How to answer for Questions (you have to use HIRAC method) So how do I answer a HIRAC problem question? For each topic, you will be provided with a ‘guide to problem solving’. This ‘checklist’ will assist you to identify the relevant points which you will need to consider when answering the problem questions. When answering legal problem questions generally, it is recommended that you use the HIRAC method. If you are not familiar with the HIRAC method, please read the following explanation so that you can draw upon this method when answering legal problem questions. HIRAC simply stands for Heading, Issue, Rule, Application and Conclusion. That is: H – Heading Identify the major theme as your heading. I – Issue State the legal issue raised. R – Rule Your next sentence will be a statement of the legal rule(s) or principle(s) that applies to the situation. State the principle clearly and concisely in your own words, and indicate the case or legislation that is your primary source of that principle. A – Application Your next sentence should be your application of the law – that is, you apply the legal principle to the facts in the problem. This is where you can draw heavily upon the case law. You could use the following ways to apply the legal rule: • The legislation could be interpreted to mean … which would apply to these facts because … • B would need to argue that … • What B would need to show is … B can show this because …[refer to relevant facts]. • There is not sufficient information, but B would only successful if she could demonstrate that … then … • In the facts given, B has …. This is similar to the facts in A v B where the court concluded that …. • Unless A could demonstrate that … then … • A would not succeed unless … • A would only succeed if … C – Conclusion This last part is where you state your conclusion. That is, what is the result when you’ve applied the legal principle to the facts you’re given? For example, is there a bailment or not, has A breached the relevant legislation, does B have a legal remedy? When doing this, have regard to which (if any) party you have been asked to advise. You could use the following ways to state your conclusion: • It could be argued that… • It is arguable … • I would advise B to argue that … • It would be possible to conclude that … • It is unlikely that … Finally – revise your answer Once you have finished writing your answer, ask yourself the following questions. 1. Did you prepare a plan before you started writing your answer? 2. Did you answer the specific question/s asked by the Problem / assignment? 3. Did you support your answer by referring to the relevant legal principles? 4. Did you support your answer by referring to the correct and most relevant authorities (primary sources – cases and legislation)? NB. There may be case law and statute law that applies to a problem. Which is the most current law? 5. Have you applied the law to the relevant facts gi.

1. How to answer for Questions (you have to use HIRAC method)
So how do I answer a HIRAC problem question?
For each topic, you will be provided with a ‘guide to problem
solving’. This
‘checklist’ will assist you to identify the relevant points which
you will need to
consider when answering the problem questions.
When answering legal problem questions generally, it is
recommended that you use
the HIRAC method. If you are not familiar with the HIRAC
method, please read the
following explanation so that you can draw upon this method
when answering legal
problem questions. HIRAC simply stands for Heading, Issue,
Rule, Application and
Conclusion. That is:
H – Heading
Identify the major theme as your heading.
I – Issue
State the legal issue raised.
R – Rule
Your next sentence will be a statement of the legal rule(s) or
principle(s) that applies to the situation. State the principle
clearly
and concisely in your own words, and indicate the case or
legislation that is your primary source of that principle.
A – Application
Your next sentence should be your application of the law – that
is,
you apply the legal principle to the facts in the problem. This is
where you can draw heavily upon the case law. You could use
the
following ways to apply the legal rule:

2. • The legislation could be interpreted to mean … which would
apply to these facts because …
• B would need to argue that …
• What B would need to show is … B can show this because
…[refer to relevant facts].
• There is not sufficient information, but B would only
successful
if she could demonstrate that … then …
• In the facts given, B has …. This is similar to the facts in A v
B
where the court concluded that ….
• Unless A could demonstrate that … then …
• A would not succeed unless …
• A would only succeed if …
C – Conclusion
This last part is where you state your conclusion. That is, what
is
the result when you’ve applied the legal principle to the facts
you’re
given? For example, is there a bailment or not, has A breached
the
relevant legislation, does B have a legal remedy? When doing
this, have regard to which (if any) party you have been
asked to advise.
You could use the following ways to state your conclusion:
• It could be argued that…
• It is arguable …
• I would advise B to argue that …
• It would be possible to conclude that …
• It is unlikely that …
Finally – revise your answer
Once you have finished writing your answer, ask yourself the
following questions.
1. Did you prepare a plan before you started writing your
answer?
2. Did you answer the specific question/s asked by the

