ACTY5320 Law of Business Obligations Assignment Sample

• Subject Code : ACTY5320
• University : Unitec My Assignment Services is not sponsored or endorsed by this college or university.
• Subject Name : Law

Case Study: Property Law Assignment

Question 1

Brief Facts

Jane wanted to buy a property from Diane, the owner of the property. They started discussing the terms of the sale and landed on $1.4 million. Jane, having the backing of Sophie, her friend who promised her to help her in buying that property, showed her interest in the given offer. Seeing this, Diane handed her a signed agreement made by her lawyer on the given property to which Jane promised to give her acceptance the following day itself. That same day, when Jane went back home and discussed the offer with her friend Sophie, she was happy to help her and accepted the offer. Jane, in search of more information about the market value of the property, started talking to Janice, a real estate agent. The moment Jane told Janice about the property, she knew exactly which property was she talking about and went to Diane and made a higher offer of $1.6 million on behalf of the client. Diane accepted that and sold the property to Janice. This came to the notice of Jane and she the following next day went to Diane with the signed agreement and showed her discontent. Diane had no other choice but to be empathetic about it.

The issue is whether there was a valid contract between the parties?

Legislation

1. Contract and Commercial Laws, 2017.

2. Common law

Application

The foundation of New Zealand law of contracts is the common law of England. It has adopted it but as per time made some modifications too.

In the given problem, Jean and Diane never made a valid contract. Reason being, for a contract to be binding, there are some essentials that are to be fulfilled (University of Auckland, 2016):-

1. Intention to create a legal relationship

2. Offer

3. Acceptance

4. Consideration

5. Capacity to contract

Though this is not specifically mentioned in the act, it has been held in a varied number of cases and an accepted practice worldwide. The first and foremost step to contract is consensus ad idem meaning meeting of minds. This can be seen in the given case where Jean was offered by Diane a price of $1.4 million, she never gave her acceptance but said that she would like to check with a few things first. This clearly shows that there wasn’t a common consensus between the two. Also, when Diane handed over the signed agreement to Jean and Jean assured to come back with an affirmation from Sophie, her friend who was going to make the transaction happen, that following day, she didn’t show up. Hence, when Janice made a higher offer, Diane went for it as she was not lawfully binded by the contract. Acceptance must be communicated to the offeror. If the offeror does not know or have no knowledge about the offer that he made, then it is plausible of the offeror to think that the offer was not accepted. In Henthorn v Fraser [1892] 2 Ch 2, it was held that where the means of communication is to be by post, so it is acceptable when the post is posted.

A very known statement, “All contracts are agreements, but all agreements are not contracts” is quite applicable in this case. For an agreement to be legally valid, all the above-mentioned points should be satisfied. All contracts are agreements because that is the starting point of any valid contract, but all agreements cannot be contracted if any of the above-mentioned points get hindered. Therefore, the agreement between Jean and Diane is not a valid contract.

Conclusion

With the application of the laws, it is proved that Jean had no contract with Diane and that she cannot impose legal implications on her or Janice, as a matter of fact. She never accepted the given offer and she did not abide by the promise she made to give her acceptance the following day when Diane handed her the agreement. Hence, there was no sale, no contract, and no basis that she can impose legal implications on all of them. The basic five elements to the contracts have to be fulfilled in order to impose a breach of contract suit in the court.

Question 2

Brief Facts

Queens Property Limited (QPL) is one of the mega stars working as property dealers in New Zealand. They are planning on expanding their business by building medium to high density apartment buildings. Its project in downtown Auckland, where he sold around 80 apartments before the construction in 2016, made him have his loan sanction for around $40million. The directors and shareholders of the QPL kept their homes and others as security. the financers gave a deadline of 20 August 2020 and after that, they shall cease whatever assets they can and also call it the debt of immediate repayment. So QPL gave the construction contract to Greenstone Construction Limited. Under this, the deadline given to Greenstone was 15 July 2020.

The construction started in 2017 and was going on very well when in 2020, a pandemic aroused and put the project on a standstill since the construction work were made to stop. After this the purchasers started calling QPL is the apprehension that they might not get the deposit back as the market is going slump. So the board of directors got in a pickle situation as if they have to purchasers cancel on the project, they will not be able to re-sell it. So QPL made a new deal with Greenstone that if they divert the resources of all of their other projects into this, they shall be paid another $500000. Greenstone took the deal and completed the project by late June 2020. After this when Greenstone tried contacting QPL for the payment, they didn’t answer and then later sent lawyers to them saying that there was no such deal with them as they already obliged to complete the project by July,15th and also that the amount of $500000 was in no way adequate because it was above the market price.

