Assignment Task:
Task:
Question 1
Cape Ltd (Cape) is a company specialising in supplying electrical materials to builders. One of its clients is Little River Construction Pty Ltd, a small construction firm operating in the Bellarine region. Little River is owned by Nick Spooner. Business has not been good for Little River over the past year and Little River’s suppliers, including Cape Ltd, have been pressing Nick for payment for goods supplied. In addition, Cape Ltd requested Nick to personally guarantee Little River’s debt to ensure a continuous supply. Nick was not happy to provide such a personal guarantee but was later persuaded to execute a written personal guarantee after Cape Ltd’s Sale Manager assured him over the phone that the guarantee would not be enforced, and that the arrangement was being made for the purpose of re-assuring Cape Ltd’s head office. Soon after, Little River entered administration and Cape Ltd sought to enforce the personal guarantee assumed by Nick Spooner.
In another matter, Cape arranged for its CEO’s aging office to be renovated. Cape selected a two-week period during which the CEO was away on an overseas business trip. Allure Ltd (Allure) was selected to carry out the renovation work based on the quote it submitted. The contract was signed subject to Allure’s standard terms and conditions which were written in fine print on the back of the quote. The Cape staff involved in the contracting process were new to this and did not read the fine print. Cape’s CEO arrived from overseas on a Sunday evening and felt that he needed to drop some documents in his office and to check how the renovation had gone before the working week began the next day. During his late-night visit, he was dismayed to discover that his cherished desk, which had passed down to him from his grandfather who founded the company, was broken and splattered with paint, including the leather top. This damage was due to the negligence of Allure’s employees who carried out the renovation. The restoration of the desk would cost $1200. Cape made a formal complaint to Allure five days later, however, Allure responded by pointing to its terms and conditions which stated that any complaint regarding their work should be notified within three days of completion of work and in any case, their “liability for any loss is limited to $150, howsoever caused.” Based on the above
Advise Nick Spooner as to whether he can challenge the enforcement of the personal guarantee he provided. (10 marks)
b) Advise Cape Ltd as to whether Allure Ltd can rely on the fine print to avoid or limit their liability to Cape Ltd. (15 marks)
Question 2
Packer Variety Superstore Pty Ltd (Packer) is a company engaged in the retail of party supplies, cake decorating supplies and craft supplies. The business is owned by Chris Packer who started as a landscaper and now owns the thriving variety superstore in Melbourne’s South East. The business has been booming recently. To cope with a massive number of pallets of new stock arriving weekly, Chris decided to build a warehouse. To this end, he selected an industrial estate in Dandenong North where the warehouse could be built. This is a short driving distance from where his flagship superstore is located.
Packer, on behalf of the business, contracted on 20 January 2020 with Swindon Ltd (Swindon) to construct a large warehouse. The parties agreed that the work will be completed on 20 July 2020. Unfortunately, the work was not completed by the end of December 2020. In the meantime, Packer made many deals with his suppliers in anticipation of the massively increased storage space. One deal a shipment of several containers of various items from Vietnam, was one he had hoped would significantly boost the company’s income and cement his place as one of the big players in the sector. He placed the order on 20 February 2020, exactly one month after signing the construction contract with Swindon. His suppliers in Vietnam agreed to deliver in midAugust 2020. When it appeared that the warehouse would not be ready in time, he cancelled his order and paid $20,000 to his suppliers, being a liquidated damages amount agreed in the contract. He could have simply walked away from the deal, but he did not want to endanger an existing business relationship that he had carefully cultivated over the years. If the delivery had been successful, Packer’s business would have made a profit of $80,000.
In anticipation of his deal with the Vietnamese suppliers, Packer also hired an advertising agency to market his products through digital media including Facebook and Instagram. The advertising campaign cost him $10,000.
In another matter, Packer, realising the increasing importance of environmentally friendly products, entered a contract with a company that presented itself as a supplier of recyclable tableware. The company advertised that, “Disposable tableware doesn’t have to cost the earth. Our Picnic and Party Range is made from plants, not plastic. The entire range is recyclable, so you can host a zero-waste event with ease.” Packer purchased 50 cartons of disposable cups. Each carton contained 1000 cups and cost $40. The total price was $2000. However, Packer discovered that the recyclability claim was not entirely true because the disposable cups, although mostly made of paper, could not be recycled through the standard paper recycling process due to an inner plastic liner. Based on the above facts address the following questions.
1. Concerning Packer’s claim against Swindon for breach of contract, discuss whether Packer is entitled to damages for:
The $20,000 liquidated damages paid to the Vietnamese suppliers. (5 marks)
The $80,000 profit he would have made if the delivery had been successful. (5 marks)
The $10,000 advertising campaign cost (5 marks)
2. Whether Packer has any legal remedies against the supplier of recyclable tableware (10 marks)
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