Hi, Tutors

I have 2 problem questions around contract law.

(1)SandorandJoffrey are close friends and have been since childhood. In 2013 they agreed to go into business together. Under this arrangement Joffrey purchases old houses in inner west Sydney and Sandor, who is a licensed building work contractor for the purposes of the Home Building Act 1989(NSW), uses his building skills to renovate them. The renovated houses are then sold and the profits split 50:50 between them.

Before Sandor starts work on any renovations, Joffrey gives him an estimate of what he thinks the renovated house would sell for. Sandor uses this information to determine what materials to use in the renovation. It takes Sandor (assisted occasionally on week-ends by his brother Gregor) around five months to renovate a house and he typically starts within one month of Joffrey purchasing the house.

On 1 December 2018, Joffrey purchased a house in Marrickville. Prior to the start of the renovations, he told Sandor that he intends to move into the house and not sell it after Sandor has renovated it. Joffrey agreed to pay Sandor $250,000, which Joffrey said was an estimate of the amount Sandor would receive if the renovated property sold on the market at the current market prices. In keeping with all their previous agreements, the arrangement between them is oral. There are emails with details of the property and the renovation schedule.

In light of Joffrey's expensive tastes, Sandor decided to spend an extra $80,000 ordering custom fittings for the kitchen, bathroom and sunken games room.

Unlike their other renovation projects, Joffrey visited this project frequently and was pleased not only with the progress Sandor was making, but also with the attention to details evident in the kitchen, bathroom and sunken games room.

Having worked over the Christmas-New Year period, Sandor was due to complete the renovation ahead of schedule in early March 2019.

On 20 February 2019 the NSW State Government announced a planned re-routing of the M44 motorway through Marrickville. While the house itself isn't subject to a compulsory acquisition order, this new route has devalued properties nearby. Joffrey now estimates the market price for the house to be just $100,000 more than he paid for it in December 2018.

Over a coffee at a nearby caf the following week, Joffrey tells Sandor that he won't be moving into the house but intends to sell it. He also says he will pay Sandor his usual share at the current market price.

Advise Sandor

By way of background information on the Home Building Act 1989 (NSW) see this information from the NSW Department of Fair Trading. You can find the text of the Act on the NSW Legislation Website. You should look in particular at ss 7(1), 7(2) and 10 of the Act.

(2) Janice, a property developer based in Sydney, had long been seeking an opportunity to develop a block of flats in the inner-city suburb of Newtown. One day in early February, while walking along King Street, she noticed a "for sale" sign prominently displayed on a large vacant block. Janice had seen the block before and thought it offered an excellent commercial opportunity, so she immediately called the number listed on the sign, and reached Emily.

Janice and Emily spoke very briefly over the phone, agreeing to meet at a caf in Newtown on 8 February to discuss the land.

Upon arrival at the caf, Janice and Emily had the following conversation:

Janice: Like I said on the phone, I've just been up on King Street and I've seen that the block of land is on the market. I have been interested in it for a long time. Are you handling that sale?

Emily: I own that land. I'm looking to sell for around two million. I should let you know up-front that I don't want any lawyers involved in any sale. All they do is burn up our money, and I'm perfectly capable of selling a block of land by myself.

Janice: Two million sounds like a great price, but I'm not sure about the idea of doing the sale without involving solicitors. Isn't there something that we might miss? This deal would be very important for my business - I'd want to build a pretty major development on the site on a tight time-frame, and I can't afford to let the sale go wrong.

Emily: Look, cutting out the lawyers is one of the reasons the price can be as low as it is. It's up to you. If you're not comfortable doing this between ourselves, you can just walk away from this. But if you want to go ahead, we can shake on it and reach an agreement right now. I'll sell you the land for two million, and we can meet at the land titles office to finalize the sale two months from today. You really have nothing to worry about - you don't even have to bother with a deposit. Just pay me the full two million on settlement day.

Janice: Ok, I'm sold. I'll see you at the land titles office at midday two months from today.

Janice and Emily then shook hands, exchanged phone numbers and email addresses, and went their separate ways. Janice, thrilled with the opportunity to finally build a block of flats in Newtown, subsequently arranged a significant loan from her bank to finance the planned project, using another project she was currently developing in Parramatta as the security for this loan. She also contacted an architect, and instructed him to prepare five sample designs for apartment blocks which might be suitable for an inner-city site. Janice paid the architect $25,000 as an up-front fee for these services.

A week before the day appointed for settlement, Janice sends an email to Emily in which she writes: "Dear Emily Just confirming our appointment at the Land Titles Office next week to finalize the sale of the Newtown block. Look forward to seeing you then. Janice"

Emily immediately replies also via email: "Dear Janice, thanks for the email. I have some news regarding the sale of the land, but I will meet you as we agreed to explain. Yours, Emily."

The following week on the appointed day, Janice arrives at the land titles office and is met by a very apologetic Emily, who explains that though she believed she was the owner of the King Street land - which had been in her family for many years - she discovered a month after her meeting with Janice that the registered owner is actually her estranged sister Patricia. Emily explains that she is very sorry, but she is unable to follow through on her agreement with Janice.

Advise Janice.