1Legal Issues for Managers 2007GIRLecture 9(Week 10)M.docx

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Legal Issues for Managers: 2007GIR
Lecture 9
(Week 10)
Module 3 (Part 2):
The Law of Business Associations
Law of Agency &
Law of Partnership

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Administration
Ensure that you check the announcements on [email protected]
([email protected]) and your marks in My Marks.
You should now have your Mid-Semester Exam marks available
in My Marks. If you want genuine feedback (not simply
checking your grade as they have been scanned), you can see
your exam papers this week during the times provided on
[email protected] course site. A time will also be made available
for the Deferred Mid-Semester Exams when we have received
them back from scanning.
A notice about the time, date & place of the Deferred Mid-
Semester Exam is now available on the course website.
IF you want to do well on the FINAL EXAM, in addition to
making a genuine effort on the ASSIGNMENT continue
practising your ILACs before you attend your seminars, add a

few notes to your answers, download the seminar slides and try
to attempt the answer again on your own. If you did not have a
satisfactory answer, see your tutor in consultation and bring
along your ILAC homework attempts. This is the most effective
way to prepare for the Final Exam.
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Recap of Last Week
The Law of Companies/Corporations
Summary
The essential characteristics of a ‘company’ and why they are
important.
The different types of business structures available, in
particular companies, and when can they be used to meet the
needs of business & society.
The main duties imposed upon the directors of a company.
The concepts of insolvency and insider trading.
The way companies can be wound-up.
Quick Question:
The Corporations Act 2001 (Cth) prohibits trading in shares
with the advantage of information that is not publicly available.
This offence is also known as …………………………… and is
prohibited by section ..........
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Business Structures
BUSINESS
STRUCTURES
Sole
Trader
Partnership
Joint
Venture
Incorporated
Associations
Trust
Company
Proprietary
Company
Public
Company
Large
Small
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Seek the advice of a good accountant & lawyer when
considering what form of business structure you may want to
set-up. The main consideration should be liability – Not
taxation. Thus, this message applies to today’s lecture and next
weeks! Strategic planning is the key to business success.
44% of businesses fail in the first 3 years
Failing to plan, is planning to fail!
See separate mind-map on the types of companies in those
lecture slides when available
http://www.business.gov.au/business-topics/business-structures-
and-types/Pages/default.aspx

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Lecture Objectives
Understand the term ‘sole trader’ and the ensuing advantages,
disadvantages and legal obligations.
Understand the nature of agency and the roles of agents and
principals.
Understand the legal obligations imposed upon agents and
principals.
Understand the nature of a partnership and differentiate a
the sections of the Partnership Act 1891 (Qld) & the Common
Law.

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Ask your accountant and Lawyer
Sole Trader
For low risk activities – limit personal liability
Close family only involved
Often short term venture/limited profitability
Little prospect of significant growth – often only returns a
‘wage’ to the owners
Unsure about future of the venture
Partnership
Mum and Dad partnerships
Partnership of family trusts
Essential to have a partnership agreement – for termination,
valuation, introduction of capital, payments to partners etc.
Losses can be distributed to partners, but you need to know who
you are ‘getting into bed with’

Sole Traders and Partnerships
– When to use generally?
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Sole Trader
Definition – Sole Trader:
A person who trades alone, without the use of a company
structure or partners and who bears alone full responsibility for
the activities of the business.
(Butterworths Concise Australian Legal Dictionary)
Person carrying on his or her own business on his/her own.
No formal requirements to create, but if a trading name other
than that of the individual is to be used, the sole trader must
register that business name (Business Names Registration Act
2011 (Cth)).
No distinction between the person and the busines
personally liable for all expenses and losses of the business!

Advantages of being a Sole Trader
Advantages
Simple
Often work from home
Can trade in own name*
* Limited registration requirements (business names if
appropriate, and licenses if necessary)
No sharing of profits
Retention of full control
Taxation advantages when profits are low
Business losses can sometimes be written off your PAYG tax
from another job
Can close business at any time or be sold, divided or altered
without approvals (Consider having a Business Deed of
Agreement – contract at this time)
No public disclosure of financial information
Cash in hand – naughty, naughty!

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Disadvantages
Unlimited liability - the business is not a separate legal entity
from the owner, so the owner is personally liable for all debts!
Finance is difficult to obtain (& Mixed-Money)
Need to pay own ‘employee’ benefits
Needs own insurance, pay own GST, income tax, keep up with
inflation (taxation disadvantage when profits are high)
Business generally ceases on death or disability of owner
(Consider having a Enduring Power of Attorney document)
Big investment of unpaid time

No sharing of skills and expertise (subject to employee
engagement)
Cash in hand – naughty, naughty!
? Bottom line = are you purchasing a job or a business – often
working well below what one is worth – some suggest to be
better off you need to making a profit of at least 30% above a
salary
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Disadvantages of being a Sole Trader

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Agency: The Law Relating to Agents
Not that type of agent!

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Definition & important points about Agency
The law of agency is primarily based on common law
principles and is an exception to the law of privity of contract.
Definition - Agency: A relationship existing between two
parties whereby one (the principal) authorises the person (the
agent) to act on the principal’s behalf to negotiate with a
separate third party.
Two important points about Agency in relation to the Law of

Contract:
There is a contract between the Principal and the Agent
Creates authority of the Agent to act on the Principal’s behalf
Principal
Agent
Agent deals with Third Party creating agency
Agency creates contract directly between Principal and Third
Party
Third Party
Exercise of authority by the Agent with a Third Party leads to
creation of PRIVITY (of contract) between the Principal and the
Third Party.

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Classification (Type) of Agents

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Creation of Agency
Expressly
Agency created by agreement by deed, in writing or by word of
mouth.
Implied or by conduct (holding out or estoppel)
A reasonable person examining the conduct and actions of the

parties would conclude that there was an agency in existence
(e.g. partnership).
Ratification
Where Agent has acted without Principal’s authority, Principal
may subsequently ratify the transaction.
Ratification is retrospective, and dates back to the time the
contract was made.
Keighley, Maxsted & Co v Durant [1901] – not ratified – agent
did not disclose & therefore was liable for loss
Operation of Law
Necessity (emergency) - there must be a genuine emergency
where the Agent (is entrusted with Principal’s property and
acting in their best interests) cannot get in touch with them.
Great Northern Railway v Swaffield (1874) – Necessity
Cohabitation - a presumption that a spouse or de facto has
authority to pledge credit for necessaries suitable for their
lifestyle.

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Authority of the Agent
The basic types of authority that might occur between an agent
and a principal:
Actual Express Authority
Actual Implied Authority
Apparent (Ostensible) Authority
---------------------------------------------------------------------------
---------
Actual Express Authority
The actual authority of an agent arises from the creation of the

agency between Principal and agent.
Authority conferred by the Principal in writing or words.
Freeman v Lockyer v Buckhurst Park Properties Ltd [1964] –
Actual express authority

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Authority of the Agent
2. Actual Implied Authority
Authority is implied from the conduct of the parties.
An agent has authority to do anything that is incidental or
necessary for the carrying out the principal’s express
instructions (within their actual authority).
Implied authority as agents of that class, but can be limited.
Hely-Hutchinson v Brayhead Ltd [1968] - “They thereby
impliedly authorise him to do all such things within the scope of
that office.”
3. Apparent (Ostensible) Authority
Where the words and/or conduct of the Principal lead a Third
Party to reasonably believe that the Agent has authority.
The appearance of authority as it appears to others
Panorama Developments (Guildford) Ltd v Fidelis Furnishings
Fabrics [1971] – apparent authority
Pacific Carriers Ltd v BNP Paribas (2004) – “The question was
what a reasonable person would have understood them to mean,
based on their wording and the surrounding circumstances.”

