Question

Sarah has always loved the kind of music described as “country and western” music. After leaving school she decided to start a business importing the kinds of clothing and accessories that lovers of country and western music liked to wear. Eventually the demand for this style of clothing became so big that Sarah leased a shop in a suburban shopping centre where she sold her clothing under the name “Sarah”. Sales increased even more when Sarah also played the latest country and western releases from her extensive music collection while customers enjoyed the experience of browsing in her shop. However after six months Sarah was feeling the pressure of running a busy retail business on her own as well as maintaining the online sales part of the business. One day Joe, a well-known local country and western singer, came into Sarah’s shop to buy some new clothes. It is the first time that Joe has been to Sarah’s shop and he was very impressed, especially as he liked the background music Sarah was playing there. Sarah also recognised Joe straight away and told him how much she loved his style of singing, and they soon developed a friendship. When Sarah told Joe how she was so busy that it was becoming hard for her to run her businesses by herself, Joe suggested they could work together. He explained that he was looking for somewhere to work during the day and to market the CDs of his own music while still working as a singer with his band at night. Sarah happily accepted Joe’s suggestion, so they entered into a verbal agreement to share the rent and other outgoings. They further agreed to divide the profits from the sale of the clothing and other items, including the CDs of his music that Joe produced. Joe also agreed to give Sarah 25% of the profit from his singing performances carried out at night. To give Business Law Assignment 1 201903 3 the business a distinctive image they decide to change the business name and market it now as “Countrylife Classics”. After six months the business was operating at a reasonable profit, so Sarah and Joe placed the following advertisement for a part-time assistant on an internet job site: Countrylife Classics A local thriving clothing and music boutique is looking for a young and highly motivated assistant to help customers identify and purchase business products. Duties include merchandising, deliveries and stock control Assistance at select music events may also be required No experience necessary, just a passion for music Jason, a thirty-year-old man with ten years’ experience working in fashion for a large retail store and a part-time musician, applied for the position, but never heard anything from Sarah or Joe. Eventually Jason went to the shop and introduced himself to Joe, who happened to be working that day, asking for some feedback about his job application. Joe told Jason that they just wanted “a good-looking young girl who was into the country and western scene since obviously this would be better for business”. Jason was outraged, especially as he had years of experience in retail fashion and a passion for many music styles, so he threatened to report Countrylife Classics to the relevant government agency for discrimination. In the meantime, Suzie, a recent high school graduate, was the successful candidate for the position of “fashion and musical assistant” at Countrylife Classics. When starting there she signed a document in which she was described as a “contractor”. The document also said that she was required to work six hours a day for three days each week including Saturday and also each night that Joe had a singing engagement. Suzie was also expressly instructed by Joe and Sarah not to make any purchases for the business, other than office supplies, without first consulting them. She was paid a minimum rate per hour each week while working under their close supervision, and was required at all times to wear a t-shirt bearing Countrylife Classics’ logo on it. Recently Sarah and Joe paid for Suzie to attend a short sound production course with a view to training her in aspects of the CD production side of the business. Since Suzie began working in their business she has caused Joe and Sarah a few problems. Only recently she accidentally reversed the work van bearing the Countrylife Classics logo on it into an outdoor furniture setting on display in front of Harry’s Hardware, another shop in the same complex, completely destroying the items. Harry, the proprietor, who witnessed the entire incident, observed that Suzie was looking at something on her mobile phone while she was reversing the van. Harry is claiming the replacement cost of the furniture ($2,000) from Countrylife Classic. However, Joe and Sarah completely deny responsibility for Suzie’s actions, asserting that, as she was a contractor, Suzie is entirely responsible for the consequences of her actions. Therefore Harry should claim the money from Suzie, not Countrylife Classics . Business Law Assignment 1 201903 4 On another occasion when Suzie was working alone in the shop she bought something for the business that she was not authorised to buy. It all started when a young man with an American accent came into the shop and inquired as to Joe’s whereabouts. He said that his name was Tex and that he lived in Los Angeles where he worked as a producer specialising in country and western music. He said that he had heard some of Joe’s music and wondered whether Joe would like to purchase some CDs made by Tex featuring music he had produced that was currently very popular in the USA. Suzie tried calling Joe to ask him whether he wanted to buy Tex’s CDs, but Joe was not answering his phone. Tex seemed so nice to Suzie, and believing that Joe would be pleased with her decision, Suzie agreed to purchase a selection of Tex’s music for a total price of $600. She gave Tex $100 deposit and told him to send the business an invoice for the remaining amount. The next day when Suzie told Joe about her encounter with Tex he was shocked, then angry, especially when later he received an invoice from Tex for the outstanding amount of $500. He immediately contacted Tex to cancel the agreement, and explained that Suzie had no authority to make such a purchase on behalf of the business. However Tex said that it was not his problem and as far as he was concerned they had a binding agreement. A month later Sarah took a booking on behalf of Joe for him and his band to appear at the local football club’s end of season celebration to be held on the last Saturday in September. However, she forgot to make a note of this in Joe’ booking diary. Sarah also forgot to mention this to Joe who had since arranged to appear on the same night at a popular hotel. On the afternoon of the football club celebration, when it became clear to the club manager that Joe and his band was not going to be able to appear there, the manager was forced at the last minute to engage a more expensive and less suitable band, which certainly did not impress the guests who were expecting a night of classic country and western music. The football club is now threatening to sue Countrylife Classics for breach of contract unless it agrees to compensate them $1,500 for the extra cost of hiring the second band at short notice. Joe is angry with Sarah and tells her that it is entirely her responsibility to compensate the football club.

