1The IRAC method:How to answer legal problem-based questions for examsBy Jonathan Temporal1IntroductionLaw students and students of law subjects taught in a Higher Education Institutionsuch as Holmes Institute are required to sit a variety of class tests and finalexaminations. These assessments consist of a range of different question types,such as short answer questions and essay-type questions. The most commonquestions students will find in law exams are problem-based questions. Problembased questions are factual cases involving two or more parties that present a legalissue or issues. Typically, students are asked to identify the legal issue or issues forresolution, resolve these issues, or advise one or both of the parties by discussingtheir rights, obligations, responsibilities and liabilities. In doing so, students areexpected to apply legal rules and principles learned in class and their readings.Students are further expected to form a conclusion concerning the legal issuespresented by the problem-based question.It is important that students organise their writing and follow a structure in answeringa problem-based question. Doing so ensures that the reader will understand the flowof their discussion and be persuaded by their arguments. One of the most seriousfaults an answer to a problem-based question can have is being unintelligible toreaders. Even if a student knows the issues that are presented by a case andunderstands the rules and principles to be applied in resolving those issues, if theanswer does not follow a clear and sound structure, the reader will be lost amid thestudent’s rhetoric.Problem-based questions present students with a set of facts which need to beanalysed in light of legal principles distilled from many sources – statutory provisions,common law principles, judicial precedents and other materials. Answering thesequestions require the use of legal writing skills. This style of writing is distinct fromother forms of writing students might have been exposed to in their universityundergraduate or even post-graduate but non law-related studies. Legal writingemploys a specific structure that lawyers follow in various forms; this is the samestructure that law lecturers generally expect to see in students’ answers to problembased questions.One basic structure students can use in answering problem-based questions is theIRAC structure. IRAC stands for Issue, Rule, Application and Conclusion. WhileIRAC is not the only structure used in legal writing to analyse cases, it does presenta simple way for students to logically and quickly answer any problem-basedquestion. Indeed, this is the same way that judges and lawyers write in1 Solicitor NSW and Law Lecturer, Holmes Institute (Sydney).2deconstructing a set of facts presented to them: by identifying and presenting theissues to be resolved, discussing the legal rules relevant to the issues, applyingthem to the facts presented in the case, and reaching a conclusion..Using IRACLegal writing using the IRAC structure does not come intuitively to many students. Itis not, however, a complicated method. All it requires is clear thinking and an abilityto spot the issues presented by a case and logically applying legal principles to thefacts.Consider this example2:In arriving at its decision, the court applied legal principles on contracts, specificallythe enforceability of simple contracts. Contracts may be ‘formal’ or ‘simple’ contracts.A formal contract is an agreement that is signed, sealed and delivered in accordancewith formalities required by law.3 Contracts that are not formal contracts are simplecontracts. Fitzpatrick et al (2017) explain that simple contracts may be verbalcontracts, totally or partially in writing, or even implied by the behaviour of the parties2 Clarke v Dunraven [1897] AC 59. In Fitzpatrick, et al. (2017), Business and Corporations Law, 3rd edition: LexisNexis Butterworths (p. 84).3 Fitzpatrick, et al. (2017), Business and Corporations Law, 3rd edition: Lexis Nexis Butterworths (p. 84)Facts: Two boats collided while competing in a regatta run by a yacht club. Both boats involved in the accident had agreed to be bound by the rulesof the club before entering the regatta. The rules stated that any owner of a boat who breached the regattarules would be liable for the cost of repairs to the boat to be damaged asa result of being fouled by another.Issue: Were the parties bound by the rules of a contract without actuallymaking an agreement?Held: The Appeals Court decided the boat owners had entered into a contractby entering the regatta, and that involved being bound by the rulesimposed by the club. This was despite any direct offer and acceptancebetween the owners of the two boats.3– or a combination of all three means – and require offer and acceptable as well as afinal agreement.4 The terms ‘contract’ and ‘agreement’ are often interchangeableand mean similar things; in fact, one might define a contract as a legally enforceableagreement.5From the above example, students will quickly realise that one good way to reviseanswering problem-based questions using IRAC is by reading briefs or summaries ofcourt decisions because the courts follow the same structure in deciding cases.Application of IRACConsider this problem-based question involving a restraint of trade clause in acontract6:The most important step in answering a problem-based question is the most basicone: make sure you read the question. Understand what is being asked and be surethat you address this in your answer.In this question, we are asked to advise a party (the seller) concerning the legality ofa restraint of trade clause in a contract of sale of a business.Issues:The issue in this case is whether the restraint clause – that Jose will not trade in thesporting