Name: Vũ Đức Kiên
Student ID: 2013280018
MID-TERM EXAM OF LEGAL AND ETHICAL ISSUES IN BUSINESS
Time allowed: 90 MINUTES
ALL Questions to be attempted
A. Short questions (50 marks)
1. Abigail agrees to let her flat to Xavier for one day for the purpose of
viewing a carnival. Xavier pays her a £50 deposit with £80 due to be paid
at the end of the carnival. Due to civil unrest, the government prohibits all
street entertainment and the carnival is cancelled just before Xavier is due
to travel to the flat. Neither party has incurred any costs (save for payment
of the deposit) in performance of the contract. Abigail can keep the deposit
and Xavier must pay an additional £15 so that each party bears an equal
loss?
Answer:
Abigail must pay back the deposit and Xavier need not pay the balance.
The Law Reform (Frustrated Contracts) Act 1943 states that the sums paid
would become either partially or fully recoverable, if a contract was
impossible to perform. Legally, this provided the opportunity for a party to
recover the benefit which has unjustly enriched the other party. In this
case, even though Xavier had already paid the deposit, he could not use
the carnival due to objective reasons. Therefore, Abigail must pay back the
deposit and Xavier need not pay the balance due to the Law Reform
(Frustrated Contracts) Act 1943.
2. Foul Foods Ltd, a company specialising in the production and sale of
cream cakes on an industrial scale, bought a large oven from Ovens & Co
intending to extend their existing business to include the production of
pizza bases. The delivery of the oven was three months later than the
contract date. During those three months Foul Foods Ltd tried
unsuccessfully to buy another oven. Foul Foods Ltd has claimed for its lost
profits in the following two ways: (1) Profits which would have been made
from the expected increase in business following their increased capacity;
and (2) Profits which they would have made from a lucrative contract for
the supply of pizza bases to a nationwide supermarket chain for which they
would have been able to bid Is Foul Foods Ltd’s claim for its lost profits
likely to be successful?
Answer:
Yes, but only the lost profits from the expected general increase in trade
are recoverable, not those from the loss of the lucrative supermarket
contract
3. A seller of a farm realizes that the potential buyer has a mistaken
understanding about the deed. If the seller fails to correct the
misunderstanding, there is no misrepresentation. A misrepresentation
occurs only by an actual statement.?
Answer:
If the seller fails to correct the misunderstanding, there is still
misrepresentation because it is fraudulent where the trader makes the
statement knowing it to be false or without believing in its truth, or without
caring whether it is true or false. In that case, the trader may be guilty of
the offense of fraud as well as misrepresentation.
4. When Myrtle comes home from work one evening, she finds that her
yard has been mowed and trimmed. Later, a man comes to collect the yard
work. Myrtle refuses to pay for the work since she has never seen the
man before and did not hire him to do her yard work. The court would
order Myrtle to pay the reasonable value of the yard work because of the
benefit conferred to her.?
Answer:
No, because Myrtle would not have to pay for the yard work. A contract is "a
legal document that states and explains a formal agreement between two
different parties". In this scenario we found out that Ms. Myrtle didn't know
the man that worked in her yard, and that she never requested that specific
work. This man assumed that by doing the job, Ms. Myrtle was going to
compensate him in one way or another but in the end she turned out to be
mad because she never requested such work. For the next time, if the man
wants to be paid then he needs to have a contract or an agreement with
the other person.
5. Roberto thinks he has accepted an offer of employment from Hans
for a two-year term at $55,000 the first year and $65,000 the second year.
Hans, however, thought there was an at-will employment offer and the
salary for the second year, if the employment continued, would be based
on Roberto’s job performance. If Roberto takes the matter to court, the
court will try to decide what Roberto and Hans were each thinking during
their employment discussion.?
Answer:
During their employment discussion, Roberto and Hans talked about the
salary for a period of 2 years working. Roberto had thought that wages
would be paid annually. With salaries for the first and second years of
$55,000 and $65,000 respectively. But Hans thinks otherwise, Hans thinks
that Roberto's job and salary in the second year will not be decided at the
time the two have discussed. If after the first year, Roberto and Hans are
still working together, then the salary will be decided by Hans again based
on Roberto's performance in work.
