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Coco is company based in ACT that manufactures sport clothes. The owner of the company, Coco, decides to offer the business for sale. Jone thinks
Coco is company based in ACT that manufactures sport clothes. The owner of the company, Coco, decides to offer the business for sale. Jone thinks that demand for sport clothes will persist and decides to negotiate with Coco to buy the business. In September, Jone looked at the financial reports and asked if there were any other matters that might affect the profitability of the business. Coco said 'No, everything is fine, nothing to worry about'. This statement was true at that time. In October the Australian Government began legal proceedings in the Federal Court againstCoco for contravening the law relating to standards for clothes. Coco was aware of these proceedings, and that they were likely to be costly. However, she did not mention this to Jone. On 3 November, Jone told Coco in an email that he wanted to buy the business. On 5 November Coco emailed Jone and said "I'm so glad that you have agreed to buy Coco, it is very profitable and I have no reason to believe that there will be any troubles in the future". On 6 November, Coco and Jone sign a contract for sale and Jone pays a deposit. Coco agrees to transfer the business and Jone agrees to make the final payment on 5 December. The contract did not mention anything about liabilities arising from court judgments. Jone makes the final payment on 5 December and ownership of Coco is transferred to Jone. On 15 December Jone learns that the Federal Court has ruled against Coco and that the company is required to pay $5million in penalties, and change the material used to make the clothes (to ensure it meets the Australian Standard). Jone is very upset and comes to you for advice. It is not difficult to source the appropriate material to make the clothes, but the penalty is very expensive and he wishes he never signed the contract. He doesn't want to put time into running the business. For example, he isn't sure if he can be bothered fulfilling a huge order for clothes that Coco just received from the supplier (this would mean missing out on $1.5million in profit). Jone asks you for advice about whether he can undo the contract or get his money back from Coco. Advise Jone: a.Is there any action in negligence b. Is there any action in contract c. Is there any action in equity
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