Case Study of Law
Instructions to Students
This assignment carries 20% of the marks for this subject.
The word limit is 1,500 words and the front cover of your assignment should note the total word count used. Words in excess of the permitted 1,500 will not be read or marked.
This assignment is intended to provide you with the opportunity to consider a range of legal issues that can arise in contract in the course of carrying on a business and to develop your ability to research and analyse problems from the perspective of those legal issues. You are expected to think through the issues thoroughly, consider both parties’ rights and liabilities and provide a reasoned solution to the problems posed by the facts. In particular, you will need to ensure that you cover each of the specific matters that are set out in the question.
Students may work collaboratively in considering the problems (and are strongly encouraged to do so) but individual essays are to be submitted by each student – and they are to be your own work. (Students should read and are expected to comply with the university’s policy on plagiarism, both generally and in relation to collaborative work submitted individually).
Jill has been planning to open a coffee shop and bookstore in the Townsville waterfront area hoping to benefit from the large tourist population. So many things have not been going to plan though that she is now having second thoughts. In particular, she has had the following problems and is not sure what her legal position is. What do you see that position to be? Give reasons.
a. Because she was not familiar with the area Jill asked Ken, the manager of the motel at which she was staying, for help in locating a suitable property for the business. She told him she would ‘make it worth his while’ if he found her somewhere she liked. Ken spent a day making enquiries and gave Jill the details of three potentially suitable vacant commercial premises. She was so relieved to have those leads that she immediately promised to pay him $500. She now thinks that that was too generous and proposes to buy him a bottle of wine instead. Does she have a possible legal problem? Why/why not? (3 marks)
b. Last week, after she looked at all of the premises that Ken had suggested, Jill entered into an oral agreement with the owner of one of them to lease his premises for two (2) years on standard lease terms at an agreed rental of $600 per week. She paid a deposit and the landlord agreed that, even though the formal lease had not been signed, she could immediately start fitting the premises out with everything she would need for the proposed coffee shop and bookstore. She was given a key and started fitting the premises out – installing shelving and a counter for the coffee sales. This morning she received a telephone call from the landlord’s solicitors who told her that the landlord had received a better offer for the shop and would not be going ahead with the lease.
Given that her agreement with the owner, so far, is only oral, is it still enforceable? (2 marks)
Is the fact that her oral agreement with the landlord was intended to be followed up with a formal signed lease a problem? Why/why not? (4 marks)
c. As part of her preparations she also researched suppliers of commercial expresso machines and found that one, ‘Coffee a Go-Go’ which had its head office in Brisbane, seemed to be very reasonable. She wrote to them and asked about prices for a Two Group Expresso Machine and a top-of-the-range coffee grinder. They replied that they had both in stock, that they were on sale for $6,000 and $1,500 respectively and that if she wanted them she had to let them know by return mail by midday on that Thursday. Jill posted a letter to them on Wednesday morning but when she rang this morning to arrange delivery the company told her that they had disregarded her letter because they had emailed her on Tuesday evening cancelling their offer. Jill had not checked her email and had therefore not become aware of it. Can she demand that the company sell her the two items? Why/why not? (5 marks)
d. The business plan that Jill’s accountant prepared for her to take to the bank to apply for a business loan identified that cash flow over the first 12 months is Jill’s greatest risk factor. The bank manager knows that Jill’s greatest initial expense will be the cost of stocking her shop with books and says that if she can find some way to remove that as a risk he will recommend the loan. Jill had previously arranged with a wholesale book supplier to supply her with books on 30 day payment terms but, after meeting the bank manager, she went back to them, explained the problem and asked whether they would allow her to defer all payments for 12 months, to let her establish the business, and then revert to the previously agreed 30 day payment terms. They agreed and Jill obtained the bank loan. Three months later they demanded that Jill immediately pay for all the books with which she had been supplied up to that point and that she pay for all future supplies on the original 30 day terms. Although her business is improving, Jill’s cash flow is not sufficient to allow her to pay both the book-sellers and her loan installments. Does she have a problem? Why/why not? (6 marks)
[Total for Question: 20 marks]