Management - Question 1 13 Assessment Answer

QUESTION    1     (13 marks)

Kate and Gino are close friends. A few years ago, Kate completed her Master of Professional Accounting degree at Southern Cross University. Since then she has worked as an accountant in an accountant’s office. Recently she was admitted to a professional accounting body. She decided that she would establish her own business specialising in internal control systems.  In establishing the business, she was assisted by Gino who gave her valuable advice in regard to various computer programmes. He also gave her the names of some people who were familiar with that type of business and also introduced her to business people who could be potential clients.

Kate’s business prospered. She decided that in view of her success she would buy a very special expensive foreign car as an indicator of that success. She bought the car and in appreciation of the help given to her by Gino, she said to him: ‘I want to give you my old car as a gift for all the help you gave me in getting started in business.’ Gino replied: ‘Thank you, that’s great. I am in some financial difficulty at present and getting your car as a gift will be of enormous financial benefit to me’.

Kate then said: ‘In that case I would not mind if you sold my old car. You could then use the cash to help get you over your financial problem. The car is worth about $20,000.’

Gino decided to sell the car in order to get the cash. With the help of Kate, he drafted an advertisement for publication in a daily newspaper that read:

Holden X22 car for sale $20,000. Excellent condition. Write, phone or,              email.  Also, you may call at my home address. The first person to contact me will get the car.

There followed Gino’s name, address, phone number and email address. The advertisement was published in the daily newspaper on May 1 last.

On that day, Marcel posted a letter to Gino saying: ‘I am interested in buying your car. Is it an automatic or manual?’ Gino did not reply to him.

On May 2, Lin posted a letter to Gino: ‘I agree to buy your car for your price of $20,000. When can I pick it up?’ Gino did not reply to her.

On May 3, Singo phoned Gino and said that he agreed to buy the car for the advertised price. Because of the bad phone connection, Singo was unsure of Gino’s reply.

Also on May 3 Hang sent an email: ‘I really want your car. I called at your address but no one was home.   I left a cheque in your mailbox for $2000 as a deposit on the full price of $20,000. I hope a cheque is acceptable to you’. Gino read the email but did not reply to her. He tore up the cheque.

However, early on May 2 Kate said to Gino ‘I am very sorry but I have decided to keep my Holden car as I think I will need a second car for use in the business. I am very sorry for any trouble I may have caused you.’

Assume the letters were received by Gino two days after being posted.

You are required to:

Advise each of the above parties in relation to any legal rights or obligations they may have.

In your answer, you are required to refer to relevant legal authority

 QUESTION    2      (12 marks)

Lily recently bought a very large house in the north coast of NSW.She decided to have the gardens landscaped. She checked the newspapers and found an advertisement by a company called Doall Pty Ltd. (D Co) which stated “Paths, fencing and garden maintenance our specialty. We also can quote for larger jobs. We can do it all. No job is too big for us”. After discussions with D Co Lily entered a contract with the company

They agreed on a price of $85,000. Lily was given a document headed “Memorandum of Terms of Contract”. This document set out the job specifications, price and date of completion. On the reverse side of this document, the following clauses were inserted by rubber stamp:

Clause 1: The company accepts no responsibility for personal injury to the customer during performance of the contract.

Clause 2: Liability for any damage to the customer’s home is limited to the sum of $3000 and no liability can be accepted for the loss of, or damage to, the customer’s goods.

 Sid, employed by D Co, drove a dumper truck through the wall of Lily’s house. When Lily returned home that night, she collided with the dumper truck which Sid had left in the middle of the driveway. Her car was completely wrecked and her arm was broken.

Next day Lily phoned the managing director of the company and demanded that the company pay for the property damage and the personal injury to her. The managing director denied any liability of the company and said:” I am sorry Lily but the contract is quite clear, the company is not liable. Even if the company were liable, the maximum amount payable would be $3000”.

Lily is very angry at the company’s response to her demands. She seeks your assistance.

You are required to advise:

a.   Lily, and

b.   Doall Pty Ltd (D Co)

regarding their possible legal rights and liabilities.

Discuss only the position under the common law.

In your answer, you are required to refer to relevant legal authority.