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10TH EDITION
BUSINESS
LAW
ANDY GIBSON
Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018—9781488611803—Gibson/Business Law 10e
Detailed CONTENTS
How to use this book xi Case law (precedent) 73
Educator resources xv Legal cases as precedent 76
MyLab Business Law xvi Statute law 79
Preface xviii Methods of statutory interpretation 85
About the author xxii
Key to case report abbreviations xxiii PART 2
Table of cases xxiv CIVIL LIABILITY 99
Table of statutes xxix
CHAPTER 4
PART 1 Civil Liability:
THE LEGAL FRAMEWORK 1 The Law of Torts and Negligence 100
Why is an understanding of the law of
CHAPTER 1 torts important to business? 101
Legal Foundations 2 Some general principles of tortious liability 102
Introduction 3 Time periods for tort actions 104
What is law? 3 Negligence 106
Are rules always law? 3 Elements of negligence and the roles of the
Sources of law 4 plaintiff and the defendant 107
Characteristics of a legal system 5 CHAPTER 5
Classification of laws 7
Major and minor types of laws in the
Applications of Negligence to Business 142
Product liability (defective products): What
Australian legal system 13
is the legal position of manufacturers? 143
Commonwealth and state powers 15
Occupier’s liability 158
Separation of powers 25
Criminal negligence 167
CHAPTER 2
Legal Systems 31 PART 3
What are the roles of the police and the courts? 32 LAW OF CONTRACTS 173
Hierarchy of the courts 34
Original and appellate jurisdiction 35 CHAPTER 6
The state and territory court hierarchies 35 Introduction to Contracts 174
Criminal jurisdiction of the inferior courts 36 Contracts: The basis of commercial law 175
Federal courts 40 Sources of contract law 175
Abolition of appeals to the Privy Council 43 Contract and agreement distinguished 175
Features of a court hierarchy 44 The law of contracts 176
Alternative methods to courts 44 Creation of an apparent simple contract 176
Judicial and quasi-judicial tribunals 48 Classification of contracts 178
The ombudsman 55 Classification according to formal or simple
The adversary system 57 contracts and its importance to business 181
The parties 58 Contracts and e-commerce 185
The legal profession 60
The judiciary 61 CHAPTER 7
The jury 62 Agreement Between the Parties 189
Representative or class actions 62 What constitutes a contractual agreement? 190
Step 1: Is there agreement between the parties? 191
CHAPTER 3 The conventional approach: rules relating to offer 195
How Law is Made: Termination of offer 207
Precedent/Statute Law 69 Rules relating to acceptance 211
Sources of law 70 Rules as to contracts by post 216
Finding cases 71 Electronic offer and acceptance 218
vii
CHAPTER 8 PART 4
Intention to Create Legal Relations 223
CONSUMER LAW 411
What is intention? 224
Step 2: Is there intention to contract? 225 CHAPTER 16
The statutory position 232 Statutory Consumer Guarantees
Non-commercial agreements—agreements
lacking serious intention 232
and the Australian Consumer Law 412
An introduction to consumer guarantees 414
CHAPTER 9 Consumer guarantees applying to goods 417
Consideration 239 Consumer guarantees relating to the
Step 3: Is consideration present? 240 acceptability of goods 419
Consideration defined 240 Where there is no overlap with the Sale
Essential rules for consideration 241 of Goods Acts 428
Promissory estoppel 252 Consumer guarantees relating to the supply
of services 428
CHAPTER 10 Consumers’ rights concerning guarantees
Capacity of the Parties 259 for the supply of goods and services 429
Step 4: Determining validity: Do the parties Non-exclusion of implied consumer guarantee 432
to the contract have full contractual capacity? 260
CHAPTER 17
Infants (or minors) 260
Corporations 269 General and Specific Consumer
Bankrupts 269 Protections under the ACL 436
Mentally unsound and intoxicated persons 270 Scope of the Australian Consumer Law 437
Married women 271 Chapter 2: General protections 440
Chapter 2, Part 2-1: Misleading or deceptive
CHAPTER 11 conduct (ss 18–19) 441
Genuine Consent 274 Chapter 2, Part 2-2: Prohibition of unconscionable
Step 5: Is there genuine consent? 275 conduct (ss 20–22) 448
Misrepresentation 287 Chapter 3: Specific false representations
Duress and undue influence 294 (ss 29–31, 37) 453
Unconscionable (unfair) contracts 299 Prohibition of other ‘unfair practices’ 458
Chapter 3, Part 3-3: Safety of consumer goods
CHAPTER 12 and product-related services 462
Is the Contract Legal? 307 Manufacturer’s liability 463
Step 6: Is the contract legal? 308 Chapter 3, Part 3-5: Product liability under the
Contracts illegal by statute 308 Australian Consumer Law 466
The common law position 311 Consumer transactions 470
Chapter 5: Enforcement and remedies 471
CHAPTER 13 State consumer protection bodies 475
Terms of the Contract 326 Regulation of the financial services industry 476
Express terms 327
Collateral contracts
How important is the term?
332
334 PART 5
Implied terms 341 BUSINESS ORGANISATIONS
Meaningless terms 344 AND THE LAW 481
Exception, exemption or exclusion clauses
or terms 345 CHAPTER 18
Agency 482
CHAPTER 14 Introduction to agency 483
Rights and Liabilities of the Parties, Distinguished from other relationships 484
Discharge and Remedies 362 Classification of agents 485
Privity of contract 363 Appointment of agents 486
Assignment 365 Authority of the agent 489
Ending the contract 367 Duties of agent to principal 492
Rights of agent against principal 497
CHAPTER 15 Liability of agents and principals to third parties 498
Remedies in Contract 386 Liability of principal and agent in tort 501
Remedies at common law 387 Termination of agency 501
Equitable remedies 402 Remedies of a principal 503
Loss of right to sue 407 Some specific types of agency 503
viii BUSINESS LAW
CHAPTER 19 Industry complaints resolution 626
Concepts underlying insurance law 627
Introduction to Companies and
Making the contract of insurance 638
Incorporated Associations 511 Construction of the insurance policy 644
Administration of company law 512 Agents and brokers 648
Companies 513 Fire insurance 649
Lifting the veil of incorporation 514 Other kinds of general (indemnity) insurance 650
Nature of companies 516
Corporate insolvency 534 CHAPTER 24
Associations 535 Sale of Goods—Business to Business 657
Sale of goods 658
CHAPTER 20
Sale of Goods Act or ACL? 659
Partnerships 541 Formation of the contract 659
Essential elements of a partnership 542 Why is the distinction between property
When does a partnership exist? 545 and possession important in business? 664
Relationships that can look like partnerships 545 Classification of goods 665
Creation 550 Passing of risk 672
Relationship to outsiders 552 Transfer of title by non-owner 672
Liability of partners 553 Performance of the contract 674
Being an apparent partner or ‘holding out’ 555 Remedies of the parties for breach of contract 677
Liability on change of partners 556 The Vienna Sales Convention 680
Relationship between partners 557
What are the rights of each partner? 557 CHAPTER 25
What are the duties of each partner? 559 Property and Mortgages 685
What happens to partnership property? 560 The distinction between ownership
Dissolution 561 and possession 686
Limited partnerships 563 Land 686
Goods 687
CHAPTER 21
Distinguish between real and personal property 688
Choosing a Business Entity 570 What is the extent of land? 693
Factors to consider in choosing a business entity 571 Interests in land 693
Sole traders 572 Methods by which land ownership is established 696
Partnerships 573 What is a mortgage? 707
Companies 573 Mortgagor’s right to deal with the property 709
Trusts and trustees 574 Remedies of the mortgagee 709
Franchises 579 Licence and lease distinguished 711
Business names 582 Classification according to duration 712
Terms of agreement for lease 713
ONLINE CHAPTERS Terms of a leasing contract 713
Termination of leases and tenancies 713
CHAPTER 22 Can the landlord recover possession
Other Business-Related Torts 587 of the premises? 714
Other business liabilities in tort law 588 Residential tenancies legislation 714
Intentional torts—trespass 588 Retail tenancies legislation 717
Defamation 599
Economic torts: In what business situations CHAPTER 26
might a plaintiff rely on an economic tort? 608 Intellectual Property 723
Nuisance 614 The concept of intellectual property 724
Statutory torts—breach of statutory duty Copyright 724
and statutory nuisance 618 Designs 736
New torts 619 Patents 739
Trade marks 742
CHAPTER 23 What is passing off ? 746
Insurance 622 Australian Consumer Law—unfair practices 747
Risk 624 Confidential information 747
What is an insurance contract? 624
Parties to an insurance contract 625 CHAPTER 27
Sources of insurance law 625 Ethics and Business Practice 753
General Insurance Code of Practice 626 The law and morality 754
Administration 626 Morals and ethics 756
DETAILED CONTENTS ix
Theories of ethics 756 The national workplace relations system 857
Corporations and ethics 762 Human rights-based work regulations 860
Ethical investing 763 Work health and safety and workers’
Ethical professional advice 764 compensation 865
CHAPTER 28
Criminal Law in a Business Context 772
ON DEMAND CHAPTERS
Sources of the criminal law 773 CHAPTER 32
Differences between criminal law and civil law 773
Classification of offences 774
Electronic Commerce 876
Electronic transactions legislation—making
Criminal procedure 775
contracts electronically 877
Elements 776
Legal aspects of maintaining a business website 883
Standard of proof 776
Electronic commerce consumer protection 886
White-collar crime 777
Jurisdiction problems 888
Statutory criminal liability in business situations 780
Privacy 888
Criminal liability involving companies 782
Cybercrime and business 890
Cybercrime 784
Electronic banking 892
Civil penalty 784
CHAPTER 29 CHAPTER 33
Negotiable Instruments 897
Competition Law 789
Negotiability as an exception to the nemo
Operation of the Act 790
dat rule 898
Administration of the Act 790
Bills of exchange 899
The concepts of ‘market’ and ‘competition’
Cheques 902
in business 792
Bank cheques 919
Restrictive trade practices 794
Other methods of money transfer 919
Authorisations and notifications (s 88) 807
The Code of Banking Practice 921
Enforcement procedures and remedies 807
The banking industry ombudsman 921
Industry codes of conduct 808
Financial Transaction Reports Act 1988 (Cth) 921
CHAPTER 30
CHAPTER 34
Insolvency and Debt Recovery 813
Should legal proceedings be commenced? 814 Consumer Credit and Privacy 928
The debt recovery process 814 Operational areas of the National
Overview of bankruptcy proceedings 816 Credit Code 929
Other effects of bankruptcy 818 Types of credit arrangements and parties 930
Key aspects of bankruptcy 819 Formalities 932
Effect of a sequestration order 824 Security for the credit—mortgages
Alternatives to bankruptcy 824 and guarantees 934
Property available for payment of debts 827 Hardship and unjust transactions 935
What power does a trustee have to avoid Privacy Act 1988 (Cth) 938
antecedent transactions? 831 The Privacy Act 1988 (Cth), as amended
Collection of money or property by the Privacy Amendment (Enhancing
from third parties 832 Privacy Protection) Act 2012 941
What is the order of payment of debts? 833 Hire-purchase 944
Discharge and annulment of bankruptcy 834
Corporate insolvency 836
CHAPTER 35
Ethics and Regulations
CHAPTER 31 in Marketing and Advertising 950
The Work Environment Ignorance of the law is no excuse! 951
and the Employment Relationship 843 The law and ethics 951
Introduction to employment law 844 Ethics in a business context 954
Implied duties in the contract Marketing law 954
of employment 850 Advertising law 966
Termination 854 Glossary of legal terms G-1
The Importance of the Commonwealth Index I-1
Constitution Act 1900 (Imp) 856
x BUSINESS LAW
HOW TO USE THIS BOOK
ChApTER 2
Legal Systems
LEARNING OBJECTIVES
On completion of this chapter, you should be able to:
LO Explain the function of police in enforcing the law and

1 the role of courts in administering law and resolving
disputes
LO Identify the state and territory court hierarchies in the

2 Australian legal system
LO Describe the objectives, hierarchy and jurisdiction of

3 the courts in the federal court system
LO Identify the adversary system, and describe alternative

4
Learning objectives are stated at the beginning of
methods of dispute resolution
■■
LO Discuss the function of different state and federal
5 tribunals
the chapter, and are signposted in the margin where
LO Explain the role and purpose of the ombudsman
LO
6
Discuss the roles of the legal profession, judiciary,
they are covered in the chapter. They provide an
7 juries and parties in criminal and civil trials.
excellent framework and revision tool.
M02_GIBS1803_10_SE_C02.indd 31 6/1/17 3:32 PM
This chapter discusses the various court systems, the jurisdiction of the courts to hear
cases, alternative methods to the courts to resolve disputes, the functions of some of the
judicial and quasi-judicial tribunals and the ombudsman, the role of court personnel, and the
litigation process.
Australia has two main court systems, organised in terms of jurisdiction (i.e. the types of cases or
matters that each court can hear):
■■ the federal court system; and
■■ the court system of each of the states and territories.
Each of these systems has jurisdiction to hear different types of cases, as do the courts within each
system. (The jurisdiction of each court—i.e. which matters it can hear—is established by the Act that
created it, known as an ‘enabling’ Act.) Because of the importance of the legal framework to the business
environment, it is necessary to understand how each system operates in the event that a dispute leads
to litigation.
Unlike the federal court system, the jurisdiction of each state and territory stops at the border.
This means, for example, that New South Wales law doesn’t apply outside the borders of New South
Wales, and Queensland law doesn’t extend beyond the borders of Queensland, and that the same is
generally true in all Australian state and territory jurisdictions. However, there is an exception, and that
can be found in an initiative between Western Australia (Cross-Border Justice Act 2008), South Australia
(Cross-Border Justice Act 2009) and the Northern Territory (Cross-Border Justice Act 2009) called the
‘Cross-Border Justice Scheme’. In this scheme there are effectively no legal state or territory borders in
the outback region where they meet. The Cross-Border Justice Scheme enables police, magistrates,
fines-enforcement agencies, community corrections officers and prisons of one jurisdiction to deal with
offences that may have occurred in another participating jurisdiction.
The process of bringing and maintaining, or defending, a legal action (called litigation) is both time-
consuming and costly owing to the complex procedural rules (or rules of evidence) employed within our
court systems. (This partly explains why there has been a shift in recent times towards alternative
methods of dispute resolution such as tribunals, mediation, arbitration and neighbourhood dispute
centres.) As a rule of thumb, the higher the court in a court hierarchy, the greater will be the legal costs.
The legal system in Australia is adversarial in nature (compared with civil law systems such as
those found in Europe, which are inquisitorial) and, while using a solicitor or barrister is not
compulsory, most parties will inevitably use them when they are involved in litigation. The solicitor will
be used in pre-trial matters, while the barrister will represent the party in court.
LO
1 WhAT ARE ThE ROLES Of ThE pOLICE ANd ThE COuRTS?

