Case scenario 1 -Agreement, Intention, Consideration and Promissory Estoppel

Ms Sienna Square is a 35 year old novice land and business developer who has recently started her own development company (having worked for another company as a marketer, and having just finished her MBA). She is thinking about developing a small shopping complex in Elizabeth, as she has seen an opportunity to buy and demolish a run-down set of shops and to re-build on the land. But she is worried about going ahead without tenants who could come in straight away and provide her with an immediate income to cover the interest on her borrowings.

She is at a new year's dinner party on December 31 and speaks by chance with Mr Power, who is known for his ownership and management of a number of IGA supermarket franchises. "As a matter of fact, I am looking for space in the northern suburbs for another small IGA", Mr Power says. Sienna talks to him about her plans, but nothing more is said. She gives Mr Power her business card though.

On January 10, Sienna receives a letter from Mr Power explaining his "committed intention" to lease any space that Sienna might develop "for a small IGA supermarket in Elizabeth". He writes that "in 3 months I will instruct my lawyers to prepare the formal contracts to rent for at least 5 years the development space we spoke about, and at a rental to be agreed." Sienna is excited. She writes back immediately, telling Mr Power that she has the approval from her bank to borrow the money to buy the property and to start the development phase. In the next 10 weeks, Sienna buys the property, spends $10,000 on demolition and another $20,000 on a development plan, using a builder, Mr Crow, whom she instructs on February 15. Mr Crow was her choice once she found out that Mr Crow does a lot of Mr Power's work and that they are constantly in contact with each other. Mr Crow, she discovers, however, is rather arrogant and sits down with her to discuss her plans for only 20 minutes. "I am a busy man," he says, "and this is a very small development." There is no time to go through the 17 page standard form written contract which they both sign on February 16.

Unhappily for Sienna, on March 29, Mr Power calls her by phone, cancelling all of his plans. He offers no compensation, "because we don't have a contract, as simple as that. I am going to focus more on the eastern suburbs now, not the north," he adds.

Worse news was to come. Sienna's development plan from Mr Crow (for which she has just paid $20,000) arrives on March 30. It does not include the detailed architectural drawings that she thought were going to be done and included in the price. The plan simply contains a broad concept drawing, the permissions sought and gained, a series of quantity surveys and all the costings, including a further estimated $10,000 for architectural drawings. "You will need to go to an architectural draftsman," says Mr Crow. "You really should have known that. I don't usually work with ignorant people." A closer look at the written contract from Mr Crow reveals that what he says is true; it says nothing about the provision of architectural drawings, only "concept guidance for the building phase of the project."

Advise Sienna generally. Consider, in your answer, what effect on Sienna's arguments for some legal remedies would be news that Mr Power had heard from Mr Crow on February 15 that Sienna was spending $20,000 with Mr Crow for development plans.

Note that you should focus entirely on the common law, not on the Australian Consumer Law, and speak only in the most general of terms about the remedies she should seek.

Exercise - Contracts for the sale of goods

Ash's mother Shashi wants to buy a shopping cart that will be suitable for carrying her weekly groceries home from the supermarket. She goes to a shop owned by Neville that specialises in the sale of shopping carts. Shashi tells Neville what she wants and asks for advice about which cart to buy. Neville recommends the Shopper Ultra model that sells for $150.00, but when Shashi asks about the Shopper Basic, which sells for only $49.95, Neville tells Shashi that it is ‘not as good, but should be adequate'. Shashi buys the Shopper Basic. A few weeks later, she is unhappy because after using the cart to carry a stack of books back from the library, the fabric of the cart has started to tear. Has Neville breached the statutory implied term regarding fitness for purpose?

Exercise - Terms and representations

Johnny decides to order the organic fruit for his restaurant from a new supplier, George. When he reads through the terms of the written contract given to him by George, he sees that while George guarantees that the fruit will be ‘fresh', the contract says nothing about whether the fruit will be organic. Johnny asks George about this, explaining that he tells his customers that his fruit is always organic. George assures him that the fruit will always be organically grown. Johnny then signs the contract without changing it. The next three deliveries include fruit that is not organically grown. Can Johnny legally enforce George's verbal promise about the fruit?
(600 words) - 20 marks

Exercise - Trade marks

The Lame Duck restaurant is located directly across the road from a McDonald's restaurant. Johnny thought it would be funny if he put a large sign out the front of his restaurant with the words ‘Mmmm . . . try our vege burger instead', with each of the ‘m's in the shape of the McDonald's ‘golden arches'.

(a) Would the sign infringe McDonald's registered trade mark?

(b) How would your answer be different if the golden arches were not a registered trade mark?