goods retail business for 5 years within a 25 kilometre radius of SunburySporting Goods’ premises in Sunbury – is valid or void.Rules:The applicable restraint of trade rules are as follows:4 Ibid, at p 83.5 Gibson A & Fraser D (2016), Business Law, 9th edition: Pearson Australia.6 Problem-based question taken from Fitzpatrick, et al. (2017) above n3, 327.Jose runs Sunbury Sporting Goods, the leading sports store in Sunbury andthe surrounding area. He decides to sell the business, and Fay, the localbusiness sales agent, introduces a prospective buyer, Jillian. Whennegotiating the contract for the sale of the business, the issue of the restraintclause arises. Jillian requests that the clause read that Jose will not trade in asimilar business for a period of 5 years within a 25 kilometre radius of thebusiness premises in Sunbury.Advise Jose of the legality of the restraint of trade clause.4 Common law provides that some kinds of contracts are illegal because theyare intrinsically harmful to society.7 Illegal contracts are void. One type of illegal contract void at common law is a contract thatunreasonably restrains trade. Restraint clauses are usually found in contracts of employment as well as saleof businesses (vendor restraints). Employment restraint clauses are unjustifiable and courts have treated themdifferently compared with vendor restraints.8 Courts take a less strict view with respect to vendor restraints. This isbecause in the sale of a business, the parties more or less possess equalbargaining power; the parties themselves negotiate a price, the price willdepend on the terms of the contract and, generally, the greater protection isafforded to the purchaser, the higher the selling price.9 All contracts in restraint of trade are void unless it is proved that the restraintis reasonable in the circumstances.10 To be ‘reasonable’, the restraint of trade clause must be:o reasonable in the interests of the parties; that is, the relevant partymust possess a legitimate interest to protect and the restraint shouldbe no wider than is required to protect that interest;o reasonable in the interests of the public; that is, it must have somebenefit to the public.11 Thus, if the clause is reasonable, having regard to the interests of the partiesand the public, it will not be void for illegality.12 Courts consider the following factors to determine the reasonableness of avendor restraint clause:o the geographical extent of the restrainto the time period involved;o the bargaining strengths and positions of the parties during thenegotiations; ando the type of business and activity being restrained.13Application of the rules:All the facts of the case must be examined in order to assess the reasonableness ofa restraint of trade clause; each case turns on its facts and the conclusions mightvary depending on the circumstances.7 Fitzpatrick, et al. (2017) above n3, 320.8 I.F. Asia Pacific Pty Limited v Galbally [2003] VSC 192.9 Gillard J in Tropeano v Riboni [2005] VSC 229 at [86].10 Sidameneo [No 456] Pty Ltd v Alexander [2011] NSWCA 418.11 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535.12 Fitzpatrick, et al. (2017) above n3, 323.13 Gibson A & Fraser D (2016) above n5, 337.5For instance, in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd14, arestraint clause that sought to restrain the seller of a munitions manufacturingbusiness from engaging in the manufacturing of guns, whether directly or indirectly,anywhere in the world for 25 years was held to be reasonable. This was due to theinternational scope and reach of the business that was sold.If circumstances were changed, however, and the sale only involved a smallbusiness with a limited geographical scope of operations, such a long period ofrestraint would clearly be unreasonable.In Nordenfelt, however, an expanded version of the original restraint of trade clauseseeking to prohibit the seller from engaging in “any business competing or liable tocompete in any way with that for the time being carried on by the company” wasfound to be unreasonable for being too wide.15There are other examples of cases where restraint of trade clauses were found to bereasonable. A restraint for two-years on the seller of an accounting practice coveringall of Australia was found to be reasonable, given that the buyer’s own relatedpractice operated nationwide.16 A clause restraining a partner who left hispartnership from competing with the latter’s business for five years was foundreasonable because the partner had communicated with former clients through acompany owned by his wife.17 These cases underscore the importance ofconsidering all the facts of a given case to decide whether a restraint of trade isreasonable or not.Going back to the problem-based question at hand, the clause must beassessed in terms of the geographical and time restraints it imposes on theseller. These restraints will be likely be found reasonable by the courts if theyare reasonably necessary to protect the goodwill of the business sold.18 Thequestion is, do the restraints protect a legitimate interest of the buyer of thebusiness? Are the restraints no greater than what is necessary to protect thatinterest?It is submitted that the geographical restraint on the seller Jose not to trade in asporting goods business within a 25 km radius of Sunbury Sporting Goods isreasonably necessary to protect the goodwill of Sunbury Sporting Goods and isno greater than what is necessary to protect the latter’s interest. According tothe facts, Sunbury Sporting Goods has developed a reputation as the leadingsports store in Sunbury and surrounding areas. This means that its scope ofoperations extends beyond the immediate Sunbury area; thus it has a legitimateinterest to protect its sales in all its areas of