Dr. J Abedin (Bus & Comm Law: KL) 1 HOME WORK- 2 CA PROFESSIONAL STAGE (Knowledge Level) (9th Batch) Business and Commercial Law Contract and Agency Problem Scenario Questions No. 2 Question No: 1 ïƒ˜ A shipbuilder had contracted to build a tanker for North Ocean Tankers. The contract was in US dollars and didn't contain any provisions for currency fluctuations. Approximately halfway through construction of the ship, the United States devalued its currency by 10 per cent. As the shipbuilders stood to make a loss on the contract, they demanded that an extra US$3 million be paid or they would stop work. The buyer reluctantly agreed under protest to pay, as he already had a charter for the tanker and it was essential that it be delivered on time. The buyer didn't commence action to recover the excess payment until some nine months after delivery. Will the buyer succeed in recovering the excess? Question No: 2 ïƒ˜ A solicitor carried out legal work for a property developer. When the solicitor submitted his bill, the property developer suggested that he might like to reduce his bill in exchange for a share in the venture. The developer subsequently repudiated the agreement, claiming that he didn't have to share the profits with the solicitor because the contract was voidable for undue influence. ïƒ¼ Is the property developer correct? Or is the contract enforceable? Discuss. Question No: 3 ïƒ˜ Fleming gave a block of land that he owned to Stanley, unaware that he was giving it away forever. Fleming was illiterate, had only limited business experience and was of low intelligence. Stanley had been a close friend of the family for many years and Fleming had relied on him for advice, comfort and friendship. When Fleming learned that he had given the land away forever, he tried to recover it. ïƒ¼ Do you think he would be successful? Explain your answer. Dr. J Abedin (Bus & Comm Law: KL) 2 Question No: 4 ï± James and ABC Bank ïƒ˜ James wanted to borrow money from ABC bank to support and expand his small consulting business. The bank required a copy of James' accounting records in order to confirm that James is running a stable business with a reliable cash flow. ïƒ˜ James usually does all the accounting for his business and is very familiar with everything on the accounting side of things. ïƒ˜ The day before the meeting with ABC bank James was extremely busy with clients all morning so he asked his wife Sandy to print out a copy of the accounts in preparation for the meeting in the afternoon with the ABC bank representative. Sandy accidently adjusted the accounting tables as she was formatting and printing the accounts making the business look much more profitable than it actually was. ïƒ˜ Between 1.00pm and 1.45pm Johnny had a chance to look over the paper work including the accounting records for his meeting with the ABC Bank financial representative. James presented the accounts to ABC Bank in the same state that Sandy had printed them. James' business secured a $670, 000 loan. 3 months later a recently sacked employee from James' firm sends an email to ABC Bank informing them that James is losing lots of money every day and they might want to reconsider their loan arrangements. Advise ABC Bank about whether they are bound by the loan contract they have signed with James. Question No: 5 ïƒ˜ Ann, aged 14, signed a three-year contract with Ted in order to learn ballet dancing. The terms of the contract stated that: a. Ted would teach Ann ballet dancing to the best of his ability free of charge; b. during the three-year period, Ann could not accept stage engagements other than those under Ted; and c. Ted could employ Ann to perform on stage, but was not bound to do so. ïƒ˜ Ann accepted a stage engagement from Bill, as her income from Ted's employment was insufficient for her support. Ted wishes to sue Ann for breach of contract. ïƒ¼ Advise him. Question No: 6 ïƒ˜ Washington, an insane person of limited means, entered into a contract with Lincoln for the purchase of an antique axe and a cherry tree for $100. The price paid for both these items was fair and reasonable and, at the time the agreement Dr. J Abedin (Bus & Comm Law: KL) 3 was made, Washington seemed to be a normal person. Washington refused to take delivery of either the axe or the cherry tree, or to pay for them. ïƒ¼ Lincoln wishes to know whether he can recover damages for breach of contract from Washington. Question No: 7 ï± Bruce, while he was so drunk that he didn't know what he was doing, bid successfully at an auction for the purchase of a house. It was clear to the auctioneer that Bruce didn't know what he was doing. However, after Bruce sobered up he confirmed the contract with the auctioneer. He