The issues are whether Greenstone shall succeed in their claim of additional $500000 against QPL and can QPL disagree to pay since the mentioned amount was above the market price.

Legislations

1. Contract and Commercial Act, 2017.

2. Common law

3. Precedents

Application

As per section 11,‘promisee’ means a person who is a party to the contract and to whom a promise is made or given. The same section defines ‘promisor’ as a person to is a party to a contract and who makes the promise to the promise. Putting this into our case, so QPL becomes the promisor and Greenstone the promisee.

The issue of Greenstone to be paid the extra $500000 is undisputable. Since the rest of the section of the act talks about the beneficiaries being the promisor, so the rest of the case shall be judged by common law and precedents.

Common law says that for a contract to be valid there should be five elements available (University of Auckland, 2016):-

1. Intention to create a legal obligation

2. Offer

3. Acceptance

4. Consideration

5. Capacity to contract

6. Legality of the contract

Hence the counter-offer made by QPL that apart from what was decided between them for the payment of the construction of the buildings, it shall pay an additional amount $500000 if Greenstone diverts all of its resources to his project. Greenstone acted on the said promise nad finished the project before 15th July. There was an offer, there were acceptance, consideration and capacity to contract and the contract was legal. Hence QPL stands that there was no contract since Greenstone acted on the former contract made is a breach of trust.

In 127 Hobson Street v Honey Bees Preschool [2019] NZCA 122, the jury adopted a test called ‘disproportionality test’. Earlier a genuine pre-estimate loss was applied to the loss of the contract. But UK and Australia went a bit further and freedom to the contracting parties decide the damages. Under this case, Honey Beas had already mentioned the penalty clause in their contract and that is why the damages were decided on that basis only. After this test, the court held that it shall be decided on the basis of objectivity that how much damages shall suffice for either of the parties, the quantity of gain the other party gained. It was stressed that not all promises shall turn into a contract but other factors also have to be taken into consideration that which promises shall be legally and morally binding.

For consideration to be valid, it must not be made in past, it must come from the promisee, it must be legal and it must be requested (Weitzenböck, 2015). One question does arise that what consideration was given from Greenstone side. So the moment when he agreed to divert its resources from other projects to the project of QPL that moment consideration was given from his side.

The second issue here that whether QPL can deny the payment on the price being above the market price, so that is very illogical. Firstly, the amount offered was not given by Greenstone but QPL. Secondly, if the amount was so inappropriate to QPL he shouldn’t have offered it being in the construction business of so long. This clearly showed malicious intent of the promisor to not pay the additional amount he promised. On the grounds of natural justice, QPL should consider paying Greenstone.

Conclusion

To conclude this case, Greenstone’s take on having that additional pay of $500000 from QPL is valid and QPL is bound to pay that. The five elements of a contract are in this counter-offer made and not considering this would amount to injustice to Greenstone. The promise made by QPL is a valid promise as he gave an incentive to Greenstone to finish the project on time at the cost of other projects of Greenstone. The damages to be given is a part of the jury to decide and that is decided on the basis of the gain the other party gained. Greenstone did incur a loss as he diverted all the resources of other projects to the project of QPL and saved him from a huge liability of paying loan and handing over the deposits of the purchasers.

Question 3

Brief Facts

Richard Anderson is 17 years old and a child prodigy in painting. He wanted to start a business in this area where he could design pictures and paintings on cars, vans and trucks. For this, he needed equipment and place to paint. Albert Buildings Limited (ABL) had a warehouse in Glenn Innes and advertised about it on TradeMe rent. Richard seeing this contacted ABL where he got to know they had a spray-painting equipment. After some discussion, Richard agrees to pay $1200 per week for the warehouse and the equipment. Four months later, Richard met some of a financial crisis. The machine was too of low quality due to which he could not make much use of it. This fact did not come to his notice when he was signing the lease.

The issues are advised ABL of his legal position in this case and if Richard’s father has had guaranteed the lease, so what shall be the situation.

