Manuel Schmick Graduated From The Nat

Manuel Schmick Graduated From The Nat

Manuel Schmick, after graduating from the National University of Hairdressing, decided to expand his male grooming hairdressing business in Western Sydney. He engaged Loren Knowsitall, an accountant and financial adviser, to prepare a business plan for this expansion. Loren advised Manuel that his financial position was sound and recommended borrowing money to set up five salons in Sydney's Eastern suburbs. Based on Loren's advice, Manuel borrowed $2,500,000 from Ripoff Credit, signed five three-year leases, purchased hairdressing equipment, employed celebrity hairstylists, and engaged Tracey's Designs & Graphics for website development. However, subsequent events led to significant financial losses, making Manuel unable to pay Ripoff Credit. Loren admitted she failed to consider Manuel’s pre-existing debts and underestimated costs, and she also used tarot readings to advise on the business prospects.

Advise Manuel on any rights and liabilities arising from these facts, citing relevant statutory and case law authority, using the ILAC format of legal problem solving.

Paper For Above instruction

Issue

The first issue is whether Manuel Schmick has any rights against Loren Knowsitall for negligent advice that led to financial loss. The second issue concerns whether Manuel bears any liability under the loan agreement with Ripoff Credit, considering the advice he relied upon and the circumstances surrounding the loan and leasing agreements.

Law

Negligence and Duty of Care

In Australian law, a duty of care arises when a party owes a foreseeable risk to another, and there is a relationship of proximity or control. The seminal case is Donoghue v Stevenson (1932) AC 562, which established the neighbour principle—one must take reasonable care to avoid acts or omissions that could foreseeably harm neighbors. Further, the Civil Liability Act 2002 (NSW) elaborates on duty of care, breach, damages, and defenses, emphasizing reasonable foreseeability and breach of duty in assessing liability (Civil Liability Act 2002 (NSW) ss 11, 13).

Misrepresentation and Reliance

Contract law stipulates that where a party makes false representations, the other party may have rights to rescind or seek damages. The case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447 highlights that unconscionable conduct or misrepresentation induced reliance, leading to voidable contracts.

Contract Formation and Intention

For a valid contract, elements include offer, acceptance, consideration, and intention to create legal relations (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256). Here, Manuel's reliance on Loren's advice can be explored as a contract of professional advice. The lease agreements and loan agreements also require clear mutual consent and consideration.

Liability for Loan and Leasing Contracts

Parties to a loan agreement are bound by the terms once signed. Under the equal bargaining power principle, contracts are valid unless vitiated by misrepresentation, duress, or unconscionability (Commercial Banking Co of Sydney Ltd v Amadio (1983) 151 CLR 447). Leasing contracts require mutual assent and clarity on terms.

Application

Manuel v Loren

In this case, Manuel relied on Loren’s advice about his business’s financial health, including her recommendation to borrow for expansion. If Loren failed to exercise reasonable care and breached her duty by inadequately assessing Manuel’s financial position (including ignoring pre-existing debts), Manuel might claim that this negligence caused his losses (Cattanach v Melchior (2003) 215 CLR 1). The use of tarot cards for business advice, however, may weaken claims of negligence, but professional financial advice must meet standards of reasonable skill and care. If Loren’s advice fell below this standard, Manuel could potentially seek damages for negligent misstatement.

Ripoff Credit Loan Agreement

Manuel's contractual liability to Ripoff Credit arises from his signed loan agreement. If Loren’s advice was negligent or misrepresented Manuel’s ability to repay, Manuel could argue that the loan was procured unlawfully or that there was misrepresentation at the time of signing (Commercial Bank of Australia Ltd v Amadio). Since Manuel relied on Loren's advice and not on any misrepresentations made directly by Ripoff Credit, his primary recourse would be against Loren for negligent advice, rather than the bank.

Leases and Equipment Purchases

Manuel signed five leases and purchased equipment based on his reliance on Loren’s advice and perhaps on the professional recommendations. If any of these contracts were procured by fraudulent misrepresentation or undue influence, Manuel might be able to rescind them (Commercial Bank of Australia Ltd v Amadio). However, if all parties acted in good faith, the contracts are likely valid, and liability for any losses would depend on whether Loren’s advice was negligent or intentionally misleading.

