MBS502 Business Law TD211

Unit CoordiJohn MurpMurdoch BEmail: j.mu Academic DAmanda MTelephone:E-mail: ama Lecturer Saritha KriTelephone:E-mail: sar

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© Published by Murdoch University, Perth, Western Australia, 2010.

John Murphy This publication is copyright. Except as permitted by the Copyright Act no part of it may in any form or by any electronic, mechanical, photocopying, recording or any other means be reproduced, stored in a retrieval system or be broadcast or transmitted without the prior written permission of the publisher.

CONTENTS

UNIT INFORMATION ONE Introduction 3TWO Resources for the Unit 6 THREE Assessment 7

LEARNING GUIDE INTRODUCTION 12 ONE The Australian Legal System Part 1 13 TWO The Australian Legal System Part 2 15THREE Agency Law 16FOUR Partnership Law 18 FIVE Contract Law – Formation of Contract 20 SIX Contract Law – Offer and Acceptance 22 SEVEN Contract Law – Consideration and Legal Capacity 24 EIGHT Contract Law – Legality of Object and Genuine Consent 25NINE Contract Law – Contents of a Contract 26TEN Contract Law – Discharge of Contract 28 ELEVEN Contract Law – Remedies and Damages 29

LAW FOR BUSINESS

MBS502

Unit Information

3

ONE

Introduction

Unit Overview

Welcome to MBS 502 Law for Business. This is an introductory course for postgraduate students who have not previously studied law. The aim of this course is to provide postgraduate students with the essential general grounding in the Australian legal system and some particular areas of substantive law. This unit will focus on the Australian legal system, fundamental principles of contract law and some particular applications of it to business operations.

Prerequisites

There are no prerequisites for this unit.

Aims and Objectives

Unit Aims The broad aim of this unit is to acquaint postgraduate students with some general legal principles applicable to business in Australia. This involves introducing postgraduate students to The Australian legal system, contract law and its particular application to some aspects of Contracts of Employment. The objectives of the course are:

1. To give participants wishing to develop management and business skills the basic

legal knowledge they need to conduct day to day business affairs and in particular, to identify when they need to seek legal advice.

2. To enable postgraduate students to acquire a sufficient understanding of the law, its institutions and the manner of their operation in reaching resolution of legal disputes.

3. To develop postgraduate students critical thinking skills in the legal context.

Learning Objectives On successful completion of the unit you should be able to:

1. Examine legal aspects of business relationships 2. Identify and manage fundamental legal issues in an objective manner 3. Communicate with legal advisors in an intelligent and informed manner

Graduate Attributes This unit will contribute to the development of the following Graduate Attributes:

1. Communication 2. Critical and Creative Thinking 3. Social interaction 4. Independent and Lifelong Learning

4

Unit Coordinator and Local Lecturer

Unit Coordinator Your unit coordinator in Murdoch University Perth for Law for Business is John Murphy.

Contact Details Email: [email protected] Phone: +61 8 93607515

Local Lecturer Your local lecturer and tutor for Law for Business in Dubai is Ms Saritha Krishnakumar.

Contact Details Email: [email protected]

Phone: +971 4 4355700

Administrative Contact Kristina Rowena Estero Email: [email protected]

Phone: +971 4 4355700

Technical Help For technical difficulties contact the IT Help Desk: [email protected]

or phone Mr Janeesh Karammal (IT Support) at +971 4 4355700

How to Study this Unit

Learning Activities

The teaching program consists of a weekly seminar held in Lecture Theatre on Mondays and Tuesdays from 6pm to 9pm. .

Attendance

Attendance and participation at all sessions is encouraged.

5

Study Schedule Date (week commencing)

Lecture Description Reading

09 Jan 2011 One Introduction to the Unit; and

The Australian Legal System

– Its origins and development

Text Chapter 1 and other

ECMS material

16 Jan 2011 Two The Australian Legal System

– Hierarchy of Courts, Doctrine

of precedent and Statutory

Interpretation


ECMS material

23 Jan 2011 Three Agency law – an introduction

to the application of Common

Law principles


case materials

30 Jan 2011 Four Partnership Law – an

introduction to the application

of legislation and its

interpretation


case materials

06 Feb 2011 Individual Study Week

13 Feb 2011 Five Contract Law

Formation of contract:

Intention to create legal

relations,

Text Chapters 4 & 5 and

other case materials

20% Test will be

held on 17th Feb

(Thursday) at 7 pm

for both Monday

and Tuesday

Classes

20 Feb 2011 Six Contract Law – Formation of

contract: Offer & Acceptance

Text Chapters 4 & 5 and


27 Feb 2011 Seven Contract Law - Formation of

contract: Consideration;

Legal Capacity

Text Chapter 4 & 5 and


06 Mar 2011 Eight Contract Law - Formation of

contract: Legality of Object:

Genuine Consent



Individual Report

(2000 words max)

30%

13 Mar 2011 Nine Contract Law - Contents of

contract: Representation,

terms & warranties, exclusion

clauses



20 Mar 2011 Ten Contract Law - Discharge of

contract: Breach &

Frustration;

Text Ch 9 and other case

materials

27 Mar 2011 Eleven Contract Law - Remedies &

Damages

Text Ch 9 and other case

materials

03 Apr 2011 Study Break

10 Apr 2011 Assessment

6

TWO

Resources for the Unit

Unit Materials To undertake study in this unit, you will need: Essential Textbook and Reader

Text: Sweeney, B. & O’Reilly, J., Law in Commerce, 3rd Edition, LexisNexis Butterworths, Australia, 2007

Other References Latimer P, Australian Business Law, 28th Edition, CCH Australia Ltd, 2009.

Gibson & Fraser, Business Law, 4th Ed, Prentice Hall, 2009

Vermeesch & Lindgren, Business Law of Australia, 11th Ed, LexisNexis, 2005

Butterworths Business and Law Dictionary, Lexis Nexis, 2nd Ed, 2005

Online Resources The unit welcome page and LMS online unit materials are available. There are also other materials available from the Library. Electronic Course Material & Reserve info http://prospero.murdoch.edu.au/search~S1/ Past exam paper http://wwwlib.murdoch.edu.au/exams/

7

THREE

Assessment

Assessment Components You will be assessed on the basis of: Assignment Description Value Due Test (Internal students only)

Multiple choice & short answer test 20 % Week 6 (17th February 2011 – Thursday – 7 pm)

Assignment Individual paper 30% Week 9 (8th of March 2011)

Final exam Extended response 50% Assessment period

Individual Paper must be handed before 6 pm.

Assessment Details

Test

A test will be held in the Week 6 session. Students will be allowed 50 minutes to complete 20 multiple choice questions and 5 short answer questions. The questions will be based on topics up to and including the session 4 topic. The test will be marked out of 20 and is worth 20% of the final unit grade. The test is closed book.

Assignment

The assignment question will be distributed to students in session 4 and will be posted on LMS following that session. The assignment will be no more than 2,000 words. Students must use a 12 size font, double spacing and default Microsoft Word margins. This assignment is marked out of 30 and is worth 30% of the final unit grade. Submit this assignment using the assignment tool in LMS. The due date for submission of this research paper is 6.00pm 8th March 2011. Please see below for details of extension to this deadline. The mark for your assignment will be determined by reference to the quality of its analysis, its clarity and organisation, and its presentation, including its freedom from distracting stylistic errors (grammatical, spelling, punctuation and typographical). This is a legal problem solving exercise. Most of the references are expected to be to the source laws that are statute and/or case law.

8

The Library provides a citation guide at http://wwwlib.murdoch.edu.au/find/citation/.

Assignment Marking Guide

Identification of relevant issues

6

Examination & analysis of information

14

Presentation

4

Referencing

6

TOTAL

30

Due date extension for the assignment will be granted only in an exceptional circumstance. If something exceptional arises that requires an extension you should contact the unit coordinator before the due date. Only the unit coordinator can grant extensions. Late submissions which have no agreed due date extension will have 10% of the marks deducted per day of delay. Reasons which are insufficient to warrant an extension include computer failures, car failures or other transportation difficulties, work conflicts and other study commitments

Final Exam

The final examination will be of 3 hours duration and held in the assessment period. It will be an extended response exam and based on lecture material and readings provided in the course of the unit. The examination is open book. It will be marked out of 50 and is worth 50% of the final unit grade. The final exam will consist of a number of short legal problem solving exercises similar to those covered in the tutorial exercise covered during the semester.

Deferred Assessment

The availability of deferred assessment is not determined by the Unit Coordinator. A central administration procedure must be followed

Determination of the Final Grade

The assignments and the exam will be marked on the performance achieved in each of the respective areas of assessment. The final grade will be the accumulation of the pro rata score for each assessment.