Legislation

1. Contract and Commercial act, 2017

2. Minor’s act 1969

Application

Subpart 6 of the Contract and Commercial Act gives detailed instruction about the legal standing of the contract with a minor. S 85 says that a contract with minor is void. S 86 says for a contract made with a minor to be made void, the court shall look into the fairness and reasonableness of the contract. S 89 says what the court can make a contract unfair and unreasonable and can cancel the contract and order for restitution of the property under S 95. For this the court under S 90 has to see the subject matter of the contract, the circumstances surrounding the contract, the nature and value of the property in case the contract in about property, etc.

Applying the above-mentioned section on the given problem, then under S 85, the contract is void between Richard and ABL. S 86 talks about fairness and reasonableness, so that depends on the discretion of the court. If one looks at the facts from a layman point of view, then it could be seen that $1200 per week meaning $750 per day for a warehouse and spray equipment sounds unreasonable, applying S 90 clause (c). Therefore under S 89, the court should cancel the contract between the parties and return the warehouse to ABL under S 95.

Minor’s Act, 1969 has divided minors contract into two categories- one where the contract is enforced against the minor due to unconsciousness or oppression and second which are unenforceable on the minors and the only remedy available is compensation and restitution depending on case to case (Gilbert, 2016). The minor contracts have always been decided to protect their interests (Morrow & Benjamin Ltd v Whittington [1989] 3 NZLR 122 (HC)).In this case, it was held that if the plaintiff is fully aware of the defendant’s minority, then he must be aware of the legal implications that come with it, hence, he cannot take plea on the validity of the contract, as it is void. Similarly, in the given problem too, ABL contracted with Richard so it can’t be that they didn’t know about his minority. Even if they didn’t it was their responsibility to check whether the other party is capable to contract or not. Therefore, ABL cannot compel Richard to pay the lease or ask for the property given on lease. In the end, it depends on the court to decide which option seems feasible to them.

In the second issue, if Richard’s father would have guaranteed the lease then under S 98-101, his father should have taken permission from the District Court. Then, the legality of the contract would stand valid as a contract made on behalf of the minor by his guardian, that stands valid.

Conclusion

To conclude this problem, Richard is a minor and therefore the contract between him and ABL stands invalid because a contract with minor is valid as per law. ABL is supposed to know about this thing whether the party they are contracting with is incapable to contract. Therefore, ABL cannot force to seize the warehouse or the equipment. If Richard’s father is making the lease then it shall be treated just as any other contract.

Question 4

Brief Facts

Jacinta and Mr and Mrs Haigh came into a contract with each other where Jacinta wanted to buy their shop for setting up a chain of health food shops. Jacinta saw their books of accounts and came to know that their annual sale is $750000 and she thought it is the apt business to invest in. she took their books and after two months came with an offer of $1.5 million. In these two months, the sales of Haighs depleted drastically and there were some alterations in the other business in the mall. The depletion was almost 25% compared to last year and they hid this fact from Jacinta when she came with an offer. Jacinta too did not ask for revised books and they entered into a contract. Later, Jacinta came to know about this at a social event when she came in contact with one of the tenants of the mall. She was due to pay the amount but then she realized that the value of the shop was not as what it was shown and demanded a recent record of sales from Haighs.

The issues are whether there was contractual misrepresentation and if yes, then remedies available to Jacinda and circumstances under which cancellation of the contract is permitted under Contract and Commercial act, 2017.

Legislation

1. Contract and Commercial act, 2017

Application

With the application of the subpart 3 of part 2 of Contract and Commercial Act, 2017, it could be seen that Haighs did misrepresent to Jacinta. Section 35 states what misrepresentation means. If A induces B to enter into a contract through misrepresentation, either innocent or fraudulent, that is misrepresentation and A is entitled to damages. What the Haighsdid was a fraudulent half-truth (Biggs, 2015). In Oakes v Turquand (1867) LR 2 HL 325, it was held that if the intendor intends to mislead and in lieu of that hides an important fact, then that amounts to misrepresentation. Under S 37, the party misrepresented had the liberty to cancel the contract, provided the other party accepts the misrepresentation.