Explain the
function of
police in The role of the police
enforcing the
law and the role In theory, everybody in the community is responsible for apprehending law-breakers. However, in
of courts in
administering
practice this is a function that is usually better left to the police force. The police force plays no direct
law and role (although it certainly plays an indirect role) in the creation of new laws. Nor is it
resolving concerned with the punishment of wrongdoers.
disputes
In The role of the police

BrIEf The main function of the police is to enforce the laws created by other authorities.
They serve the law itself, and are independent of the government.
32 Part 1 tHE LEGaL FraMEWOrK
M02_GIBS1803_10_SE_C02.indd 32 6/1/17 3:32 PM
xi
■■ In brief boxes summarise key points relevant to the
particular area of law under discussion.
The High Court did what Blackburn J in Milirrpum’s case could not do, and that was to overrule
200 years of common law precedent by rejecting the terra nullius proposition that Australia was
unoccupied land, with no local law in existence. In the course of his judgment, Brennan J noted at page 5
(with Mason CJ and McHugh J agreeing) in relation to precedent, that:
If a postulated rule of the common law expressed in earlier cases seriously offends those contemporary
values, the question arises whether the rule should be maintained and applied. Whenever such a question
arises, it is necessary to assess whether the particular rule is an essential doctrine of our legal system and
whether, if the rule were to be overturned, the disturbance to be apprehended would be disproportionate to
the benefit flowing from the overturning.1
Some advantages and disadvantages of precedent In

Advantages Disadvantages BrIEf
Promotes consistency Precedent may not be relevant to today’s circumstances
but has to be followed
Coherence Slow to respond to community changes
Certainty May require an Act of Parliament to change
Efficiency
Justice—equality and fairness
Factors to consider for precedent to operate

In order for precedent to operate, there has to be in existence a court hierarchy where the lower courts
will be bound by the decisions of higher courts in that hierarchy (see Chapter 2). In order to determine
the importance of a decision, factors that have to be considered include:
■■ Where does a particular court fit in a hierarchy?

■■ Who was the judge (or judges)?
■■ Even if a decision comes from a higher court in the same hierarchy, it is only the ratio decidendi that
can create a binding precedent. Anything else said in a judgment about the law is at best only capable
of being of persuasive value.
Rules of precedent
Courts of record
Only the more important courts in a hierarchy (the superior courts, which formally record in writing
their court reports) have their decisions followed in later cases by other courts. Known as courts of
record, any judgment of any superior court that is accurately reported is entitled to consideration.
However, the great majority of recorded cases will not create precedents. They will be decided by the
application of existing legal rules.
Binding precedent
In the case of a binding precedent (the ratio decidendi of an earlier case decision), each court is
bound by the decisions of courts higher than it in the same hierarchy of courts, whether or
not it believes that a decision is correct. Courts at the same level reserve the right to reconsider their
own earlier decisions, but it must be established that the earlier decision was manifestly wrong.
To determine whether a court is part of the same hierarchy, consider whether it is linked by a right
of appeal.
HOW LaW Is MaDE: PrEcEDEnt/statutE LaW cHaPtEr 3 77
M03_GIBS1803_10_SE_C03.indd 77 6/1/17 3:39 PM
■■ Business tips and Business risk management alerts

identify areas of the law that people in business need to
ISSUE: Could Quinn withdraw his option before the
promised time period had elapsed where it was
force the defendant to carry out their promise, rather
than seek common law damages, which may not be
be alert to or aware of.
supported by consideration—that is, the five shillings? as beneficial.
You will see that the court is not concerned
DECISION: The option, having been given for value
about the amount of the consideration (its
(the payment of five shillings), was enforceable and
adequacy) as long as it exists and has some value.
non-revocable. The company’s acceptance was good
In this case it was five shillings to keep the option
and a binding contract was made which was enforced
open for a week.
through an order of specific performance. (Quinn was
directed by the court to honour the option.) CASE REFLECTION: Why should the giving of
even nominal consideration be so important in the
COMMENT: Usually the plaintiff in such cases will
formation of a contract?
seek an equitable remedy in specific performance to
Where there is an option in an agreement, if the parties have made no provision as to the time during
which the option must be exercised, the implication is that the option will be executed in reasonable
time—a question of fact depending on the circumstances in each case. For example, in Ballas v Theophilos
(No 2) [1957] HCA 90, the High Court found that 16 months to exercise a clause in a partnership
agreement to acquire the share of a deceased partner wasn’t reasonable even though the agreement did
not specify a time limit to exercise the share option.
BuSINeSS tIP
Options and return of the consideration
The use of an option supported by consideration by an offeree can prevent the offeror from revoking
their offer for a specified period. The offeror has also agreed not to sell the item to anyone other
than the offeree within that period. However, the offeror should specify in the option contract
whether the offeree will recover the deposit money they may have given the seller (offeror) if the
option is not exercised.
BuSINeSS rISK mANAGemeNt ALert
!
Notice of terms
Where an offer contains terms, all the terms and conditions should be brought to the
notice of the offeree as it sets out the parameters on which the offeror is prepared to be
bound. If they are not, a dispute may arise as to whether the parties have, in fact, ever
reached an agreement. This is always a question of fact to be decided objectively on the
basis of whether a reasonable person would have concluded that an offer had been made.
Terms must be followed exactly

Any terms or conditions specified by the offeror must be met by the offeree in accepting the offer, such
as ‘reply by email only’. The key word is ‘only’, as it suggests that the offeror has a particular reason in
mind for wanting a reply in this fashion. These terms or conditions must be exactly followed if there is
to be a valid acceptance.
Impact of statute law

The Australian Consumer Law or ACL (or its predecessor, the Trade Practices Act 1974 (Cth)) has had
a significant impact on the making of offers. For example, ACL s 18 would have caught the activities
of the Carbolic Smoke Ball Company in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. The company
206 PART 3 lAW Of CONTRACTS
M07_GIBS1803_10_SE_C07.indd 206 6/1/17 4:11 PM
xii BUSINESS LAW
■■ Boxed cases that are broken up into a number of
parts, to make them as user-friendly as possible,
The meaning of ‘conduct’
‘Conduct’ means doing, or refusing to do, any act, and has been given a wide meaning under the ACL. have been integrated into the text. They contain:
It not only catches positive statements by sellers of goods or services, but it can also catch:
■■ statements of opinion that imply false representations of fact or are not reasonably held; – the court in which the case was heard (which is
puffs—for example, exaggerated advertisements such as ‘we sell the best ice cream in the world’—
often important for determining the importance
■■
if they are likely to mislead or deceive;
■■ broken promises and false predictions;
■■
■■
statements that are literally true but that create a false impression;
precontractual statements leading up to the entering into a contract that were false—for
of the case for the purposes of precedence);
example, in Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367, both the oral
representations and statements in a brochure by the appellants about the capabilities of a tree- – an outline of the facts;
cutting machine induced the respondents to purchase it; however, the machine fell far short of
expectations and the court found the representations and statements to amount to misleading or
deceptive conduct; and
– the main issue(s);
■■ silence, if it is likely to mislead or deceive (as was the case in Henjo Investments Pty Ltd & Ors v Collins
Marrickville Pty Ltd (1988) 79 ALR 83, below), or, when asked about why the business is for sale, – the decision of the court in which the case was
failing to mention to the buyer that a similar business is opening nearby.
heard;
Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd (1988) – a brief commentary providing additional
79 ALR 83
tHe court: Full Court of the Federal Court of DeciSion: Silence can constitute misleading or
information about the case; and
Australia
factS: Henjo owned a restaurant business. The

deceptive conduct when the circumstances give rise
to a duty to disclose relevant facts. This duty to – a case reflection question to encourage
disclose is not negated merely because inquiries
local council had granted approval for the seating
of 84 people. The liquor licensing authority
prohibited seating or service in the bar area. After
that would have disclosed the true position could
have been made.
students to reflect on the case, the decision of
opening the restaurant, the seating was increased
significantly and the bar area was used as a service
comment: By declaring how many seats were
being used and demonstrating the seating the court and its application to business.
area, all without approval. Collins entered into arrangement, the vendor was disclosing only part of
negotiations to purchase the business, and was the factual situation. Remaining silent about the
told of the number of seats being used and shown officially approved number of seats created an
the seating arrangements. Collins didn’t become incorrect impression in the mind of the buyer about
aware of the lack of approval for the seating potential seating capacity and therefore, of course,
arrangements until after completion of the what the potential profit could be from those extra
purchase. Collins brought proceedings claiming patrons.
misleading or deceptive conduct.
caSe reflection: When supplying informa-
iSSue: Should the officially approved seating tion to a customer, should a business consider not
arrangements have been made known when only the accuracy of the information, but also how it
disclosing the actual seating arrangements? might be interpreted?
By giving a warranty that is false, as Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia
Ltd (1993) 42 FCR 470 (below) illustrates, a person may engage in misleading or deceptive conduct
even if they didn’t intend to mislead or deceive, and even if they haven’t engaged in any other false
representations.
442 Part 4 ConSUmEr Law
M17_GIBS1803_10_SE_C17.indd 442 6/1/17 5:56 PM
■■ In-chapter Review questions provide an opportunity

