LAWS1204/LAWS6104 CONTRACT LAW Tutorial Guide 2017

TUTORIAL QUESTIONS
LAWS1204/6104 CONTRACT LAW
SEMESTER 2, 2017

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TUTORIAL ONE: OFFER Week 2

Question 1
Sam went to the local supermarket and took from the shelf a bottle of lemonade. Immediately
after he placed it in the trolley provided, it exploded, severely injuring him. He wants to sue the
supermarket alleging breach of contract. Advise Sam.

Question 2
The Ezi Furniture Store advertises that it is holding a closing down sale because it is ceasing
business. The advertisement states that “all goods must be sold. No reasonable offer will be
refused.” Cate sees a rocking chair which has a price tag on it stating “$200”. When she says
she will buy the chair at that price, the manager of the store tells her he has decided to keep it
for himself. Can Cate insist on buying the chair?

Question 3
Gupta is a doctor in Melbourne. He has developed a product called ‘Gupta’s Flu Cure’ which
he wants to sell to consumers. The advertisement for Gupta’s Flu Cure (GFC) reads, “Have
you ever had the flu? Then you need to try GFC. There is no risk of contagion if you take GFC
because you will be naturally immune from the flu. If you feel over-stretched, squeezed or
generally at your limits then GFC will restore you to a creditworthy state. All you need to do is
to take two tablets of GFC every day and you will never ever have the flu again. To show how
sincere I am I have deposited $1000 with Todd at Outsourced Bank. I will pay you the $1000 if
you use GFC every day and still you get the flu.
Angela Merkel also lives in Melbourne. Angela tried GFC every day for three weeks. When
her sister Frances came home from a holiday in Greece she had the flu. Angela fell ill with the
flu within two days. Advise Angela.

Question 4
On February 1 Alex telephoned Bart offering to sell him her horse Cicero for $100,000 and
promising to hold the offer open until February 11. On February 5 Alex wrote a letter and
personally delivered it to Bart’s office withdrawing her offer. The letter was placed on Bart’s
desk but Bart did not come to the office that day. On the same day Alex also telephoned to
Bart’s house and left a message with Bart’s wife that the offer was withdrawn, but Bart’s wife
forgot to pass the message on to him. That evening Bart faxed a letter of acceptance to Alex.
Is there a contract?

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TUTORIAL TWO: OFFER, ACCEPTANCE AND CONSIDERATION Week 3

Question 1
Frank is a farmer in Yass. He signs an agreement with Farm Equipment Pty Ltd to buy a
Russian tractor for $56,000. Just before the parties sign the agreement Frank writes the
following words on the document: “Subject to the purchaser being able to raise the money at
satisfactory rates in the next four weeks.”
During the following four weeks, Frank is very busy and only has time to do some initial
searches in the internet looking for interest rates. He visits the Commonwealth Bank website
and the National Australia Bank website. Frank thinks their interest rates are a bit high.
At the end of the four weeks, the manager of Farm Equipment Pty Ltd tells Frank he will give
Frank extra time to raise the purchase price. Frank tells the manager, “Thank you but I don’t
need it. I’ve found a cheaper tractor in the Classified Ads in the paper and I’m buying that
one.”
Does Farm Equipment Pty Ltd have any rights against Frank?

Question 2
Imogen has been offered a place at the Truly Excellent University. Her father tells her he will
contribute $3000 per year to the costs of her university education. Imogen takes up her
place at the Truly Excellent University but her father makes no payments. Does Imogen
have an action in contract against her father?

