Question 1
Elena was the owner of a beauty salon in North Melbourne. The salon was quite
successful and had won a number of creative styling awards. In 2014, the salon had
been featured by InStyle magazine and became a popular hot spot for fashion icons.
In early 2015, Elenas brother Ringo decided to develop a new shopping centre on the
outskirts of Williamstown. Ringos dream was to establish a fashion hub for elite
brands. Impressed by the success of his sisters salon, Ringo decided to approach
Elena to see if she would lease one of his prime location stores. He tells Elena that a
number of big brands had already signed long-term leases, including a number of
high-end fashion shops and a cinema, and that he would pay for her store to be
fitted-out.
Elena, excited by the prospects of the development, agrees to a 5 year-lease at $3000
per week. The development was partially completed on 1 January 2016 and Elenas
new store opened two weeks later. Although her store was in a prime location, she
was disappointed to find that a number of the big brands promised by Ringo had not
actually signed leases and that construction on the cinema was still another 12
months away.
With a lack of big brands, the shopping centre struggles to attract customers and a
number of shopkeepers begin to leave. On 23 November 2016, Ringo publishes the
following add in the Herald Sun:
Short time offer! Special rate of $1,500 per week for all businesses
that sign a new 2-year lease at our Williamstown Shopping Centre.
On 24 November 2016, Elena reads the advertisement and is furious that she is
paying double the amount offered in the newspaper. On the same day, she writes to
Ringo demanding that he reduce her rent to $1,500 per week. On 27 November 2016,
Ringo writes back to Elena stating that he could not reduce the rent of her premier
store to $1,500, but instead would reduce the rent to $2,000 per week.
For the next 6 months, Elena pays the reduced rent. She uses the $1,000 saved each
week to advertise and redecorate the salon. She also purchases a new massaging
chair on credit (the credit was only available to Elena based on the stores reduced
weekly expenditure).
The shopping centre continues to struggle, and Elena fed up with the lack of business,
confides in her mother Maria that she is thinking of terminating the lease. Ringo hears
from Maria that Elena is considering terminating her lease. Worried about his cash
flow and the number of business leaving the centre, Ringo sues Elena to recover
$6,000 that he claims is rent in arrears.
Using case law, advise Elena of the likelihood of Ringos success.
(1,000 words)
5
Question 2
Albert is a poorly educated immigrant who knows very little English. He owned and
operated a small fruit orchard in the Kinglake ranges for over 40 years, and following
the passing of his wife Maria, decided it was time to sell the orchard and move closer
to his daughter Josephine in Essendon.
Josephine held a large parcel of land in Essendon, and upon hearing of her fathers
plans, offered Albert the opportunity to build a small unit at the back of her property.
The only condition was that Albert would need to arrange and pay for the
construction himself. Albert thought this was a perfect idea and told Josephine that
he would start looking for a builder straightaway.
The next morning Albert met with his neighbour Steven at the Flying Tarts Bakery for
a cup of coffee, where he told Steven about his plans. Steven was sad to hear that
Albert was leaving Kinglake, but explained that his brother George owned a
construction company and would be able to help. Steven made a quick phone call and
advised Albert that George could meet with him on Sunday.
George visited Albert on the Sunday with a number of unit plans for Albert to look at.
Overwhelmed by the number of plans, Albert asked George for his advice on which
unit would suit him best, pointing out that he wanted something small and cheap.
George responded, ah, you cannot go past the Mirage unit plan. It is one our most
popular designs, and not to mention our cheapest! In fact, the Mirage was one of the
most expensive options.
George knew that Albert could not read the contract, but insisted that he sign that
day to lock in the price. Albert thought George looked trustworthy enough and
proceeded to sign the contract without reading it. The contract provided that George
would build one (1) unit to the specifications of the Mirage Unit plan for $250,000,
payable upon completion of the project.
Construction commenced on the unit shortly after and the build went smoothly. The
project was complete within a couple of months, from which time Albert moved into
the unit. However, Albert was disappointed to find that the flooring was lopsided,
resulting in the doors and cabinetry not closing properly. Small cracks were also
appearing in the walls and some of the ceilings had begun to sag.
An upset Albert sought advice from an independent building consultancy firm, who
explained that the concrete slab had been laid incorrectly and that it would cost
$75,000 to fix. Albert was forced to rent an apartment at a cost of $300 per week
while the repairs took place (he had already sold the orchard and Josephine did not
have enough room in her house). Albert paid the consultancy firm $75,000 for the
repairs, which took 3 months to complete.
6
Albert has now received an invoice from George for the full contract price ($250,000).
Albert is very upset and refuses to pay George a cent. Albert has now come to you for
advice.
Using case law, advise:
a) whether Albert has any obligations to pay George; and,
b) whether Albert would have access to any remedies under contract law.
(1,000 words)
7
Question 3
Harry Harbinger operates a sole-trader computer software business that specialises in
developing software applications for accountancy firms. Harry has dedicated the past
10 years growing his sole-trader business, but is beginning to find it difficult to attract
new clients. The feedback he has received from recent demonstrations suggests that
his product is out-dated and looks like something straight out of the 90s.
Harry decides that it is time to freshen up his product. He wants to hire a team of
high-quality programmers and a physical space to develop his product, but
understands that additional financial capital is required. Harry would also like to
establish a side-business that specialises in the supply of computer products and
hardware to complement his software business.
Harry attempts to borrow money from Seedy Bank, but is told that he does not have
enough security for the amount required. Disappointed by this, Harry is considering
raising capital by offering part-ownership in his business.
Harry has now come to your for advice on which business structure would best serve
his purpose. He tells you that his biggest concern is retaining absolute control over
the direction of the business, but that he would like to implement a structure that will
attract and keep the right employees.
In your discussions with Harry, you discover that he is unmarried and has no living
family.
Advise Harry of the potential ways to structure his business, including the strengths
and weaknesses of each option for Harrys specific circumstances.
(1,000 words)
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