mid-session exam question(1)

Enterprise Law
Autumn Semester 2018 Take-home mid-session Exam
Value: 20 marks
Assessment tasks exist to help students learn and apply their knowledge.
Grades exist to show how fully this goal is attained.
This assessment task must be the student’s own understanding and effort. If
the words or ideas used are not your own, then you must correctly reference
This is a compulsory assessment task.
The instructions for completing this exam are in the Learning Guide. Please read
through those instructions before commencing your answer and also note any
additional instructions and/or advice which may be/has been posted on vUWS. The
marking criteria is available in the Learning Guide.
Please note, in particular, there is a strict maximum word limit. Further, students
are only allowed one submission via Turnitin. Make sure you upload your final
The exam is expected to take less than 3 hours to complete. The allocated time for
completion is intended to take account of students’ other commitments. This also
allows you time to reflect upon your answer and ensure your referencing, grammar etc
is correct. Accordingly, requests for extensions will only be considered in the most
extraordinary circumstances. If you make such a request you must attach all work
done to date on the exam to your email. As an exam, it is more likely you would need
to read the policy on special consideration if you do not meet the deadline for this task.
There are two parts to this exam and students must answer both parts.
Part A:
14 marks
Elle runs a Bed & Breakfast house in the Southern Highlands in NSW. To give it a
certain quaintness, Elle decides to install outside shutters to frame her windows. Elle
orders the pine shutters, which are on sale in the local hardware store. Elle hires a
handyman to install the shutters. The instructions are contained in a booklet
supplied with the shutters. In very small writing appears the following statement:
These shutters are for decoration only and should not be installed where
exposed to harsh weather conditions.
The handyman read this clause but did not say anything to Elle.
After the shutters had been in place for several months, the wood appeared to be
splitting. Elle notices that some of the shutters are damaged but does nothing about
On a windy evening, one of the damaged shutters is blown from the window
surrounds and hits Kimberley, a guest who was in the garden enjoying her one
cigarette per day. Another shutter flies off and hits Charles, a member of the public,
who is taking a short cut across Elle’s property having been caught out too long on a
bush walk.
Kimberley suffers bruising and cuts across her arm and shoulder and develops a
phobia about wind, claiming she can no longer leave the security of her own home,
and cannot work. Charles suffers a head injury and is off work for six months
Elle immediately removes all the shutters.
Kimberley and Charles have advised that they intend to sue Elle in negligence.
Advise Elle on the likelihood of those claims being successful, giving full legal
reasons for your response.
Part B:
6 marks
Jacob is interested in buying a small retail clothing business called ‘Sport ‘n Surf’ in
Cronulla. One Saturday, Jacob runs into two former school friends, Rose, who owns
a hairdressing salon in Cronulla and Geoff, who is a business broker specialising in
matching prospective business buyers with sellers in the hotel sector. Jacob tells
Rose and Geoff that he is considering buying the business. Rose tells Jacob that
Cronulla is booming and that the business is sure to do well, as everyone in Cronulla
surfs and plays a sport of some description. Geoff, who is not an accountant, offers
to have a look at the books of the business and give Jacob his view. The books of
the business have been prepared by Water Accounting Services, the business’ usual
accountants. Geoff inspects the books and tells Jacob that the business is doing well
and that it made a profit of $120,000 last year. In fact, due to an error by Water
Accounting Services, the profit was reported as $120,000 when in fact it was
$12,000. Geoff advises Jacob that based on the past profit disclosed in the
accounts and his own observations of the business, the purchase price sought by
the sellers at $250,000 extremely reasonable.
Jacob bought the business for $250,000 and at the end of twelve months is very
disappointed to find that his profit was only $12,000. He learns from other business
brokers that a reasonable purchase price for the business, even based on a profit of
$120,000 would have been $200,000, but clearly less if based on a profit of $12,000.
Discuss whether Jacob may have been owed a duty of care on the above facts, and
if so, by whom. Fully explain your answer.