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Authority [Example] – What type?
My Company, ‘Party On’ appoints Snoop as Company

Secretary. ‘Party On’ Company Secretary is written on his
business cards below his name. Snoop dressed in his Armani
suit goes out and leases a fleet of 7 series BMW’s for use on
behalf of the company.
Questions:
Would ‘Party On’ be required to meet the legal obligations of
such an agreement? &
What, If any, type of authority does Snoop have to act on behalf
of the business?
Answers:
This scenario is based on the common law case of:
Answer:

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Jen is my personal business secretary. I tell her to collect a
package for the business from the Post Office.
She goes there and when she attempts to pick up the package
she finds a $20 surcharge that she has to pay to collect it.
Questions:
What type of authority did I give Jen?
Does Jen have authority to pay the surcharge? If so, what type

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Angelina has represented me (agent) in ordering supplies from
Brad for my party supply business. She is now in the process of
ordering supplies from Brad using my business details.
Brad makes a reasonable assumption that Angelina has the
authority to act as an agent for me because she has done so in
the past.
Angelina makes a deal to buy 100,000 pink party balloons from
Brad (apparently on my behalf). The balloons are manufactured
and delivered to my shop.
Question:
Can I deny to Brad that Angelina had the authority to order the
pink party balloons or would I have to hope its party season?
Answer:

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Duties of an Agent
Every agent owes certain duties to a principal depending on the
nature of the agency or according to the express or implied
terms of the agreement.
Agents main duties include:

Following principal’s instructions;
Act in person;
Act in the principal’s interest (good faith): Lintrose Nominees
Pty Ltd v King [1995];
Making full disclosure of any personal interest
Not making a secret profit: Regal (Hastings) Ltd v Gulliver
[1942]
Exercising due care and skill, although the standard will vary
according to whether the agency is gratuitous or for reward;
Mitor Investments Pty Ltd v General Accident Fire & Life
Assurance Corp [1984];
Maintaining confidentiality of information gained from the
agency relationship;
Taking care of property; and
Keeping separate and proper accounts, making available for
inspection.

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Rights of Agent against Principal
Right to remuneration
Agent is only entitled to remuneration if this is expressly or
impliedly agreed to in the contract.
LJ Hooker Ltd v W J Adams Estate Pty Ltd (1977) – not entitled
to recover commission
Right to indemnity and reimbursement
Generally, an Agent is entitled to be indemnified against any
liabilities and reimbursed for any expenses incurred in the
course of carrying out Principal’s instructions.
Right of lien

Agent is entitled to a lien, if the goods are lawfully in Agent’s
possession and they have not been paid for by Principal.

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Liability of Principals and Agents
As a general rule an Agent cannot sue or be sued on a contract
between a Principal and a Third Party where:
the agent discloses the agency relationship.
Agent must ensure that they act within the scope of their actual
or apparent authority if they are to avoid liability:
for breach of warranty of authority; or
any Torts they commit.
The remedies available to a principal for breach by an agent
include:
rescission;
refusing to pay a commission;
suing for damages; or
suing the agent for recovery of a secret commission.

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Termination of Agency
Termination by acts of the parties
Mutual agreement
Revocation of Agent’s authority
Agent withdrawing from the agreement
Secret commission

Completion
Expiry of a time limit
Termination by Operation of Law
Performance
Lapse of time
Death of Principal, although acts done after Principal’s death
but before notice has reached Agent are valid and Agent will
not be held liable
Insanity
Bankruptcy
Frustration

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Types of Agency
Specific types of Agency include:
Mercantile (or factor) agents
Have control or possession of goods on behalf of a principal and
can sell them in their own name.
Del Credere Agents
Agent guarantees both sale and payment to principal.
Brokers
A general agent who buys and sells on behalf of the principal
but has neither possession or control.
Directors
Directors are agents of their companies.
Partners

Partners are agents of their co-partners.
Auctioneers
Are an agent of the vendor until the fall of the hammer when
they become an agent for the purchaser.
Real Estate Agents
Not strictly agents as the relationship is not strictly ‘Principal &
Agent’.

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Time for a quick break
The Law of Partnership
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For the Assignment Partnership ILAC Question you only to
apply the partnership sections and cases (i.e. from this slide
onwards, but of course you should understand how the concept
of agency operates)

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The Law of Partnership
The objectives of this part of the lecture are to understand and
then apply:
the test for determining the existence of a partnership;
the relationship between partners and outsiders; and
the rights and obligations of partners to each other.
Partnership law is regulated by both statute and common law
principles.
The statute is the:

Partnership Act 1891 (Qld) (PA)
You can abbreviate to PA for our purposes.
You do NOT have to look up the sections of the PA and only are
required to use the sections and cases from the lecture notes
(and text) to answer any partnership questions – although you
should refer to the text for details of the facts and to support
your understanding of the law of Partnership.
You do Not have to use the cases from the Agency Chapter (or
from slides before this point) to answer any ILAC question.

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Types of Partnerships
1. General Partnerships
In a general partnership no partner enjoys limited liability in
respect of the partnership’s liabilities.
Partnerships, unless otherwise stated, are general partnerships
in that all the partners are liable.
2. Outsize Partnerships
The Corporations Act s115(1) sets the maximum number of
members permitted to form a partnership at 20.
However s115(2) allows some exceptions to the policy for
professional associations:
e.g. Doctors, lawyers, architects, accountants.

Types of Partnerships
3. Limited Liability Partnerships
These types of partnerships need to be registered.
In a limited partnership there are two types of members: general
partners who manage the business and limited partners who take
no part in the business.
General partners assume unlimited liability, whereas limited
partners are only liable for the amount of capital they contribute
to the partnership.
4. Incorporated Limited Partnership
Is a body corporate with legal personality separate from that of
the partners and has perpetual succession.
Is limited to certain types of venture capital businesses.

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Not Partnerships
Associations for the purpose of pleasure (cricket clubs) or
charity (benevolent associations) or those not organised for the
purpose of making pecuniary profits (religious associations) ≠
partnerships.
These associations may make profits but they reinvest those
profits in their primary activities and do not distribute them as
dividends to their members.

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Other Relationships That Can Look Like Partnerships (but
generally are not)
Associations of people which possess some of the features of
partnership, but are not partnerships, include:
Joint Tenants
Separate rights between the parties but a single owner against
the rest of the world.
Tenants in Common
Participate in co-ownership.
Co-Ownership
Does not necessarily involve carrying on a business with a view
to profit - Partnership does;
Not necessarily result of agreement - Partnership is;
Not necessarily agents of each other – Partners are; and
Can transfer share without consent of co-owner – Partner
cannot.
Joint Venture
Normally not a partnership, but a one-off commercial activity
using shared product, although a single undertaking can amount
to a partnership where the parties are engaged in a commercial
activity with a view to profit.

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Joint Venture or Partnership?

Joint Ventures can be distinguished from Partnerships on the
basis that:
It is usually an ad hoc undertaking for a specific task or time;
It is a separate venture for each of the parties;
Liability is individual;
Profits are received individually;
Invoices are usually issued separately and paid individually;
The parties can dispose of their interest in a joint venture
without the need to assign; and
The parties are not agents for each other and do not owe a
fiduciary duty to each other.
Cox v Coulson [1916] – divided proceeds (profits) between
them but had separate liabilities & therefore was a joint Venture
not a partnership.