Question 3
Jamal owns an avocado farm in far north Queensland.
On 10 March Jamal receives from Georgia, a fruit exporter, a printed form which was
headed "Offer to Purchase". In the "Description of Terms" section, the following was written:
"Hundred cases of avocados for four months and an option for a further hundred cases per
month as required."
In the "Delivery Dates" section, the following entry appeared:
"Early April and monthly thereafter."
In the "Purchase Price" section appeared the words:
"Please advise."
On 11 March, Jamal wrote to Georgia in the following terms:
"I accept your offer of 10 March. Advise price is $100 per case."
That letter reached Georgia on 13 March. On the basis of the $100 per case purchase price,
Georgia calculated her own sale price and advised her overseas customers.
On 20 March, Jamal received a letter from Golden Ring Canneries which read:

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"We are excited to announce the development of our new avocado-pineapple juice drink. We
expect demand to be great and therefore offer to buy your entire avocado produce for the
next three months at a price of $120 per case, with subsequent purchases to be negotiated."
That afternoon, Jamal wrote back to Golden Ring "accepting your terms". He then wrote to
Georgia as follows:
"I regret to inform you that I would not be able to supply you as we had agreed."
Georgia received that letter on 22 March. She immediately telephoned Jamal and said: "we
had a deal. You have to supply 100 cases per month. Furthermore I need an extra 75 cases
in the first month."
Jamal tells Georgia to "get lost". Georgia subsequently suffers considerable losses as a
result of Jamal's failure to supply her with avocados and her consequent inability to fulfil
certain export orders. She brings legal proceedings against Jamal
On 24 March, Jamal receives a lucrative order from Japan and accordingly telephones
Golden Ring asking if he can allocate 5% of his avocado crop for that year to the Japanese
order. At this stage Golden Ring had not yet received Jamal's letter of 20 March, but
nevertheless refuse Jamal's request and insist on obtaining the entire avocado crop over the
next three months.
Advise Jamal.

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TUTORIAL THREE: CONSIDERATION, INTENTION AND CAPACITY Week 4

Question 1
Dorothy says to Parker, “I will pay you $100 if you ride your bicycle from Canberra to Yass”.
Parker replies, “I will do that”. What remedy (if any) has Parker against Dorothy if he
commences to ride to Yass and when he is halfway there, Dorothy rings Parker on his
mobile phone and says to him, “Of course, I did not and do not intend to be legally bound by
my offer to pay you $100”? Advise Parker.
Would your answer have been different if Dorothy had suggested to Parker that he
ride to Yass with a deeply racist or sexist slogan pinned to his back?

Question 2
Josh and Ben decide to set up an internet business. They discover they need someone who
can create web pages. They ask their friend Elisabeth if she will join them in the enterprise,
using her skills and expertise as a graphic designer. Elisabeth agrees, and, largely as a
result of her efforts, the business is a great success. Josh and Ben send Elisabeth an email
telling her that in consideration of her services, they will give her a one-third share in the
internet business by issuing her with one third of the shares in the company that owns the
business and they will make her a director of the company. Josh and Ben between them
own the remaining two-thirds of the shares and are the only other directors of the company.
In the meantime, Josh and Ben sell the company and the internet business to a Malaysian
company and make a very large profit. When Elisabeth asks for her share of the proceeds of
the sale, Josh and Ben tell her she is not entitled to any payment.
Advise Elisabeth.

Question 3
George owns a café in Kensington. He hires Mildred as a short order cook. Mildred’s
contract term is for one year and her rate of pay is $35 per hour. Mildred has a small child
who stays in day care when she is at work. The cost of childcare is subsidised by the
Federal Government. George was aware of Mildred’s situation when he hired her. The
Government has recently cut all funding to childcare. Mildred is affected by the cuts. Mildred
asks George to raise her pay to $45 per hour so that she can afford to keep her son, Tristan,
in day care. Mildred tells George that if he does not pay her more money she will have to
quit and find another job. George agrees, but then changes his mind a month later. Advise
George.

Question 4
Brett Davis is a 15 year old school boy from Mackay. Brett is an exceptional rugby league
player. NRL talent scouts have rated Brett as the brightest junior talent to emerge in years.
The Parramatta Eels want to sign Brett for their junior development program. What issues
of contract law might arise?

