Solution Code: 1FFJ
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On 1 January 2015, Bill borrowed $5,000 from Anne, with the money to be repaid on 1 January 2016, together with interest of $500, making a total of $5,500.
On 28 November 2015, Bill told Anne that he had lost his job and asked her if she would accept $4,000 on 1 January 2016 in full settlement. Anne promised that she would accept $4,000 on that date in full settlement and not sue Bill for the outstanding $1,500.
On 1 January 2016 Bill paid Anne $4,000 thinking that the matter was finished. However, one week later Anne sued Bill for the balance of $1,500.
Eric asks his very close friend Michael, “Would you like to buy my excellent 1998 Commodore for $2000?” Michael accepts Eric’s offer because he has always wanted that particular model of car. They agree to meet at the SCU car park on Friday at 1.00 pm when Eric will hand over the car and Michael will hand over the $2000 in cash.
They meet at the agreed time and place and Eric hands over the car, keys and signed registration papers to Michael. But, in his rush to get to an important meeting, Eric doesn’t check the money in the envelope. Later that evening he discovers that Michael has paid him 2,000 in Hong Kong dollars which equals just 360 Australian dollars. When Eric tells Michael that he was supposed to pay 2,000 Australian dollars, Michael points out that there was no agreement about any particular national currency and all he was required to do under the contract was pay $2,000, which he had done.
Eric seeks your advice as to whether or not he can sue Michael for a breach of contract, claiming that Michael was required to pay him AUD 2000, not HKD 2000 even though there had been no mention of currency at the time of the agreement. What is your advice?
George sees a big sign in the window of the local video shop advertising a special membership offer of 100 overnight DVDs for the next three months for only $100. The sign also lists the numerous terms and conditions of the membership contract. George pays his $100 joining fee and commences to enjoy recently released movies at that cheap price.
Several weeks after joining George rents an overnight DVD and, because he falls ill, does not return it for eight days. When he does return the DVD, the shop owner tells him that he must pay an extra $140, referring George to a term of the contract that states:
“Hire of DVDs under this agreement is restricted to overnight hire only. Any such DVD not returned by 3pm on the following day must be paid for at the rate of $20 per day.'
The normal late fee in other video shops is normally $5 per day. Advise George.
Grant sells second hand motor vehicles from his Sydney car yard. Grant enters into a contract with Eagle Eye Security whose guards are required to patrol his premises every night. One night Andy, the security guard on patrol, lights a cigarette and throws the match into what he thinks is a puddle of water but is, in fact, oil which catches fire and then causes an explosion that destroys the car yard and all the vehicles contained therein. The contract between Grant and Eagle Eye includes the following clause
Eagle Eye Security shall not be responsible, under any circumstances, for damage or injurious act caused by an employee of the company unless such act could have been foreseen and avoided by the exercise of due diligence on the part of the Company as his employer.
Eagle Eye Security does not accept responsibility for any loss or damage to property however such loss or damage may arise or be caused.
The sale contracts are made in a manner that they specify the amount of money to be submitted and in the required currency. It is crucial for contracts contain this information for clarity purposes. However, there are contracts that do not specify this information when they are developed. In Australia, all sale contracts are assumed to be conducted in Australian Dollars. This is the case unless otherwise specified in the contract (Hawthorne, 2012). In the case between Erik and Michael, Erik had a right to sue Michael for making the payment for the car in Hong Kong Dollars. The sale contract drawn up between the two of them did not specify the exact currency to be used. However, the sale agreement was made within the Australian boundaries. The contracts did not specify the currency that would be used in the transaction process. Because the sale agreement was made in Australia, it is expected that the currency to be used is Australian Dollars. This is the standard currency that is used within the country. For this reason, Erik can move to court to seek legal action against Michael for making the purchase payment in the form of Hong Kong Dollars. This can be categorized as a breach of contract on his part. On the other hand, Erik did not bother to check that the money was handed to him in the envelope by Michael. Legally, this can amount to negligence on his part (Alex, 2006). Under the law, negligence cannot be treated as a form of defence against an offence that has been committed. Erik should have taken the time to examine the contents of the envelope to determine whether the money paid to him was in the correct format. This is termed as due diligence, which was the responsibility of Erik. However, Michael was in breach of contract because he did not observe the basic legal requirements and make the payment for the vehicle in Australian Dollars. Also, Erik should be fined for not conducting due diligence and inspect the contents of the envelope.
Before entering into a contract, it is always advisable that you first become well acquainted with all the contents of the contract. In this example, George failed to thoroughly read through the terms and conditions carefully before entering into the contract (Ron, 2011). For this reason, he was not aware of the consequences that would be incurred if he did not return the borrowed DVD in good time. According to the contract, it does not factor in the possibility that a customer may become ill and unable to return the DVD at the stipulated time. Therefore, the owner of the shop is right in demanding the penalty from George for not returning the DVD at the set time. Every business is unique to each other. The shop owner may have a reason for charging such a high amount of money as penalty fees. The reason for doing this may vary from one business to another. For example, the owner of the shop could be doing this within then intention of discouraging people from overstaying with borrowed DVDs. Overstaying with the DVDs would mean that the owner would not be able to rent the DVDs to other customers who may wish the same DVDs (Aviva and Webb, 2010). This will translate into a loss of revenue for the business. The shop owner was charging a total of $20 per day for a rented DVD. This figure seems to be a bit high, but George has no right to question it or oppose it. This is because George agreed to enter into the contract without conducting his due diligence on the contract. George became ill and unable to return the DVD. In this case, George is obligated to pay the requested amount to the shop owner.
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