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Commercial Law

1. Chloe is a naturopath practitioner whose business is steadily picking up. Recently she has been thinking of opening a meditation studio in the leafy suburb of Burnside. She found a perfect place but before signing the 2 year lease with the landlord, she went to the Burnside Council to check if there were any building works scheduled to happen close to her intended premises as she needed a quiet environment for her meditation practice.

She spoke to the person sitting in the front desk attending to general enquiries and told him about her business and that she wanted to check before signing the 2 year lease. The council officer checked on the computer to see if there were any planning approvals close to Chloe’s intended studio. While doing this he was called away to attend to another matter. Upon returning to his desk, he has a cursory glance at the screen and said “it should be fine”.

Chloe signed the 2 year lease. 4 months after opening her business, big heavy machineries arrived at the property next door. When Chloe asked the workmen what was happening, she was told that they were doing a major renovation next door including knocking down a few walls.

The noise made it impossible for Ellen to continue her practice. With the on-going noise and the failure of her business Ellen is now suffering a nervous disorder.

Ellen has moved out of the premises and stopped paying rent. She wants to get out of her contract with her landlord as she is now no longer able to continue her practice. The landlord is threatening to sue Ellen for breach of contract.

Advise Ellen as to what she can do?     

2. Bob purchased a woollen jumper from Clothes Galore in Adelaide. The woollen jumper was made by Southern Knitting Mills in their Victorian factory.
As a result of wearing the woollen jumper without first washing it, he contracted dermatitis as the jumper contained sulphite, which it was found had been left in the wool during the manufacturing process. The sulphite couldn’t be seen on a reasonable inspection by either the retailer or the buyer.
Has Bob any remedy or remedies available to him under the Australian Consumer Law?

Sample Answer

1. Facts:
Chloe is a naturopath practitioner who has an intention to set up a meditation studio or a centre for meditation in the suburb of Burnside as of late, she has seen a steady increase in her business. In order to set up her business, she found a place but before entering into any agreement, she went to the Burnside Council to ensure and find out if any building work is coming up in the nearby area where she intended to take a lease for a period of two years. Given the circumstances, she was given assistance by the council officer that the Burnside Council and the associated premises would be fine keeping in mind her meditation studio and the environment she required. After entering into the contract, and the lapse of four months, a sudden incident started happening. Big heavy machinery started working next door and upon enquiry, Chloe came to know that a major renovation work was taking place next door. The machineries made a loud noise and hence, it was impossible for Chloe to carry on with her work there. Subsequently, she moved out of the place and refrained from paying any rent. She expressed her intention to withdraw the contract as the purpose behind the contract did not exist anymore. She was threatened by her landlord that she would be sued for making a breach of contract.

The issues that arise in the present matter are as follows:

Whether the landlord has a right to sue Chloe for having breached the contract?
Whether the contract can be rescinded or avoided by Chloe?
We shall take into account the relevant provision of the Commercial Tenancy (Retail Shops) Agreements Act, 1985 and certain case laws in this aspect. The following three rules shall be used to determine the conclusion of this matter:

Section 6 of the Commercial Tenancy (Retail Shops) Agreements Act, 1985;
Renard Construction (NE) Pty Ltd v Minister for Public Works (Renard Construction (NE) Pty Ltd v Minister for Public Works, 1992); and
Con Kallergis Pty Ltd trading as Sunlighting Australasia Pty Ltd v Calshonie Pty Ltd (ü Con Kallergis Pty Ltd trading as Sunlighting Australasia Pty Ltd v Calshonie Pty Ltd, 1998).
Application Of The Rules:
Section 6 (1) of the Commercial Tenancy Agreements Act states that the occupant should be supplied with a declaration of disclosure in agreement with Section 6 (4) at least 7 days prior to inflowing into the agreement. In the given instance, Chloe has not been served with any notice or declaration of disclosure by the landlord (Dorter & Sharkey, 1981). Further, Section 6 (1) also provides that if the revelation declaration is unfinished or if it contains any message that is false or misleading, the, the tenant may within a stipulated time frame of 6 months after the commencement of the lease period, hand out a note to the landlord in order to terminate the agreement (Miller & Jentz, 2011). Applying the essence of this section, Chloe who is the occupant in the given instance, can conclude the contract within six months as the required revelation declaration has not been made or satisfied by the landowner.

