INTRODUCTION TO BUSINESS LAW

Instructions

This document consists of four (4) pages including this page.

There are three (3) questions and all questions must be answered. They are of equal value. This assessment task contributes 30% of your final grade. This assessment task is based upon the content covered in Weeks 4 and 5 (Contract law).

Word limit: The word limit for the entire assignment is 1500 words. There is no 10% margin of error on the word limit and you may not use footnotes to get around the word limit (eg, such as by placing extra text in the footnotes - footnotes should be used for the reference only as a general rule, not for added descriptions).

Referencing style: Assignments must be referenced adopting an appropriate business referencing style.

QUESTIONS:

1. Fey is a champion badminton player, and is to compete in the forthcoming world badminton championships representing Australia. She decides to update all of her badminton equipment, including her racquets. She purchases four new badminton racquets without strings, and takes them to an expert in badminton racquets in Sydney to have the racquets strung at the correct tension.

When she enters the expert's shop, she does not notice a sign which is placed on the wall behind the counter which says, in medium-sized print, ‘Whilst all possible care is taken with stringing and restringing work entrusted to us we cannot accept responsibility for any defective work or defective products used by us, and we will not be liable for any loss or losses to customers, even if demonstrably caused by negligent workmanship on our part'. Fey could not have read the notice, even if she had seen it, since she usually wears contact lenses, which she was not wearing at the time.

She left her racquets for restringing and was given a docket which she placed in her purse, assuming that it identified her racquets so that she could collect the right racquets on her return. The same words which appeared on the notice behind the counter were also printed on the docket in very fine, but legible, print on the back of the docket.

A few days later, Fey collected her racquets which appeared to be correctly strung, paid the costs of stringing, packed the racquets with her other gear and left for the world championships overseas.

Whilst competing in the first round of the competition, the strings in Fey's racquet broke. She selected two replacement racquets in turn and the strings also broke. She was eliminated from the first round of the championships. Valuable endorsements totalling $20,000, which Fey would have received if she had played in the finals, were thus lost and all observers agreed that Fey's poor performance was directly attributable to her faulty racquets, which had been strung with defective material. Subsequent testing of the strings showed that they were suitable for squash racquets, but not for badminton racquets, and they should never have been used by the person stringing the racquets for Fey.

Fey seeks your advice. Can she successfully sue the racquet stringer for the $20,000 which she has clearly lost as a result of his faulty work? Advise Fey.

2. Francine has inherited a leisure centre with a large swimming pool from her deceased husband. Francine has a contract with Blue Waters Pty Ltd ("BlueWaters") to manage the leisure centre. BlueWaters arranges for a subcontractor to clean the large swimming pool at the leisure centre for the sum of $2,000 per week, which is $500 less than the usual rate for this service. The agreement between BlueWaters and the subcontractor provides that the swimming pool will be cleaned twice a week for a year to the satisfaction of the maintenance manager of BlueWaters.

For the first six months, the subcontractor cleans the pool to the satisfaction of the maintenance manager. However, a rapid rise in the costs of labour and cleaning products, results in the subcontractor reducing its standard of cleaning the pool. The subcontractor asks BlueWaters for $500 per week more to clean the pool so as to maintain its cleaning standards.

BlueWaters makes inquiries of other cleaning specialists and discovers that they would only be prepared to clean the pool for $4,000 per week. BlueWaters reluctantly agrees to pay its subcontractor the new price of $2,500 per week, but states that it will pay the increased price only after the end of the contract period. At the end of 12 months BlueWaters refuses to pay the increased price to its subcontractor.
Advise BlueWaters whether they have to pay the extra $500 per week.

3. In May Belinda met Clive through an introduction agency. Belinda joined the agency because she had been lonely and depressed since her husband died.

Belinda took Clive to be a successful businessman but Clive was in financial trouble. His personal account with the bank was overdrawn and his company was operating well in excess of its overdraft limit on its account with the same bank.

Clive proposed a scheme whereby, in exchange for a monthly payment of $3000 and a share of the ultimate profits, Belinda permit her property, worth $1,200,000 to be mortgaged to the bank and the company would then borrow further funds and develop it. Belinda was to be a director of the company. In fact Clive intended to use the funds to launch a new business venture and to reduce his indebtedness to the bank.

Belinda gave Clive the title deeds to her property. The following day Clive brought a large bundle of documents to Belinda's home for signature. Belinda wanted to read the documents but Clive became angry and slammed his hand on the document preventing her from reading further, and threatened to end their relationship. Belinda felt very distressed and physically threatened. She did not read the rest of the documents, but simply signed them.

Unknown to Belinda the documents included a personal guarantee, which meant that Belinda, would be generally liable to pay the bank if Clive or his company were unable to repay their debts.

Because Clive had the title deeds of Belinda's property and her signed guarantee his company was able to obtain a loan of $750,000 from the bank, which Clive used for his new business. None of the money went to redevelop Belinda's property.

Henry, the bank's branch manager was aware that Belinda did not have a solicitor advising her. He was given a copy of the minutes of the company directors' meeting and he could see from this that Belinda understood the loan to be for the purpose of redeveloping her property.
Belinda has now ended her relationship with Clive. Advise Belinda.