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TUTORIAL FOUR: CERTAINTY AND ESTOPPEL Week 5

Question 1
Arnold is married to Kimberly. They live on a large rural property outside of Canberra.
Kimberly owns the property. Arnold and Kimberly run a livestock business from the property.
Kimberly has a brother called Joe. Kimberly told Joe that if he and his wife moved onto a
small cottage on the property and helped her run the business she would subdivide her land
and allow him to buy one-third of the property.
Joe and his wife, Tudie, moved on to the property. Kimberly began to prepare a contract of
sale for the sale of the one-third of the property. Joe’s wife then made substantial repairs to
the cottage. Joe provided the funds for the repairs that Tudie made. Joe also arranged for a
loan from the ANZ Bank in order to purchase the one-third parcel of the property. Joe also
arranged for a private road to be put in place in order to connect the one-third parcel of the
property to the main road.
After some months Arnold began an affair with Tudie. The affair lasted for one year.
Eventually the affair was discovered. Tudie then left Joe.
A final contract for the sale of the one-third share of the property has not been completed.
Similarly, Kimberly has not completed the subdivision. Kimberly is now refusing to subdivide
the property and to sell the one-third to Joe. Advise Joe.

Question 2
Mary, a public-spirited law student at the ANU, decided to join in a “Walk on Want” to raise
money in aid of refugees. After obtaining a number of sponsors for her walk, she called at
the home of Janet, a well-known Canberra philanthropist. When Mary explained the purpose
of her visit, Janet replied “That sounds like a good cause, and deserves a generous
donation. For every kilometre you walk, I’ll pay you in dollars the equivalent of the
percentage increase in the June quarter Consumer Price Index. And if it is raining on the day
of the walk, I’ll double that.” On hearing this, Mary thanked Janet and left.
The “Walk on Want” was to be held on Sunday 27 July 2014. On Thursday 24 July 2014 the
Federal Treasurer announced that in the June quarter the Consumer Price Index had
increased by 0.4 percent over the March quarter and by 2.5% over the previous June
quarter. On the evening of Saturday 26 July the weather forecast in Canberra for the
following day was for heavy rain. On hearing this, Janet telephoned Mary’s home; Mary was
out, but Janet said to her mother: “Tell Mary I’m pulling out of my sponsorship of her ‘Walk
on Want’ tomorrow”. Mary’s mother did not pass this message on to Mary.
On the Sunday Mary took part in the “Walk on Want”. The route of the Walk went past
Janet’s home, and as Mary passed by, Janet called out: “I’ve pulled out of my sponsorship of
your walk”. Mary waved in acknowledgment and continued walking. At that stage, Mary had
covered 10.4 km from the start of the Walk and she went on to complete 20 km. The
Weather Bureau records shows that 64 mm of rain were recorded in Canberra on 27 July.
Is Janet legally obliged to pay anything to Mary for her participation in the “Walk on Want”,
and, if so, how much?

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Question 3
Archie owns a mine in Queensland. His wife Betty is not an owner of the mine. Archie signs
a contract with BTX Pty Ltd which states, “Archie and Betty allow BTX Pty Ltd to operate the
mine provided that they pay $50,000 per annum to Archie and Betty.”
If Archie dies will Betty be able to enforce the contract?

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TUTORIAL FIVE: EXPRESS TERMS AND IMPLIED TERMS Week 6

Question 1
Sonia sells quantities of perfume and cosmetics to a business that is called Magda’s House
de Bowtay. Kim is the manager of Magda’s House de Bowtay. Each time Sonia sent Kim a
delivery of cosmetics and perfume, she sent a sold note to Kim confirming the prior oral
contract. Sonia and Kim had done business this way for a number of years. Kim would contact
Sonia and place an order over the phone and Sonia would send through a sold note the same
day or the day after.
The sold notes contained standard forms, including a clause (clause 6) that stated that the
supplier took no responsibility for latent defects in the goods delivered. Kim had received
many of these notes in the past but had never read them.
The last delivery of goods Kim received contained perfume that had gone off and smelt like
turpentine. It turns out that there was a latent defect in that particular batch of the brand of
perfume. Kim wants Sonia to refund her the price of the perfume but Sonia refers Kim to
clause 6 of the sold note and tells Kim she is not obliged to pay Kim anything. Advise Kim.

