Question Commercial Law Q Question 1 On 14 November 2012, Elizabeth obtained judgment against Andrew in the Supreme Court for $120,000. Andrew has made no efforts to satisfy the judgment. (1) Advise Elizabeth whether she can issue a writ of execution, a bankruptcy notice or a bankruptcy petition against Andrew. (2) A sequestration order is then made against Andrew on 10 May 2013. The Official Receiver in Bankruptcy has discovered that: (a) On 12 January 2013, Andrew sold his drum kit worth $3,000 to Nick for $1,500; (b) In August 2011 Andrew transferred his house into his mother's name; (c) Barry was owed $10,000 by Andrew for mechanical work which he had performed for Andrew. Andrew paid Barry on 31 December 2012. Question 2 FBS Bank has a registered mortgage in Max's home (worth $500,000), securing a loan extended to Max of about $450,000. The bank's dealings with Max were ordinary commercial dealings, done in good faith, and without notice of any potential insolvency issues. Today a sequestration order has been made against Max who owes over $2m to a range of unsecured creditors. Those debts pre-date the FBS Bank loan and security interest. How will the trustee-in-bankruptcy deal with Max's home? Question 3 Before answering these questions, also refer to the case summaries of Carlill v Carbolic Smoke Ball Co in Latimer Australian Business Law at ¶5-080; ¶5-212 and ¶5-150. a. Was the advertisement a mere "puff" or sales talk? b. Can an offer be made to the whole world? c. Need acceptance or an intention to accept an offer be communicated? d. Can performance of a condition in an offer constitute sufficient acceptance of that offer? e. Was the contract made when the offeree did the act requested? f. Did the offeror make notification of performance by the offeree a condition of the offer? g. Was the advertisement too vague to form the basis of a contract? h. Was this a wagering contract which was void under the statute for illegality? Question 4 A writes to B to sell his stamp collection to B. B, who has stopped collecting stamps, gives A's letter to another collector C, and C writes a letter of acceptance to A. Is there now a contract between A and C? Question 4 A self-service chemist's shop had a checkout at the exit. Drugs which by statute could not be sold except under the direct supervision of a qualified pharmacist were shelved in the shop and customers were able to select the articles they wanted to purchase from the shelf and pay the cashier for them at the exit. A registered pharmacist supervised each transaction at the exit, and the pharmacist was entitled to refuse goods to any customer. The shop was prosecuted for selling poisons without the sale being supervised by a pharmacist. The prosecution depended on where the sale took place – did the sale take place at the shelf or at the cashier? Question 5 A (a handy man) says to B, after inspecting B's house: 'I will replace all the cracked external windows of your house for $800; the job should be completed next week.' B replies: 'Yes – excellent. That sounds like a good price and next week would be perfect.' Has an enforceable contract been formed between A and B? Has good consideration passed between them? Question 6 Earlier today Joan, a frail but mentally sound 87-year old woman, was in the front garden of her home. Max, a big man who was heavily tattooed, parked his van outside her garden and started a conversation with Joan. He shows Joan a bird bath that is in the back of his van and tells her that: "Your front garden would look much better with this bird bath in it. I'm selling it for $500 – you can pay me cash tomorrow. It would be a shame for you to miss out on it, just as it would be a shame if your home was burnt to the ground in a fire". Joan felt intimidated by Max. However she also liked the bird bath and orally agreed to buy it from him for the stated price. He immediately put it in her garden and said he would return tomorrow afternoon for his $500. 1. Explain whether any contract was formed between Joan and Max? In your answer address all elements of contract formation. 2. Joan has now changed her mind about the bird bath purchase. Can Joan, prior to paying Max the $500, avoid any contract? If so, on what basis can she avoid the contract? What legal consequences would follow for Joan and Max if the contract was avoided? (In your answers refer only to the general law of contract, both common law and equity. Do not refer to statute law.) Question 7 In early August 2013 Bev verbally contracts with Andy to buy 3000 fresh pineapples. She explains at the time that the fruit is for use in manufacturing her new line of organic (e.g. chemical free) frozen yoghurt that she plans to manufacturer. Under the contract of sale, Andy is to source the fruit from growers and then deliver the pineapples to Bev in three deliveries of 1000 pineapples on 1 September 2013, 1 October 2013 and 1 November 2013. a) The 1 September delivery, once Bev inspects the fruit, is clearly sourced from a non-organic grower who had used chemicals. Has Bev any right under sale of goods legislation in relation to this fruit? b) The 1 October delivery was put in Bev's cool room, however due a thermostat malfunction the fruit perishes. Under sale of goods legislation whose loss is this? c) The 1000 pineapples intended for the 1 November delivery were in Andy's warehouse about to be dispatched to Bev when Candice visited Andy and said pointing to the pineapples: 'I need that fruit urgently for my organic supermarket – if you can sell them to me I'll pay you above market price.' Andy told Candice that he had agreed already to deliver them to Bev. Candice said: 'I don't care – I'll pay you double.' Andy then agreed to sell the 1000 pineapples to Candice. Candice took immediate possession of them. Under sale of goods legislation who owns those pineapples? Question 8 reg purchased premises which he used as the head office for his fireworks business. Greg took out a fire insurance policy over the building and its contents with XYZ insurance. The building and its contents were destroyed by fire. Insurance investigators later discovered that Greg used the premises not only as his office headquarters but also for the manufacture of fireworks products. Prior to taking out insurance, Greg had deliberately not disclosed this intended manufacturing use to XYZ in the insurance proposal in order to minimize his premium payments. Explain the way in which the Insurance Contracts Act 1984 (Cth) regulates XYZ's treatment of Greg's claim on his policy. (10 marks) Question 9 Adam runs an outdoor rock-climbing business. Bernice while climbing on one of Adam's excursions in a State National Park falls and acquires a serious brain injury. This occurred because a safety harnesses Adam allocated for her use failed. The harness had been damaged recently and not checked by Adam. Bernice is 28, had an active life and had just commenced her career as a psychiatrist with expected annual earnings of over $500,000. She is now confined to home with poor balance, dizziness, blurred vision and limited ability to concentrate. These are expected to be her lifelong conditions. Explain how the Australian law of negligence (comprising both common law and statute) applies to these facts. Question 10 Toby imports electrical heaters manufactured abroad – although he is unsure of the exact identity of the manufacturer. The heaters have a defect which means that after about two hours of use at high temperature an internal plastic part melts and toxic fumes are emitted. Max gave his teenage daughter Bella one of the heaters as a gift. Her boyfriend Victor (a brilliant medical student) became seriously ill after inhaling the toxic fumes and suffered permanent brain injury. What rights, if any, does Victor have against Toby under the Australian Consumer Law? Do any damages caps apply to any compensation he might be awarded?