Curtin Law School Assignment Report

Curtin Law School
FINAL ASSESSMENT
End of Trimester 1A, 2020
BLAW1004 Business Law
This paper is for Dubai students
This is anOPEN BOOK examination
Please read the below instructions carefully
SURNAME:
GIVEN NAME:
STUDENT ID:
Total Marks 50
Examination Duration 24 hours
Start Time 9.30am Tuesday 14th April 2020
Finish Time 9.30am Wednesday 15th April 2020
Materials Allowed All lecture and tutorial material and
textbooks allowed.
Instructions to Students
This paper has 3 Parts. All Parts are compulsory
For Parts A and C, please type your answer at the end of the question.
For Part B, please underline your chosen answer.
Once you have downloaded the document, please save it to your desktop.
Please save your work every 15 minutes so that your work is saved in the event of
technical issues.
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If you experience any technical issues, please take a screenshot.
Warning: This paper will be submitted through Turnitin therefore you must comply
with University Academic Integrity Policies. This means students MUST NOT collude
with another student, nor copy material from any sources into your answer. Students
need to write ALL answers in their own words.
Once completed: Once students have completed the examination, the examination
needs to be uploaded in the following way via Blackboard:
- Once on the BLAW1004 Business LawDuabi Blackboard site, click on the
‘Assessment’ link
- Click on the ‘Final Examination’ folder
- Click on ‘Turnitin Assignment: View/Complete’ link and follow the instructions to
submit your assessment.
The examination will begin on the next page
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PART A: Four Step Process question (15 marks)
Students are reminded that Part A examines ‘Topic 7 – Remedies for breach of
contract’only.
The Four Step Process marking rubric is:
STEP ONE No marks specifically allocated
STEP TWO 8 marks
STEP THREE 6 marks
STEP FOUR No marks specifically allocated
OVERALL USE OF THE FOUR STEP
PROCESS AND STRUCTURE OF ANSWER
1 mark available
Justine Lim decides to open her own art gallery in Perth, the Gallery of Modern Art
(GMA). To launch the opening of GMA, Justine sources a new contemporary painter
in Melbourne, James Scott, who specialises in painting Australian native plants and
wildlife. Given the rarity of contemporary paintings depicting Australian native plants
and wildlife, Justine believes that exhibiting James Scott’spaintings will make her
gallery very successful in a highly competitive art market in Perth.
Justine contacts James Scottand asks to exhibit his work at the grand opening of
GMA on Saturday 1 March 2018. To ensure he agrees, Justine tells him that the
grand opening of GMA will be a very luxurious event and that no expense will be
spared! She predicts she will spend over $100,000 on the event to ensure it is a
great success. James Scott agrees and sends her a standard contract stating the
terms upon which he is willing to exhibit his paintings. The contract states:
1. James Scott agrees to release 25 paintings for exhibition at the grand opening
of GMA in Perth from Saturday 1 March 2018 to Saturday 8 March 2018.
2. GMAare responsible for couriering the 25 paintings. The paintings will be
ready for collection on Friday 21 February 2018 and must be returned by
Friday 14 March 2018.
3. The work of other painters must not be displayed within the gallery whilst the
gallery exhibits the work of James Scott.
Justine agrees to the terms specified by James Scott in the contract, and signs the
contract.
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Justine contacts David, the owner of Courier Express to hire their services to
courierJames Scott’s 25 paintings from Melbourne to Perth. David agrees and
requires a non-refundable deposit of $2,000 to secure his services. The cost of the
shipment and delivery of the 25 paintings will be an additional $5,000 per delivery. A
10 day cancellation policy applies otherwise the cost of the scheduled delivery must
be paid in full.
To promote the opening of GMA, Justine hires the public relations services of Travis’
consultancy business. Not only is Travis responsible for promoting the opening of
GMA, he is responsible for designing and printing the invitations and arranging the
publicity for the event. The cost of hiring Travis’ services is $2,500.
News that GMA will be exhibiting James Scott’s work at its opening night travels
around Perth fast. The local newspapers report the GMA opening as the art event of
the year!
On Thursday 20 February 2018 (one day before the paintings are due for collection),
James Scott hears untrue rumours that GMA’s opening will exhibit a number of
Australian painters. Without clarifying the circumstances with Justine, he decides to
terminate the contract. Justine makes no attempt to reason with James Scott. Acting
hastily, she decides to cancel the GMA grand opening, since she does not have any
art work to exhibit.
Justine is very upset and wishes James Scott would carry out the terms of their
contract because if he does not she will incur substantial loss, such as:
1. The non-refundable deposit of $2,000 to secure the services of Courier
Express and the cost of the first delivery of $5,000 (as it was too late to cancel
their services).
