LAW EXTENSION COMMITTEE
SUMMER SESSION 2012-2013
CONTRACTS
PROBLEM QUESTIONS
LECTURE 7
10 DECEMBER 2012
Question 1
Gara is a professional photographer who travels the world taking scenic photographs
that she sells. As part of her business she maintains a library of her photographs for
hire. Gara’s sister, Sybil, is a tourism promoter focusing on tourism in the Balkans.
Recently Sybil visited Gara’s library and arranged to hire photographs of
Montenegro’s rugged hinterland which Sybil wanted to use for a promotional
campaign she was doing on behalf of the Montenegrin government to encourage
Australian tourism to Montenegro. Gara said she would make an appropriate selection
of photographs and forward them to Sybil in plenty of time for Sybil’s presentation.
A few days later Sybil received a packet of 20 photographs. A covering letter
indicated that the hiring fee for the photographs was $10 per day, that they had to be
returned to Gara within 10 days and that an attached closely typed sheet of conditions
otherwise governed the contract between Sybil and Gara.
Sybil’s presentation was very successful. However, she was 5 days late in returning
the photographs to Gara. Gara referred Sybil sheet of conditions and claimed that
Sybil had to pay a ‘late return fee’ of $5,000 in accordance with Clause 17 which
stipulated that a ‘late return fee’ was payable if photographs were returned after the
due date at the rate of $50 per day, per photograph.
Sybil, who had not previously read the sheet of conditions, seeks your advice as
to whether clause 17 is part of the contract.
Question 2
Bruno was the owner of a large heritage listed house known as ‘Bumper Hall’ which
was built on 10 hectares of land in the Hunter Valley. The house had been recently
featured in a story in a popular heritage magazine. Jacko was impressed by the story
and decided that he wanted to purchase the property. On 20 February 2011 Jacko
wrote and posted a letter to Bruno which included the following statement:
I am prepared to pay you a price for ‘Bumper Hall’ determined by a
valuer appointed by the President of the Real Estate Institute of New
South Wales if you are willing to sell.
On 28 February 2011 Bruno wrote and posted a letter to Jacko which included the
following statement:
I am happy to sell you ‘Bumper Hall’ in accordance with the terms of
your letter dated 20 February 2011.
Bruno’s letter to Jacko was delivered on 1 March 2011.
On 2 March 2011, Bruno telephoned Jacko and told him that he had changed his mind
about selling ‘Bumper Hall’.
In relation to the above facts answer the following questions:
(a)
Is there an enforceable contract between Bruno and Jacko?
(b)
How, if at all, would your advice in (a) differ if Jacko’s letter of 20
February 2011 had gone on to say: ‘Please let me know about this by
the end of this month’?
(c)
How, if at all, would your advice in (a) differ if Jacko’s letter of 20
February 2011 had instead gone on to say: ‘My agreeing to buy from
you is subject to the preparation of a formal contract of sale’?
Question 3
Pauline is the leader of a newly formed political party called ‘The Know-Nothing
Party’. She organises an open-air rally in Sydney to publicise the party.
Pauline contracts with John for him to provide catering facilities at the rally at a cost
of $5,000.
Hanson, a committed support of Pauline, agrees to fly an aircraft over the rally trailing
a banner showing the party’s emblem. Hanson says he will provide the services free
of charge.
Tony, a prominent sympathiser of Pauline’s political program, writes to Pauline
saying that he ‘hopes the rally will be the first step towards putting some backbone
into the country’ and that, accordingly, he will provide $10,000 ‘to help with
expenses’.
Pauline is determined that the rally should be successful and, at the last minute, she
agrees to pay John ‘a bonus of $1,000 to ensure that things run smoothly’. Similarly,
fearing trouble from radical opponents of her political party, she asks police
authorities for additional protection for which she agrees to pay $3,000.
The rally is a success but Pauline refuses to pay the $1,000 bonus to John and the
$3,000 to the police. Hanson finds that his anticipated costs were far more than
anticipated and Pauline agrees ‘to reimburse him fully in due course’. Tony informs
Pauline that he cannot pay the $10,000 as his business has suffered a dramatic and
sudden decline in profitability. As a result Pauline refuses to reimburse Hanson.
