Ok here is the assignment!
I couldnt link it so sorry if its so long.
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Please consider carefully the following circumstances: -
Charles and Camilla are the owners of Winns Ore, an exquisite mansion on the outskirts of Sydney. For a number of years they had run a small B.Y.O. restaurant on the property, specialising in classic English fare.
Charles was a visionary and had always planned to expand the venture from a small restaurant to a large banquet reception centre. There was extensive accommodation on the premises, and with the forthcoming Olympics, Charles could see a future in a larger operation.
In February 1996 Charles and Camilla applied for a general liquor licence. With a word in the right places from Charles’ parents, Liz and Phil, the licence was granted.
There were a number of conditions on the licence including compliance with the local health and building requirements.
Charles and Camilla consulted with the Rural City of Wodonga engineer and health inspector. They explained their plans, which included a function centre to cater for up to 300 patrons, along with the operation of two smaller, exclusive restaurants on the premises. The inspector made it clear that, with such numbers, there would be stringent air conditioning requirements.
Camilla then rang HRH Airconditioning. This business was run by Mark Parker, an old friend of Camilla’s. Mark came to Winns Ore and had a look around. The project was enormous. Mark said with some hesitation: -
I’m really not sure Cammy, I have limited myself to very small projects like flats and kit homes. This one may be beyond me.
Camilla was keen for Mark to do the job and said she was not worried.
Mark spent some time looking around and queried
What exactly do you want to do here?
Camilla explained that they required an air-conditioning unit sufficient for the two small restaurants and the function centre that would hold up to 300 people. She showed Mark the plans, which included a large kitchen in the centre of the building to service all areas.
Mark made some enquiries of the Wodonga engineers and the health department. He decided that, as work was light at the moment, he would take on the job.
Part of Mark’s business was, not only to install, but sell air conditioners. Mark had always sold Broomer Air conditioners, a leading name in the industry. He discussed the specifications with Broomer and it was agreed that it would be best to install a 64 Kilowatt (Kw) air conditioner.
Mark consulted with Camilla and advised the price of such a unit would be $64,000.00. Camilla was dismayed, this was beyond the budget. Mark then suggested a cheaper way.
Mark happened to have in stock a pair of second hand Bradvent 28 Kw air conditioners. They would cost $14,000.00 each. The total price installed would be $32,000.00. At the conclusion of the discussion Mark said: -
I’ve seen this dual system installed before. It was at the Brittany High School I think, in the gymnasium; it managed 300 people quite comfortably.
Camilla was satisfied and told Mark to proceed. On April 15, Camilla went to HRH Air-conditioning, paid $5,000.00 deposit and signed the purchase order. The document contained the usual information such as the names of the parties, the purchase price, the air conditioner model numbers and the date of installation. At the conclusion of the document the following appeared in fine print: -
he purchaser agrees that all express or implied warranties as to fitness or merchantability are hereby excluded.
Camilla asked Mark what this meant. Mark replied that he had no idea and ‘anyhow the condition was irrelevant as the goods were second hand.’ Camilla did not press the matter further.
Whilst Camilla was organising the premises, Charles was not idle. Realising they would need finance Charles had been to the Regal Bank. Regal agreed to advance the sum of $200,000.00 to finance the renovations and ongoing business costs. The bank required a personal guarantee and a mortgage from Charles’ parents over their farm ‘Sandringham’
Charles visited Liz and Phil and explained the arrangement. He assured his parents that business was fine and the venture would prosper. In fact, just that week, Charles had secured a large contract with the Olympic 200 organising committee for three one-week long conferences at Winns Ore in December. The conferences and associated accommodation at the mansion would gross $400,000.00. Up to 300 delegates and their partners were expected to attend each conference. The size of the function area and the guarantee of comfortable and gracious conditions had prompted the decision by the committee to choose this venue over others.
Charles explained to his parents the mortgage and guarantee would be for only 6 months and for not more than $200,000.00. On April 22, the bank manager (an old friend of the family and their long time adviser) visited ‘Sandringham’. Phil was busy with his stamp collection and Liz was exercising her pit corgis. Phil greeted the bank manager and indicated that Charles had already explained everything. The bank manager realised the hard part was done and duly produced the mortgage and guarantee for signing. Phil quickly perused the documents and signed them both. Phil called Liz, who was now in the kitchen preparing tea, to come in and sign the documents. Liz duly complied, she did not bother to read the documents as Phil looked after those sort of things.
The mortgage and guarantee were for an unlimited period and an unlimited amount.
By September 1996 the renovations were completed and business was going well. There had been a number of small functions, wedding receptions and the like in the function centre. The restaurants were particularly popular with the local community.
In November 1996 troubles began to occur. Larger Christmas functions were organised and it became clear that when the restaurants were full, and the function centre had more than 180 people, the air-conditioning began to struggle. It failed to clear the smoke and fumes from the kitchen and could not maintain a comfortable temperature.
On November 9, unbeknownst to Charles and Camilla, Mr. McGhee from the Olympic 200 committee attended a reception for his niece. The air-conditioning failed completely and the guests had to move outside. It was rumoured by the local residents at the reception that there had been a lot of problems at Winns Ore and the health inspector had been around a number of times.
On November 13, Charles and Camilla received a letter from the Olympic 200 Committee stating that it had genuine concerns that Winns Ore would not be able to accommodate 300 people, and that it was not prepared to risk losing face on the international stage by exposing the delegates to sub-standard facilities. The committee cancelled the booking for all the conferences in December.
By January 1997 the air-conditioning had failed completely. Consultant engineers advised that the capacity was too small to cope with in excess of 250 people if the kitchen was in operation. The Bradvent 28 Kw model was notoriously bad in any area with a kitchen. They were not surprised that the air-conditioning failed as any large load tended to cause an electrical fusion in the units; these models were showing typical Bradvent characteristics.
The Miller Council closed the function room until the problem had been fixed. The Liquor Licensing Commission suspended the liquor licence pending production of a certificate of compliance from the Council. Accordingly, the restaurants were closed as well.
Business deteriorated. The bank would not finance the installation of a new larger air conditioner and foreclosed on the loan, which had expanded to $350,000.00.
As no funds were available to repay the debt the bank called upon Liz and Phil to pay on the guarantee, if this was not done ‘Sandringham’ would have to be sold in accordance with the mortgage.
As a result of the disastrous season Camilla has had a nervous breakdown which resulted in psychiatric expenses and 6 months recuperation at the Royal Health Retreat. The medical expenses were $1,300.00 and the Retreat cost $500 per week.
Camilla and Charles come to see you. They believe:
• HRH air-conditioning has breached the contract by not supplying an air conditioner that would ‘do the job’.
• The Olympic 200 Committee had no right to cancel their conferences.
• The Regal bank has no right to make demands on Liz and Phil.
To date their major losses have been: -
- replacement cost of the airconditioner $64,000 (not yet installed).
- loss of profit from the Olympic 200 conferences $150,000.
- loss of business over the summer period .
- Camilla’s medical expenses and recuperation expenses.
You are to assess dispassionately the legal position of Camilla and Charles as well as Liz and Phil and advise them of their options. Your assessment should consider both the Common Law and, if applicable, the Goods Act 1958 (NSW.). You are to ignore the Trade Practices Act 1974 or any other Commonwealth or State legislation that you may be tempted to consider relevant.
If any further information is required explain the nature of this information and how it would influence your advice.
SOME POINTERS WOULD BE GREAT!
THANKS GUYS
