SP22016: Business Law - Tardis Cafe - Case Study Assessment Answer

Business Law Case Study Assignment

Case Scenario

1 .Your TARDIS Café has now been operating for 12 months and you decide to have a first year anniversary party called “DOCTORS CELEBRATION” You have invited 100 people and have asked them all to dress as their favourite Doctor, or a character from Doctor Who.

Assignment Task

Because you know a lot of the outfits will be valuable, you set up a cloak room for people to check in their extra belongings. Donna is running the cloakroom.

She is instructed by you that when a person hands over a piece of clothing, Donna is to give them a ticket which has a number on the front and states on the reverse side:

“We do not take any responsibility or liability for clothing checked in to our cloakroom.”

Travis has made himself an amazing Doctor Who outfit that includes a 28 foot scarf (pictured). He decides to check it in at the cloakroom because he has been tripping over it since he arrived. He hands his scarf to Donna and receives his ticket with the disclaimer on the back.

When he goes back at midnight to collect it, it is no longer there. Donna has got confused when handing back similar clothing, and has incorrectly given it to a different person whom she cannot remember. Travis wants TARDIS Café to pay for the replacement of his scarf which cost him $200.00. You wish to rely upon the exemption clause on the ticket.

2. The special drink of the party is the “Wiggly Wobbly Timey Wimey Cocktail” which contains a high quantity of alcohol. Yourself and Adam (the two directors) have been served a lot of the cocktail by Donna and are quite intoxicated. You have been able to still talk to the guests but you are both swaying on your feet. Seamus has been with you all night and has not consumed any alcohol at all.

Seamus runs an Italian restaurant that has not been doing very well. He says to you and Adam, “I think you should make pizzas here, and I have just the pizza oven for you. You can have it for $5,000.” You and Adam reply, “Yes, we accept your great big fat oven, you big Irish Italian guy” and then you both fall over onto the floor due to intoxication, laughing.

The next morning a small electric pizza oven is delivered from Seamus’ Italian Restaurant with an invoice for $5000. You have a very bad hangover and very little recollection of anything that was said the night before.

Advice TARDIS Café if a valid contract has been made.

3.You have decided to sell TARDIS Café T-Shirts and mugs at the café. Donna is again working for you and you tell her to put a price on the T-Shirts of $35.00 and the mugs $5.00. Donna accidently makes the signs incorrectly and they are on display with T-shirts $5.00 and mugs $35.00.

Billie loves Doctor Who and sees the T-shirts. She approaches Donna and says she would like 5 T-shirts for $5.00 each.

Is Donna, acting on behalf of TARDIS Café, obligated to sell the T-shirts to Billie at $5.00 each?

4 .You have had enough of Donna’s mistakes; losing scarves, getting you drunk, mixing up signage. You terminate her employment. As she is leaving she fires off the following words to you, “I am going to join another café and wherever I go I am going to help make it so much better than your silly Doctor Who business.”

You point out to Donna that when she was hired 12 months ago you put into her contract an express clause that says: “I, Donna, agree, upon my leaving the employment of TARDIS Pty Ltd, not to work at any other café within five kilometres radius of any Doctor Who café, for a period of 24 months.”

She has signed the contract at the end and remembers reading that clause.

5 .TARDIS Pty Ltd has decided to open another café in Norwood. You have found an ideal premises on The Parade and you have made enquiries about it. You decide to go ahead with the lease.

What is the landlord required to give you in writing in relation to the lease?

You notice one of the ovens is not working properly. What is the landlord’s obligation in relation to fixing the oven?

6 .In your new café at Norwood, you want to install old cinema row seats alongside long tables. These seats are in sets of 4 seats, and each set needs to be bolted to the floor. They will stay there indefinitely and will not be unbolted and moved around because that would involve a lot of work.

Will TARDIS Pty Ltd be able to take the seats when they vacate the premises in due course?

1 .This case is a classic instance of the use of the exemption clause also known as the exclusion clause. The exemption clause traditionally seeks to absolve one party from certain liability in a contract. The party that drafts the contract is usually the one that will include the exemption clause in the contract. The clause could seek to protect the drafting party from negligence, damage, non-performance or loss (Lawson, 2011). Including the exemption clause is common practice in applications of consumer law but is also used in other cases quite liberally. The effectiveness of this clause depends on how well it has been drafted. The only rules that I would consider while relying on this clause are that it should have been clearly indicated in the contract; and that it is not contrary to any other law. If the clause satisfied these two conditions, then, I could rely on it knowing that it is legally binding.