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The Advantages and Disadvantages of Partnerships
Advantages
Simple structure
Relatively cheap to set up*
* If trading under another name – must register a business
name.
Sharing in skills, economies and overall efficiency
No public disclosure of financial information

Sharing of profits and losses – but you need to know who you
are getting into bed with!
Disadvantages
Partners are liable for the debts and actions of the other
partner(s) ** - generally do not enjoy benefits of separate legal
entity or limited liability!
** Provided the partners are acting within the scope of the
partnerships business
Maximum number of members where public company is
unlimited
No perpetual succession without prior agreement
Often no general manager, as this person may be considered a
partner under some circumstances
Sharing of profits and losses – who you are getting into bed
with!

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Elements of Partnership - When Does a Partnership Exist?
Common Law & Partnership Rules
A partnership may be formed either EXPRESSLY or
IMPLIEDLY and in each case all the circumstances must be
examined in order to ascertain:
the intention of the parties;
whether there has been a sharing of net profits and losses
accompanied by a state of agency; and
whether each party has a voice in the management so that it
could be said that an agency exists.
Definition: A partnership is defined as:
“the relationship which subsists between persons carrying on a

business in common with a view of profit.”
Section 5 Partnership Act 1891 (Qld) (PA)
Q1. Is there a Partnership?

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ONLY if it is not clear from the section 5 and the case law, do
we need to look at the rules in Section 6
*HINT* Always determine if there is a partnership first to see if
you can follow the Partnership Act, unless you are specifically
told that the business is a Partnership.
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Q1. Is there a Partnership?

Partnership
- Who is a partner?
- Must they share profit?
- Must they take part in day to day running of business?
Re Ruddock – mutuality of rights and obligations
M Young Legal Associates Zahid – not profit but retainer
Flowchart adapted from Mr. C Cameron, Griffith University

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The partnership need not actually make a profit, but a profit
must be intended by the parties at the inception of the
partnership.
Who is a partner?
It is also possible for a person to be a partner (& liable):
even though they do not take part in the day to day management
of the business
Re Ruddock (1879) – mutuality of rights and obligations – not a
creditor, but a partner.
even though they do not contribute capital or have a claim to a
share of the profits
M Young Legal Associates Ltd v Zahid [2006] – Partnerships do
not have to make profits, but must be created with a view to a
profit. It is possible for a person to be a partner, even though
they do have a claim to a share of the profits; if claiming a
retainer.

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‘Carrying on a business in common with a view to a profit’

If the Partner had the authority to act, then they have ‘bound’
the partnership…. The partnership will be responsible for the
debts.
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Q2. Did the Partner have Authority?
Actual Express authority
Section 8 PA A partner has authority to bind the Partnership
where they have....

Apparent authority
Implied authority
Business of Partnership is carried out in the usual way Goldberg
v Jenkins
Molinas v Smith
Written or oral
(or combination of both)
Powers that all partners would have in those circumstances,
unless the agreement says otherwise
Molinas v Smith
Business is of the kind carried out by the Partnership
Polkinghorne v Holland; Mercantile Credit Co v Garrod;
Molinas v Smith
Third Party must not know that Partner had no actual authority
to act
Construction Engineering Pty Ltd v Hexyl Pty Ltd; Molinas v
Smith
Third Party must have known or believed that the person is
a Partner
Molinas v Smith
Flowchart adapted from
Mr. C Cameron, Griffith University
Contract Law
; to be read in conjunction with s.12 (PA) – cases apply to both
sections

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Partnerships are unique in that every partner is both a principal
and an agent for their other partners. As such they owe mutual
fiduciary duties to each other.
Section 8 Partnership Act 1891 (Qld) (PA) – Power to bind firm
Every partner is an agent of the firm and other partners, for the
purpose of the business of the partnership.
Any act of a partner done in the usual course of the partnership
business can bind the firm and the other partners.
An exception to this general principle arises where:
the partner had no authority to act for the firm in the particular
matter
AND
the other person knew this or had reason to believe the person
was not a partner.
- Reminder – 3 types of authority – Actual Express, Actual
Implied & Apparent (Ostensible) created through agency
relationship of partners to each other
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Partnership: Relationship To Outsiders
(and each other) Liability of Partnerships and Partners (Agency)

Actual Express Authority: (Summary)
If a partner has actual authority the other partners will be bound
by the partner’s acts if done in the usual course of business.
Actual Implied Authority: (Summary)
Provided nothing is stated to the contrary in the partnership
agreement, the powers of partners to bind the firm by their acts
usually done in the course of business generally includes:
the selling of property & goods of the firm;
purchasing goods usually used by the firm;
Molinas v Smith [1932] – binding on partners
employing suitable staff;
receiving payments and receipts; and
entering into contracts on behalf of the firm.
Molinas v Smith [1932] – binding on partners

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Apparent (Ostensible) Authority: (Summary)
third parties need to establish:
the partner was acting in the usual course of the partnership
business;
the act was done by the partner as a partner (otherwise the
partnership will not be liable even if a benefit to the partnership

is derived)
the transaction was carried out in the usual way;
the 3rd party knew or reasonably believed the person was a
partner; and
the 3rd party was not aware that the (person) partner had no
authority to bind the firm.
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985)
– not binding on co-partners, if the third party is not aware of
the existence of a partnership
Molinas v Smith [1932] – binding on partnership

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Liability of Partnerships and Partners
Liability of partnership and partners arises in contract and tort:
Contract Law
Liability is joint only (collectively):
The creditor has only one right of action.
Best to sue in firm name.
s12 (PA) – Liabilities of partners (Contract)
Note that sections 8 (Agency) & 12 (Contract) are to be read in
conjunction with each other
Note: IF a partner holds him/herself out to be a partner in
breach of a partnership agreement then the firm (partnership)
can sue the partner personally, but the firm and partners can
still be liable. Similarly if a person allows oneself to be held

out personally to be a partner (identified).
s17 (PA) – Persons liable for holding out

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Section 8 & 12 (& s17): Questions to ask …
Did the partner have actual authority?
If yes, the partnership is liable; If yes or no, then ask:
Did the partner have implied authority?
If yes, the partnership is liable – IF action is within ‘scope of
business' then normally this would be the case; unless there is a
contrary (limiting) agreement or it does not fit into the
categories previously listed (i.e. purchasing goods etc.); If yes
or no, then ask:
Did the partner have apparent authority?
i.e. was s/he (the partner) acting in the usual way of a business
of the kind carried on by the firm.
If no, partnership is not liable to any of the above, then the
partnership is not liable but partner/agent might be liable
personally.
If yes, the partnership is liable, unless the third party knew:
the partner had no authority to act for the firm in the particular
matter &
the person knew this or had reason to believe the person was not
a partner.
If partner holding out in breach of partnership, then partners are
liable (s17) but can sue partner personally for losses.
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If the Partner was:
- acting in the ordinary course of business OR
- acting with authority of the other partners
The partnership and the partners will be responsible for the
damages.
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Q2. Did the Partner have Authority?
Acting in the ordinary course of the business Polkinghorne v
Holland
Section 13 PA A partner causes loss or damage to someone
(who is not a partner) by a wrongful act or omission while ...
OR with Authority of the other Partners
Partnership will be jointly and severally liable Section 15 PA
OR
Flowchart adapted from Mr. C Cameron, Griffith University

