UNIVERSITY OF SYDNEY LAW EXTENSION COMMITTEE SUMMER 2008-2009 CONTRACTS PROBLEM QUESTIONS LECTURE 2 (17 November 2008) Text: Gooley & Radan Chapter 4 Question 1 Paul owns and operates a second-hand bookshop in Manly that is open between 9 am and 5 pm from Monday to Friday each week. On Tuesday last week, Douglas, a thirdyear university student, visited the bookshop and saw an old hardback copy of the first of the ‘Harry Potter’ novels on sale for $25, which he wanted, but could not afford to buy at that price. He discussed the matter with Paul, who offered to sell him the book for $18. Douglas said he had to think about it. Paul promised to keep the offer open for acceptance by Douglas until 10.30 am the next day. Paul gave Douglas his business card and Douglas gave Paul his mobile telephone number. That night Douglas decided that he would buy the book. He telephoned Paul’s bookshop at 10 pm and left a message on Paul’s answering machine to the effect that he agreed to buy the book for $18 and that he would call by the bookshop on Wednesday afternoon to collect, and pay for, the book. The next day, Wednesday, Paul opened his bookshop for business at 9 am. At 9.30am Mary visited the shop and saw the ‘Harry Potter’ book. She was keen to buy it to complete her collection of ‘Harry Potter’ books, and offered Paul $30 for it. Paul accepted her offer. Mary paid for the book and left Paul’s shop with her purchase. At 10 am Paul telephoned Douglas and told him that he had sold the book to Mary. Douglas told Paul about the message he had left on Paul’s answering machine the night before. After his telephone conversation with Douglas, Paul accessed his answering machine and heard the telephone message that Douglas had left the previous evening. Douglas seeks your advice as to whether he can sue Paul for breach of contract. Question 2 Sydney City Council owns premises in the central business district of Sydney from which it operates a child care centre. Early in 2005 the Council resolved that, as from 1 April 2006, 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 2 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 2005 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 2005. 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 2006, 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 3 Andrew owned an old, dilapidated and unoccupied house in inner Newcastle. Nicole was interested in buying the house, but only if she could renovate and convert it into office space from which to operate her book-publishing business. Andrew, knowing of Nicole’s interest and plans for the house, wrote a letter to Nicole in which he offered to sell it to her for $450,000. He also promised that he would keep the offer open for 90 days so that Nicole would have time to obtain the necessary council approvals that she needed to obtain for the renovations before she could enter into a contract to buy the house from Andrew. Twelve weeks later, having incurred expenses of $10,000, Nicole obtained the council’s consent to the development she wanted to undertake on Andrew’s property. She immediately wrote a letter to Andrew in which she advised that she had obtained the council approval she needed and that she was accepting his offer to sell her the land for $450,000. 3 On the next day, on her way to a post office to post her letter to Andrew, Nicole drove by the property and saw a man working at the house. She approached the man who identified himself as Cameron. He told her that he had purchased the property from Andrew three weeks ago and was going to restore the house and use it as his home. Nicole then drove to the post office and posted her letter to Andrew. Andrew received the letter the next day. Advise Nicole as to whether she can sue Andrew for breach of contract. LECTURE 3 (20 November 2008) Text: Gooley & Radan Chapters 5 & 6 Question 1 Flo and Eddie were travelling around Central America together. While in El Salvador, Flo had her bag stolen together with her travellers’ cheques. She asked whether Eddie would lend her $500 in American dollars while she was arranging to get the travellers’ cheques replaced. Eddie agreed, provided Flo would repay the loan in the same currency when she got her replacement travellers’ cheques. When Flo obtained her replacement travellers’ cheques Flo and Eddie were in Honduras. The day before they arrived in Honduras a left-wing faction of the Honduran military had overthrown the pro-American government and installed itself in power. The government of the United States immediately cut off all diplomatic relations with Honduras. As a consequence, Honduran banks refused to carry out transactions involving American dollars. Eddie asked Flo to repay her the loan in Honduran currency (the lempira). Flo agreed, but said that in view of restrictions imposed by Honduran banks, she could only afford to repay an amount in Honduran lempira that was equivalent to $300 in American dollars. Eddie, who was, unknown to Flo, in desperate need of funds, was so relieved that he said he would accept that in full discharge of the debt owed to him by Flo. A few days later Flo and Eddie had a bitter argument and agreed to part ways. Eddie now seeks your advice as to whether, pursuant to the law in New South Wales, he can sue Flo to recover the balance of the loan. Question 2 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. 4 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 3 Bill and his wife Hilary decided to purchase a new luxury cabin cruiser from Whitewater Cruisers Ltd. They signed a written contract to purchaser the cruiser. The contract provided that Bill and Hilary would purchase the cruiser as their joint property for $200,000, but that the purchase price would be paid by Bill. Bill paid the price, and the cruiser was delivered to Bill and Hilary. On their first voyage there was a fire which led to the destruction of the cruiser. The fire was caused by a defect in the engine which was of inferior quality and not in accordance with the specifications set out in the contract of purchase. Unfortunately Bill was killed in the fire. Hilary suffered serious injuries. Hilary seeks you advice as to whether she can sue Whitewater Cruisers Ltd for breach of contact. LECTURE 4 (24 November 2008) Text: Gooley & Radan Chapters 7, 8 & 9 Question 1 Laurie, a practicing accountant, is also a first grade football player, who, by a contract dated 1 November 2005, is contracted to play for Bathurst Football Club (BFC) in a competition within New South Wales run by the New South Wales Football Council (NSWFC). His contract is for two years covering the 2006 and 2007 football seasons. By the terms of Clause 1 of his contract with BFC, Laurie is to be paid, per game 5 played, an amount that is mutually agreed upon by Laurie and BFC prior to the first game of each season. In 2006 Laurie and BFC agreed that Laurie would be paid $1,000 per game for that season. By Clause 2 of the contract Laurie agreed not to play football with any other club, in any other competition run by the NSWFC or by any other organisation in New South Wales, until the end of the 2007 season. In August 2006, Laurie contracted with Killara Football Club (KFC) to play football for one season in a summer night-time competition in New South Wales, organised and run by the New Football League (NFL). The NFL competition was to start two weeks after the 2006 competition run by the NSWFC was completed, but was not to finish until a month after the 2007 NSWFC competition was due to commence. BFC seeks your advice as to whether it can enforce clause 2 of its contract with Laurie and thus prevent him from playing for KFC. If the provision is unenforceable advise BFC of what amendments to its contract should be made in order to prevent a similar occurrence of this situation in the future. Question 2 Smith and Jones recently reached an oral agreement on the sale of Smith’s land in Newcastle to Jones. It was also agreed that the price would be the same as the current Valuer-General’s valuation of the property, although neither Smith nor Jones knew what that amount was. Smith confirmed the details of their agreement in a signed letter that he sent to Jones the following day. The letter also stated ‘this agreement is to be superseded by a formal contract prepared by my solicitors and including all the terms upon which we have agreed.’ Two days later, Smith decided that he did not want to proceed with the agreement and advised Jones accordingly. Jones seeks your advice as to whether he has an enforceable contract with Smith in relation to the Newcastle property. Would you advice be different if the oral agreement also included the fact that Smith would be able to reside in the house on the property for six months after the sale was completed, but Smith’s later letter made no reference to this aspect of the agreement. Question 3 John was the owner of a large heritage listed house known as ‘Bumper Hall’ built upon 10 hectares of land in the Hunter Valley. The house had been recently featured in a story in a popular heritage magazine. Vic was impressed by the story and decided that he wanted to purchase the property. On 20 February 2007 Vic wrote and posted a letter to John 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. 6 On 28 February 2007 John wrote and posted a letter to Vic which included the following statement: I am happy to sell you ‘Bumper Hall’ in accordance with the terms of your letter dated 20 February 2007. John’s letter to Vic was delivered on 1 March 2007. On 2 March John telephoned Vic 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 John and Vic? (b) How, if at all, would you advice in (a) differ if Vic’s letter of 20 February 2007 had gone on to say: ‘Please let me know about this by the end of this month’? (c) How, if at all, would you advice in (a) differ if Vic’s letter of 20 February 2007 had instead gone on to say: ‘My agreeing to buy from you is subject to the preparation of a formal contract of sale which is acceptable to my solicitor’? LECTURE 5 (27 November 2008) Text: Gooley & Radan Chapter 10 Question 1 Bill took his computer to Joe, a computer repairman, for repair. Joe gave Bill a receipt and asked him to sign it. Bill did not read the document, but signed it as requested. The receipt contained a clause excluding Joe from liability for any damage to the computer arising during its repair. A few days later Bill came back to Joe’s shop and gave his receipt to Joe. Joe retrieved the computer and then said to Bill: ‘Oh yeah, I remember this one. It was damaged beyond repair when I accidentally dropped it. I’m afraid that this is bad luck for you, as I am not liable for the damage because of the exclusion clause on the receipt that you signed.’ Bill seeks your advice as to whether he is bound by the exclusion clause. Question 2 Alan is the owner of a retail shopping centre in Sydney. Bill, a florist, negotiated a lease of one of the shops for his business for a period of five years. A comprehensive written document containing the negotiated terms of the lease was prepared by Alan and forwarded to Bill for signature. Prior to signing the written document Bill 7 obtained a verbal assurance from Alan that Alan would not, during the currency of the lease, permit any of the other shops in the shopping centre to be leased as a florist shop. Upon receiving Alan’s assurance, Bill signed the lease. However there was no term in the lease placing any limitations on Alan in relation to the leasing of other shops in the shopping centre. In relation to the above facts: (a) If, two years later, Alan leased one of the shops in the shopping centre to Charlie, who opened up a florist shop, could Bill sue Alan for damages for breach of contract? (b) How, if at all, would you advice in (a) differ, if the written lease had included a clause that stipulated that the lease expressed the entirety of the agreement between Alan and Bill and that neither of them had been influenced or induced to enter into the lease by any statements or assurances given by either of them before the lease was signed? Question 3 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 4 Jenny, an evening student studying contract law at the University of Sydney, parked her car in the University’s car park nearest to the lecture theatre in which lectures in contract law were held. This was the first time she had ever parked her car within the 8 campus. She approached the automatic ticket machine in the middle of the car park and placed $6 in coins into the machine for an evening ticket to park on the campus. Jenny noticed that there was writing on the back of the ticket. She read part of the writing which specified the time period during which she could park her car on campus. Because of her hurry to get to the lecture she did not read all the writing on the ticket. Whilst she was at the lecture, an employee of the University engaged to do maintenance work accidentally backed his truck into Jenny's car, causing considerable damage to it. Jenny approached the University seeking monetary compensation to cover the costs of repairing her car. The University denied it was liable to Jenny for any compensation, stating that it was protected from liability by the terms of the exclusion clause which, you can assume, excluded the University from liability to Jenny. Jenny claimed that, on her understanding of the law, she was not bound by the exclusion clause printed on the ticket. The University seeks your advice as to whether Jenny is bound by the terms of the exclusion clause printed on the ticket. Would you advice be different if Jenny had received the ticket from an attendant at the entrance to the University’s grounds? LECTURE 6 (4 December 2008) Text: Gooley & Radan Chapters, 11, 12 & 13 Question 1 Microchip Computers Ltd (MC) engaged Gates, a superannuation consultant, to establish a superannuation scheme for the benefit of its employees. A detailed contract was entered into between MC and Gates for this purpose. It provided that MC would pay a fee of $25,000 to Gates and that the fee was only payable when the superannuation scheme was established. The contract also stipulated that MC could, at any time, change its mind and not proceed with the superannuation scheme. If it chose to do that it was entitled to terminate its contract with Gates. One month after entering into this contract, MC decided not to proceed with the setting up of the superannuation scheme and terminated its contract with Gates. At the time of the termination of the contract, Gates had done considerable work towards establishing the superannuation scheme. Gates claims that he is entitled to $15,000 for the work done. This sum was calculated on the basis of Gates standard hourly charging rate which had formed the basis of his calculations for the contract price. Gates’ contract with MC made no provision for compensation to Gates in the event that MC terminated the contract before the superannuation scheme was established. Gates seeks your advice as to whether he can sue MC for breach of contract to recover the sum of $15,000. Question 2 9 Bill visited an amusement park operated