2. The cost of $2,500 for hiring Travis’ public relations services.
3. The costs incurred for the grand opening as of Thursday 20 February 2018
(e.g. invitations, deposit for musicians, food, etc.) – estimated value of
$150,000.
4. Thenegative publicity generated as a result of cancelling the GMA opening at
short notice – Justine estimates that the damage to GMA’s reputation would
be $5,000.
5. The cost of $2,000 for professional counselling that Justine has sought as a
result of James Scott breaching the contract.
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Assuming there has been a breach of the terms of the relevant contract, using
the Four Step Process, determine:
1. Whether Justine will be successful in obtaining orders from a court to make
James Scottexhibit his paintings in GMA; and
2. If Justine is unsuccessful in obtaining orders from a court to make James
Scott exhibit his paintings in GMA, what remedies are available for breach of
contract by James Scott? To what extent will James Scott be liable for the
losses claimed by Justine?
NOTE: Students are only required to write one Four Step Process answer to the
above question. The question has been broken down to assist students to focus their
answers in the examination.
Please begin writing your answer below.
Issue
The key issue is to ascertain if there has been a breach of contract between James
Scott and GMA. Also, in wake of this breach, it needs to be determined if Justine can
demand specific performance as a remedy. Further, it needs to be outline, what
other remedies could Scott claim with regards to breach of contract considering the
extent of financial losses that she would occur in case of breach of contract.
Relevant Law
Whenever there is a violation of a condition in the contract, there is a breach of
contract owing to which the innocent party can potentially terminate the contract.
Alternatively, there are a host of remedies available to the innocent party to deal with
the breach. The most common remedy available is that the innocent party can
terminate the contract and claim for damages (Taylor and Taylor, 2015). It is
noticeable that the objective of the damages is to ensure that the innocent party is
put in the same position as would have been the case if the breach of contract would
not have happened. This has been highlighted in Radford v de Froberville (1978) 1
All ER 33 (Paterson, Robertson and Duke, 2015).
The damages awarded to the innocent party would comprise of the direct loss and
consequential loss. As indicated in Hadley v Baxendale (1854) 2 CLR 517, damages
for consequential loss would be given only when the guilty party was aware of these
losses at the time of contract enactment. If the damages are not considered
sufficient by the honorable court, then equitable remedies such as specific
performance would be considered (Carter, 2012). Specific performance as a remedy
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implies that a court order is issued to the guilty party who has to fulfill the underlying
contractual obligation. As indicated in Lumley v Wagner (1852) 42 ER 687, the court
has the discretion to award the same (Taylor and Taylor, 2015).
Application
In the given case, there has been a breach of condition by James Scott by not
agreeing to send his painting to GMA despite the latter not being at fault. This would
lead to GMA being eligible for remedies to breach of contract. One of the remedies
which the court would consider is specific performance. Based on the list of direct
and consequential losses which EMA can suffer owing to the cancellation of the
event, it is better than the court issues an order to Scott whereby he is ordered to
send his painting. However, before issuing the specific performance order, the court
would consider whether it is possible for GMA to prevent all the losses and organise
the opening event as per the previous schedule. If Scott would not be able to ship
the paintings in time, then specific performance will not be recommended by the
court as this order would lead precent the possible losses that GMA would suffer.
If specific performance is not awarded, then claim for damages would be provided by
the court. This would include not only the direct loss but also the consequential loss.
This is because Scott was aware at the time of contract enactment that the event
would be big with significant amount of spending. Also, GMA Gallery would display
only his work and now when he has denied sending his painting, the gallery would
not be able to arrange any alternative on a short notice. As a result, his breach of
contract would have led to cancellation of event and related losses being incurred by
the gallery. Hence, Scott cannot offer a defence indicating that he was not aware of
the consequential losses from his denial to send paintings.
Conclusion
There has been a breach of contract with EMA gallery being the innocent party.
Specific performance is a suitable remedy in this case provided Scott can still ship
his paintings on time for the opening ceremony to take place. If this is not possible,
then courts would provide damages to the gallery. These would not be limited to
direct loss but would involve consequential losses since Scott at the time of contract
enactment was aware of the potential repercussions of breach of contract.
References
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Carter, J. (2012) Contract Act in Australia. 3rd ed.Sydney: LexisNexis Publications
Paterson, J. Robertson, A. and Duke, A. (2015) Principles of Contract Law. 5th ed.
Sydney: Thomson Reuters.
Taylor, R. and Taylor, D. (2015) Contract Law. 5th ed. London: Oxford University
Press.
PART B – Applied Case Study
PART B: Applied case study 40 Questions (20 marks - questions are of equal
weight)
Students are reminded that Part B is concerned with the following topics:
 ‘Topic 6 – Performance and breach of contract’;
 ‘Topic 7 – Remedies for breach of contract’; and
 ‘Topic 9 – Liability in tort law: Negligence’.