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Liability of partnership and partners also arises under Tort Law
- A partnership & its partners are liable jointly and severally for
negligent acts of the firm (partners) that cause damage.
Liability is joint (collectively) and several (individual):
s13 (PA) – Liability of the firm for wrongs
Any partner who causes loss or damage to a person not a partner
because of the a wrongful act or omission, so long as they were
acting in the ordinary course of the business of the firm, or with
authority of the co-partners, then the firm will be liable.
Polkinghorne v Holland (1934) – Partners liable joint and
severally
s15 (PA) – Liability for wrongs joint and several
Where a firm is liable under section 13 and cannot pay, partners
are each personally liable.
Polkinghorne v Holland (1934) – Partners liable joint and
severally
Note: the Partnership Act 1891 (Qld) also deals with crimes:
(e.g. ss14 & 16).
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Liability of Partnerships and Partners

Liability On Change of Partners
Incoming and outgoing partners
s20 (PA) – Liabilities of incoming and outgoing partners
Incoming partners are generally only liable for future debts,
unless they agree to assume liability for past debts.
Outgoing partners remain liable for debts incurred before
retirement unless the creditors and other partners agree
otherwise.
Outgoing partners may be liable for debts incurred by the
partnership after retirement if they have not taken steps to
notify former and (possibly) new customers/clients of their
retirement.
s29 (PA) - Retiring partner
If there is not a separate agreement then a retiring partner can
bring a partnership to an end.
“If no fixed term has been agreed upon for the duration of the
partnership, any partner may determine the partnership at any
time on giving notice of the partner’s intention so to do to all
the other partners.”

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(Fiduciary) Duties of Partners
The partners are under a FIDUCIARY DUTY towards each
other :
Partners in a firm are bound to render true accounts and full
information of all things affecting the partnership to any partner
or his or her legal representatives.

s31 (PA) - Duty of partners to render accounts etc.
Every partner must account to the firm for any benefit derived
by the partner without the consent of the other partners from
any transaction concerning the partnership, or from any use by
the partner of the partnership property name or business
connection.
Applies also to transactions undertaken after a partnership has
been dissolved by the death of a partner, and before the affairs
of the partnership have been completely wound up, either by
any surviving partner or by the representatives of the deceased
partner.
s32 (PA) - Accountability of partners for private profits
Scotts and Momentum Productions Pty Ltd v Lewarne [2009] -
liability to account for profit

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(Fiduciary) Duties of Partners
The partners are under a FIDUCIARY DUTY towards each
other :
If a partner, without the consent of the other partners, carries on
any business of the same nature as and competing with that of
the firm, the partner must account for and pay over to the firm
all profits made by him or her in that business.
s33 - Duty of partner not to compete with firm
Unless the Partnership Agreement states otherwise, the
Partnership Act 1891 (Qld) outlines the rights partners will
share equally in profits and losses.
s27 - Rules as to interests and duties of partners subject to

special agreement (Sharing of profits and loss – equally unless
otherwise agreed)
Relationship & Duties of Partners

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This scenario is based on Birtchnell v Equity Trustees Ltd
(1929) (not in text – you do not have to look up this case (facts
are all here)– it has been included to test your learning – you
may cite case if it applies to any ILAC or Short Answer etc.)
The plaintiffs discovered that their deceased partner in a real
estate business had also been running a profitable land
development business on the side with one of the partnership’s
clients. The plaintiffs sued the deceased partner’s estate to
………………………..... and …….……..................... as per
sections …. and …. of the ………………………….(Qld) (PA).
The deceased partner had breached his duties to the firm and
other partners by ……………………………... as per …. of the
(PA).
Therefore any of the deceased partner’s profits will have to
shared equally with the other partners as per .…(PA).
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Quick (Short answer) Question
Lets write an application …

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Dissolution of a Partnership

Methods of Dissolution
Dissolution ENDS the partnership. A partnership may be
dissolved (terminated) automatically by: (Not required for ILAC
Assignment)
s35 - Action of the parties
By the expiration of a fixed term;
If entered into for a single undertaking, the completion of
the undertaking; and
By a partner giving notice where no time is specified.
s36 - Operation of law
By a partner giving notice; and
Death or bankrupt.
s37 - Illegality
By either party.
S38 - A Partner may apply to the court to have the
partnership dissolved on the grounds of: Knight v Bell (1887) –
dissolution of partnership by court
Insanity of a partner;
Permanent incapacity;
Conduct of a partner detrimental to the interests of the
partnership;
Wilful or persistent breach of the partnership agreement;
Where the partnership can only be carried on at a loss; and
Where the court considers it just and equitable.

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Each Partner is entitled to a proportionate return of their

contribution to capital before distribution.
If the Partnership is being dissolved because of death,
insolvency or bankruptcy, it is necessary to distinguish between
partnership property and private property to determine the
rights of the different groups of creditors.
If the Partnership Agreement is silent on the manner of
disposition of assets, the Partnership Act (PA) applies.
Dissolution of a Partnership
Methods of Dissolution
Summary of Key Points
Understand the term ‘sole trader’ – advantages/ disadvantages
& legal obligations.
Understand agency – in particular how it applies to
partnerships. Do not apply the agency chapter or the agency
sections of these lecture notes to your assignment (only
homework).
Understand the nature of a partnership –
learning to apply the sections of the Partnership Act 1891 (Qld)
& the Common Law.

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Quick Questions (Short Answers):
Incorporated Limited Partnerships (ILP) can only be used for
……………………… businesses.
According to Section ... of the …………………………………
(Qld), a partnership is “the relationship which subsists between
persons
….……………………………………………………………………
……………”

Reminders for Assignment:
You must use the ILAC method for answering your assignment.
The assignment is very good practice for the Final Exam.
If you list a section of the law or a case, you must then attempt
to apply it in the application to be awarded marks under the law
and/or application section. There is NO sense if just copying
ever case or section out of the lecture notes or text unless you
are able to show how it applies. If in doubt, include the section
or case and attempt to apply (i.e. no negative marking).
Think about how you are going to set out the assignment – two
page maximum.
Go back over the Model Answers & Tips and Tricks Document
to help you..
Quick Questions, Reminders & Next Week

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Next Week & the following
Reminders for the next couple of weeks:
Next Week (11):
Assignment Due via Safe Assign
Anti-Discrimination Law Lecture
Seminars: Agency/Partnership
Following Week (12):
Employment Law Lecture
Seminars: Anti-Discrimination Law
Final Week (13):
Brief review and outline of final exam structure in lecture
Seminars: Employment Law etc.
Any questions, please feel free to come and see me now
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Review your required readings
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2007GIR Legal Issues for Managers – Sem 1, 2016
Hypothetical ILAC Submission
Griffith Business School
2007GIR - LEGAL ISSUES FOR MANAGERS - ILAC
ASSIGNMENT
Weight: This assessment is worth 15% of the total marks for
this course.
Due Date: This assessment must be submitted online via
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Penalties apply to any answer which exceeds the two page
maximum and for not following any of the instructions below.
Assessable Content:
· Chapter 16 (Law of Partnership) of the Course Textbook
(Turner et al., Business Law for Managers (3rd Ed), the lecture
content covering Partnership Law, and this document. These are
the only sources of information required for this assignment.
· There is NO need to undertake any additional research and
marks will not be provided for such.
· There is NO need for Harvard or APA etc., referencing or
footnotes. However, if directly quoting from the facts or the
textbook/lecture slides please use double quotation marks and
put (“Facts”) or (“Text”) or (“Slides”) in brackets after the

quote and add the page number. Failure to do so will result in
penalties for plagiarism.
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folder (up to 5 days with 10% penalty per day consistent with
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the library, will NOT be considered submitted.Formatting
Instructions:
· Do NOT use a cover page for this assignment.
· You must use a header or footer, include your name, student

ID, tutor’s name and tutorial day and time, on both pages of
your submission (i.e. Alf Stewart, s1002030, Sharon Hayes,
Tuesday 3-4pm).
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use single line spacing to acceptably answer the assignment.
Acceptable fonts are Arial, Century Gothic or Times New
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to allow you sufficient space to answer the question thoroughly.
Additional Instructions:
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Bullet points are not appropriate for this assignment (except in
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evidence that complies with University Policy must be
provided. Pressure of work commitments is not a valid reason
for an extension.
· Allow plenty of time to submit – Server or other IT issues are
not an acceptable reason for late submission.

