BUSINESS LAW

Answer the following questions with reference to the relevant common law (including equity) principles operating in Australia concerning contracts plus related and other transactions. Do not consider the effects of legislation potentially applicable other than that specifically identified. Students may make whatever additional factual and/or legal assumptions are necessary or convenient. And students should write about 3500-4000 words, or about 400 words per 10 mark allocation.
Please also note that:
• Additional readings relevant to this assignment may be made available to students via the library’s Course Resources Online (CRO) system.
• The assignment counts for 40% of the total assessment for the course. But for convenience of grading, the assignment questions are allocated a total of 100 marks. Your aggregate notional score out of 100 marks will then be scaled back to a mark/score out of 40 for this assignment.

Question 1 30 Marks
Read the recent Queensland Supreme Court case Sugar Australia Pty Limited v Mackay Sugar Ltd [2012] QSC 38 (see http://www.austlii.edu.au/au/cases/qld/QSC/2012/38.html) and answer the following questions.
(a) Provide a short account of the background of the case, including contractual dealings between the parties and the events which gave rise to the present dispute. (5 marks)
(b) What were the arbitrator’s conclusions regarding what (if any) contractual terms were in force between the parties (“Sugar” and “MSL”) in April/May 2011 when Sugar had to purchase more expensive sugar from an alternate source? (5 marks)
(c) If Sugar had been aware early in the 2010 season – before expiry of the existing 3 year contract – that MSL planned to sell most of its production to other buyers, which coupled with the adverse long term weather forecast of wet weather reducing the late 2010 harvest, would likely jeopardise MSL’s ability to continuously supply Sugar’s scheduled production by April 2011, could Sugar have obtained an injunction preventing the sale of MSL’s production to other buyers? (Make whatever assumptions are necessary or convenient). (10 marks)
(d) Assuming for convenience (i) there was in existence a contract of sorts between the parties as at April/May 2011, (ii) Sugar was per (c) above, aware of the risk of non-supply by MSL but chose a passive ‘wait and see’ strategy rather than investigating in advance alternate economical sources of supply and/or obtaining an injunction against MSL and then (iii) sued MSL in damages for non-supply during April/May 2011, would MSL be able to assert in defence, that Sugar had failed to properly mitigate its damages and so its claim should fail? (10 marks)
Question 2 30 Marks
Moreton Bay Rescue Pty Ltd (“Moreton”), a private firm, provided coastal patrol and rescue services with just one boat to the Queensland Government under a profitable three year contract. In January 2013, half-way through its contract, to urgently replace its damaged boat, Moreton contracted with Kuranda Kat a north-Queensland-based boat manufacturer to supply it with a newly designed high speed wave-piercing catamaran, Karunda Kate, for $500,000. The contract specified that the new catamaran must be able to operate at a continuous speed of at least 40 knots full of fuel with a crew of four and have an operational range of at least 200 nautical miles. However, it proved quite unsuitable for coastal patrol and rescue use. The new catamaran was very unstable in bad weather, it was slow and couldn’t exceed 35 knots, fuel consumption was excessive, the engine broke down constantly requiring expensive repairs and the hull was easily damaged. These failures caused Moreton to breach the conditions of its contract, allowing the Government to terminate its contract without notice on 1 April 2013, and in effect banned Moreton from bidding for similar service contracts. As a result, Moreton was forced into liquidation but was able to promptly re-sell its catamaran for a fair market price of $300,000.
Required:
Moreton seeks your advice as to which (if any) of the following categories of damages, under Australian common law contract rules, it can rely upon to sue Kuranda Kat:
• $50,000 for excess running and repair costs;
• $200,00 for loss on resale of its defective catamaran, Karunda Kate;
• the loss of 15 months income from its lucrative contract, its per month net profit until January 2013 being $12,000;
• loss of the chance to submit a bid – when its contract was due to expire – for the new three year coastal patrol contract, commencing in July 2014; and
• $100,000 being the costs of winding up its coastal services business including the sale of its bay-side boat property.
Question 3 20 Marks
Weipa Ore Ltd (“Weipa”) a north Queensland mining company entered into an exclusive three year sole agency agreement with Batavia Export Agents Pty Ltd (“Batavia”). Under the agreement, Weipa agreed to pay Batavia a 5% commission on ‘rare earth’ mineral ore sales. During the first year of the agency agreement, the following transactions occurred:
(a) In breach of clear contrary instructions, Batavia obtained a very profitable $30 million contract for Weipa with a Chinese Government-owned firm, Dalian Corp. Later on, Dalian sought to terminate the agreement on the basis of Batavia’s lack of authority. (5 marks)
(b) Due to a shipping error, Batavia sent a Malaysian buyer, Medan Steel, the wrong grade of ore from Weipa. The error cost Medan Steel $2 million in extra processing expenses. (5 marks)
(c) Batavia entered into an agreement as principal with Medan Steel to sell it rare earth ore obtained from another Queensland mining company, at a profit of $2 million. (5 marks)
(d) Based on its experience with transactions (a)-(c) as detailed above, Weipa wished to terminate its 3 year agency contract with Batavia. (5 marks)
Required:
Advise the above parties of their respective rights and liabilities under Australian common law agency rules in relation to these four transactions.

Question 4 20 Marks
In Australian common law, the law of obligations comprises contract law and the law of torts, with such tort law having effect by operation of law.
Required:
(a) Explain what is meant by the phrase ‘by operation of law’, and discuss with case law and hypothetical examples, how both contract law and tort law might apply to the same transaction. (10 marks)
(b) Consider whether, at common law, an exemption clause can address both liability in contract and tort and the impact (if any) of the Civil Liability Act 2003 (Qld) in relation to this matter. (10 marks)
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