Law of Investment, Contract between Charlie and Denise - Assignment Example

Introduction In the case mentioned, it is clear that, according to Australian contract law, there is a breach of contract. Itis because of this breach of contract that Charlie forfeits his 390,000 dollars to Denise or Denise’s financial advisory company, Bandito Financial Advisors and Planners. The implications behind the development are that Charlie is subject to all legal acts such as legal redress and reimbursement, since these acts are extended to the slighted litigant. The veracity of this standpoint is underscored by the discussion of relevant legislation, pertinent laws of negligence and Australian contract law that ensues forthwith. Issues under the Relevant Legislation and the Law Relating To Negligence, Contract and Fiduciary Duty It is clear that there are legal issues in this case that concern fiduciary duty and negligence law. In the first place, the case states expressly that there is a contract between Charlie and Denise, or Bandito Financial Advisors and Planners. The agreement meets all the legal elements and felicity conditions needed to make a contract. Specifically, there is an offer being advanced for an acceptance. On the one hand, Denise and her financial advisory company are extending an offer to Charlie, the offer being the issuance of financial advice. Charlie, on the other hand, remits 300,000 dollars to Denise, thereby signifying his acceptance of the offer. The advisory services offered by Denise and the money exchanged signify the cooperation, as both Denise and Charlie are of legal age and sound mind. The latter means that they have entered a legal relation. There are formalities in the agreement, and both parties entered the agreement intentionally. Again, there is a profound aspect of certainty. The Sales of Goods Act of 1896 clearly specifies all these conditions, thereby making the agreement between Charlie and Denise a full-fledged contract. Denise and her company, Bandito Financial Advisors and Planners, were bound to a contract when these conditions were fully met, yet they proceeded to dishonor the contract by not meeting their end of bargain. This amounts to negligence, or dereliction of duty, on their side. In the Australian tort law, the failure to practice care that would be exercised by any reasonable and prudent person under similar circumstances amounts to negligence. A prudent and reasonable legal person could have ensured that it meets all the aspects of the bargain that were in the contract. Again, according to the Australian tort law, Denise and her company will be found guilty of having used misrepresentation. Misrepresentation may, in turn, emanate from the use of deceit, defamation, negligent advice, innocent misrepresentation, passing off and injurious falsehood. In the case at hand, it is clear that Denise used injurious falsehood since she presented herself as a licensed and qualified financial advisor, yet she is not. Australian tort law is strict in relation to negligence, since it acts on both willful failure and failure that stems from an oversight (Marshal 525). In the determination of negligence, the case Jaensch v Coffey set precedence that has been followed heretofore. In this case, there must be the determination of proximity between the defendant and the plaintiff as being sufficient enough to cause injury or loss to the plaintiff. In this case, it is obvious that Charlie and Denise interacted (in order to enter a contract of financial nature). It is this interaction that directly led to Charlie’s forfeiture of his 300,000 due to Denise’s injurious falsehood. In this case, the forfeiture of the money amounts to harm. Denise also uses negligent advice to rid Charlie of his money. She, for instance, wrongly advises Charlie that upon investing 300,000 dollars he will be able to make 10% profit during the first year and 25% profit by the third year. The culpability of Denise and her advisory agency is further compounded when the concept of fiduciary is introduced. By the term fiduciary duty, it is meant that the ethical relationship of trust between parties must be upheld. The same is not optional when it comes to contract law in almost all legal jurisdictions, including Australia. According to Rickett (613), when discharging fiduciary duties, it is binding that the representatives owe their clients fiduciary duties and must, therefore, act in the best interests of these clients in order to eschew the danger of conflicts of interests. Among other stipulations, this requirement is well divulged upon in the ASX Market Rules, the Corporations Act 2001 and the Territory Fair Trading Act. From the foregoing, the culpability of Denise and her firm is very apparent since Denise did not act in the best interests of Charlie, her client. It is clear that Denise was mainly interested in increasing her commission by having Charlie invest his money in the Ostrich Farm Unit Trust. She had initially pretended to be concerned about Charlie’s investments and prospects of success and has given Charlie false information. This means that Denise let conflicts of interests have the better part of her when she was dealing with Charlie. Again, her parochial pursuit is well uncovered by the fact that she operates in a trade wherein she is not licensed. The Corporations Act is categorical that all AFS Licensees are obligated to ensure total compliance between the services rendered and the financial services laws. Denise’s lack of operating license is not a reason for acquittal from this obligation. Instead, it is an indisputable evidence of Denise’s breach of the tort law both in spirit and writing. The case Alati v Kruger (1955) sets good precedence to the contract cases. In it, the defendant had sold a store to the plaintiff, only that the defendant had lied about the store’s worth. This made the plaintiff to seek rescission and restoration to the position preceding the contract. That the Australian court ruled in favor of the plaintiff, is a matter that shows the gravity of the fiduciary duty (Clarke, 1). It is also important to note that as far as the rules and regulations set up by the governing authorities in relation to licensing are concerned, Denise and her company are still totally culpable. The licensing of financial operations is done under the auspices of the Australian Securities and Investments Commission (ASIC). At the same time, the commission oversees the operations and management of ASIC. Nevertheless, it is the Regulatory Policy Group and the Deterrence Group that oversee the licensing and operations of organizations such as Bandito