Question 1

(a) With reference to the relevant South Australian legislation, what is the nature of the business entity that Sarah and Joe are operating. [1 mark]

(b) Explain what procedures (if any) would have been required to operate the business using the names “Sarah” and “Countrylife Classics”

Question 2 (a) Discuss whether Countrylife Classics has unlawfully discriminated against Jason in their refusal to consider his application for the position of “assistant”. [2 marks]

(b) If Jason decides he wants to complain about Countrylife Classics , to whom will Jason make the complaint in South Australia? [1 mark]

Question 3

With reference to the legal principles distinguishing employees from independent contractors, explain whether or not Countrylife Classics is correct in denying responsibility for the damage caused by Suzie to Harry’s property. [5 marks]

Question 4

Since Tex is refusing to refund the deposit and insists that Countrylife Classics is required to pay the outstanding amount of $500, with reference to the principles of agency law discuss whether or not Countrylife Classics is required to pay for the CDs provided by Tex. [5 marks]

Question 5

Discuss the legal significance of Joe’s assertion that he is not responsible for the extra cost incurred by the football club when hiring a replacement singer at the last minute.

Answer 1

Question 1

a-With reference to the relevant South Australian legislation, what is the nature of the business entity that Sarah and Joe are operating. [1 mark]

Answer: This business entity is called is called Partnership.

b-Explain what procedures (if any) would have been required to operate the business using the names “Sarah” and “Countrylife Classics”

Answer: Procedures required to operate the business using the names “Sarah” and “Countrylife Classics” is as follows:

To carry on a business under a business name, Sarah must register the name. She do not need to register a business name if:

She conduct business under your personal name

She has a company and you conduct business under the company name

She is in a partnership and she conduct business under all of the partners' names

If she trade under any other name, then she has to follow the following steps:

Business Registration Service

The Australian Government Business Registration Service combines several business and tax registrations in one place, making it even easier to start a business. You can apply for an Australian Business Number (ABN) and register your business name online.

Other ways to register a business name

ASIC Connect - If you already have an ABN, you can apply for a business name directly with us by using ASIC Connect.

Private service provider - She can choose to register or renew her business name with a private service provider (PSP). This could be her accountant, her solicitor, or another business that provides online services with ASIC. They will usually charge a fee for their services above what ASIC would charge.

ASIC may also request information for the purposes of establishing or maintaining the Business Names Register. She must provide this information if requested.