Please underline your chosen answer in each Multiple Choice Question below.
NOTE: The fact scenario below relate to questions 1 to 25.
Given the incident with James Scott, Justinedecides not to open an art gallery but
instead pursue a career and business venture in floristry, specialising in rose
bushes. Justine turns her art gallery space into a floristry in a matter of weeks and
names her floristry: Just Justine’s Roses.
In order to stock her floristry, Justine decides to contact a plant supplier, Chris Crisp
Plants, a Perth based business. After visiting Chris Crisp Plants and reviewing the
price list with the owner, Chris, Justine decides to use Chris Crisp Plants as her sole
supplier.
Justine enters into an enforceable contract with Chris, on behalf of Just Justine’s
Roses, on the 1 June 2018. The terms of the contract are as follows:
1. A minimum of 500 rose bushes** will be delivered three times a week, on
Monday, Wednesday and Friday mornings, at 6AM. Rose bushes of at least
three different colours must be supplied (depending on which rose bushes
are in season).
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** A minimum of 500 rose bushes must be delivered with each delivery – any
less and Justine cannot fill her contractual obligations with clients.
2. It is essential that all thorns are removed from the stems of the rose bushes
prior to delivery to prevent injury.
3. All rose bushes must be sprayed with sugar serum (to give the rose bushes
a glossy exterior) prior to delivery.
4. The cost of the rose bushes shall not exceed the sum of $5,000 per delivery.
The cost of the rose bushes shall be calculated using the following formula:
number of rose bushes delivered multiplied by $10 (cost of one rose bush at
date of contracting) plus $200 (cost of delivery).
5. Just Justine’s Roses account will be personally managed by Chris. Chris will
be solely responsible for the administrative and financial aspects of the
account as well as preparing and packaging the rose bushes.
6. The contract will end on Sunday, 31May 2019. During this 12 month period,
Just Justine’s Roses cannot source or sell rose bushes from another
wholesaler or supplier.
In June 2018, Justine discovers that Chris has allowed his 16 year old son, Owen, to
prepare and pack the rose bushes for delivery by himself with no guidance or
supervision from Chris. Due to Owen’s lack of experience, he does not remove all
the thorns off the stems of the rose bushes. A large proportion of the rose bushes
delivered still had thorns on the stems. Justine brings this to Chris’ attention after 6
deliveries of rose bushes contained thorns.
As a result of Owen’s carelessness, Justine has received multiple cuts from the
handling the rose bushes that contain thorns. Furthermore, Justine’s customers have
demanded a refund for the rose bushes they have purchased containing thorns.
1. Assume that Chris is running late one morning. He calls Justine at 5.30AM of
the morning of delivery and informs her that delivery will be 6.30AM. Does the
breach of this term allow Justine to reject the attempted performance, terminate
any further work, as well as claim for damages?
a. No, this is late performance. Generally, the courts treat time clauses as
only warranties. This means Justine can claim damages, but cannot
terminate the contract.
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b. No, this is late performance of a condition. The courts always treat time
clauses as conditions. This means Justine can claim damages, but
cannot terminate the contract.
c. Yes, this is late performance of a condition. The courts strictly classify
time clauses as conditions. Justine can reject the performance,
terminate the contract and claim damages.
d. Yes, this is late performance of a warranty. This means Justine can
claim damages, but cannot terminate the contract.
2. Which case would the court use as the best precedent when considering
whether late performance has occurred?
a. Hadley v Baxendale
b. Holland v Wiltshire
c. McDonald v Denny Lascelles
d. Radford v de Froberville
3. One Monday morning, Chris only delivers 450 rose bushes. Does the breach of
this term allow Justine to reject the attempted performance, terminate any
further work, as well as claim for damages?
a. Yes, this is partial performance of a warranty. Justine can reject the
performance, terminate the contract and claim damages.
b. Yes, this is partial performance of a condition. Justine can reject the
performance, terminate the contract and claim damages.
c. No, Chris has substantially performed under the contract. This
means Justine can claim damages, but cannot terminate the
contract.
d. Yes, this is substantial performance of a warranty. This means Justine
can claim damages, but cannot terminate the contract.
4. Which case would the court use as the best precedent when determining the
type of performance that Chris has rendered by delivering only 450 rose bushes
on that Monday morning:
a. McDonald v Denny Lascelles
b. Hoenig v Isaacs
c. Radford v de Froberville
d. Buckenara v Hawthorn Football Club
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5. Even if the court were to find that the rose bushes had been delivered as
required under the contract, given that thorns were not removed from a large
proportion of rose bushes over six deliveries, Justine believes that Chris has not
adequately performed the contract. Which cases would the court use as the
best precedent when interpreting the terms of the contract to determine the
performance required?
a. Hide & Skin Trading v Oceanic Meat Traders and Australian
Broadcasting Commission v Australasian Performing Right Association
b. Hoenig v Isaacs and Hochester v De La Tour
c. Holland v Wiltshire and Handbury v Nolan
d. Steele v Tardiani and Varley v Whipp
6. Justine is concerned about the losses she has incurred due to the failure to
remove the thorns and as a result would like to end the contract immediately.