Question 2
Anthea is a student at the Australian National University. Anthea lives in a residential college
that is located on campus grounds. The college is named Barry Hall and is run by ANU
employees. Barry Hall is officially part of the ANU. Mercedes is also a student at the ANU.
Mercedes lives at Barry Hall. At a formal event at Barry Hall, Mercedes got into a fight with
Anthea after she saw the latter talking to her ex-boyfriend. Since then Mercedes has stalked
and harassed Anthea on an intermittent basis. Despite knowing all about this conduct, various
employees at the ANU have declined to intervene. One ANU staff member advised Anthea
that she should simply change colleges. Anthea no longer feels safe on the ANU campus.
Anthea is in a contract with the ANU by virtue of her enrolment as a student. Does the
University have an obligation to Anthea to provide her with a safe campus experience?
Question 3
Margaret owns a suburban parking station. At the entrance of the station there is an automatic
machine that issues customers a ticket as they drive into the parking station. Printed on the
front of the ticket is the following: “Customers are advised that vehicles are parked only
subject to the conditions displayed on the premises.”
The conditions are displayed on a notice attached to the wall of the payment office.
Customers go to this office to pay their parking fees prior to leaving the parking station. The
notice reads:
Conditions of Parking
The station is open from 6am – 12am midnight. Charges are $4 per hour or part thereof; for
vehicles left overnight an additional fee of $250 is payable. Margaret regrets that she cannot
accept any responsibility for any harm, loss or damage whatsoever.

When customers pay the parking fees they are given a document headed “Receipt” which
indicates the amount paid and also repeats the words of the notice on the wall of the payment

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office. John, Meg and Anne all recently parked their cars in the parking station. They had each
used the station about once a month over the past year, but had never read the ticket, the
notice or the receipt (all of which have been used in exactly the same form throughout this
period).
Anne’s car was stolen when a thief persuaded Margaret that he was the owner of the car and
had lost his ticket and Margaret allowed him to take the car away. The car has not been
recovered. When John came to collect his car, Margaret was assisting another customer who
had trouble parking his car. Margaret carelessly drove over John’s foot causing him
considerable injury.
Meg had had too much to drink after work at the pub and forgot about her car until the station
had closed. She was outraged the next morning when the cashier demanded payment of
$250 in addition to the normal parking fee. Meg refused to pay the $250.
Margaret is threatening to sue Meg for $250. Anne is threatening to sue Margaret for the value
of her car and John is threatening to sue Margaret for compensation for his injuries. What
would your advice be to all the parties?

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TUTORIAL SIX: CONSTRUCTION Week 7

Question 1
Contract Construction Problem

Cinema Century Ltd (‘Cinema’) is a national cinema chain. Commercial Property Trust Ltd
(‘CPT’) owns a number of buildings which it leases to commercial tenants. Cinema wants to
lease such a building in a rural town in New South Wales. Alice, a representative of Cinema,
meets with Kerrie, the property manager of CPT, to discuss the possibility of Cinema leasing
the building from CPT. On 1 June, 2013 they meet and Kerrie shows Alice CPT’s standard
lease agreement. The term of the lease would be for five years. The document contains the
following term:

Provided always that the Lessor (CPT) may at any time during the currency of the term
hereby created terminate this lease by giving to the Lessee (Cinema) at least four weeks'
notice in writing of it’s intention so to do.

Alice and Kerrie have the following conversation:

Alice: Kerrie, I am not happy with this clause. Cinema will be making a considerable
commitment and investment if it leases these premises. We need to be certain that
we will be in the premises for the duration of the lease. We also want an option for a
further 5 year lease.

Kerrie: We have an option clause we can include here. However, I cannot change
the language of the termination clause. There is no need for you to worry about it
though. CPT only ever exercises the termination clause in its leases if the tenant
defaults on paying the rent or becomes insolvent.

