Problem Solving Question:

Adam owns four automotive parts stores in New South Wales. He and his family members have

solicited your advice as to their contractual liabilities and rights arising out of the following

circumstances:

a) On 20 September 2020, Adam has a meeting with Nicholas, who owns an auto supply centre.

During negotiations, Nicholas offers to sell Adam 40 commercial lifters for $4,000. He also tells Adam

he will keep the offer open for the next 24 hours. Two hours after the meeting, Nicholas receives a

call from Mustafa who offers $4,200 for the goods. Nicholas immediately accepts Mustafa's offer.

Adam calls three hours later (within the 24 hour period) and informs Nicholas he accepts the offer

and wants the lifters delivered. Nicholas tells Adam the goods have already been sold and Adam will

miss out as he should have phoned earlier.

b) Adam's parents, Mr and Mrs Faraway, migrated to Australia from Europe in 1977 and they are

dependent on their two children, Adam and Bernadette for advice and support. The parents have

limited education, no business knowledge, poor English skills, and since retiring their only income is

the age pension. They own their own home which is valued at around $850,000. Bernadette is a

charming but ruthless businesswoman who is always trying to make a quick buck. She recently

needed $320,000 to pursue a start-up opportunity she believes will make her wealthy. She is able to

borrow money from Dubious Bank but only after she persuades her parents to act as guarantors.

Bernadette misleads her parents as to the extent and purpose of the loan. The Bank is unaware of

this. After investigating their financial position, the bank manager meets with Mr and Mrs Faraway

to sign the guarantee agreement. The manager asked whether Mr and Mrs Faraway had any

questions and when they said they did not, they signed the documents as required. Bernadette

spends the loan money and within two months the start-up company becomes insolvent and

Bernadette loses her entire investment. When she is unable to repay the loan, Dubious Bank looks to

the parents to honour their obligations as guarantors, which means the Bank will sell their home to

recoup the monies Bernadette owes.

Advise Adam as to what contractual liability, if any, he and/or his family members have in the

above circumstances. Your answer MUST be supported by relevant legal authority (case law

and/or legislation), and be structured in the IRAC format.

Please note:

- Do not refer to the Competition and Consumer Act 2010 (Cth) or any Sales of Goods Act from any

State or Territory in answering these questions.

- You may answer the question in two separate IRACs format

- All written work submitted in this subject MUST be referenced in accordance with the Australian guide to legal citation 4th edition