The best remedy for Justine to seek in relation to this is:
a. An injunction.
b. Termination and damages.
c. Specific performance.
d. Damages only.
7. This is the best remedy available to Justine because:
a. Justine is able to prove a breach of a condition.
b. Justine is not able to prove less than substantial performance of a
condition, but this is not required for this remedy.
c. Justine is able to prove breach of a warranty and this is sufficient.
d. The remedy is issued to prevent an anticipated or ongoing breach of
contract, so Justine would not be required to prove any breach of
condition or warranty.
8. Which of the following statements is correct concerning the remedy that Justine
will receive, if she is successful in her action against Chris?
a. Justine will not have the opportunity to specify to the court the remedy
that she seeks.
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b. The court must grant the remedy that Justine seeks.
c. The court will decide what remedy is appropriate, but take into
account Justine’s preferences.
d. Justine is only able to request one type of remedy from the court.
9. Consider this scenario: Justine has included an additional message within all
rose bushes. The message reads ‘DANGER – thorns not removed’. Justine took
this course of action as she could not afford to purchase the equipment
specifically designed to remove thorns from the stems of rose bushes without
damaging the plants. Despite the message, some customers still received cuts.
A court is likely to determine:
a. Justine has done all that is reasonably possible in the circumstances to
mitigate her loss.
b. Justine has not done what a reasonable person would do in the
circumstances as she should have taken out a loan to purchase the
equipment.
c. Justine has not mitigated her loss as the thorns are left exposed and
customers are receiving cuts as a result.
d. Chris has not mitigated Justine’s loss as the thorns are left exposed and
customers are receiving cuts as a result.
10. Assume that Owen has removed all the thorns from the stems of the rose
bushes, but has not sprayed the rose bushes with the sugar serum. Does the
breach of this term allow Justine to reject the attempted performance, terminate
any further work, as well as claim for damages?
a. Yes, this is late performance of a warranty. This means Justine can
claim damages, but cannot terminate the contract.
b. Yes, this would constitute partial performance of the contract.
Justine can reject the performance, terminate the contract and
claim damages.
c. No, this is non-performance of a condition. This means Justine can claim
damages, but cannot terminate the contract.
d. No, this is non-performance of a warranty. This means Justine can claim
damages, but cannot terminate the contract.
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11. Justine would be happy to keep the contract on foot, if she could be assured
that Chris prepares and packages the rose bushes for the remaining duration of
the contract and not his son, Owen. In these circumstances a court is likely to:
a. Issue an injunction to enforce Chris’ contractual promise to be personally
responsible for the preparation and packaging of the rose bushes prior to
delivery.
b. Order specific performance for Chris to prepare and package the
rose bushes prior to delivery.
c. Issue an equitable order for Chris to prepare and package the rose
bushes prior to delivery or to appoint an employee who is of an
equivalent level of seniority and experience to Chris.
d. Decide that an order for specific performance for Chris to personally
prepare and package the rose bushes prior to delivery is not available as
the performance involves personal services and goodwill.
12. Which case would the court use as the best precedent when deciding whether
to make an order for Chris to personally perform the contract?
a. Hadley v Baxendale
b. Dougan v Ley
c. Donoghue v Stevenson
d. Radford v de Froberville
13. Which of the following statements best reflects the approach the court would
adopt when deciding whether Chris owes Justine a duty of care?
a. It was reasonably foreseeable that injury of some kind would
happen to someone as a result of Chris’ conduct; that Justine was
such a person and in the circumstances it was not unreasonable to
impose a duty on Chris to take care not to do anything that would
cause Justine harm.
b. It was not reasonably foreseeable that injury of some kind would happen
to someone as a result of Chris’ conduct; that Justine was not a member
of this class of person and they were not in a recognised relationship,
nor was Justine in a position of vulnerability.
c. Justine could foresee that an injury of some kind would happen to her as
a result of Chris’ conduct and they were in a recognised relationship.
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d. Justine could not foresee that injury of some kind would happen to her
as a result of Chris’ conduct and she was not in a recognised
relationship or a position of vulnerability with Chris.