Financial Advisors and Planners. That Denise is not licensed to operate as a financial advisor and yet acts as one is a matter that further implicates her. By this virtue, she is guilty not only of breaching a contrast but also of disregarding trade rules by operating without a license. The issue of licensing is shown to be very important by the Wilkinson v Osborne case which took place in 1915. In this case, the court ruled to the effect that contracts are subject to nullification; if during the formation of the contract, there was a breaching of public policy. It is clear that Denise and her company breached public policy when she entered a contract for which she lacked the license to fulfill its terms (SLN, 1). According to Bell (684-6), there are newer legislations that illumine the dynamics and facts surrounding this case, so that it is easier to ascertain the legal position of the litigant (Charlie) and the defendant (Denise and her financial advisory agency, Bandito Financial Advisors and Planners). On the side of the client, Mr. Charlie, the law (Australian Consumer Law in the unfair contract terms) is very categorical. Particularly, the Australian Securities and Investments Commission made amendments (Australian Securities and Investments Commission Act, ASICA) on July 2010 to ensure that laws that tackle unfair conditions in consumer contracts for financial services exist and are fully functional. The provisions of ASICA strengthen, consolidate and enforce consumers’ redress powers. Unfair contractual dealings such as misleading, using unconscionable conduct and deceptive mechanisms are some of the activities that are proscribed under the ASICA Act. The import of this is that Mr. Charlie as the plaintiff has the legal grounds to open a legal suit, since by all means Denise’s dealings amount to misleading and the use of unconscionable and deceptive means. Chaikin (34-35) poignantly points out that it is also binding on the Australian court to nullify the contract that Denise and Charlie entered. This is because the new provisions of the ASICA Act bequeathed investors and consumers with additional protection. To do this, ASICA Act granted the courts the power to render a term as unfair if that term is found to have been contrived through falsehood, deceit or with a criminal intent. The case pitting Charlie against Denise and Bandito Financial Advisors and Planners adequately meets the threshold needed to warrant the unfair contract terms provision. First, the provision covers all the standard forms of contract, which comprise utilities, finance, telecommunications and domestic buildings. Contracts entered for client-and-broker agreements, home loans and credit cards all fall within the rubric of standard class of contracts. It is plain that the contract between Charlie and Denise was both a financial one and one that takes the form of a client-and-broker agreement. In case of the latter, Charlie is the client and Denise a broker for the Ostrich Farm Unit Trust and the owner of Bandito Financial Advisors and Planners. Secondly, the contract qualifies as a consumer contract, given that in its nature it involved the selling of a financial product and the rendering of financial services. Allan (36) is assertive that in the event that the terms of the contract are found to be unfair, the contract is declared as not binding. The gravity of the foregoing is that the contract is to be revoked and Denise compelled to fully reimburse Charlie. Conversely, it is also possible for the Australian court to order Bandito Financial Advisors and Planners or Denise to fully ensure that it fully meets all its obligations that it owes Mr. Charlie. The rationale behind this recourse is that a contract can remain binding to the parties involved if that contract is found to be capable of performing upon the removal of the unfair term having been effected. This may especially apply in this case if the money (300,000 dollars) given to Denise, or Bandito Financial Advisors and Planners, is found to have been expended or remitted to another party such as the Ostrich Farm Unit Trust and is, therefore, nonrefundable. In this case, Bandito Financial Advisors and Planners and Denise are to be forced to fully discharge their duties to Mr. Charlie. Conclusion The foregoing makes it clear that there is a breach of contract on the side of Denise and her company, Bandito Financial Advisors and Planners. This has left Charlie seriously shortchanged. To correct this situation, Charlie should first lodge a complaint with Bandito Financial Advisors and Planners since it is the financial services provider. Should Bandito Financial Advisors and Planners fail to resolve this complaint, Charlie should forward his case to the Credit Ombudsman Service Ltd or the Financial Ombudsman Service (FOS). Although Charlie may also move to simultaneously lodge the complaint with the ASIC, ASIC lacks the mandate to expunge terms that are unfair or to declare such terms as unfair. Thus, it is paramount that even as Charlie lodges his complaints he must seek legal redress in the court of law. The power to decide whether a term is unfair or fair rests within the court’s jurisdiction. On the contrary, ASIC can only cooperate with Bandito Financial Advisors and Planners to have the unfair conditions removed or make an application to have the courts declare the term as unfair. On the side of ASIC, the need to totally expunge Denise and Bandito Financial Advisors and Planners from practice and never to grant either of them the operating license cannot be gainsaid if ASIC considers the need to protect legitimate and fair business, its paramount mandate. Works Cited Allan, Rose. “Legal Implications of Partnering.” Australian Journal of Public Administration, 53.1 (2004): 36. Print. Bell, Matthew. “Cementing the Expectation Measures as the Ruling Principles for Calculation of Contract Damages.” Melbourne University Law Review, 33.3 (2009): 684-717. Print. Chaikin, David. “A Critical Examination of How Contract Law is used by Financial Institutions Operating in Multiple Jurisdictions.” Melbourne University Law Review, 34.1 (2010): 34- 67. Print. Clarke, Julie. “Cases.” Australian Contract law. 2010. Electronic. Retrieved From: http://www.australiancontractlaw.com/cases.html Marshall, B. Adelle. “Reconsidering the Proper Law of Contract.” Melbourne Journal of International Law, 13.1 (2012): 505-539. Print. Rickett, Charles. “Understanding Remedies for Breach of Trust.” Otago Law Review, 11.4 (2008): 603-628. Print. SLN. Student Law Notes. 2012. Electronic. Retrieved From: http://www.studentlawnotes.com/contract-law Read More