Questions
Please post any question you have in our General Discussion Forum on LMS. The teaching team will NOT answer any questions via email.
Learning Objectives Assessed
This assessment task is designed to test your achievement of assessing legal risks in the area of contractual and non-contractual risks and obligations and the Australian Consumer Law (ACL).
Scenario: No seats in the house
James wants to open a restaurant in Melbourne. He engages Lloyd Right Pty Ltd, an architectural firm, to design the restaurant interior and exterior including the layout and position of the tables and chairs. Under the contract, Lloyd Right Pty Ltd will receive $15,000 for the services rendered. Lloyd Right Pty Ltd will be responsible for all aspects of the interior and exterior design, including the ensuring the seating capacity and obtaining permits from the local council. Before signing the contract, James explains to Lloyd Right Pty Ltd's manager, you, that, in order to be profitable, the restaurant must seat at least 100 customers. You assure James that this would be the case. Yet the written contract you both immediately sign following the conversation does not mention the minimum seating capacity.
You measure the floor-space of the restaurant for the purposes of determining the seating plan. You also measure the size of the footpath space outside the restaurant as James wants some outside street-side tables in order to serve more customers and to present a good image to people who pass by.
You select a beautiful Italian-design table and chair for use in the restaurant and show James the design in a photograph. James is very impressed with the table and chair and asks you how many customers the restaurant will seat if these tables and chairs are used. You assure James that, including both inside and outside space, the restaurant will seat a total of 120 customers with the Italian-design tables and chairs. James, relying on your figure, agrees to the purchase of the Italian tables and chairs and to the rest of the design of the restaurant. You order the tables and chairs which will cost James a total of $50,000.
When the restaurant is completed and ready for opening, James finds that the restaurant only seats 80 customers and so will lose substantial profits. In fact, he loses about 40 customers per day and each customer brings in about $30.
When he informs you of this, you realise that the tables you ordered are slightly larger than standard-size restaurant tables, a fact you failed to check before ordering them.
In addition, an inspector from the local council informs James that the tables on the outside footpath must be removed as the council prohibited street-side dining, a fact you could have discovered by ringing the council, but you failed to do so.
You are sick with dread. You are worried that you have exposed your business, Lloyd Right Pty Ltd, to considerable legal risk. You are desperate to avoid negative publicity and wish to ‘make this go away', as you put it.
- Discuss what assistance/ financial compensation you would offer James if you are taking your responsibilities under contract into account. Use cases to support your recommendation but please exclude statutory law.
- Discuss what assistance/ financial compensation you would offer James if you are taking your responsibilities under tort of negligent misrepresentation into account. Use cases and statutes to support your recommendation. Please note that you have not to consider building/ planning law etc., consider only the statutes that we have covered.
- You start remembering our subject, ‘Foundations of Company and Common Law' and the topics covered there. You decide to quickly and shortly sum up possible other legal risks that you might face. Take ONE other legal risk and explain how it might be applicable here. Also make ONE suggestion as to how ANY of the risks could be better managed in the future.