WA Structuring Answers to Contract Law Problem Question?

Discussion in 'Australian Law Students Forum' started by Hstudent990, 17 September 2018 at 4:42 AM.

  1. Hstudent990

    Hstudent990 Member

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    Need some assistance in structuring answers to this problem question. Particularly with question 4 as I would not know what area this refers to other than using my personal opinion.

    Scenario:

    Bob purchases a block of land and wants to build a house on it. He bought the land because he had heard that a major shopping centre and school were planned for the area. He plans to build a luxury house on the land and live there until the shops and school are completed as the value of his land and house will undoubtedly increase. Bob intends to sell then for a tidy profit.

    Bob talks to builder John explaining the proposed school and shop developments and how he thinks they will increase the value of the land and that this is why he wants to build a luxury house. John is keen to build Bob’s house as he has another potential client, James, who also wishes to build a luxury house in the future.

    John has not yet built anything other than low cost standard package housing and James is a bit hesitant to contract with John. However, James tells John that if Bob’s house looks good when it is complete, James will contract with John to build a similar house.
    On 1 June 2018 Bob enters into a contract with John to build the house. John is to commence on 30 June 2018 and finish by 30 June 2019.

    The house is one of the standard package houses that John provides, but it has numerous luxury upgrades. In particular, Bob has specified that John obtain and use a very high quality marble tile that is only available from Italy and that is to be used for floors of the house.

    On 2 June 2018 John places an order for the marble with XYZ Quarries in Italy, the only supplier of the marble. The marble is to be delivered by 30 June 2018. On 20 June 2018 Bob finds out that the plans to build a shopping centre and school have been scrapped by the local council.

    On the same day, John informs Bob by letter that XYZ quarries have ceased operating and the marble is no longer available. John proposes some alternatives but Bob says that nothing can compare to the originally specified tiles. John says that he will try to find some other alternatives.
    On 21 June 2018, Bob is approached by Mary who wishes to buy his land. He immediately signs a contract to sell the land to Mary, to be settled on 31 July 2018.

    On 22 June Bob writes to John and states that:

    1) Because John cannot supply the marble, he has breached a condition of the contract and Bob is hereby terminating the contract; or

    2) Alternatively, the scrapping of the development plans has frustrated the contract and accordingly it is terminated.

    On 23 June John receives the letter. He also finds out from his real-estate friend that Bob has already signed a contract to sell his property to Mary.

    John estimates that if the contract to build the house does not proceed, he will lose around $50,000 profit. He has also purchased materials for the project that cannot be returned to the supplier.

    Further, there is no doubt that James will not sign with John and will instead take his business elsewhere. Finally, John has found the whole matter to be most disappointing and distressing.
    John comes to you for advice, he wants to know the following:

    1) Does either the failure to obtain the marble or the scrapping of the development plans result in the contract being terminated?

    2) Regardless of your answer to 1) above, if the contract is not terminated for failure to obtain marble or by the scrapping of the development plans, how should he treat Bob’s letter i.e. what are John’s options?

    3) In the event that Bob has wrongfully terminated the contract, what damages could John successfully seek?

    4) John has been asked to build a house by Richard commencing 1 July 2018, but this is a low profit job ($10,000 profit), should John take this contract?
     
  2. Rob Legat - SBPL

    LawTap Verified Lawyer

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    As with any contract question, identify the contract(s) between which parties and start there. This involves unraveling the issues and apportioning them to each contractual relationship in chronological order (which is important). Then deal with each contract separately. Look at each step that occurs and what the parties do in response to that step. For example: Does an event constitute a breach of a material term? If so, what effect does the conduct of the innocent party have (such as affirming the contract)?

    With 4, consider the effect of mitigation.
     
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