for students to test their understanding of key concepts
The position where there has been a part failure of consideration, rather than a total failure, has been
remedied, at least in Victoria (Part 3.2 of the Australian Consumer Law and Fair Trading Act 2012) and in
New South Wales (1978) and South Australia (1988) by the Frustrated Contracts Acts.
and issues as they arise in a chapter, and also serve as a
Application of Part 3.2 of the Australian Consumer Law and Fair Trading Act 2012 (Vic)
Money paid under a contract that is subsequently frustrated is recoverable, but if the payee has incurred
quick revision.
some expense in carrying out their obligations under the contract they are entitled to recover expenses
for the work performed before the occurrence of the frustrating event. This adopts the effects of Fibrosa,
and includes situations in which there has not been a complete failure of consideration.
For example, if A agrees to erect a factory for B for $100 000 payable on the date of completion, and
just before completion the factory is completely destroyed by fire, under the old common law rules A
would not recover anything because the obligation to pay fell due after the frustrating event. However, in
Victoria, A would receive some satisfaction under the Australian Consumer Law and Fair Trading Act 2012,
because the court must treat that part of the contract that is not frustrated as a separate contract (s 42)
and calculate expenses for work performed (s 39) and an amount for benefits obtained by the parties
(s 38). The court also has the power to allow amounts paid or payable to be recovered or paid where it
considers it just to do so in all the circumstances (s 37).
Part 3.2 has no application if the parties have anticipated a frustrating event and introduced a term into
their contract as to what will happen if such an event does occur, as in the common law position (s 41). The
Act applies only where the parties don’t allow for the occurrence of a frustrating event in their contracts.
Application of the Frustrated Contracts Act 1978 (NSW)
The New South Wales Act also adjusts the rights of the parties where a contract has been frustrated
to ensure that any loss arising by frustration is shared equally between them (Pt 3). Any moneys paid
before frustration must be repaid (s 12), as must any benefits a party receives from the actions of
another party under the contract. Promises due but not performed because of the frustrating event are
discharged (except where necessary to support a damages claim: s 7).
Application of the Frustrated Contracts Act 1988 (SA)
The South Australian Act attempts to ensure that no party is unfairly advantaged or disadvantaged as
the result of a frustrating event (s 7(1)), and to this end the court has been given wide powers to assure
an equitable adjustment is achieved between the parties (s 7(2)). It combines the value of contractual
benefits received and the value of contractual performance up to the date of frustration, subtracting the
latter from the former and then notionally dividing the remainder between the parties equally. However,
the Act is subject to any provision in the contract itself as to the consequences of frustration.
REvIEw QUESTIONS
14.3 A fishing company owned four trawlers of a type useful only if fitted with an otter trawl. The
company then chartered a similar trawler, which increased the fleet size to five. To fit this type
of trawl required the permission of the Minister of Fisheries. The company applied for five
licences, but was granted only four. The company fitted the four trawls to four of the boats it
owned, and then claimed that the charter of the fifth boat was now impossible and that the
contract was at an end. Is the fishing company correct in its belief?
14.4 A ship was chartered to proceed ‘with all convenient speed’ from Liverpool. One of the terms
of the agreement read: ‘ . . . all and every danger and accident of the seas excepted’. The ship
left Liverpool but ran onto rocks the following day, and it was over three months before it
could be towed off. After this was done, it was found that months of work would be needed
before the ship would be seaworthy again. Was the contract frustrated despite the term in the
contract regarding accidents at sea?
380 Part 3 law of contracts
M14_GIBS1803_10_SE_C14.indd 380 6/1/17 11:16 PM
HOW TO USE THIS BOOK xiii
■■ At the end of every chapter there is material to engage,
challenge and test students’ understanding of the area
KEY TERMS
An understanding of the following term will help you to better understand the material in this chapter.
covered in the chapter. This includes:
Contract: an agreement containing promises made between two or more parties, with the intention of
creating certain rights and obligations, which is enforceable in a court of law. – Key terms with definitions to assist students’
E-commerce: commerce by means of computer, the Internet and other telecommunication links such
as electronic data exchange (EDI). understanding of the material—go to the glossary
E-contract: a contract that is completed electronically, generally by email or sMs.
Electronic Transactions Acts: the Commonwealth and each state and territory have similar legislation
which sets out rules to ensure that a transaction will not be invalid simply because it was
for a full listing of all key terms;
conducted through electronic communication.
Rescission: an equitable, discretionary remedy that, if granted by the court to an innocent party, sets
– Key points, which provide a summary of points
and a good foundation for students to build their
aside the contract and treats it as though it never existed.
Termination: where the innocent party brings the contract to an end and is discharged from any future
obligations; this does not affect any obligations still outstanding at the date of termination.
KEY POINTS
notes from; and
An understanding of the following points will help you to better revise material in this chapter.
1. What is the difference between a contract and an agreement? A contract is an agreement – Tutorial questions to encourage discussion and
containing promises made between two or more parties that create rights and obligations
enforceable in a court of law. An agreement, on the other hand, is not legally binding because it
lacks one or more of the six essential prerequisites that must be present for a legally enforceable
debate among students.
contract.
2. What is the definition of a contract? A contract is an agreement containing promises made

between two or more parties that create rights and obligations enforceable in a court of law.
3. What are the elements of a simple contract? Intention to create legal relations, agreement and
consideration must be present for a simple contract to come into existence. note that there is no
question of validity or otherwise at this point.
4. What is contractual validity? legal capacity, genuine consent and legality of objects will
determine whether the simple contract is valid or not.
5. What is the difference between formal vs simple contracts? A formal contract is signed, sealed
and delivered, and derives its validity from its form alone (it doesn’t need consideration). A simple
contract requires no special formalities but does require the presence of all six elements (including
consideration) and may be oral or written.
TUTORIAL QUESTIONS
1. Why is it necessary today for some contracts to be wholly in writing and some contracts to be
evidenced in writing? Discuss.
2. What sort of problems may arise in contract law for users of e-commerce? Discuss.
3. In the purchase of a car, or for that matter anything of value, why is it important to check that
the seller has a valid title in the goods? Discuss.
4. List three elements that are necessary for the creation of a valid simple contract.
5. Explain the difference between a formal and a simple contract.
6. Is an unaddressed proposal in an electronic communication to create a contract an invitation

