Exam 2012, questions and answers PDF

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Final Exam Contracts 2012
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Primary Examination for the Bachelor of Laws Semester 1, 2012

104992 (Course ID)

CONTRACTS LAW 1503

Official Reading Time: 10mins Writing Time: 200 mins Total Duration: 210 mins

Instructions for Candidates  Please answer BOTH questions 1 and 2 in Part A and TWO questions in Part B.  The answers to questions 1 and 2 are each worth 35% of the total mark for the exam. The answer to your selected questions from Part B are each worth 15%. Permitted Materials

 This is an open book examination. Candidates may take into the examination room any book or materials other than those borrowed from a University Library.

DO NOT COMMENCE WRITING UNTIL INSTRUCTED TO DO SO

Course ID: 104992

Page 2 of 6

PART A Please answer BOTH Questions 1 and 2 QUESTION 1 (35 marks) In 2011, the Major Events Company of Adelaide was organising a major festival of the arts to be held in Adelaide in March 2012. The Company planned a grand opening night with a concert at the Entertainment Centre they were billing as a “musical extravanganza”, and a closing night concert at Elder Park. Briony, the Major Events Company’s managing director, negotiated with Lisa, one of South Australia’s most famous singers, to sing at both concerts. A written contract was drawn up in which Lisa agreed with the Major Events Company to perform at both the opening and closing concerts for a total payment of $90,000. Of this fee, $40,000 would be paid on signing the contract, and $50,000 paid after Lisa performed at the closing concert. The contract stipulated that even if she did not perform, Lisa would be entitled to retain the $40,000. Just before signing the contract, Lisa paused, and said to Briony, “Look, I’m happy to sing as this is my home town, but I think the fee is rather small. I usually get paid more than this”. Briony replied that while the Major Events Company was not prepared to pay Lisa more, perhaps some other benefit might be arranged. She added that aside from the direct benefit of the fee, there was considerable interest in the musical extravanganza from a musical producer interstate, and if the event went well, there was a possibility the singers might be given an opportunity to perform again in Sydney and Melbourne, although of course she couldn’t guarantee that would happen. Lisa asked whether her friend, George, a much less well-known but reasonably popular singer at local clubs, might be given the chance to perform at one or both of the concerts. George had suffered from a series of illnesses in the last year, as a result of which he had left the band of which he was a member. As he had now fully recovered, he was trying to pick up more singing work again. The opportunity to sing at the concert would provide him with great publicity. Briony responded: “Yes, that should be fine. We are still looking for another singer to perform one or two songs at the closing concert. If you sign up we will invite George to sing at the closing concert for $12,000, payable by Major Events after Gorge has performed at the concert.” The contract was amended to reflect their agreement about George, and Lisa then signed the contract. The day after Lisa signed the contract, George received an offer to sing with a band at a local venue on the same night as the closing concert, for a fee of $6,000. Lisa rang and told this to Briony, who said “Look, we think a popular local singer would be a great idea for us, so we would like him to be available to play at the concert”. After Lisa informed George of this, George turned the band down. A week later, George received a letter from Major Events, informing him that the company had found another singer to perform at the closing concert and George was no longer needed by Major Events. When Lisa found out, she was enraged, and refused to perform at either concert. The “musical extravanganza” received critical acclaim, and all the singers were subsequently hired to repeat the performance in Sydney and Melbourne. Lisa received the $40,000 on signing the contract, but not the remainder of the money. George has been paid nothing.

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Course ID: 104992

Page 3 of 6

(a) Advise Lisa of her legal rights and/or liabilities against the Major Events Company. (b) Advise George of any legal rights he may have against the Major Events Company.

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Course ID: 104992

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QUESTION 2 In September 2011, Luke bought a property at Willunga, South Australia, with a large house and a large shed. Luke planned to use the shed to carry out his carpentry business. He moved into the property in November 2011, and when his current commercial lease expired on 1 December 2011, transferred all his existing carpentry work from his previous tenancy into the shed on his property. In February 2012, being concerned about the rising costs of electricity, and the impact of greenhouse gas emissions on the climate, Luke decided to install solar panels on his house and shed to source electric power. After doing some research and comparing systems and prices on the internet, Luke rang Sunny Solar Pty Ltd, a company specialising in the sale and installation of solar panels. Luke told the manager Nick that after reading the newspapers recently he was concerned about problems with faulty installation and wiring in the solar industry, and the manager assured him that Sunny Solar Pty Ltd only used fully qualified electricians with A-class licences to do their work. Luke was satisfied, and agreed to purchase two state-of-the-art rooftop solar systems - one for his house, at a price of $15,000, payable in a lump sum after completion of installation, and one for his workshop, at a price of $42,000, also payable in a lump sum after completion of installation. The company posted a contract to Luke which he signed and returned. This written contract did not mention the use of A-class electricians. Sunny Solar Pty Ltd contracted an electrician, Jeremy, to install and wire the rooftop solar systems. Jeremy installed the solar system on the roof of the shed by 31 March, and Luke paid the company $42,000 in April. After the company received the $42,000, Jeremy installed the rooftop solar system of the house, completing the work on 30 April. Before Luke paid for this there was a huge thunderstorm on 5 June 2012. As a result of the extremely strong winds, a number of solar panels on the roof of the shed became dislodged, and rainwater entered the electrical wiring system of the solar panels on the shed, causing the shed to catch fire, and completely burning it to the ground. This happened because Jeremy had incorrectly installed and wired the solar systems. Had the solar panels been installed and wired correctly, the dislodging of the solar panels and the fire would not have occurred. It is well known in the industry that incorrect installation and wiring of solar panels pose a fire hazard. As a result of the fire, Luke sustained burns to his body requiring thousands of dollars in medical fees to treat, and was unable to work for 6 months. Also, the destruction of his carpentry work in the shed meant that Luke could not fulfil various contracts he had with his customers, and he became liable under those contracts for damages of $20,000 of carpentry work he could not supply. The rooftop solar system on the house, which was incorrectly installed and wired, will cost $1,000 to fix, and Luke is refusing to pay any money at all to Sunny Solar Pty Ltd for its installation. Meanwhile, Luke has discovered that Jeremy was not an A-class electrician at the time of the accident, having failed to pay his electrical licence fees and renew his certificate. Jeremy has disappeared overseas and is not to be found.