3. Problem / assignment?
3. Did you support your answer by referring to the relevant
legal
principles?
4. Did you support your answer by referring to the correct and
most relevant authorities (primary sources – cases and
legislation)?
NB. There may be case law and statute law that applies to a
problem. Which is the most current law?
5. Have you applied the law to the relevant facts given in the
problem?
6. If you’ve made some assumptions because you weren’t told
all
of the facts you needed to know to answer the question, did you
clearly state those assumptions?
7. Is your written answer well-constructed?
• Is it logical?
• Have you used clear ‘everyday’ language?
HIRAC Example
Below is an example of a problem question answered using the
HIRAC structure.
Brown’s Steel searches the internet for a new lathe. An
Australian supplier is
located which promises delivery in two days. The manager
downloads and
completes the necessary on-line document and clicks the ‘I
agree’ button without
reading all the terms. Two days later when the lathe is
delivered, Brown’s Steel
is advised that it is responsible for the delivery costs. When the
manager
complains, he is told that the cost of delivery, and the fact that
the purchaser was
responsible for this cost, was included in the on-line conditions.
Advise Brown’s Steel

4. Heading
This is a problem dealing with e-commerce and ‘click wrap’
contracts.
State the basic area of law
Issue/s
Is there an enforceable contract between Brown’s Steel and the
Australian Supplier?
Specifically, is the term regarding delivery costs enforceable?
Try to phrase this in legal terms – rather than just asking ‘does
B have to pay the
delivery costs’ which is clearly what B is worried about, think
‘if this case came
before a court what legal issue(s) would the lawyers be arguing
about?’ Here B
would be trying to argue that the contract (or that particular
term) was not
enforceable. This is important because getting the right issue
helps you focus on
what rules are relevant and what facts are important in the
application)
Rules
The relevant law which applies is the law where the material
was downloaded (Dow
Jones v Gutnick).
In ‘click wrap’ contracts, parties may be bound by the terms and
conditions by
clicking the ‘I agree’ button (Hotmail Corp v Van$ Money Pie,
Caspi v Microsoft
Network)
Condense the rules. Keep them simple and to the point. Try to
avoid quoting from
cases or legislation, put it in your own words. Start with a broad
principle (ie to

5. establish jurisdiction) and then work your way down to the more
specific rules – do
not include the facts of the cases just the relevant rule – this
could be case law
and/or legislation.
Application
The appropriate jurisdiction for this matter is the Australian
courts as both companies
are Australian and the internet agreement was downloaded in
Australia.
Although there have been no Australian decisions about
‘clickwrap’ contracts, it is
likely that Brown’s Steel will be bound by the terms and
conditions of the
downloaded agreement by virtue of the manager clicking the ‘I
accept’ button even
though he did not read the terms. This is provided all
requirements regarding
formation of contract have been complied with. There is nothing
in the facts which
suggests that this is not the case.
Refer to the specific facts to explain why/how the rules apply to
the scenario ie both
companies are Australian thus…., the manager clicked the ‘I
agree’ button, thus… This is also the part in which you can
refer to facts of cases if they are relevant – ie
to explain why B may be bound by a rule (the facts are very
similar to x v y or to try
to distinguish why B may not be bound by a rule – ie x v y
involved fraud so not
applicable to B.
Conclusion
The term is enforceable against Brown’s Steel, even though the
manager was unaware

6. of it. Brown’s Steel is liable to pay the delivery costs. Be
specific – include the
practical consequence – tell your client what the outcome is
most likely to be based
on the law.
Business law Questions
Question 1
Jack, Nolan, Andy, Helen and Erica were the directors of
Gemsales Pty Ltd, a company engaged in the business of
importing and supplying jewellery as wholesalers to the local
market.
The company decided that as the market was becoming more
competitive it needed to expand its business as it felt with
increased volumes of sales it would be able to lower its prices
and be more competitive. In order to do so it obtained a $4
million dollar loan from the Friendly Bank Ltd. $3 million was
used to buy more stock and $1 million was used to buy a large
new warehouse and showrooms from Traders Pty Ltd.
Andy was not at the meeting that had made these decisions as he
was in hospital recovering from a serious accident. Erica, as
was her usual custom, had not attended the meeting but signed
the requisite documentation agreeing to the expansion of the
business and the getting of the loan. Helen who attended, said
she did not know if she agreed and abstained from voting. Jack
and Nolan both voted to go ahead with the expansion and the
getting of the loan.
At about this time Nolan has established contact with Mark,
who was setting up a new business as a retailer of jewellery.
Mark was looking for reliable suppliers, but said he would not
deal with Gemsales Pty Ltd as he did not like Jack, the

