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LAWS3041/LAWS6141 Contracts Law Research and Critical Thinking Assessment 2 Answers

LAWS3041 Contracts Law Assessment 2 Questions and Answers

 

Assessment Brief:

  • Subject: Law
  • Number of Words: 2000
  • Citation/Referencing Style: AGLC4

 

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Part 1: Estoppel(10 marks: 4 for reasoning and 6 for evidence/support)

 

Introduction to your argument: In addition to their contract, Susie sent an email to Phoebe with the following text: ‘It is the policy of Nexus that there will only ever be one shop of any particular kind/use in any of its Shopping Plazas. It is in our own interest that the business of our tenants is fully protected at all times. Tenants need not have any fears on this score.’ These statements comprise promises that create an estoppel.

 

CHAIN OF REASONING   EVIDENCE / SUPPORT
First,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
[optional] Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
[optional] Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
And finally,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]

 

Conclusion: The estoppel created by these promises means that Susie cannot now deny the promises and must therefore shut down the new sportswear shop that opened in Valentine Plaza.

 

Part 2: Interpretation(15 marks: 6 for reasoning, 9 for evidence/support)

 

Introduction to your argument: The ‘informal agreement’ states that the ‘contract will terminate’ if ‘Harold Grimes chooses for any reason to stop working’. The most reasonable interpretation of the phrase ‘chooses for any reason to stop working’ is that Harold was required to make a proactive, definitive choice that he communicated to Phoebe.

 

CHAIN OF REASONING   EVIDENCE / SUPPORT
First,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 

Then,

 

 

  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 

Then,

 

 

  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 

[optional] Then,

 

 

  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 

[optional] Then,

 

 

  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 

And finally,

 

 

  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]

 

Conclusion: Because Harald is in a coma, he could not – and did not – ‘choose[] for any reason to stop working’. Therefore, the ‘informal agreement’ has not terminated and Phoebe may continue to pay $10,000 per year as previously.

Part 3: Contingent Conditions(15 marks: 6 for reasoning, 9 for evidence/support)

 

Introduction to your argument: As an alternative argument to the Interpretation argument[above], it must be made clear that the ‘informal agreement’ contained the following full statement: ‘In the event that Harold Grimes chooses for any reason to stop working then this contract will terminate.’ This statement created contingent condition in the contract which determined the circumstances under which the contract could be terminated. [Please skip/ignore any third-party issues related to Stuart here.]

 

CHAIN OF REASONING   EVIDENCE / SUPPORT
First,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
 Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
[optional] Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
[optional] Then,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]
And finally,
  • evidence 1 (plus explanation)
  • evidence 2 (plus explanation)
  • [evidence 3 (plus explanation)]

 

Conclusion: Therefore, because Harold elected to affirm the contract, his right to terminate the contract was lost: Harold cannot now terminate the ‘informal agreement’(nor can Stuart on his behalf) and Phoebe may continue to pay $10,000 per year as previously.

The background facts for this Assessment are the SAME as for Assessment 1, but for convenience I will repeat them here:

Harold owned a menswear store in a small shopping plaza in Valentine (“Valentine Plaza”). Harold recently married his partner of 30 years, Stuart Grimes. Stuart has Multiple Sclerosis (MS) and Harold was keen to spend more time with him but was worried about their financial security. Phoebe Sharp was the sole director and shareholder of Sharp Dresser Pty Ltd (“Sharp Dresser’) which had operated a menswear store in Charlestown for the past 10 years. Phoebe knew Harold because she and Stuart were good friends.

They shared a passion for horse riding and had competed together on the equestrian circuit years ago. Sharp Dresser had been profitable, but Phoebe was aware that a development proposal for a residential tower with retail shops on the ground floor had been submitted to Lake Macquarie Council. The proposed development was very close to Phoebe’s shop in Charlestown. She thought that a new retail precinct might include a similar shop and was concerned about how competition might impact the business. The shop lease was due for renewal in couple of months. Because of her concerns, she began discussions with Harold about acquiring his business in Valentine.

The owner and landlord of the shopping mall in Valentine was Nexus Ltd (“Nexus”). Susie was the Plaza manager employed by Nexus. Harold told Phoebe that Susie had been easy to deal with and he had never had any issues. Harold had been a tenant in the shopping centre for more than 20 years. Harold’s current lease had recently been renewed. It was for 3 years with an option for two more 3 years terms (9 years in total), so the remaining term was almost 8 years if the option was exercised at the end of this term. The lease was a ‘retail lease’ within the meaning of the Retail Leases Act NSW. Harold gave Phoebe a copy of his lease documentation and the disclosure document provided by Nexus at the beginning of his lease term.

Phoebe noted that the disclosure document (using the form in Schedule 2 of the Act) had marked the answer to Question 8 (and item 2.2) ‘Does the lease provide the lessee with exclusivity in relation to the permitted use of the premises?’ as ‘Yes’. Phoebe checked the lease but could not find any clause in the lease dealing with exclusivity. She questioned Harold, who said that an exclusivity clause was in his previous lease, but when the lawyers had drawn the current lease, the clause had not been included. Harold said that when he questioned Susie about the omission, Susie had said “Oh, I am not sure what happened there, just an oversight by the lawyers I imagine. But don’t worry Harold, you are our best tenant. We wouldn’t want to lose you. It wouldn’t make sense to have two menswear stores in the plaza.” Harold told Phoebe that Susie was a ‘woman of her word’, so he had not been concerned.

