Question

Jay LeCrasstulua owns several Tuvaluanese restaurants in New South Wales. He and his family has solicited your advice as to their contractual liabilities and rights arising out of these circumstances:

On 20 September, Jay meets Rosita over lunch. Rosita owns a small dairy farm called ‘The Mighty Cow'’. After some negotiations, Rosita offers to sell Jay 200 kgs of Wagyu beef for $3500. She also tells him that she will keep the offer open for the next 24 hours. Two hours later, Rosita receives a call from Angelo who offers $3700 for the meat. She immediately accepts Angelo's offer. Jay calls three hours later ( within the 24 hours period) and informs Rosita that he accepts the offer, want his meat delivered and that he will sue her for breach of contract if she does not comply with their deal.

Jay agrees to buy a new truck for home deliveries. He approaches Mario's Trucks and Motors Pty Ltd and makes enquiries about a couple of vehicles. He agrees to purchase a Pantech 2018 for $60,000. After the contract is signed he asks Jeff, the sales manager, if they will provide the first service free of charge. Jeff agrees. Two months after the purchase, the car needs to be serviced and Jeff is reluctant to honour his promise.

Jay commenced negotiations to lease some commercial premises to be used for their new restaurant in Leura. Part of the negotiation concerned the ability of Jay to demolish a wall in order to remodel the interior and build an oven. Nacho, the landlord, shook Jay's hand and told him they had a deal and that he could go ahead and get started. Jay took a large bank loan to finance the re-modelling. Four weeks later, Jay received a letter from Nacho indicating that he did not intend to proceed with the lease. Jay has already spent $150 000 on the remodelling but has not received a signed lease as yet. He has also hired two International chefs to work at the new restaurant.

Jay's parents, Mr and Mrs LeCrasstulua, migrated to Australia from Tuvalu in 1967. They are dependent on their two sons, Jay and Ricardo, for advice and support. They have limited education, no business acumen and poor language skills. Their only income is their age pension. They own their home which is valued at around $750,000. Ricardo is a charming but fleckless business man who is always on the verge of something great. In 2017, he needed $265,000 to pursue a dot com opportunity that would make him as rich as his brother Jay. He is able to borrow money from The Con Bank but only after he persuades his parents to act as guarantors. He misleads his parents as to the extent and purpose of the loan. The bank is unaware of this. After investigating their financial position the bank manager meets with Mr and Mrs LeCrasstulua and go over the guarantee contract. He asks whether they had any questions and when they do not, they signed the documents as required. Ricardo uses the money in an internet company. The company becomes insolvent and Ricardo loses his entire investment. When he is unable to repay the loan, Com Bank looks to the parents to honour their obligations as guarantors.

Assume that you are Jay’s solicitor and that he has asked you for legal advice. Advise him as to what contractual liability, if any, he and, or his family have in the above circumstances, citing relevant case law authority and using the ILAC format.

Answer 1

Case 1: Jay and Rosita:

Issue:

In this case the issue is whether Jay has right to sue Rosita for the breach of contract.

Law:

A contract is a valid agreement between two or more parties. In case of breach of contract by a party the other parry to the contract will have the right to take defaulting party to the court.

Application:

In this case Rosita has breached the contract by selling beef to another person before the 24 hours window thus, Jay has the right to sue Rosita as she has breached the contract.

Conclusion:

Since Rosita has not fulfilled her promise she has breached the contract hence, Jay has the right to take Rosita to court for breach of contract.

Case 2: Jay and Mario:

Issue:

Whether Jeff can be prosecuted by Jay for his reluctance to honour his promise.

Law:

The agreement signed by the parties shall govern a contract. The parties to the contract must adhere to the terms and conditions provided in the agreement in order to avoid breach of contract. The promise made by the parties to the contract must be fulfilled to avoid cancellation of a contract.

Application:

In this case Jeff has breached the contract by failing to keep his promise. Hence, Jay can ask for compensation from Jeff for the loss to Jay.

Conclusion:

Jay can sue Jeff for his refusal to fulfil his promise. Jay should be compensated in case of financial loss due to his non fulfilment of promise.

Case 3: Jay and Nacho:

Issue:

Is the contract between Jay and Nacho enforceable in a court of law and can Jay sue Nacho for the financial losses due to the act of Nacho?

Law:

The contract between two parties can be on the basis of written agreement or on the basis of oral agreement. Thus, both the agreements are valid and enforceable in a court of law.

Application:

In this case Jay and Nacho has entered into a contract though the lease agreement has not been signed yet it is a valid contract. Since Jay has already contracted certain liabilities keeping in mind the contract with Nacho there is a binding agreement between the two, i.e. Jay and Nacho.

Conclusion:

Nacho is liable to the contract with Jay and thus, Jay can due Nacho for breach of contract and should be compensated for the financial losses.