14. Assume that Chris owes Justine a duty of care. Which statement best reflects
how a court would assess the standard of care that Chris owes to Justine?
a. Chris was required to do all that he could do to prevent Justine from
suffering harm.
b. Chris was required to do what he thought was necessary to prevent
Justine from suffering harm.
c. Chris was required to do what a reasonable person would do in the
circumstances to prevent Justine from suffering harm.
d. In these circumstances, Chris was not required to do anything to prevent
Justine from suffering harm.
15. Assume Chris has breached his duty of care to Justine. What would a court
most likely find in relation to remoteness of damages for Justine’s losses?
a. The damages are too remote because Chris would not have recognised
the harm as a real possibility.
b. The damages are too remote because a reasonable person in Chris’
position would not have recognised the harm as a real possibility.
c. The damages are not too remote because Chris would have recognised
the harm as a real possibility.
d. The damages are not too remote because a reasonable person in
Chris’ position would have recognised the harm as a real
possibility.
16. Assume Chris agrees that he owes Justine a duty of care. However, he does
not believe he owes her customers a duty of care. He claims that the
relationship between him and her customers is too remote. Is Chris’ legal
assessment correct?
a. No, Chris’ legal assessment is incorrect. He does owe a duty of
care to Justine’s customers.
b. No, Chris’ legal assessment is incorrect. Chris does owe a duty of care
to Justine’s customers because Chris has a direct contractual
relationship with Justine’s customers.
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c. Yes, Chris’ legal assessment is correct. Chris does not owe a duty of
care to Justine’s customers as their relationship is too remote and
fanciful.
d. Yes, Chris’ legal assessment is correct. Chris does not owe a duty of
care to Justine’s customers as it is not reasonably foreseeable that
Justine’s customers could be harmed as a result of Chris’ actions.
17. Which case would the court use as the best precedent when considering
whether Chris owes a duty of care to Justine’s customers?
a. Woolcock Street Investments Pty Ltd v CDG Pty Ltd
b. Shaddock & Associates Pty Ltd v Parramatta City Council (No 1)
c. Perre v Apand Pty Ltd
d. Donoghue v Stevenson
18. Although Justine is aware that a large number of the rose bushes delivered
contain thorns, she does not wear any protective gloves when arranging the
rose bushes after they have been delivered. In her opinion, wearing gloves
makes her hands sweaty and are uncomfortable. As a result, she incurs further
injuries as the thorns continually cut her hands. The court will view Justine’s act
of not wearing protective gloves as:
a. Contribution to remoteness.
b. Vicarious liability.
c. Contributory negligence.
d. Substantial causation.
19. Assume that a court finds Chris was negligent. What is the goal of the courts
when awarding damages in a tort action?
a. Put Justine and the injured customers in the position they would
have been had Chris conducted himself properly.
b. Put Justine and the injured customers in the position they would have
been but for the commission of the tort.
c. Put Justine and the injured customers in the position they would have
been had Chris acted as a reasonable bystander.
d. Put the injured customers in the position they would have been but for
Justine’s breach of contract.
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20. Assume that a court finds Chris was negligent. Is there a monetary limit as to
how much Justine and her customers can claim for injuries or loss sustained?
a. No, there is no monetary limit. Given that Chris has breached his duty of
care to Justine and her customers, they can claim for all the injuries or
losses they sustained.
b. No, there is no monetary limit. But Justine and the injured customers are
only entitled to claim for the injuries and loss caused as a direct result of
Chris’ actions.
c. Yes, but the limit is determined by the courts only. The judge will decide
the reasonable monetary limit that Justine and her customers can claim
entirely based on the circumstances of the case without reference to any
legislation or precedent cases.
d. Yes, state legislation places limits on the monetary amount that
Justine and her customers can claim.
21. Due to all the problems Chris is experiencing with rose bushes, he decides to
supply Justine with sunflower plants instead. Chris’ act of supplying Justine with
sunflower plants instead of rose bushes constitutes:
a. Non-performance as he has completely failed to perform at the time
performance is due, that is to supply sunflower plants on time.
b. Non-performance as supplying sunflower plants bears no relation
to what was agreed to be undertaken, that is to supply rose bushes.
c. Partial performance as he has provided the correct quantity of flowers
but not as specified in the contract.
d. Substantial performance as he has provided the correct quantity of
flowers but not as specified in the contract.
22. Unsatisfied with the service from Chris Crisp Plants, Justine begins ordering
plants from another plant supplier. Chris wants to stop Justine from ordering
plants from the competing plant supplier. What remedy should Chris seek from
a court?
a. Damages.
b. Specific performance.
c. An injunction.
d. Rescission.