9

Final Grades for Units which Award Grades Notation Grade Percentage Range HD High Distinction 80 – 100 D Distinction 70 – 79C Credit 60 – 69 P Pass 50 – 59 N Fail Below 50DNS Fail Did not participate in any assessments

after HECS census date S Supplementary Assessment 45 – 49* *The award of the grade S shall be at the discretion of the Unit Coordinator.

The grade descriptors are provided in the Murdoch University Handbook and Calendar and at http://www.murdoch.edu.au/admin/policies/assessment.html#11

Interim Grades: NA or NS Not Available or Not SubmittedQ Deferred Assessment S Supplementary Assessment

University Policy on Assessment

Assessment for this unit is in accordance with the provisions of Degree regulations 40-48. Check these in the current Murdoch University Handbook and Calendar or http://www.murdoch.edu.au/admin/legsln/regs/bachelor.html#assessment

Assessment Roles and Responsibilities Please refer to the University Policy on Rights and Responsibilities of Students and Staff http://www.murdoch.edu.aadmin/policies/assessment.html#8

Academic Integrity Murdoch University encourages its students and staff to pursue the highest standards of integrity in all academic activity. Academic integrity involves behaving ethically and honestly in scholarship and relies on respect for others' ideas through proper acknowledgement and referencing of publications.

Lack of academic integrity, including the examples listed below, can lead to serious penalties. Find out more about how to reference properly and avoid plagiarism at: http://www.murdoch.edu.au/teach/plagiarism

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Plagiarism Inappropriate or inadequate acknowledgement of original work including:

Material copied word for word without any acknowledgement of its source

Material paraphrased without appropriate acknowledgement of its source

Images, designs, experimental results, computer code etc. used or adapted without acknowledgement of the source

Ghost Writing An assignment written by a third party and represented by a student as her or his own work.

Collusion Material copied from another student's assignment with her or his knowledge.

Purloining Material copied from another student's assignment or work without that person's knowledge.

Adapted from Section 9.3 of the Assessment Policy, Plagiarism and Collusion http://www.murdoch.edu.au/admin/policies/assessmentlinks.html#9

Plagiarism-checking Software The University uses software called Turnitin which checks for plagiarism.

Non-discriminatory Language Please refer to: http://www.murdoch.edu.au/teach/studyat/non_disc.html

Student Appeals and Grievances Handling Processes Please refer to: http://www.oss.murdoch.edu.au/grievances/

Conscientious Objection in Teaching and Assessment (This relates to an objection based on an individual's deep moral conviction of what is right and wrong) For guidelines on conscientious objection, see http://www.murdoch.edu.au/vco/secretariat/admin/gdelines/consciobj.html

11

Law for Business

MBS502

Learning Guide

12

INTRODUCTION

How to Use this Learning Guide

This Learning guide contains topic by information including:

List of required readings Key Concepts Case Studies

This information is designed to help you move through the unit in a way which will lead to thorough, critical and reflective learning. Although the focus questions are optional, they will help you consolidate your learning and assist you in becoming an independent learner.

13

LECTURE ONE

Introduction to Australian Legal System

Essential Reading

1. Sweeney & O’Reilly – Chapter 1

Key Concepts

1. Law 2. Rule of Law 3. Ethics and the Law 4. Types of Law 5. English system of Law 6. Commonwealth Constitution

Case Study

Terry, who lives in Brisbane, decides to open a coffee shop in Fremantle. Rather than operate as a sole trader, she registers a private company as the owner of the business. As the managing director of the company, Terry leases premises, employs waiters, gets a loan from the bank and purchases equipment. She agrees to purchase all her coffee supplies from Sam for a year. Terry gets permission from the local council to put chairs, tables and umbrellas on the pavement outside the coffee shop. When she opens for business the following things happen:

Terry does not properly secure one of the umbrellas and a customer is injured when it blows over in a gust of wind.

Terry finds an alternative supplier of coffee who offers lower prices. Terry wants to cancel her agreement with Sam.

The owner of the neighbouring shop complains that Terry’s tables encroach on his space, and pushes them away from his store.

Terry’s waiters complain that they are being forced to work too many hours each day.

A health inspector says that Terry’s kitchen is dirty and fines the company $1000.00.