Phoebe noticed that the current lease agreement did contain the following clause:

  1. This lease contains the entire agreement between the parties, and the parties hereto acknowledge that no obligations have been assumed by them which are not to be found herein.

The following week, Phoebe’s lawyers drafted a contract to purchase the business and forwarded to Harold’s lawyers to consider. The agreed sale price, including shop fittings and stock-at-value, was $120,000. Harold rang Phoebe on Friday afternoon. He said he had been in touch with Susie, and Susie didn’t see any reason why Nexus would not consent to an assignment of the current lease. Harold had mentioned Phoebe’s concern about the lack of an exclusivity clause in the current lease. Susie told Harold that she didn’t think Nexus would want to spend money on a variation of the existing lease, and although they might be prepared to negotiate a new lease, they would probably want to increase the rent.

Susie said she was happy to send Phoebe an assurance in writing. Harold told Phoebe that he also had a ‘touchy’ issue he wanted to discuss. He was concerned about his and Stuart’s entitlement to a Commonwealth Senior’s Health Card. If his income exceeded a threshold in a financial year, they would lose their entitlement to the card. Stuart’s health condition required expensive prescription medicine to treat, so the Health Card made a big difference to their living income. Harold suggested that if he agreed to reduce the purchase price to $80,000, Phoebe could employ him as a sales assistant for 1 day per week for the next four years.  She would pay him $10,000 salary per year. This (and his pension) would keep him under the cap for the Health Card. Harold drew up an informal agreement, which included a clause that said:

  1. Sharp Dresser will employ Harold Grimes as a part time sales assistant, for an annual salary of $10,000 per year from the commencement date (to be inserted) until the fourth anniversary of the commencement date. In the event that Harold Grimes chooses for any reason to stop working then this contract will terminate. Within 28 days from the termination date Sharp Dresser will pay Harold and Stuart Grimes a ‘termination payment’ which is the sum of $40,000 less $10,000 for every year that Harold has worked for Sharp Dresser and received payment of his annual salary.” (At the bottom of the agreement were bank account details for an account held jointly by Harold and Stuart).

Phoebe was happy to agree to this arrangement. The informal agreement (2 copies) was signed and dated by Phoebe as sole director of Sharp Dresser and she returned it to Harold. Harold and Stuart both signed the agreement (the words ‘jointly’ appeared in brackets after their names) and returned one copy to Phoebe. A few days later Phoebe received an email from Susie which included the following statement:

Statement on behalf of Nexus Ltd regarding Valentine Plaza

It is the policy of Nexus that there will only ever be one shop of any particular kind/use in any of its Shopping Plazas. It is in our own interest that the business of our tenants is fully protected at all times. Tenants need not have any fears on this score.

Phoebe was reassured and instructed her lawyers to proceed with the purchase of the business from Harold and to take steps to complete the assignment of the retail lease from Harold to Sharp Dresser. When they did receive the assignment of lease it was signed by two directors of Nexus. It was accompanied by an updated lessor’s disclosure statement, that answered ‘No’ to Question 8 (and ‘No’ to Item 2.2). Neither Phoebe nor her lawyers took too much notice, as the response was consistent with the terms of the current lease.

Meanwhile Phoebe gave notice to her landlord that she would not be renewing Sharp Dresser’s lease of the shop in Charlestown. She moved to Valentine Plaza, and for the next 12 months her business transition went smoothly. Sales were up and she enjoyed her arrangement with Harold which allowed her to take Tuesdays off to play golf, while Harold ran the store. At the beginning of their second year (2020), the pandemic arrived, and the business’s takings plummeted. Harold told her that he was not keen to come into work as Stuart was ‘high risk’ for COVID and he didn’t want to take any chances. Phoebe said that Sharp Dresser couldn’t afford to make a termination payment ($30,000) under the agreement, but she said that she would continue to pay his salary in the hope that things would soon return to normal.

In late November 2020, when Phoebe had just started feeling optimistic about a turnaround for her business and Harold had told her he was planning to return to work very soon, she was shocked to find that a new shop, specialising in sportswear for both men and women, was opening up at the other end of Valentine Plaza. Phoebe was only informed about the opening on the preceding Friday, in a late afternoon phone call from Susie.  When she complained and reminded Susie of her email, Susie was sympathetic, but said Nexus believed that the new shop was not within the ambit of the policy statement, as it was not the “same kind” of shop. Phoebe strongly disagreed, as sportswear accounted for most of her turnover.

Since the new shop’s opening, Sharp Dresser’s takings have declined significantly. To make things worse, Phoebe received a phone call from Stuart, who was distraught: Harold had had a stroke a few days ago and had been hospitalized. This morning he had slipped into a coma and the doctors aren’t sure if he will recover. Stuart is worried about how he will cope without Harold, both financially and physically. Stuart told Phoebe that because Harold is no longer able to work, the contract is terminated. He asked Phoebe to make the termination payment of $30,000 as soon as possible. Phoebe doesn’t want to let Stuart down, but the business is strapped for cash, and she has come to you seeking some legal advice about her options.

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