6. Problem – based questions (50 marks)
QUESTIONS Sinclair and Roman are very good friends. They have been friends
for over 20 years having met during their undergraduate studies at La Trobe
University. Sinclair and Roman try as much as possible to have lunch together
once a week to keep up their friendship. On one of those occasions, Sinclair
discussed his intention to buy a second-hand car for his 18 years old daughter,
Nikola, who is now studying accounting at La Trobe University. The family live
about two hours away from La Trobe Uni and access by public transport has been
extremely difficult. Roman tells Sinclair he has an old car which could be useful for
that purpose and he is happy to ‘let go’ of the car to Sinclair. Roman invites Sinclair
to his house to inspect the car. Sinclair and Nikola visit Roman’s house and were
shown a Toyota Corolla, 2010 model with registration number ANT 202. Nikola
doesn’t quite like the car as all her friends drive brand new cars, but she says
nothing. Sinclair informs Roman that the car looks quite good and would serve
Nikola’s purpose. All she needs is a means of transportation to uni and when she
starts working, she could save up to buy another car. Roman replies saying he
feels the same way and that he had the car checked by a mechanic and serviced
and that cost him about $2,000, so the car is in good condition and ready to go.
Sinclair and Roman discuss the market value of the car which they both agree is
about $5,000. Roman presents a roadworthiness certificate to Sinclair and hands
over the key to Nikola. Roman says he is happy for Nikola to drive the car away
on the day and that himself and Sinclair would conclude the deal. Sinclair has since
registered the car in Nikola’s name. Six months later, Nikola’s 17 years old friend,
Hayden tells her he needs to buy a car and that his parents have agreed that he
could buy one. Since Nikola doesn’t quite like the Toyota Corolla, she decides to
sell it to Hayden for $3,000. Hayden pays Nikola $1,000 and promises to pay the
balance in 2 weeks. It’s now over two months and Hayden has yet to pay the
outstanding sum of $2,000. Nikola does not want the car back since she has used
up the initial $1,000 as deposit for a new car, and in any case, Hayden had an
accident with the car, and it is no longer in good condition. Meanwhile, Roman has
been quite unhappy with Sinclair. Sinclair has also noticed a change in Roman’s
attitude and their friendship has soured. Roman claims that Sinclair has made no
payment for the car he sold to him and has in fact said nothing about it. He says
he had waited as a good friend for Sinclair to say something for months. He says
on occasions, he had indirectly requested for payment, but Sinclair had always
pretended not to understand him. Roman says he called Sinclair three days ago
after months of no contact and demanded that Sinclair pay the $5,000 outstanding
on sale of his 2010 model Toyota Corolla, ANT 202. Sinclair says he does not owe
Roman a cent.
1. Is there an offer between Roman and Sinclair and who made the offer? (10
marks)
Yes, an offer was made between ROman and Sinclair. Roman has made the offer
to take the car by proposing to Sinclair to take his car for his daughter. He also
invited Sinclair and his daughter, Nikola, to come and visit his house for dinner and
see the car for themselves before making the decision. Hence, it can be seen that
Sinclair, after listening to Roman about his desire to buy a car, made an offer to
him to take his car for his daughter. In this case, an offer was made to an individual.
2. Was the offer accepted and how was acceptance expressed and
communicated? (10 marks)
Roman has made the offer by stating that he could give his car and Sinclair
accepted to visit his house to see the car. Yes, the acceptance of the offer was
given as he had gone to the Roman’s house to look at the car's condition. He also
agreed to purchase the car for $5000. They both commonly accepted that the
market value of the Toyota car was $5000 and post that Sinclair took away the car
keys from Roman.
3. Was there an intention to create legal relations? (10 marks)
Yes, there was an intention to create a legal contract between both the parties.
Roman got the mechanic beforehand and got the repairs done for the car for it to
be in the working condition. Also, Sinclair and Roman decided that the market
value of the car will be $5000 and they would be concluding the deal later on. The
papers of the car were also transferred to Sinclair by Roman and Sinclair also got
the name on the car's documents transferred to his daughter's name. Hence, there
were intentions to make a legal contract by the end of both the parties.
4. Was any consideration provided? (10 marks)
No, there wasn't any consideration given for the car by Sinclair to Roman. Roman
transferred the roadworthiness certificate to Sinclair and also handed over the car
keys to Nikola. They both agreed that the market value of the car was $5000
currently and concluded the deal later on. However, there was no consideration
given for the deal at that very point of time. There was no money given later on too
by Sinclair to Roman. Thus, there was no consideration given in return for the car.
The car stands in the name of Nikola post Sinclair got the car from Roman's place.
5. Is there any particular reason why there might not be a valid contract
between Nikola and Hayden? (10 marks)
No, because the contract between Hayden and Nikola will be valid. There was an
offer made by Nikola to Hayden which she agreed to. The car was delivered to
Hayden and she paid Nikola one-third of the agreed money with the promise to
pay the remaining money later. As the car was in the name of Nikola, she had the
right to sell it off to anyone. Moreover, insufficient consideration does not cancel
and make a contract invalid.