7. Managing Director. Not wishing to miss out on such a lucrative
business opportunity, Nolan arranged to set up his own business
as a jewellery wholesaler and a contract was entered into
between Mark and Nolan for the supply of jewellery.
Six months later, Nolan resigned as a director. At the same time
it was clear the company had over-extended itself and was
insolvent and could not pay the interest on its loans.
It also became clear that Nolan was a major shareholder in
Traders Pty Ltd and the other directors were unaware of this at
the time of the purchase of the warehouse and showrooms.
Furthermore, Nolan had been approaching other established
customers of Gemsales Pty Ltd and had secured orders for his
own business.
Advise as to the liability of the parties both under common law
and the Corporations Law.
Question 2
Eric, Mary and Mei Ling are the only shareholders and directors
of Nemo Pty Ltd, a trading company that supplies food products
to cafés around Brisbane. In recent times, Nemo’s cash flows
have been pressured because several large customers, including
CafeNow (a large franchise coffee shop with hundreds of
outlets), have been late in paying their invoices. This has meant
that on several occasions Nemo has not had sufficient funds to
pay its bills, particularly rent. The owner of its warehouse
(Leaseco Ltd) has written several letters warning that if Nemo
is late in paying its rent, it will be evicted from the premises.
At the same time as the company’s cash flow troubles, the
employees take industrial action in an attempt to receive a pay

8. increase. This s trike stops deliveries from the warehouse
for two days, with several customers cancelling their supply
contracts with Nemo. The cash flow problems are increased,
when the company’s bank, Eastbank Ltd, threatens to appoint a
receiver over the company, if it does not pay its monthly
interest within two weeks.
Eric, Mary and Mei Ling convene a board meeting to consider
their options. Eric and Mei Ling would like to negotiate with
their creditors to restructure the company’s debts. Mary,
however, would like to sell out and change industries.
Advise Eric, Mary and Mei Ling as to their options under the
external administration procedures under the Corporations Act,
including the advantages and disadvantages of such procedures.
Question 3
Company A (which markets computer software) and company B
(which runs a computer training college) enter into an
agreement to form a new company, company C. Company C is
to provide onsite computer training for retail businesses that use
company A's software. Shirley (a director of company A) and
Laverne (a director of company B) are authorised by the boards
of directors of their respective companies to, as a matter of
urgency, take whatever steps are necessary to form company C
and to secure training contracts on its behalf.
Shirley and Laverne instruct solicitors to register a company.
More quickly than they anticipate, they manage to attract a
large training job from company Y. Purportedly on behalf of
company C, they execute a contract with company Y. They have
told the company Y representatives that company C is not yet
registered. The parties agree to include a clause that provides
that if company C (or a company reasonably identifiable with it)

9. is not registered within two months of the date of the contract,
then company Y can rescind the contract.
Consider these facts in the light of each of the following
scenarios and questions.
1. Assume company C is registered a month after the contract
is executed. What steps must Shirley and Laverne take to ensure
that:
· the contract with company Y is binding on company C; and
· neither of them is personally liable for the actions of company
C under the contract.
2. Assume company C is not registered within the two-month
period. What remedies does company Y have and against
whom?
3. Assume Shirley and Laverne do procure the registration of
company C. Company A, company B and two individuals, C and
D, become its shareholders. Shirley and Laverne organise the
transfer of assets from their own company, company SL, to
company C at grossly inflated values. Company C becomes
insolvent and a liquidator is appointed. Once registered, neither
Shirley nor Laverne have taken any role in the management of
company C. Despite this, what remedies might the liquidator
still pursue against Shirley and Laverne?
Question 4
MNK Mining Ltd is a company that needs funds to expand its
business. The company plans to engage in a large scale equity
capital raising in the next 12 months but wishes to raise as
much debt as possible before that time while cheap debt is
readily available.
MNK has been involved in fundraising discussions with a