for others to make offers, or is it an offer which others can accept? Discuss.
188 pART 3 lAw of ConTRACTs
M06_GIBS1803_10_SE_C06.indd 188 6/1/17 4:05 PM
xiv BUSINESS LAW
EDUCATOR RESOURCES
A suite of resources provided to assist with delivery of the text, as well as to support teaching and learning.
Solutions Manual
The Solutions Manual provides educators with detailed, accuracy-verified solutions to the in-chapter and end-
of-chapter questions in the book.
Test Bank
The Test Bank provides a wealth of accuracy-verified testing material. Updated for the new edition, each chapter
offers a wide variety of true/false, short-answer and multiple-choice questions, arranged by learning objective
and tagged by AACSB standards.
Questions can be integrated into Blackboard or Moodle.
PowerPoint lecture slides
A comprehensive set of PowerPoint slides can be used by educators for class presentations or by students for
lecture preview or review. They include key figures and tables, as well as a summary of key concepts and
examples from the text.
xv
MyLab Business Law
A GUIDED TOUR FOR STUDENTS
AND EDUCATORS
Auto-generated Test
and Assignments
Each MyLabTM comes with
preloaded assignments, all
of which are automatically
graded.
Assignable content
Educators can select
content from the Study
Plan, Multimedia and/or
Test Bank and assign to
students as homework or
quizzes.
xvi
MyLab Business Law www.pearsonmylabandmastering.com
Study Plan
A Study Plan is generated
from each student’s results
on quizzes and tests.
Students can clearly see
which topics they have
mastered and, more
importantly, which they
need to work on.
Learning Resources
To further reinforce
understanding, Study Plan
and Homework problems
link to the eText and
additional learning
resources.
MyLab Business Law xvii
PREFACE
The tenth edition of Business Law continues to provide stu- sources and classifications of law; the origins of major
dents of commercial or business law with an accessible and sources of English law; the interface between Common-
student-friendly but authoritative and comprehensive text- wealth and state powers and the role of the Australian
book. It provides extensive coverage of business law topics Constitution; the division of powers under the Constitu-
and considers the legal environment in which businesses tion; the difficulty of changing the Constitution; the role of
must operate. Care has been taken to ensure that the text the High Court in federal expansion; and, finally, what the
represents current law in all states and territories. Business separation of powers is.
Law will satisfy the requirements of most business or com- ■■ Chapter 2 considers the role of the police and the
mercial law subjects throughout Australia. courts within the Australian legal system; examines the
This edition has retained the distinctive layout of the pre- court system within which the legal system operates at
vious nine editions. The learning aids, such as In brief, state and federal (including the features that make up a
Business tips and Business risk management alerts, court hierarchy); the growth of e-technology in the
and the boxed cases and flowcharts continue to feature courts; and the growth in alternatives to the courts,
strongly throughout the text. More features of the text are as including alternative forms of dispute resolution, quasi-
follows. judicial tribunals and ombudsmen. The chapter con-
cludes by providing an overview of the adversary
■■ The citation for Australian cases, where possible, is now
system, the role of the various parties in it, and the role
in what is referred to as report-neutral form. The refer-
and growth of class actions.
ence to where the case may be found is not cited to a law
■■ Chapter 3 begins by looking at where law comes from
report but rather to where it can be accessed online. Stu-
and how it can be found, as well how to correctly cite
dents often cannot access a law library or understand
cases and statutes for essays or answers to problem
how to find a law report or statute easily. However, today
questions. It then goes on to explain the importance of
they are so computer literate that it is easier for them to
case law (the ratio decidendi and obiter dicta) and
look up what they can online.
legal cases as precedent as sources of law within the
■■ Topic coverage has been increased in a number of areas
Australian legal system. The final part of the chapter is
to reflect changing needs in student understanding of
devoted to statute law, its creation by parliaments, the
how the law interfaces and interacts with business. For
rules of interpretation applied by the courts when
example, topic coverage has been increased and fine-
doubts arise about the meaning of words or phrases
tuned throughout the text.
applied to particular facts, and the intersection
■■ All cases now contain a Comments section after the
between international treaties and domestic law; and
decision, setting out points to note about the case and
concludes with a brief overview of the growing impor-
putting it into a context that will help to give business
tance of delegated or subordinate legislation as a regu-
students a better understanding of where a legal princi-
latory tool by all levels of government on the
ple might perhaps have emanated from or how it applies
community.
to a particular fact situation.
■■ All cases also contain a Reflection question at the end
Part 2—Civil Liability To assist students’ understanding
of each case, asking students to think about the case and
of tort law, and negligence in particular (as this is probably
the decision, and to reflect on its importance and appli-
the most important area for business, although not the only
cation to business.
tort relevant to business), the tort of negligence is consid-
ered in the following two chapters. Chapter 22, an online
The legal environment of business chapter, contains further commentary on other areas of tort
Business Law presents topics that are traditionally part of
law that is of relevance to business.
business law courses.
■■ Chapter 4 begins by considering why an understanding
Part 1—Legal Framework contains three chapters that
of the law of torts is so important to business; the differ-
introduce the student to the legal framework of business.
ent types of tort actions; some of the general principles
■■ Chapter 1 discusses what law is; the interface between of tort law; the range of remedies available; the compen-
business and law; its major characteristics; the major sation available outside tort law; the importance of time
xviii
in terms of commencing an action; and the distinction Once a simple contract has been created, it is then nec-
between tort and criminal law, and tort and contract law. essary to see whether that simple contract is valid and
The chapter then moves on to examine the tort of negli- enforceable. There is no particular order of importance in
gence, and what an injured party or plaintiff needs to the following chapters, but they raise issues that need to be
establish in order to have a cause of action in considered for the purposes of determining the ‘validity’ of
negligence—for the plaintiff, the elements of duty, breach the simple contract that has been created.
and damage, and for the defendant, the issue of defences.
The chapter concludes with a brief overview of what a ■■ Chapter 10 (capacity) considers the ability of the par-
successful plaintiff will recover if they win their case. It ties (including infants, corporations, bankrupts, the men-
should be noted that the duty question aside, which is tally unsound and intoxicated persons, and married
still based on the common law, the remaining elements women) to fully understand what they have entered into
of breach, damage, defences and remedies are all now (which may be termed their ‘capacity’ to understand
based on the civil liability legislation (the Wrongs Act 1958 what they are entering into).
in Victoria). ■■ Chapter 11 (consent) considers what the consequences
■■ Chapter 5 then explores some of the areas of tort are if one or both of the parties say they have misunder-
absorbed by negligence, including occupier’s liability, stood the situation (e.g. because of mistake, misrepresen-
product liability, non-delegable duties and strict liability, tation, duress, undue influence or unconscionability).
product liability, defective structures, negligent misstate- Has an agreement been reached?
ments, the liability of professionals, vicarious liability, ■■ Chapter 12 (legality) considers whether the purpose of
non-delegable duties and strict liability, breach of statu- the contract is legal. Is the contract illegal or void at stat-
tory duty, and finally criminal negligence. ute or common law?
Part 3—Law of Contracts contains 10 chapters that Once it has been established that a contract exists:
cover the basics of the common law of contracts, although
you will notice throughout this section numerous refer- ■■ Chapter 13 (terms) considers what it is that the parties
ences to statutory intervention, principally in the form of have agreed to (the ‘terms’ of the contract), and includes
the Australian Consumer Law (ACL). Without contracts, commentary on the impact of the ACL on the terms of a
business and the community as we know them today would consumer contract. Strange as it may seem, it sometimes
not exist. happens that what the parties think they have agreed to
Chapter 6 is an introductory chapter to contract law; is not the same, and a dispute eventuates.
Chapters 7 to 9 look at the elements that must be present for ■■ Chapter 14 (rights and liabilities) considers the rights of
the creation of a simple contract; and Chapters 10 to 12 the parties and also who is a party to the contract (an
look at the elements that have to be satisfied for the simple issue of privity), as well as whether the contract has been
contract that has been created to be valid. The approach discharged by performance, agreement, frustration,
that has been used is to divide up the creation of a valid operation of law or lapse of time or dissolved or breached
simple contract into ‘steps’ to make it easier for the student by virtue of a term (depending on whether it is a con-
to understand the basic principles involved in the formation sumer contract or not) such as a condition, warranty or
of a contract, although in reality the courts very rarely consumer guarantee.
openly use such an approach. ■■ Chapter 15 (remedies) considers the remedies that are
available to the innocent party (i.e. the party not in
■■ Chapter 6 considers the sources of contract law, what
breach) at common law (generally damages) and in
elements need to be considered in the creation of a sim-
equity (generally either specific performance to make a
ple valid contract, and the various ways in which a con-
person carry out their contractual obligations or an
tract may be classified.
injunction to restrain a party from breaking their con-
■■ Chapter 7 (agreement) considers whether there has been
tract) if the contract has been breached.
agreement between the parties to create a contract—has
there been an offer and is there an acceptance? Part 4—Consumer Law contains two chapters. The pri-
■■ Chapter 8 (intention of the parties to create legal rela- mary focus of this section is on consumer rights and protec-
tions) considers the element of ‘intention’—that is, do tion, the changes that have occurred as a result of the ACL
the parties intend to create a contract that is legally and the referral by the states and territories of their con-
enforceable in a court of law? sumer protection powers to the Commonwealth.
■■ Chapter 9 (consideration) is the final step in the first
part of the process in determining whether a contract ■■ Chapter 16 examines the interpretation of the implied
exists, as it looks at the element of ‘consideration’— statutory consumer guarantees and their application to
that is, what is the price paid to buy the other person’s contracts involving consumers. The position of non-
promise? If agreement, intention and consideration consumers (i.e. businesses) is examined in Chapter 24.
are present and identifiable, a simple contract is said The ACL replaced the implied terms of condition and
to exist. warranty found in the old state and territory [Sale of ]
PREFACE xix
Goods Acts with non-excludable statutory guarantees, There are also a number of online chapters that are
and extended the meaning of ‘sale’ by using the term available in an electronic format via MyLab Business Law.
‘acquire’ instead. These terms were implied by the ACL
■■ Chapter 22 examines some other business-related torts
into every contract for the sale of goods and services,
that are of growing importance to business. First are the
and have expanded a consumer’s rights in the event of
intentional torts, including trespass, defamation and the
a supplier or manufacturer failing to comply with a con-
economic or business torts (which protect business
sumer guarantee.
interests and include intimidation, interference with
■■ Chapter 17 discusses the consumer protection provi-
contractual relations, conspiracy, passing off, injurious
sions contained in the ACL in regard to prohibited
falsehood, deceit and misrepresentation). The second
unconscionable conduct, misleading and deceptive con-
group is probably a misnomer because it consists of only
duct, and unfair trading practices. It also examines the
one tort: nuisance. It is concerned with indirect harm
new national regulation of consumer transactions, in
involving the use and enjoyment of land and takes three
particular unfair contract terms, unsolicited consumer
forms: public nuisance, private nuisance and statutory
agreements and lay-by agreements. The chapter exam-
nuisance. Finally, there is a brief overview of what are
ines the national scheme for product safety, product
known as the statutory torts and the new tort of invasion
information and product liability created by the ACL, and
of privacy.
then outlines the new system for enforcement and rem-
■■ Chapter 23 is concerned with insurance, a very impor-
edies. The chapter concludes by providing a brief over-
tant topic for businesses because they cannot operate
view of the role of the states and territories in the
without incurring some risk and sometimes subsequent
protection of consumers.
loss. Insurance is a means for business to protect its
assets against the risk of loss and obtain compensation
Part 5—Business Organisations and the Law contains
where loss occurs. This chapter examines the concepts
four chapters covering the law of agency, companies, part-
underlying insurance, the making and construction of the
nerships and choosing a business entity.
insurance contract, the law regarding agents and brokers,
■■ Chapter 18 examines the law of agency, the purpose of and some common forms of business insurance.
an agency and how it is created, the authority of the ■■ Chapter 24 examines the statutory rules that business
agent, the rights and duties of the agent and principal to has to operate under involving the sale of goods. The two
each other, their liability to third parties, and how the earlier chapters on consumer protection (Chapters 16
agreement can be terminated. and 17) largely focused on the rights of the consumer.
■■ Chapter 19 examines one of the three most important This chapter considers how the contract is formed, the
forms of business ownership that exists in Australia importance of the distinction between property (or own-
today: the company. This chapter considers the essential ership) and possession, the different classifications of
characteristics of a company, the different types of com- goods, the transfer of title, how the contract may be per-
pany to choose from for business purposes, and the legal formed, and the remedies for breach by either party. The
requirements related to the management and winding-up chapter concludes by briefly examining what the legal
of the company. The chapter concludes by looking at position of the parties is when they are in different coun-
one other form of incorporated body, the statutory asso- tries (the Vienna Sales Convention).
ciation, which is widely used by clubs and associations ■■ Chapter 25 begins by looking at the distinction between
that want the protection offered by incorporation but are real property (or realty) and personal property. It includes
not trading bodies. a reference to the very important Personal Property Secu-
■■ Chapter 20 examines the second most important form rity Act 2009 (Cth). It also considers interests in land and
of business ownership in Australia: the partnership. how ownership and possession may be obtained, the
This chapter considers the essential characteristics of a mortgaging and leasing of land, and the rights and duties
partnership, how it is created, how it is distinguished of residential and commercial landlords and tenants.
from another similar entity (the joint venture), what the ■■ Chapter 26 looks at a completely different kind of
rights and liabilities of the partners are, as well as their ‘property’ right called intellectual property, such as pat-
duties and how a partnership may be dissolved and its ents, designs, copyrights and trade marks. As you will see
assets distributed, and finally looks at what a limited when you read this chapter, it is a particularly important
liability partnership is. area for business because the failure to protect and
■■ Chapter 21 examines which business entity is most manage its intellectual property can mean the difference
suited to a particular business—that is, sole trader, part- between success and failure.
nership, company, trust or franchise (including a com- ■■ Chapter 27 briefly discusses business ethics and morals,
mentary on the new Franchising Code of Conduct, which and emphasises the idea that ‘just because it is legal, that
became effective from 1 January 2015). The chapter also does not make it right’. The concepts of ethics and mor-
includes a commentary on the National Register of Busi- als are considered in the context of the law, with refer-
ness Names. ence to several ethical theories.
xx BUSINESS LAW
■■ Chapter 28 discusses the criminal law aspects of business Business application
relationships. It considers white-collar crime as well as Many business law textbooks take a legalistic approach to
examples of criminal offences created by the various stat- presenting legal topics to business students. A common
utes referred to in the book. ‘Chain of responsibility’ legisla- comment from students in business courses is: ‘Why are we
tion and its impact on management are also considered. studying law? We aren’t going to be lawyers. If we need
■■ Chapter 29 examines the operation and administration legal help or advice, we will go and see a lawyer.’ While this
of the restrictive trade practices provisions contained in statement is partly true, the reality is that an awareness of
Part IV and VII of the Competition and Consumer Act 2010 one’s legal rights and a general knowledge of the law are
(Cth) on businesses. The aim of these parts of the Act are important in business today. Regulators who make and
to strengthen competitiveness of private enterprise at enforce the law, such as the ACCC, assume that both indi-
the various levels of production and distribution of indus- viduals and companies have an understanding of the legal
trial and consumer goods and services for the benefit of processes that impact on their business. This book recog-
consumers and business in general. As a result of these nises that what is important to students studying commer-
aims, the Act has enormous importance for business. cial or business law is the application of court decisions,
■■ Chapter 30 looks briefly at the process of debt recovery statutes and government regulation to both business and
in the lower courts before examining personal bank- their daily lives.
ruptcy in detail, and the liquidation, administration and There are a number of features that have been incorpo-
receivership of companies. It includes a reference to the rated into Business Law that will demonstrate the applica-
Personal Property Security Act 2009 (Cth). tion of law and government regulation to the business
■■ Chapter 31 begins by considering whether a person is environment.
an employee or an independent contractor, and why the There are many features in the book that are designed
distinction is important, before explaining how a con- for your benefit. These features are tools to help make your
tract of employment is formed, and what are the rights learning more effective and to help you to see the
and duties of the employer and the employee. The relevance of the book’s content to your life and work.
chapter then considers aspects of the work environ- I strongly suggest you spend some time reading ‘How to
ment, including the Fair Work Australia Act 2009 (Cth), use this book’, on pp. xi–xiv, to get the most out of your text
the issue of discriminatory behaviour in the workplace and MyLab Business Law.
and the new national work health and safety regimen.
The following chapters are available on demand: Acknowledgments
Pearson Australia and I are indebted to the many known,
■■ Chapter 32 looks at an area that is becoming very
and anonymous, academics who were surveyed or inter-
important for business. This is the area of electronic
viewed, and provided feedback in the planning, develop-
commerce, and this chapter examines some of the issues
ment and production stages of this new edition. Your input
confronting business, including the electronic transac-
has ensured that this edition retains all the hallmarks of
tions legislation and electronic contracts, the legal
earlier editions, but is now a true collaborative effort
aspects of maintaining a business website (and the juris-
ensuring we put the business law student, and the busi-
dictional problems that raises), and the issues of privacy,
ness perspective, at the centre of this new re-launched
cybercrime and electronic banking.
edition.
■■ Chapter 33 looks at the different methods that are used to
I would be grateful for any further comments or sugges-
pay for goods or services (i.e. bills of exchange, cheques and
tions from teachers or students concerning Business Law.
credit/debit cards). The purpose and operation of the
Your feedback will improve future editions.
Financial Transaction Reports Act 1988 (Cth) is also examined.
You can contact me at the email address below (and, yes,
■■ Chapter 34 examines consumer credit under the new
you will get a reply as I do appreciate the input).
National Credit Code and privacy. It includes a reference
to the Privacy Amendment (Enhancing Privacy Protection)
Andy Gibson
Act 2012 (Cth).
andygibson100@hotmail.com.au
■■ Chapter 35 begins by examining the connection between
February 2017
business and ethics before looking at aspects of marketing
law, including the marketing mix and the legal factors
impacting on marketing, and concludes by looking a the
ethical and legal requirements for advertising in Australia.
PREFACE xxi
ABOUT THE AUTHOR
Andy Gibson
Andy Gibson has lectured in Business Law now for 30 years, first at the (then) Royal
Melbourne Institute of Technology, then at Griffith University on its Gold Coast campus.
He is currently at Southern Cross University. Andy has co-authored a number of Business
Law texts with Doug Fraser, as well as being sole author of another. He has jointly authored
a text on the Law of Torts and currently is the foundation editor of a Sports Law looseleaf
publication. Andy was Financial Director of the Australian and New Zealand Sports Law
Association (ANZSLA) up until 2012 and writes current case and legislative summaries for
the ANZSLA online publications Sports Shorts and The Commentator, as well as being on the
Editorial Board for the ANZSLA peer-reviewed Sports Law Journal.
xxii
KEY TO CASE REPORT
ABBREVIATIONS
Some of the more commonly encountered case KB/QB King’s Bench/Queen’s Bench Reports 1891
reports and references that can be found in Commer- to present (England)
cial Law are mentioned below. However, this is not an LIJ Law Institute Journal of Victoria (articles)
exhaustive list of all the case reports and references. Where LQR Law Quarterly Reviews (articles)
the case reports are from another country or are a reference LR (NSW) Law Reports (New South Wales)
or journal, details appear in brackets after the report’s name. LSB Law Society Bulletin (South Australia)
It is also worth noting that where Australian cases have been (articles)
referred to in the text, if the case is available online the cita- LSJ Law Society Journal (New South Wales)
tion is an ‘electronic’ online citation rather than a citation to LTR Law Times Reports (England)
a Law Report. This is to facilitate ease of access to cases for Lloyd’s
the reader who is interested in reading the full case rather Rep Lloyd’s Reports (England)
than just an extract. MLR Modern Law Review (articles)
NSWLR New South Wales Law Reports
ABC Australian Bankruptcy Cases NSWR New South Wales Reports
AC Appeal Cases 1891 to present (England) NTR Northern Territory Reports
ACL Australian Current Law (a reference guide) NZLR New Zealand Law Reports
ACLC Australian Company Law Cases QdR Queensland Reports
ACLD Australian Company Law Digest QSCR Queensland Supreme Court Reports
ALJ Australian Law Journal (articles only) QSR Queensland State Reports
ALJR Australian Law Journal Reports QWN Queensland Weekly Notes
ALR Australian Law Reports SALR South Australian Law Reports
ASLR Australian Securities Law Reporter SASR South Australian State Reports
ATPR Australian Trade Practices Reporter SCR
All ER All England Reports (England) (NSW) Supreme Court Reports (New South Wales)
App Cas Law Reports, Appeal Cases (England) SCR
Aust Torts (NSW) Eq Supreme Court Reports, Equity (New
Reports Australian Torts Reports South Wales)
BCLC Butterworths Company Law Cases SR (NSW) State Reports (New South Wales)
CB Common Bench Reports (England) TLR Times Law Reports (England)
CLR Commonwealth Law Reports TPC Trade Practices Cases
Ch Law Reports, Chancery Division 1891 to Tas LR Tasmanian Law Reports
present (England) VLR Victorian Law Reports
DLR Dominion Law Reports (Canada) VR Victorian Reports
ER English Reports (England) WALR Western Australian Law Reports
Ex/Exch Exchequer Reports (England) WAR Western Australian Reports
FLC Family Law Reports WLR Weekly Law Reports (England)
FLR Federal Law Reports WN
HL House of Lords (England) (NSW) Weekly Notes (New South Wales)
ILJ Insurance Law Journal (articles) WR Weekly Reporter (England)
IPR Intellectual Property Reports
xxiii
TABLE OF CASES
Page numbers in bold indicate boxed discussions of cases. Australian Securities and Investments Commission (ASIC) v
Plymin, Elliott and Harrison [2003] 529
A-G for Australia & Kirby v R and the Boilermakers Society Australian Securities and Investments Commission (ASIC) v
[1957] 26 Rich [2003] 525, 526
A Schroeder Music Publishing Co Ltd v Macauley [1974] Australian Securities and Investments Commission v Vizard
318–319 [2005] 526, 527
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australian Woollen Mills Pty Ltd v The Commonwealth
Australia Limited (1993) 442, 443 [1954] 230–231
Adams v Lindsell (1818) 217 Azzi v Volvo Car Australia Pty Ltd [2007] 192
Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v
Bou Najem [2009] 131, 166 Ballas v Theophilos (No 2) [1957] 206, 210, 381
Adler v Dickson (The Himalaya) [1955] 357 Balmain New Ferry Co Ltd v Robertson [1906] 352
Agar v Hyde; Agar v Worsley [2000] 119, 120 Baltic Shipping Co Ltd v Dillon [1991] 349
Alameddine v Glenworth Horse Riding Pty Ltd [2015] 164 Baltic Shipping Co Ltd v Dillon [1993] 396–397
Alexander v Cambridge Credit Corporation Ltd (in rec) Banque Brussels Lambert SA v Australian National Industries
(1987) 392 Ltd (1989) 229, 230
Allcard v Skinner (1887) 298, 299 Barnett v Chelsea and Kensington Hospital Management
Amoco Australia Pty Ltd v Rocca Brothers Motor Engineering Committee [1969] 129
Co Pty Ltd [1973] 320 Barton v Armstrong [1976] 294, 295
Andar Transport Pty Ltd v Brambles [2004] 355 Bell v Lever Brothers Ltd [1932] 279, 280
Anderson v Glass [1869] 242 Belna Pty Limited v Irwin [2009] 164
Anderson Ltd v Daniel [1924] 309 Bettini v Gye [1876] 336, 337
Andrews v Australia and New Zealand Banking Group Ltd Blazely v Whiley (1995) 25
[2012] 401 Blomley v Ryan [1956] 270–271
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd Bojczuk v Gregorcewicz [1961] 262
[1987] 339 Bolton v Stone [1951] 124
Anton Piller KG v Manufacturing Processes Ltd [1976] 405 Bolton Partners v Lambert (1889) 488–489
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] 426 Boulton v Jones (1857) 281, 282
Ashton v Pratt (No 2) [2015] 233–234, 312 BP Refinery (Westernport) Pty Ltd v President, Councillors and
Associated Newspapers Ltd v Bancks [1951] 336 Ratepayers of Shire of Hastings (1978) 342
Attwood v Lamont [1920] 316, 317, 318 Brambles Holdings Ltd v Bathurst City Council [2001] 194
Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 256 Brighton le Sands Amateur Fishermen’s Association Ltd v
Australia and New Zealand Bank Ltd v Ateliers de Vasilios Koromvokis [2007] 134–135
Constructions Electriques de Charleroi [1967] 490 Brooks v Burns Philp Trustee Co Ltd [1969] 314
Australian Competition & Consumer Commission (ACCC) v Bryan v Maloney [1995] 145, 150
Excite Mobile Pty Ltd [2013] 450 Burnie Port Authority v General Jones Pty Ltd [1994] 154
Australian Competition & Consumer Commission (ACCC) v Burns v MAN Automotive (Aust) Pty Ltd [1986] 398
Keshow [2005] 450 Byrne & Co v Leon Van Tienhoven & Co (1880) 208, 217
Australian Competition & Consumer Commission (ACCC) v
Nissan Motor Co (Australia) Pty Ltd & Anor [1998] 455 Calsil Ltd v TVW Enterprises Ltd, Re [1984] 459
Australian Competition & Consumer Commission (ACCC) v Caltex Refineries (Qld) Pty Ltd v Stavar [2009] 114
Radio Rentals Ltd [2005] 450 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume
Australian Safeway Stores Pty Ltd v Zaluzna [1987] 161 Sales (Finance) Pty Ltd [1974] 548–549
Australian Securities and Investments Commission (ASIC) v Carlill v Carbolic Smoke Ball Co [1893] 196, 199, 204–205,
Adler & 4 Ors [2002] 527, 528 206, 212, 214, 231, 245
Australian Securities and Investments Commission (ASIC) v Carpet Call Pty Ltd v Chan (1987) 416
Gallagher (1993) 524, 525 Carter v Hyde [1923] 210
xxiv
Another random document with
no related content on Scribd:
* Pronounced Yule in the original.
"Mostly," answered Willi, with slight hesitation, while Lili, remembering their various
deviations from the paths of righteousness, decided to change the subject of conversation,
and gaily embraced her father instead. Willi and Lili, the twins, were exactly eight years
old and were so inseparable that nobody even spoke of them separately. They always
played together, and often undertook things which they had a clear glimmering that they
should not do.
"And you, Rolf, how are you?" said the father, next, to a boy about twelve years old with a
broad forehead and sturdy frame. "Are you working hard at your Latin and have you made
up some nice riddles?"
"Yes, both, papa. But the others won't ever try to guess them. Their minds are so lazy, and
mamma never has time."
"That is too bad, and you, Paula?" continued the father, drawing to him his eldest daughter,
who was nearly thirteen. "Are you still longing for a girl friend, and do you still have to
walk about the garden alone?"
"I haven't found anybody yet! But I am glad you are back again, papa," said the girl,
embracing her father.
"I suppose you are spending your holidays in a useful fashion, Jul?" asked the father,
shaking hands with his eldest.
"I try to combine my pleasure with something useful," replied Jul, returning his father's
handshake. "The hazel nuts are ripe now, and I am watching over their harvest. I also ride
young Castor every day, so he won't get lazy."
Julius, who was seventeen years old, and studied at a high school of the nearest town, was
home for his holidays just now. As he was very tall for his age, everybody called him "big
Jul."
"I must ask you to continue your greetings in the garden, papa. All kinds of surprises await
you there," began Jul again, coming up to his father, who was pleasantly greeting Miss
Hanenwinkel, the children's governess and teacher.
But Jul had to pay dearly for this last remark. Immediately Willi and Lili flew at him from
behind, enjoining him to silence by pinching and squeezing him violently. Fighting them off
as best he could, he turned to Lili: "Let me go, little gad-fly. Just wait, I'll lead up to it
better." And turning towards his father he said loudly, "I mean in the garden where mother
has prepared all kinds of surprises you won't despise. We must celebrate by having
something to eat, papa."
"I agree with you; how splendid! Perhaps we shall even find a table spread under my apple
tree. I should call that a real surprise!" cried the father, delighted. "Come now!"
Giving the mother his arm, he went out, followed by the whole swarm. Lili and Willi were
thrilled that their papa thought this was the only surprise in store for him.
Upon stepping outside, the parents stood immediately under a triumphal arch; at both
sides hung small red lanterns which lit up the large hanging board on which was a long
inscription.
"Oh, oh," said the father, amazed, "a beautiful triumphal arch and a verse for my welcome.
I must read it." And he read aloud:
"We all are here to welcome you beside the garden gate;
And since you've come, we're happy now, we've had so long to wait.
We all are glad, as glad can be, our wishes have come true;
You've got back safe, and we have made this arch to welcome you."
"Beautiful, beautiful! I suppose Rolf is the originator of this?"
But Willi and Lili rushed forward crying, "Yes, yes, Rolf made it, but we invented it. He
made the poem, and Jul set up the poles, and we got the fir twigs."
"I call this a wonderful reception, children," cried the delighted father. "What lovely little
red, blue and yellow lights you have put everywhere; the place looks like a magic garden!
And now I must go to my apple tree."
The garden really looked like an enchanted place. Long ago the small colored lanterns had
been made, and Jul had fastened them that morning on all the trees and high bushes of
the garden. While the greetings were taking place in the house, old Battist and Trine had
quickly lit them. The branches of the apple tree also were decorated with lights, making it
look like a Christmas tree, with the apples gleaming out between the lanterns. They threw
their light down on the table with its white cloth on which the mother had set the large
roast, tempting the guests with the special wine for the occasion and the high pile of apple
tarts.
"This is the nicest festival hall I can imagine!" exclaimed the father happily, as he stood
under the sparkling tree. "How wonderful our dinner will taste here! Oh, here is a second
inscription."
Another white board hung down on two strings from the high branches behind the trees.
On it was written:
"Happy all at my first are reckoned,