Partnership ILAC Hypothetical Problem Solving Question:
John, Paul, George and Ringo own an architect business in
Brisbane City called Quarrymen Designs Architects (QDA).
They started the firm (business) in 2012, a few years after
graduating from university. As the firm became more
successful, each took a separate role in its management. Under
the firm agreement, John is now in charge of QDA purchases up
to a limit of $50,000, Paul looks after designing new quarries,
leaving George to network with clients. Ringo was involved in
setting up the business, but no longer takes part in its day to day
management, and whilst he no longer takes any share of the
profits, he receives an annual retainer to provide architectural
advice.
On three occasions during 2015, to aid the drawing of
construction site plans, on behalf of QDA John purchased
design equipment from Brisbane Computer Sales (BCS), up to
the value of $40,000 each time. Having paid the previous BCS
invoices via the firm’s credit card when the invoices were due,
John again dealt with BCS earlier this year on behalf of QDA by
faxing the orders on the company letterhead. The first purchase
on 1 February 2016 was for $50,000 and the second purchase in
mid-March 2016 was for $90,000. In mid-April 2016 QDA lost
a major contract, placing the firm into financial difficulty. Last
week, QDA received an invoice from BCS demanding payment
for both lots of equipment that arrived at QDA at the same time
last week. Aware that the firm is now unable to pay the debt,
John contacted Ringo for help, however Ringo simply replied,
“… sorry, not my problem mate, you got us into this mess,
you’re responsible for purchases!”
Due to personal problems George recently started drinking
heavily and gambling. He now has a large gambling debt that he
owes Big Stars Betting Pty Ltd. To pay off his debts, George

decided to start another architect firm called Nathan Architect
Design Surveys (NADS) located at Nathan about 11km from
Brisbane City. George sometimes works from home, but as he
has been fighting with his wife a lot recently, he has been using
his QDA city office to do this work. Last week George and his
wife had another argument about their own personal financial
problems. Fed up with her husband’s gambling, George’s wife
called Paul and told him about George’s other business NADS.
She said that he had made a $50,000 profit running NADS over
the last 6 months, using former clients of QDA. When
confronted by Paul, George stated that he was highly
embarrassed about his drinking and gambling debts, and started
NADS in his own time at nights so John and Paul would not
find out about his bad habits.
Using ONLY the Partnership Act 1891 (Qld) and the relevant
common law from the textbook and partnership lecture slides
(do not use sections or cases outside of these materials), advise
QDA about all issues as of today’s date. You do not deal with
any sections or cases dealing with the dissolution of a
partnership.
~ END OF HYPOTHETICAL FACTS~
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Page 4 of 4
Model Answer for Students - ILAC: Hypothetical – Michelle v
Richard’s Kebabs
Michelle was walking home from her local nightclub in the
early hours of Sunday morning. She had been celebrating her
19th birthday and had consumed quite a large number of ‘Rum
and Colas’ (alcoholic drinks). As Michelle walked along she
noticed a kebab shop sign “Richard’s Kebabs” and feeling
rather hungry decided to stop at the store and buy a kebab. The
store was fairly busy when she entered and after five minutes
Michelle was desperate to go to the toilet. Michelle asked an
employee behind the counter who was serving customers where
the bathroom was, and the employee pointed towards the back
of the shop whilst giving her the key, as it was locked at that

time of night.
Michelle went to the back of the store to use the toilet. When
she was finished Michelle pulled the cord but nothing happened;
the toilet would not flush. She continued to pull harder on the
cord until the cistern, which was not attached but simply resting
on a wall-mounted bracket, fell and hit Michelle on the head
knocking her unconscious. Michelle suffered a fractured skull
which resulted in $30,000 dollars in medical bills and lost work.
Richard, one of the owners of the kebab store found Michelle
unconscious and called an ambulance. Michelle has decided to
sue Richard’s Kebabs (or at the least the store or its insurance
company) for failing to warn her about the broken toilet.
Michelle has come to you for advice. In your answer work
through ALL of the elements of negligence (occupier’s liability)
and apply any relevant defences and remedies. Try to briefly
apply the Civil Liability Act 2003 (Qld) as well as common law
cases.
Note: For our purposes, there is no need to apply the Personal
Injuries and Proceedings Act 2002 (Qld) or the Limitations of
Actions Act 1974 (Qld).
Dear Students
The ILAC scenario given (Michelle v Richard’s Kebab Shop)
was very, very loosely based on Bryant v Fawdon(1993) -Aust
Torts Reports ¶81-204, summarised below. Spot the differences
in the facts which could lead to a different conclusion. In the
Bryant case, the defendants were held not liable but in the
current ILAC scenario, due to the change of facts it is likely
that the defendant, Richard’s Kebabs, would be held liable.
Michelle’s intoxication could lead to a reduction in damages
because of contributory negligence. Comment by Ben French: If
this case was in the lecture notes, then you would have been
expected to compare/contrast (apply/distinguish it in the
application. The given ILAC hypothetical and this case has

several points of similarities (for example: similarity of
unsecured cistern on a commercial premise, but different as
there was locked gates (no key given) and no chain/cord
attached to cistern.
These details below are a copy from Butterworth’s CaseBase.
You do not need to use this database during this course but it is
available via the library if you go on to complete more
advanced law courses.
“Facts:
The plaintiff trespassed on commercial premises at night in
order to enter an unlocked toilet block and use the facilities.
She gained entry by climbing over a padlocked gate, used the
toilet in darkness and attempted to flush it. She did not see the
modern, push-button cistern but instead tried to flush a disused
concrete cistern resting on timber beams overhead. The disused
cistern fell on her, causing serious injuries.
Held:
The Full Court of the Supreme Court of WA held that the heavy
and unsecured, disused cistern, capable as it was of being
dislodged from its resting place, constituted a “serious danger”.
However, the majority of the court held that the plaintiff failed
to establish a reasonably foreseeable risk of injury, and that the
defendant thus owed her no relevant duty of care. (Australian
Safeway Stores Pty Ltd v Zaluzna (1987) Aust Torts Reports
¶80-073 and Hackshaw v Shaw (1984) Aust Torts Reports ¶80-
312 were discussed. Relevant to this conclusion was the trial
judge’s finding that there was no chain attached to the flushing
mechanism of the disused cistern: Bryant v Fawdon Pty
Ltd (1993) Aust Torts Reports ¶81-204.”
Another Similar case was decided (Sayers v Harlow Urban
District Court) and was awarded Council 75% liable, plaintiff
25% liable.
In Sayers v Harlow UDC (1958) 1 WLR 623 having paid to use