by Wayne. Once in the amusement park Bill decided that he wanted to take a ride on the ‘Ghost Train’ roller coaster. Entry into the ‘Ghost Train’ ride was through an automatic entrance. To get in, Bill placed $5-00 in coins into a slot. In return the machine produced a ticket and automatically opened a door allowing Bill to proceed to take a seat on the ‘Ghost Train’. Adjacent to the machine was a large sign which stated: Riding the ‘Ghost Train’ is subject to prescribed conditions on your ticket. On the back of Bill’s ticket produced by the machine the following clause was printed: The management accepts no liability whatsoever for any injury or damage to persons injured howsoever caused whilst riding the ‘Ghost Train’. Although Bill noticed that there was something printed on the back of the ticket he did not read it. During the ride, the ‘Ghost Train’ ran off its tracks and as a result Bill suffered injuries to his arms and legs. When discussing Bill’s injuries, Wayne conceded that they were the result of his negligence insofar as not properly maintaining the train’s tracks. In relation to the injuries he suffered, Bill claims that Wayne is liable to him for damages in the tort of negligence. Wayne rejects the claim on the basis of the sign adjacent to the entrance to the ‘Ghost Train’ ride and the clause printed on the back of Bill’s ticket. Bill seeks your advice as to: (i) (ii) whether the clause printed on the back of the ticket is part of the contract; and whether, if the clause is part of the contract, it enables Wayne to escape liability for damages in relation to Bill’s claim in the tort of negligence. Question 3 Roscoe entered into a lengthy written contract with Ace Driving School. Under the contract, Roscoe was to be taught to drive, and was to have the use of a car belonging to Ace Driving School for his test for a driver’s licence. During the test, Roscoe negligently drove into Helen’s parked car. Helen successfully sued Roscoe for $5,000-00, being the cost of repairing her car. Roscoe assumed that Ace Driving School would have an insurance policy which covered him, but they did not have any such policy. Roscoe seeks your advice as to whether he can sue Ace Driving School for breach of contract. LECTURE 7 (11 December 2008) 10 Text: Gooley & Radan Chapters 14 & 15 Question 1 Alain owns a 1967 HR Holden sedan which he wishes to sell. He also owns a FJ Holden sedan which he wishes to retain. He places the following advertisement in the local newspaper: ‘For sale - Holden sedan, good condition. Roadworthiness certificate available. $2,000 or suitable swap’. Blair reads the advertisement and is interested in possibly exchanging his Ford Falcon for a Holden, so that all the cars he uses in his pizza home delivery service are Holdens. He goes to Alain’s home to inspect the car. When he arrives, Alain is out, and the only vehicle in the yard is the FJ Holden. Whilst Blair is inspecting the car he is interrupted by Alain who has just returned home. Blair, who has to rush off to his pizza shop to open for the day, says to Alain: ‘I came about the car, but I must go now. I will telephone you tomorrow’. The next day Blair telephones Alain and says: ‘I don’t have $2,000 but I do have a 1980 Falcon as a swap. I’ll be away tomorrow, but I will leave my keys with my landlady, and if you like the Falcon, take it and leave the Holden with the keys with my landlady’. The next day Alain delivers the HR Holden, collects the Falcon and then proceeds to Clinton’s second-hand car yard. He sells the Falcon to Clinton for $3,000. The following day, upon his return home, Blair discovers that he has the HR Holden instead of the FJ Holden. He attempts to locate Alain without success. He does, however, discover that Clinton has the Falcon. Blair demands that Clinton returns the Falcon, but Clinton refuses to do so. Blair seeks your advice as to whether he is entitled to recover the Falcon from Clinton. Question 2 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 January 2006 and was validly exercised on 1 August 2006. 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 September 2006. On 1 September 2006 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 2005 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. 11 Question 3 Jim is the owner of 1,000 hectares of Crown leasehold land in the far west of New South Wales. He contracts to sell the land to Larry. It is a term of the contract that the land be converted to freehold land prior to settlement so that Larry would receive freehold title on settlement. Clause 3 of the contract stipulated that the purchase price would ‘$500 per hectare calculated on a freehold basis’. No deposit was required to be paid by Larry upon the execution of the contract. After the contract was executed Jim proceeded to have the land converted to freehold at a cost of $10,000. When it came to settlement of the sale Jim claimed that the terms of Clause 3 of the contract required Larry to pay as the purchase price a sum of $510,000 on the basis of his understanding that the contract price included the costs of conversion that he had incurred. Larry claimed that he only had to pay $500,000 on the basis of his understanding that Clause 3 did not include the costs of conversion of the land to freehold. Larry has since commenced an action for specific performance proceedings against Jim seeking an order that Jim transfer title to the land to him in exchange of payment by Larry in the sum of $500,000. Jim claims that the contract is not enforceable against him. Is Jim correct? Question 4 Sally offered to sell to Betty ‘that unsigned painting which you have always liked’. It was agreed that the price for the painting of $1,000 included Sally’s costs of having it cleaned and restored. The restorer discovered that there was another painting beneath the one which was the subject of the sale, which turned out to have been painted by a famous French impressionist painter and was worth approximately $1,000,000. Sally claims that she does not have to deliver the painting to Betty on the ground that the contract between them is either void ab initio or voidable. Betty seeks your advice as to whether Sally’s claim is correct. LECTURE 8 (15 December 2008) Text: Gooley & Radan Chapters 16, 17 & 18 Question 1 Tom is a young British man in his early twenties who recently moved to Australia in search of opportunity. He finds work in Sydney as an accountant but is quite lonely and misses his friends and family back home. Over the course of several months, he takes to regular heavy drinking as a means to ease his boredom and, hopefully, befriend some locals. 