Assignment 2 – Case Study (Problem Solving Task)
The due date for submission of this assignment is midday, Monday, 9 May 2016. Assignments must be submitted online via Learnline. No other form of submission, including email, will be accepted. The word limit is 1,500 words (10% margin allowed, under or over).
A)Terry and Richard
Whilst browsing the Internet, Terry saw an advertisement on Gumtree (an Internet trading site) for the sale of a used ski boat posted by Richard, a retired boat mechanic. The advertisement read: “Immaculate ski boat with 150hp [horsepower] in board engine. All safety equipment and trailer included. Only $14,000 (negotiable)! You won’t find a better bargain. SMS or call 0400 007 007 for inspection.”
Terry sent a message to Richard and they agreed to meet so that Terry could see the boat. While inspecting the boat, Terry remarked that Richard appeared to have taken very good care of the boat. Richard gleefully agreed, adding that he had regularly serviced the boat himself and that he had experienced no mechanical problems, as the engine was “only 12 months old.”
Richard made this statement about the age of the engine based on the information supplied to him by the original owner of the boat. As Terry was a member of a water ski club, he also enquired how many skiers the boat could pull at one time. Richard replied “I bet she would definitely pull up to four skiers at once. I can guarantee you that.”
After having a final look over the boat, Terry said “I’ll take her for $13,000”. Richard responded “Good man!” and handed Terry the “necessary paperwork”, which Terry signed without properly reading it.
After payment and delivery of the boat, Terry took some friends water skiing. Unfortunately, this did not work out as expected. The boat could not pull more than two skiers at once, and – after 20 minutes of use – the engine began to vibrate and to emit thick smoke before stopping completely.
Terry took the boat to a repair shop where he was told that the engine was at least three years old and had only 110 horsepower. The engine was so worn out and in such a poor condition that it could not be repaired.
Terry is unhappy and starts reading the document he has signed at Richard’s. He discovers that it only states the price, registration and serial number of the boat. No other details of the boat are recorded or referred to in the document; however, it contains the following clause: “Boat is sold as inspected. No warranty or condition implied by statute, common law, or otherwise is given as to fitness for purpose, quality or performance of the boat.” Until now, Terry was not aware of this clause.
Assuming there is a contract between Terry and Richard, explain if and what grounds and remedies exist under common law or Sales of Goods legislation which would allow Terry to take action against Richard.
(50% of marks)
2
B) Wallies Limited
Wallies Limited (‘Wallies’) is a public company which operates a supermarket business in Brisbane, specialising in organic, high quality fresh fruit and vegetables. Wallies is considering opening a new store in Sydney (it owns a building which it can convert to a store). First, Wallies needs to ensure that it can obtain quality produce (organic fruit and vegetables) from a reliable supplier. Wallies started negotiating with the only suitable local supplier, Sydney Farm Produce Pty Ltd (‘SFP’) for a contract to supply Wallies with the produce it needs for the supermarket (the amounts to be supplied will vary month-by-month).
At a face-to-face meeting, Wallies’ CEO (Michael Keen) tells SFP’s Managing Director (Jenny Collins) that Wallies cannot enter into any contract to purchase furniture to set up the new store (eg, new office furniture and shelves for the shop floor, etc) until it can first sign a contract with SFP for the supply of the produce for its new supermarket. Collins (SFP) said that she understood this, and she was also keen to finalise the negotiations and sign a final, binding contract. Three days later the key terms of the Wallies-SFP contract are almost complete after the parties have exchanged draft contracts and discussed (by correspondence) minor amendments to the contract document. In all correspondence, SFP has always made it clear that “there is no final binding contract between Wallies and SAFP until there is signed, final, written agreement.” There is just one final matter to negotiate, which is the amount of fruit SFP will agree to supply over the Christmas period. Collins (SFP) calls up Keen (Wallies) and tells him “I just don’t want to agree to anything which I can’t later perform.” Keen tells Collins that if Wallies cannot order furniture and start setting up the new store soon, there will be a costly delay. Collins says to Keen: “OK, just go ahead and buy your furniture, it will all be sweet. In the next few days my people will be able to tell me exactly how much fruit we can supply over Christmas, we can put that in the contract and sign it. It will happen for sure.”
Wallies then signs a contract with a furniture supplier for the urgent manufacture and supply of $250,000 worth of furniture. About one week later, Keen (Wallies) calls Collins (SFP) again to find out when the supply contract will be signed. Collins tells Keen that she found out that Culls Supermarkets – a competitor of Wallies – will pay a higher price for all of the produce which SFP can supply, and so SFP has decided to sign a supply contract with Culls instead. Keen gets angry, but Collins reminds Keen that there was no final contract signed between SAFP and Wallies. Collins says: “I am sorry but that’s the legal situation and nothing can change it.” Wallies then tells the furniture supplier to cancel the order for the furniture – the furniture supplier is now angry because it has bought a lot of materials for the job and already has completed half the ordered furniture, ready for delivery. The furniture supplier says that it may get its lawyers involved if Wallies will not pay for the furniture it has ordered.
Advise Wallies on its legal rights, obligations and remedies in respect of (i) the furniture supplier and (ii) SFP.
(50% of marks)
Note: If more information is required to answer completely, state what that information is and why it is relevant. In your answers be sure to cite specific legislation and/or cases in support of your statements, propositions and contentions. There may not necessarily be one ‘right answer’ – references to legislation or cases which support your reasoning will make your answer more persuasive and will also demonstrate your knowledge, understanding and ability to apply legal principles and concepts
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Posted on May 4, 2016Author TutorCategories Question, Questions