Christmas is in the state of my second,
And for my whole the feast is spread
With candy, nuts and gingerbread."
"Oh, I see, a riddle; Rolf must have made this for me!" said the father, kindly patting the
boy's shoulder. "I'll set to work guessing as soon as we have settled down. Whoever
guesses the riddle first may touch glasses with me before the others. Oh, how pleasant it
is to be together again."
The family sat down under the tree, and the conversation soon began to flow. From big Jul
down to little Hun there seemed to be no end of all the experiences everybody had to tell.
A sudden silence fell when the father pulled out from under his chair a large package,
which he promptly began to unpack. The children watched his motions with suspense,
knowing that a present for everybody would now come to light. First, came shining spurs
for Jul, then a large blue book for Paula. Next emerged a rather curious object, turning out
to be a large bow with a quiver and two feathered arrows, a present for Rolf. As the father
took out the fine arrows with sharp iron points, he said with great emphasis:
"This weapon belongs to Rolf only, who knows how to use it. As it is no toy, Willi and Lili
must never think of playing with it. Otherwise they might hurt somebody with it. It is
dangerous, remember."
A gorgeous Noah's ark containing many kinds of animals in pairs and a Noah's family was
presented to the twins. The men all held big staffs and the women carried large umbrellas,
much needed while going on board the ark. For little Hun, who came last, a wonderful
nutcracker came to light, whose face seemed doomed to uninterrupted sorrow for all the
tragedies of this world. His mouth stood wide open when not in action, but when screwed
together, he cracked nuts in the neatest fashion with his large, white teeth. The presents
had to be shown properly and commented upon, and the admiration and joy knew no
bounds.
Finally the mother resolutely got up to tell the children to go to bed. Their usual bedtime
was long since past. As the father got up, he asked with a loud voice, "Yes, but who had
guessed the riddle?"
No one had done so, as all except Rolf had completely forgotten it.
SHE HAD BEEN LOST IN EVERYTHING

SHE HAD PARTLY SEEN AND HEARD
"But I guessed it," said the father, no other answer being heard. "I suppose it is
homecoming. Isn't it, Rolf? Let me touch your glass now and also let me thank you for the
riddle."
While Rolf joyfully stepped up to his father, several frightened voices cried out, "Fire, fire!"
The next moment, everyone leaped from their seats, Battist and Trine came running out
with bottles and buckets from the kitchen, and Hans came from the stable with another
bucket. All rushed about shrieking wildly, "The bush is on fire, the hedge is on fire." The
confusion and noise was truly amazing.
"Dora, Dora!" a wailing voice called down to the little garden of the neighboring cottage,
and the next moment Dora hastened into the house from her place of observation. She
had been so lost in everything she had partly seen and heard that she had not realized
that she had been squatting on the ground for two full hours.
Upstairs, the aunt in grief and fright had pulled her belongings from the wardrobes and
drawers and had piled them high as for immediate flight.
"Aunt Ninette," said Dora timidly, conscious of having remained away too long. "Don't be
frightened any more. Look, it is dark again in the garden over there and all the lights are
out."
Upon gazing over, the aunt saw that everything was dark and the last lights had been put
out. Now a very dim lantern approached the apple tree. Probably somebody was setting
things in order there.
"Oh, it is too terrible! Who could have guessed it!" moaned the aunt. "Go to bed now,
Dora. We'll see tomorrow whether we shall move or leave the place entirely."
Dora quickly retired to her room but she could not go to sleep for a long, long while.
She saw before her the garden and the gleaming apple tree, heard the merry children's
voices and also, their father's pleasant, happy words. She could not help thinking of her
own dear father who had always been willing to listen to her, and she realized how
fortunate her little neighbors were. She had felt so drawn to the children and their kind
parents, that the thought of moving away from the house quite upset her. She could not
go to sleep for a long, long while, for her mind was filled with the recent impressions.
Finally her own beloved father seemed to be gazing down at her and saying the comforting
words as he used to do:
"'Yet God keeps watch above us