Alice: Well, if you are sure that is the only basis on which CPT exercises that clause,
we will sign. Cinema is in a very good financial position and always meets its
financial obligations.

On 30 June, 2013 Cinema signs the five year lease agreement with CPT. On 28 August,
2015, CPT writes to Cinema advising that it is exercising its rights under the termination
clause in the lease and is terminating the lease with Cinema. Alice is incensed by this. She
telephones Kerrie and they have the following conversation:

Alice: Kerrie, how could you let this happen? You told me CPT only exercises the
termination clause if the tenant defaults in paying the rent or becomes insolvent.
Cinema pays the rent on time and is not insolvent.

Kerrie: I am sorry Alice but there is nothing I can do. There is a new investment team
in place in the company and they have introduced a number of changes to the
direction CPT is taking with its tenants.

If CPT is successful in terminating the lease, Cinema will suffer significant financial
loss. Alice comes to you for advice. Advise Alice.

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TUTORIAL SEVEN: UNCONSCIONABLE CONDUCT, UNDUE INFLUENCE Week 8

Question 1
Abedi Tuda arrived in Australia in 1996 from Somalia. Abedi initially entered Australia on a
student visa. This visa expired in 1999. However, Abedi stayed in Australia after his student
visa had expired. Abedi lived in Melbourne and was able to avoid detection by the
immigration authorities for the next fifteen years.
During his time in Melbourne, Abedi ran a small catering business. The business became
incredibly successful and Abedi was able to buy two houses in the Melbourne suburb of
Balwyn. Each house is now valued as being worth at least $1.4 million.
In 2001, Abedi met Sandra Heseltine. At first Sandra was a client of Abedi’s catering
company. Eventually they became friends and lovers. To Abedi, Sandra epitomised
everything that he loved about Australia and she was deeply aware of his feelings for her.
Their relationship was on and off, but they eventually decided to be ‘just friends’ in 2011.
During the course of their relationship Sandra became aware of Abedi’s migration status.
In 2013, Sandra told Abedi that she wanted to rekindle their romantic relationship. They
began living together as a couple. In August 2013, Sandra got Abedi to provide one of his
Balwyn houses as security for a business loan that she wanted to take out with the National
Australia Bank. Abedi was happy to comply, but was worried that Sandra did not explain the
financial position of her business to him or her actual business plans.
In late 2014, Sandra convinced Abedi that he might face trouble from Australia’s immigration
authorities. She also convinced him to sign his properties over to her for safekeeping in case
he was deported. This was achieved by virtue of a ‘sale’ at a very considerable undervalue.
Under the terms of the sale Sandra only paid $200,000 for both houses. Sandra drafted the
contract of sale and transfer documents herself and got Abedi to sign them. Coincidentally,
Sandra had borrowed $220,000 from the National Australia Bank.
Following an anonymous tip-off, Abedi was arrested and detained by the Australian Federal
Police and immigration authorities on the 14th of December 2014. However, after a month
the Immigration Department released Abedi and he was granted permanent residence in
Australia. In the view of the Immigration Department, Abedi had actually been eligible for
permanent residency in late 1999.
Abedi has since discovered that it was actually Sandra who alerted the Immigration
Department to his migration status before his arrest. Sandra is now refusing to return Abedi’s
houses to him and has changed the locks.
Advise Abedi

Question 2
Read Lisa Sarmas’s article on Louth v Diprose. Do you agree with her critique on gender
stereotypes in Louth v Diprose?