Discuss the contractual claims (if any) that exists between:
(a)
(b)
(c)
(d)
Pauline and John
Pauline and the police
Pauline and Hanson
Pauline and Tony.
Question 4
Sydney City Council owns premises in the central business district of Sydney from
which it operates a child care centre. Early in 2011 the Council resolved that, as from
1 April 2012, it would cease to run the child care centre but would, in the meantime,
enter into a contractual arrangement for five years with an appropriate private child
care provider who would operate the centre pursuant to a lease of the premises from
the Council. The Council then sought expressions of interest from private child care
providers interested in operating a child care centre from the Council’s premises.
Fifteen providers responded to the Council’s call for expressions of interest.
In June 2011 the Council invited five of the private providers to tender for the right to
operate a child care centre from Council’s premises. Council’s letter inviting tenders
stipulated, inter alia, as follows:
‘Your tender must be submitted to Council by 5-00 pm on 30 November
2011. It must also strictly comply with the presentation and format
specifications set out in the attachment to this letter. Council wishes to
ensure that members of the committee that selects the successful tenderer
are unaware of which tenderer submitted which tender when the
committee makes its decision’.
Care For Kids Limited (CFK) was one of the five operators invited to submit tenders.
All five operators submitted tenders.
CFK submitted a tender that complied with all of Council’s requirements. In
preparing its tender, CFK spent $20,000, and conservatively estimated that, if
successful, it would reap profits of $300,000 over the five year term of the contract.
When the selection committee met in February 2012, the CFK’s tender was not
considered because it had been inadvertently misplaced by Council staff that had
received it, and Council thus assumed that CFK had not submitted any tender at all.
The selection committee resolved that one of the other four operators should be
awarded the contract.
CFK has indicated that it will be suing Council in relation to the above events.
The Council seeks your advice as to whether CFK has a claim against the
Council for breach of contract.
Question 5
Donna is a keen skateboarding competitor who has competed in many women’s
skateboarding competitions in Australia and overseas. She is looking forward to
competing for the first time in the new Surfers Paradise Skateboarding Classic, and
has already registered and paid the competition fee. She thinks she has a very good
chance of doing well this year and even winning the main prize.
She arrives in Surfers Paradise three days before the competition and books into a
hostel with her skateboarding friend Heidi. After practising on the first day, she
decides to relax on the second day and go sightseeing with Heidi. They decide to visit
Mount Bullfrog, one of the area’s main tourist attractions and a place they have not
seen before. They proceed to the wildlife reserve and the famous Mount Bullfrog
lookout. Before they pay the entrance fee, Donna notices a large sign at the main
entrance. It says ‘Welcome to Mount Bullfrog’ and contains interesting information
about the geography of the area, the Aboriginal landmarks and the local flora and
fauna. It also includes other official-looking information that Donna does not bother
to read. Some of the information is covered by bushes. Included in that information at
the bottom of the sign are the following words:
‘Patrons enter at their own risk. The Mount Bullfrog Reserve is not liable for
your loss or injury.’
About 10 minutes after entering, Donna and Heidi are making their way towards the
main lookout area, when suddenly Donna’s shoe slips on a wet piece of rock covered
in moss. She falls and fractures a small bone in her foot. After attending the main
office and sick bay for treatment, Donna is told by the Reserve manager that they are
not liable to compensate her for any injury or damage she may have suffered because
of the notice displayed at the entrance. Donna complains that the Reserve cannot
avoid liability because she was not aware of all the details on the sign, and because
no-one pointed these out to her.
After attending the local hospital and having her foot x-rayed and treated, Donna
returns to the hostel and calls the organisers of the Surfers Paradise Skateboarding
Classic. She explains to the main promoter that she will not be able to take part in the
competition because of her injury and asks for the competition fee to be returned. The
promoter informs her that there is nothing in the competition contract about return of
fees in cases of withdrawal. Donna complains that skateboarding competition
contracts usually allow return of moneys in circumstances like hers.