Clarity of the clause including its visibility would have been very important factors in the case. Travis could use the fact that the disclaimer was printed on the back of the ticket against us. He could argue that he only saw the exemption clause upon coming back to pick his scarf. If we look at the case Thornton v Shoe Lane Parking Limited, we will realise that availing the notice early enough as well as clear enough to the other party are key determinants of the validity of the clause. In this case, Shoe Lane Parking Limited could not rely on a clause printed at the back of the parking ticket since the ticket was given after the driver has purchased the parking service, and he was only made aware of the clause after making the decision to park there.

Similarly in our case, it would be difficult to rely on the exemption clause to protect ourselves from the responsibility of the loss of Travis’ scarf simply because the clause was not printed on the fore side of the ticket. It would therefore be easy for Travis to claim that he never saw the clause and that he might have made a different decision had he seen it. Otherwise, if we can get Travis to admit that he read and understood the clause before leaving his scarf, we could rely on the clause to protect TARDIS Café from compensating Travis for his loss. Normally, the exclusion clause will be interpreted as narrowly as possible which makes it important for the drafting party to exercise utmost rigor when including it in a contract (Connel & Maison, 2015).

2 .This situation is complex and would require a deep analysis to determine whether there was a contract or not. First, we will have to establish whether the arrangement satisfied the three basic requirements of a contract which are: a mutual agreement to do something; an intention to make it legally binding; and, the involvement of or the exchange of a valuable item(McKendrick, 2014). From the scenario, we can easily conclude that there was a mutual agreement between the intoxicated directors and Seamus to purchase the pizza grill. Seamus presented the deal to the directors: “…you can have it at $5000…” and the directors responded positively: “Yes, we accept…”

However, there arises the issue of incapacity – the directors could have been in no capacity to enter a contract. According to the Australian Contract Law, intoxication besides mental disorder, bankruptcy, and being of minor age are some of the circumstances that can render one without capacity to contract. So, we need to determine if the two directors were in a positionto understand the nature of the agreement and what was generally being discussed to definitively conclude that they were in a capacity to contract (Carter, 2012). We can conclude that, despite their intoxication, the directors were still in a position to understand the offer that was presented to them by Seamus. In the case Blomley v Ryan, intoxication is not considered as a reason enough for Ryan to resile from the contract. Therefore, inasmuch as the directors were not intoxicated beyond capacity to reason, the first condition of willing mutual agreement is fulfilled

Secondly, we need to establish if there was an intention by both parties to make the arrangement legally binding. From the conversation held between the directors and Seamus regarding the sale of the oven, there is no indication, by either party to make the arrangement legal. In fact, for the directors the conversation ends as a joke as they laugh off to the ground. Seamus too did not exhibit any intention to make the agreement legally binding. Therefore, this condition does not seem to be fulfilled at all.

The last condition we would look at is if the contract would involve the exchange of a valuable. Indeed, if the deal had gone through, an item of value would have been exchanged. Therefore, with regard to exchange of a valuable, this condition was fulfilled. Evaluating the three conditions, we can conclude that no valid contract was made since there was no intention whatsoever by either party to make the agreement legally binding.

3 .The Australian Consumer Law requires that businesses provide their consumers with accurate pricing information and that which is not deceptive or misleading (Corones, 2013). Errors in pricing may occur naturally leading to a dilemma whether the seller should take responsibility for the error. The decision on whether the seller should honour the wrong price is never straightforward. Donna might have made a genuine mistake and had no intention to defraud the buyers of the mugs and T-shirts. In this case, TARDIS Café would not have been obligated to sell the T-shirts at $5.00 each. However, it might have been necessary to demonstrate that Donna had made a genuine confusion in the pricing and that it was not an attempt to fleece unknowing customers. The company policy offering remedy on wrong pricing would have given a clearer guide to settling the claim; but the sale of the T-shirts and mugs just came up as it is not part of our core business.

To support our exemption from selling the T-shirts at $5.00 each, all the T-shirts were labeled with the same wrong price. In this case, the Consumer Law would protect the seller from the loss that would be incurred by selling the entire stock at the wrong price. However, we must correct the price before accepting Billie’s payment. If Donna makes a further mistake and accepts Billie’s payments for the T-shirts at $5.00, the contract would be complete and we would have nothing against Billie. Provided that, under the Australian Consumer Law, Donna’s actions cannot be interpreted as misleading and deceptive conduct, she will not be obligated to sell the T-shirts at the wrong price.

4 . Post-employment restraints such as the one stated in her employment contract are normally not enforceable if not carefully drafted (Thomas, Bishara & Martin, 2014). I, as the drafter of the conditions, will have to demonstrate reasonability of the restraint at the time of its agreement; I will have to show that the conditions made sense and were not just coercive because the other party was in need of a job. For the restraint to be enforceable it has first to be reasonable and not contrary to public policy besides fulfilling other conditions. In common law practice, such restraints cannot be imposed solely on the basis of restraining competition from the former employee or preventing them from using their skills or expertise in another employment.