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23. Which case would the court use as the best precedent when deciding whether
to issue the order sought by Chris to stop Justine from purchasing rose bushes
from a competing plant supplier?
a. Associated Newspapers v Bancks
b. Buckenara v Hawthorn Football Club
c. McDonald v Denny Lascelles
d. Radford v de Froberville
24. Assume that through no fault of Justine, Chris or Owen, Chris Crisp Plants rose
bushes were damaged as a result of an unexpected heat wave in Perth in
September and all of their rose bushes died. Chris Crisp Plants will be unable to
supply Justine with rose bushes for 6 months until the rose bushes grow back.
Which of the following statements is the most likely approach a court would take
to the question of whether performance of the contract entered into between
Justine and Chris has been frustrated?
a. The contract has been frustrated. Although performance was
initially possible, the changed circumstances have now made
performance impossible.
b. The contract has not been frustrated because Chris can still supply
Justine with rose bushes as specified in the contract, although the rose
bushes are withered. Therefore, performance of the contract is still
possible.
c. The contract has not been frustrated because the heat wave does not
amount to a supervening event rendering the performance of the
contract impossible.
d. The contract has been frustrated because although performance is
possible, the heat wave makes performance difficult for Chris as the
supply of withered rose bushes will adversely affect his business. A
slight increase in difficulty with respect to performance amounts to a
supervening impossibility.
25. Which case would the court use as the best precedent when deciding on the
treatment of supervening impossibility?
a. Associated Newspapers v Bancks
b. Hadley v Baxendale
c. McDonald v Denny Lascelles
d. Codelfa Construction v State Rail Authority
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NOTE: The fact scenario below relates to questions 26 to 40.
Justine decides to replace her delivery van. She visits the Sword Company car
manufacturer and wholesaler. Justine informs the Sword Company representative,
Brad, that the van must operate without any problems otherwise she might lose
some business as this van will be the sole vehicle used to deliver plants. Justine also
informs Brad that she has a lucrative contract with a Perth socialite, Caroline Love,
that she cannot afford to lose. Brad states that he understands and assures Justine
that the Sword car range and in particular their vans, are not only reliable but also
very fashionable. Justine chooses a pink 2018 Sword van model. The van is
delivered to Just Justine’s Roses the following week.
On the first delivery run on a particularly busy day, the delivery van stalls and does
not restart. It appears that the engine has overheated. Justine calls NAV, a local car
roadside assistance company for assistance. Justine is informed by the operator that
the call out fee is $500 and that a NAV representative will be onsite to assist her in
90 minutes.
After waiting for 30 minutes, Justine tries to restart the engine. After her fifth attempt
to restart the engine, the engine over heats and blows up. Thick black smoke is
emitted from the engine. Justine suffers an asthma attack and loses consciousness.
An onlooker calls an ambulance. The ambulance fee is $750.
While Justine was in hospital, the doctors and nurses were required to clear her
nasal passage as the inhalation of the smoke caused internal damage. The medical
treatment fee is $800.
After receiving the necessary medical treatment, a doctor suggested to Justine that
she should undergo cosmetic lip surgery as her lips appear lifeless. The doctor
recommended cosmetic lip surgery to make Justine’s lip appear plump. Justine has
always hated her lips and agrees to undergo the surgery. The cosmetic lip surgery
fee is $1,500.
As Justine was admitted into hospital, Just Justine’s Roses did not make any of their
orders and deliveries for that day, including a delivery of rose plants to Caroline
Love. After Caroline did not receive the rose bushes that she had ordered, Caroline
cancels her future contract with Justine. Justine was to supply Caroline with various
plants for her holiday house. Justine will suffer a $5,000 loss from the cancelled
contract.
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Due to all the stress of commencing legal action against the Sword Company,
Justine’s marriage breaks down. Justine is extremely upset and distressed by the
failure of her marriage.
Justine claims that the Sword Company is to blame for all the medical treatment she
underwent, the loss of profits and the breakdown of her marriage. She believes that
the Sword Company is liable to pay for all her losses.
26. Assume Justine can claim damages for breach of contract. If she does, the
court will determine the amount to be awarded on the basis that:
a. The court will consider amounts put forward by each party’s counsel,
and then determine the damages to be awarded based on notions of
fairness.
b. The damages awarded aim to put Justine in the same financial
position as if the contract had been properly performed by Sword
Company.
c. The damages awarded aim to put Justine in the same financial position
she would have been in but for the breach by Sword Company.
d. The amount to be awarded can only be determined once all of the loss
suffered by Justine is absolutely certain as the court cannot take into
account matters, such as loss of chance.