12 One night he meets Anita and David who are both in the second-hand car business. The three strike up a casual acquaintance and they drink for several hours in each other’s company. At the end of the evening, Tom escorts Anita home but after several pots of coffee she asks him to leave as she has to go to work early the next day. David contacts Tom during the next few days and they start to catch up regularly. It would be fair to say that David is Tom’s only close friend in Australia. Anita does not often accompany them on these outings as she has a wide circle of friends and is often busy with other people. Tom has developed an attraction to Anita and, after a few weeks, he asks her out on a date but she refuses saying that he is ‘not her type’. This upsets Tom and he heads off to the local pub to talk to David about it over a couple of jugs of beer. David advises him to work on his overall image. This may help him with Anita specifically, but will certainly increase his chances of making more friends in Sydney. Tom asks what he should change about himself. David starts by giving advice about fashion and grooming, but says that really, as a matter of priority, Tom should stop driving his 1988 Ford Laser and should invest in a BMW vehicle. As it happens, David claims to have just the car Tom needs in his car yard. Tom says he would like to have a look at it sometime during the week. But David replies that a serious potential buyer is coming by to test drive the vehicle on the afternoon of the next day, so Tom should inspect the car in the morning and buy it as soon as possible if he likes it. The next morning, David collects Tom from his house. Tom is not feeling at all well and is still recovering from his heavy drinking of the night before. He would really much rather stay in bed and sip tea. David drives him to the car yard and shows him the BMW for sale. He insists Tom test drive it. Tom is non-committal, but when David says that Anita has always had a ‘thing for BMW drivers’, he agrees to purchase the car, which is at a special low price. Tom picks up the BMW a few days later and arranges to see Anita on Saturday night. He picks her up in his new car and takes her to an expensive restaurant. In between talking about the wonders of the BMW, Tom declares his love for Anita and presents her with a valuable gold bracelet, which has been in his family for several generations. At the end of the evening, Anita thanks him for the meal and the bracelet, but says she does not love, or even particularly like, him and never will. Tom realises that the BMW has not worked as intended and seeks to return it to David, who refuses to take it back. Tom also demands that Anita return the bracelet, but she says she can see no reason why she should do so as it was a gift. Does Tom have any chance of setting aside either transaction on the ground that it was tainted by unconscionability? Question 2 Julia is the unemployed, 19-year-old heiress of a sizeable fortune of approximately $4 million dollars left by her deceased parents. She is very much in love with her boyfriend, Tim, a 25-year-old apprentice to a mechanic. Tim wants to establish his own workshop and asks Julia for the necessary capital. Julia expresses doubts as she does not want money to ‘complicate their relationship’, but Tim promises that everything will be fine. When Julia maintains her resistance, Tim says she clearly has no faith in him and threatens to break tip with her. In order to prevent this, Julia 13 forwards him $500,000. Julia’s only living relative, Uncle Philip, is shocked when he hears of this and advises her to be more careful with her money. He suggests that she purchase some real estate and/or a business. As it is, he has a winery in the Hunter Valley region, which he says he would be prepared to sell to her. It is situated on 20 acres of land and the winery has returned healthy profits over the last few years. Uncle Philip makes an appointment for Julia with his solicitor, Mr Duncan. At this meeting, at which her uncle is present throughout, Mr Duncan presents Julia with a contract of sale under which she can purchase the winery business and the land for $3 million dollars. This is approximately the market value of the property. Julia is unemployed and unsure how she wishes to spend her life, so she considers this suggestion seriously. She makes inquiries about the winery’s income and is shown the financial records. She asks for time to think over the proposition, but after a week, contacts her Uncle Philip and agrees to purchase the property. Mr Duncan executes the contract and arranges the conveyance. Tim and Julia are married soon after. Tim’s business is making a healthy profit and he draws an income of $40,000, which is used to cover their day-to-day expenses. But, despite their initial happiness, the relationship sours and, after Julia has an affair, the couple split when she is 22. Julia decides that she wants the money she gave to Tim returned. He refuses, saying that it was a gift - and in any case, they have both benefited from the resulting income of the garage. Julia also seeks to rescind the contract with Uncle Philip. The winery has not returned a profit since she bought it and its market value has fallen well below the purchase price she paid. Advise Julia as to whether she can rescind either of these transactions. Question 3 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. 14 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. LECTURE 9 (18 December 2008) Text: Gooley & Radan Chapters 19, 20 & 21 Question 1 Elton owned a one-bedroom flat in Potts Point. Elton contracted with Dudley, an interior decorator and furniture designed, to re-decorate the flat. Dudley was to supply the necessary furniture, including a fitted bookcase, a wardrobe and a bedstead. The agreed price for the redecoration was $20,000. Dudley claimed that the redecoration was completed on 1 February 2003. Elton claimed that the work was faulty, in that the bookcase was shorter than it should have been, and refused to pay Dudley any of the $20,000 contract price. At a cost to him of $1,200, Elton had a new bookcase made and installed into his flat. Dudley has sued Elton for $ 20,000. Advise Elton in relation to this claim. Question 2 Elton owns a one-bedroom flat in Potts Point. Elton contracted with Dudley, an interior decorator and furniture designed, to re-decorate the flat. Dudley was to supply the necessary furniture, including a fitted bookcase, a wardrobe and a bedstead. The agreed price for the redecoration was $20,000. Dudley claimed that the redecoration was completed on 1 May 2008. Elton claimed that the work was faulty, in that the bookcase was shorter than it should have been and refused to pay Dudley any of the $20,000 contract price. At a cost to him of $1,200, Elton had a new bookcase made and installed into his flat. Dudley has sued Elton for $20,000. Advise Elton in relation to this claim. Question 3 In July 2006 Bonzo Butchers Ltd (Bonzo) entered into a contract with Fido Freezers Ltd (Fido) under which Fido agreed to store $40,000 worth of frozen meat for Bonzo in cold storage for a period of 12 months at a charge of $400 per month. Clause 26 of the contract read as follows: It shall be a term of this agreement that duly authorised representatives of Bonzo Butchers Ltd shall be granted access at any time between 8-30 am and 5-30 pm on any business day for the purpose of inspecting the meat. On Friday 29 August 2006, Bonzo received an offer from Rover Retailers Ltd (Rover) to buy the meat for $50,000, subject to a satisfactory inspection of the meat being done on that day. The sales manager of Bonzo and a representative of Rover went to Fido’s cold store at 5-15 pm on that day, but were refused admission by the foreman 15 because he was about to lock up the building for the night. As a result, no inspection of the meat was possible and Bonzo lost the sale to Rover. Bonzo now claims to be entitled (i) to terminate its contract with Fido, and (ii) to recover damages of $10,000 for the loss of profits they would have made on the sale of the meat to Rover. Advise Bonzo in relation to its claims against Fido. LECTURE 10 (12 January 2009) Text: Gooley & Radan Chapters 22, 23, 24 & 25 Question 1 Three years ago Jerry entered into a contract of bailment with Kramer under which Kramer undertook to take due care of a safe and a number of pistols, and to redeliver these goods to Jerry on demand. Commonwealth government regulations in force at the time