LAW6000: Jeff Owns a Business that makes and sells a well-known Brand of Peach Brandy: Business and Corporate Law Assignment, LIU, Australia

Question 1

Jeff owns a business that makes and sells a well-known brand of peach brandy (“the Business”). Jeff holds a business name, and a trademark for a logo, associated with the Business’s brand of peach brandy. Business sources fruit from local producers. The Business is operated on land which is also owned by Jeff.

Jeff decides it is time to sell the Business and is introduced to Tina who is interested in buying the Business. Jeff and Tina enter into negotiations and agree on a deal. Both Jeff and Tina sign the following document which Jeff prepared.

Heads of Agreement between Jeff and Tina

1. Jeff agrees to sell, and Tina agrees to buy, Jeff’s peach brandy business and the land it is on.

2. Purchase Price: $2.5 million.

3. All existing supplier agreements to be transferred to Tina.

4. All fixtures and fittings, as inspected and agreed, are included in the sale.

5. All employees to be transferred as per solicitor prepared agreement.

6. Parties to negotiate the transfer of trademark and business name at a future date for a separately determined amount.

7. This agreement is subject to the preparation of a formal contract of sale based on these terms acceptable to the duly appointed solicitors for Jeff and Tina.

Jeff arranges for his solicitor to prepare a formal contract for sale and then sends the completed contract to Tina. When Tina receives the contract, she calls Jeff and says: “Jeff, I have changed my mind. I don’t want to buy your business anymore”. Jeff replies: “ You have got to be joking Tina, it is way too late to change your mind, you have already signed the Heads of Agreement. You are legally bound to buy the business. Make this easy and buy it as we agreed for I will have to sue.”

Required:

Part A

You are Tina’s solicitor. Using the IRAC legal problem-solving process gives your conclusion on whether Tina is legally bound to buy the Business as a result of signing the Heads of Agreement.

Part B

What would be your conclusion if Tina had included in the Heads of Agreement a term stating: This agreement is subject to Tina obtaining suitable finance

Question 2

Save a lot Shopping Centre Ltd (“SSC”) recently opened a new store in your city. SSC is a membership warehouse club: – this means customers must become a member before they can shop at SSC. As a new business in the area, SSC was keen to attract as many new members as possible so it started an advertising campaign.

The advertising campaign included a catalog with the following wording at the top of the front page in large bold font:

Do you want to save $$$$ you know you do!!!!!!

Huge savings for all new members

Get a HUGE 25% off all products if you join right now! Today in fact! 30 days only!

Memberships will go fast, first in best dressed. Be late be disappointed – memberships are limited At the very bottom of the advertisement, there is additional wording in very small print which states: “The 25% price reduction for new members only applies to the first $150.00 of items purchased. Fruit and vegetables excluded.”

Dess saw the advertisement flyer and picked it up. Dess thought he could save money by buying bulk supplies for his large family, however, he basically stopped reading at a 25% discount and didn’t notice the fine print.

Dess didn’t want to miss out on the limited memberships, so he went to SSC the next day and paid a $10 monthly membership fee, signed some terms and conditions which he briefly glanced at, got his membership card, and started shopping. Dess filled five trollies with bulk household items worth about $1200.00.

At the checkout, Dess is told that the 25% discount only applies to the first $100.00 of items purchased. Dess complained and was referred to Miss Strict, a “customer care representative”. Miss Strict showed Dess the fine print in the advertisement. Dess got very angry and decided not to buy anything. Dess then asked Miss Strict to cancel his membership. However, Miss Strict reminded Dess he signed the terms and conditions which included the following term:

1. The Customer is not permitted to cancel the membership before the expiry of 12 months unless the customer pays a cancellation fee of $150.00.

Dess attempted to negotiate with Miss Strict arguing it was just ridiculous to have such small printing and this was entirely unacceptable to charge $150 to cancel a $10 membership, However, Miss Strict told Dess:

“This is your fault, you should have read the advertisement more carefully, and you indicated you read the terms and conditions by ticking this box and signing the terms and conditions. I think it is unreasonable you think you have grounds to complain.”

Dess stalks out of SSC and decided to lodge a complaint with the Australian Competition and Consumer Commission (“the ACCC”).

Required

Part A

Using the IRAC legal problem-solving process gives your conclusion on whether the ACCC has any grounds to start legal proceedings against “SSC”?

Please limit your response to a consideration of the general protections under the Australian Consumer Law.

Part B

Using the IRAC legal problem-solving process give your conclusion on whether the ACCC has any grounds to start legal proceedings against “SSC” if Dess had purchased food for use in his café?

Question 3

Phil is managing director of LightsBright Pty Ltd. Phil has accepted a large order for electrical fittings from CheepCheep Pty Ltd on behalf of LightsBright.

The order has been delivered to CheepCheep as per the agreed terms, however, CheepCheep has not paid they’re $75 000 invoices.

CheepCheep is in serious financial difficulty and this was well known or suspected across the industry.

Consequently, at the time the order was made, CheepCheep was known generally as a bad credit risk in the industry. Phil was aware of this, however, he is a good friend of Robert, the managing director of CheepCheep. Phil decided to provide the order in any event.

CheepCheep has now been placed into liquidation and has still not paid the debt owed to LightsBright Pty Ltd.

Required

Using the IRAC legal problem-solving process give your conclusion on whether:

(a) Phil, the managing director of LightsBright Pty Ltd be held personally liable for the unpaid debt, and if so why?

(b) Could Robert, the managing director of CheepCheep Pty Ltd be held personally liable for the unpaid debt, and if so why?

(c) Will the ‘business judgment rule’ be relevant to either Phil or Robert in these circumstances?