a public toilet, a 36-year-old woman found herself trapped
inside a cubicle that had no door handle. She attempted to climb
out by stepping first on to the toilet and then on to the toilet-
roll holder, which gave way. The court held that the injuries she
suffered were a natural and probable consequence of the
defendant's negligence, but that the damages would be reduced
by 25% since the claimant had been careless in depending for
support on the toilet-roll holder as a secure foothold. NOTE:
This is a 1958 case (we would expect a person to use their
mobile phone first etc…).
Note my comments and explanation on the side working through
the process (hover over words if not showing).
ILAC Answer:
ISSUES: Comment by Ben French: Underline your ILAC
heading.
(See Maps on Lecture Slides in regard to duty of care, to create
questions)
Under the Civil Liability Act 2003 (Qld) and the common law:
Comment by Ben French: Summary of the law, the parties
involved and the legal issues (questions) to be answered.
These can be listed as individual or grouped questions as long
as your cover all the issues.
1. Did the defendant, Richard’s Kebabs owe the plaintiff,
Michelle a duty of care based on occupier’s liability?
2. If so, did Richard’s Kebabs breach the duty of care owed to
Michelle?
3. If so, did Michelle suffer damage or injury and if sustained,
were the damages too remote (or not reasonably foreseeable)?
4. Are there any defences available to Richard’s Kebabs?
5. Is Michelle likely to succeed in her claim in the Queensland
Magistrates Court for $30,000 as damages for her injuries?
LAW: Tort Law - Negligence Comment by Anne Tran: List all

relevant sections and cases, and include a brief description of
what each section and case is about. Remember that if you
mention a section/case here and don’t apply it in the
“Application” section, you will not be awarded any marks for
the “Law”.
Statute: Civil Liability Act 2003(Qld) Comment by Ben
French: Note that the name of Acts and year should be written
in Italics in assignments, similar to text.
ss.9(1)&(2): Breach of Duty of Care
s11: Causation
s12: Onus of proof
ss.23-24: Contributory negligence
ss.53-62: Damages
Common Law: Comment by Ben French: Once cited, students
can use just the first name of case only in the Application as
shown below – do not use letters of cases (i.e. D v S).
Comment by Anne Tran: Even though negligence is
covered in the CLA, the CLA doesn’t cover everything, and the
common law continues to apply, so it is still necessary to refer
to relevant cases.
Donoghue v Stevenson [1932]‘duty of care’- ‘neighbour
principle’.
Australian Safeway Stores Pty Ltd v Zaluzna [1986]–Occupier’s
liability. Comment by Ben French: If students used Hackshaw
v Shaw for occupier’s liability some marks would be awarded,
but Australian Safeway Stores Pty Ltd v Zaluzna is the
preferred case because Michelle is not a trespasser. If in doubt,
apply both. [Remember that occupiers must take reasonable care
to ensure that anyone (even trespassers) who come onto those
premises are not injured].
Romeo v Conservation Commission of the Northern Territory
(1998) and/orVairy v Wyong Shire Council [2005] - ‘reasonable
foreseeability’
Nagle v Rottnest Island Authority (1993)and/orBolton v Stone
[1951] - not ‘reasonably foreseeable’

Liftronic Pty Ltd v Unver (2001)- ‘contributory negligence’
APPLICATION Comment by s1549997: Note that most of
the answer is developed in the application (analysis/argument)
stage and therefore this is where most marks are given in an
answer. It shows the marker that students understand how the
law applies to the legal questions (issues) asked.
If students choose they can number the issues to be answered
here in the application, addressing them individually and then
doing a joint conclusion.
As per s12 CLA, the plaintiff, Michelle bears the burden of
proof and must establish the following elements in order to
succeed in a tort of negligence action. First, Richard’s Kebabs
owed her a ‘duty of care’; second, Richard’s Kebabs breached
the duty of care owed to her; Third, Michelle suffered damage
as a result of that breach; and fourth, the damage was not too
‘remote’, that is, it was reasonably foreseeable. If Michelle can
prove all of those requirements, Richard’s Kebabs will then
have to establish a defence, and then possible remedies would
be discussed.
Duty of Care Comment by Anne Tran: The use of sub-
headings isn’t necessary but you may find that it helps you to
structure your answer more clearly
To establish a duty of care, the plaintiff, Michelle, needs to
prove that it was reasonably foreseeable that the actions of
Richard’s Kebabs could cause injury to Michelle ((Donoghue).
If an occupier has control over land or premises, the occupier
will owe a duty of care to an entrant to ensure that the entrant is
not exposed to any risk or injury (Australian Safeways).
Comment by Anne Tran: Set out the rule that was set out
in the case (or the section of the CLA where relevant)
Comment by Ben French: Once cited, students can use just
the first name of case only in application as shown below – do

not use letters of cases (i.e. D v S).
In this case, Richard’s Kebabs have control over the shop
premises, including the toilet which means that they are the
“occupier” of the premises. They will owe a duty of care to
Michelle to make sure that she is not exposed to risk or injury
whilst she is on the premises. Further, it is reasonably
foreseeable that Richard’s Kebabs’ actions could cause injury to
Michelle because if they don’t take steps to make sure that the
shop and the toilet are safe, it is reasonably foreseeable that
someone could be injured. Richard’s Kebabs owe Michelle a
duty of care under both Donoghue and Australian Safeways.
Comment by Anne Tran: Explain how the rule/law/case
applies to Richard’s Kebabs and Michelle and use the facts from
the question to support your answer.
Breach of Duty
Section 9(1) CLA states that a person does not breach their duty
unless the risk was foreseeable, it was not insignificant and a
reasonable person would have taken precautions in the same
circumstances. In deciding what a reasonable person would do,
s9(2) CLA states that a court will consider the probability of
harm, the likely seriousness of the harm, the burden of taking
precautions and the social utility of the activity that created the
risk of harm.
It is foreseeable that if a cistern is not secured to the wall, there
is a significant risk that it could fall and injure someone. It is
likely that the cistern could fall, and if it did fall, it is very
likely that it would cause serious injury. In applying ss9(1) and
(2) CLA, it seems that Richard’s Kebabs has not acted
reasonably. It would have been very cheap and easy to secure
the cistern to the wall properly, or to put up a sign saying that
the cistern was broken, or not allowed customers to use the
toilet. This further supports the argument that Richard’s

Kebabs did not act reasonably in the circumstances.
In Vairy, the High Court decided that there was no duty to erect
signs to warn of the risk, as the risk of the injury was obvious.
This also applied in the case of Romeo when a young girl
injured herself when drunk on the edge of a cliff in a national
park. Whilst both these cases involve a young person who was
injured while drunk, these cases can be distinguished from the
current scenario because the defendants in Vairy and Romeo
were public authorities, not private property owners like
Richard’s Kebabs. Comment by Anne Tran: This is
“distinguishing” a case – explain why the current scenario is
different from the decided case
In Nagle, the High Court held that there is a duty to warn of
risks, where the risks are not reasonably foreseeable and
obvious. It could be argued that Michelle should have known
that there was a risk that the cistern could fall on her head. It
should have been obvious when she pulled on the cord and it
didn’t work, that she should stop, rather than pulling harder on
the cord. It could be argued that the risk was obvious, and
Richard’s Kebabs didn’t need to warn Michelle about the risk.
Damage and Reasonable Foreseeability Comment by Anne
Tran: You can address these two issues separately if you wish
Section 11 CLA states that the breach of duty must cause actual
damage to the plaintiff, and the damage must be a reasonably
foreseeable consequence of the defendant’s act or omission.
Richard’s Kebabs failed to properly secure the cistern to the
wall (or take steps to remove the cistern, put up warning signs,
or make the toilet unavailable to the public) and this caused the
cistern to fall on Michelle’s head which in turn caused the skull
fracture. Richard’s Kebabs’ breach of duty caused the injury to
Michelle.