stipulated that anyone who gained possession or control of a pistol was required to surrender it to the police within one month of it coming into their possession. Kramer did not however surrender Jerry’s pistols to the police. Last week Jerry demanded that Kramer return the safe and pistols. Kramer advised Jerry that he was unable to do so because he had lost the goods in the meantime. Jerry seeks your advice as to whether he can sue Kramer for damages for breach of contract in relation to the lost safe and pistols. Question 2 Frank lives in a small farm in south-west New South Wales. He is an avid fan of modern music and, in particular, of the great rap singer Entley Bentley. When Frank heard that Entley Bentley would be giving a concert in Young on 1 January 2007, he immediately bought a ticket which cost him $100-00. Wanting to make the concert a memorable experience for himself, Frank decided that he would be chauffeur-driven from his home to Young and back on the day of the concert. To this end he contacted Luis’ Limo Service, and told Luis about the concert and his passion for rap music and in particular of his admiration for Entley Bentley. He said he wanted Luis to drive him to the concert and back in Luis’ stretchlimousine. Luis offered to take the job for a total fee of $500-00, and Frank agreed. It was further agreed that Frank would pay a deposit of $200-00 immediately and that the balance would be paid on the day of the concert. On 31 December 2006 the concert is cancelled because of the sudden death of Entley Bentley due to a drug overdose. Advise Frank as to his rights in this situation. Question 3 16 Redgrave owned a business of selling clocks and watches in a small country town in southern New South Wales. The closest town of comparable size was just under 200 kilometres away. Redgrave sold his business to Hurd. Clause 17 of the contract for sale of the business stipulated as follows: Redgrave agrees that for a period of five years from the date of the completion of the sale of the business he shall not operate or work for any business engaged in selling and/or repairing clocks and watches within a radius of 250 kilometres from the location of the business that is the subject of this contract. Six months after the completion of the sale of the business, Redgrave opened up new business selling clocks and watches in the same town, just a few hundred metres away from the business he had sold to Hurd. Hurd immediately seeks your advice as to whether he can prevent Redgrave from continuing to operate his new business. Question 4 Hamid, a refugee from Afghanistan, arrived in Australia four years ago. Since then he has worked at menial jobs, and has gained only a minimal understanding of English. On occasions of illness Hamid has always been treated by Abdul, a qualified medical practitioner. Last year Abdul himself became ill and needed a kidney transplant. He knew of Hamid’s medical details and offered him $20,000 for one of his kidneys. Hamid agreed, because he needed the money, and a written contract was signed which recorded Abdul’s agreement to pay Hamid $20,000 for one of his kidneys. Before Hamid signed the contract, Abdul assured him that there would be no problems with the operation, and that Hamid would be able to function quite normally on just one kidney. Abdul and Hamid went to hospital. They were together for the relevant operations, which were completed without any problems. However, Hamid subsequently developed complications, which resulted in blindness. These complications were due to the fact that Hamid’s remaining kidney had a slight defect. His blindness would not have occurred if his other kidney had not been removed. Abdul had not detected the defect in his earlier examination of Hamid, although it should have been detected by any competent medical practitioner. Section 3 of the Human Organ and Tissue Transplant Act 2001 (NSW) states: It is unlawful to obtain any organ of a living human being in return for payment of money. Penalty: $24,000 or 8 years imprisonment. Abdul refused to pay Hamid any of the promised money. Unaware of the provisions of the Human Organ and Tissue Transplant Act, Hamid threatened legal proceedings against Abdul. Abdul wished to avoid litigation and the adverse publicity that Hamid’s claim might generate, fearing that he could lose his licence to practice 17 medicine. He telephoned Hamid and offered him $100,000 for all his troubles in return for Hamid promising to remain silent about the whole matter. Hamid agreed, and a deed incorporating the agreement was executed by Abdul and Hamid. However Abdul has again refused to pay any money to Hamid. Hamid seeks your advice as to any course of action that he may have for breach of contract against Abdul. LECTURE 11 (15 January 2008) Text: Gooley & Radan Chapters 26 Question 1 Elvis owned a house and land in Dee Why. He lived in the house. He wanted to redevelop his property by demolishing the existing house and building a new house with a swimming pool in the backyard. He entered into a contract with Graceland Constructions Pty Ltd (Graceland), a building company in which Graceland agreed to build, within a period of four months, a two-storey house and swimming pool on Elvis’ land. The contract price for all the work to be done was $350,000, which was paid by Elvis, in accordance with the terms of the contract, when the building work commenced. At the time of entering into the contract Elvis advised Graceland that he would have to lease alternative premises to live in, at a weekly rent of $200, until the building work was completed. Graceland completed the work on time and handed possession of the property to Elvis. Upon inspecting the property Elvis discovered that Graceland had committed the following breaches of the contract: (i) (ii) the composition of the cement used in the foundations of the house was not as stipulated in the contract; the swimming pool was 20 centimetres shallower than stipulated in the contract. Because of the first breach, Elvis was unable to move into the new house because there was a real danger that the house might collapse. He contracted with Fair Dinkum Builders Ltd (Fair Dinkum) for the house to be demolished and rebuilt as originally agreed with Graceland. This cost Elvis $340,000. In relation to the swimming pool, the fact that it was shallower than it should have been did not affect the use to which Elvis had intended to use the pool, nor did it impact on the value of Elvis’ property. Nevertheless, Elvis contracted with In Depth Swimming Pools Ltd for it to be rebuilt to its proper depth at a cost of $40,000. As a result of the rebuilding, Elvis had to continue leasing his alternative premises for 20 weeks until Fair Dinkum completed the rebuilding of the house. Elvis seeks your advice as to what damages for breach of contract, if any, he could recover from Graceland. Question 2 18 Harry is a pilot and owner of a small aeroplane which he uses for his business of providing pleasure flights in and around the Sydney metropolitan area. He operates the business from the airport in Bankstown. On 1 October 2006 he entered into a contract with Malcolm, a well-known adventurer, which stipulated that, on each Saturday after the date of the contract for a period of one year, Harry would take Malcolm on joy flights between the hours of 10 am and 3 pm. The fee for each Saturday was $4,000, and it was agreed that the whole year’s fees were to be paid in advance. Accordingly Malcolm paid Harry $208,000 on 1 October 2006. Clause 13 of the contract stipulated that if ‘for any reason whatsoever’ flying the aeroplane on any particular Saturday ‘was precluded by order of any competent governmental or other authority’, Harry would refund half of the fee for that day to Malcolm. One Saturday in December 2006, all small aeroplanes (including Harry’s) were prevented from flying by the manager of the Bankstown airport because maintenance work had to be undertaken on the airport’s runways. On that occasion Harry duly refunded $2,000 to Malcolm. In March 2007 Harry advised Malcolm that he would not be performing the contract as from 1 April 2007 because he wanted to retire and spend the next few years flying his aeroplane around various parts of Australia. Malcolm tried to persuade him to continue with the contract, but Harry was insistent that he would not do so. Malcolm then demanded that Harry repay him $104,000, being the fees that he had paid for the 26 weeks of the contract that Harry was now refusing to perform. Harry refused to comply with Malcolm’s demand. Without the funds that he demanded from Harry, Malcolm could not afford to engage the services of another pleasure flight operator. Malcolm seeks your advice as to whether, in an action for damages for breach of contract against Harry, he can recover the $104,000 that Harry has refused to refund to him. What would be your advice to Malcolm in relation to his rights against Harry (if any) if the events of 2007 described above had not taken place but, instead, legislation that banned all pleasure aeroplane flights came into effect on 1 April 2007? Question 3 Andre owned a house in Annandale that he contracted to sell to Brian. After the contract was made, but before the transaction was completed, Andre told Brian that he was going to buy a new house in Glebe with the proceeds of the sale of the house in Annandale. A few days later Andre signed a contract with Carrie to purchase a house in Glebe. When the date for the completion of Andre’s sale to Brian arrived, Brian was unable to pay the purchase price because of delays in arranging his finance. In order to carry out his obligations to Carrie, Andre had to obtain a short-term loan from Acme Loans Ltd. Andre had to pay interest on the loan until Brian was able to finalise his own loan and complete his contract with Andre. The amount of interest Andre paid to Acme Loans Ltd totalled $4,000. Furthermore Andre was deeply distressed as result of Brian’s failure to complete his contract on time and the subsequent need to arrange a short-term loan with Acme Loans Ltd. 19 Andre seeks your advice as to whether he can sue Brian for damages for breach of contract and recover: (i) (ii) the interest he paid to Acme Loans Ltd; compensation for the distress that he suffered as a result of Brian’s breach of contract. Question 4 On 1 November 2005, when he was in arrears with the repayments on a mortgage to Franklin over his property in Campbelltown, Jeff entered into a written contract for the sale of the property to Sherman which was due to be completed on 1 May 2006. On entry into the contract Sherman paid a deposit of 5% of the purchase price. On the same day, Jeff contracted to purchase a property in Ingleburn and arranged for a loan from a bank to enable him to complete the purchase as completion was due to take place on 1 February 2006. At the time of his contract with Jeff, Sherman had been told that the price that Sherman had agreed to pay for the Campbelltown property ($600,000) would cover: (i) the sum required to discharge the mortgage over the Campbelltown property ($100,000); (ii) the sum required to repay the loan that Jeff had arranged for the purchase of the Ingleburn property ($450,000); and (iii) to pay for airfares and accommodation for Jeff for a trip to Mexico to attend his son’s wedding in early June 2006 ($10,000). Jeff completed the contract for the purchase of the Ingleburn property on 1 February 2006. His monthly interest payment on the bank loan thereafter was $2,500. On 1 May 2006 Sherman failed to complete his contract with Jeff. As a result Jeff had to cancel his trip to Mexico because he did not have the funds available to pay for the airfares and accommodation. Jeff was bitterly distressed at having to miss his son’s wedding. On 12 May 2006, Jeff obtained a summary order for specific performance of the contract, but Sherman failed to comply with the order despite repeated requests from Jeff that he do so. Meanwhile, Franklin, as mortgagee, exercised his rights of sale in relation to the Campbelltown property. It was sold at auction on 15 December 2006 for $550,000. The sale was completed on 1 March 2007. As the mortgagee sale of the Campbelltown property meant that compliance with the order for specific performance was no longer possible, Jeff had the order for specific performance vacated by the court and now seeks your advice as to the possible claims in relation to damages for breach of contract that he could make against Sherman. LECTURE 12 (22 January 2009) Text: Gooley & Radan Chapters 27, 28 & 29 Question 1 Albert entered into an arrangement with Brian and promised to mow Albert’s lawn and in return Albert promised to pay Colin $200. This arrangement was entered into 20 by way of deed to which Albert, Brian and Colin were the parties. Brian subsequently mowed Albert’s lawn, but Albert refused to pay Colin. In relation to the above facts answer the following questions: (a) (b) (c) (d) If Brian sues Albert for damages for breach of contract, what would be the likely measure of damages that Brian would recover? Could Brian obtain an order for specific performance against Albert? Could Colin sue Albert for damages at common law? Could Colin obtain an order for specific performance against Albert? Question 2 Mandrake owns a shopping centre in Chatswood. In 2003 Clarence leased one of the shops for 10 years to operate a florist business. The lease stipulated that Clarence was required to have the florist shop open for business between the hours of 9 am and 5 pm on every day that the shopping centre was open to the public. Although clause 29 of the lease clearly stated that there were no restrictions upon Mandrake in relation to his choice of tenants for any other shop in the centre, prior to executing the lease Clarence was assured by Mandrake that no other shop in the centre would be permitted to operate a florist business. In mid-2005 Mandrake leased one of the shops in the centre to Floral Power, a large business that operated florist shops in over 150 locations in New South Wales. Because of its size, Floral Power was able to compete aggressively with Clarence’s business. As a result Clarence’s business suffered a significant reduction in patronage and profitability. In February 2006, Clarence advised Mandrake that he could no longer continue in his business and that, in breach of the lease, he was going to close down his business and vacate the shop premises on 1 May 2006. Because of a general slump economic activity in Australia, Mandrake has little prospect of finding another tenant to take over the premises that Clarence had leased from him. Mandrake therefore advised Clarence that he would seek an order for specific performance against Clarence requiring Clarence to continue to operate the florist business until the lease expired in 2013. Clarence was angered by Mandrake’s attitude and said that none of the problems with running his business would have occurred had Mandrake not permitted Floral Power to operate a florist business in the shopping centre. Clarence now seeks your advice as to the following: (a) Whether a court would