27. Which case would the court use as the best precedent when considering the
aim of an award of damages in contract?
a. Hadley v Baxendale
b. Koufos v Czarnikow Ltd
c. McDonald v Denny Lascelles
d. Radford v de Froberville
28. Assume that Sword Company has breached the contract. Justine believes that
she has suffered a number of losses as a result of Sword Company’s breach of
contract. Which case would the court use as the best precedent when
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determining how to classify the loss that Justine has suffered as direct or
consequential loss?
a. Radford v de Froberville
b. Steele v Tardiani
c. Hadley v Baxendale
d. Holland v Wiltshire
29. A court is likely to define a consequential loss as a:
a. Loss that can be fairly and reasonably considered to be foreseeable as
arising naturally (according to the usual course of things) from the
breach of contract itself.
b. Loss that is reasonably in the contemplation of both parties at the
time they made the contract as a probable result of the breach.
c. Loss that is reasonably in the contemplation of the defendant at the time
they made the contract as a probable result of the breach.
d. Remote loss that is foreseeable as a loss flowing from the usual course
of events.
30. A court is likely to define a direct loss as a:
a. Loss that can be fairly and reasonably considered to be
foreseeable as arising naturally (according to the usual course of
things) from the breach of contract itself.
b. Loss that is reasonably in the contemplation of both parties at the time
they made the contract as a probable result of the breach.
c. Loss that is reasonably in the contemplation of the defendant at the time
they made the contract as a probable result of the breach.
d. Remote loss that is foreseeable as a loss flowing from the usual course
of events
31. Assume that Sword Company has breached the contract. A court is likely to find
that the $500 call out fee for NAV roadside assist is:
a. A direct loss.
b. A consequential loss.
c. A loss that is too remote to be claimed.
d. An example of Justine not mitigating her losses.
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32. Assume that Sword Company has breached the contract. A court is likely to find
that the $750 ambulance fee and $800 necessary medical treatment is:
a. A direct loss.
b. A consequential loss.
c. A loss that is too remote to be claimed.
d. An example of Justine not mitigating her losses.
33. Assume that Sword Company has breached the contract. A court is likely to find
that the $1,500 cosmetic lip surgery is:
a. A direct loss.
b. A consequential loss.
c. A loss that is too remote to be claimed.
d. An example of Justine not mitigating her losses.
34. Assume that Sword Company has breached the contract. Which of the following
statements best reflects Justine’s responsibilities to mitigate her losses?
a. Justine must take reasonable steps to avoid the losses that flow
from the breach.
b. Justine must do everything that is possible to minimise the losses that
flow from the breach.
c. There is no obligation on Justine to do anything, but she must not
deliberately do something to make the loss greater.
d. Justine is not required to do anything as it is Sword Company’s
responsibility to mitigate her losses as they have breached the contract.
35. Which case would the court use as the best precedent when determining what
Justine’s responsibilities are for mitigating her loss?
a. Steele v Tardiani
b. Radford v de Froberville
c. Burns v MAN Automotive
d. Holland v Wiltshire
36. What is the likely result of Justine being able to claim damages for the
disappointment and distress of her marriage breakdown?
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a. On the given facts, Justine is likely to be successful in this claim as the
Sword Company’s breach was the final straw and as a result, Sword
Company must compensate Justine for the breakdown of her marriage
b. On the given facts, Justine is unlikely to be successful in this
claim.
c. On the given facts, Justine is likely to be successful in this claim as
Sword Company was the sole cause of the breakdown of her marriage.
d. Justine can be successful in her claim for the disappointment and
distress of her marriage breakdown only if she can establish that she
attempted to mitigate her loss, such as seeking marriage counselling.
37. Which case would the court use as the best precedent when determining
whether Justine is entitled to any damages for disappointment and distress of
her marriage breakdown?
a. Codelfa Construction v State Rail Authority
b. Dougan v Ley
c. Baltic Shipping Co v Dillon
d. Buckenara v Hawthorn Football Club Ltd
38. Assume that while in hospital, Justine telephones Caroline and informs her of
the situation. Justine tells her that she is very sorry and that she can have the
rose bushes delivered the next day. Can Caroline terminate the contract on the
grounds that Justine has failed to perform the contract on the specified date?
a. Yes, performance must be made when agreed and there are no
exceptions to this rule.
b. Yes, performance must be made when agreed as time is of the essence.
c. No, performance must be made when agreed; otherwise
performance is due within a reasonable time.
d. No, performance must be made when agreed, otherwise performance is
due when convenient.
39. Caroline notified Justine that she no longer wanted Justine to supply the flowers
for her holiday home, one week prior to commencement of their contract.
Justine sues Caroline for a breach of contract. A court is likely to determine that:
a. There had been an anticipatory breach of contract by Justine after
which Caroline is immediately entitled to sue.
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b. There had been no anticipatory breach of contract by Caroline which
means that Justine has repudiated the contract.
c. There had been an anticipatory breach of contract by Caroline but
Justine is not entitled to sue until the time for performance had arrived in
one week’s time.
d. There had been an anticipatory breach of contract by Caroline after
which Justine is immediately entitled to sue.
