Case Study: The Beacon group of businesses
Questions on Offer and Acceptance
Problem 1: Algol Rigel works with her brother Altair Rigel in a small tourism business known as Beacon Tours that operates in Tasmania. To promote the business Algol creates several vouchers. These vouchers confirm that for the first ten customers that bring the voucher plus a friend to the business premises on a weekday that they will be entitled to a tour of Port Arthur for an introductory price of $50. Normally such tours are conducted by Algol's business at a price of $200 per person. The brochures are placed into a number of letter boxes in suburbs around Hobart and Launceston.
The next Monday Horton Hearsa who arrives at the business with his friend Ned McDodd and they claim the right to be taken on the tour of Port Arthur that same day. Algol tells them that the vouchers were just promotional. Horton disagrees. Both are friends of yours and have sought your assistance.
Required: Advise Algol and Horton using the principles of offer and acceptance.
Questions to Consider:
- Has a valid offer been made?
- Has that offer been accepted?
- How was acceptance to take place?
- Is there agreement?
Problem 7: Altair and Algol are approached by Vega a 16-year-old daughter of a friend, Vernon. She asks if she can come along on a tour to Cradle Mountain and watch how Altair and Algol interact with their guests and conduct their tours. Altair and Algol are impressed by Vega so when she next asks to come along on a tour they agree. Vega continues to come along on tours as she can around her schooling and in fact starts assisting both Altair and Algol. After four months Vega's father Vernon approaches Algol. He believes that Altair and Algol owe his daughter money for the work that she has done for their business.\
Required: Using just the principles of contract law (and if you chose employment law) do you believe there is a contract between Vega and Altair and Algol? Should Algol and Altair wish to allow Vega to continue playing an active role in their business, what should they do?
Problem 8: Algol and Altair now trade under the business name Beacon Tours. Recently they secured a contract with an international travel company to conduct a tour for 15 indigenous Finnish business people. Pursuant to the contract with the international travel company they were to undertake three days of training about Sami culture before collecting the 15 travellers from the Hobart airport. Because of some extra work Algol and Altair were too busy to undertake the 3 days of training.
The delegate for the international travel company wish to terminate the agreement. They assert that the undertaking of the Sami culture course was a fundamental term in the contract.
Required: Advise Beacon Tours if the international travel company can terminate the agreement?
Questions to Consider:
- How important is the requirement to undertake the training course?
- Is it a term or merely a representation?
- If it is considered to be a term, is it a guarantee?
- What test do the courts use to determine if there is a guarantee?
- If it is a guarantee, what remedy will be available to the travel company?
Problem 9: Beacon Tours has recently developed its own uniform for Algol, Altair and Vega Vaspasian its newest employee. Vega is now 18 years old and as part of her work for the business she took all three uniforms to be dry cleaned at 20 Minute Cleaners Pty Ltd. After handing over the clothes and paying for the cleaning Vega received a docket. On the reverse side of the docket was the following statement:
"we accept no responsibility for goods damaged during the cleaning process". 20 Minute Cleaners Pty Ltd did not take reasonable care of the uniforms and, as a result, they were damaged.
Required: Advise Beacon Tours as to whether the dry cleaner is liable to compensate them for the damage caused. Note the operation of ss 54 & 55 re guarantees under the Competition and Consumer Act 2010 (Cth).
Questions to Consider:
- Is there a contract between the parties? If there is, has the exclusion clause on the receipt become part of the contract? Would a reasonable person have regarded the document as one that would contain contractual terms and not one that would be regarded as a mere receipt?
- Does the ACL apply here?
- If it does, can the plaintiff rely on Pt 2-3?
Problem 12: Altair Rigel wants to surprise his wife Bella for their 30th wedding anniversary so visits a local jewellery shop in Hobart. The owner of the jewellery business is Formalhaut who knows Altair quite well, having taken a number of Beacon Tours over the past few years. Over the phone Altair confirms with Formalhaut that he wants a necklace made for his wife from red beryl and white gold. A design is agreed and so is the price of $3 000. The pendant is to ready for collection by the day before Bella's birthday on the 10th November. Altair pays a $1,000 deposit and agrees to return on the 9th November to collect the pendant.
Over the next few days Altair proudly tells a few friends that he is having a special pendant made by Formalhaut for his wife. He tells a number of his friends over a luncheon one day and this is overheard by some local villains. On the 9th November one of these villains attends Fomalhaut's jewellery shop claiming to be Altair. He confirms he is there to pick up the pendant for Bella. Unfortunately, that day Formalhaut is away so he has left his new shop assistant Sirius in charge. Sirius has never seen Altair but was aware that he would be coming in to collect the pendant. Sirius hands the pendant over to the villain. Later that day when Altair attends the jewellery shop the error is discovered. Required: Advise Altair and Formalhaut if the legal principles in relation to mistake as to identity is relevant here and who, if any does it assist? Also, applying its principle what might be the expected outcome and is this a fair result?
