Commercial Law - Past year papers

QUESTION 1
(a) Tom, an RMIT final year engineering student, comes each morning to his lectures by
tram. On one particular trip, Tom decides to sit on a particular seat but as he roughly
rests his weight on the seat, the whole seat suddenly collapses, injuring his back. Tom is
taken to hospital and requires spinal surgery. Tom’s injuries become worse due to a
hereditary bone disease. While recovering in hospital, Tom becomes grossly
overweight due to the prolonged inactivity and as a result develops diabetes, a serious
digestive disease.
As a result, Tom has lost his part-time job. After investigation by the tramway
authority, it is discovered that one of the tramway’s maintenance workers, Bill, who
was responsible for periodically repairing the tram’s seats, had failed to replace a
particular bolt to the broken seat. This would have prevented Tom’s injuries. However,
Bill states that it is common practice in his job that such bolts are only routinely
replaced on all tram seats once every two months. Indeed the tramway’s management
states that it would be too expensive to replace all such bolts more frequently. To do so
would cause ticket prices to increase.
REQUIRED:
Fully advise Tom of his common law rights available in negligence against any party.
(15 marks)

(b) Alfred has for many years worked on his parent’s farm as a partner in the family
business. Alfred is an experienced house builder but decided to give up his successful
business to help his elderly parents on the farm for no payment. Several months ago,
Alfred decided to marry and was keen to return to his business to better provide for his
family. Knowing this, Alfred’s parents promised him that if he continues to work on the
farm they will divide-off and give to him part of the farm property so that he could
build his own home. In reliance on this promise, Alfred continued to work on the farm
and obtained a large bank loan to pay for the construction of his new home. The parents
had promised they were arranging with their lawyer to execute a contract to evidence
this transfer of the property. However after many months and with the house almost
completed, no formal contract was yet entered into. Unknown to Alfred, the parents
were reluctant to proceed with this arrangement. They wanted to give the entire farm to
their daughter, Maria. The parents told their lawyer to “go slow with the preparation of
the contract”. Alfred has recently spoken to his parent’s lawyer and was told that his
parents now refuse to sign any contract and want him to leave the farm immediately.
REQUIRED:
Fully advise Alfred as to any relevant common law rights and remedies he may have
against his parents.
(10 marks)
(15 + 10 = 25 marks)


QUESTION 2
Jen goes to ITAL Pty Ltd, a carpet shop. Jen meets Stan, an experienced salesman, and
explains that she wishes to carpet her house with a good quality and durable product. In fact
Jen stresses that, being both asthmatic, she and her son Larry are sensitive and allergic to
synthetic carpet which also contain chemicals and therefore must have carpet that is chemicalfree
and made only from wool. Stan reassures Jen that all his carpets are “environmentally
friendly and safe”.
Stan suggests that she buys an expensive top quality carpet described on a shop brochure as
‘WOOLEX-safe and tough’. This carpet is imported from the manufacturer in Sweden by a
Melbourne based company, OSLO Imports Pty Ltd. Stan shows Jen a sample of the carpet
and Jen is satisfied with the carpet’s appearance. A contract is signed and a term is included
that excludes any conditions and warranties implied by statute. The purchase price is $23,000.
This amount includes the service installation costs. Stan shows Jen a large shipment of the
carpet in a rolled-up bundle, however due to the packaging, it is not possible to properly
inspect the carpet. OSLO Imports Pty Ltd also guarantees that this carpet is safe, durable and
environmentally friendly.
After installation Jen is unhappy as the edges of the carpet are not well cut to shape nor
securely attached to the floor. Furthermore, the carpet looks far different to what she thought.
Jen and Larry begin to suffer from their asthma. Larry is in need of medical care due to the
inhalation of dangerous fumes from the carpet. Chemical analysis of the carpet reveals that it
contains a poisonous chemical and is composed mainly of rayon, a synthetic material. A
single attempt to wash out the chemicals by normal, steam cleaning has failed and the carpet
is now damaged.
REQUIRED:
Fully advise Jen and Larry of all their relevant statutory rights

QUESTION 3
Last week Phil, a collector of rare and unique musical instruments, advertised in the local
community newspaper the sale of several musical instruments. Included were three trombones
for $300 each and four saxophones for $400 each.
As well, Phil asked his young son Ben to prepare multiple copies of a handout sheet outlining
the same information and to deliver these to all the letter-boxes in the community. Phil agreed
to pay Ben $20 for this work.
On the 1 May, responding to the advertisement, Brett offered Phil $250 for one of the
trombones. Phil asked for $280. Brett said he would think about it. Phil agreed to leave this
offer open for 10 days.
On the 2 May, after reading the letterbox handout, Sarah called Phil accepting to buy one of
the saxophones for $400. Phil explains to Sarah that he no longer wishes to sell his
saxophones.
Phil has now decided not to sell his trombone collection.
Phil also refuses to pay his son, Ben the $20.
REQUIRED:
Applying any relevant case law principle, discuss and fully advise whether Phil has any
contract with any party.
(10 marks)


QUESTION 4

(a) Charlie, a 15 year old school student, has recently entered into a contract with Howard,
a well known football trainer. Howard believes that Charlie has great potential to be a
highly successful player and wants to use his services. Howard and Charlie enter a
contract whereby Howard will offer him playing engagements, training and advice as
well as supplying Charlie with expensive football equipment. Charlie now decides that
he does not wish to be obligated under any part of this arrangement.
REQUIRED:
Fully advise Charlie as to his relevant common law position.
(8 marks)


(b) Roberta is about to be employed by Max, the owner of the Golden Castle Chinese
Restaurant Pty Ltd. Roberta is a recent cooking graduate and Max knows that Roberta
would be grateful for an opportunity to gain experience as a Chinese chef. Max prides
himself that his restaurant serves his grandmother’s prized “Beijing Duck Supreme”
soup. This recipe is a guarded family secret. Max wishes to include terms in the
employment contract with Roberta to permit him to fully restrain her future use of any
skills, information etc obtained during her employment with Golden Castles.
REQUIRED:
Fully advise Max as to what extent the common law would permit him to include such
a restriction in this contract.
(10 marks)


(c) Andy, a young and inexperienced importer of shoes has contracted with Mike’s
exclusive delivery service company to deliver Andy’s shoes to stores in Melbourne.
Andy and Mike had agreed earlier that the delivery charge would be $200 per tonne
shipment. Andy’s business had financial difficulties at the beginning, however with
time, his store customers have increased and his profits seem to be slightly improving.
Mike was fully aware of Andy’s difficult financial situation. Mike also knew that Andy
had several very large delivery orders with six stores and was heavily in debt. Recently,
Mike sent a series of emails threatening to refuse to deliver, unless Andy pays him $800
per tonne. Feeling pressured due to difficulties arranging an alternative deliverer and
realizing he cannot afford to lose these six large orders, Andy reluctantly and unhappily
signs a new contract with Mike for $800.
REQUIRED:
Fully advise Andy as to all possible legal ways available to permit him to avoid this
new contract.
(12 marks)
(8 + 10 + 12 = 30 marks)