Mrs Golf v Mr Iron - Case Study Example

QUESTION 1 Question 1: worth 20 marks – write no more than 1000 words Mrs Golf is a very rich owner of a golf range. At the end of a day’s golfing many golf balls were filthy and she wanted to find a quick way to clean them. Mrs Golf saw an advertisement in a newspaper saying that a company produced a machine that would clean 2000 golf balls in 10 minutes. Mrs Golf rang Mr Iron who owned the company and asked him to come and install the machine. Mrs Golf told Mr Iron that she wanted the machine immediately as it had been raining in Sydney for 6 days and the golf balls were all filthy. Mr Iron said the price for the machine would be $1000 plus a modification of $300 to make it work faster and an extra fee of $50 if it was to be installed in a hurry. The machine was installed and the first load of golf balls was put in. Mr Iron said ‘don’t expect them to come out absolutely clean’. When the balls came out they were not clean and soil clung to them. Mr Iron advised Mrs Golf that he had another gadget that he could attach to the machine to help do the job better. It would cost another $200. Mrs Golf was desperate and agreed. The extra gadget was attached and failed to properly clean the golf balls. Mrs Golf also found out that the machine was not approved by the Water Board as it used too much water in a time of drought in Sydney. However Mr Iron had no idea the Water Board had to approve the use of the machine and neither did Mrs Golf. PARTIES Mrs Golf v Mr Iron ISSUE This question concerns the principle of misrepresentation. Although Mr Irons knew that his product could not deliver the quality service clients expected he continued to extract money from Mrs Golf. “Generally, the plaintiff has no right to damages for any loss suffered as result of the misrepresentation, although he may obtain a limited form of indemnity.”1 and was ignorant of factors that affected his business such as the need to register with the Water Board. In this respect, a certain measure of negligence is also present. LAW If it were merely the case that Mr Irons misrepresented the quality of his golf cleaning machine and that the misrepresentation as deemed non-fraudulent but a mere attempt at puffery, rescission and payback of the amount entailed in the transaction might be necessary. Mr Irons misrepresentation, however, goes beyond such puffery. He charges an additional amount of money with the promise of better cleaning of the golf balls though he is unable to deliver and he further charges more money with the promise of making the machine work faster and yet is unable to deliver the necessary quality. It would be necessary to prove that Mr Irons had an intent to defraud and that he knew full well that even with the modifications the machine would not deliver as promised. Mrs Golf and Mr Irons have not developed a long term relationship. They have only just met, which raises the question as to whether there is duty of care in this case. If that were the case and it might be argued that the kind of representations that Mr Irons has made, though within a short time, places him in a position of having a duty of care towards Mrs Golf. In fact, “It is possible that where a "special relationship" exists between the parties, damages on a tortious basis could be recovered if the misrepresentation was made in breach of a duty of care (see Hedley Byrne & Co. v. Heller & Partners [1964] A.C.”2 Because of the advertisement put out by Mr Irons and his incremental efforts to extract money from Mrs Golf, it seems that his conduct borders on fraud even though he had tried to mitigate the seriousness of his misrepresentations by noting that the balls are unlikely to come out perfectly clean. Potential damages arising from fraud, if the court so judges, is “generally accepted to be the tortious measure--to put the plaintiff in the position she would have been in had the tort not been committed, by compensation for out-of-pocket losses.”3 In fact, considering that Mrs Golf needs the golf balls in a hurry and stands the risk of losing a considerable amount of money, if she is unable to get the golf balls as cleanly as she desires (or reasonably so) and ends up losing money, it is possible to have Mr Irons bear the cost of such loss. In the UK, “The Court of Appeal, even without the support of direct authority, was in no doubt that damages for loss of profits were recoverable …. According to Beldam L.J.: "It is conceded that losses made in the course of running the business of a company are recoverable. If in fact the plaintiffs lost the profit which they would reasonably have expected from running a business in the area of a kind similar to the business in this case, I can see no reason why those do not fall within the words of Lord Atkin in Clark v. Urquhart...'actual damage directly flowing from the fraudulent inducement.'”4 The court may focus only on rescission, in which case it could order the defendant to pay back to the plaintiff amounts covering losses resulting from the nonperformance of the oral contract. In Whittington v. Seale-Hayne (1900) 82 L.T. 49., the plaintiff leased premises belonging to the defendant for the purpose of poultry breeding. The plaintiff had relied on comments made by the defendant that the area leased was sanitary. As it turned out, the water supply was contaminated by drains and the manager of the farm became sick; also most of the birds that were being reared died. “The defendant submitted to rescission of the lease and agreed to pay the plaintiff compensation for the rent and rates he had paid and repairs he had done under the lease. The plaintiff also claimed for loss of stock, loss of profit on sales, loss of a breeding season, removal expenses and medical expenses, but the court rejected this claim because the lease did not oblige the plaintiff to move in, rear poultry or employ a manager.”5 If, for example, in the past, the machine that Mr Iron was presenting to Mrs Golf had worked fine and that