Problem 1 (5 marks) Topic 3 only

Charlie operates a flower shop. He agrees to sell his business to his sister Ali for $45,000. They both use their own solicitors to negotiate the terms of a formal written agreement. The agreement contains a restriction that Charlie cannot, in the following two years, open another flower shop within 2 kilometres of the one he has just sold to Ali. 

After six months, however, Charlie opens another flower shop just one kilometre away. Ali wants to sue Charlie for a breach of contract but fears the agreement was not intended to be legally binding because they are siblings.

Ignore any restraint of trade issues in your answer

a) What is the issue you need to consider? (1mark) 

b) What are the relevant legal rules relating to this problem? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information, if Ali sues Charlie for breach of contract, will she win in court? What is your answer – yes? or no?  Explain your answer. (2 marks) 

Problem 2 (5 marks) Topic 3 only

Nick is organising a university student party at the student union building. He approaches the local police, wanting them to keep out 'undesirables' such as drug addicts and Brisbane Bronco supporters. 

The station sergeant informs him that he would have a patrol car call in periodically during the evening. Nick says he actually wants an officer stationed outside the entrance all night but is informed this will cost him $1000.  Nick agrees to this proposal. After the big event, when Nick receives the account from the Police Department, he refuses to pay. The Police Department sues Nick for a breach of contract.

a) What is the issue you need to consider? (1mark) 

b) What are the relevant legal rules relating to this problem? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information will Nick win in court? What is your answer – yes? or no?  Explain your answer. (2 marks)   

Problem 3 (5 marks)     Topic 3 only  

Mike, a motor mechanic, owes Helen $5000 due and payable on 24 June 2018. He phones Helen and informs her that he has lost his job and there is no chance he can hope to pay the full debt for a while because there are no job opportunities for mechanics in the area. 

Helen says 'if you can bring me $1000 on 24 June, and while you're here check my BMW's steering because I'm worried there's something wrong with it, I promise I will not sue you for the rest.' 

Mike does as Helen asks and then learns that she is suing him for the outstanding amount.  

a) What is the issue you need to consider? (1mark) 

b) What are the relevant legal rules relating to this problem? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information, if Helen sues Mike for breach of contract will she win in court? What is your answer – yes? or no?  Explain your answer.  (2 marks)

Problem 4 (5 marks) Topic 4 only

Lizzie sees a big sign in the window of the local video shop advertising a special membership offer of 100 overnight DVDs for the next three months for only $100.   The sign also lists the numerous terms and conditions of the membership contract.  Lizzie pays the $100 joining fee and commences to enjoy recently released movies at that cheap price.  

Several weeks after joining Lizzie rents an overnight DVD and, because she falls ill, does not return it for eight days. When she does return the DVD, the shop owner tells her that she must pay an extra $140, referring Lizzie to a term of the contract that states: 

'Hire of DVDs under this agreement is restricted to overnight hire only. Any such DVD not returned by 3pm on the following day must be paid for at the rate of $20 per day.'  

The normal late fee in the DVD-hire industry is $5 per day. 

a) What is the issue you need to consider? (1mark) 

b) What are the relevant legal rules relating to this problem? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information, if The DVD store sues Lizzie for breach of contract will the store win in court? What is your answer – yes? or no?  Explain your answer.  (2 marks) 

Problem 5 (5 marks) Topic 4 only

Tori took her best dress to the dry cleaners because it was badly stained at a recent party. She was asked to sign a small document which looked a bit like a receipt but was headed Agreement and contained the following clause, 

We will not be responsible for any loss or damage of whatever nature or howsoever caused. 

Tori's dress is damaged beyond repair and she demands compensation from the dry cleaner's owner who flatly refuses and draws her attention to the above clause in the agreement.  Tori hadn't actually read the wording before she signed because it never occurred to her that anyone could avoid their obligations in this manner.

a) What is the issue you need to consider? (1mark) 

b) What are the relevant legal rules relating to this problem? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information, if Tori sued the dry cleaners for the destruction of her dress would she win in court? What is your answer – yes? or no?  Explain your answer.  (2 marks) 

Problem 6 (5 marks) Topic 5 only

Sandra wishes to buy a new copier for her accounting business. She tells Mr Smith of Smith's Office Equipment that she needs one that can handle large volumes and can sort and complete work very quickly and asks for his advice on which copier she should purchase. He recommends a particular model that Sandra purchases for $12,000. 

Within a week she discovers that her new machine is very slow, continually overheats and is unable to handle the large amounts of work she requires. Parts of the copier have fallen off and cracks have appeared in the glass.  When she tells Mr Smith he responds that it's not his concern and she should take it up with the manufacturer.

Refer only to the Goods Act 1958 (Vic) as per your textbook

a) What is the issue you need to consider? (1mark) 

b) What are the relevant sections of the Goods Act? (1 mark) 

c) What are the main cases related to this problem?  (1 mark)

d) Based on this information, Does Sandra have any rights against Smith's? What is your answer – yes? or no? Explain your answer.  (2 marks)

Solution 1

Issue

Can Ali sue Charlie for breach of contract?

Legal Rules 

In any contract, the terms can be bifurcated on the basis of importance into conditions and warranties. (Christensen & Duncan 2009)

Those terms which are the essence of the contract are called conditions. These are roots, heart and soul of contract and if not performed makes the contract redundant and the aggrieved can terminate the contract and sue for damages. 

The terms which are additional to the conditions and are not the essence of the contract are warranties. If such terms are not performed then it will not render the contract ineffective and only damages can be sought by the plaintiff.

Main cases 

Hong Kong Fir Shipping v KKK [1962].

Commonwealth v Amann Aviation Pty Ltd (1991).

Application and Conclusion 

Ali wishes to buy the flower shop of Charlie for $45,000. When the contract was made then Charlie incorporated a term according to which a restriction was imposed upon Charlie under which he is not permitted to open any other flower shop within 2 Km and for next two years.

It is submitted that the terms that are made part of the contract are very essential to the contract as Ali purchased the shop in order to make sure that her business remain profitable for some time. Thus, the term is a condition.

This condition is violated when Charlie opened a flower shop within 1 Km after 6 months. Thus, a condition is violated and Ali can cancel the contract and sue for damages.

(Some parts of the solution has been blurred due to privacy protection policy)