things like make charitable donations on shareholders’ behalf.
(b) Market-based schemes such as ‘carbon trading’ are one way of trying to get companies to factor in environmental concerns into their decision-making.
(c) Businesses factor in externalities into their prices
(d) Stakeholders can include employees, suppliers and government
(e) None of the above statements are false

QUESTION 8
The character-based ethical theories:
(a) focus on what a person with good virtues would do
(b) state that a virtue is a ‘mean’ between vices of deficiency and excess
(c) state that achieving the right result, but for the wrong reasons (eg not acting out of a sense of duty) is not ethical
(d) can include virtues such as justice and care
(e) None of the above statements are false

QUESTION 9
A partnership:
(a) is usually limited to 20 people
(b) is not a separate legal entity
(c) is the relationship between people carrying on a business, in common, with a view to profit
(d) does not give its owners ‘limited liability’
(e) None of the above statements are false

End of ‘Which statement is false section’

QUESTION 10
The normative study of ethics is about:
(a) what someone ought to do in certain situations
(b) what someone does in certain situations
(c) the real meaning of ethical concepts that people use
(d) all of the above
(e) none of the above

QUESTION 11
Which of the following statements is correct?
(a) Cabinet is part of the Legislative arm of government
(b) Senior government minister make up cabinet
(c) All Commonwealth ministers are part of the Federal Executive Council
(d) Options (b) and (c) are correct
(e) Options (a), (b) and (c) are correct

QUESTION 12
Which of the following statements is correct?
(a) The party bringing a court case for the first time is termed the appellant
(b) For a case citation where the case was heard for the first time, the defendant is the party listed first
(c) The respondent is the party who responds to an appeal, and they may be either the plaintiff or defendant
(d) All of the above
(e) None of the above

QUESTION 13
Under the public interest theory of regulation:
(a) using welfare economics approach, regulation is needed to address market failure
(b) regulatory failure occurs if the costs of regulation exceed the benefits, therefore advocating the removal of the regulation
(c) using a political approach, regulation can be used to give expression to broader social aspirations, for example redistribution of wealth
(d) All of the above are correct
(e) Only options (a) and (c) are correct.

QUESTION 14
The Commonwealth of Australia: * (a) Is a federation of states * (b) Did not exist prior to 1901, as the land was made up of separate English colonies * (c) Was established under the Constitution and Bill of Rights * (d) Both (a) and (b) are correct * (e) All of (a), (b) and (c) are correct

QUESTION 15
Which of the following is correct? * (a) Equity law was a harsher, procedure-focused area of English law * (b) Equity originated from the English Courts of Justice * (c) Equitable principles are no longer used since the two court systems were combined * (d) Equitable remedies included specific performance and injunctions

QUESTION 16
An agent can only bind the principal to a contract with a third party if the agent has:
(a) Express authority to act
(b) Implied authority to act
(c) Apparent authority to act
(d) Both (a) and (b) are correct
(e) All of (a), (b) and (c) are correct

QUESTION 17
Andy appoints Barb to be his agent. Barb is authorised to buy products for Andy’s nursery business. Barb visits 2 suppliers looking for ceramic pots. Charlie Co Ltd offers pots for sale at $5 each. Delta Bros Ltd offers similar pots to Barb for $7 each, but says that if Barb signs the contract with them, they’ll throw in some free pots for Barb to use in her own garden at home. She signs with Delta Bros Ltd. Which of the following is correct?
(a) Barb can keep the free pots because as an agent she has a right to remuneration
(b) Barb can keep the free pots because Andy will not find out about it.
(c) Barb has breached her fiduciary duty to Andy because she did not act in his best interest by buying the more expensive option
(d) Barb has breached her fiduciary duty to Andy because she made a secret profit from her position as an agent.
(e) Both (c) and (d) are correct

Lecture 7

Contract:
“An agreement between two or more persons intended to be binding, which is enforceable at law.”
Not necessary for a contract to be in writing to be enforceable
Some contracts however are required to be in writing
Most contracts are oral

Types of Contracts
Formal contracts: “Agreements made in writing which must follow strict requirements, but do not require consideration.”
Simple contracts: “Any contract other than a formal contract. Simple contracts require consideration and unless required by law (e.g. sale of land), can be in writing, spoken or a combination of both.”