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TUTORIAL EIGHT: DURESS, MISREPRESENTATION, UNDUE INFLUENCE Week 9

Question 1
Jack agrees with Loader, a removal contractor, to pack and remove his furniture from
Sydney to Melbourne on 1 May for an all-in cost of $10000. He has sold his house and must
give vacant possession at 3pm on 1 May. On the morning of 1 May, before any packing has
begun, Loader tells Jack that he will not go ahead with the job unless Jack promises to pay
him an extra $2500 and also $500 to each of his packers, Winkle and Nod. Jack says, “You
know that all the other carriers are booked up for weeks and I have no option,” and signs a
note promising to pay the extra $3500. Loader then finds Jack’s wife Jill alone in the lounge
room and tells her he cannot guarantee that Winkle and Nod will handle her porcelain
collection safely unless she promises to pay Loader another $1000. Very frightened, she
signs a promise to pay this sum, saying, “This is blackmail.”
Everything is safely delivered and on time. Loader, Winkle and Nod demand the additional
sums promised. Advise Jack and Jill.

Question 2
Alicia is 42 years old and lives in Sydney. Alicia is from a very wealthy family, but her
parents have both died. Alicia’s parents left her a very significant sum of money.
Unfortunately, Alicia has had significant mental health issues. She lives alone and is very
vulnerable.
In recent months Alicia has been attending a Swedish Church in St Ives. The pastor of the
church spends a lot of time advising Alicia. One Sunday the pastor and another parishioner
invites Alicia to a dinner party. At the party the parishioner, James, suggests that Alicia might
want to make a very large donation to the Swedish Church. The pastor tells Alicia that it
would be a great idea. Alicia donated $500,000 to the Swedish Church.
Her sister has now told Alicia that she has been cheated. Can the gift be set aside?

Question 3
In mid-2013, Isabella offered to sell her business to Daniel for $200,000. During their
discussion, Isabella made the following statements to Daniel:
"In the high season I'd say the business pulls in at least $5000 a week, maybe more.
If you introduce outdoor seating, the takings will jump by at least $700 per week, for
sure."
It was true that the business has been taking at least $5000 during the summer season of
2013. However, this was due to the appointment of a popular Brazilian chef at the
restaurant. This chef advised Isabella early in June 2013 that he would be returning to Brazil
in September, 2013. However, Isabella did not pass this information on to Daniel.
Daniel decided to purchase the restaurant business. After running the restaurant for 18
months, Daniel comes to you for legal advice. He tells you that: (i) the most that the
restaurant has ever earned in a week has been $2000; (ii) he introduced outdoor seating but

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was fined by the local council for installing this seating in breach of the restaurant's licensing
conditions.
Advise Daniel

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TUTORIAL NINE: FRUSTRATION, CONSTRUCTION, BREACH AND ILLEGALITY Week 10

Question 1
Pierce has a contract to export live cattle to Malaysia. Pierce contracts with Troy to ship the
cattle to Malaysia. The day after the cattle is loaded onto Troy’s ship the Federal
Government bans the live export trade. Pierce has received payment from Troy and the ship
has set sail. He is unsure as to whether the contract can be completed. Advise Pierce.

Question 2
Sarah is a singer. Last week Sarah signed a contract to sing at a concert. The following day
Sarah found herself locked out of her apartment in Pymble. As she was standing outside a
freak thunderstorm took place. Sarah was thoroughly drenched. She subsequently
developed pneumonia. Has Sarah’s singing contract been frustrated?

Question 3
Helen runs a tea shop called Helen’s TeaTime. She is interested in purchasing an
assortment of different types of tea from a foodstuffs supplied called Sonia. To improve her
sales, Helen wants to supply a particular blend of tea called Russian Caravan. She speaks
with Sonia and asks her whether Sonia would be able to prepare and supply this particular
blend of tea. Sonia replies:
“Yes, that's no problem. I can prepare and supply that blend of tea. I have a great deal of
experience in blending different teas. This will not be any trouble.”

At the end of February 2015, Helen and Sonia enter into a contract pursuant to which Sonia
will supply Helen with Russian Caravan for a period of 12 months. The contract contains a
number of terms, including the following:
Clause 6: The supplier will deliver 10 kg of the tea blend Russian Caravan to the purchaser
on the 5th and on the 20th day of each month – beginning on 5th March 2012 – provided those
days are working days, otherwise on the next working day.
Clause 7: The purchaser will pay the supplier the amount of $800 on the 28th day of each
month – beginning on 28th March – provided that day is a working day, otherwise on the next
working day.
Clause 9: The purchaser acknowledges that the supplier will not be responsible for any loss
suffered by the purchaser as a consequence of any defects in the goods supplied.

