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Question 1: 17 marks
Just over two years ago, Jane bought a rundown coffee shop business and the premises at which the business was carried on. Soon after buying the business and premises, she had the shop refitted. This was done by her husband Edward, who runs a redecorating business. The cost of refitting the shop was $40,000. Jane did not pay this amount to Edward despite the fact that the original term orally agreed between them was that Jane would pay the full amount to Edward within a year. It was also orally agreed at the time that no interest would be payable on the debt.
The coffee shop business has proved very successful. Six months ago, the shop next door to Jane's was put on the market for sale. Jane saw this as a great opportunity to expand her business. She spoke to her bank manager about obtaining a loan to finance the purchase and redecoration of the adjoining shop. The bank manager was concerned that Jane had not yet paid her outstanding debt to Edward. Furthermore, if Jane did pay this debt, it seemed that she would not have quite enough capital to meet the bank's lending rules.
Jane explained this situation to Edward. She said she was very keen to buy the shop but she could only do so if he would accept $10,000 in full and final settlement of the outstanding debt. Edward agreed to this and they wrote their agreement on a sheet of paper and both signed it. Edward's reason for agreeing to this arrangement was partly because he wanted to help his wife and partly because he assumed that she would hire him to redecorate the new shop.
Jane produced the signed written agreement to her bank and, because of it, was able to get a bank loan and go ahead with the purchase of the shop next door. Jane then arranged for the shop to be redecorated but she did not engage Edward to do this. Instead, she hired Max who operates a decorating business across the road from Jane's coffee shop business. Jane has paid Max $25,000 for redecorating the shop.
Jane has since spent a lot of time socially with Max and has now declared her wish to end her marriage to Edward and start a new relationship with Max.
Edward is outraged at Jane's declaration and his first response has been to sue her for the $30,000 that he claims is outstanding from his refitting the coffee shop.
Advise both parties about their legal position in respect to this dispute between Edward and Jane.
Question 2: 8 marks
Jean was a regular shopper at Top Star Supermarket, which was part of a large nationwide supermarket chain. She was there at least once a week and sometimes more often if the specials were really good.
When Jean was there this week, she slipped on some grapes in aisle 3 and broke her ankle. Grapes are normally found in the fruit section of the store and the store was not sure how the grapes got there or how long they had been there.
The store manager indicated that there were a number of spillages every week in the aisles in this store.
Is Top Star Supermarket liable in negligence for Jean's injury?
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Issue: The main issue is whether Edward has any right to claim his outstanding $30,000 from Jane for refitting the coffee shop.
Under the Australian contract law, an agreement which is formed with the intention to enforce it legally is termed as a contract. However, to form a valid contract there are few essentials which must be present, such as, offer, acceptance, consideration, intention, and capacity. (The Law Handbook, 2015)
All essentials are relevant in order to establish a valid contract.
It is important to understand the relevance of 'legal intention' under the law of contract as the same is relevant in order to resolve the current issues.
The legal intention is a contract element which must be present in order to form a valid contract. Legal intention submits that the party to the contract must have the intention to abide by the contract legally, that is, whenever there is a dispute amid the parties then they are willing to resolve their dispute in the court of law and is held in Rose and Frank Co v Crompton (1923). However, the presence of intention must be analyzed by understanding the scope both under the domestic and commercial relationship amid the parties. (Moles R, n.d)
Many times, the parties under the contract are in domestic or family relationship. In such situation, the general presumption that prevails is that the parties normally do not intend to abide themselves legally and thus the contract is not intended to be enforceable under the court of law and is held in Australian European Finance v Sheehan (1993). (Moles R, n.d)
But the assumption was found to be negated by establishing the fact that the parties though are in family/domestic relationship but still intends to enforce the intention established between them legally, that is, they establish a contract which has the enforceability of law and is held in Balfour v Balfour (1919). The parties in such situation enter into a contract with commercial motives or intend and if any other party does not perform his part of obligation that the aggrieved party may enforce the agreement legally and is held in Todd v Nicol (1957). (Moles R, n.d)
Likewise, many times the parties who enter into a valid contract are not in family/domestic relationship. The general presumption in such kinds of the contract is that the party's intent to bind themselves legally, that is, the contract is enforceable under the court of law and is held in Masters v Cameron (1954). However, this presumption can be rebutted by the parties by showing contrary view, that is, though the parties are not related to each other in a social manner however still they do not intend to abide by the contract legally and is held in Edwards v Skyways Ltd (1964). (Moles R, n.d)
In such situation, it is submitted that a valid contract can only be made when both the parties agree on the same thing at the same time. If the parties do not intent unanimously on a particular thing it cannot be said that there is a meeting of minds and there is a valid formulation of contract. However, when it is difficult to ascertain the intention of the parties that the terms established amid the parties must be analyzed.
Thus, one if the ways, in order to depict the intention of the parties, is to evaluate the agreement that is established between the parties. The analysis becomes easy when the agreement established between the parties is in written form. When the parties enter into a written agreement then they must abide by its terms regardless what they intend. In the leading case of Errington v Errington Woods (1952), it was submitted that when a written agreement is established amid the parties than they must abide by its terms. (Hepburn S, 2013)
Thus, after analyzing the laws that deal with the intention of the parties it is now important to apply the law to the given facts of the case study.