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What are Torts, and How Do They Apply to Business Situations?

A fraud or a crime that is done by an individual to another is referred to as ‘Tort’, though this term is quite common and has not legalized definition to it what so ever, it is a term that is more of a common knowledge and used in the common laws that may or may not have been legalized by a said judge of a court. Since Australia and United Kingdom share a common heritage due to UK’s colonial domination, it is seen that most laws, mostly the common ones help differentiate torts in Australia. The extension of the ‘Civil Liability Acts’ and the many states of the continent have brought certain enhancements in the laws regarding the torts. Out of the many, some common tort crimes are (Leon, 2015):

  1. Fraudulent Misrepresentation
  2. Trespassing
  3. Negligence
  4. Breach of Legal And The Public Duties
  5. Interfering in family and employment based decisions
  6. Economic damage including international
  7. Private nuisance
  8. Defamation

Economic Torts are the torts that are done in financial and business situations. These torts are mostly committed deliberately or result from small mistakes like working hastily or simply, negligence, in a business situation in order to wrong a said business entity and in economic and financial terms. These torts, in most cases lead to a significant amount of loss. They may not be taken under crimes, but there are others that might be labeled as crimes and lead to a significant damage to the trading (Little et al. 2014). It is stated that in such cases that the party that’s aggrieved may approach legal help and demand a monetary payback or a compensation for the damage and may request the seizure of any more of those activities if a financial damage is faced.

Negligence and misrepresentation are the most frequently committed torts in a business situation. Negligence is when the person on which a duty is assigned, fails to proceed with it in caution and makes a mistake. In the case of Donoghue v Stevenson’s case, it was stated that an individual is bound by duty to act with utmost when interacting with a ‘neighbor’, the individual who is going to directly get affected from the way that we are going to proceed with our job. It is expected of the parties involved to have the foresight of such common actions and make prior arrangements to deal with these things.

It is essential for the aggrieved to first fulfill certain conditions prior to the establishment of any claim on an individual for committing an act of neglect. Aggrieved party must prove to the court that the said person was bound by a contract to fulfill a responsibility of utmost care and had committed an act of breaching of his said duties. The party must also prove that the person’s negligence caused the aggrieved to sustain a certain degree of damage. Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428 stated it quite clearly that any damage that is caused to the aggrieved must also prove that any damage caused was sustained only because of the said breach and could have been somewhat foreseeable, as any person reasonable would have seen if they were in the same trouble as of the other party in question, as said in the Wagon Mound No 1 [1969] AC 388, case, where the person at defense was liable of any loss that might have been a foreseeable one, then he has to take its full responsibility.

The Most Common Types of Tort in Business: Negligence and Misrepresentation

It was in the Oyston v St Patricks’s College [2011] NSWSC 269, case that a the girl named Jazmine Oyston filed a lawsuit against her college St. Patrick’s College, situated in New South Wales, condemned on charges of negligence and successfully won. She had charged such for neglecting her serial bullying and harassment which led to traumatic depression and occasional panic attacks and long term anxiety. She charged the school for not taking proper measures that could have prevented the clearly foreseeable harm inflicted upon her. The court agreed and could very well foresee that in-fact, many of the school students were subject to bullying.

It was judged by the jury that though the case was clearly foreseeable, the school failed to help Miss Oyston and prevent her from the subjected bullying. The court went through the facts as to whether the institute had previously taken any measures so as to take proper care of a subject as sensitive as bullying and implement proper policies that would help them deal with it. It was seen by the court that not only did the school fail to implement their said policies, but even thought they could very well see the child’s suffering, they didn’t bother themselves letting Miss Oyston get injured (Stickley, 2016).

It was also solidified by the judge that any prudent or sane person might have not delayed and taken actions immediately and ordered the authorities to monitor all the students in the college and report any act of bullying without fail. Miss Oyston’s mental injuries were taken into consideration and it was stated that the college was liable for her state of mind that could have been avoided if not neglected. The college was penalized and Oyston was given compensation for her mental damage.

It was established by the student Miss Oyston that the institute, though they could totally foresee, decided to neglect her mental health and the discrete situation she was trapped in. The college had failed to fulfill its responsibility of caring for the students which directly resulted to Miss Oyston’s suffering.

Misrepresentation is the tort where a party makes certain false exaggerations to another party in relation to a contract or a product in order to induce them into signing on to the contractual agreement. Hence, a false statement made while negotiating over something is an act of misrepresentation. If a contractual term comes as misrepresented, then the other party has the right to put the contract aside and sign itself out (Sandeen, 2015). In order for a party to file a case of misrepresentation, it has to fulfill certain criteria in order to confirm the misrepresentation done to them. The most common one would be an incorrect statement based on any common law or estimates for future, this was regarded as essential in the Esso Petroleum v Mardon [1976] QB 801 case. It is also stated if the party had knowledge of the said fact, then they have committed an act of misrepresentation, they will be liable to the damage caused as in Smith v Land & House Property Corp [1884] 28 Ch D 7 case.

Proving Negligence: A Complex Process

The other element, which is on the aggrieved party’s point of view is that whether they trusted and believed what was said to them or misrepresented to them and agreed to enter the contract or not. If, the party managed to not get induced by the exaggerated claims of the other party and was not in any way induced, then the claim can be called a legitimate one (North and Flitcroft, 2016). Hence, it further seen that misrepresentations are of three categories, Fraudulent, Innocent and Negligent Misrepresentation.

