Tutorial Questions

Question 1 (Consideration; Promissory Estoppel)

On January 1 2009, Ryan entered into a 5 year lease of a restaurant premises in the central business district of Southport, Queensland. In 2010, the local council approved a light rail project. This involved the construction of rail lines which ran past Ryan's restaurant. Construction commenced in the same year on 1 July with completion of the project to occur by early 2015. The construction works in and around Ryan's restaurant and associated traffic made it difficult for customers to access the restaurant, so much so that sales revenue dropped 60%. Ryan wanted to quit the lease and if sued for breach of the lease, intended to file for bankruptcy as he had very few assets other than the restaurant. David, the owner of the premises and Ryan's landlord, did not wish to lose Ryan as a tenant because it was unlikely that David would find another suitable tenant given the market conditions. With this in mind, David approached Ryan on 1 January 2011 and entered into an oral agreement with Ryan to reduce the rent from $15,000 per month (as stated in the written lease agreement) to $5,000 per month. The agreement did not state the period for which the reduced rent was to be paid. Due to good weather, the construction of the rail line in Southport was completed early (January 2013). In fact, business has been very good for Ryan since 1 January 2013, with revenue up 20% compared to the time just before construction commenced. In response to the improvement in Ryan's business, David has demanded rent in arrears from Ryan claiming that he has to meet his existing contractual obligation to pay $15,000 per month and that Ryan provided no new consideration under the verbal agreement to reduce the rent.

Advise David as to whether he can claim from Ryan under common law (consideration) and/or equity (promissory estoppel):

(a)  Rent in arrears from 1 January 2011; or

(b)  Rent in arrears from 1 January 2013       

Question 2 (Consideration)

In December 2012, Archie and Bob enter into a written contract whereby Archie agrees to rebuild Bob's Toyota Supra for $5,000 to be payable upon completion. Archie rebuilds the Toyota Supra and provides an account for $5,000. Bob advises Archie that he is willing to pay Archie $3,000 and promises to professionally wash and detail Archie's BMW roadster as and when requested by Archie during 2013. Bob asks Archie whether he would be prepared to accept this arrangement as full and final settlement for the rebuilding work. Archie agrees and receives the $3,000. Shortly after receiving the money, Archie asks Bob whether he uses the Maguires brand of car wash and polish when detailing Archie's car. Bob promises Archie that he will use this brand. In fact Bob uses a different brand of car wash and polish. Archie finds out, changes his mind on the arrangement and decides to sue Bob for the $2,000 on the grounds that Bob has an obligation to pay the balance and that Bob breached the agreement to use the Maguires brand of car wash and polish. Advise Archie.