14

Discuss these events. In particular, do the following:

(a) Identify aspects of this case that relate to the following areas of law:

- Criminal law - Tort law - Contract law - Property law - Administrative law - Corporations law

(b) Find examples in the case-study of how the law does the following things:

Allows people to organise and plan with reasonable certainty. Lays down the rights, duties and powers of members of different classes and

groups. Permits, encourages, forbids or discourages particular activities. Controls the use of force and forbids unauthorised violence. Creates rights and duties that can be enforced and provides remedies. when

rights are interfered with or duties are not discharged.

(c) Why is it important to know the law? Are persons expected to know the law? Where do you look to find the law? In what different forms does the law exist?

15

LECTURE TWO

Introduction to Australian Legal System

Essential Reading


Key Concepts

1. Court Hierarchy 2. State and Federal Courts 3. Case Law and Precedent 4. Ratio decidendi and obiter dicta 5. Statute Law 6. Delegated Legislation 7. Statutory interpretation

Case Study

EXAMPLE OF STATUTORY INTERPRETATION (taken from J Carvan, Understanding the Australian Legal System, 2005, Lawbook Co, ch 6)

In the second reading speech for the Ellenbrook National Park (Restriction of Entry) Bill, the relevant Commonwealth Minister says: “We have been concerned for some time that the Ellenbrook National Park which is on Commonwealth land, enjoyed each year by thousands of bush walkers, cyclists, and family picknickers is being ruined by heavy traffic. This legislation will restrict vehicular access to the Park so that the present users of the Park will continue to enjoy it in the years to come.” The Bill passes. The new Act carries the short title: “An Act to restrict traffic into the Ellenbrook National Park”. Section 5 of the Act reads: “No vehicle shall be permitted entry to the Ellenbrook National Park”. Mary, who has been cycling through the Park every weekend for the past 20 years, is refused entry with her bicycle by a Park Ranger the weekend after the Act commences. Discuss whether the Ranger is entitled to restrict Mary’s entry to the Park

16

LECTURE THREE

Agency Law

Essential Reading


Key Concepts

1. Principal and Agent; types of agency relationships 2. Authority of the agent; actual, implied and apparent 3. Duties of the agent to the principal 4. Liabilities of agent and principal 5. Termination of the agency 6. 6. Introduction to IRAC

Case Study 1. Anne is a Fremantle based sailmaker. She is interested in selling into the growing North West

market. She meets a Broome boat dealer, Murray, at a conference and, after much talk, but with nothing in writing, they come to the following business arrangement: (a) Anne is to supply Murray with a range of her most popular sails, but the sails are to

remain her property and will be displayed as such; and (b) Murray is to sell the sails to customers and pay Anne 85% of the proceeds. What is the legal nature of Anne and Murray’s arrangement? Would it be different if Anne were to simply sell the sails to Murray?

2. Terry runs a chain of retail nurseries in Perth’s southern suburbs. Rex is a friend who owns a

yard where Terry stores plants before delivery to her nurseries. During the summer Terry goes on holiday for a month of trekking and mountain climbing in Nepal. After a week Rex receives at his yard a huge delivery of plants which Terry had ordered from wholesalers. The nurseries cannot take many of these plants, a large number of which are susceptible to sun and heat damage. They will die if they stay in the yard. They need to move to somewhere with shade and a sprinkler system. Nobody in authority is available. Advise Rex.

3 Natalie owns a computer shop. She employs several salespeople plus a couple of people to assemble and repair computers. Her senior salesperson is Reece who is tempted to leave and work for his brother-in-law in a higher status job. To try to keep him working at her shop, Natalie gives Reece a pay rise and the title “manager”, although his job remains essentially selling to customers and he has no authority to make other business decisions. Natalie introduces Reece to dealers and customers as “manager”, and has him wearing a badge saying as such. Joseph, a computer components wholesaler, visits the shop one day when Natalie is out supervising the installation of a computer network. Joseph persuades Reece to sign an order for a large quantity of components for the shop. Advise Natalie whether the order binds her.

17

4 Heather is a real estate agent. She is selling a block of home units “off the plan” for Prestige Developments. Heather becomes aware that a competing development has run into problems with council approval and is not likely to proceed. This will mean that the Prestige Development units will be worth much more than planned. Seeing a commercial opportunity Heather does two things: (a) She helps finance a friend to buy several of the units to on sell later at a big profit which

they will split; and (b) In return for a cash payment she tells several buyers of the likely increase in value of the

units. After all the units have been sold, it becomes clear to Prestige Developments what has happened. Advise them.