And doeth all things well.'"
These words were still in her mind as she went to sleep, while the lights, the gleaming tree
and merry children across the way followed her into her dreams.
After the fire was put out, Willi and Lili were found to be the culprits. Thinking that Rolf's
riddle would look more beautiful if made transparent from behind like the inscription used
every Christmas behind their tree, "Glory to God on High," they had fetched two lights.
Then standing on a high step which had been used for fastening the inscription, they held
the lights very near the riddle. When no joyful surprise was shown on any of the faces,
they put the lights still nearer, till at last the paper was set on fire, catching the nearby
branches. They owned up to their unfortunate undertaking at once and, in honor of the
festive occasion, were sent to bed with only mild reproof. Of course they were forbidden to
make further experiments with fire.
Soon after, deep quiet reigned in the house, and peacefully the moon shone down over the
sleeping garden and the splendid tall trees.
CHAPTER IV
ALL SIX
"We shall have to move away from here, Mrs. Kurd," were Aunt Ninette's first words the
following morning when she came down to breakfast. "We seem to have come into a
dreadful neighborhood. We had better move today."
Speechless with surprise, Mrs. Kurd stood still in the middle of the room. She looked at
Mrs. Ehrenreich as if she could not comprehend the meaning of her words.
"I mean it seriously, Mrs. Kurd, we must move today," repeated Aunt Ninette.
"But you could not possibly find more delightful neighbors in all Tannenberg, Mrs.
Ehrenreich, than we have here," began Mrs. Kurd as soon as she had recovered from her
amazement.
"But, Mrs. Kurd, is it possible you did not hear the terrific noise last evening? It was worse
than any of the things we especially meant to avoid."
"It was only the children, Mrs. Ehrenreich. They happened to be especially lively because
they had a family party last evening."
"If such feasts are celebrated first by a wild explosion of joy, and end with a fire and an
unspeakable confusion, I call such a neighborhood not only noisy but dangerous. We had
better move at once, Mrs. Kurd, at once."
"I don't believe the fire was intended to take place at the party," Mrs. Kurd reassured the
aunt. "It was probably a little accident and was at once put out. Everything is most orderly
in that household, and I really cannot believe that the lady and gentleman can possibly
want to move on account of such neighbors as we have. You would be sure to repent such
a decision, for no better rooms can be had in all Tannenberg."
Aunt Ninette calmed down a trifle, and began breakfast with Dora and Uncle Titus.
Breakfast was over by that time in the big house, and the father was attending to business
while the mother was looking after her household duties. Rolf, who had a daily Latin lesson
with a pastor of the neighboring parish, had long ago left the house. Paula was having a
music lesson with Miss Hanenwinkel, while Willi and Lili were supposed to review their
work for the coming lessons. Little Hun sat at his table in the corner, examining his
sorrowful looking nutcracker-man.
Now Big Jul, who had just returned from his morning ride, entered the room, his whip in
his hand and the new spurs on his feet.
"Who'll take off my riding boots?" he shouted, flinging himself into a chair and admiring his
shiny spurs. Immediately Willi and Lili flew towards him, glad of a chance to leave their
work.
With not the slightest hesitation, Willi and Lili took hold, and before Jul could prevent it, he
was pulled off his chair, Willi and Lili having hold of him and not the boots. At the last
instant, he had been able to seize the chair, which, however, tumbled forward with him.
Jul cried loudly, "Stop, stop!" which brought little Hun to his big brother's rescue.
Holding the chair from the back, the small boy pushed with all his strength against the
twins. But he was pulled forward, too, and found himself sliding along the floor as on an
ice-slide. Willi and Lili anxious to complete their task, kept up their efforts in utter
disregard of Jul's insistent commands to stop, and the words:
"O, Willi and Lili,

You twins, would you kill me?"
BEFORE JUL COULD PREVENT IT,

HE WAS PULLED OFF HIS CHAIR.
Little Hun shrieked loudly for assistance, till at last, the mother came upon the scene. Willi
and Lili let go suddenly, Jul swung himself back to the chair, and little Hun, after swaying
about for a few seconds, regained his balance.
"But, Jul, how can you make the little ones so wild? Can't you be doing something more
profitable?" the mother admonished her eldest son.
"Yes, yes, I'll soon be at a more profitable occupation, dear mamma. But I feel as if I
helped you with their education," he began in a conciliating tone. "If I keep Willi and Lili
busy with innocent exercise like taking my boots off, I keep them out of mischief and any
dreadful exploits of their own."
"You had better go to your profitable occupation, Jul. What nonsense you talk!" declared
the mother. "And Lili, you go to the piano downstairs at once and practice, till Miss
Hanenwinkel has finished with Paula. Till then Willi must study. I should call it a better
thing, Jul, if you saw to the little ones in a sensible way, till I come back."
Jul, quite willing, promised to do his best. Lili hastened to the piano, but being in a rather
excited mood, she found her fingers stumbling over each other while doing scales. The
little pieces therefore tempted her more and she gaily and loudly began to play:
"Rejoice, rejoice in life

While yet the lamp is glowing
And pluck the fragrant rose
In Maytime zephyrs blowing!"
Uncle Titus and his wife had just finished breakfast when the riding-boot scene took place
in the big house. Uncle Titus went straight to his room and barred the windows, while his
wife called to the landlady, begging her to listen to the noise, herself. But the whole affair
made a different impression on Mrs. Kurd than she had hoped.
"Oh, they have such times over there," said Mrs. Kurd, amused. When Mrs. Ehrenreich
tried to explain to her that such a noise was not suitable for delicate people in need of rest,
Mrs. Kurd suggested Mr. Ehrenreich's taking a little walk for recreation to the beautiful and
peaceful woods in the neighborhood. The noise over there would not last very long. The
young gentleman just happened to be home for the holidays and would not stay long. Lili's
joyful piece, thrummed vigorously and sounding far from muffled, reached their ears now.
"What is that? Is that the young gentleman who is going away soon?" inquired Aunt
Ninette excitedly. "What is coming next, I wonder? Some new noise and something more
dreadful every moment. Is it possible, Mrs. Kurd, you have never heard it?"
"I never really noticed it very much. I think the little one plays so nicely, one can't help
liking it," Mrs. Kurd declared.
"And where has Dora gone? She seems to be becoming corrupted already, and I can't
manage her any more," wailed the aunt again. "Dora, Dora, where are you? This is
dreadful, for she must start on her work today."
Dora was at the hedge again, happily listening to the song Lili was drumming on the piano.
She appeared as soon as her aunt called to her, and a place was immediately chosen near
the window, where she was to sew for the rest of the day.
"We can't possibly stay here," were the aunt's last words before leaving the room, and
they nearly brought tears to Dora's eyes. The greatest wish of her heart was to stay just
here where so many interesting things were going on, and of which she could get a
glimpse now and then. Through her opening, she could hear a great deal and could watch
how the children amused themselves in their pretty garden. Dora puzzled hard to find a
way which would prevent their moving. However, she could find none.
Meanwhile eleven o'clock had come, and Rolf came rushing home. Seeing his mother
through the open kitchen door, he ran to her.
"Mamma, mamma!" he cried before he was inside. "Can you guess? My first makes—"
"Dear Rolf," the mother interrupted, "I beg you earnestly to look for somebody else; I have
no time just now. Go to Paula. She is in the living room." Rolf obeyed.
"Paula!" he cried from below. "Guess: My first makes—"
"Not now, please, Rolf!" retorted Paula. "I am looking for my notebook. I need it for
making a French translation. Here comes Miss Hanenwinkel, try her. She can guess well."
Rolf threw himself upon the newcomer, Miss Hanenwinkel. "My first makes—"
"No time, Rolf, no time," interrupted the governess. "Go to Mr. Jul. He is in the corner over
there, having his nuts cracked for him. Go to him. See you again."
Miss Hanenwinkel, who had once been in Italy, had in that country acquired the habit usual
there of taking leave of people, and used it now on all occasions. If, for instance, the knife-
sharpener arrived, she would say, "You here again. Better stay where you belong! See you
again." With that she quickly closed the door. If the governess were sent to meet peddlers,
or travelling salesmen coming to the house on business, she would say, "You know quite
well we need nothing. Better not come again. See you again," and the door was quickly
shut. This was Miss Hanenwinkel's peculiarity.
Jul was sitting in a corner, and in front of him, sat little Hun, busy giving his sorrowful
looking nutcracker nuts to crack, which he conscientiously divided with Jul.
Rolf stepped up to the pair. "You both have time to guess. Listen!"
"'My first is just an animal forlorn.

My second that to which we should be heir,
And with my whole some lucky few are born
While others win it if they fight despair.'"
"Yes, you are right. It is courage," explained the quick older brother.
"Oh, but you guessed that quickly!" said Rolf, surprised.
"It is my turn now, Rolf. Listen, for it needs a lot of thinking. I have made it up just this
minute," and Jul declaimed:
"'My first is sharp as any needle's end,

My second is the place where money grows,
My whole is used a pungent taste to lend,
And one you'd know, if only with your nose.'"
"That is hard," said Rolf, who needed time for thinking. "Just wait, Jul, I'll find it."
Herewith, Rolf sat down on a chair in order to think in comfort.
Big Jul and small Hun meanwhile kept on cracking and eating nuts, Jul varying the game
by sometimes trying to hit some goal in the room with a shell.
"I know it!" cried Rolf, overjoyed. "It is pick-pocket."

"Oh, ho, Rolf, how can you be so absurd! How can a pick-pocket smell?" cried Jul,
disgusted. "It is something very different. It's spearmint."
"Yes, I see!" said Rolf, a little disappointed. "Wait, Jul, what is this?"
"'My first within the alphabet is found,

My second is a bread that's often sweet;
My third is something loved by active feet.
My whole means something more than just to go around.'"
"Cake-walk," said Jul with not the slightest hesitation.
"Oh ho, entirely wrong," laughed Rolf, "that doesn't work out. It has three syllables."
"Oh, I forgot," said Jul.
"You see you are wrong," triumphed Rolf. "It is abundance. Wait, I know still another."
"The first—"
"No, I beg to be spared now, for it is too much of an exertion, and besides I must see to
Castor." Jul had jumped up and was running to the stable.
"Oh, what a shame, what a shame!" sighed Rolf. "Nobody will listen to me any more and I
made up four more nice riddles. You can't guess, Hun, you are too foolish."
"Yes, I can!" declared the little boy, offended.
"All right, try then; but listen well and leave these things for a while. You can crack nuts
later on," urged Rolf and began:
"'My first is closest bonds that can two unite,

