Australian Contact Law Past Paper

Question 1 [10 marks] Larry, an elderly pensioner, agreed to help his son Shemp overcome a cash flow problem that Shemp’s business was experiencing. Larry said he would execute a mortgage over his home in Collaroy in order to secure what Shemp told him was a short-term loan of $100,000 from MegaBank Ltd to Moe Pty Ltd, Shemp’s private company. The Collaroy house is Larry’s only significant asset. Shemp brought the mortgage papers from the bank to Larry’s home and Larry signed them in front of his

Larry, an elderly pensioner, agreed to help his son Shemp overcome a cash flow problem that Shemp’s business was experiencing. Larry said he would execute a mortgage over his home in Collaroy in order to secure what Shemp told him was a short-term loan of $100,000 from MegaBank Ltd to Moe Pty Ltd, Shemp’s private company. The Collaroy house is Larry’s only significant asset. Shemp brought the mortgage papers from the bank to Larry’s home and Larry signed them in front of his next door neighbour Curly, who witnessed the signature. However, the mortgage signed by Larry secured all outstanding debts owed by Moe Pty Ltd to MegaBank. At no stage did Larry receive any professional advice about the loan. Nor was he aware of all of its terms, one of which gave MegaBank the right to sell Larry’s home in case Moe Pty Ltd defaulted on the loan. Shemp’s business failed after six months because of rapidly falling consumer demand and a sharp rise in interest rates. Larry comes to you for advice. Advise Larry of the following: a) Could he rescind the mortgage he signed with MegaBank under any general

Larry comes to you for advice. Advise Larry of the following:

a) Could he rescind the mortgage he signed with MegaBank under any general law principle? [5 marks] b) Has MegaBank engaged in any conduct that violates the Australian Consumer Law? [5 marks] Question 2 [10 marks]

b) Has MegaBank engaged in any conduct that violates the Australian Consumer Law? [5 marks]

 

Question 2 [10 marks] Ace is a go-karting enthusiast who races at various go-karting races and meetings. He establishes contact with Zac, a licensed kart dealer, who is selling an almost new kart for $6,500. Ace inspects the

Ace is a go-karting enthusiast who races at various go-karting races and meetings. He establishes contact with Zac, a licensed kart dealer, who is selling an almost new kart for $6,500. Ace inspects the kart and decides it is what he is looking for. He takes it for a spin around Zac’s rural property, but he does not have the chance to check its top speed. He is told it has a two-stroke engine that is capable of considerable speed for semi-professional go-karting on established tracks. Zac pulls out some paperwork for Ace to sign. Ace has a quick look at the document, which recites the kart’s particulars, engine capacity, registration and other details. He asks Zac whether the kart will attain a speed of 120kmh. Zac says “Don’t worry mate, 120kmh is nothing for this baby.” Ace says “In that case, this baby’s mine.” He signs the papers, hands over a cheque for $6,500 and takes delivery of the machine a few days later. When Ace goes for a practice run at the Insanity Kart Track, he finds the kart can only reach a top speed of 100kmh. When he rings Zac to complain, Zac says “Don’t ask me mate. My lawyer prepared all the paperwork we use here.”

Advise Ace on what basis he could sue Zac for his verbal assurance about the kart’s speed? (Refer to general law principles only)

 

Question 3 [10 marks]

Simon took his hand-made Italian shoes and his wife’s Prada handbag for repairs to Elvira, a well-known repairer of leather goods that his family had used for many years. As usual, Simon was handed a docket which, as usual, he placed in his wallet without reading. When he returned to collect the goods the following week, he discovered that his shoes were stained and his wife’s handbag was missing. The shop assistant recalled giving the handbag to another customer who had lost her docket. No explanation was offered for the stained shoes. Simon was very angry and demanded compensation. Elvira refused, referring Simon to a clause on the docket which read: Elvira will not be liable for any loss or damage to any goods left for repair howsoever such loss or damage may be caused. Elvira also pointed out that the same words were printed on a large sign on the wall. The sign had obviously been there for some time. Simon protested that he had never read either the sign or the docket.

Simon seeks your advice about whether Elvira can rely on the docket and the wall sign to avoid paying compensation for the lost handbag and the damaged shoes.

 

Question 4 [10 marks] In August last year Tim completed the purchase of a second-hand furniture shop in Balmain from Harry. Clause 15 of the contract of sale stipulated that Harry could not open ‘any shop selling new and/or second-hand furniture’ within 25 kilometres of the Balmain shop for a period of three years. Two weeks ago, a sign went up at some empty shop premises across the road from Tim’s shop. The sign said that Harry would be opening up a second-hand furniture shop in those premises in three months’ time.

Tim seeks your advice as to whether, and on what basis, he could prevent Harry from opening a second-hand furniture shop in the premises across the road.