Intention
If parties agree, this does not necessarily mean a contract is formed
Without the intention to form a contact or have it considered under the law, it may still be an agreement, but not an agreement that is legally enforceable by courts – because it is not a contract
Intention can be determined by considering relevant context and relationship between parties, and determining what inferences can be drawn from that
Courts start with 2 presumptions:
Social, family/domestic or voluntary agreements do not intend to create legal relations – therefore contract is presumed to not be a binding contract
Commercial agreement do intend to create legal relations – therefore contract can be binding
NOTE: THESE ^ CAN BE REBUTTED!

* Non-commercial agreement
E.G.: Social (REBUTTED)
Trevey v Grubb:
A three-person syndicate won $218 000 in a lottery. The ticket was in the name of the defendant, who refused to share the prize with the plaintiff.
Was this just a friendly arrangement so that it could be said that there was never any intention on the part of the parties to enter into legal relations?
Held: High Court – even though this was a social arrangement, there was a contract and the plaintiff was entitled to a share of the winnings in proportion to her contribution. *
E.G.: Husband and Wife
Balfour v Balfour
Facts: The husband promised to pay a monthly allowance to the sick wife (who lived in UK) until the wife was able to join him in Sri Lanka. The husband failed to pay and the wife sued.
Held: Parties had no intention to be legally bound *
E.G.: Domestic
Parties were engaged in 1918, defendant promised to pay his fiancee an annual dress allowance of 100 pounds to be paid in quarterly sums of 25 pounds. After their marriage in 1918, defendant paid the plaintiff a quarterly dress allowance until 1920. Parties separated in 1923. In 1928, plaintiff commenced action to recover moneys she claimed were outstanding – 278 pounds for her dress allowance from the period 1921-1923.
Held: domestic agreement, no intention to create legal relations *
E.G. Husband and Wife (REBUTTED)
Popiw v Popiw
A husband had promised his estranged wife that if she returned to live with him he would transfer the matrimonial home, which was in his name, into their joint names. She returned to live with him but the transfer never took place. They subsequently separated. She then sought to enforce her husband’s promise to transfer the home into their joint names.
Court held that there was intention to be legally bound. The agreement was made after the parties had first separated and also they had sought legal advice about the agreement *
NOTE: NOT RESTRICTED TO H&W, BUT FAMILY TOO: PRESUMPTIONS CAN BE REBUTTED IF PROMISES ARE SERIOUS FOR 1 PARTY. *
E.G.: Family
A wealthy old man persuaded his sister and her family to move to Australia from England on the basis that they would get his house in his will. The plaintiff did move, but after a year, the defendant changed his will after a falling out.
Court held that the presumption was rebutted, there was ample evidence to indicate that the parties did intend to enter into a binding and enforceable contract as ‘the consequences for the plaintiffs were so serious…’ *
E.G.: Voluntary
Teen Ranch Pty Ltd v Brown
B was a volunteer worker at a non profit Christian youth centre. He received accommodation, food and the use of camp facilities and was expected to obey camp rules, but he received no wages. While working at the camp he was injured and he claimed workers’ compensation.
Held: no evidence of intention to create legal relations by the parties so no contract of employment could be said to exist. Brown’s work was voluntary and he was not entitled to workers’ compensation. * * Commercial agreements
E.G. Commercial
Edwards v Skyways Ltd
During an industrial dispute, an airline company promised employees that they would make an ex gratia payment to anyone made redundant. The company later refused to pay a redundant employee.
The court held that as the agreement was commercial, it was presumed to have intention.
So the employees were entitled to the ex gratia payment. *
THIS PRESUMPTION CAN BE REBUTTED BY:
Letters of comfort
Binding in honour only
Shall not be attended by or give rise to any legal relationships *
E.G.: Letter of comfort
Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad
A subsidiary company wanted a loan from a merchant bank, and to help gain this, the parent company gave a ‘letter of comfort’ to the bank stating “It is our policy to ensure that the business of [subsidiary] is at all times in a position to meet its liabilities to you under the above arrangements”. After the loan was made, the market in which the subsidiary operated crashed and the company wound-up with heavy losses.
The bank sued the parent company for a breach of contract, but it was held that there was never an intention to create legal relations. *
E.G. Honour Clause
Jones v Vernon’s pools Ltd
‘It is a basic condition of the sending-in and acceptance of this coupon that it is intended and agreed that the conduct of pools...shall not be attended by or give rise to any legal relationships, rights, duties or consequences whatsoever or be legally enforceable...but all such arrangements, agreements and transactions are binding in honour only’