It is reasonably foreseeable that if the cistern isn’t properly
secured to the wall, it could fall on someone’s head and cause
injury. The head injury is reasonably foreseeable, and therefore
the damage is not too remote.
It is likely that Richard’s Kebabs has been negligent, they owed
Michelle a duty of care, they breached that duty, the breach
caused the injury to Michelle and the injury was reasonably
foreseeable. Comment by Anne Tran: This is a preliminary
conclusion – a brief summary of what we have discussed so far,
before we move onto defences.
Defences
Contributory negligence is a partial defence and applies when
the plaintiff has failed to take reasonable care for their own
safety (as discussed in ss.23-24CLAand in the case ofLiftronic).
It could be argued that Grace didn’t take reasonable care for her
own safety because she was intoxicated and this would have
affected her judgement. If she had been sober, she may have
seen that the cistern was loose and would not have continued to
pull on the cord. The defence of contributory negligence may
apply, and the damages payable by Richard’s Kebabs would be
reduced. Comment by Ben French: Briefly repeated in the
conclusion – students could cover this in the application or
conclusion and still be awarded marks. Comment by Ben
French: Case may be listed here or in conclusion as it deals with
remedies. Comment by Anne Tran: Note that there are
other sections of the CLA that may apply for intoxication but
we will not discuss them here.
Voluntary assumption of risk (ss.14-15) would not apply
because Michelle did not know that there was a risk that the
cistern could fall on her because it was loose, and she did not
voluntarily assume the risk. It could be argued that the fact that
the cistern was loose and could fall was an “obvious risk”, but

it is unlikely that this would succeed. Comment by Anne
Tran: This is not required for answer but is here to explain the
principle to students.
Comment by Anne Tran: If you feel that it is an obvious
risk, feel free to argue that way, but just make sure you follow
it through to the correct conclusion
CONCLUSION:
On the balance of probabilities it is likely that the Magistrates
Court would find that the defendant, Richard’s Kebabs owed the
plaintiff, Michelle a duty of care when she entered their
premises. Occupiers need to take reasonable care to protect all
who enter their premises from injury. Here, it was reasonably
foreseeable that Michelle could be hurt by the cistern as it was
not properly secured. Richard’s Kebabs breached its duty of
care as the owner, and the staff members had not acted
reasonably in the circumstances, such as by securing the cistern
or using a warning sign, or preferably keeping the toilets locked
and not allowing people to use them until it was fixed. This
would have prevented Michelle from being injured. Richard’s
Kebabs, or at least his insurance company, would be liable in
negligence. Richard’s Kebabs will be able to argue contributory
negligence (ss23 & 24) as a defence and it is likely that the
$30,000 damages sought by Michelle will be reduced.
Comment by Ben French: Civil matter Comment by Ben
French: As the facts state that Michelle wants to sue for the
amount of $30,000. Comment by Ben French: Include the
names of the parties in your conclusion. Comment by Ben
French: Further names of parties involved Comment by Ben
French: As will be discussed in the Company Law lecture, if
Richard has appropriately structured his business affairs it is
unlikely that he would be personally liable (no need to include
that here).
End note about the conclusion and law/application to students:

The conclusion could be argued in the alternative. But it is less
likely that the court would decide in favour of Richard’s Kebabs
and therefore less marks would awarded if the alternative
answer was given. Most important is how the ILAC is argued in
the application. IF a conclusion is given that does not follow
the argument given in the application, and thus it is not logical,
then marks would not be provided. The conclusion must
support the argument. Marks are only given for the law part of
the ILAC, if the sections and cases mentioned are applied in the
application.
1
Ben’s guide to answering hypothetical (problem)
questions...hope it helps
Simple tips and tricks –
BEFORE YOU BEGIN ANSWERING THE HYPOTHETICAL
· If possible, work out who you are advising as soon as you start
reading the question. This can often be achieved by reading the
last couple of lines first. Knowing who you are going to advise
from the beginning, can help with your understanding of the
problem!
· If you are lucky, the last couple of lines may also give you the
following information:
· an overview of the some issue(s);
· whether your client is the complainant (plaintiff, appellant) or
the accused (defendant, respondent); and
· who some of the other parties in the hypothetical are and what
role they play (for example whether they are a complainant or

respondent or just an observer.
· Often it is a good idea to circle the names of the parties the
first time they are mentioned in the hypothetical. This should
ensure you a quick way to look back over the question after you
have read it the first time and ensure that you have accounted
for all the parties involved.
· If you cannot work out the relationship between the parties
(for example who the complaint (plaintiff, appellant) and
respondent (defendant) are, then draw yourself a simple
mindmap or diagram to show their connection to each other.
This is often helpful when there are several parties who may be
jointly or severally liable. This approach is often helpful in
answering particularly long questions.
· If you do have a long question then you may need to read it
twice. Although this can be time consuming, it is often not
possible to discern all the facts of a hypothetical the first time.
Furthermore it is even more difficult to discern the key issues
and legal principles when you have only read the hypothetical
once.
· Underline the key points, such as dates, conditions or
comments made by the parties. At the same time think about
any time limitation problems that might occur for your client or
the other party.
· Make notes in the side margin of each paragraph, and if
certain facts remind you of a particular case or piece of
legislation, then write it down straight away so that you do not
forget to refer to the case or legislation.
· If you quote the law, whether directly from a case or a text
book, place the quoted words in inverted commas to
acknowledge that you are directly quoting a passage. You

should then write in brackets very briefly where the quote came
from (for example (Text) or (Case)). If the quoted text is from
legislation you need to identify the section number if possible.
· In an exam situation you do not have to cite the full name of
popular cases that have been discussed in lectures, tutes or
those covered in the course text book. You can simply use their
common name (for example instead of in the case of Smith v
Jones [1991] 1 CLR 146 use…in the case of ‘Smith’). In
completing assignment research questions it would be necessary
to give the full citation the first time the case is mentioned and
then only the common name of the case.
· If the legislation has a common abbreviation you can use it
instead of writing the whole name of the legislation (for
example the Queensland Anti-discrimination Act = QADA).
· If you use common abbreviations in your exam then make a
list of them at the top of the paper so the marker knows what
you are referring to, for example, K is commonly used for the
word contract – therefore the first time you use the word
contract you should indicate the letter (K) in brackets after its
use or make a note of your abbreviations at the top of your
answer page.
SETTING OUT THE ANSWER
· Leave plenty of white space in between each section of your
answer. This normally makes it easier for the marker to follow
and allows you to neatly go back and add in information that
you had not thought of when you first completed that part of the
question. Having subsequently remembered the extra
information (for example a section of the law or a case that
applies to this situation) it is a lot easier to add the information
into the relevant section, without your answer ending up messy

with lines and arrows all over the place.
· A good paper is always easier to mark than a bad one. Do not
make the marker have to ‘look for the marks’. Readability and
layout of your answer is very important and goes a long way to
making for a happy marker.
· Underline key cases and legislation in your answer,
particularly in the application part of the answer. This way they
will stand out to the marker.
· Be logical in your approach. In setting out your answer you
must use the ILAC approach. That is Issue, Law, Application
and Conclusion.
· Ensure that you underline your headings. (i.e. Issue, Law…)
so they stand out and the layout of the answer is clear.
· Highlight the relevant facts – the facts that need to be
considered to determine the matter between the parties. The
best place to highlight the relevant facts is in the application
stage, where you have to apply the facts to the law!
· Remember most of the marks in a hypothetical are for
correctly applying the law to the facts of the scenario in the
application section. Therefore you should use your time
accordingly!
· Use the KISS process – ‘keep it simple stupid’ - in the case of
addressing hypotheticals, this means remembering to always
break the problem down into simple steps and ensure you
address every legal element in the problem. No matter how
simple the element may seem, it is better to briefly address it
than not address it at all.
· Another way of considering what the key facts are is to ask

yourself - “What do I have to prove to make my case, or to
defend my case?”
· Try to visualise the problem and put yourself in the place of
the client. Think about the problem in a real world situation,
what is the most likely outcome, consider what you would do if
you were in this situation.
· If necessary infer into the hypothetical and explain to the
marker why you made these assumptions. Do not make
unreasonable assumptions as they will get a big red cross
through them. But remember this is a law subject, so you must
spend most of your time and word count discussing the Law,
and how it applies to the facts given.
· Always show both sides of an argument.
· Try to distinguish cases to show why they support or do not
support your client’s case.
· Apply lateral thinking to the hypothetical problem given and
consider as many (reasonable) alternative ways of arguing the
case as possible.
· Remember sometimes hypothetical scenarios are based on real
cases.
ILAC
Short OverviewANSWERING LEGAL QUESTIONS
There are four stages to correctly answer legal problem
questions.
1. Identifying the legal issues involved in the problem. Issues
are the questions which need to be resolved or answered.