18

LECTURE FOUR

Partnership Law

Essential Reading


Key Concepts

1. Essential elements of a partnership 2. Authority of partners 3. Liability of partners 4. Partnership by estoppel 5. Rights and duties of partners 6. Dissolution of the partnership

Case Study

1. Fred and Barney saw an opportunity to make some money for their local surf club by selling cold drinks and ice creams to people on the beach from a small four wheel drive refrigerated van. They used their own money and a loan Fred obtained from the local bank to buy the necessary equipment and get the necessary council permission and permits. They planned to recoup their outlay from initial profits and then pay the balance into the surf club trust account. However, the business venture did not go as planned owing to a particularly cool and wet summer. While some sales were achieved, and prospects looked good, Fred was unable to repay the loan when it fell due because sales were poorer than anticipated.

Explain whether Barney is liable for the debt?

2. Wilma and Betty are partners in a small suburban accounting firm. During the course of doing the books for the practice Wilma discovered that profits had dropped noticeably in the last financial year. Upon investigation she discovered that Betty had not been paying into the partnership accounts money that she had received from clients.

3. Quincey is a partner in a very successful medical practice. Without the authority of the

practice he goes to a pharmaceutical company with whom the firm has had regular dealings and ordered a supply of a revolutionary new drug worth over $100,000 on the firm’s account which showed great promise in treating cancer patients. The firm had been discussing the purchase of the drugs for some time in partner’s meetings but felt they could not justify the expense at the moment. Discuss the liability of the firm for Quincey’s purchase.

4. Groucho, Harpo and Chico are partners in a small stage and screen investment business

that they established a short time after leaving university in 2001. The firm was quite successful and in January 2005 they decided to take on an extra partner, Zeppo. During the course of an audit for partnership purposes for his admission, the auditor discovered irregularities in some of the accounts. Further investigations showed that Groucho had been

19

systematically stealing from the firm’s trust accounts since 2003 and that some $2,000,000 in client’s money was missing. Advise the partners.

5. Natalie and Terry orally formed a partnership for a one-year term. As part of their capital contributions Natalie transferred 1,000 shares of X Corporation valued at $4,000, and Terry transferred 1,000 shares of Y Corporation valued at $8,000, to the partnership. The shares were put into the partnership name in order to facilitate their use by the firm as collateral security for business loans and an overdraft facility. None of the shares were sold. The one-year term has come to an end. Natalie’s contributed shares in X Corporation have increased five times in value, and Terry’s contributed shares in Y Corporation have declined by seventy-five percent (75%). Natalie wants to take her shares back but Terry wants all shares to be sold and the proceeds divided equally. Assume this matter was never mentioned when they made their oral partnership agreement. How should the matter be resolved?

20

LECTURE FIVE

Contract Law

Essential Reading

1. Sweeney & O’Reilly – Chapters 4 and 5

Key Concepts

1. Definition of a contract 2. Elements of a simple contract 3. ntention to create legal relations

Case Study

1. In order to induce his estranged wife to return home, Tom promised his wife that he would transfer the matrimonial home to her name. The parties saw a solicitor and had a formal agreement prepared and signed. His wife returned home over a year ago, but Tom has to date refused to transfer title in the home to her. On the basis of contract law principles only, advise Tom’s wife.

2. Five workmates at the Murdoch University Business School made an agreement to operate a lottery syndicate, based on the rule that any winnings are to be shared in proportion to the monies contributed toward any winning ticket. The agreement was not written down, however past winnings were always shared in accordance with the agreement. Last week a ticket purchased by a member on behalf of the syndicate won first prize of $3,000,000. (Each member of the syndicate contributed equally to the purchase price of the ticket). That person now claims that, since he physically purchased the ticket, and personally selected the numbers, the money technically belongs to him and that no other member of the syndicate has any legal rights to appropriate any of the winnings. Advise the other members of the syndicate.

3. An aging grandfather promised to transfer a $100,000 term deposit into his granddaughter’s name if she took a 12 month break from her university studies to care for him full time so that he did not have to hire a nurse. The grandfather wrote down the promise but never altered his will. The grandfather died 12 months and one day from when the granddaughter came to care for him. Is the granddaughter entitled to the term deposit?

