QUESTION
Wattlebrush Shire Council is investigating recent transactions conducted by Council employees to assess whether it has any legal liabilities or obligations. A review of recent actions has established the following facts.
1. Council’s property services manager Adam negotiated to buy a used twelve seat minibus from Tony’s Transport Pty Ltd (Tony) for Council’s use for the price of $35,000. Adam wanted time to get Council’s approval on the price. Tony promised to keep the offer to sell at that price open for exactly one week. However, after two days Adam noticed on Tony’s website that the minibus was ‘sold’. Worried he would lose the deal, Adam immediately rang Tony and told him the council accepted the offer. However, Tony told him he had decided to sell the minibus to a favoured client in the meantime. Adam was very angry, complaining that only two days had elapsed since Tony made the promise.
2. Council’s maintenance manager Betty had begun negotiations to find a new contract cleaner for the council premises. Finally, Betty came to an agreement with the manager of Zac Cleaners Pty Ltd (Zac) on the main terms, and typed up some ‘heads of agreement’ on her laptop. As she shook hands with Zac in her office, Betty said “I’ll give this to our lawyer to write up the paperwork”. Betty was later instructed by Council not to proceed with the contract because it had serious misgivings about Zac’s connection to several failed companies. Betty advised Zac the cleaning contract would not proceed. When he threatened to sue, Betty told him “We never put the contract in writing. Don’t blame me, the Council made me do it.”
3. Council’s works manager Charlie was in charge of the renovations of Council premises. A contract was in place with a local building company, which was owned by Dick, to do the renovations at a contract price of $1.25 million. It was a term of the written contract that the works were to be completed in time for the council’s jubilee celebrations. However, while the job was proceeding, Dick told Charlie that his company had some serious financial problems and he could not finish the job on time. Charlie promised to pay a further $250,000 so Dick could complete the renovations on time because all the jubilee celebrations had been organised. Dick agreed and made arrangements for the job to proceed. When the works were finished, members of the council’s Board overruled the extra amount because of emergency budget cuts. It advised Dick it would pay only the original contract price. Dick sent a letter threatening to sue the Council to recover the $250,000. 3
4. Council’s environmental sustainability manager Daisy had agreed to help a local agricultural product business, Feel the Grain, to eradicate rats, cockroaches and other vermin from its premises under Council’s ‘ExVerminate’ program. However, most of the wheat and barley stock of the business became contaminated due to Council’s actions. Feel the Grain began legal action against Council for breach of contract. Daisy also advertised in the local newspaper that Council would provide a rates discount to any local business that achieved certain environmental cleanup targets. But later the Council reprimanded Daisy for misunderstanding its instructions, and publicly retracted the rates discount plan on its website. One local tyre recycling plant advised council it was seeking legal advice because it had already made changes to its internal processes to reach the targets.
ADVISE THE WATTLEBRUSH SHIRE COUNCIL ABOUT ANY POSSIBLE CONTRACTUAL RIGHTS AND LIABILITIES IT MAY HAVE IN RELATION TO ALL OF THE ABOVE TRANSACTIONS. [You may assume that each of the Council managers had the legal authority to transact on behalf of the Council].
INSTRUCTIONS
In respect of each of the transactions by Adam, Betty, Charlie and Daisy on behalf of the Council respectively, write a response that addresses the following:
a) The legal issue (or issues) in the transaction(s).
b) The legal principles you will use to resolve each issue.
c) The application of those legal principles to the facts of each issue.
d) The concluding advice you would give in respect of each issue.
Direct your comments to whether each transaction could bind the Council to the other parties under the law of Contracts. There is no need to provide an overall answer to the situation in which the Council may find itself. Refer only to material covered in the Australian Contract Formation part. There is no need to consider any material in the Contents of Contracts (or any other) part of the course.
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