operations. If Jose were allowed toopen a competing business within 25 km of the Sunbury store, this could likelyadversely impact Sunbury’s sales. Further, although the facts are silent, it is14 [1894] AC 535.15 See also Gibson A & Fraser D (2016) above n5, 337.16 Complete Business Strategies Pty Ltd v AFA Wealth Pty Ltd [2013] QSC 043.17 Hunter v Koulouris [2011] NSWSC 88718 See Lindner v Murdock’s Garage [1950] 83 CLR 628; Butt v Long [1953] 88 CLR 476; and Lloyd’s ShipsHoldings Pty Ltd v Davros Pty Ltd [1987] 17 FCR 505.6assumed that Jose, who ran Sunbury Sporting Goods, was largely responsiblefor the business’s success and that he must have built it over a period of time.As former owner of Sunnybank Sporting Goods, Jose would also evidentlypossess intimate knowledge of the business’s strategies and plans in its areasof operations. In Nomad Modular Building Pty Lt v Smith19, the Supreme Courtof Western Australia upheld the validity of a restraint clause that sought toprohibit an employee of a WA business from working with a competitorcompany in Queensland. The court found that the restraint was reasonablesince the employee had knowledge of his former employer’s strategic plans forQueensland.It is submitted, however, that the 5-year restraint on Jose from trading in asporting good business is unreasonable and will likely be read down by thecourts.Similar to geographical restraint clauses, for a time restraint clause to be valid, itmust be reasonable in the interests of the parties and the public. It was held inLloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd20 that ordinarily a time restraintshould only be such as to allow sufficient time for the former business owner’sconnection with customers to fade away. Thus, whether a time restraint isreasonable or not will depend on the individual circumstances of each case. A two-year restraint covering all of Australia was found to be reasonableas the buyer’s accounting firm had office throughout the country.21 A five-year restraint that sought to stop an ex-partner from competingwith the business of his former partnership was found to be reasonable;this was considering that the partner had previously contacted formercustomers through a company owned by his wife.22 A restraint of trade clause that sought to prohibit a former employee of acompany from working with a competitor company for six months wasfound to be valid.23 A three-year period of restraint on a former managing director andshareholder of a company from joining a competitor was found to bereasonable. Given that the employee had been with his former companyfor over 20 years, joining a competitor could be damaging to thecompany’s business.24In this case, it is argued that a 5-year restraint on Jose from trading in a sportinggoods store is unreasonable. It is doubtful that Sunbury Sporting Goods needssuch a long period of time to ensure that its former owner Jose’s influence andconnection with former customers has ceased to exist. It is submitted furtherthat 5 years is much too long a period for Sunbury Sporting Goods to be19 [2007] WASC 117.20 [1987] 17 FCR 505 at 524.21 Complete Business Strategies Pty Ltd v AFA Wealth Pty Ltd, above n16.22 Hunter v Koulouris, above n17.23 Nomad Modular Building Pty Lt v Smith [2007] WASC 117.24 Austress-Freyssinet Pty Ltd& Ors v Kowalski [2007] NSWSC 399.7allowed to re-establish its business under new management withoutcompetition. Jillian, as new owner of Sunbury Sporting Goods, should rely onher own management acumen and the strength of her own customer relationsto grow her business; whether her new business succeeds should not entirelydepend on restraining Jose from establishing a competing business for such along period of time as 5 years.Conclusion:If you have correctly identified the legal issues to be resolved, cited the correct legalrules and properly applied them to the facts of the case, your conclusion shouldlogically follow. In your conclusion, be sure to answer what was asked in the originalproblem question. Ensure that your conclusion is no more than one or two lines,With regard to the problem question at hand, the conclusion could be somethingalong these lines:“In conclusion, given the above legal rules and after applying them to the factualscenario of this case, the courts might find that restraint of trade clause sought to beimposed against Jose is valid in terms of its geographical scope; however, it is likelyto be found invalid insofar as the 5 year restraint period is concerned. Given this, thecourts will also likely read down the time restraint clause, that is, the court mightimpose a lesser and more reasonable time restraint on Jose.”In parting, always remember that answering legal based problem-questions is a skillthat can be acquired with practice. So the more practice you have at answeringthese types of questions yourself and, if possible, getting your lecturer’s feedback,the better you will become.8ReferencesBooksFitzpatrick, J., Symes, C.F.,Veljanovski, A & Parker, D (2017). Business andCorporations Law. 3rd ed. Chatswood, N.S.W.: LexisNexis Butterworths.Gibson, A. & Fraser, D. (2015). Business Law. 9th ed. Melbourne, VIC: PearsonAustralia.CasesAustress-Freyssinet Pty Ltd& Ors v Kowalski [2007] NSWSC 399Butt v Long [1953] 88 CLR 476Clarke v Dunraven [1897] AC 59Complete Business Strategies Pty Ltd v AFA Wealth Pty Ltd [2013] QSC 043Hunter v Koulouris [2011] NSWSC 887I.F. Asia Pacific Pty Limited v Galbally [2003] VSC 192Lindner v Murdock’s Garage [1950] 83 CLR 628Lloyd’s Ships Holdings Pty Ltd v Davros Pty Ltd [1987] 17 FCR 505Nomad Modular Building Pty Lt v Smith [2007] WASC 117Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535Sidameneo [No 456] Pty Ltd v Alexander [2011] NSWCA 418Tropeano v Riboni [2005] VSC 229 at [86]
