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The given Assignment deals with the laws related to the business organization in which one friend on advice of other entered the new business of Restaurant industry. Max’s friend Charlie wished to purchase a restaurant. Max was the owner of the Greek Restaurant, The Hercules, which was running successfully. Charlie saw a Greek Restaurant Bruno, which was for sale and around the corner of the Hercules. Charlie cleared his intentions regarding entering the Restaurant Industry in which he did not had any experience or skills. He wanted to have discussion with Charlie regarding his Advice and guidance as he was new to this business law. Max assured Charlie that Bruno appears to be running successfully and there is a lot of gathering in the Restaurant which could be seen outside the premises and also from Hercules as it was nearby only. Charlie was very keen to buy the business. He also assured that Charlie would almost have guaranteed profits in the time period of 12 months. Charlie on getting a favorable advice from his friend decided immediately to purchase the Restaurant along with his brother Harley. However, one year later, they were on the edge of bankruptcy. It simply represents that advice from someone is different and acting on it in appropriate manner is different. Lack of experience and skills and knowledge might be the significant reason for its failure. Moreover, it takes initial few years for a business to get expanded and efforts of employees at every level of the organization cannot be denied. (Schaffer et al.,2011)
Facts of Issues:
1. Keen interest of Charlie in Restaurant Business
2. Purchase of restaurant on Advice and guidance of Max.
3. Max may have the intention to compete more successfully as Charlie was new to the business and could not easily accept changes.
4. Charlie relied upon the advice of Max
5. The sale in Bruno was affecting the business of Max before the purchase by Charlie and Harley.
6. Bruno was running successfully in the past.
7. Charlie lacked skills and experience in the Restaurant business.
The Assignment gives importance upon the elements for establishment of negligent misstatement and also with the issues in case of liability of the third party. The Assignment has been elaborated with a number of case laws making the topic clear along with the appropriate results. There are reasons for any action of sufficient cause. Max is having experience in his Restaurant business and for the same field he gave advice and guidance to Charlie in the serious context. Max after giving the advice should have realized that Charlie would act upon his advice. The components which are necessary for arguing any case for the negligent misstatement has been applied with legal facts of law as provided in the Assignment. The further elaborations could be made through different case laws clearly which would help to understand whether Charlie and Harley could sue Max for claiming the damages. Max even after being giving advice and guidance to Charlie on his expertise could fall under any legal penalties and implications. (Crane & Matten,2016)
1. Hedley Byrne & Co. Ltd. vs. Heller & Partners Ltd. (1964)
A care is to be taken in relation to the statements which are careless as they could cause economic loss. It basically indicates that the statement must be untrue, misleading, inaccurate or damages result. It indicates that a negligent misstatement may give rise to an economic loss which may sometimes be the reason for negligent misrepresentation which may be outside of a contractual relationship.(Cantwell, Dunning & Lundan,2010)
In the present case, Charlie on being advised and guided by Max entered into a business transaction of restaurant which resulted into the economic loss. Moreover, after an year, they were on the edge of bankruptcy and turnover also declined badly since Charlie and Harley took over the business.
While making the statement, no attempt was made by Max to limit his part of liability.
2. Mutual Life and Citizens’ Assurance Co. Ltd. vs. Evatt
1. There is no requirement for the existence of contract when the guidance provided is of any serious nature and have any Professional context.
2. It indicated that the first emphasis is upon the person who provides the advice or who claims to have knowledge on that subject matter. The duty of care lies upon the person who gives any advice on the serious matter. The circumstances so raised make the other party realizes that he is being trusted to the best of his information and follow the advice thereby.
3. Also, providing of any information by the experts must be done with reasonable care. In the given case, Max and Charlie are friends but no other information or advice regarding them was provided. Moreover, information may not be essential as to whether there is a social relationship or not.
4. The person claiming for any negligent misstatement acts depends upon the information or advice. Since, Charlie himself was keen to purchase the Restaurant; it was believable that he would act upon the guidance of Max. Even Charlie knew that the Restaurant was full of customers. However, it is not clear that whether Charlie provided this information when he was asked for guidance to Max. It was also known to Max that Charlie doesn’t have any experience in this business as he was not from this industry.
5. While providing the advice for future, the duty of care is also extended of Max towards Charlie as he would be acting upon his advice and guidance clearing out his intentions upon it.
3. L. Shaddock & Associates Pty Ltd. vs. Parramatta City Council
It was concluded that the advice or guidance need not always be provided by the Professional Advisors in any particular field. In the given case, Max while providing the advice was the owner of the Hercules where he didn’t provided anything in relation to its profitability aspects.
Max could also be termed specialist as Bruno was also a Greek Restaurant just like Hercules. Both the Restaurants were nearby and due to privy to special information; the profitability of the other business was not available. Moreover, it was anyhow beneficial for Max.
Also, the information which was provided was not available all levels and it was difficult to verify it. Charlie was looking for the insider information so that he could determine profitability aspects of the restaurant for the future.(Chaffey & White,2010)
Charlie while obtaining results from previous owners at the time of negotiating sale cannot make them liable for misrepresentation of information. Basically, the crowd was given importance and the amount of turnover and profit.
Moreover, no information was provided that whether Max himself owns the Restaurant or in partnership or had owned any other Restaurant in the past.
The guidance by Max also leads to his self-benefit by reducing competition as the new owner did not had any experience of Restaurant business and it was very new for Charlie. Moreover, Max would have thought that it would be difficult for Charlie and Harley to manage the business activities. It seems that Max wanted to expand the business area by targeting the old clients of Bruno.(Love, Roper & Bryson,2011)
4. Chaudhry vs. Prabhakar
Any already existed relationship was held not to prevent the business existence for any advice. Charlie told Max that he was interested in buying the Restaurant business. It indicates Charlie wanted to have guidance upon the serious financial matters.
Moreover, it need substantial amount of money to purchase the Restaurant and the advice was required for the serious issue.
Charlie made Max realize that he was very keen to purchase the Restaurant business may be because of the reason of gathering at Bruno.
The person who provides advice or guidance must have special skills and knowledge in that particular special field.
When a person provides information or data in any serious situation, it comes under the category of reasonable care while providing the information or data.
It was Reasonably Predictable on the part of the party to whom advice and guidance is given, that it would depend upon the information so provided as advice and guidance by the other party.
It was held that Max was an expert in his own field of Restaurant business in which he provided guidance and advice to Charlie which was made in the serious course of nature. Max knew that Charlie would act upon his advice as Charlie was very keen to enter the Restaurant business which was new for him. Thus, in the present case Charlie could sue Max for damages as the elements for the same have already been elaborated along with the different case laws.
Although, Charlie’s brother, Harley would not be able to take any action against Max. Max had no idea that Charlie would express this information to Harley and Harley would depend upon the information so provided. The advice and guidance was provided by Max to Charlie and not to Harley. Charlie further clarified the same information to Harley. Moreover, Max was unaware of the fact that Charlie would start the business along with Harley, his brother.
Schaffer, R., Agusti, F., Dhooge, L.J. and Earle, B., 2011, International business law and its environment, Cengage Learning.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.
Chaffey, D. and White, G., 2010. Business information management: improving performance using information systems. Pearson Education.
Love, J.H., Roper, S. and Bryson, J.R., 2011. Openness, knowledge, innovation and growth in UK business services. Research Policy, 40(10), pp.1438-1452.
Cantwell, J., Dunning, J.H. and Lundan, S.M., 2010. An evolutionary approach to understanding international business activity: The co-evolution of MNEs and the institutional environment. Journal of International Business Studies, 41(4), pp.567-586.