Question One Business entities

a) Alan was the owner of a restaurant called Peking Duck. He had been fortunate enough to buy the premises in which the restaurant was situated and to furnish it as he had wanted. Due to a huge increase in recent  competition in the surrounding  area, Alan’s profits declined and he struggled to meet costs.  He approached his friend Bing for a loan of $100,000 and they agreed to draw up a loan agreement which included the following:- 

The lender will receive a share of the profits and losses to the extent of 40%.  

The lender has the right to examine the business books at will. 

The lender has a right to receive a quarterly business statement. 

The lender has the right to be consulted and contribute to any major decisions regarding the business. 

With the injection of money into the business, Alan and Bing decided that the way to improve trade was to refurnish the restaurant. Most of the money was spent on this and the business improved and made a profit.  Bing spent considerable time at the restaurant and came to know many of the suppliers some of whom thought he was in a partnership with Alan. 

Three years later, Alan decided he wanted to retire and sell the business. He consulted with Bing who told Alan he would be happy to buy out Alan’s share of the partnership.  Alan was surprised. He had never considered Bing to be a partner although Bing obviously thought himself to be one. Bing argued that the $100,000 was the equivalent to ¼ of the capital that Alan had contributed and that he was therefore entitled to ¼ of the proceeds of the sale of the assets of the business.

Question.) Using the Partnership Act 1891 (SA) and relevant cases discuss whether Alan and Bing are in a business partnership

b) Abdul was the owner of a restaurant called Howzda Serenity on George Street in Town Hall since April 2016. Due to the NSW Government’s construction of the light rail along George Street, business had declined, and the restaurant had not made a profit in months. 

In January 2018 he approached his friend Billu for a loan of $200,000 and they agreed to draw up a loan agreement which included the following:- 

Billu will receive a share of the profits and losses to the extent of 50% and be working in the business from 4pm to midnight on Friday, Saturday and Sunday nights. 

Billu has the right to examine the business books at will. 

Billu has a right to receive a quarterly business statement. 

Billu has the right to be consulted and contribute to any major decisions regarding the business. 

With the injection of money into the business, Abdul and Billu decided that the way to improve trade was to undertake a television and radio and print media marketing campaign.  Most of the money was spent on this and the business improved and made a profit.  Billu spent considerable time working at the restaurant and came to know many of the suppliers some of whom thought he was in a partnership with Abdul.

A series of events follow:

- In December 2019, Abdul decided he wanted to retire and sell the business.  He consulted with Billu who told Abdul he would be happy to buy out Abdul’s share of the partnership.  Abdul was surprised. He had never considered Billu to be a partner although Billu obviously thought himself to be one.  Billu argued that the $200,000 was the equivalent to ¼ of the capital that Abdul had contributed and that he was therefore entitled to ¼ of the proceeds of the sale of the assets of the business.

- In November 2019, Priya starts waitressing at the restaurant on the weekends. She is studying a WSU and had been up all night completing her assignment and was feeling quite tired on a busy Friday night at the restaurant. While carrying a tray of hot soup that night she bumps into a table and drops the soup on a customer’s $3000 work laptop damaging it. 

- In October 2019 Abdul was away on a well deserved break to Bonnie Doon. Billu decides have the lighting inside the restaurant upgraded for $5000 and an additional $5000 upgrade to the security lighting at the underground carpark where Billu parks the luxury cars he sells to cashed up clients (that Abdul does not know about). When Abdul returns, he finds an invoice for $10000 by FlashyLightsRus to Howzda Serenity to be paid immediately for work completed.

Question.) Using IRAC, advise Abdul on his potential rights and liabilities, and in doing so, discuss fully all relevant legal issues that arise in these circumstances. Your answer must be supported with relevant case law authorities.

Question Two: Contracts

2a) Grace runs a small shoe repair business in Bankstown. Kelly took a pair of his mens’ leather shoes to be repaired by Grace. Grace presented Kelly with a receipt which she asked Kelly to sign. Kelly signed the document without reading it.

Two days later Kelly returned to Grace’s shop and presented the receipt to collect the shoes. Grace told Kelly that the shoes had been badly damaged whilst being repaired, and that the damage had been caused by Grace’s negligence. Kelly demanded that Grace reimburse him for the damaged shoes, but Grace refused, relying on a clause that was printed on the receipt and which read as follows:

The repairer shall not be liable for any damage to shoes left for repairs as a result of the repairer’s negligence or fundamental breach of contract.

Kelly seeks your advice as to whether he can recover damages from Grace for breach of contract.

Question.) Using IRAC, advise Kelly, and in doing so, discuss fully all relevant legal issues that arise in these circumstances. Your answer must be supported with relevant case law authorities.

Question THREE: Contracts short answer Questions

Consider the scenario below, then write your answer to the four-part question that follows. You must answer all four parts of the question. 

Jennifer places the following listing on Gumtree: 

I have an 8 foot statue of Brad Pitt in my front yard that needs to be removed before the block can be subdivided. It is a 20 year old marble statue supported by a steady marble base and should take well to being transported. I am prepared to sell it for $1000 if you arrange for removal before 1st March 2018. Please contact me via 0411 963 965 or jennynbrad4ever@gmail.com.

In each of the separate scenarios below, advise Jennifer as to whether an agreement has been reached for the purpose of creating an enforceable contract.  Explain your reason(s) for reaching this conclusion with reference to legal authorities where appropriate.

     Alex sends an email stating he is prepared to pay $850 for the statue but will not be able to pick it up until 20 March 2018. Jennifer replies stating he can have the statue for $850 but would need to remove it by 5th March 2018 at the latest. Alex says he can remove it on 5th March 2018 but is now only prepared to pay $750. Jennifer responds by saying: “Yes, great news about the 5th, if you can make it $800 you’ve got yourself a deal.”

Bianca calls Jennifer and states that she is interested in the statue. They arrange a time for her to inspect it. After walking around it silently for about 10 minutes, Bianca says “I’ll take it” and walks off to her car before Jennifer has a chance to reply. 

Mason emails Jennifer late one night to say he will buy the statue for $1000 and pick it up on 1 March 2018. When he wakes up the next day he realises there is no room for it and immediately sends Jennifer another email stating that he is no longer interested in buying the statue. Jennifer doesn’t see Mason’s second email and replies to the first one, stating: “It’s a deal.”

Stephanie calls Jennifer (who doesn’t answer) and leaves a message saying she is on the way with $1000 and a team of 5 members of the Sydney Brad Pitt Fan Club to help transport the statue to their club house. She says she will leave the money in an envelope under the doorstep if she is not home.