My second like the shining sun is bright;
My whole's a flower that thrives best in wet ground
And like my second in its color found.'"
"A nutcracker," said little Hun at once. Jul being the little one's admired model, he thought
that to have something to say at once was the chief point of the game.
"I'll never bother with you again, Hun; there is nothing to be done with you," cried Rolf,
anxious to run away. But that did not work so simply, little Hun, who had caught the riddle
fever, insisted upon trying out his first attempt.
"Wait, Rolf, wait!" he cried, holding on to Rolf's jacket. "It is my turn now and you must
guess. My first can be eaten, but you can't drink it—"
"I suppose it's going to be nutcracker!" cried Rolf, running away from such a stupid riddle
as fast as his legs could carry him.
But the small boy ran after him, crying all the time, "You didn't guess it! You didn't guess
it! Guess it, Rolf, guess!"
All at once, Willi and Lili came racing towards him from the other side, crying loudly, "Rolf,
Rolf, a riddle, guess it! Look at it, you must guess it!" and Lili held a piece of paper directly
under Rolf's nose, while Hun kept on crying, "Guess, Rolf, guess!" The inventor of riddles
was now in an extremity himself.
"Give me a chance, and I'll guess it," he cried, waving his arms to fight them off.
"As you can't guess mine, I'll go to Jul," said Hun disdainfully, turning his back.
Rolf seized the small slip of paper, yellow from age, which Lili was showing him. He looked
perplexed at the following puzzling words written apparently by a child's hand:
"My hand.
Lay firmly
Wanted to be
But otherwise
One stays
And each
And now will
This leaf
When the time comes
That the pieces
fit
We'll rejoice
And we'll go
Never."
"Perhaps this is a Rebus," said Rolf thoughtfully. "I'll guess it, if you leave me alone a
minute. But I must think hard."
There was not time for that just then, for the dinner bell rang loudly and the family began
to gather around the large dining' room table.
"What did you do this morning, little Hun?" asked the father, as soon as everybody had
settled down to eating.
"I made a riddle, papa, but Rolf won't guess my riddles, and I can't ever find Jul. The
others are no good, either."
"Yes, papa," eagerly interposed Rolf now, "I made four or five lovely riddles, but no one
has time to guess except those who have no brains. When Jul has guessed one, he is
exhausted. That is so disappointing, because I usually have at least six new ones for him
every day."
"Yes, papa," Willi and Lili joined in simultaneously, "and we found a very difficult puzzle. It
is even too hard for Rolf to guess. We think it is a Rebus."
"If you give me time, I'll guess it," declared Rolf.
"The whole house seems to be teeming with riddles," said the father, "and the riddle fever
has taken possession of us all. We ought to employ a person for the sole purpose of
guessing riddles."
"Yes, if only I could find such a person," sighed Rolf. To make riddles for some one who
would really listen and solve them intelligently seemed to him the most desirable thing on
earth.
After lunch the whole family, including Miss Hanenwinkel, went outside to sit in a circle
under the apple tree, the women and girls with some sewing or knitting. Even little Hun
held a rather doubtful looking piece of material in his hand into which he planted large
stitches with some crimson thread. It was to be a present for Jul in the shape of a cover
for his horse. Jul, according to his mother's wish, had brought out a book from which he
was supposed to read aloud. Rolf sat under the mountain-ash some distance away,
studying Latin. Willi, who was expected to learn some verses by heart, sat beside him. The
small boy gazed in turn at the birds on the branches overhead, at the workmen in the field
below, and at the tempting red apples. Willi preferred visible objects to invisible ones and
found it difficult to get anything into his head. It was a great exertion even to try, and he
generally accomplished it, only with Lili's help. His study-hour in the afternoon, therefore,
consisted mostly in contemplating the landscape round about.
Jul, that day, seemed to prefer similar observations to reading aloud. He had not even
opened his book yet, and after letting his glances roam far and wide, they always came
back to his sister Paula.
"Paula," he said now, "you have a face today as if you were a living collection of worries
and annoyances."
"Why don't you read aloud, Jul, instead of making comparisons nobody can understand?"
retorted Paula.
"Why don't you begin, Jul?" said the mother. "But, Paula, I can't help wondering, either,
why you have been in such a wretched humor lately. What makes you so reserved and out
of sorts?"
"I should like to know why I should be confiding, when there is no one to confide in. I have
not a single girl friend in Tannenberg, and nobody at all to talk to."
The mother advised Paula to spend more time either with her small sister or Miss
Hanenwinkel, who was only twenty years old and a very nice companion for her. But Paula
declared that the first was by far too young and the other much too old, for twenty
seemed a great age to Paula. For a real friendship, people must be the same age, must
feel and think the same. They must at once be attractive to each other and hate the
thought of ever being separated. Unless one had such a friend to share one's joys and
experiences, nothing could give one pleasure and life was very dull.
"Paula evidently belongs to the romantic age," said Jul seriously. "I am sure she expects
every little girl who sells strawberries to produce a flag and turn into a Joan of Arc, and
every field laborer to be some banished king looking for his lost kingdom among the
furrows."
"Don't be so sarcastic, Jul," his mother reproved. "The sort of friendship Paula is looking
for is a beautiful thing. I experienced it myself, and the memories connected with mine are
the sweetest of my whole life."
"Tell us about your best friend, mamma," begged Paula, who several times already had
heard her mother speak of this friendship which had become a sort of ideal for her. Lili
wanted to hear about it, too. She knew nothing except that she recalled the name of her
mother's friend.
"Didn't you call me after your friend's name, mamma?" asked the little girl, and her
mother assured her this was so.
"You all know the large factory at the foot of the mountain and the lovely house beside it
with the big shady garden," began the mother. "That's where Lili lived, and I remember so
vividly seeing her for the first time."
"I was about six years old, and was playing in the rectory garden with my simple little
dolls. They were sitting around on fiat stones, for I did not have elaborate rooms for them
furnished with chairs and sofas like you. Your grandfather, as you know, was rector in
Tannenberg and we lived extremely simply. Several children from the neighborhood, my
playmates, stood around me watching without a single word. This was their way, and as
they hardly ever showed any interest in anything I did, and usually just stared at
everything I brought out, they annoyed me very much. It didn't matter what I brought out
to play with, they never joined in my games."
"That evening, as I knelt on the ground setting my dolls around a circle, a lady came into
the garden and asked for my father. Before I could answer, a child who had come with the
lady ran up to me and, squatting on the ground, began to examine all my dolls. Behind
each flat stone, I had stuck up another so the dolls could lean against it. This pleased her
so much, that she at once began to play with the dolls and made them act. She was so
lively that she kept me spellbound, and I watched her gaily bobbing curls and wondered at
her pretty language, forgetting everything for the moment except what she was doing with
my dolls. Finally, the lady had to ask for my father again."
"From that day on, Lili and I were inseparable friends, and an ideal existence began for me
at Lili's house. I shall never forget the blissful days I spent with her in her beautiful home,
where her lovely mother and excellent father showed me as much affection as if I were
their own child. Lili's parents had come from the North. Her father, through some agents,
had bought the factory and expected to settle here for life. Lili, was their only child, and as
we were so congenial, we wished to be together all the time. Whenever we were
separated, we longed for each other again, and it seemed quite impossible for us to live
apart.
"Lili's parents were extremely kind, and often begged my parents as an especial favor to
let me stay with Lili for long visits, which seemed like regular long feasts to me. I had
never seen such wonderful toys as Lili had, and some I shall never forget as long as I live.
Some were little figures which we played with for whole days. Each had a large family with
many members, of which everyone had a special name and character. We lived through
many experiences with them, which filled us with joy and sorrow. I always returned home
to the rectory laden with gifts, and soon after, I was invited again."
"Later, we had our lessons together, sometimes from the school teacher, Mr. Kurd, and
sometimes from my father. We began to read together and shared our heroes and
heroines, whose experiences thrilled us so much that we lived them all through ourselves.
Lili had great fire and temperament, and it was a constant joy to be with her. Her merry
eyes sparkled and her curls were always flying. We lived in this happy companionship,
perfectly unconscious that our blissful life could ever change."
"But just before we were twelve years old, my father said one day that Mr. Blank was
going to leave the factory and return home. These words were such a blow, that I could
hardly comprehend them at first. They made such an impression on me, that I remember
the exact spot where my father told me. All I could understand was that Mr. Blank had
been misinformed about the business in the beginning and was obliged to give it up after a
severe loss. My father was much grieved, and said that a great wrong had been done to
Lili's father by his dishonest agents. He had lost his whole fortune as a result."
"I was quite crushed by the thought of losing Lili, and by her changed circumstances
besides. It made me so unhappy that I remember being melancholy for a long, long time
after. The following day, Lili came to say goodbye, and we both cried bitterly, quite sure of
not being able to endure the grief of our separation. We swore eternal friendship to each
other, and decided to do everything in our power to meet as often as possible. Finally, we
sat down to compose a poem together, something we had frequently done before. We cut
the verses through in the middle—we had written it for that purpose—and each took a half.
We promised to keep this half as a firm bond, and if we met again, to join it together as a
sign of our friendship."
"Lili left, and we wrote to each other with great diligence and warm affection for many
years. These letters proved the only consolation to me in my lonely, monotonous life in the
country. When we were young girls of about sixteen or seventeen, Lili wrote to me that her
father had decided to emigrate to America. She promised to write to me as soon as they
got settled there, but from then on, I never heard another word. Whether the letters were
lost, or Lili did not write because her family did not settle definitely anywhere, I cannot
say. Possibly she thought our lives had drifted too far apart to keep up our intercourse.
Perhaps Lili is dead. She may have died soon after her last letter—all this is possible. I
mourned long years for my unforgettable and dearest friend to whom I owed so much. All
my inquiries and my attempts to trace her were in vain. I never found out anything about
her."
The mother was silent and a sad expression had spread over her features, while the
children also were quite depressed by the melancholy end of the story.
One after the other said, sighing, "Oh, what a shame, what a shame!"
But little Hun, who had listened most attentively, had drawn tenderly near his mother and
said comfortingly, "Don't be sad, mamma! As soon as I am big, I'll go to America and fetch
Lili home to you."
Rolf and Willi had also joined the other listeners, and after thoughtfully gazing at a slip of
paper in his hand, Rolf asked, "Mamma, did the poem you cut apart look like a Rebus,
written on a narrow paper?"
"Perhaps, Rolf. It might have given that impression," replied the mother. "Why do you
ask?"
"Look, mamma," said Rolf, holding out the yellowish slip of paper, "don't you think this
might be your half?"
"Rolf, it really is," cried the mother, agitated. "I thought I had lost it for good, for after
keeping it many years, I suddenly could not find it. I have never really thought about it, till
I told you about this friendship. Where did you find this dear token, Rolf?"
"We found it!" cried Willi and Lili simultaneously. "We found it in the old family Bible. We
wanted to see if Eve's face was still scratched up," the twins continued, taking turns giving
their information.
"Oh, yes, that brings back another memory of Lili," said the mother with a smile. "She did
this one day as we were both imagining how beautiful it would be to be in paradise. She
suddenly grew so furious at Eve for having eaten the apple that she scratched her face in
the picture with a pencil for punishment. But my old poem! I am afraid I can't puzzle it out
any more," said the mother after trying to study the broken sentences. "It is so dreadfully
long ago. Just think, children, over thirty years!"
The mother laid the paper, carefully folded, in her workbasket and asked the children to
pick up their things and follow her, as it would soon be time for supper. As they knew well
that their papa was always punctual, they quickly packed up their things and one after the
other disappeared into the house through the triumphal arch, which had been left
standing.
Dora had been watching the quiet group under the apple tree for quite a while through the
hole in the hedge. As everybody got up and slowly went away, she had the chance to
examine one child after another. When they were all gone, Dora heaved a deep sigh and
said to herself, "If only I could be allowed to go over there, just once."
At supper, Aunt Ninette said, "At last, we have had a few quiet hours! What a relief! If this
keeps on, we might possibly remain here. What do you think, dear Titus?"
Dora waited anxiously for her uncle's answer.
"The air is very heavy in these rooms, and I feel even more dizzy than I did in Karlsruhe,"
declared the uncle.
Dora dropped her eyes to her plate and her appetite was gone.
The aunt broke out into loud wails now. Should the whole journey and their stay here
prove absolutely useless after all? Should they have moved the very first day? She found
consolation at last in the thought that the family opposite had quieted down, and that the
windows could be opened by tomorrow. Dora clung to this hope, for as long as she lived so
near, a possibility remained that she might go and play, at least a single time, with the
children in their fragrant garden.
CHAPTER V
BEFORE AND AFTER THE DELUGE
IT HAPPENED quite often that nobody had time to play with little Hun, and he himself
found nothing on earth to do. At such times, he would wander aimlessly all through the
house, bothering everyone at their work. His mother always sent him to his little table and
wanted him to keep busy there. The boy would then be very unhappy and troublesome. He
often chose the most inconvenient moments for these restless moods, when everybody
was especially busy.
The day following the events just related was a Saturday, when the house was being
cleaned and the furniture blocked all the hallways. Hun wandered about among the chairs
and sofas and seemed in just as unsettled a state as was the house.
After looking for his mother everywhere, he succeeded in finding her on the top floor of the
house, sorting the clean laundry, but she sent him downstairs again with the words, "I am
very busy now, Hun. Go and look for Paula; she may have time for you." He found Paula at
the piano.
"Go away, Hun! I have to practise and can't guess your stupid charades," she said to her
little brother, who had caught the fatal fever from Rolf. He was most anxious to say his
own charade about the nutcracker and was terribly disappointed not to have the chance.
"Here's Miss Hanenwinkel, go to her," said Paula.
"Miss Hanenwinkel, my first one cannot drink, but eat," the little one cried as soon as he
saw the governess.
"No, Hun, please spare me," the governess hurriedly interrupted him. "I do not know what
will happen if you begin it, too. I have no time. Look, Mr. Jul is just getting down from his
horse over there; go to him."
"COME, I'LL SAY IT AND YOU MUST LEARN IT BY HEART."
The little one wandered off.
"Jul, nobody wants to guess my riddles, Miss Hanenwinkel least of all," he complained to
his big brother. "She said you ought to do it."
"Did she say so? All right, then, say it," Jul encouraged him.
"My first you can't drink, but eat," began Hun, and stopped.
"All right, keep on, Hun!"
"You have to make the rest, Jul; but the whole must be nutcracker," said the little boy.
"I can see that quite clearly; but because Miss Hanenwinkel has sent me a riddle to guess
through you, I'll send her one, too. Come, I'll say it and you must learn it by heart. Then
you can go and ask Miss Hanenwinkel to solve it for you."
Standing the little one in front of him, Jul said several times quite slowly:
"When like my first Hun's crow, disturbs all men

Into the second does the whole put then
The naughty culprit, saying, 'See you again.'" *
Before very long, the small boy had memorized the lines and eagerly ran off to serve them
up to the governess.
The latter sat in the schoolroom, trying to explain a problem in arithmetic to the twins.
This proved a hard task today. The two were dreadfully absent-minded. Just then Hun
came into the room.
"A charade, Miss Hanenwinkel," he announced at once.
* Hanenwinkel translated into English means Rooster-corner.
"But I won't let you say it now. This is no time for such nonsense," said the governess,
firmly. But as Jul was the originator this time, the little boy grew quite audacious. Without
swerving, he declared several times:
"It's Jul's charade, Jul made it up."
"Then say it quickly," said the governess, visibly relenting. The boy distinctly recited his
riddle.
Miss Hanenwinkel, who came from Bremen, did not like to be left behind and was always
quick in replies. Immediately sitting down at the table, she took up pen and paper and
wrote:
"My first's the time for nuts, my whole then finds

