Context
Business Structures Pages 2 – 6
Sole trader Page 2
Partnership Page 2
Corporation Page 5
Trusts Page 5
Franchise Page 6
Contracts Law Pages 7 – 19
Introduction to contracts Page 7
Offer Page 7
Acceptance Page 9
Intention Page 10
Consideration Page 10
Terms Page 11
Invalid contracts Page 14
Ending the contract Page 17
Remedies Page 19
Employer/employee relationships and Page 21 – 27
agency relationships
Employer or contractor Page 21
Vicarious liability Page 22
Ownership of intellectual property Page 22
Employment contracts and regulatory Page 22
provisions
Recruitment and dismissal Page 24
Work Health and Safety Page 25
Discrimination Page 27
Agency law Page 27
Consumer law Page 32 – 63
Section 18 Page 32
Section 29 Page 35
Unfair contracts or terms Page 38
Prohibited sales methods Page 41
Faulty and dangerous products: Page 45
Introduction
Consumer Guarantees – Good Page 46
Consumer Guarantees – Services Page 51
Consumer remedies Page 52
Standards, bans and recalls Page 58
Safety defects Page 61
1
, Business structures
Sole trader
Owned and operated by an individual, they have direct control over the operations of their business
and complete responsibility for all its activities.
They are flexible and adaptive to changing condition and they are entitled to all profits from the
business and receive any profit as personal income.
Simplest form of business structure, only requiring an ABN. However, they face difficulty raining
finance to start and maintain their business due to the risk involved. Business isn’t a separate legal
entity and is one with the owner.
Advantages Disadvantages
Ownership and control of business Unlimited liability
Lack of formalities and relatively cheap to form Difficulty in raising large amounts of money of
capital
Keep all profit as well as flexibility Lack of management skills or expertise
Partnership (in detail)
Where a group of two of more persons directly own and operate a business together. The owners of
the business are called partners and share in any profits of the business. They are relatively easy to
establish as there is no formal requirements for registration
Often there will be a written partnership agreement (articles of partnership) - This sets out the
relationship between the partners. However, it is not strictly necessary to have a written agreement.
Under legislation in each State and territory, a partnership is defined as the relationship that exists
between people who are ‘carrying on a business in common with a view of profit’ (Partnership Act
1892 (NSW) ).
Even if a group of people conducting business together, decide not be partners or describe as
something else, legally they are seen as a partnership
Each partner owes the other partners of the firm legal duties known as fiduciary duties (eg: duty of
partner to avoid conflict of interests of the partnership). The partners share responsibility for the
operational decisions of the business. Obligations taken on by a partner in the ordinary course of
business (eg: entering into a contract) are binding on the other partners.
Partners share responsibility for any legal liability the business incurs (such as debts — this is
referred to as joint liability. Partners may be sued, either together as a group or individually
A partnership is not normally a separate legal entity from the partners who own it. However, in some
States (such as New South Wales), it is possible to register an ‘incorporated limited partnership’
which has a separate legal personality and which may sue or be sued in the firm name
2
, Advantages Disadvantages
Can be cheap to form and run as well as flexible Unlimited liability
Maintenance of secrecy Numbers limited to between 2 and 20
Potential for partners to pool capital and Fights and disagreements may occur
experience
A default relationship
Whenever people carry out business together, they may be treated, legally as partners.
If the dealings between business people satisfy the 3 elements of partnership, the law will treat them
as partners (partner relationship is 'implied'), in that sense the category operates as a type of 'default'
legal structure.
Business people may be treated as partners even if:
• They don’t have a written or verbal agreement
• They haven't thought about their business structure at all
• When they have stated they are not a partnership, or have described themselves as another legal
relationship
The case: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974)
illustrates that businesses will be held to be a partnership if it satisfied the criteria of partnership,
even if parties do not describe themselves as such.
Even if people call themselves partners, if they do not satisfy the 3 criteria points, they will not
legally be seen as a partnership.
Three elements of partnership
Section 1(1) of the Partnership Act 1892 (NSW) sets out the 3 elements needed
Carrying on a business "Carrying on" suggests a requirement for an ongoing relationship.
Legislation can be that specific as the meaning might have been
different had the words "carry", "carries" or "carried" been used
‘Carrying on’ becomes tricky in terms of work done that’s preparatory
(carrying out preparation) to trade, but which takes place before the
business actually starts up.
If the planning is not very far advanced, the cases tell us that it won’t be
considered to be ‘carrying on’ business – yet – and therefore will not be
a partnership – but the courts do also look into what sort of relationship
the parties themselves thought they would have.
