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Law extension committee summer session 2006-2007 contracts problem questions


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LAW EXTENSION COMMITTEE
SUMMER SESSION 2006-2007
CONTRACTS
PROBLEM QUESTIONS

LECTURES 15-16

LECTURE 15 (19 February 2007)
Text: Gooley & Radan Chapters 34, 35 & 36
Question 1
James and Charles entered into a verbal contract to the effect that James would undertake certain renovations to Charles’ house at Bondi for a fee of $50,000. After the work was completed Charles took possession of the property but refused to pay any of the agreed fee. Charles claimed that the contract was unenforceable because of legislation that stipulated that contracts for such building work were unenforceable unless the contract was in writing, clearly set out the work to be done and was signed by the parties to it.
James seeks your advice as to whether he has any claim against Charles.
Question 2
Six months ago Figo borrowed Luis’ valuable stamp collection that was conservatively valued at $40,000. On the following day, due to inadvertence on Figo’s part, the collection was placed in a box for rubbish that ended up being collected by rubbish collectors from Figo’s home and subsequently destroyed. Luis, who had been collecting stamps as a hobby for over 20 years, was deeply distressed at the loss of his valuable collection, and threatened to sue Figo for damages in relation to the loss. Figo vehemently denied that he was in any way liable for the loss. However, eager to avoid any litigation over the issue, Figo wrote a letter to Luis in which he said that he would pay Luis $2,000 if Luis agreed not to proceed with any litigation against him. The letter also asked Luis to indicate his attitude to Figo’s proposal within seven days of the date of the letter. Six days after the date of the letter, Luis, still deeply upset about the loss of the stamp collection, posted a letter to Figo in which he agreed to Figo’s proposal. The letter was received by Figo two day later. Three days later Figo sent Luis a cheque for $2,000.
Recently, having recovered from the distress related to the loss of his stamp collection, Luis sought legal advice on the matter for the first time. Based upon the legal advice given to him, Luis instructed his solicitor to commence legal proceedings against Figo for damages in relation to the lost stamp collection. The pleadings filed on behalf of Luis assert the following:


  1. that the exchange of letters between Figo and Luis did not create a contract and that, as a result, Luis was free to commence legal proceedings against Figo, and




  1. that, even if there was a contract created by the exchange of letters, the court should declare it void.

Figo seeks your advice as to the merits of these two assertions.


Question 3
Brian, the owner of a racehorse, approached Kerry Enterprises Ltd (KE), the owner of a property on the Central Coast and enquired as to the possibility of his horse being allowed to graze on KE’s land. KE agree and a written contract of agistment was prepared. Clause 7 stipulated that the written agreement contained the complete agreement between the parties. Prior to signing the contract, Brian asked KE if the land was rich in a particular mineral which was important for the quality of the grass and consequently for the health of his horse. KE verbally assured Brian that the soil was rich in the particular mineral. Brian then signed the contract. Six months later it was discovered that the land was completely deficient in the mineral and that as a result Brian’s horse had suffered a decline in health.
Advise Brian of the possible claims he has (if any) against KE.

LECTURE 16 (22 February 2007)
Text: Gooley & Radan Chapters 37 & 38
Question 1
Ernest is a famous Australian novelist who was negotiating a new contract with his publisher, Hemingway Books Ltd, in relation to his autobiography. During the negotiations, Ernest was visited by Irving, an old friend with whom he had spent much time travelling in Australia’s outback in the 1960s. Irving told him that on one drunken evening in the 1960s he (Ernest) had had ‘a one-night stand’ with Marlene, a local barmaid that resulted in Marlene getting pregnant and later giving birth to a boy named Rusty. Irving told Ernest that he (Irving) had known about Marlene and Rusty for many years but had not said anything to Ernest, because Marlene had begged him not to do so. However, as Ernest was now about to write his autobiography Irving thought that Ernest should know about and meet Rusty, Marlene having died in the early 1990s.
Ernest was flushed with pride that he had a son, having only fathered three daughters with his wife Hazel. He also decided that in his contract with Hemingway Books Ltd he would have a clause inserted that would require half of the $100,000 advance he was to be paid for the book, to be paid to Rusty. A contract to that effect was entered into a few days later.
A week after signing his contract, Ernest met his son Rusty for the first time. The meeting did not go well because Rusty found it difficult to accept Ernest as his father. Ernest told Rusty about the contract with Hemingway Books and that, in accordance with its terms, the sum of $50,000 was to be paid to Rusty on the next day. Rusty told Ernest that he would be happy to take the money because that was the least that his father could do for him, but that he never wanted to see Ernest again, and that as far as he (Rusty) was concerned, Ernest could ‘go to Hell’.
On the afternoon of the next day Rusty went to the offices of Hemingway Books and demanded payment of the sum of $50,000 as stipulated in its contract with Ernest. Hemingway Books refused to pay the money.
(a) Rusty seeks your advice as to whether he can bring an action against Hemingway Books in relation to its refusal to pay him $50,000.
(b) If Rusty told Hemingway Books that he was going to sue them for $50,000 and in response Hemingway Books agreed with Rusty it would pay him $15,000 if he would desist from taking any legal action, would Rusty be able to sue Hemingway Books for breach of contract if Hemingway Books subsequently refused to pay him the sum of $15,000?
(c) Would your advice in (a) above be different if, earlier on the day that Rusty went to the offices of Hemingway Books, Ernest had arranged with Hemingway books that the amount to be paid to Rusty be reduced to $10,000 and Hemingway Books refused to pay that amount to Rusty?
Question 2
Sean and Michael each borrowed $1,000 from Paddy. Subsequently, Paddy wrote a letter to David in which he assigned to David the whole of the debt owed to him by Sean and half of the debt owed to him by Michael. David then told Sean and Michael of the assignments and gave each of them a photocopy of Paddy’s letter.
On the date that both debts were due, Sean and Michael both refused to re-pay to David the money that they had previously borrowed from Paddy. David immediately commenced separate legal proceedings against Sean and Michael seeking to recover $1,000 from Sean and $500 from Michael.
Sean and Michael seek your advice as to whether David is likely to succeed in either of these proceedings.


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