Much pleasure in them, for at once he grinds
Them up between his teeth; but we can't see,
That there's much of my second in this. For he,
My whole, that is, throws shells upon the floor
And makes us tumble on them at the door."
"Take this to Mr. Jul," she said, giving the little one the paper, "and tell him I refuse to be
beaten. As long as he has turned my name so nicely into a charade, I am sending him one,
too. But don't come in again, Hun. We must work hard, and another disturbance might be
fatal."
Willi and Lili were less afraid of a disturbance, and it was quite visible that the recent
interruption had already had the dreaded effect. While the governess had been talking to
their brother, the twins had moved their heads closer and closer together, apparently deep
in making plans. These had proved so absorbing that they could not even remember the
simplest sums, and Miss Hanenwinkel found herself obliged to shut her book with a deep
sigh. She remarked in conclusion, that if each number represented some foolish exploit,
Willi and Lili would grasp them all.
This opinion of the governess was not without foundation, because the twins seemed
especially gifted for such exploits. Apparently a scheme of this kind was in their heads
now, and as soon as the lesson was done, they rushed enterprisingly towards the laundry.
Here they had a secret consultation opposite all the washtubs in the place.
At table, Jul pulled out a sheet of paper and asked, "Who can guess a fine riddle Miss
Hanenwinkel has composed?" After which he read it.
He was hardly finished when Rolf cried out the answer, "Julius and by rights Yule-use."
It was the right solution. Miss Hanenwinkel, however, did not read her riddle, because she
did not wish to have her peculiarity discussed and laughed at.
After dinner, Willi and Lili ran to the laundry again, for it was Saturday afternoon and they
were free to do what they pleased. Miss Hanenwinkel had meant to watch the children, but
seeing them enter the laundry, she supposed they were going to wash some doll's
clothing, a favorite occupation of theirs. She was glad they had found something to keep
them busy for at least a couple of hours.
But Willi and Lili had an idea which reached far beyond a mere doll wash. While playing
with their new Noah's ark they had entered so deeply into the miraculous existence of the
people and animals in the ark that Lili conceived the brilliant idea of executing a trip in the
ark themselves. She carefully thought out everything necessary for such a journey, and
being alert and practical, she knew quite well how to do it.
Among the washtubs, the twins selected one of medium size for the ark, one just big
enough to hold them and the animals if everybody kept nice and quiet.
Schnurri and Philomele were to represent the animals in the ark, and the first thing the
children did, was catch hold of the two pets so necessary to their idea. Schnurri followed
the call with a growl, while Philomele rubbed her soft fur against Lili's legs so caressingly
that the little girl picked her up tenderly saying, "You really are much nicer than Schnurri,
dear Philomele."
Philomele had gotten her name because she mewed very melodiously, and Schnurri his,
because he grunted and growled so much. But there was a cause for this. The two had
been commanded to live in harmony together and to do each other no harm. Schnurri
punctually obeyed these instructions by always being peaceful and considerate towards
Philomele. While they were having dinner from the same dish, he ate very slowly, knowing
that the cat with her tiny mouth could not eat as fast, as he. Philomele was always
pleasant towards the dog when anyone was watching, but when nobody was around, she
frequently lifted her paw and gave him a treacherous blow behind the ear. This would
make Schnurri growl, and as this happened very often, he growled nearly all the time. He
had gotten his name unjustly, because he was by nature a peace-loving and friendly
creature.
For the trip in the ark, some water was necessary. Lili knew that on wash days a long
wooden funnel or pipe was laid under the fountain outside and into the tub, which made
the latter fill with water. She had planned to let the water flow from the wooden funnel to
the floor of the laundry where the washtub always stood. In that way the floor would be
gradually covered with water and finally the tub would be lifted up, representing the
swimming ark. All this was carefully planned, and only the long funnel which was
necessary for that manoeuvre had to be secured.
Willi and Lili could not quite decide whether it was wiser to ask Battist or Trine for help.
Old Battist and young Trine stood in practically the same relationship as Schnurri and
Philomele. Battist had served many years in the household, and knowing about everything,
had a word to say about all the management of the house and stable, as well as the
garden and the fields. The universal respect shown to the old man annoyed Trine, who felt
that regard was due to her, too. If she had not served the family very long yet, her aunt
had lived in the Birkenfeld household so many years that she had actually become too old
to work and was resting from her labors now. Trine had taken her place and was decidedly
jealous of old Battist's authority, which she herself did not recognize at all. She behaved
very decently to the old man before the family, but teased him as soon as they turned
their backs, just as Philomele did with Schnurri.
The children knew this, and often made use of this state of affairs for their own private
ends. Willi and Lili felt that Trine would be more willing to lend them aid than the old
gardener, who never much approved of extraordinary schemes. But the needed funnel
came under his especial sceptre, and therefore Lili decided to ask the old man's assistance,
while Willi held on to Schnurri and the cat. Finding Battist on the threshing-floor sorting
out seeds, Lili stood herself in front of him with her hands back of her, taking the identical
attitude her father always took when talking with his workmen.
"Battist," she began energetically, "where is the funnel which is used in the laundry for
filling the washtubs with water?"
Battist looked at Lili from his seeds, as if anxious to weigh her question. Then he asked
deliberately, "Did your mamma send you here?"
"No, she didn't send me, I want it myself," explained Lili.
"I see; then I don't know where the funnel is," retorted Battist.
"But Battist," Lili commenced again, "I only want a little water from the spring fountain.
Why can't I have it?"
"I know you two small birds," growled Battist. "Once a little bit of fire and then a little bit
of water, and finally some dreadful mishap. You can't have it this time, you can't have it."
"Then I don't care," sulked Lili, and went at once to the kitchen where Trine was sweeping
the floor.
"Trine," said the little girl pleasantly, "won't you come and give us the funnel for the
fountain? Battist is horrid, he won't even give it to us for a second. But you will let us have
it, won't you, Trine?"
"Of course," replied Trine. "I don't see why you shouldn't have a little bit of water. But
you'll have to wait until the old bear goes away. Then I'll go with you."
After a while Trine saw Battist walking across the yard towards the fields.
"Come, now," she said, taking Lili's hand in hers and running to the laundry.
She pulled out the pipe from its hiding place, laid one end under the spigot and the other
into a small tub. Then she explained to Lili how to take the pipe away when the bucket was
full enough. She and Willi could do this quite well themselves and when they needed more
water they could put it back. Trine had to go back to her work now.
When the maid left, they were ready to start on their excursion. After the pipe was laid on
the floor, Lili climbed in, followed by Willi, and Philomele was lifted and Schnurri was pulled
inside. Noah and his wife sat in their beautiful ark now, grateful over their delivery and
joyful over their trip on the rising floods. The water from the fountain was steadily flowing
into the laundry, and all of a sudden the ark was lifted and began to float. Noah and his
wife screamed with delight. They had really succeeded in their plans, the ark actually
swam about on real waves.
Several high stone steps led down into the laundry, and it therefore held a large quantity
of water. The water rose steadily higher and higher, and the children began to feel a little
frightened.
"Look, Willi, we won't be able to get out any more," said Lili, "it's getting higher all the
time."
Willi looked out thoughtfully over the edge of the tub and said, "If it gets much higher,
we'll have to drown."
Of course it kept on getting higher and higher.
Schnurri was beginning to get restless, too, and by jumping about, threatened to upset the
washtub. It rocked violently to and fro. The water by that time was so deep that the
children could not possibly climb out again, and seized by a sudden panic, they began to
shriek with all their might: "We are drowning, we are drowning! Mamma! Mamma! Battist!
Trine! We are drowning!"
Finally, instead of words, they just frantically screeched and yelled. Schnurri barked and
growled from sympathy, while Philomele revealed her true character, and began to bite and
scratch, while meowing loudly. Philomele refused to go into the water, neither would she
stay in the tub. Instead, she went on crazily and scratched the children whenever she
could. But when the faithful Schnurri saw that no assistance was coming in answer to their
cries, he jumped into the water with a big leap. He swam towards the door, gave himself a
shake and ran away. But the children yelled worse than ever now, for Schnurri had nearly
upset the tub in jumping out.
Dora had long ago run down to her hole in the hedge to see what was the cause of the
pitiful cries.
The laundry stood close to the hedge, but she could see nothing but a funnel through
which water flowed into the laundry. But she heard their cries about drowning and turning
about, she ran upstairs again.
"Aunt Ninette," she cried breathlessly, "two children are drowning over there. Don't you
hear them, don't you hear them?"
The aunt had heard the yells, despite her tightly barred windows.
"Oh, gracious, what does it mean?" cried the affrighted aunt. "Of course, I heard the awful
noise, but who is drowning, I wonder? Mrs. Kurd! Mrs. Kurd! Mrs. Kurd!" Meanwhile, the
soaked dog ran in big leaps towards the coachhouse, where Battist was cutting bean poles.
Schnurri rushed up to him, pulled his trousers, barked violently, then tried to pull Battist
along again, howling incessantly.
"Something is up," said Battist, and putting one of the poles on his shoulder, he said to
himself, "One can never tell what may be useful."
Herewith, he followed Schnurri, who gaily preceded him to the washhouse. By that time,
the mother, the governess, Paula, Rolf and Hun, and at last Trine had assembled, as the
awful noise had penetrated into every nook and corner of the house and garden. Battist at
once held his long pole out over the floods towards the tub.
"Take hold of it tight and don't let it go!" he called to the children, and after drawing the
whole ark towards him, he lifted the inmates onto dry land.
Willi and Lili were so scared and white that they had to recover a little before being
examined about their exploit. Taking each by the hand, their mother led them to the bench
under the apple tree and gave them a chance to revive a little.
Jul, leading the small Hun by the hand, followed and said, "Oh, you terrible twins, some
day you will both come to a terrible end."
With trousers turned up, old Battist had stepped into the deluge, and had opened all the
vents for draining to let the floods disperse. To Trine, who stood beside him, he said
pityingly, "It only happened because you have no more sense than the seven-year-olds!"
He knew quite well who had fetched the funnel. Trine, realizing that she had been duped,
could give no answer, but like Philomele, got ready to scratch her adversary.
When everybody sat safe and sound again under the apple tree, Philomele came up to Lili,
tenderly meowing and rubbing against the girl's legs. But the child pushed her away, and
instead she and Willi tenderly stroked the wet Schnurri, who lay at their feet on the
ground. The twins secretly resolved to give Schnurri their whole supper that night, for in
their great extremity, they had found out the true character of their pets.
After thoughtfully gazing at the rescued twins for a while, the small Hun joined Jul, who
was wandering to and fro on the gravel path.
"Jul," said the little one solemnly, "tell me in what way the terrible twins could come to a
fearful end?"
"They might do it in different ways, Hun," replied Jul, standing still. "You see they have
already tried fire and water. In some excited mood, they may next pull down the house
over our heads. Then we'll all be lying underneath, and everything will be over."
"Can't we quickly jump away?" asked little Hun, concerned.
"We can, if they don't do it in the middle of the night."
"Please wake me up then," Hun implored his brother.
Mrs. Kurd had come in answer to Aunt Ninette's repeated cries at the identical moment
when Battist was pulling the ark to safety and the cries had stopped.
"Did you hear it, Mrs. Kurd? Wasn't it terrible? But everything is quiet now. Do you
suppose they were saved?"
"Of course," said Mrs. Kurd calmly. "The little ones were just screaming a little, and there
can't have been any real danger."

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On completion of this chapter, you should be able to:

LO Explain the function of police in enforcing the law and

LO Identify the state and territory court hierarchies in the

LO Describe the objectives, hierarchy and jurisdiction of

LO Identify the adversary system, and describe alternative

M02_GIBS1803_10_SE_C02.indd 31 6/1/17 3:32 PM

1 WhAT ARE ThE ROLES Of ThE pOLICE ANd ThE COuRTS?

In The role of the police

32 Part 1 tHE LEGaL FraMEWOrK

M02_GIBS1803_10_SE_C02.indd 32 6/1/17 3:32 PM

Some advantages and disadvantages of precedent In

Factors to consider for precedent to operate

■■ Where does a particular court fit in a hierarchy?

HOW LaW Is MaDE: PrEcEDEnt/statutE LaW cHaPtEr 3 77

M03_GIBS1803_10_SE_C03.indd 77 6/1/17 3:39 PM

■■ Business tips and Business risk management alerts

BuSINeSS rISK mANAGemeNt ALert

Terms must be followed exactly

Impact of statute law

M07_GIBS1803_10_SE_C07.indd 206 6/1/17 4:11 PM

xii BUSINESS LAW

factS: Henjo owned a restaurant business. The

442 Part 4 ConSUmEr Law

M17_GIBS1803_10_SE_C17.indd 442 6/1/17 5:56 PM

■■ In-chapter Review questions provide an opportunity

380 Part 3 law of contracts

M14_GIBS1803_10_SE_C14.indd 380 6/1/17 11:16 PM

HOW TO USE THIS BOOK xiii

2. What is the definition of a contract? A contract is an agreement containing promises made

5. Explain the difference between a formal and a simple contract.

6. Is an unaddressed proposal in an electronic communication to create a contract an invitation

M06_GIBS1803_10_SE_C06.indd 188 6/1/17 4:05 PM

xiv BUSINESS LAW

MyLab Business Law xvii

"Beautiful, beautiful! I suppose Rolf is the originator of this?"

"Happy all at my first are reckoned,

SHE HAD BEEN LOST IN EVERYTHING

"'Yet God keeps watch above us

"O, Willi and Lili,

BEFORE JUL COULD PREVENT IT,

"Rejoice, rejoice in life

"Paula!" he cried from below. "Guess: My first makes—"

"'My first is just an animal forlorn.

"Oh, but you guessed that quickly!" said Rolf, surprised.

"'My first is sharp as any needle's end,

"I know it!" cried Rolf, overjoyed. "It is pick-pocket."

"'My first within the alphabet is found,

"Cake-walk," said Jul with not the slightest hesitation.

"Oh, I forgot," said Jul.

"Yes, I can!" declared the little boy, offended.

"'My first is closest bonds that can two unite,

"If you give me time, I'll guess it," declared Rolf.

Dora waited anxiously for her uncle's answer.

"COME, I'LL SAY IT AND YOU MUST LEARN IT BY HEART."

The little one wandered off.

"All right, keep on, Hun!"

"When like my first Hun's crow, disturbs all men

"A charade, Miss Hanenwinkel," he announced at once.

* Hanenwinkel translated into English means Rooster-corner.

"It's Jul's charade, Jul made it up."