Case: Keith Spicer v Mansell [1970]
The court found that it was not a partnership as Spicer and Bishop’s
activities were only preparatory to carrying on a business, and didn’t
satisfy this ‘carrying on a business’ element of partnership
In common between The business also needs to be carried on ‘in common’ between the
partners (running the partners
same business together)
3
, This question can come up when business people are involved in related
businesses – but to be in partnership they need to be involved in running
the same business
Case: Checker taxicab co limited v stone
Court found that owner of taxi cab and driver of the cab ere not carrying
business in common. They were complementary but were separate
businesses.
Business must be The business must be run with a "view of making profit". This does not
operated with a view of mean the business must make a profit, but must, at lease have a motive
profit (motive of profit) for profit.
This requirement makes it so most sporting, charitable and religious
groups/organizations are not treated - for legal purposed - as
partnerships. Though they may raise money through activities, their
objective is non-commercial, and the profits are not divided between
members (which is an important right partnerships posses)
The partnership relationship – rights and powers
If they don’t have a written partnership agreement, or if they have one but it doesn’t cover
everything, then the Partnership Act will set down the rules for them.
The partnership agreement is therefore an important part of setting out the exact arrangements for
things like:
• The name and duration of the partnership
• What the partnership is for (what type of business are they)
• What authorities the partners have to do business on behalf of the partnership, including any
limitations that may have been placed on a partner’s activities
• How much money, property or other input each partner is to contribute – this does not have to
be equal, but if it isn’t specifically covered the Partnership Act 1892 (NSW) s 24(1) requires
equal contributions
• How the partnership profits are to be divided, which again doesn’t have to be equal, but will be
treated as equal under the Partnership Act 1892 (NSW) s 24(1) if the partners don’t specify a
different division of profits
• What will happen if a partner retires or dies
• A range of other financial arrangements, such as payment of employees and raising credit on
the firm’s account
The advice here is that if partners want their partnership to run in a manner that’s different from the
default arrangements in s 24 of the Act, then they should draft a partnership agreement specifically
for their firm
Once the partnership is in action, the partners generally also have the rights to:
• Pledge or sell the firm's property
• Buy goods of the kind usually employed in the firm's business
• Engage and employ servants for the carrying out of the firms business
• Borrow money, contract debts, give securities for those debts, and pay debts
• Receive payment of debts that are owned to the partnership
4
Business Structures Pages 2 – 6
Sole trader Page 2
Partnership Page 2
Corporation Page 5
Trusts Page 5
Franchise Page 6
Contracts Law Pages 7 – 19
Introduction to contracts Page 7
Offer Page 7
Acceptance Page 9
Intention Page 10
Consideration Page 10
Terms Page 11
Invalid contracts Page 14
Ending the contract Page 17
Remedies Page 19
Employer/employee relationships and Page 21 – 27
agency relationships
Employer or contractor Page 21
Vicarious liability Page 22
Ownership of intellectual property Page 22
Employment contracts and regulatory Page 22
provisions
Recruitment and dismissal Page 24
Work Health and Safety Page 25
Discrimination Page 27
Agency law Page 27
Consumer law Page 32 – 63
Section 18 Page 32
Section 29 Page 35
Unfair contracts or terms Page 38
Prohibited sales methods Page 41
Faulty and dangerous products: Page 45
Introduction
Consumer Guarantees – Good Page 46
Consumer Guarantees – Services Page 51
Consumer remedies Page 52
Standards, bans and recalls Page 58
Safety defects Page 61
1
, Business structures
Sole trader
Owned and operated by an individual, they have direct control over the operations of their business
and complete responsibility for all its activities.
They are flexible and adaptive to changing condition and they are entitled to all profits from the
business and receive any profit as personal income.
Simplest form of business structure, only requiring an ABN. However, they face difficulty raining
finance to start and maintain their business due to the risk involved. Business isn’t a separate legal
entity and is one with the owner.
Advantages Disadvantages
Ownership and control of business Unlimited liability
Lack of formalities and relatively cheap to form Difficulty in raising large amounts of money of
capital
Keep all profit as well as flexibility Lack of management skills or expertise
Partnership (in detail)
Where a group of two of more persons directly own and operate a business together. The owners of
the business are called partners and share in any profits of the business. They are relatively easy to
establish as there is no formal requirements for registration
Often there will be a written partnership agreement (articles of partnership) - This sets out the
relationship between the partners. However, it is not strictly necessary to have a written agreement.
Under legislation in each State and territory, a partnership is defined as the relationship that exists
between people who are ‘carrying on a business in common with a view of profit’ (Partnership Act
1892 (NSW) ).