In Wakelin v RH and EA Jackson Ltd (1984) 2 NZCPR 195 (HC) it was held that where a farmer has let out his property for sale, concealing the fact that tenants were removed from that land, is a case of misrepresentation and the plaintiff has the right to cancel the contract. Since Jacinda did not pay any amount to the Haighs, so all she can do is to cancel the contract after intimidating the Haighs about the truth she knows and would be legal to do. If the matter goes to the court then she can under S 43-49 can make a plea about the misrepresentation made the Haighs. The sections give the power to the court to grant relief to the victim party.

The second issue on the circumstances under which cancellation of the contract is permitted under the act: -

1. Under S 36, if the other party repudiates the contract, then the party can cancel the contract.

2. Under S 37, if the contract is based on misrepresentation

3. Under S 39 if parties have the same interest level as before as compared to one who did misrepresentation or wanted to repudiate the contract, can get it cancelled by the leave of court.

Conclusion

As per the Contract and Commercial Act 2017, the Haighs did misrepresent fraudulently to Jacinda about the decline in sales of their shop and knowing that Jacinda was planning of building a chain of health care shops, did not disclose this information to her. The act was completely fraudulent and hence Jacinda has the liberty of cancelling the contract without any legal implications.

Question 5

Brief Facts

Betty is the owner of “Betty Butchery Limited” is Westmere. Due of a shortage of cheap meet in New Zealand, he imports from Australia, but the quality of that is not that good. He didn’t make any profits last year therefore he investigates about it and found that another butchery “Ponsonby Meats Limited” has attracted customers by selling New Zealand farmed meat. Hence he decides to re-label Australian meat into New Zealand meat.

The issues is Fair Trading Act 1986 applicable?; what sort of breaches does Betty commit? and which organization should Ponsonby report to about Betty and what is the maximum penalty?

Legislation

1. Fair Trading Act 1986

Application

For the first issue, the act is applicable to Betty for “unfair conduct” under Part 1. Section 9-12 talks about misleading and deceptive conduct meaning that no person who is in trading of good and services shall mislead the public in relation to nature, manufacturing process, quantity etc. section 12A says that anyone making unsubstantiated representation meaning representing things which are not being, then the court shall have regard to such matters.

For the second issue, Betty committed “false representations” too. Under section 13, where a trader, concerning the supply of good or services, shows that a particular good is of a kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use then that is misleading. Betty showed that the meat that he was selling was of New Zealand even though it was of Australia which he had full information about, is false representation.

For the third issue, the matter comes under the purview of the District Court under Part 5 “enforcements and remedies.” Section 38 says that the jurisdiction of the court entitles to matters that are mentioned under section 40. Section 40 says that any offence that comes under Part 1 of the act is an offence and is liable for conviction. For an individual, it is fine not exceeding $200000. Section 40A also talks about the offences that come under section 24, which says that if by false representations anyone gained commercial gain then he is liable to pay extra compensation for the gain he incurred. The amount shall be decided by the court depending on case to case.

Conclusion

Therefore the unfair trade practice committed by Betty for misleading it customers for the kind of meat that he was selling, is an offence under the act and the maximum fine that district court can levy is $350000 under section 43B. if any commercial gain was made by him by selling, then that shall be decided by the court how much more amount can be levied.

References

127 Hobson Street v Honey Bees Preschool [2019] NZCA 122

Biggs, E. (2015). Should an innocent half-truth be an actionable misrepresentation? Retrieved from http://www.nzlii.org/nz/journals/NZLawStuJl/2015/6.html#fnB20

Fair Trading Act 1986

Gilbert, J. (2016). A major misunderstanding of minor’s contracts? Enforcement and restitution under Minor’s Contract Act, 1969. Retrieved from http://www.nzlii.org/nz/journals/VUWLawRw/2009/37.pdf Henthorn v Fraser [1892] 2 Ch 2,

Morrow & Benjamin Ltd v Whittington [1989] 3 NZLR 122 (HC) Oakes v Turquand (1867) LR 2 HL 325

University of Auckland, (2016). Introduction to the law of contracts. Retrieved from http://www.pauldavid.co.nz/docs/Introduction_To_The_Law_Of_Contract.pdf

University of Auckland, (2016). Introduction to the law of contracts. Retrieved from http://www.pauldavid.co.nz/docs/Introduction_To_The_Law_Of_Contract.pdf Wakelin v RH and EA Jackson Ltd (1984) 2 NZCPR 195 (HC)

Weitzenböck, E. M. (2015). English law of contract: Consideration. 

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