there was no reason for Mr Iron to suspect that the information he was presenting was wrong, this could affect Mrs Golf’s probable chance of getting rescission or restitution. “The representee is also given the right to claim damages unless the representor can prove that he believed, on reasonable grounds, in the truth of his representation and continued so to believe up to the time the contract was made.”6 The Sale of Goods Act, which retains much from the common law, is relevant here and has been “ amended to provide that the right to rescind a contract for a breach of a condition is not lost until the buyer has had a reasonable opportunity of examining the goods (s.4). (This was done to ensure that the remedies for breach of condition are kept broadly in line with the remedies for a misrepresentation which induces a contract).”7 FACTS AND LAW Misrepresentation Misrepresentation would have occurred if Mr Iron knowingly presented his product to Mrs Golf and collected money from her knowing that the product would not work. Duty of care Mr Iron advertised and presented his products as being able to perform a certain service that Mrs Golf valued highly. When Mr Iron had not been able to make the golf balls clean, he undertook to add other gadgets, all of which failed, meaning that Mr Iron whose promises had established a duty of care, failed totally in producing the right product that Mrs Golf had expected. Breach of duty The kind of representations Mr Iron made were tantamount to making an enforceable contract. Damages If Mrs Golf is unable to get the golf balls cleaned properly she is likely to do business or damage the reputation of her business, both of which could eventually amount to a substantial loss for her in the business. CONCLUSION If Mr Iron had been acting in good faith and just happened not to have his equipment function as expected, the law might give him some breathing room. As things stand, it seems that he has actively sought to obtain money through what amounts practically to fraudulent means. This could mean that he might be compelled by the court to make good to Mrs Golf any amounts he has taken and it is also possible, in particular where it is established that Mr Iron has a pattern of fraudulent behavior, that he could be subject to damages to cover the income that Mrs Golf would have lost if not for the delay and poor and shoddy work done by Mr Iron. Question 2: worth 2 marks – write no more than 20 words Mrs Boss bought a car in 2002. It was never right and she was very unhappy with it. In 2009 she decides to sue the car dealer Mr Bung. Can she sue Mr Bung? Mrs Boss should have contacted the company within the period within which the warranty on the car held valid. Question 3: worth 8 marks – Write no more than 500 words Your have a client, Ms Ant, who is 18 years old and had no business experience and who you think has been subjected to unconscionable behaviour by the Bring it on Bank of NSW. The Bank did not advise Ms Ant when she borrowed $100,000 from them for the renovations to her house that she would be subject to an interest rate of 10% the first year and 18% per cent the second year. She would never have taken the loan if she knew the Bring it on Bank rate would increase so much in the second year. Advise Ms Ant of her rights with reference to both common law and statutory law. PARTIES Ms Ant v Bring It On Bank ISSUE The issue concerns non-disclosure or concealment which made Ms Ant fall into the trap of contracting for a high interest loan. Since the bank did not follow the regulations for which it is bound, Ms Ant has recourse to hold the bank liable to some extent. On the other hand, Ms Ant should have done her due diligence; failure on her part to ask the right questions may make her somewhat responsible for some of the losses she has incurred or might yet incur. LAW Unlike tort or contracts, banking law is not a discrete area of the law. Rather, it includes a number of principles that can affect how those engaged in the business of banking function. Banks or financial institutions that are authorized to take depositions come under three main regulatory agencies in Australia, the Reserve Bank of Australia, APRA, and the Australian Securities and Investments Commission (ASIC). REMEDIES Ms Ant can make her case known to the Banking and Financial Services Ombudsman (BFSO), who is neither a regulator nor a government agency. Rather, it is charged with the resolution of disputes and comes under “Part 7 of the Corporations Act 2001 (Cth) (Corporations Act). Membership of an approved scheme is a licence requirement. An important part of the BFSO’s role as an external dispute resolution scheme is identifying and addressing systemic issues – issues which affect a number of customers.”8 For the kind of problem Ms Ant has encountered, it is important to recognize that “The role, powers and responsibilities of ASIC are set out in the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). They include the power to regulate unconscionable conduct and consumer protection in the financial services industry, contained in Part 2 Division 2.”9 In fact, should there be a need to bring claims against a financial institution for deception or some other form of undesirable conduct, the ASIC Act would be very helpful. “For example, the prohibition against misleading or deceptive conduct by a financial services provider is s12DA of the ASIC Act, not s52 of the Trade Practices Act.”10 When it comes to issues pertaining to lending and consumer credit, another code that comes in handy is the Uniform Consumer Credit Code which was introduced in 1996. The policy demands that financial institutions be truthful in presenting their offerings to customers. This means. • Provide meaningful disclosure to debtors, mortgagors and guarantors at relevant pre-contractual, contractual and post- contractual stages; • Ensure that the cost of credit is disclosed to prevent deception; • Enable comparison between products, and encourage