The case of Joystick Company Pty Ltd can be held in the recent instances of misrepresentation where it was seen that the Australian Competition and Consumer Commission (ACCC) had filed a legal proceeding against the organisation inside the Federal Court that the said company was involved in the act of misrepresentation. It was claimed that the company lied to the buyers that their products were free from any formaldehyde or other toxins. When tested, their product was in-fact intoxicated and may result to sickness. The director was held responsible for knowing the ill effects of his products full well and was condemned (Corones, 2014).

Competition and Consumer Act 2010 was established in Australia in order to maintain the stringent responsibilities of the business towards the consumers and also to safeguard trading and commercial activities in the country at all cost. The said statute that prohibits all business organizations from engaging in fraudulent actions in the famed Section 18 of schedule 2 of the Act of the Australian Consumer Law which stops any company from committing malpractices that involve Antisocial Conduct, Use of Unfair means, misleading, misrepresentation, selling goods In referral way, baiting with false advertisements, an act to mislead public and etc. Schedule 2 of the Competition and Consumer Act 2010 makes consumer guarantees very clear and a must follow for all the companies at all cost such that the safety and welfare of both the organization and the consumers are met in every way possible in the business. These include the rights of the consumer to get products that are of good quality and are sold to them at a fair price and also how the stock is delivered and provided to all the customers engaged in business with the said company. 

It is clear in the country of Australia that misrepresentation in all its categories is considered illegal and if a company were to exaggerate false facts to a company knowing full well that the facts are false but believing in them anyway just to induce the consumer into purchasing it in the first place, then they are to be punished by law. This falls under the statutory interests of the economy (Howells and Weatheril, 2017).

Recent Examples of Misrepresentation in Business

The said torts of both misrepresentation and negligence are most common of them all in the business world. It falls in the company's hands to not make any exaggerations or false representations in order to attract the customers or hurt their consumer rights. Businesses and all retailers must make sure that they are not engaging in any act of unfair practice (Latimer, 2016). This includes price, value and quality and the basic nature of stock provided such that any claim that may arise in regard to misrepresentation is avoided at all cost.

 Hence to avoid such situations, safety goods must be used that would not harm a consumer in any way. If a risk that in all possible circumstances my eventually arise or is foreseen then measures are to be taken in order to avoid the risk completely such that any damage caused to the company or customer are avoided in all ways. As per the laws of Australian Consumer Law, the business must comply with guarantees of the consumer if supposedly a client happens to make any claims against the working of the said company (Pearson, 2017).The business should make sure that disclosure of necessary information about the product in question is made such that safety is maintained for all consumers in question. 

Another such incident like the company Joysticks was with Uber when it filed a suit against phone media company Fetch Media for engaging into acts of misrepresentation by not controlling and complying with false advertisements that were making Uber responsible for committing the misrepresentation. It is evident from this case that torts that arise from the company are liable to make the reputation and goodwill of it to go down which will further include considerable financial loss of the company in the economic criteria.

The authorities like the Australian Consumer laws ensure saturation and stop companies from making such acts of frauds that would harm the consumers and themselves which includes creating a significant disruption in the terms and proceeding of the said contract that could lead to dissatisfied consumers and parties (Brody and Temple, 2016). In such cases, if the aggrieved has suffered any said losses or damages, it falls on the shoulder of condemned to handle all the repairs and provide all the goods necessary to compensate for the losses faced by the said party. Hence, it is now clear that any entity or individual that owes any significant form of duty to another entity or individual has to make sure to carry it out properly without making errors or committing fraud actions, especially when the risk concerned is clearly foreseen. 

Reference List

Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428.

Brody, G. and Temple, K., 2016. Unfair but not illegal: Are Australia's consumer protection laws allowing predatory businesses to flourish?. Alternative Law Journal, 41(3), pp.169-173.

Competition and Consumer Act 2010 schedule 2

Corones, S.G., 2014. Competition law in Australia. Thomson Reuters Australia, Limited.

Esso Petroleum v Mardon [1976] QB 801.

Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge.

Latimer, P., 2016. Protecting Consumers from Unfair Contract Terms: Australian Comparisons.

Leon, J.J., 2015. Negligence-Torts-Negligent Misrepresentation-Downfall of Privity-Hanberry v. Hearst Corp., 81 Cal. Rptr. 519 (1969). DePaul Law Review, 19(4), p.803.

Little, J.W., Lidsky, L.B., O'Connell, S.C. and Lande, R.H., 2014. Torts: Theory and Practice. LexisNexis.

North, J. and Flitcroft, R., 2016. Businesses beware When does the Australian Consumer Law apply?. Governance Directions, 68(5), p.306.

Oyston v St Patricks’s College [2011] NSWSC 269,

Pearson, G., 2017. Current Issues for Consumer Protection Law in Australia. In Consumer Law and Socioeconomic Development (pp. 199-208). Springer, Cham.

Sandeen, S., 2015. LAW9151-W. Torts: The Common Law Process. F15. Sandeen, Sharon.

Smith v Land & House Property Corp [1884] 28 Ch D 7.

Stickley, A.P., 2016. Australian Torts Law. LexisNexis Butterworths.

Wagon Mound No 1 [1969] AC 388,

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