Scenario:

Azure Beach Accountants and Financial Services has been approached by a new client.

Rae Warrin has opened a 140-seat seafood restaurant 'Catch of Today'. Rae has purchased an already operating licensed restaurant in the city's Central Business District. That business was previously called 'Fast Pizza.'

Rae had the premises renovated, including the removal of the 'Fast Pizza' pizza ovens, and the very expensive installation of fish tanks for keeping live fish, which are purchased directly from the fish market.

Rae hired staff, set up a kitchen, and opened two weeks ago.

The original restaurant 'Fast Pizza' was a licensed restaurant, and by purchasing the business as a going concern, Rae has taken over the current liquor license.

Because Rae wanted to get the business established quickly, it was set up as a sole trader operation. Rae is now becoming aware that there may be some risks involved in being a sole trader and that is one of the reasons for seeking advice from your firm.

Rae also has a spouse, and two school-age children, and owns a large family home worth around $2M. The house is mortgaged and there is currently still $500,000 owing on the mortgage.

Rae would like some advice on possible business models to reduce personal risk and minimise taxes.

A second reason for seeking advice is - possible breach of contract.

'Fast Pizza' had seating for 140 people, which was the size that Rae wanted. When Rae bought the business and renovated it and converted it into 'Catch of Today' Rae understood that the new restaurant was licenced for 140 people.

However, upon examination of the liquor licence, it now appears that the liquor licence covers only 120 people allowing drinking alcohol while dining for 120, not 140 as Rae was led to believe. Rae can only accommodate 120 diners consuming alcohol rather than 140, which will impact the business' revenue. In addition, there will be expenses involved in applying to the authorities for an increased license, as well as a time delay while the application is being processed.

Also, there is no guarantee that the licensing authorities will grant the license expansion.

From Rae's point of view, it is now certain that the contract was not fair, and is costing money, and Rae wonders if the sale of the restaurant, was in fact, a breach of contract.

Third reason for seeking advice - possible negligence issue.

During the first week of operation, a customer slipped and injured themselves in the 'Catch of Today' seafood restaurant.

The fish tanks have been set up so that they are visible to customers when they are seated. However, the walkway in front of the fish tanks isfenced off and has a sign saying 'Private Area. Staff Only.'

But a customer disregarded this sign and walked right up to the fish tanks to get a better look. The ground was wet because the live fish cause splashes which wet the ground.

As the customer stepped away from the tank they slipped on the wet ground and sprained their wrist.

Rae Warrin has now received a letter from the customer's solicitor. The letter states that Rae Warrin failed to take reasonable care to prevent injury from occurring. They will seek damages for the injury caused by negligence. The injury required them to take time off work, as they work as a contract data entry clerk in an office. A sprained wrist means the person cannot do data entry work, and as a contractor, earning a daily rate, lost income because of the injury.

Rae is very concerned about this and is seeking advice on this issue.

In summary:

• Rae would like some advice on possible business models to reduce personal risk and minimise taxes, going forward.
• Rae would like to seek advice on the restaurant sale and possible breach of contract, in relation to the liquor licence question.
• And, if there is a breach of contract, what remedies might exist?
• Advice on the possible negligence claim where the customer slipped and sprained their wrist.

Task 1:Research contract and consumer law

Before embarking on specific advice, research contract and consumer law and related legislation, regulation, and practice that would serve as a guide to addressing clients' circumstances.

Your written responses in this assessment can take the following approach:

• complex information can be summarised in the form of bullet points
• if you mention legislation, you can abbreviate the name of the Act, as long as it is clear which act you are referring to
• if you mention case law you can abbreviate the name of the case, as long as it is clear which case you are referring to.

Prepare a report with the following headings.

1. Areas of risk

• What are the areas of risk in the application of contract and consumer law the client should consider?

1. Legal issues impacting different types of entities and relevance to client

• How do the legal issues impact the different types of legal entities?
• How is this relevant to the client's circumstances in regard to:
  • structure
  • operation
  • performance.

1. Risk mitigation

• How can risk be mitigated for the client in the formation and operation of the legal entity?

1. Analysis, recommendations, and conclusion

• Having analysed the client's business information, provide an initial recommendation for the client.