4. A Fremantle cabaret artiste, Englebrech Schumaker entered into an agreement with the

manger of one of Perth’s biggest retirement villages that he would put on a two hour show every Wednesday afternoon (at $150 per performance) at the village for 6 months. The agreement was put in writing and had a statement that the parties had not entered a legally binding agreement. Instead, they merely had a mutually satisfying arrangement of “mutual respect and friendly cooperation”. Englebrecht had only performed 5 of the shows when he was offered an engagement on a large international cruise ship

21

operating out of Singapore for 12 months. Without giving any notice to the retirement village he stopped doing the shows. The retirement village manager has been forced to hire another cabaret artiste that costs $350 per performance. Would the retirement village succeed if it sued Englebrech for breach of contract?

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22

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23

letter to Curry dated June 5. Matera reconfirmed that she was indeed buying the painting as stated in her letter to Matera dated June 5. Trace the legal consequences of ALL communications and advise Matera of her contractual position with Curry. Would your answer be different if Brett Heady was not an art dealer but just a stranger that Matera met at the art opening?

24

LECTURE SEVEN

Contract Law

Essential Reading


Key Concepts

1. Consideration 2. Legal Capacity

Case Study

1. Bart Singhson operated a fuel service station and in January 2009 made a contract with Seagull Petroleum to sell only petrol supplied by them for the next three years. In January 2010, owing to some massive road works nearby, part of the normal traffic going past his service station was to be diverted for almost a year. Bart Singhson, who was facing financial ruin, immediately contacted Seagull Petroleum to lower the base rate at which the petrol was being supplied to him. Seagull Petroleum agreed to lower the rate by 10% while the traffic remained diverted due to the road works. In reliance of this promise by Seagull Petroleum, Bart Singhson hired a manager for the 12 months to January 2011. In June 2010 new management took over Seagull Petroleum and one of their first acts was to cancel this arrangement with Bart Singhson. Seagull Petroleum demanded that the base price of the petrol revert to the original rate and that Bart Singhson make payment, within two weeks, of all arrears calculated from the original base rate contained in the 2009 agreement. Discuss if Bart Singhson can enforce the promise to lower the base rate by 10% while the traffic remained diverted and also refuse to pay the arrears demanded.

2. Julie’s shop has been robbed and she says to Clive, a police officer, “If you find the thief who did this, I will give you $500.” Clive finds the thief and arrests him. Clive informs Julie that he has arrested the thief and now wants the $500. Julie changes her mind and refuses to give Clive the $500. Does Clive have any legal rights in relation to the reward?

25

LECTURE EIGHT

Contract Law

Essential Reading


Key Concepts

1. Legality of Object

Case Study

1. Fred is retiring from his legal practice and, while attending a BBQ at his home on Monday 26 January, he makes an offer to sell his office equipment to his neighbour Wilma for $10,000. Wilma accepts Fred’s offer and pays him a deposit of $1,000. It was agreed that Wilma would collect the office equipment on Friday, 30th January, and at the time of collection, Wilma will pay the balance owing. Unfortunately, a robbery had occurred at Fred’s office some time at the weekend before the 26th January and all the office equipment has been taken. Neither Fred nor Wilma was aware of this until Tuesday, 27th January. What effect does this robbery have on the contract between Fred and Wilma?

2. Mr Magoo, an optician, was negotiating with Westpaddock Enterprises Ltd, a large Perth Shopping centre developer, to lease a shop front in the City Gardens shopping megaplex. On April 1st Magoo informed Westpaddock Enterprises that he needed customised equipment to be installed in the premises which would need to be ordered by 30th April. On April 25th Magoo couriered a signed lease agreement to Westpaddock Enterprise’s solicitors, who phoned and informed him that the lease was acceptable and would be signed by Westpaddock Enterprises “within the next couple of days”. Magoo then ordered, and 2 weeks later took delivery of, the customised equipment manufactured to the dimensions of the shop front. In fact Westpaddock Enterprises were, unknown to Magoo, negotiating with another potential tenant for the same shop front; and therefore deliberately chose to delay the signing of the lease documents. They have just informed Magoo that they will not be signing the lease and they will be giving it to another tenant instead. What can Magoo do?