Legal Duty and Tort Liability

Given Loren’s role as a financial adviser and accountant, she likely owed a duty of care to Manuel. If her advice failed the standards of a reasonable professional, Manuel could sue her in negligence for damages arising from economic loss (Bryan v Maloney (1995) 182 CLR 609). The key question is whether Loren owed such a duty, whether she breached it by failing to consider Manuel's debts and costs adequately, and whether her advice was a significant cause of Manuel’s losses.

Conclusion

  • Manuel has potentially grounds to claim damages against Loren for negligent misstatement if her advice fell below professional standards, especially since she failed to consider pre-existing debts and underestimated costs.
  • His contractual obligations under the loan agreement are valid, but he may have defenses against repayment if he proves Loren’s advice was negligent or misleading.

Issue

  • Did Loren owe Manuel a duty of care, and did her advice breach that duty, causing Manuel's financial loss?
  • Is Manuel liable to Ripoff Credit under the loan agreement, considering his reliance on Loren’s advice?
  • Were the lease and equipment purchase agreements valid and enforceable given the circumstances?
  • Could Manuel seek remedies for misrepresentation, undue influence, or unconscionable conduct associated with his contractual arrangements?

Law

Referring to the law of negligence, contracts, and misrepresentation, as previously discussed, the key principles involve the existence of duty of care, breach, causation, and damages in negligence; and elements of offer, acceptance, consideration, and intention in contract law. The case of Commercial Bank of Australia v Amadio (1983) 151 CLR 447 demonstrates that procedural unconscionability can vitiate contracts, especially where there is unequal bargaining power or misleading conduct. The doctrines of misrepresentation and undue influence also apply, especially where advice or negotiations are involved (Commercial Bank of Australia v Amadio; Commercial Bank of Australia Ltd v Munro (1982) 149 CLR 638).

Application

Manuel v Loren

Manual's argument depends on whether Loren owed a duty of care as a professional adviser and if she breached this duty by neglecting to consider all relevant financial factors, including pre-existing debts. Given her admitted oversight, a court may find she was negligent jn failing to exercise the standard of care expected of a financial adviser. Consequently, Manuel could claim damages for economic loss. Her reliance on tarot readings, however, might dilute her professional liability but does not absolve her of negligence if she fell below the required standard.

Manuel and Ripoff Credit

The loan contract being a legally binding agreement means Manuel has obligations to repay unless he can prove the contract was procured through misrepresentation or non-disclosure of material facts. If Loren’s advice was negligently false and substantially influenced Manuel’s decision to borrow, he might seek to revoke the agreement or claim damages, citing reliance on negligent misstatement.

Leasing and Equipment Contracts

These agreements, signed after assurances from Nano and purchase from The Speedy Brothers, are binding if there was mutual consent and clarity. If Nano’s conduct was misleading or if the contract was entered into based on false pretenses, Manuel might argue for rescission or damages for breach of misrepresentation. The same applies to the equipment purchase, where Gus’s refusal to honor the free service could constitute a breach of contract.

Family Guarantees and Borat’s Loan

In relation to his parents’ guarantees, the Sagdiyev family might claim they were misled or that the bank did not properly explain the extent of their obligations. Under the Australian Consumer Law (ACL), unconscionable conduct might be argued if the bank took advantage of their limited education and language skills (ACL 2010 (Cth)). If the bank's conduct is found unconscionable, the guarantees may be rescinded.

Conclusion

  • Manual has a potential claim against Loren for professional negligence based on breach of duty to exercise reasonable skill and care in financial advice.
  • His contractual obligations to Ripoff Credit are valid unless he can demonstrate misrepresentation or undue influence.
  • The lease and purchase contracts are binding unless they can be rescinded due to misrepresentation or unconscionable conduct.
  • The Sagdiyev family may have remedies if the bank engaged in unconscionable conduct, making their guarantees potentially invalid.

References

  • Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
  • Donoghue v Stevenson (1932) AC 562
  • Bryan v Maloney (1995) 182 CLR 609
  • Latimer, P (2010). Australian Business Law. 29th ed. North Ryde: CCH.
  • Heilbron, G, Latimer, P, Nielsen, J, & Pagone, T (2008). Introducing the Law. 7th ed. North Ryde: CCH.
  • Acts Interpretation Act 1901 (Cth)
  • ACL 2010 (Cth)

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