BLAW5016 FUNDAMENTALS OF BUSINESS AND CORPORATIONS LAW

REVISION QUESTIONS 2019-2

Question 1

Ben is a second-hand car dealer. He has advertised a Holden Commodore for $24,000, having bought it second-hand from a private owner for $12,000. When Ben bought the car, the private owner told Ben that he has been the only owner, that he has carefully maintained the vehicle with regular service and that the car has never been in an accident. The private owner also assured Ben that the mileage shown on the odometer was genuine. At the time of purchase, Ben did not check the accuracy of these statements as the price of the car was cheap.

After purchasing the car from the private owner, Ben realised that some of the statements made to him by the private owner were wrong, since Ben's own mechanic has informed him that the car had been in a serious accident and has travelled many more kilometres than what the odometer indicates. Nevertheless, Ben advertises the car to be in excellent condition, accident free and so on.

When Jane came to inspect the car in response to Ben's advertisement, Ben repeated that the car had no accident history, and the odometer reading was genuine.

Jane buys the car from Ben at the price requested by Ben which was $24,000.

After owning the car for only a short time, Jane discovers that some of the statements made to her by Ben were untrue, and she consults you for advice as to her legal rights against Ben. Jane's mechanic informs her that the car is worth only $17,000.

REQUIRED:

Advise Jane of the action (both common law and statutory) she can now take against Ben and the remedies available to her. Will Ben have the same courses of action and remedies against the private owner as Jane has against Ben?

Question 2

When Jo became aware of plans for a highway that will bypass his service station franchise, he put the service station up for sale. During the discussion with Kenny, who was very keen to buy, Jo became aware that Kenny does not know of the plans. Should Jo disclose what he knows?

Question 3

Robert drove his car into a city car park and took a ticket from the machine.On the back of the ticket was a printed statement that advised customers that the car park owners would accept no liability for any damage to customer's cars howsoever caused.The machine from which the ticket is printed stamps the time of entry on the ticket.In this case the stamp smudges the statement in relation to damage, although Robert had not read the ticket in any event.Robert parks his car and returns two hours later to find that the car park attendant has accidentally dented Robert's car door when he was attempting to perform some maintenance work.Does Robert have a claim?

Question 4

A wine merchant sends out a prospectus to his client's containing certain information, namely that the wine that would be produced by the merchant would be for sale in 2 years.An investor, who had received the prospectus, subscribes to the prospectus on the basis of these statements.The wine is not produced in 2 years and in fact there is never any wine produced.As a result the investor loses all her money.What action could she take under the Australian Consumer Law?

Question 5

Michael has a contract with Nicole to print and bind her end of year assignments which Nicole is due to submit for her final year assessment at Curtin University.In breach of the contract, Michael delivers the assignments 2 weeks late; they are poorly printed and bound upside down.Nicole cannot present them for marking and has to get them re-printed which costs and extra $100.Nicole cannot get her final year marks, misses graduation and a job opportunity because of being unable to finish her course. What damages can Nicole claim?

Question 6

Stewball, Tim's racehorse has won 3 of its last 4 weekly races. On the night before Stewball's 5^th race he appeared to be ill, so at 3 am Tim called Victor the regular vet for Tim's stable, who promised he would be there right away, but Victor fell asleep again and didn't make it. Tim withdrew the horse from the race. Later another vet discovered the horse had only been stung by a wasp and fit to race. Tim claims from Victor:

aReimbursement for the other vets' bill of $170.

bForfeited entry fee for withdrawing the horse of $400.

cLost prize winnings of $35,000 if Stewball had come first.

dLost bets of $35,000 if Tim had put $5,000 on at 7 to 1 as he usually did.

eLoss of Tim's reputation as a reliable race entrant, estimated by Tim at $20,000.

Victor admits that he should not have gone back to sleep and is willing to pay $10,000 to settle the issue, but Tim refuses to accept this and while the dispute is unsettled Tim will not allow Stewball to race. Each week as Stewball misses a race, Tim adds another $70,000 to his claim. How do you think these issues would be resolved?

