Question 2

Adam Lee is a dumpling-chef. He thinks there is a good market for his dumplings to

be home delivered in a frozen state.

Adam did not want to set up his own delivery service, so he appointed Home Food

Delivery Services (HFDS) as his agent. Adam and HFDS agreed that:

Adam would manufacture the dumplings and package them in temperature-

controlled boxes to ensure they stayed frozen.

HFS would advertise Adam's frozen dumplings.

HFDS would sell Adam's frozen dumplings to customers and retain 30% of the

sales as a commission.

HFDS would sell Adam's dumplings for at least $1 each to maintain them as a

premium product.

No discounting by HFDS was allowed.

Adam's frozen dumplings were successfully launched on the market. Both Adam and

HFDS were extremely pleased with the sales figures and customer reviews. Selling

the dumplings as a premium product, with a premium price, is a very successful

approach.

Approximately 6 months later, and without the knowledge or permission of Adam,

HFS changed its approach by promoting Adam's dumplings as "a cheap and easy

way to feed the whole family", with a discounted price down to $0.25 per dumpling.

Part A

- Has HFDS breached any of the duties it owes to Adam?

- Explain which, if any, duties are breached.

Part B

After Adam completed a large delivery of dumplings to HFDS, the manager at HFDS

noticed that the packaging of the dumplings was broken, putting the dumplings at

risk of defrosting. If this were to occur, the dumplings would no lorrger be fit for sale.

The HFDS manager tried phoning Adam, but he could not be reached. The HFDS

manager decided to urgently call Freezer Supplies Pty Ltd to purchase some new

packaging to keep the dumplings frozen. The cost of this new packaging was $3,000.

Adam now refuses to pay the $3,000 because he says he did not enter into a

contract with Freezer Supplies Pty Ltd.

- Explain under the law of agency whether Adam is correct.

(For your answer, refer to relevant court cases, legal principles and legislation

wherever applicable)