Question 1 (25 marks)

Part A

Laboodle Interiors has been hired by HSN to build the interior of its new office space which it will be leasing. HSN specialises in site rehabilitation in the mining and energy sector and so has decided to relocate the firm's head office from Sydney to Perth. HSN will be leasing the office space in the HSBB building as of 10 September 2017 and will move in by 10 December 2017. HSN has let Laboodle know that the office space needs to be ready at least one week before the move-in date to allow the office to be set up. The Sydney office lease expires on 11 December.

On 4 November 2017, Laboodle lets HSN know that the office space will not be ready until 31 December and that, with the Christmas break, that date is likely to be delayed until mid-January 2018. This results in a situation where HSN will either have to find temporary office space or extend the lease on the Sydney offices by a further three months which is the minimum renewal option specified in the lease contract.

This will also mean that HSN will be obligated under the new lease in the HSBB building on top of funding rent in temporary offices or continuing their old lease, which will have serious financial ramifications for HSN. Further, HSN has invested a large amount of money in an advertising campaign in the WA sector offering their services and have gained some big clients in the industry, contracts which would be very lucrative. If the company remains in Sydney they will not be able to fulfill these contracts or will need to do so at great expense to the organization, which is obliged under the contracts to do several site visits in order to assess site rehabilitation. HSN is concerned about the impact this may have on their reputation.

HSN has come to you seeing advice regarding Laboodle's liability for any losses they may suffer. Advise HSN.

Part B

Given the situation, Barnaby Molloy, the Principal and Director of HSN, has contacted Jack, an old university buddy he knows in Perth. After a quick chat, Jack rustles up a couple of floors of office space in his building on William Street. He lets Barnaby know that he can use them for next couple of months free of charge because they are temporarily empty. HSN moves into the William Street offices the following week.

After three weeks, Jack lets Barnaby know that HSN will have to vacate the premises within the week as a US company wants the office space and is willing to pay big money for it. Barnaby is understandably upset. He explains to Jack that the new HSBB offices are not ready yet for HSN to move into, but Jack says he can't miss this opportunity, especially when there is so much space for lease in Perth.

Barnaby has come to you seeing advice. Advise Barnaby.

Question 2 (15 marks) "In making agreements, commercial or otherwise, must parties then (a) comply with terms and conditions agreed; and (b) be able to terminate the contract if one of the parties wishes to do so?"

Critically analyse whether you agree with this statement. Ensure that reference is made to relevant cases and, if applicable, relevant legislative provisions.

Question 3 (10 marks)

To what extent does a lack of capacity affect a party's ability to contract?