then subsequently refused to complete the contract. Is Bruce bound? Question No: 8 If a restraint is to be reasonable between the parties, what factors determine 'reasonableness'? Question No: 9 ïƒ˜ Peter and Lee were dealers in imitation jewellery located near each other in Adelaide. Lee sold her business to Peter and agreed that she would not carry on or be engaged in the sale, importation, or manufacture of real or imitation jewellery anywhere in Australia for a period of two years. One year after selling the business, Lee established a retail jewellery business in Cairns. Can Peter enforce the covenant against Lee? Explain your reasoning. Question No: 10 ïƒ˜ In order for a party to rely upon an exclusion clause, what must they show? Question No: 11 ïƒ˜ In the case of a signed contract, can the party signing limit their liability in both contract and tort? Dr. J Abedin (Bus & Comm Law: KL) 4 Question No: 12 ïƒ˜ Sam took his suit to Quick Klean Drycleaners Pty Ltd. This was the first time he had been to this drycleaner. After giving his suit to the assistant behind the counter and paying for the dry-cleaning, he was given a receipt with a number on it. The assistant told Sam that he needed to bring the receipt with him when he came to collect his suit. She also told him that the drycleaners 'would take all care but accept no responsibility during cleaning'. She pointed out that a similar clause appeared on the back of the ticket. It read: 'Quick Klean Drycleaners Pty Ltd will take all care but accept no responsibility for effective removal of all stains during cleaning'. ïƒ˜ When Sam came back to collect his suit he found a tear in the right sleeve. ïƒ˜ When he brought this to the attention of the shop assistant, she reminded him that she had previously advised him that all care would be taken, but that Quick Klean didn't accept responsibility for items left for dry-cleaning. ïƒ¼ Advise Sam. Question No: 13 ïƒ˜ Jones drove her car into Smith's Parking's new automatic car park for the first time. There was a sign outside the car park that listed the various charges and stated that owners parked at their own risk. When she drove up to the ticket machine, Jones was issued with a ticket. She then drove into the garage, where her car was mechanically parked. Jones was injured when she returned later to collect her car, and she claimed damages from the garage. The car parking company attempted to rely on a condition exempting it from liability. On each ticket, in small print, were the words 'Issued subject to conditions ... displayed on the premises'. On a pillar opposite the ticket machine were printed eight conditions, the second of which exempted the car parking company from liability for any injury to a customer on the premises. Jones would have needed to have parked her car in the garage and walked around to the pillar to have read the conditions. ïƒ¼ Could the car parking company successfully rely on the exemption clause to protect it from any action by Jones? Question No: 14 ïƒ˜ What are the consequences at common law of frustration of contract? How have the statutory reforms of New South Wales, Victoria and South Australia addressed some of the difficulties created by the operation of the doctrine? Discuss. Question No: 15 ïƒ˜ Under what circumstances will the quantum meruit rule operate? Dr. J Abedin (Bus & Comm Law: KL) 5 Question No: 16 ïƒ˜ How do the following terms in a contract differ? ïƒ¼ A. condition ïƒ¼ B. condition precedent ïƒ¼ C. condition subsequent Question No: 17 ïƒ˜ In April, Jackson engaged Tim as a courier. Tim was to commence work on 1 June. On 1 May, Jackson wrote to Tim telling him that, despite their agreement, economic circumstances were such that he no longer required his services. ïƒ¼ Can Tim sue Jackson? Question No: 18 ïƒ˜ Explain the purpose of rescission Question No: 19 ïƒ˜ Explain the purpose of restitution. Question No: 20 ïƒ˜ For a claim in restitution to be successful, what does the innocent party have to establish? Discuss. Question No: 21 ïƒ˜ Explain why it is important to have an understanding of the Limitation Act or Limitation of Actions Act of your state or territory in relation to contracts. Question No: 22 ïƒ˜ Under an agreement between Emtee Theatres and Mandrake, two theatres were to be leased to Mandrake and he in turn was to lease a third theatre back to Emtee. In the lease agreement with Emtee, it was agreed that they would have all the offices in the theatre. Mandrake, in fact, occupied an office in the third theatre for some months, and refused to move out even though he was repeatedly asked to do so by Emtee. ïƒ¼ Can Emtee bring an action against Mandrake for specific performance of the agreement?