LAW EXTENSION COMMITTEE
SUMMER 2010-2011
CONTRACTS
PROBLEM QUESTIONS
WEEKEND SCHOOL 2
29 JANUARY 2011
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
Mandrake owns a shopping centre in Chatswood. In 2006 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-2008 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 2009, 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 2009. 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
2016. 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
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 4
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 5
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
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.