2. Identifying the area of law. This means referring to the
relevant cases and statutes.
3. Applying these legal principles to the facts of the problem so
as to answer the questions raised in the issues. This requires
you to use the relevant law to argue your case and also respond
to arguments that may be raised by your opponents.
4. Reaching a conclusion. This requires you to state who you
think shall win the case and what remedy the complainant is
likely to obtain from the courts.
This is known as the ILAC method and must be used in
answering hypothetical problem question(s). It is there to help
you properly structure your answer to demonstrate your
knowledge.
In Depth Overview
Identification of each step in completing the ILAC method
ILAC is also known as FILAC if you include the facts in your
answer. Do not spend your time re-writing all the facts as you
will not get marks for doing this. However, you may choose to
scribble down a few key facts at the top of the exam or the side
of the exam as a reminder to yourself of the key points in the
question. Alternatively use a highlighter and make margin notes
to ensure you cover them in your answer.
ISSUES
· Define the issues – Ask yourself, what are the questions that

need to be answered?
· Rephrase the issues as questions, starting with the major /
overriding issue.
· For example: Did Mick the Chef sexually harass the waitress
Elena? If so is his employer vicariously liable?
· Next break the rest of the question down into sub-issues.
· Expect to receive a hypothetical that raises more than one
issue. If there is more than one issue then complete the steps
above for each major issue.
· If you feel numbering the issues helps with the layout of the
question, or your answering of the question then you can use
this approach.
LAW (Statement of relevant legal principles)
· The elements of the area of law that must be satisfied before
an action is successful.
· Cite the law briefly, with authority, in relation to each issue
posed above (from the issue section).
· If you are using a very similar case then give a very brief (2 to
4 lines) overview of the facts and legal principle(s). “When you
are answering a question, quote a case where the factual
situation is similar to provide support to your work. The most
important part of a decided case is the legal principle. Facts of
a decided case are only important where they help you identify
the legal principle(s) or help you relate to the problem in front
of you.”[footnoteRef:1] [1: Carvan, Miles & Downer, A Guide
to Business Law, Sixteenth Edition, 2005, Law Book Co.]

· “The name of the case is important because it shows that you
are on track. However, if you remember the principle but forget
the name of the case, you should still write in the principle and
indicate its source, e.g., in a recent New South Wales Supreme
Court case.”[footnoteRef:2] [2: Ibid, 1.]
· You may consider using the same numbering system that is
used in the “Issues” part.
· If you are citing legislation try to cite the relevant section
and/or subsection if relevant. For example the Competition and
Consumer Act (2010) (CCA) is often cited in contract law when
discussing the legal principles of misleading and deceptive
conduct. If you know the legal principle is set out in the CCA,
but you do not know which section, you should still cite the
legislation, but remember that you will get much better marks if
you quote the section number(s).
APPLICATION of the previously mentioned legal principles to
the facts given in the hypothetical - (sometimes ‘application’ is
also known as ‘analysis’ or ‘argument’)
· Deal separately, as far as possible, with each issue in turn.
· Use the facts to discuss the legal principle(s) (elements).
· Discuss whether the elements apply or not.
· For example: “Having regard to the relevant facts such as the
purpose of the contract, the importance that Jack attached to the
question of the horse’s racing abilities and the content of the
final conversation between Jack and Jill, it appears likely the

parties intended that the two year period was a term of the
contract [etc].”[footnoteRef:3] This given hypothetical scenario
can be distinguished from Roscorla v Thomas because the
conversation about the horse’s racing ability occurred before
the contract was completed. [3: The work of Lillian Corbin,
Senior Lecturer Griffith University Faculty of Law.]
· If there is a case or piece of legislation that does not favour
your client’s case you still need to discuss it. Although your
client may not want to hear the bad news, your client(s) needs
to know the good and bad sides of the case. You can be assured
if a client was being sent to jail and you did not advise them of
this possibility, then they would be more upset with you (as
their counsel – legal representative) than if you had not done
your job properly and forewarned them that it was a possibility
(and they should ‘pack their toothbrush’!).
· Decide how you may be able to distinguish a case that has
similar facts to your case. That is, show that whilst the case is
similar in nature to another case that has already been decided,
it is different because of a particular fact or facts of the
distinguished case and your client’s case is different in some
way (i.e. the hypothetical). Therefore the Commissioner, Judge
or Magistrate should not consider it as a persuasive or binding
precedent. This skill is very difficult for a student to master
and therefore do not be too concerned if you are unable to do
this at first attempt.
· In relation to case law remember the rules concerning court
hierarchy. This will allow you to realise whether the judgment
concerning the court hierarchy is binding or merely persuasive.
You may want to include this information.
· In relation to legislation, make sure that you are using the
piece of legislation relevant to the jurisdiction.

· It is always a good idea to quote short pieces of information
from the facts to argue your case and to prove an element of the
hypothetical, particularly if you are able to rely on the spoken
word of one of the parties in the hypothetical. For example,
Mick the Chef sexually harassed the shop assistant Elena,
telling her that he would like to see her dressed “…in the
naughty knickers lingerie, coming out of his bedroom.” If you
quote from the hypothetical case, ensure that you place the
quote in inverted commas.
· Similarly, if you decide to quote some of the facts of the
hypothetical, such as “…Brian was made to work on the
apprentice’s bench because his boss had decided that was
Brian’s speed”, ensure that the quote is in inverted commas.
Any quote should not be too much longer than the example
given here.
CONCLUSION (opinion)
· Note that, on the facts given to you, it might be possible to
come to a different conclusion to that of other students. A
CONCLUSION IS VALID AS LONG AS IT IS JUSTIFIED BY
REFERENCE TO THE RELEVANT FACTS AND LAW!
· State your conclusion succinctly in relation to each of the
issues.
· Make sure that your conclusion answers the legal issues (the
questions involved) first and foremost.
· For example: “It is likely that on the balance of probabilities,
the court would decide that Jack is entitled to ............”.
· At this point you may wish to make reference to the

consequences, in terms of the likelihood of taking the matter to
court (which court or tribunal it is most likely to be heard in,
considering the different jurisdictions), the remedies available
to upon your client or likely to be imposed against your client
(for example the type of damages etc).
· Finally check and re-check your answer against what you were
asked to advise on. For example: if you were asked to consider
the matter using the Queensland jurisdiction, ensure that you
have done this.
Make yourself a checklist, a template or a mindmap for
answering different types of hypothetical questions (areas of
law).
Ben French How to answer a hypothetical 1

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