Advise Donna whether she can to take legal action against the Mount Bullfrog
Reserve for her injury and against the promoter of the Surfers Paradise
Skateboarding Classic for the return of the fees she has paid.
Note: In answering this question, confine your answer to the position under
general law principles and do not discuss any statutory provisions.
Question 6
Clark granted an option to Kent, a property developer, to purchase 10 hectares of land
for a total price of $80,000. The option was granted on 1 November 2011 and was
validly exercised on 1 April 2012. On that day a contract for sale of the land to Kent
was executed with the contract price being stated as $80,000. Completion of the
contract was due to take place on 1 June 2012.
On 1 June 2012 Clark refused to complete the transaction because he claimed that he
understood that the option and contract should have been at a price of $80,000 per
hectare.
Clark seeks your advice. He informs you that during 2009 he had a valuation done on
the property which valued his land at $600,000. The valuation also went on to say that
an anticipated re-zoning of the land by the government would result in the land being
valued at approximately $1,000,000. He also informs you that a month ago Kent
completed the purchase of an adjoining 10-hectare property for $700,000.
Advise Clark as to what action, if any, he can take with respect to the contract
between himself and Kent.
Question 7
In April 2012 Kramer leased commercial premises in Petersham in which he planned
to open up a pizza restaurant where customers would make their own pizza under the
supervision of qualified staff. In order to set up the restaurant, Kramer contacted
Vanderlay Industries Ltd in relation to purchasing a pizza oven. After discussions
between Kramer and Vanderlay Industries, both parties signed a document on 1 May
2012 which said:
Vanderlay Industries agrees to supply a Kruger F-7K Pizza Oven to Kramer at a price to be
determined by J Peterman, registered valuer. Delivery of the pizza oven to take place upon
signing and execution of a formal contract for sale within 14 days of the said Peterman
determining the price of the pizza oven.
On 2 May 2012, Kramer entered into discussions with Newman with a view to
employing him as one of his staff for the restaurant. Newman told Kramer that he had
just returned from New York where he had worked for 5 years in the type of pizza
restaurant that Kramer was planning to open. On 3 May 2012 Kramer wrote a letter to
Newman in which he said:
I am prepared to employee you in my restaurant for a six-month period at a weekly salary of
$800. Your working hours will be 3pm to midnight each Wednesday to Sunday (inclusive),
starting 1 June 2012. If agreeable to you let me know by by 10 May 2012.
On 7 May 2012 Newman wrote a letter to Kramer agreeing to the terms of Kramer’s
letter of 3 May 2012. Kramer received Newman’s letter on 9 May 2012. On the same
day Kramer discovered that Newman had, in fact, worked as a postman in New York
and not in any pizza restaurant.
On 10 May 2012, Peterman advised Kramer and Vanderlay Industries Ltd that the
price for the pizza over was $ 25,000.
On 11 May 2012, Kramer decided that he would abandon his pizza restaurant pland in
favour of opening a shop selling fat-free yoghurt.
Kramer now seeks your advice as to whether he is bound in contract law to either
Vanderlay Industries Ltd and/or Newman.
Question 8
John agreed to build a large sailing boat for Bruce, at a fixed price payable in United
States dollars. Payment was to be made in instalments. After the payment of the first
instalment the United States dollar was devalued by 10 per cent. John demanded that
future instalments be increased by 10 per cent. Upon receiving legal advice Bruce
refused to pay the increased amount. Protracted discussions took place between John
and Bruce in an effort to resolve the dispute. John persisted with his demand that
remaining instalments be increased by 10 per cent, and threatened to break his
contract with Bruce and not complete building the boat. John knew that Bruce, a
professional yachtsman, desperately needed the boat to be completed on time to be
able to compete in the next Sydney to Hobart yacht race, and that Bruce had a number
of contracts with sponsors for that race. Ultimately Bruce agreed to pay the extra 10
per cent demanded by John.
Bruce completed the building of the boat and John paid the remaining instalments
plus the additional 10 per cent demanded by John.
Bruce now seeks your advice as to whether he can recover the additional 10 per
cent that he paid to John, either on the basis that there was no contract to pay
the additional 10 per cent, or that if there was such a contract that he could have
it rescinded.