Part A

About Omnipresent Foods

Part A

Omnipresent Foods (OF) operates an on-demand foodstuff sales business. Their business is becoming increasingly popular with families in Auckland, mainly because they sell in bulk and at significantly lower prices when compared with other food stores in Auckland.  Persons intending to buy foodstuff from them would have to make orders via their website. Intending buyers have to select their desired foodstuff items from a digital list available on OF’s website. It is expected that buyers choose their preferred delivery date and their payment methods. As explained on OF’s website, buyers go about their purchase in any of two forms. They could pay online upon completing their selection of desired foodstuff items, in which case, a token is generated, which, among other things, contain the description ‘paid in advance’. This token is expected to be presented to the deliveryman at the appointed date and time of delivery. The other payment option is that buyers can choose to pay at the moment of delivery or a later appointed date, but they would have to pay a bit more than buyers who follow the other payment method.  Buyers who desire to opt for this method of payment also get a token, but this token would, among other things, read ‘IOU’. This IOU token is equally expected to be presented at the appointed date and time of delivery.

Recently, however, it has been reported in the Auckland Online Digest that three persons have expressed their intentions of pursuing separate legal actions against OF. One of them is Herman. Herman claims that he ordered 10 bags of cashew nuts from OF in the belief that the items were purely cashew nuts as described on OF’s website at the time. However, at the time of delivery, he received 10 bags of mixed nuts. Although each of the bags contained approximately eighty percent (80%) cashew nuts, they were mixed with peanuts, hazelnuts, and almonds.  OF responded to this claim that they had written a note against the particular cashew nut advertisement, stating that “cashew nuts may be combined with other forms of nuts”. Herman denies seeing any such note, and that even if he had seen it, the note was vague and uncertain as to what it clearly means.

Aaria is the second of these three persons. She claims that she had believed that by choosing the other payment option available on OF’s website, she would get a delivery of foodstuff items she selected. She claims that an IOU token was generated after she had made her order; however, at the appointed date of delivery, nothing was delivered to her. OF has responded that since Aaria had not paid for the foodstuff she supposedly ordered, there she had no contractual right enforceable against them.

Purchasing Foodstuff from Omnipresent Foods

Kambiz is the third person. He claims that he had also selected the other payment method and received an IOU token, but that before the appointed delivery date, he had made several phone calls and sent five emails to OF that he was no longer interested in the delivery of the foodstuff because his wife had arranged for foodstuff from another supplier. In any case, OF delivered the foodstuff to his home, but he refused to accept delivery. OF has charged Kambiz’s bank account which is linked to his subscription to their website. He is unhappy about this and claims he does not deserve such  harsh and ‘unfair’ treatment.

You are required to advise Herman, Aaria and Kambiz concerning their respective contract law rights against OF, arising from the individual transactions.

Herman claims that OF misrepresented the subject matter of the contract to him. Do you think he can succeed with a claim of misrepresentation against OF?—Explain your position.

Aaria claims that OF is in breach of the contract they had. Do you think there was a contract between OF and Aaria?—Explain your position

Kambiz claims OF is not entitled to charge his bank account and as such wants OF to retract such action. Do you think Kambiz effectively revoked his offer to buy from OF?—Explain your position.

Part B

Kris Rickett Digital Inc. (KRD) produces wireless headphones for exercise and fitness enthusiasts.  Their original market targets are Australia, Malaysia and Singapore. However, they decided to introduce their products into the New Zealand market before summer 2017. The management of KRD have studied the New Zealand market well, and they believe that they only way they can have a superior market position in the wireless headphone market is for their headphones to be adorned with colourful leather jackets (usually a blend of colours). This is because they know that the majority of fitness enthusiasts who buy wireless headphones are youths who like attractive accessories.

As part of the advertising campaign, KRD’s management has also secured a yearly renewable publicity contract with Loud Press, an online magazine trendy among New Zealand youths. Loud Press has promised to provide weekly adverts for KRD’s wireless headphones at half its usual advertising rate. Thus, KRD would be charged $2,000 monthly instead of $4,000 monthly.

KRD signed a $500,000 agreement with Tamaki Leather Place (TLP), a New Zealand company, for the production of colourful leather jackets needed for the adornment of headphones they plan to sell. When KRD and TLP signed the contract, KRD had explained the importance of prompt delivery by TLP, which was to enable KRD to meet the summer market and facilitate enjoyment of the cost-effective publicity contract with Loud Press. KRD did not inform TLP that it intended to sell its headphones for $200 instead of $100, the prevailing market price of wireless headphones in New Zealand.  

TLP failed to deliver the expected leather jackets until three weeks after the expected date of performance, even when the contract made it clear that timely delivery is an essential term. For this reason, KRD was not able to gain the summer market lead it had expected and consequently had to terminate the publicity contract with Loud Press.

KRD alleges that if TLP had not breached the contract, they would have sold at least 50,000 headphones, and therefore they would have made a net profit of 9,500,000 over the first two months. TLP, however, denies the possibility of such KRD making such profits within that period. TLP also argues that whatever real loss KRD might have suffered because of the breach, TLP should only be liable to the extent that KRD would have mitigated against the loss by selling the headphones without the colourful jacket (i.e. with alternative jackets).

Advise KRD on the following concerns:

(1)  Whether they can claim for compensation for contractual breach based on their plan to sell each headphone for $200.

(2)  Whether they are entitled to compensation for the cost of finding an alternative publicity contract.

(3)  Whether they can receive compensation for the cost of settling out of the contract with Loud Press.

(4) Whether KRD must mitigate their loss.