Problem 13: The business Beacon Tours has been running profitably for some time and Altair and Algol decide it is time that the business makes some investment decisions. They talk to their financial advisor Iota Draconis and she suggests looking at buying shares in a newly formed company Wombat Wonders Ltd. Altair confirms that he knows the managing director of the company Sigma. Altair contacts Sigma and asks to meet him to discuss the purchase by him and Algol of shares in Wombat Wonders Ltd. Sigma and Altair meet over lunch. Sigma confirms that Wombat Wonders Ltd is a Tasmanian construction company that wants to expand to enable it to tender for construction work in Devonport Tasmania. Sigma provides Altair with a copy of the company's prospectus that sets out details around the current business operations and in relation to what the company intends to do with the funds raised by the sale of new shares. That prospects contains a number of misrepresentations. Sigma is aware of these misrepresentations but does not disclose any of this to Alistair. In reliance on both the oral statements made by Sigma and the statements made in the prospectus Altair and Algol purchase $200 000 worth of shares in Wombat Wonders Ltd. Six months after purchasing these shares Wombat Wonders Ltd is placed into liquidation.
Required: Using just the principles of misrepresentation (leaving director's duties and breaches of the Corporations Act (2001) as topics we will consider later in unit) do you believe that Altair and Algol may be able to sue Sigma?
Problem 16: Having suffered some recent financial lose Altair Rigel, a Tasmanian business man, pays his friend Orion, a director of several Australian listed companies, $15,000 for "inside information" which he intended to use in determining how to invest profits made by his business Beacon Tours. Insider trading is a criminal offence pursuant to the Corporations Act 2001 (Cth), s 100G. Orion has since failed to provide any information to Altair and has indicated that he has no intention of ever doing so.
Required: Advise Altair as to whether he can recover the $15,000 already paid.
Questions to Consider:
- What is the purpose of the contract?
- Is it contrary to public policy?
- Does it fall within one of the classes of contract illegal at common law?
- Will Altair be able to recover his money?
Problem 18: Algol and Altair intend purchasing a rival tourism business from a local entrepreneur. They wish to ensure that he cannot set up a competing travel business or tourism venture within 12 months after the purchase or they believe that the investment will not be viable.
Required: Advise Algol and Altair as to how far they can go with respect to restraining the vendor's freedom of trade. What if they go too far?
Questions to Consider:
- What area of law is the question concerned with?
- Is a contract in restraint of trade valid or void?
- If a contract in restraint of trade is prima facie void, what does this mean?
- How can Algol and Altair protect themselves then? What factors determine whether a restraint is reasonable?
- What is the effect on Algol and Altair if the clause they insert is not reasonable?
- See Nordenfelt v Maxim Nordenfelt Guns and Ammunition - is it a useful precedent here?
Problem 21: Beacon Tours, a Tasmanian tourism business has recently expanded into catering as Vega one of their employees had been sponsored by the business to take a cooking qualification. This was a good addition to the business as feeding and entertaining paying guests has become expected. In October 2019 Beacon Tours, trading under their newly registered business name of Beacon Catering, agreed to cater for a wedding on the 12 January 2020.
A term of the contract provided for the food to be delivered to the wedding venue 'before 7 o'clock' on the 12 January 2020. Believing that it is an evening wedding Beacon Catering had the food ready and attempted to deliver it to the venue by 6pm on the 12 January 2020. The customer, Canopus, who had contracted them refused to accept the food saying that the food was supposed to be delivered by 7am on the 12 January 2020 and that the wedding took place at midday and that therefore it had already taken place and food had been purchased last minute when Beacon Catering did not show up by 7am. The customer therefore refused to accept delivery due to the lateness of the hour.
Required: Can Beacon Catering sue Canopus for damages for non-acceptance? Is Beacon Catering liable to be sued by Canopus for breach of contract for failure to deliver?
Questions to Consider:
- Is the attempted delivery an issue of tender?
- What has to be established for a good tender?
- What did the contract say about delivery?
- Does the plaintiff's action in attempting to make the delivery at 7pm satisfy this criterion?
- Note the operation of the Sale of Goods legislation in relation to delivery
Problem 22: Beacon Tours are looking to expand and are wanting to purchase land in Latrobe in Tasmania to build an amusement park. They find some land that they believe might be suitable. They are aware however that they will need the permission of the local council to erect an amusement park on the land. Beacon Tours enters into a contract with the vendor of the land that contains a clause which states that the contract is subject to and conditional upon the approval of the local council within six months or Beacon Tours could cancel the contract.