40. Which case would the court use as the best precedent when determining
whether there has been an anticipatory breach?
a. Hide & Skin Trading v Oceanic Meat Traders
b. Mahoney v Lindsey
c. Holland v Wiltshire
d. Steele v Tardiani
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Part C: Short answer questions (15 marks – each question is worth 5 marks)
Students are reminded that Part Cexamines ‘Topic 10 – Business Organisations’
only.
Students must answer three of the four short answer questions from the list below.
Please write your answer beneath the questions you have chosen to answer.
Choose THREE (3) from the following four options:
1. Outline the advantages and disadvantages of establishing a sole trader
business organisation structure. Where appropriate, please refer to legislation
or case law.
The various advantages of sole trader are as follows (Davenport and Parker,
2014).
 It is easy to incorporate since there are no elaborate procedures and
legal formalities as are required for the company structure. Only a
business name needs to be selected which may or may not be
registered.
 There are practically no reporting formalities associated with the sole
trader business structure. As a result, the costs associated with this is
avoided here.
 Since 100% of the ownership rests with the underlying owner, hence
he/she would have complete control over the business and can take
business decisions without any interference. Also, all the profits would
accrue to the sole owner.
The various disadvantages of sole trader are as follows (Gibson and Fraser, 2014).
 Since the business organisation is not a separate entity from the owner,
hence the owner would have personal liability for the debts owed to the
business.
 It may be difficult to raise any money in the form of equity by selling
stake. Hence, either the incremental funding ought to be through loan or
money infusion by the owner. This limits availability of capital.
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 Since sole trader business structure is a pass through structure, hence
business income is essentially personal income of owner owing to which
marginal tax rate may be quite high.
 Also, since there is 100% ownership of the owner in this business
structure, hence all major decisions have to be taken by the owner
without any division of work.
2. Explain the partnership business organisation structure. Where appropriate,
please refer to legislation or case law.
As per Section 1 of Partnership Act 1892 (NSW), a partnership needs to have
the following three elements (Pathinayake, 2014).
 Carrying on the business – This implies that there needs to some degree
of repetitiveness in the underlying activity carried by the firm. This has
been indicated in In Smith v Anderson (1880) 15 Ch D 247. However,
later cases indicate that even isolated ventures may be carried out using
partnership.
 In common – The partnership activities are carried out on behalf of all
the partners who would have equal share with regards to profit and loss
even though the partnership agreement may allocate profits and loss
differently. This has been indicated in Re Ruddock (1879) 5 VLR (IP &
M) 51 case.
 With a motive to profit – It is imperative that profit motive is to be present
with regards to partnership activities. This aspect separates partnership
from clubs, associations where profit motive is absent.
3. Explain the trust business organisation structure. Where appropriate, please
refer to legislation or case law.
4. Outline the advantages and disadvantages of establishing a company business
organisation structure. Where appropriate, please refer to legislation or case
law.
The key advantages of establishing a company business structure are
highlighted below.
 As per s. 124 Corporations Act 2001, a company is a separate legal
entity from the owners. Hence, the company is separate from its owners.
As a result, the business liabilities would not be personal liabilities for the
shareholders of the company. This has been upheld in the Salomon
v A Salomon and Co Ltd [1897] AC 22 case (Pathinayake, 2014).
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 Since the company is not known by the owners, as a result, it is possible
for the company to transfer equity to different owners without impacting
the existence of the company. Hence, the company can raise finances
by issue of new equity or transfer of existing equity (Davenport and
Parker, 2014).
 The company business structure is subject to corporate tax rate which is
significantly lower than the highest slabs of marginal tax rate applicable
in Australia. As a result, the tax liability in the company business
structure is lower than the other business structures assuming equal
profit (Gibson and Fraser, 2014).
The key disadvantages associated with a company business structure are indicated
below (Pendleton, W. and Vickery, 2016).
 There are a host of formalities involved in setting up of the company
since registration with ASIC is mandatory. This process involves time,
cost (especially) with regards to lawyer) since there needs to be specific
information about directors, company secretary and potential company
constitution.
 The company needs to comply with the relevant norms of the
Corporations Act 2001. Based on the type of company, these
disclosures may be less or more cumbersome in terms of maintaining
records and reporting. This would incur cost and other resources.
References
Davenport, S. and Parker, D. (2014) Business and Law in Australia.2nd
ed..Sydney:LexisNexis Publications.
Gibson, A. and Fraser, D. (2014) Business Law. 8th ed. Sydney: Pearson
Publications.
Pathinayake, A. (2014) Commercial and Corporations Law.2nd ed. Sydney:
Thomson-Reuters
Pendleton, W. and Vickery, N. (2016) Australian business law: principles and
applications. 5th ed.Sydney :Pearson Publications.
END OF EXAMINATION
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