Question 7

John has invented special fins that can be attached to pleasure boats to make them more efficient in the water. However, John does not have funds to market his product. John's friends Andrew, Mel and Kyra have incorporated Aqua Fins Ltd, and are the directors and majority shareholders in the company, each holding 30% shares. John holds the other10% shares in the company, but is not a director.

John has recently discovered that the directors of Aqua Fins Ltd are diverting the company's contracts to Special Fins Pty Ltd and the shareholders of this company are the spouses of Andrew, Mel and Kyra. John wants to bring this matter for discussion at the next annual general meeting of Aqua Fins Ltd.

The directors of Aqua Fins Ltd inform John that there is no point in complaining because the directors using their voting rights as shareholders will pass at a general meeting an alteration to the constitution, which will give them the right to divert contracts to Special Fins Pty Ltd.

Advise John on the above matters using both the Corporations Act and case law.

Question 8

Compute Ltd designs and manufactures computer keyboards.The managing director of Compute Ltd is Mary Chip and the board of directors has given her the authority to undertake any transaction on behalf of the company up to a spending limit of $350,000.Any expenditure above this amount requires the approval of the board of directors.The other directors of the company are Major Quick and Slow Buck. Major Quick is aspiring to become the next managing director and he often refers to himself as 'MD' when dealing with outsiders. The other directors don't mind him doing so, and they sometimes introduce Major as Compute Ltd's 'MD' on social and business occasions.

Mary Chip is on a business trip when she meets Bertie Boffin, an inventor who has designed a revolutionary method of inputting data into computers that could make the keyboard obsolete.Mary believes she has to act urgently to protect Compute Ltd's interest so she agrees that Compute Ltd will pay Bertie Boffin $400,000 to buy his invention.Meanwhile, Major Quick thinks that Mary Chip's absence represents the perfect opportunity to replace the company's ageing fleet of motor vehicles which Mary and the Board have been reluctant to do. Major negotiates and signs a contract with Car-For-You Pty Ltd to purchase new delivery vehicles for the company at a total cost of $280,000. When Mary returns to Compute Ltd, the company's research and development staff determine that Bertie Boffin's invention is not a threat to keyboards as Mary thought it might be.The other directors are angry with Mary for breaching their expenditure limit instruction and order that Compute Ltd should not pay Bertie on the grounds that Mary had no authority to act.Mary, in turn, is angry about Major's decision to purchase new vehicles on behalf of the company and she writes to Car-For-You that 'the deal is off'.

REQUIRED

With reference to Corporations Act and case law, determine whether Bertie Boffin and Car-For-You would succeed in enforcing the agreements against Computer Ltd.

Question 9

Minh, a self-taught whiz-kid, started a small business manufacturing personal computers for home and office use. He constructed computers to fit the specifications required by individual customers. He contacted Brett who is a salesman for Hot Chips, a specialist supplier of computer chips and inquired whether he would be able to fill a standing order for a regular supply of Micron III computer chips. Minh emphasised to Brett that the chips had to be fully compatible with the Comp shade v2.0 software. Brett replied by saying that he would be delighted to become Minh's regular supplier and recommended that he consider the Fast-track brand of chip. Brett also said "No worries Minh. I guarantee that the Fast-track chips will be compatible with the Comp shade v2.0 interface". Minh was impressed with Brett's professional attitude and decided to sign a contract with Brett for an order of 50 Fast-track Micron III chips per month. Clause 10 of the contract stated that the chips would be of industry standard size for Micron chips i.e. 2cm x 2cm.

On June 5 Minh began in earnest to start building computers that customers had ordered. He was shocked to discover that all of the chips that he tested operated at a speed of full Micron III capacity. Minh came to the realisation that the chips would not operate at full capacity unless he replaced his Comp shadev2.0 interface with the new Comp ease v1.0 software system. This would cost him an extra $5,000.

REQUIRED:

Using the 4 Step Process and your knowledge of Contract Law, discuss whether the statement about the chips being able to function with Comp shadev2.0 part of the contract as Minh would want to terminate the contract based on that statement being erroneous?