competition; and • Achieve product flexibility by regulating substance not form.11 If the bank does not disclose information that turns out to be critical, as in the case of Ms Ant, it may be subject to a breach of fiduciary duty. “The claim is, usually, that the bank was under a duty to disclose certain information adverse to the customer’s interests.”12 Trying to prove that the bank was deliberate in withholding the information can be difficult. Question 4: worth 10 marks – Write no more than 500 words An oral contract took place between Pat and Dave. Pat is a very rich woman and Dave was her life long friend who she trusted. Pat asked Dave to build a yacht for her with GPS navigation. Dave hired Don to build the yacht for $100 000. Later, Don found out that Dave was going to hire a computer specialist Fono to put in the GPS navigation system. Don was furious and said he would not build the yacht if Fono was employed. Don also asked Dave for a $120 000 increase in Don’s fee to $220,000. Needing the yacht delivered on time, Dave finally agreed. When Don finished the yacht, he delivered it directly to Pat. Dave then paid Don for his work on the yacht by using a bank cheque, but refused to pay Don the extra $120,000. However, Dave said he would pay Don an extra $50,000 in cash in full settlement of the bill provided Don did not ask for more money in the future. Write an advice on whether Don can sue Dave for the remaining money in the future if he accepts the extra $50,000 in full settlement of the contract. In your answer you must refer to the relevant common law. Do not refer to statute law. http://www.austlii.edu.au/au/journals/BondDRN/2005/4.pdf It is clear that Dave’s efforts to reduce the payment stems from the pressure on him to ensure that the work is done on time for his friend. It had come as an unexpected development for Dave that Don did not want him to employ Fono to undertake the installation of the GPS system. Don’s extra fee of $120 seems unconscionable to Dave whose counter strategy is then to offer $50,000 extra if Don is willing to forego the opportunity of suing for further funds later on. Dave hopes that Don’s agreement to the settlement would release him from further obligation and that it will be a durable agreement. It is possible that if Don really needs money he will agree to take the $50,000 and then upon getting so-called “buyer’s remorse” decide to go back on his work. There are usually cases that make it legally possible to set aside an agreement that apparently seemed to have been concluded. “The broad cross cultural legal exceptions to finality based on post-agreement events include: The doctrine of frustration Protection of the public purse… Legislative destabilization based on new public poicy13 More specifically, if there is an indication that the agreement between Dave and Don involved some form of misrepresentation, Don might have recourse to sue. Also, some mistakes, or unconscionable dealings such as issuing a false cheque or non-disclosure of material facts in some kind of agreements. Also, it must be noted that, “Entering negotiations and a resulting contract at a time when one of the parties does not have sufficient capacity to consent due to youthfulness, junior status, depression, undue market pressure, inexperience, lack of information, lack of independent advice, haste, inappropriate threats, undue influence.”14 Also, getting a law to explain the full nature of the agreement to Don could be useful in preventing the situation where Don comes back with an excuse to sue. Question 5: worth 10 marks – Write no more than 500 words Joe Cuts runs a retail butchers shop in Sydney. He sells mostly fresh meat and has an excellent reputation. It is a busy shop and Joe Cuts needs to employ a junior butcher to help out during the week and when he is away. He employs John Ham-fisted as an apprentice to assist in the shop and cut the meat and display it in the window and attend the Homebush markets where Joe Cuts orders the fresh meat for the shop once a week. Joe Cuts is tired and decides to go on a 2 weeks holiday with his family. He leaves John in charge of the shop and as part of his work he has to order meat from the supplier at the Homebush markets. Fearing John may order too much meat, Joe Cuts specifically instructs John not to spend more than $2000 per week. In the first week, John goes to the supplier Mr Chops and spends $2000, but in the second week, due to a severe meat shortage (due to swine fever) the price of meat has doubled, and John orders meat to the value of $4000 from Mr Chops. When Joe Cuts returns from holiday he is furious with John and refuses to pay Mr Chops more than $4200 of the total purchase price telling him, "You know that $2000 a week is all I ever spend, get the balance off my junior butcher John' You are a solicitor. Advise Mr Chops on his legal rights in getting the balance of $800 paid to him and by whom. In your answer refer to the relevant common law. Do not refer to statute law. End of exam PARTIES Mr Chops v Joe Cuts LAW It is clear that Joe Cuts provided very clear instructions to Mr Chops and that there was a clear limit to how much Joe Cuts wanted to purchase. Even though Mr Chops erred in not having limited the amount given to John Ham, there is no indication that Joe Cuts lost money because of the transaction. If anything, it seems that the products had been sold and that profits had been made, meaning that Joe Cuts now sought to pocket any profit that might have arisen from the sale of the products without making good the payment due to Mr Chops. Granted, Mr Chops had made a mistake but he had made an honest mistake, supposing that the same amount of meat, rather than just the cost, was what was important. If there is an indication that Joe Cuts had lost money he could argue that he was not responsible for making the payment. On the other hand, with no indication that this was the case, he could be persuaded, if not compelled, to make the payment. Read More