26

LECTURE NINE

Contract Law

Essential Reading


Key Concepts

1. Representations – Terms – Warranties 2. Exclusion Clauses

Case Study

1. Terri took her husband’s dinner jacket and her green silk dress to Anne Cleaners dry-cleaners, a firm her family used whenever they had cleaning to be done. As in the past, she was handed a docket and, as usual, she placed it in her purse without reading it. When she called to collect the clothing she found the dinner jacket missing and her dress badly stained. One of the assistants recalled handing the dinner jacket to a customer who had apparently lost his docket but who was able to identify the jacket when allowed to sort through the rack. No explanation was forthcoming about the stain. When Terri demanded compensation she was referred to a clause on the docket which read: "We will not be liable for any loss of or damage to clothing left for cleaning howsoever such loss or damage may be caused." The manager also pointed out that the same words were printed on a large sign at the entrance of the shop. The sign had obviously been there for some time. Terri protested that she had never read either the docket or the sign. Terri wants to sue for the loss of the jacket and the damage caused to her dress. Advise her.

i. Would your answer be different if there was no large sign at the entrance of the

shop? ii. What if Terri had never been to Anne Cleaners before and there was no large sign

at the entrance of the shop?

2. Yvonne decided to leave a bag and a notebook computer at the Western Rail cloakroom. She paid $5.00 and received a ticket at the counter. Above the counter was a sign that read: “See back of ticket for conditions”. On the face of the ticket was written a number, the date, opening and closing times and the words, “See Back”. On the back of the ticket were several clauses, including one that said: “Western Rail will not be responsible for any package exceeding the value of $50.00”. When Yvonne returned and presented her ticket, her bag could not be found. She contends that the notebook computer is valued at $2,500.00 and the bag contained other valuables worth $500.00.

i. Would Yvonne be successful in claiming the full loss of $3,000.00?

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ii. Would your answer be different if Western Rail had allowed a third-party to claim Yvonne’s bag and computer without producing a ticket for it?

iii. What if there had been no sign above the counter or the face of the ticket that directed her attention to the conditions on the back of the ticket?

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LECTURE TEN

Contract Law

Essential Reading


Key Concepts

1. Discharge of Contract 2. Breach 3. Frustration

Case Study

1. Melinda owned a resort hotel, The Gorringe, at Rockingham. During the summer she contracted with George, an air-conditioning and heating contractor, to enlarge the air-conditioning and heating system of the hotel. The proposed work required moving the existing systems, adding to the present network of ducts and providing additional air outlets in various specified rooms. The total price of the work and parts required was $30,000 and the method of payment was stated as “$5,000 to be paid upon signing of the contract with the balance due on completion of the work”. By January 15, George’s employees had proceeded to the point where much of the relocation work had been done and the main trunk line of ducts installed. The work remaining to be done comprised about one-third of the total agreed job. On January 16, there was a thunderstorm and the building was struck by lightning. The entire hotel building and contents were destroyed. George brought an action against Melinda for $15,000, representing the value of services and parts supplied up to the time of the fire. • Would George be able to succeed in his claim? Give reasons for your answers. • Would your answer (in contract law) be different if the fire was caused not by lightning

but by Melinda’s own negligence? • Also consider the above facts where there is no fire and George has completed the

job but Melinda discovers that the air outlets have not been installed according to the plans. The cost of rectification work is estimated to be $5,000. Can Melinda refuse to pay George for the job and argue that it was a lump sum contract where she is only obliged to pay the full amount upon “due completion of the work”?

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LECTURE ELEVEN

Contract Law

Essential Reading


Key Concepts

1. Remedies 2. Damages

Case Study

1. Bill Late had a contract to install new computers at the Microhard Trade Centre (MTC) in Fremantle by the end of February this year. As a result of delays, primarily due to Bill Late's own lack of efficiency, the installation project was not completed until the end of April. Unknown to Bill Late, Microhard Trade Centre had also been awarded a contract to host an international conference in March on global GIS systems and satellite imagery that would have netted the company an additional $100,000 profit over and above its normal monthly profit of $10,000. The conference was cancelled, as Microhard Trade Centre was unable to provide any computer services. Microhard Trade Centre was also unable to carry out any business activity during the extra two months that it took Bill Late to complete the work. Microhard Trade Centre now claims business losses as follows: Normal business losses for 2 months at $10,000 profit/month $ 20,000 Salaries paid to secretarial and computer staff for 2 months $ 10,000 Loss of additional profits due to cancellation of conference $100,000 Total $130,000 Advise Bill Late if he is liable for all or any of the losses being claimed by Microhard Trade Centre.

Documents

MBS502 Business Law TD211