On 5th April 2015, Sonia delivers only 8kg of Russian Caravan. Helen tells Sonia that she is
not happy about this. The delivery is again underweight on 20th April, this time by 1 kg. On
July 20th the delivery is only 7kg, and both deliveries in August are underweight, by 2kg and
1kg respectively. On each occasion, Helen tells Sonia that she is not happy, as this
particular blend is her best-selling tea and she is losing sales. In September, Sonia makes
the deliveries in accordance with the contract.
In October, Helen receives a complaint from a regular, valued customer who has had an
allergic reaction to the Russian Caravan tea she bought from Helen in September. Helen

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establishes that Sonia had supplemented the September deliveries with another type of tea
in order to make up the quantities. The customer was allergic to this particular tea. Helen is
greatly concerned about this situation and comes to you for advice. She wants to change her
supplier and wants to know what rights and liabilities she has against Sonia. Helen has just
discovered that Sonia has no experience in the tea industry at all. Sonia has also learned
that at the time that the contract was signed, Helen did not have a license to trade in tea
under the Food Safety Act 1985 Act (Cth) as her previous license had expired six months
ago. Helen was aware that she did not have the relevant license at the time that the contract
formed, but she acquired the license three months later. Advise Helen.

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TUTORIAL TEN: TERMINATION AND BREACH Week 11

Question 1
Jane agreed to buy a block of land from Alan. The purchase price of $155,000 was payable
by a deposit of $35,000 due on 6 January, 2010 and five instalment payments each of
$30,000 which were due on 6 January, 2011, 2012, 2013, 2014 and 2015. Jane also agreed
to pay interest.
There was a clause in the contract (clause 7) that provided that, in the event of Jane failing
to pay the deposit or the balance of the purchase price ‘at the respective times herein set
out’, all ‘moneys actually paid by Jane’ were to be ‘absolutely forfeited’ to Alan. Clause 7
also allowed Alan to end the contract without prior notice and to take or retain possession of
the property. Clause 8 of the contract made time of the essence ‘in all respects’, Clause 10
stated that title to the property was to be transferred on payment in full of the purchase price.
Jane paid the deposit and took possession of the property. The first three instalments were
each a few days late and the fourth was a few days early. The final payment fell on a public
holiday. Interest was paid on the day following and an extension of time request for the
payment of the remaining $30,000 due. On 8 January Alan advised Jane of his right to end
the contract for breach but said that he would not exercise that right until 11 January. He
confirmed this in writing to Jane. The letter included the following statements:
I will not take action under the contract until 14 January but this must be regarded as
an act of grace and without prejudice to and in no way varying my right to the strict
enforcement of our contract.
Unfortunately, Jane failed to make the final payment and on 15 January, Alan wrote to her
advising that she had forfeited to him the money she had paid him and that the agreement
was at an end. Alan has now started action in the Supreme Court for a declaration that the
contract has been validly terminated and seeking to repossess the land. Jane has, in the
meantime, established a thriving farm on the land and does not want to leave. Advise Jane.

Question 2
McCutcheon & Sons Pty Ltd ('McCutcheon') is a commercial fishing company that runs a
fleet of ten fishing trawlers out of Eden, NSW. Some of the vessels are quite new but three
have been in operation for more than fifteen years. Alexander Shipyard Pty Ltd ('Alexander')
is a shipyard that builds and repairs all types of boats. McCutcheon and Alexander enter into
a written contract under which Alexander agrees to repair and maintain McCutcheon's fleet
of trawlers. The contract is for a period of three years and is signed on 1 February, 2012.
The following terms are set out under the heading 'Conditions of the Contract':
(1) Alexander agrees to provide good and skilful workmanship.
(2) Alexander agrees to use materials and parts that are of good quality and that are reasonably
fit for their purpose.
(3) Alexander agrees to exercise all reasonable care and skill in carrying out repairs and
maintenance.