order specific performance against him in relation to his lease with Mandrake. (b) Whether he can sue Mandrake for breach of contract in relation to the assurance Mandrake gave him that no other florist business would be permitted to operate in the shopping centre. Question 3 21 Sybil is an actress who plays a pivotal character in the soap opera ‘Ramsay Street’. She has played the part since ‘Ramsay Street’ began production five years ago. Her contract was renewed last month. Under its terms, Sybil has agreed to play her character on ‘Ramsay Street’ for a further three years. She also agreed that for the duration of the new three-year contract she will not appear in any other television programs or films without the approval of the company which produces the show, Oscar Chess Productions. The producers of a rival soap opera, ‘Summer Bay’, have approached Sybil and offered to create a new and central character in that show for her to play at the earliest date possible. The fresh artistic challenge that this role would offer Sybil makes the offer very appealing to her. She is also tempted by the salary that the ‘Summer Bay’ producers are prepared to pay, which is triple her present salary. She is keen to take up the offer to star in ‘Summer Bay’. In the light of the above circumstances could Oscar Chess Productions: (a) (b) obtain a court order requiring Sybil to perform the balance of her contract with Oscar Chess Productions? obtain a court order preventing Sybil from appearing in ‘Summer Bay’ until the expiration of her contract with Oscar Chess Productions? LECTURE 13 (29 January 2009) Text: Gooley & Radan Chapters 30, 31 & 32 Question 1 Laurel owns and operates a small manufacturing business. In order to improve the productivity and efficiency of the business, he borrowed $100,000 from Hardy Bank Limited. The unsecured loan was for a term of five years, with $20,000 to be repaid each year together with interest at 30 percent per annum on outstanding capital. After making the first repayment of capital and interest, Laurel was involved in a lengthy industrial dispute which made it impossible for him to make the second repayment of capital and interest, and he advised Hardy Bank Limited of his problems. The bank, fearing that Laurel could be sent bankrupt, decided that the best way to protect its unsecured loan was to allow Laurel to postpone payment of the $20,000 capital for a year and to reduce the interest rate for the entire loan to 20 percent per annum. Laurel agreed to this proposal. However six months later Hardy Bank Limited began experiencing financial difficulties of its own, and demanded that Laurel immediately make the outstanding second payment in accordance with the terms of the original loan contract. Hardy Bank Limited claims that the variation agreement did not create an enforceable contract, and that the original contract is therefore binding and enforceable against Laurel. Laurel seeks your advice as to whether the bank’s claims are correct. 22 Question 2 Andrew owned an old, dilapidated and unoccupied house in inner Newcastle. Nicole was interested in buying the house, but only if she could renovate and convert it into office space from which to operate her book-publishing business. Andrew, knowing of Nicole’s interest and plans for the house, wrote a letter to Nicole in which he offered to sell it to her for $450,000. He also promised that he would keep the offer open for 90 days so that Nicole would have time to obtain the necessary council approvals that she needed to obtain for the renovations before she could enter into a contract to buy the house from Andrew. Twelve weeks later, having incurred expenses of $10,000, Nicole obtained the council’s consent to the development she wanted to undertake on Andrew’s property. She immediately wrote a letter to Andrew in which she advised that she had got the council approval she needed and that she was accepting his offer to sell her the land for $450,000. On the next day, on her way to a post office to post her letter to Andrew, Nicole drove by the property and saw a man working at the house. She approached the man who identified himself as Cameron. He told her that he had purchased the property from Andrew three weeks ago and was going to restore the house and use it as his home. Nicole then drove to the post office and posted her letter to Andrew. Andrew received the letter the next day. Leaving aside any possible claims pursuant to any statute, advise Nicole on the following: (a) (b) whether she can sue Andrew for breach of contract; whether she has any other basis for suing Andrew. Question 3 Tony owned a small greengrocer's shop. He owed Mario $15,000 for fruit and vegetables which Mario had supplied to him. When Mario asked about payment of this amount, Tony replied that his business had not been going well and that he wanted to take up a lease of a shop at a better location. To obtain the new lease, Tony told Mario that he would need to use all his capital, as well as obtain a bank loan and that if he were to move he could only afford to pay Mario $4,000. Mario said that he would accept payment of $4,000 in full settlement of the debt. He did this because he hoped that Tony's business would prosper in the new location, thereby offering the prospect of further sales of fruit and vegetables to him. Subsequently Tony moved his business to the new location. Shortly afterwards, Mario and Tony had a major disagreement. Mario has now demanded that Tony pay him the balance of the original $15,000 debt. Mario seeks your advice as to his prospects of recovering the balance of the debt from Tony. 23 LECTURE 14 (2 February 2009) Text: Gooley & Radan Chapters 33, 34, 35 & 36 Question 1 James and Charles entered into a verbal contract to the effect that James would undertake certain renovations to Charles’ house at Bondi for a fee of $50,000. After the work was completed Charles took possession of the property but refused to pay any of the agreed fee. Charles claimed that the contract was unenforceable because of legislation that stipulated that contracts for such building work were unenforceable unless the contract was in writing, clearly set out the work to be done and was signed by the parties to it. James seeks your advice as to whether he has any claim against Charles. Question 2 Vasilios, an elderly and humble Greek peasant, migrated to Australia with his wife a few years ago. Late last year Vasilios was devastated by the sudden death of his wife. He entered into a long depression exacerbated by his increased reliance on alcohol. A few weeks after the death of his wife Vasilios met a fellow Greek who introduced himself as Nikos. Nikos told Vasilios that he was the president of the Sydney Hellenic Sports Club which had premises in Kingsford. Vasilios, who had never visited the club, was grateful for the opportunity to talk to someone in his native language, and invited Nikos to his flat for a few drinks. During their discussions, Nikos suggested that Vasilios would be better off returning to Greece and his family there, than staying on in Australia where he had no relatives. Vasilios agreed that this was a good idea, but said that it was impossible due to his lack of funds to purchase the necessary airline ticket. Nikos, who had noticed that Vasilios owned a valuable painting by a famous Greek artist, offered to buy it for $4,000, and in that way solve Vasilios’ financial problems. Vasilios reluctantly agreed, as he was particularly attached to the painting, it being a gift he had received from his late wife many years