Contract and Business Ethics

The IRAC Formula
IRAC (Issue, Rule, Analysis, and Conclusion) forms the fundamental building blocks of legal analysis. It is the process by which all lawyers think about any legal problem…
ISSUE -> What facts and circumstances brought these parties to court?
RULE -> What is the governing law for the issue?
ANALYSIS -> Does the rule apply to these unique facts?
CONCLUSION -> How does the court’s holding modify the rule of law?

Issue Spotting – The First Step
“The facts of a problem suggest an Issue or Issues.”
The key to issue spotting is being able to identify which facts raise which issues. Because of the complexity of the law, the elimination or addition of one fact (such as time of day or whether someone was drinking) can eliminate or add issues to a case thereby raising an entirely different rule of law.…you need to develop issue-spotting skills …in order to do well on the exam.
Rule – What is the Law?
“The issue is covered by a Rule of law.”
Simply put, the rule is the law. The rule could be common law that was developed by the courts or a law that was passed by the legislature.
The trap for the unwary is to stop at the rule. Although the rule is the law, the art of lawyering is in the analysis.
[Note that sometimes the rule of law can be unclear or the facts do not make it clear which rule applies. In those circumstances you have to let the examiner know that there is debate about the law, or point out what facts you need to be able to say which rule applies.]
Analysis – The Art of Lawyering
“Compare the facts to the rule to form the Analysis.”
This important area is really relatively simple. For every relevant fact, you need to ask whether the fact helps to prove or disprove the rule. If a rule requires that a certain circumstance is present in order for the rule to apply, then the absence of that circumstance helps you reach the conclusion that the rule does not apply. For instance, all contracts for the sale of goods over $500 have to be in writing. Consequently, in analyzing a contract for the sale of goods, you apply the presence or absence of two facts – worth of good and whether there’s a written contract – in order to see whether the rule holds true.
The biggest mistake people make in exam writing is to spot the issue and just recite the rule without doing the analysis. Most professors know that you can look up the law, but they want to test whether you can apply the law to a given set of circumstances. The analysis is the most important element of IRAC since this is where the real thinking happens.

Conclusion – Take a Position
“From the analysis you come to a Conclusion as to whether the rule applies to the facts.”
The conclusion is the shortest part of the equation. It can be a simple “yes” or “no” as to whether the rule applies to a set of facts. A clever professor will often give you a set of facts that could go either way in order to see how well you analyze a difficult issue. The mistake many students make is to never take a position one way or the other on an issue. Most professors want you to take a position and support it in order to see how well you analyze.
Another common mistake is to conclude something without having a basis for the opinion. In other words, students will spot the issue, state a rule, and then form a conclusion without doing the analysis. Make sure that whatever position you take has a firm grounding in the analysis. Remember that the position you take is always whether or not the rule applies.
If a rule does not apply, don’t fall into the trap of being conclusive on a party’s liability or innocence. There may be another rule by which the party should be judged. In other words you should conclude as to whether the rule applies, but you shouldn’t be conclusive as to whether some other result is probable. In that case, you need to raise another rule and analyze the facts again.
In addition, the conclusion should always be stated as a probable result. Courts differ widely on a given set of facts, and there is usually flexibility for different interpretations. Be sure to look at the validity of the opponent’s position. If your case has flaws, it is important to recognize those weaknesses and identify them.

QUESTION ONE
A company is developing a new drug which it expects will significantly reduce the disease known as rheumatism. The company has conducted many tests on the drug. One of the scientists is concerned that there are some side effects which have not been fully investigated. The company requests a confidential report from a number of other scientists about these side effects. The scientists are paid $500,000 each to investigate the drug and compile the report. These scientists are also required to sign a document promising that they will not disclose the content of their report to anyone except the Board of Directors of the company. The new confidential report indicates that side effects do occur but they are statistically small. All the Directors agree to keep the information about the side effects of the new drug confidential. The Board of Directors are confident the new drug will significantly increase the profits of the company and keep the shareholders happy. The company continues to develop the new drug and subsequently markets it.
Discuss the ethical issues in this scenario. Use relevant cases and principles. (7 marks)
QUESTION TWO
Bill owns a restaurant. He said to his 19-year-old son, Quentin, “If you work in the restaurant every Sunday for the first year of your university course, I will pay your university fees for the year.” Quentin was a talented tennis player and had been offered a scholarship to undertake tennis coaching with a famous tennis coach. The tennis coaching was to be held every second Sunday. Quentin desperately wanted to attend the tennis coaching but he also wanted to have his father pay for his university fees. Quentin made the decision, in reliance on Bill’s promise, to work every Sunday in his father’s restaurant. He did this for the entire first year of his university course. Quentin has just successfully completed the first year of his university course. He now wants to take a year off study and travel overseas. Quentin’s father, Bill, is upset that his son is going to take a year off study and now refuses to pay Quentin’s university fees.

(a)Advise Quentin using relevant cases and principles. Do not use legislation (5 marks)

(b)What is your answer if Quentin is 17 years of age? Do not use legislation (2 marks)

QUESTION THREE
Samantha advertises her Holden Monaro car for sale for $15,000. Terrence comes to look at it. He takes it for a test drive. He says, “One of my friends had trouble with a Holden Monaro. It had a rusted suspension that wasn’t visible to the eye. Is the suspension OK in this car?” Samantha replied, “Yes, this car has excellent suspension.” “Great,” says Terrence. “We have a deal.” Terrence immediately signed the contract of sale, paid the $15,000 dollars, and drove away in the car. The contract of sale was silent about the car’s suspension.
A week later Terrence discovered the car had a very badly rusted suspension.
Advise Terrence using relevant cases and principles. Do not use legislation (6 marks)

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