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Course ID: 104992

Page 5 of 6

(a) Advise Luke of any legal actions he has against Sunny Solar Pty Ltd regarding the destruction of the shed and the loss caused thereby. (b) Assume the facts in Question 2 are the same, but on the bottom of the written contract was a clause which stated: “Any liability incurred by Solar Power Pty Ltd for any negligence, loss or damage howsoever caused by the negligent acts of its contractors, subcontractors or employees shall be limited to $10,000.” What difference, if any, would this make in your advice to Luke in your answer to (a) above? (c) Advise Sunny Solar Pty Ltd whether it can recover the $15,000 for installation of the rooftop solar system on the house.

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Course ID: 104992

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PART B Please answer TWO of the following questions: Question 1 Is good faith part of Australian contract law? Discuss with reference to decided cases and legislation. Question 2 Examine Codelfa Construction P/L v State Rail Authority of NSW (1981-2) 149 CLR 337. What is the test for frustration in Australia after Codelfa? Do you agree with the court’s decision that there was no implied term in the contract that if the company was restrained by injunction from carrying out the work as envisaged by the parties, the State Rail Authority would extend the time for completion or indemnify it against loss as a result? Do you agree with the majority’s finding that a supervening event had frustrated the contract or do you agree with Brennan J who did not think that a supervening event had occurred? Give reasons for your answer. Question 3 What is the relationship between the Australian Consumer Law and contract law in Australia? In your answer, refer to legislative provisions and cases discussed in the course this year to support your argument(s). Question 4 When can a party terminate a contract? What are the effects of termination? Are there any limits on the power of a party to terminate a contract? What are time stipulations? When will a party be able to validly terminate a contract if there is breach of a time stipulation?

END OF EXAMINATION

CONTRACTS EXAM SEMESTER 1 2012

PART A - PROBLEM QUESTIONS QUESTION 1 a) As Major Events (ME) contracted with Lisa (L) for her to perform at the event and she did not do so, may seek damages for breach of contract. Lisa may respond to this claim by saying that she had a valid right to terminate the contract and was no

longer obliged to perform as a result. No termination clauses appears in the contract; at common law Lis may terminate the contract if ME: •

breaches an essential term of the contract, or

•

fundamentally breaches an intermediate term or

•

repudiates the contract.

If L would not have entered the contract without the term regarding George (G) being invited to perform

then it is likely to be an essential term of the contract (Associated Newspapers v Bancks). L could argue

as prior to signing the contract, she asked for something in addition to the fee; her request was granted a

she then accepted the agreement. However, she did say she was happy to perform even without the chan

suggesting she would have entered the contract regardless. This would suggest the term was not essentia

particularly given the informal, non promissory language used in requesting additional benefits (Tramw Advertising v Luna Park). •

If term was essential (though not likely) then L can terminate and receive damages for loss of bargain.

•

Consequential loss must be of the type expected by parties on formation (Hadley v Baxendale) -

possibility of performing in Melbourne (though that was not certain at formation to both parties) •

Loss of a chance damages likely to compensate for lost potentially successful commercial ventur (Commonwealth v Amann Aviation).

The breach does not appear to be fundamental either, as it does not deprive Lisa of the benefit of the con

herself.

L may be able to argue that as ME evinced an intention of seriously refusing to be bound by the term of

contract regarding George, ME has repudiated the contract. However, an anticipatory breach of this type refusal prior to performance - must also be fundamental (depriving L of the benefit of the contract)

(Hochster v De La Tour). As it does not affect L personally whether or not G performs, she will still ben from performance, so she cannot terminate for this.

Because L has wrongfully terminated the contract (assuming the term regarding George was not essentia she has in fact repudiated it, giving ME a right to terminate. ME can seek loss of bargain damages - the

amount to be gained to them from having L perform minus that gained from whomever substituted for h

the event. They may also be able to claim the $40,000 deposit back in a restitutionary claim for money h

and received. Because L did not perform at All, ME may argue that there was total failure of considerati

(Baltic Shipping v Dillon). However, this contradicts the contract’s express terms, so it is unlikely that s a claim would succeed.

L may argue, to seek some remedy, that ME were estopped from breaching their promise to invite Georg play. To establish this L must show •

she was induced to assume George would perform,

•

she acted in detrimental reliance on this assumption, and

•

ME reneged on this assumption unconscionably. (Waltons Stores v Maher)

However, on the facts, no detriment occurred to L relying on the promise by ME. An estoppel is likely t fail on these grounds.

As ME did breach the contract (not for wrongful termination, but for not inviting George to perform) the will also be liable for damages in a counter claim by L. However, with no actual loss resulting specifica from this breach, and no apparent right for her to terminate, L may only receive nominal damages.

b) George is not a party to the contract between L and ME. As a result he cannot directly enforce it or su under it for damages (Coulls v Bagot’s). However, in certain circumstances he may be able to still seek remedy....