After 5 months it became evident that the local council would not support an application to erect an amusement park, so they would not give approval. By this stage however Beacon Tours had realised that the land had many other uses and they wished to proceed with their purchase and erect a warehouse on the property.
Beacon Tours therefore waived the condition about obtaining council approval, but the vendor is now refusing to complete the sale to Beacon Tours.
Required: On the basis of contract law, in particular the principle of contingent conditions, do you believe Beacon Tours can force the vendor to complete?
Problem 26: Algol contracts to purchase an antique merry-go-round carousel from a collector living in Railton Tasmania. Algol's business Beacon Tours has expanded into adventure tours and is wanting to further expand into the provision of amusement rides. She has been unable to locate any other merry-go-round carousels for sale anywhere else in Australia and so to find one in Tasmania has made her very happy. She negotiates what she thinks is a fair price of $28, 000.
On the day arranged for payment and collection the owner of the merry-go-round informs Algol that he had 'changed his mind' and 'would not part with the merrygo-round'. Algol wants an order for specific performance.
Required: Advice Algol and Beacon Tours.
Problem 28: Algol is looking at purchasing a forklift truck to assist in moving the equipment that Beacon Tours has purchased. She asks a friend for advice about forklift trucks and she directs her to a Melbourne based business.
Algol telephones this business and confirms that she needs a forklift for 'general equipment moving'. The salesman recommends a brand and she purchases a second hand one for $35,000. The forklift is delivered to Beacon Tours' address in Tasmania. The first time the forklift is used to move a merry-go-round carousel owned by Beacon Tours it becomes so overheated that it is unable to be used.
Required: Advise Algol.
Questions to Consider:
a. Which legislation applies, Sale of Goods or Australian Consumer Law?
b. Is there a contract?
c. Is it a contract for the sale of goods?
d. Do any of the implied terms in Schedule 2 of the ACL apply?
e. Is the forklift fit for its purpose?
f. Has the buyer made her purpose known to the seller for which the goods are required?
g. Has the buyer relied on the seller's skill and judgment?
h. Are the goods of a kind which the seller normally sells?
i. Has the buyer bought under a trade or patent name?
j. Is Algol entitled to return the forklift and obtain a full refund?
Problem 32: Algol and Altair are keen to get their Tasmanian souvenirs sold in Queensland.
They meet a Cairns businessman, Greg, at a conference and, after much talk, but with nothing in writing, they come to the following business arrangement:
- Beacon Fun Stuff Pty Ltd is to supply Greg with a range of their most popular souvenirs but the items remain the property of Beacon Fun Stuff Pty Ltd and will be displayed as such;
- Greg is to sell the items to his customers and pay Beacon Fun Stuff 85% of the proceeds.
Required: What is the legal nature of Beacon Fun Stuff Pty Ltd's and Greg's arrangement? Would it be different if Beacon Fun Stuff Pty Ltd were to simply sell souvenirs to Greg?
Questions to Consider:
- Has an agency agreement been reached between Beacon Fun Stuff Pty Ltd and Greg?
- Has an agency agreement been expressly created?
- Does an agency agreement have to be created in writing or can it be created orally?
- Who is the principal in such an arrangement?
- If Beacon Fun Stuff Pty Ltd sells souvenirs to Greg, is there any contractual relationship between Beacon Fun Stuff Pty Ltd.'s and Greg's customers?
- Is this an issue of privity of contract?
Problem 35: Vega, an employee of Beacon Fun Stuff Pty Ltd knows that her employees Algol and Altair Rigel are looking to purchase a new transit van.
On her way home one day she spots one parked on the side of the road. The owner, Charon is with the vehicle and he chats with Vega. Vega explains that her work Beacon Fun Stuff Pty Ltd is looking for a new van. The owner Charon agrees with Vega to sell the vehicle to Beacon Fun Stuff Pty Ltd for $28 000. He agrees to have it professionally cleaned and new tyres put on and that he will deliver it to Beacon
Fun Stuff Pty Ltd.'s business premises in three days' time.
Charon does as he said he would and arrives at 9am on the appointed day. When he approaches Algol, she tells him she knows nothing about the agreement to purchase a vehicle form him. She confirms that Vega is an employee but not an agent for the company and that therefore there is no contract. Charon has spent $1500 on new tyres and lost a day's work to deliver the vehicle. He claims that Vega is an agent and that therefore Altair and Algol are obligated to complete the purchase.
Required: Advise the parties.
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