earlier. Nikos paid for the painting with his personal cheque. Three days later, after being advised by his bank that Nikos’ cheque had been dishonoured, Vasilios went to the Sydney Hellenic Sports Club in search of Nikos. When he asked to see Nikos, he was shocked to learn that the president of the club was not the man he had met a few days earlier. His shock was even greater when he noticed that the painting that he had sold was hanging in the foyer of the club’s premises. The president explained that the club had purchased the painting the day before from a person who claimed to be a Greek art dealer, and who, as it turned out, answered the description of the man that Vasilios had met three days earlier. Subsequent enquiries revealed that the man to whom Vasilios had sold the painting was a rogue and had disappeared. Vasilios seeks your advice as to whether he can recover the painting: 24 (a) under the general law; (b) under the provisions of any relevant statute. Question 3 Abbott and Costello have both owned and operated nightclubs in Newcastle since 2003. The nightclubs, aimed at attracting young adults, regularly feature well-known Australian bands and performers. Abbott and Costello are bitter rivals. Both want their respective nightclubs to be known as the best in Newcastle. In late 2005 Abbott and Costello entered into separate negotiations with Sixty Cents, a famous American rapper. Each wanted to secure the rapper’s services as a means of boosting the popularity of his respective nightclub. Newcastle newspapers and other media were aware of the negotiations and there was much media commentary to the effect that the nightclub that secured the famous rapper’s services would undoubtedly become ‘the place to go’ in Newcastle. Early in September 2006, after protracted negotiations, Sixty Cents entered into a contract with Abbott, the key terms of which were: (a) Sixty Cents would perform at Abbott’s nightclub – The Tupac Room – each Thursday, Friday and Saturday night for two years commencing on 1 April 2007; and (b) Sixty Cents would not perform anywhere else in Australia for the period of his contract with Abbott. Abbott immediately began publicising Sixty Cents’ forthcoming season at The Tupac Room. Late in September 2006, Costello, who had continued to negotiate with Sixty Cents, persuaded him that his career would be better served if he were to perform at Costello’s nightclub – Dr Dre’s – rather than at The Tupac Room. Sixty Cents then entered into a contract with Costello, the key terms of which were: (a) Sixty Cents would perform at Costello’s nightclub each Thursday, Friday and Saturday night for two years commencing on 1 April 2007; and (b) Sixty Cents would not perform anywhere else in Australia for the period of his contract with Costello. Sixty Cents also advised Abbott that he would not be performing at The Tupac Room. Costello immediately began publicising Sixty Cents’ season at Dr Dre’s. Today, Abbott seeks your advice as to whether he can: (a) get an order to prevent Sixty Cents from performing at Dr Dre’s; (b) get damages at common law against Costello in relation to Costello’s actions in persuading Sixty Cents to agree to perform at Dr Dre’s. Question 4 Bill, the owner of a very successful Sydney AM radio station recently made an application to the Federal government for a licence to operate a second AM radio station in Sydney. Confident of being granted the second licence Bill approached Fred and asked him to for a loan. Fred was an avid listener to Bill’s existing radio station. When told by Bill that he (Bill) had been granted a licence to operate a second AM radio station Fred readily entered into the loan transaction with Bill. 25 A few weeks later Fred discovered that the Federal government had in fact refused to grant Bill the second licence. Fred seeks your advice as to whether he has any claim based upon common law principles against Bill in relation to the circumstances in which the loan was made. LECTURE 15 (12 February 2009) Text: Gooley & Radan Chapter 37 Question 1 Ernest is a famous Australian novelist who was negotiating a new contract with his publisher, Hemingway Books Ltd, in relation to his autobiography. During the negotiations, Ernest was visited by Irving, an old friend with whom he had spent much time travelling in Australia’s outback in the 1960s. Irving told him that on one drunken evening in the 1960s he (Ernest) had had ‘a one-night stand’ with Marlene, a local barmaid that resulted in Marlene getting pregnant and later giving birth to a boy named Rusty. Irving told Ernest that he (Irving) had known about Marlene and Rusty for many years but had not said anything to Ernest, because Marlene had begged him not to do so. However, as Ernest was now about to write his autobiography Irving thought that Ernest should know about and meet Rusty, Marlene having died in the early 1990s. Ernest was flushed with pride that he had a son, having only fathered three daughters with his wife Hazel. He also decided that in his contract with Hemingway Books Ltd he would have a clause inserted that would require half of the $100,000 advance he was to be paid for the book, to be paid to Rusty. A contract to that effect was entered into a few days later. A week after signing his contract, Ernest met his son Rusty for the first time. The meeting did not go well because Rusty found it difficult to accept Ernest as his father. Ernest told Rusty about the contract with Hemingway Books and that, in accordance with its terms, the sum of $50,000 was to be paid to Rusty on the next day. Rusty told Ernest that he would be happy to take the money because that was the least that his father could do for him, but that he never wanted to see Ernest again, and that as far as he (Rusty) was concerned, Ernest could ‘go to Hell’. On the afternoon of the next day Rusty went to the offices of Hemingway Books and demanded payment of the sum of $50,000 as stipulated in its contract with Ernest. Hemingway Books refused to pay the money. (a) Rusty seeks your advice as to whether he can bring an action against Hemingway Books in relation to its refusal to pay him $50,000. (b) If Rusty told Hemingway Books that he was going to sue them for $50,000 and in response Hemingway Books agreed with Rusty it would pay him $15,000 if he would desist from taking any legal action, would Rusty be able 26 to sue Hemingway Books for breach of contract if Hemingway Books subsequently refused to pay him the sum of $15,000? (c) Would your advice in (a) above be different if, earlier on the day that Rusty went to the offices of Hemingway Books, Ernest had arranged with Hemingway books that the amount to be paid to Rusty be reduced to $10,000 and Hemingway Books refused to pay that amount to Rusty? Question 2 Xerxes, who is 17 years of age, and Yvette, who is a trustee for Zelda, were parties to a deed, the terms of which stipulated that Yvette would repair a computer that Xerxes used extensively for work purposes. In return for the repair work, Xerxes agreed to pay Zelda the sum of $200. Yvette duly repaired Xerxes' computer, but Xerxes now refuses to pay Zelda. In relation to the above facts, answer the following questions: (a) If Yvette sues Xerxes for damages at common law for breach of contract, what would be the likely measure of damages that Yvette would recover? (b) Could Yvette, as an alternative to suing for damages, obtain an order for specific performance against Xerxes? (c) If Yvette takes no action against Xerxes, could Zelda initiate an action for damages for breach of contract against Xerxes?