Contract between the Plaintiff - Fitlife Equipment Hire Ltd and the Defendant - GoFitness Pty Ltd - Case Study Example

IN THE MOOT COURT OF QUEENSLAND NO 376/2009 BETWEEN: FITLIFE EQUIPMENT HIRE LTD PLAINTIFF AND GO FITNESS PTY LTD DEFENDANT OUTLINE OF ARGUMENT OF THE DEFENDANT Table of Contents: I. Table of Authorities II. Statement of the issue III. Statement of the facts IV. Argument V. Conclusion I. TABLE OF AUTHORITIES 1. Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 2. Derry v Peak (1889) 14 App Cas 337, 374-5 per Lord Herschell 3. Crescendo Management Pty Ltd v Westpac Banking Corp, 1988, 19 NSWLR 40, 45-46 per McHugh J 4. 46D-E., New South Wales Law Reports/19 NSWLR/CRESCENDO MANAGEMENT PTY LTD V WESTPAC BANKING CORPORATION - (1988) 19 NSWLR 40 - 23 December 1988 5. Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. 6. Barton v Armstrong [1973] 2 NSWLR 598;[1976] AC 104 7. New South Wales Law Reports/19 NSWLR/CRESCENDO MANAGEMENT PTY LTD V WESTPAC BANKING CORPORATION - (1988) 19 NSWLR 40 - 23 December 1988 8. Trade Practices Act 1974, s.52, 5 II. STATEMENT OF THE ISSUE 1. Fitlife Equipment Hire Ltd submitted into the Moot Court of Queensland the legal issue regarding the contract between the Plaintiff– Fitlife Equipment Hire Ltd and the Defendant – GoFitness Pty Ltd. 2. The issues in dispute are: a. Is the Defendant guilty of the repudiation of the contract? b. If so, what damages (if any) ought to be imposed on the Defendant? 3. The Defendant disputes both the first and the second issues, considering that the contract into which he entered with the Plaintiff is vitiated both by misrepresentation and by duress. These matters will be further explained. III. STATEMENT OF THE FACTS 1. FitLife Equipment Hire Ltd – the Plaintiff leases gymnasium equipment to gyms in south-east Queensland. GoFitness Pty Ltd – the Defendant owns and operates a chain of gymnasiums on the Gold Coast. 2. On September 22 2008, GoFitness entered into a written contract with the Plaintiff for the lease of gymnasium equipment. The contract contains the following clause: 6. It is a condition that FitLife will take all reasonable steps within its control to supply the gymnasium equipment listed in the schedule to this contract by October 25th 2008. 3. The equipment listed in the Schedule includes 25 TopGun 5000 treadmills. In July 2008, the Plaintiff sent the Defendant a brochure, which described and listed the equipment offered for hire. The brochure described the equipment as ‘The Coolest, the Latest Technology in Treadmills!!!’ It included a statement on the backpage in small print which said ‘While FitLife takes all reasonable care, we do not guarantee the accuracy of information supplied in this brochure. The reader must make their own inquiries to be sure the information provided here is correct.’ Brad Goh, the owner of GoFitness, was very keen that their gyms were fitted out with the very latest equipment, and he was influenced by the statement in the brochure that the TopGun 5000 was ‘the latest technology’ in entering into the contract with FitLife. In fact, it was not the latest technology; a new model of that treadmill was released in August 2008. But the Defendant was not aware of that, trusting the Plaintiff that he would offer the latest technology indeed. 4. In negotiations, Brad Goh informed Bruce Fyfe, the owner of FitLife, that he was committed to opening his gyms on December 5, 2008. During negotiations in September 2008, Mr. Fyfe repeatedly telephoned and emailed Mr. Goh, pointing out how little time he had until the opening of his gyms, and putting pressure on him to agree to the contract that Mr. Fyfe proposed. The Plaintiff knew that Mr. Goh really wanted to obtain the TopGun treadmills, so he used his extreme desire in his advantage and he informed Mr. Goh that although there was one other authorized distributor of those treadmills in Australia, that distributor had no stock of TopGuns. He also pointed out to Mr. Goh that he would make sure that no other TopGun treadmills could be delivered to Mr. Goh in time – meaning, that if Mr. Goh wanted the treadmills in his gyms in time, he would have to agree to contract with Mr. Fyfe. Mr. Goh was very stressed, and finally decided that he had no other real choice but to agree to the contract with FitLife. Consequently, he agreed to a contract price that was about 25% higher than it should have been. 5. Some of the equipment which FitLife agreed to supply to GoFitness had to be shipped from Melbourne to Brisbane. The ship on which this equipment was being transported sank off the NSW coast on October 18, 2008. All of the equipment owned by FitLife on that ship was lost. The Plaintiff informed Mr. Goh that the ship had been wrecked, assuring him that they will arrange an alternative supply of the equipment and, hopefully, deliver in time. 6. FitLife delivered the equipment listed in the contract schedule, aside from the 25 TopGun 5000 treadmills, on October 24. GoFitness accepted this delivery and started paying for it from October 25. GoFitness did not complain to FitLife about the non-delivery of the treadmills, relying on the assurance of the Plaintiff that they would be delivered soon. 7. By early November, after the deadline from the Contract – October 25, 2008, it was already clear for the Defendant that the Plaintiff was not going to deliver the treadmills in time. The Defendant then resumed negotiations with GymEquip Ltd, another distributor, to lease the treadmills from them. He did not inform the Plaintiff about the negotiations with the third party, because, worrying about not having to go through the same delay again, only this time with the second distributor, he wanted to have a backup, in case that GymEquip could not supply the treadmills in time either. 8. On November 11, 2008, FitLife tendered delivery of these 25 treadmills to GoFitness. Certainly, GoFitness refused to accept the delivery that day, because it was already late for that, the clauses of the contract regarding the deadlines being totally ignored by the Plaintiff. IV. ARGUMENT I. THE CONTRACT IS VITIATED BY THE PLAINTIFF The Plaintiff induced the Defendant into this contract using illegal conduct: Misrepresentation and Duress. A. Misrepresentation 1. In the brochure that the Plaintiff offered to the Defendant, advertising the treadmills, FitLife made a false statement about the offered product. It was described as ‘The Coolest, the Latest Technology in Treadmills!!!’ The brochure included a statement on the backpage in a very small print, which said ‘While FitLife takes all reasonable care, we do not guarantee the accuracy of information supplied in this brochure. The reader must make their own inquiries to be sure the information provided here is correct.’ It is obvious why a consumer, like GoFitness would be excited about contracting with the Plaintiff, believing that he will acquire the latest technology in the fitness domain. The fact that FitLife deliberately wrote only on the brochure backcover, and only in small print that the information given in their advertisement may not be reliable, only proves the fact that with this brochure the Plaintiff had the intention of concealing the truth about the treadmills and that he erroneously suggested that the product was the latest version. If he had been honest, it would not have been necessary to write this in a small font. Also, considering that FitLife provides services and products in one specific domain – fitness equipment, it is reasonable to believe that they would be aware and informed about the upgrades of the products they distribute. The newer version of the contracted treadmills had been already released a few months before the beginning of the negotiations between the parties, so it is fair to expect the Plaintiff to have informed the Defendant that there is a newer version of the product. This statement was written in small font on purpose, only on the backpage of the brochure, so that the potential customers, being enthusiastic and delighted by the offered equipment, would not notice it. The case of Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 was a similar fraud case in which the plaintiff was induced to buy a business by the misrepresentations of the defendant. As in Derry v Peak (1889) 14 App Cas 337, 374-5 per Lord Herschell, it is possible that the statement was made recklessly, not caring whether it was true or not. All the elements of misrepresentation are present: The representor – FitLife - made a false statement with the intention of inducing the representee – GoFitness - to enter into the contract with him (Trade Practices Act 1974, s.52, 5) 2. Another Plaintiff’s misleading act was the false assurance that the deadline mentioned in the contract will be met. The Plaintiff should have asked the Defendant for an extension of the deadline, but he did not, choosing instead to mislead him again and making the Defendant believe and trust that the clauses of the contract shall be met. B. Duress 1. The illegitimate pressure that was put on the Defendant by the Plaintiff should not be ignored. The unlawful threats that FitLife will make sure that no other distributor would deliver the equipment in time left the Defendant no practical choice but to consent to the contract (Crescendo Management Pty Ltd v Westpac Banking Corp, 1988, 19 NSWLR 40, 45-46 per McHugh J ) at a higher price than expected (over 25%). 2. Another Plaintiff’s act of pressure is the calling the Defendant insistently and taking advantage of the time pressure that the Defendant was facing in order to force him to enter into the contract. 3. (Per McHugh JA) (1) The proper approach in determining whether there has been economic duress is: (a) 1 to ask 1. whether any applied pressure induced the victim to enter the contract; 1. whether that pressure went beyond what the law is prepared to countenance as legitimate; (b) 1 the pressure will be illegitimate if, inter alia, it consists of unlawful threats or amounts to unconscionable conduct. (45G) (2) It is not necessary for a victim to prove that illegitimate pressure was the reason for his entering into a contract. It is sufficient that the illegitimate pressure was one of the reasons for the person’s entering into the agreement. Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering the agreement. (46D-E., New South Wales Law Reports/19 NSWLR/CRESCENDO MANAGEMENT PTY LTD V WESTPAC BANKING CORPORATION - (1988) 19 NSWLR 40 - 23 December 1988) Analyzing the above, it is obvious that the Defendant was facing economic duress coming from the Plaintiff. “The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate (Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock). In their dissenting advice in Barton v Armstrong [1973] 2 NSWLR 598;[1976] AC 104, Lord Wilberforce and Lord Simon of Glaisdale pointed out (at 634; 121): "... in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as illegitimate. Thus, out of the various means by which consent may be obtained -- advice, persuasion, influence, inducement, representation, commercial pressure -- the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion."” .(New South Wales Law Reports/19 NSWLR/CRESCENDO MANAGEMENT PTY LTD V WESTPAC BANKING CORPORATION - (1988) 19 NSWLR 40 - 23 December 1988) II. THE REPUDIATION OF THE CONTRACT A. The Defendant did not repudiate the contract by refusing to accept the delivery of the treadmills. 1. Given the facts described above, the Defendant believed that the contract was affected by partial rescission, in the part regarding the treadmills. More than that, the Defendant honoured his obligations and paid for the rest of the contracted equipment that was delivered in time. III. DAMAGES A. The Plaintiff is not entitled to damages 1. Considering that the Plaintiff did not play fair in the present issue, it is ironic that he himself should receive any damages. 2. Because of the partial rescission of the contract, the Defendant did not suffer any losses, as he would have suffered if the treadmills would have been bought from the Plaintiff. If the Plaintiff had carried on fair negotiations, he would have asked for an extension of the delivery date, informing that it is possible that that the deadline will not be met, the Defendant would not have been forced to look for other distributors of the treadmills, and the whole conflict would have been resolved amicably V. CONCLUSION We submit to the court that our statement is correct and that the Plaintiff used miscellaneous methods both in the pre-contractual negotiations and in the realization of the contract. As a result, the Plaintiff is not entitled to any damages at all from the Defendant, as the contract was not repudiated by him. Read More