10. venture capital firm Debt Capital LLP (based in New York).
Debt Capital has agreed to lend MNK $30 million in a single
loan facility. Debt will also assist MNK to establish a further
$30 million unsecured note issue for domestic investors that
will carry 12 per cent interest and may be convertible to
ordinary shares in MNK at the option of the noteholder in 5
years’ time. MNK makes a presentation to wealthy investors at
a private function conducted by Debt Capital in Sydney.
Debt Capital’s loan document is based on an old precedent and
contains a floating charge clause covering all of the company’s
property. MNK also has a long-term lease with LeaseCo
covering mining equipment for the next 8 years.
What legal issues under the Corporations Act and the PPSA are
raised by this situation?
Question 5
Thaiwood Ltd (Singapore) develops plantation land. It instructs
Rocker to setup an Australian subsidiary. Rocker lives in
Australia, the other directors live in Singapore. Rocker is
instructed by Thaiwood to buy a property in Victoria. Rocker
signs a purchase contract in his name, for and on behalf of
Auswood Ltd. Rocker is one of three directors of Thaiwood Ltd
and the same directors are proposed for Auswood. Rocker tells
the vendor Greenhills Limited that the contract is to be changed
to the name of Auswood Ltd as soon as it is established. Rocker
also engages Treefellers Pty Ltd to clear the boundary. Without
checking with Rocker, Treefellers begin clearing only to be
stopped by an injunction filed by the EPA.
Auswood Ltd is established. Auswood’s prospectus aims to
raise money to develop plantation wood. Auswood’s directors
learn that the Victorian site is not suitable because of
environmental legislation. The EPA have filed for breaches of

11. their Act against Treefellers Pty Ltd. Greenhills provides notice
requiring settlement.
Explain who is liable, if anyone:
(a) On the contract for the purchase of land. (b) On the contract
for clearing.
Advise the directors of Auswood Pty Ltd regarding their duties.
Answer only in respect to the Corporations Act 2001; do not
address any property or conveyancing issues or law.
Question 6
A and B run a successful plant nursery for about ten years. A
runs her business activities through a company called A Pty Ltd.
B runs her business activities through a company called B Pty
Ltd.
A convinces B to incorporate in order to raise money and
decrease their liability. A contacts her accountant who sets up a
new company Anzac Nursery Inc. (ANI) with A and B as
directors and A Pty Ltd as the shareholder. B, through B Pty Ltd
lends $10,000 to ANI.
After some period, A and B fall out and are unable to decide
anything together.
Advise B of her legal remedies and how a court might assess
any action for remedies she might pursue.
Question 7
Three Diamonds is a car manufacturer and is a listed entity with
roughly 100,000 shareholders. Three Diamonds board consists
of Peta (Chairperson), Ruth (MD) and Tom (CFO) and two non-
executive directors Vince and Xantha. The company secretary
and general counsel is Belinda who is in charge of legal
compliance and governance. The company’s review date is 30
March each year.
Three Diamonds relies on corporate fleet sales for about 40% of
its business. The global financial crisis results in a serious

12. downturn in sales volumes from corporates. This puts sudden
and severe
constraints on its cashflow. It is not able to quickly reduce its
overheads to meet the falling demand. Its mechanisms to raise
funds by utilising its assets are already ‘maxed out’ due to a
major reengineering plan. Its banks are unwilling to provide
further funds.
As a result Three Diamonds embarks on a strict credit
management plan, delaying payments as long as possible,
mostly until legal action is threatened. Many suppliers require
cash only on supply.
Three Diamonds continues to trade until 30 June 2011, when the
ATO lodges a director penalty notice on the board members for
failing to pay company taxes.
1. Is the company insolvent at any particular time? 2. What
liability could the directors face if the company were insolvent?
3. Would the company secretary also face this potential
liability?
Question 8
Raising capital is a challenging activity.
Explain the application of the Corporations Act 2001 as it
affects listed and proprietary companies in their pursuit of
funds from both share and debenture sources. Pay particular
attention to the responsibilities of directors and any remedies
available relative to directors’ breaches of the Act.
If economic rationalism is the primary determinant, do you
agree that the Act effectively balances the interests of those
raising money and those investing money?