However, there are circumstances where the post-employment restraint would be easily enforceable (Golding & Howe, 2015). For example, if Donna had received special training or held confidential business information, we could enforce restraints on her on the presumption that her employment in a nearby restaurant could be detrimental to our business. If there is sufficient reason to believe that she has specific information about TARDIS Café that she could avail to our competitors, we would be able to enforce the restraint clause in her employment contract.

Another practicable situation where we could enforce the restraint on Donna is in the event that there is a possibility of her poaching our customers. Donna was always the person in direct communication with our clients and therefore there is reason to believe that she might have made personal contacts with a majority of the frequent clients. If it is true that indeed she has established personal relationships with our clients, her employment at a nearby restaurant may mean that she will go away with “her customers”. For this reason, we may be able to enforce the restraint on her. Furthermore, Donna can be quoted threatening us that she is going to join another café and help make it better than ours. Her words could mean that she has something solid such as information or established customer relationships that she can use in favour of our competitors. On this ground, we can also enforce the restraint on her.

Generally, enforcing a post-employment restraint would be difficult. Besides fulfilling the above prerequisites, the conditions such time and geographical area of implementation set out in the restraint must also be reasonable (Morris, 2014). In my opinion, the period of two years seems too long for the condition to be fulfilled. We should be able to find mechanisms to protect ourselves from competition or other detriments perceived to be causable by Donna’s exit in less time than two years. This duration may therefore make the restraint unenforceable as it is. In a recent ruling between HRX Holdings Pty Limited v Pearson, a restraint clause was enforced on Mr. Pearson after leaving HRX since he was the “primary face of the company”. However, he continued to receive his monthly salary for the period of the restraint.

5 .Lease documents

Unlike some other contracts, the agreement to lease or rent a unit, townhouse or apartment must be expressed in writing. The primary document needed in house lease contracts is the General Tenancy Agreement also known as Form 18a (Australia, 2015). I will require this form to be completed by the landlord or his agent before I pay any money or commit myself to the tenancy. I will need the General Tenancy Form and not the Residential tenancy agreement (Form 1AA) since the lease is for commercial and not residential purposes. All the terms and conditions indicated by the landlord or his agent must conform to Residential Tenancies Act 1997.

Landlord’s obligation in repairs and maintenance

In common law practice, the landlord is generally obligated to provide safe amenities to the tenants. Among the landlord’s specific responsibilities is ensuring that all installations are working as required. They are also required to regularly maintain the installations to ensure they keep working as required of them. However, the landlord can only maintain installations and fixtures that belong to them. If the oven was installed in the premise before the lease and is part of it, then the landlord has the duty to ensure that the oven is fixed at their cost. Nonetheless, he can be absolved of the duty if it has been stated expressly in the agreement that the lease does not include installations such as the ovens. If we wish to have the oven fixed, we can submit a request for repairsform to him.

6. Tenancy agreements generally prohibit the tenants from installing fixtures or carrying out repairs, alterations and renovations without the consent of the landlord (Cooper, 2015). The landlord is not obligated to agree; but if he does agree, he is not obligated to reimburse the tenant for expenses incurred. TARDIS Café must obtain written permission to install the seats, otherwise, they may be served with a Notice for breach of duty to tenant of rented premises ("Housing and accommodation - Consumer Affairs Victoria", 2016). If it is agreed in writing to install seats in the premises; and the agreement allows TARDIS Café to take its seats upon the termination of the lease, then they will be expressly allowed to take the seats in due course. If the lease agreement does not include a clause regarding the fate of the seats upon termination of the lease, the determination will be different.

In the case Vopak Terminal Darwin Pty Limited v Natural Fuels Darwin Pty Limited, the case was ruled that Natural Fuels be given time to remove its installations from the land leased from Vopak. After the expiry of the duration to remove the fixtures, Vopak applied to the Court to be allowed to treat the property of Natural Fuels as if it were their own. In its determination, the Court decided that anything fixed on the land becomes part of the land. The Court ruled in favor of Vopak as the time allowed for Natural Fuels to remove their property has lapsed.

Following this precedence, TARDIS Café will be entitled to remove the seats and restore the premises to their original state within an agreed period. All along, they must acknowledge that the seats became part of the leased house immediately after their installation. There is no law that prevents tenants’ fixtures from becoming part of the building on which they are fixed. Therefore, it is up to the tenant to incur the cost of removing the added installations otherwise they be taken up by the landlord. However, if the fixtures were approved for installation by the landlord, he must provide reasonable time to allow the tenant to remove them.