Question 2 (a) Discuss whether Countrylife Classics has unlawfully discriminated against Jason in their refusal to consider his application for the position of “assistant”. [2 marks]

Answer: Yes, Countrylife Classics has unlawfully discriminated against Jason in their refusal to consider his application for the position of “assistant” because Australia’s anti-discrimination law says, it is unlawful to discriminate on the basis of a number of protected attributes including age, disability, race, sex, intersex status, gender identity and sexual orientation in certain areas of public life, including education and employment.

If Jason decides he wants to complain about Countrylife Classics , to whom will Jason make the complaint in South Australia? [1 mark]

Answer: Complaints about discrimination under Australian law are handled by the Australian Human Rights Commission.

Question 3

With reference to the legal principles distinguishing employees from independent contractors, explain whether or not Countrylife Classics is correct in denying responsibility for the damage caused by Suzie to Harry’s property. [5 marks]

Answer:

In order to determine whether a person is an independent contractor or not, the following conditions are to be fulfilled:

Control of the job: The manner in which the person employed works, if it is in the hands of the principal employer then he is not an independent contractor but an employee but if the manner in which he works is controlled by himself then he is classified to be an independent contractor.

Nature of the work: An independent contractor brings his own machinery and all the items necessary to fulfil his job whereas, in the case of a normal employee, all the materials and machinery is provided by the principal employer himself.

Mode of compensation: Payment is done after the completion of the task assigned to the independent contractor whereas, in the case of an employee, payment is given on a regular basis.

Paid leave from work: An independent contractor has way more benefits in terms of paid leave as he is given a task and a time frame to complete that task in the amount of time assigned to him or her by the principal employer, hence an independent contractor is paid according to his or her performance.

Employers are not liable for the acts of an independent contractor, by contract, unless the work involves some “inherently dangerous activity”. So the question arises, what kind of activities are considered as “inherently dangerous”? The activities such as transporting explosive material, blowing up land for the construction of roads or buildings, and dealing with wild animals. Because of the high chance of risk of an injury in these activities, a principal employer will be found to be liable for these kinds of activities are found to be done by an independent contractor.

Thus it can be concluded that Countrylife Classics is correct in denying responsibility for the damage caused by Suzie to Harry’s property.

Question 4

Since Tex is refusing to refund the deposit and insists that Countrylife Classics is required to pay the outstanding amount of $500, with reference to the principles of agency law discuss whether or not Countrylife Classics is required to pay for the CDs provided by Tex. [5 marks]

Answer: The legal definition of agency

The basic idea of agency as the relationship between one person who acts on behalf of or represents another. This basic idea has developed into the legal definition of agency to mean “an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties”. At the heart of this definition is the agent having the legal authority to stand in place of another.

Duties of an agent

In many cases this will be specified by a legal agreement, but there are a range of duties that apply to agents in general. Breach of these duties can result in a range of different court actions based on tort, contract or equity. The duties include:

A duty to act as instructed by the principal, and to do it in person.

A duty of care, skill and diligence. An agent must exercise the care that is reasonably necessary to do what they have undertaken to do. If an agent holds themselves out as carrying out a particular trade, they will be required to exercise the degree of care which is exercised in the proper and ordinary course of that trade.

A duty to avoid conflict of interest/not to profit. Agency is generally considered to be a fiduciary relationship, which means that the agent is obliged to act in good faith towards the principal. If there is a conflict between the interests of the agent and the principal, or the possibility of profiting, the agent needs the consent of the principal.

Note, however, that the High Court of Australia held last year in Australian Competition and Consumer Commission v Flight Centre Travel [2016] HCA 49, that in spite of this duty, it is still possible for an agent and a principal to be in competition with each other. This means that the behaviour of an agent can count as anti-competitive under competition law

A duty to keep accounts. An agent has a duty to keep proper accounts of transactions and provide them, if asked, to the principal.

It can be noticed that Tex has maintained the account of transactions with Countrylife Classics, thus Countrylife Classics is required to pay the outstanding amount of $500, with reference to the principles of agency law.