Even if a group of people conducting business together, decide not be partners or describe as
something else, legally they are seen as a partnership
Each partner owes the other partners of the firm legal duties known as fiduciary duties (eg: duty of
partner to avoid conflict of interests of the partnership). The partners share responsibility for the
operational decisions of the business. Obligations taken on by a partner in the ordinary course of
business (eg: entering into a contract) are binding on the other partners.
Partners share responsibility for any legal liability the business incurs (such as debts — this is
referred to as joint liability. Partners may be sued, either together as a group or individually
A partnership is not normally a separate legal entity from the partners who own it. However, in some
States (such as New South Wales), it is possible to register an ‘incorporated limited partnership’
which has a separate legal personality and which may sue or be sued in the firm name
2
, Advantages Disadvantages
Can be cheap to form and run as well as flexible Unlimited liability
Maintenance of secrecy Numbers limited to between 2 and 20
Potential for partners to pool capital and Fights and disagreements may occur
experience
A default relationship
Whenever people carry out business together, they may be treated, legally as partners.
If the dealings between business people satisfy the 3 elements of partnership, the law will treat them
as partners (partner relationship is 'implied'), in that sense the category operates as a type of 'default'
legal structure.
Business people may be treated as partners even if:
• They don’t have a written or verbal agreement
• They haven't thought about their business structure at all
• When they have stated they are not a partnership, or have described themselves as another legal
relationship
The case: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974)
illustrates that businesses will be held to be a partnership if it satisfied the criteria of partnership,
even if parties do not describe themselves as such.
Even if people call themselves partners, if they do not satisfy the 3 criteria points, they will not
legally be seen as a partnership.
Three elements of partnership
Section 1(1) of the Partnership Act 1892 (NSW) sets out the 3 elements needed
Carrying on a business "Carrying on" suggests a requirement for an ongoing relationship.
Legislation can be that specific as the meaning might have been
different had the words "carry", "carries" or "carried" been used
‘Carrying on’ becomes tricky in terms of work done that’s preparatory
(carrying out preparation) to trade, but which takes place before the
business actually starts up.
If the planning is not very far advanced, the cases tell us that it won’t be
considered to be ‘carrying on’ business – yet – and therefore will not be
a partnership – but the courts do also look into what sort of relationship
the parties themselves thought they would have.
Case: Keith Spicer v Mansell [1970]
The court found that it was not a partnership as Spicer and Bishop’s
activities were only preparatory to carrying on a business, and didn’t
satisfy this ‘carrying on a business’ element of partnership
In common between The business also needs to be carried on ‘in common’ between the
partners (running the partners
same business together)
3
, This question can come up when business people are involved in related
businesses – but to be in partnership they need to be involved in running
the same business
Case: Checker taxicab co limited v stone
Court found that owner of taxi cab and driver of the cab ere not carrying
business in common. They were complementary but were separate
businesses.
Business must be The business must be run with a "view of making profit". This does not
operated with a view of mean the business must make a profit, but must, at lease have a motive
profit (motive of profit) for profit.
This requirement makes it so most sporting, charitable and religious
groups/organizations are not treated - for legal purposed - as
partnerships. Though they may raise money through activities, their
objective is non-commercial, and the profits are not divided between
members (which is an important right partnerships posses)
The partnership relationship – rights and powers
If they don’t have a written partnership agreement, or if they have one but it doesn’t cover
everything, then the Partnership Act will set down the rules for them.
The partnership agreement is therefore an important part of setting out the exact arrangements for
things like:
• The name and duration of the partnership
• What the partnership is for (what type of business are they)
• What authorities the partners have to do business on behalf of the partnership, including any
limitations that may have been placed on a partner’s activities
• How much money, property or other input each partner is to contribute – this does not have to
be equal, but if it isn’t specifically covered the Partnership Act 1892 (NSW) s 24(1) requires
equal contributions
• How the partnership profits are to be divided, which again doesn’t have to be equal, but will be
treated as equal under the Partnership Act 1892 (NSW) s 24(1) if the partners don’t specify a
different division of profits
• What will happen if a partner retires or dies
• A range of other financial arrangements, such as payment of employees and raising credit on
the firm’s account
The advice here is that if partners want their partnership to run in a manner that’s different from the
default arrangements in s 24 of the Act, then they should draft a partnership agreement specifically
for their firm
Once the partnership is in action, the partners generally also have the rights to:
• Pledge or sell the firm's property
• Buy goods of the kind usually employed in the firm's business
• Engage and employ servants for the carrying out of the firms business
• Borrow money, contract debts, give securities for those debts, and pay debts
• Receive payment of debts that are owned to the partnership
4