Agreement
Agreement is where an offer has been made and accepted
Courts use objective test – what would a reasonable person think when looking and the words and conduct of the parties?
Offeror: “Person who makes the offer.”
Offeree: “Person who receiving the offer.” *
Rules for offers:
Rule 1: Offers must be distinguished from an invitation to treat or request for information.
Some things may look like offers, but under the law are not.
Invitation to treat: Goods on shop shelves, goods advertised, price lists and catalogues.
Shop shelfs: Pharmaceutical Society v Boots Cash Chemists
Advertising: Partridge v Crittenden
Catalogue: Grainger & Sons v Gough
Rebutted: Carlill v Carbolic Smoke Ball *
Requests for information: Responding to a question is not an offer
Harvey v Facey
The plaintiffs asked the defendant what was the lowest cash price for a property. When the defendant replied, the plaintiff took it as an offer and purported to accept it. However, the court said that the defendant was merely indicating their minimum price if they decided to sell, and weren’t actually offering to do so *
Advertising puffs: A statement that is stupid/silly, and not meant to be taken as true
E.G.: The Lynx adverts: where you spray and the women run after you: this is a puff! *
Rule 2: Offers must be communicated to the person or persons for whom it was intended.
Offer must be communicated with offeree for them to be able to accept it *
Rule 3: An offer may be made to a particular person, to a class of persons or to the whole world.
E.G. Carlill v Carbolic Smoke Ball Co
The defendants had shown their intention to make an offer to the whole world, or rather those people who came forward and bought the product. The terms of the advertisement were specific enough to make it an offer. *
Rule 4: Offers may be terminated at any time prior to its acceptance.
Offer can be withdrawn by giving notice to offerees, even if the offer was promised to be open for a period of time (unless the offeree has paid something for the promise)
E.G.
Goldsborough Mort v Quinn
Quinn granted the plaintiff company the following option:
I John Quinn, in consideration of the sum of five shillings paid to me hereby grant to Goldsborough Mort & Co the right to purchase the whole of my freehold...lands...within one week from this date...
Before the end of the week and before the plaintiff had accepted, Quinn told the company that he was withdrawing his offer. The company went ahead and accepted the offer within the option time and sued for specific performance.
Held that the option was enforceable, the company’s acceptance was good and a binding contract was made which was enforced through an order of specific performance. Note court is not concerned about the amount of the consideration (its adequacy). *
An offer can be rejected by offeree through words or conduct
A counter offer from the offeree can then be rejected by the offeror, which also means a rejection of the original offer – Hyde v Wrench
A request for more information is not a counter offer – Stevenson Jacques v Mclean
Lapse of time; either at a time specified by offeror or a reasonable time – Ramsgate Victoria Hotel v Montefiore *
Rules for acceptance
Rule 1: Acceptance must be in reliance on the offer
A person cannot accept an offer he/she does not know about
E.G. R v Clarke a person charged with murder gave information to authorities that led to someone else (the true offender) being arrested instead. He later tried to claim a reward being offered for information. He could not accept the offer, because when he gave the information, he did not know about it. *
Rule 2: Unless dispensed with, acceptance must be communicated to the offeror, by the offeree.
Acceptance must be communicated by words or conduct
Silence is not sufficient
If offeror specifies a specific method of acceptance, it must be followed. If not, acceptance is not effective.
Post Acceptance Rule explains that acceptance occurs when letter is posted NOT received
Many businesses now try to get rid of PAR: “acceptance is only effective when we receive it”
Instantaneous forms of communication require actual receipt of acceptance (phone,fax) – therefore acceptance occurs when received by offeror
Email and Internet are not instantaneous – electronic acts (Federal and Queensland) allow for situations where contracts must be in writing but over the internet/electric stuff – email, fax, websites, texts *
Rule 3: Must be absolute and unqualified
Acceptance must be I accept
“I’ll accept if you do this” is a counter-offer *
Rule 4: Cannot be revoked
After acceptance, neither side can revoke
One party would have to willingly agree to release the other party from the contract.

Lecture 8

Consideration
Essential to the validity of contract (Rann V Hughes)
Consideration must be definite, legal and possible of performance (White V Bluett)
Consideration must move from the promisee - They have to do something (consideration) in return for that promise, but this consideration does have to move from the promisee, but not necessarily move to the promisor – (Dunlop pneumatic Tyre Co Ltd V Selfridge)
Consideration must not be past – if promise is given after act has be performed, this is not enforceable (Roscorla V Thomas)
Consideration must be sufficient