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(4) Where a vessel owner has provided specific instructions on what work is required, Alexander
accepts no responsibility for any loss or injury howsoever caused in relation to work carried
out in accordance with this contract.

McCutcheon's head engineer, Sandy, signs the contract on behalf of McCutcheon. At the
time of signing, he issues the following instructions to Pete, the managing director of
Alexander:
"We have three vessels that have been running for more than 15 years. We're going to have
to replace them soon, so don't spend a lot of time and money on them. Just make sure that
they are seaworthy."

On 6 May, 2013, Sandy phones Pete to complain about the most recent service that
Alexander has carried out on some of McCutcheon's vessels. Two of the oldest vessels
were caught in a storm at sea and the engines and generators in both vessels failed. The
refrigeration units on the vessels were not functioning because of the generator failure. By
the time the vessels could be reached and brought back to the harbour, the catch they were
carrying was completely spoiled.
It appears that replacement parts used in the engines and generators during the most recent
service of the vessels, were not adequate for the storm conditions. The spoiled catch was
worth $40,000. In addition, McCutcheon is unable to perform certain delivery contracts it has
with wholesale fish traders on the South Coast of NSW and for which it is well-known. It
does not have enough vessels available while the two oldest ones are being repaired. As a
result, McCutcheon loses these contracts which are collectively worth $100,000.
On 8 May, 2013, Alexander receives a letter from McCutcheon terminating their contract.
Pete now comes to you for advice in relation to this situation.
Advise Pete on Alexander's rights and liabilities in relation to this situation.

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LAWS1204/LAWS6104 CONTRACT LAW Tutorial Guide 2017

TUTORIAL ELEVEN: TERMINATION AND BREACH, REMEDIES Week 12

Question 1
James enters into a contract with Bruce to build a swimming pool in Bruce’s garden for
$15,000. Of this, $7000 is to be paid when the excavation is complete; $6000 when the
concreting has been done; and the balance “on final and satisfactory completion” of the
work. The contract provides that the excavation is to be completed by October 1; that the
concreting is to be done by November 1; and that the pool is to be finished and ready for use
on December 1. It also provides that Bruce is entitled to cancel the contract if at any stage
James is more than 2 weeks behind schedule with the work. Soon after James has started
the excavation, he falls ill, with the result that the work is delayed and the excavation is not
completed until October 21. Bruce is aware of these delays but does not exercise his right to
cancel until November 16 when James (by dint of great efforts to speed up the work) has
nearly finished the concreting. On November 16, a reasonable person in Bruce’s position
would have concluded that it was impossible for James to finish the work before December 7
at the earliest. Bruce has paid James the $7000 due on completion of the excavation, but
has made no further payment. Advise James as at December 17.

Question 2
A agrees to sell to B a consignment of goods which B contracts to sell on to C at a profit. A
fails to deliver and B loses the profit. Advise B. How would your answer differ if:
a. B's contract with C was especially lucrative because C had agreed to pay well
over the market price;
b. B was to process the goods further before selling them to C and the profit was
largely attributable to the added value created by the processing?

Question 3
Morgan, a poultry farmer, discovers a fault in the motor powering the ventilation system of his
largest poultry house. He telephones the manufacturers, Airco, explaining his problem and
places an urgent order for a replacement motor to be sent to him. Airco mistakenly sends a
motor of the wrong specifications and Morgan, being in such hurry to install the motor, does
not notice this. The motor is too powerful and the entire system is damaged as the fan
mechanism disintegrates. Advise Morgan in the following alternative circumstances:
(i) The house contains an exotic strain of young waterfowl which Morgan has
been rearing for Jason under an exceptionally lucrative contract; the waterfowl
die of suffocation.
(ii) The house contains chickens which die after being infected by a rare virus to
which poultry are susceptible only in very hot conditions.

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