James owns a shop that specialises in new and second hand musical equipment. Several months ago Max came into his shop with an Ibanez guitar for sale. Max said that he had inherited the guitar from his uncle who used to play in a heavy rock band many years ago. He also said that he had no idea of its value. The guitar appeared to be a rare vintage genuine Ibanez Serpent like the one that Ozzie Manson plays in the heavy metal band, Doomsday, and James knew he could easily sell it for up to $20,000. Before buying any second hand musical equipment James would normally have an expert examine the piece to determine its authenticity, however, this time he was sure that the guitar was an original Ibanez Serpent. James offered Max $1500 for the guitar which Max eagerly accepted. James then advertised the guitar in Guitar Hero magazine as follows:
Classic Vintage Guitar - the original Serpent Ibanez - the same one as played by Ozzie Manson in Doomsday - price negotiable.
Kim, the proprietor of a local night club, inquired about the guitar. As his club supported the live music industry Kim thought that such a guitar on display in his club would be a welcome attraction for both artists and patrons. Kim offered $10,000 for it which James rejected saying: "This guitar is a genuine Serpent Ibanez which I could easily sell for $20,000; however, I am prepared to sell it to you for $15,000 and that includes having it serviced before sale". Kim said that he needed to sort out his finances so could he let James know by the end of the week? James agreed.
During the week James took the guitar to All Guitars - Services and Repairs to have it serviced in readiness for sale. This was when he discovered that the guitar was not an original Ibanez Serpent, but a clever copy. The manager of All Guitars informed James that about the same time that the Ibanez Serpent was made in Japan a number of imitations were also made in the United States. He also said that only a few of them were made and that it would now be extremely rare to find an original Serpent Ibanez for sale in Australia.
Kim returned at the end of the week to buy the guitar for $15,000. James failed to mention that he had recently discovered it was a fake.
Kim displayed the guitar on the wall in his club proudly explaining to anyone who inquired that "it was an original Ibanez Serpent just like the one that Ozzie Manson plays in Doomsday". The guitar did generate a good deal of interest and Kim had many offers to buy it. One such inquirer was Robbie, the lead guitarist of a band called The Rebellion. Robbie thought that the guitar would provide a good look for the band, so he offered Kim $20,000 for it. Although Kim was sorry to part with it he could not afford knock back such a generous offer.
Soon after purchasing the guitar several of the strings broke so Robbie had to take it to All Guitars to have them replaced. The manager of All Guitars told Robbie that he had only recently serviced the guitar, however, was not at all surprised that the strings had broken. He told Robbie that the guitar was not an original Ibanez Serpent, but an imitation, and was therefore of inferior quality. He told Robbie that it was not suitable for heavy duty use and probably only worth around $800. Robbie is now demanding that Kim return his money, however, Kim is refusing because it is not his fault that the guitar is not an authentic Ibanez Serpent as this is what he was told when he bought it from Max.
ANSWER ALL OF THE FOLLOWING QUESTIONS
1. Advise Robbie whether he is entitled to get his money back from Kim?
2. Advise Kim whether he has any cause of action against James?
3. Assuming that James never took the guitar to All Guitars for a service (so that he never found out that it was not an original) would Kim still have any cause of action against James upon discovering that the guitar was not an original Ibanez Serpent?