Business Law- Case Studies
Question One (Business Entities) – 20 marks
Madison owns a small bicycle repair shop in Bankstown which she has been operating for the past three years as a sole trader. In July 2018, she attended a small business conference in Barangaroo where she met Daniel, who also happened to be operating a small bicycle repair shop as a sole trader, with his shop being in Parramatta. The pair started discussing their respective businesses and decided to try to find ways to ‘work together’. ORDER YOUR PAPER NOW
On 1 September 2018, after lengthy discussions and negotiations, Madison and Daniel came to the following agreement:
- As of today, they would begin working together under the new name Rolling Hill Bikes.
- Madison and Daniel would each contribute the materials, supplies and repair equipment that they currently hold to Rolling Hill Bikes.
- All customer contacts and supply agreements will be shared.
- Any costs would now be shared, including the rent on the two existing premises, Bankstown and Parramatta, currently used as repair shops.
- Profit would be calculated monthly and split 50:50 between Madison and Daniel.
On 15 September, Madison ordered 250 tyres from the bicycle part supplier Fast Bikes, before flying out to the south of Chile to commence a month long ‘voyage’ to Antarctica. The tyres were delivered on 17 September 2018.
On 25 September, Daniel received a letter from Fast Bikes, stating that the tyres were sold on 7-day trading terms and the full $5,000.00 is now due. Madison is still away and not contactable and Fast Bikes are now threatening to take Daniel to court to claim payment from him.
Using IRAC, advise Daniel of whether he would be considered a partner and his potential liability for the $5,000.00 owed to Fast Bikes. Make sure that you support your responses with relevant authorities from case law and statute.
Question Two (Contracts) – 20 marks
Rupert owned a home in Vaucluse and wanted to have his front yard landscaped. He contracted with Bruce, a local landscaper, for the work to be done on the basis that Rupert would supply, at his own expense, all the necessary plants, materials and supplies, and that Bruce would supply the labour and any equipment and machinery necessary to do the job. Bruce’s fee under the contract was $40,000, to be paid upon completion of the work.
In the course of the work it was realised that Rupert had over-ordered a number of expensive and exotic palms. When Bruce asked what Rupert wanted done with them, he replied that Bruce could keep them. Bruce duly had the palms planted in his own backyard, thereby considerably enhancing the value of his own property.
A month later, when all the work was done, Bruce presented his account for payment to Rupert. Rupert asked if Bruce would accept $25,000 in full settlement of the account, explaining that he had just received a notice from the local council requiring him to fence his newly installed backyard swimming pool before it could be certified. Rupert further explained that, if Bruce accepted a reduction in his contract fee, the fencing work could be done the next day, and thus Rupert would be relived from having to approach his bank for a loan. This would take some time to approve, and would potentially delay the fencing work by about a month. ORDER YOUR PAPER NOW
Bruce, who had earlier appreciated the palms that Rupert had given him, decided that he would accept the $25,000 in full settlement of the account. Rupert immediately paid Bruce the $25,000.
Five days later, Bruce received an unexpected courier delivery of a magnum of expensive French champagne. A note attached to it read:
You wouldn’t believe it, but two days after the fence was completed and paid for, I won over $500,000 on Lotto! My family and I plan to spend the next few months holidaying in Europe.
So, it’s live and let live. The champagne is a token of my appreciation for the excellent work you did.
Bruce now feels that Rupert should pay him the full amount of his fee on the landscaping contract.
Using IRAC, advise Bruce on his prospects of recovering the $5,000, and in doing so, discuss fully all relevant legal issues that arise in these circumstances. Your answer must be supported with relevant case law authorities.
Question Three (Terms of a contract) – 15 marks
Simon and Elizabeth are planning to open a new restaurant, Greentrees, in French’s Forest, and have located and secured a perfect site, subject to the local council approving their building and development plans.
After an extensive search, they have now decided on a building and shopfitting contractor that they want to use to complete the work. The contractor, Bricks & Mortar Pty Ltd, has sent over their standard contract for the job, and Simon and Elizabeth have asked their own solicitors to look it over.
The lawyers have identified three terms in the contract that they believe need to be reviewed more closely before Simon and Elizabeth commit to the agreement. ORDER YOUR PAPER NOW
Between Greentrees Restaurant Pty Ltd (‘the Client’)
Bricks & Mortar Pty Ltd (‘The Contractor’)
- The parties agree that time is to be of the essence in respect of all aspects of the construction and payments schedule of this agreement.
- The contractor will engage a landscape design architect to complete the formal exterior presentation of the building using suitable established trees and shrubs. All such plants are to be a minimum of 4 years old and native to the Sydney Basin.
- The client agrees that the contractor will not be liable in the event of a breach caused by the actions of itself, its employees or sub-contractors, including actions that would otherwise constitute negligence, except as provided under statute.
For each of the three terms above:
- Explain what type of term it is, and discuss the characteristics of that type of term;
- Explain the consequences of a breach of that type of term.