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.
(a) Will Bill have to pay this amount to Anne?
(b) Would your answer be different if they both agreed that Bill would pay the $4,000 on 12 December 2015 and Bill paid on that earlier date? Explain your answer.
Problem 2 (10 marks)
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?
Problem 3 (5 marks)
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.
Problem 4 (10 marks)
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.
a) What will you advise Grant who has come to you very distressed and fully expecting to successfully sue Eagle Eye? (NB ignore any possible statute law issues)
b) Ignoring any possible statute law issues, what would your advice be if the clause was different to the one above, instead stating the following?
Eagle Eye Security does not accept responsibility for any loss or damage to property however such loss or damage may arise or be caused.