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LAWS11061 Contract A

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Question 

The Smashed Avocados’ Smashing Success

The Smashed Avocados are a small hipster band who have been rehearsing for about 1 year in a garage in the outer northern suburbs of Melbourne.  The band includes Maria, who is the lead singer, and her two sisters, Shari and Sally, who play drums and bass guitar.  Rikuto is not related to the others, but has a wicked synth, and joined the group about 6 months ago.

Following their long stint of private performances, the band decides it is finally time to enter the big time.  They decide to book the band room at the Northcote Anti-Social Club on High Street in Northcote, one of Melbourne’s hippest suburbs.  They plan to raise some extra money with a cover charge, to go into a fund to go on tour.

They ask Ned, a close friend and fan of the band, to work on the door.  Ned has worked hard promoting the band on social media, and through original art, which he has turned into poster advertising for the night.  Ned has also run off a batch of bootleg CDs of a jam session that he recorded while the band was rehearsing. He sets them up behind his desk at the door, with a sign that says “Smashed Avocados, limited edition bootleg release, $15”.  He works out that the profit will be $750 between them, with very little outlay.  Proud of himself, Ned awaits a customer.  He feels that the group, including himself, will be able to go on tour after the night, partly due to the band’s talent, but also because of his business savvy.

Following a scorching set by The Avos, the bootleg CDs are selling like hotcakes.  Shortly, Ned is down to his last 10 CDs.  At this stage, Maria approaches the desk.  She tells Ned the CDs are way too cheap, and that he must start selling them for $30 per CD.  Ned agrees, and when the next customer approaches the desk asking for a CD, Ned tells him the price is now $30.  The fan says he only has $20 left in his pocket.  He was planning to use it for an Uber ride home, but will walk if he can have a CD for $20. Ned feels sorry for the fan, and says “Okay, you can have the CD for $20.”  Another fan standing behind the first one, overhears the conversation and asks if she can have a CD for $20 also.  Ned says the price has gone up due to popular demand, and he cannot sell any more for under $30.  The fan takes a picture of the CDs on display with the $15 price tag and tells Ned the band will be hearing from her once she has approached a consumer affairs centre.  She says she must be allowed to have the CD for $15, as that is the price advertised.  After capturing a couple of pictures on her smart phone, the fan walks away.  Ned is anxious about the confrontation, and quickly removes the sign advertising the CDs.

Glowing from the success of the gig, and the half bottle of champagne she has drunk, Maria jumps onto the stage and announces that they will be auctioning off a band poster signed by every band member. Half of the proceeds will be going to the Organic Biodynamic Fairtrade Avocado Society, which encourages ethical farming methods of Avocados around the world.  She pulls one of the beautiful posters designed by Ned off the wall and is the first to sign it.  A crowd gathers around Maria, looking to put in the highest bid.  It quickly escalates up to $150.  Before the auction is completed, Sally tells Maria that Rikuto had developed a headache straight after the show, and had to jump on the 86 tram home.  He therefore will not be able to sign the poster.  Maria calls off the auction.  Frankie, the highest bidder to that point, gets angry and says the poster is his, as he is the highest bidder.  He says he has studied law and knows that once the reserve price has been met, the seller is contractually bound and must give the item to the highest bidder.  Maria, who studied fine arts, knows nothing of contract law, and does not know what to do.    

Meanwhile, Sally, Shari and Ned are counting the door money, including the money made on the CDs.  It looks like there will be enough there to go on tour.  Ned asks Sally and Shari “Where will be our first stop?”  Sally and Shari tell Ned that he will not be going on tour with them.  It is much cheaper for them to hire people to work on the door at each venue, rather than pay for transport and accommodation for a non-band member.  Ned is upset, as he thought he was a close friend of the band, and practically a member of it, due to all the unpaid work he has put in.  He says that the bootleg CD idea was his, and he now wants to be paid for the CD sales, time on the door, and original art.

Advise the Smashed Avocados.   What issue of contract arise from the various agreements they have entered into?  Refer to cases studied in contract A in your answer.

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