Section 6 (1) (b) of the Act inter alia provides that if the landlord makes a contravention of his duty and fails to provide the revelation declaration, then, the occupant may request for recompense for the losses or compensation that he undergoes as a result of the breach (Lindgren, Carter & Harland, 1986). If we apply this requirement in the given scenario, we can say that Chloe can also ask for compensation from the landlord (Keogh, 2011). Hence, the landlord can be sued by Chloe under Section 6 of the Commercial Tenancy Agreement Act for her violation of the rights. The tenant, in this matter, Chloe, has a right to get a disclosure statement.

Now, we shall probe into the case of Renard Construction (NE) Pty Ltd. The Australian Judiciary has always given a lot of importance to the component of an implied term of good faith. In this case, JA Priest stated that both parties in a contract of immovable property should enter into the negotiations in good faith without any presence of misrepresentation or misunderstandings or wrongful intentions (Bradbrook, Croft, Hay & Bradbrook, 2009). In the given instance, Chloe had borrowed the premises for opening a business of reflection and she also took all necessary steps to ensure that the area that she intends to take on rent succeeds in providing her the type of environment she required. Only after thorough checking and scrutiny did she did she enter into the agreement and made the payment. But, in spite of all this, her requirement was not met and she failed to achieve what she wanted. Thus, there has been a breach of good faith in the matter which implies that Chloe can terminate the contract.

Now we shall take into account the case of Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd. The High Court of Australia in the present matter said that any one party in a contract is not entitled to do any act arbitrarily which are necessary for the performance of the contract (McElroy & Williams, 1941). Applying the relevant Court decision in the given issue, we can say that Chloe has rented the premises with an intention to open or set up a centre of meditation there and she had necessarily informed about the same. She had also made it very clear that she required a quiet environment to continue her rent there. But she was deprived of her requirement with the inception of the renovation work because it made a lot of noise. Thus, the landlord in the matter is responsible as he acted subjectively in the functioning of the contract.

In conclusion, we can say that:

Chloe has full rights to come to an end the contract under Section 6 (1) of the Act as she has not been provided with a proper revelation declaration by her landowner. Along with this, she can also assert for compensation that have occurred to her.
Further, the Landlord is not entitled to sue Chloe because the contract was not performed by him in good faith and he had acted illogically by confusing Chloe and failing to furnish the revelation declaration to her with the disclosure statement.
Thus, Chloe can bring a claim against the landlord and can claim for damages.
2. Facts:
Bob, a genuine consumer buys a woolen jumper from a retail store called clothes Gallore in the city of Adelaide. The jumper was manufactured by Southern Knitting Mills in the Victorian Factory. Bob wore the jumper without cleaning it and got infected with dermatitis as the jumper had certain contents of the sulphite because the traces were left in the wool during the process of the manufacture. The content of sulphite which caused the dermatitis was not visible either to Bob or to the retailer even after taking the necessary care that one is supposed to take.

The issues that arise in the matter are:

Whether the retailer can be sued by Bob for selling him a woolen jumper that caused him to suffer from dermatitis?
Whether Bob is entitled to receive any kind of damages from the retailer?
The legal rule that we shall apply to resolve this matter is Section 27 of the Australian Consumer Law and Fair Trading Act, 2012.

Application Of The Rules:
Section 27 of the Australian Consumer Law and Fair Trading Act, provides about the liability of suppliers and those persons who are engaged in conducting antecedent negotiations. Clause 1 of the section provides that in any such agreement which deals with the delivery of goods, if any depiction is made by the dealer or any other being who is acting on behalf of the dealer, comes out to be any different from the representation made, then the procurer can avoid the contract. In the given case, there was no representation that was made to Bob by the seller regarding the sulphite content (Bruce, 2010).

Section 27 (1) (a) provides inter alia that the purchase can definitely seek for damages that hve been caused to him or he may also cancel a contract in case if any misrepresentation is made to him. Hence, Bob might claim for damages or losses that he has undergone because of the incident (Paterson, 2011). Now, it was imperative that reasonable care should have been taken during the time of manufacturing. But in the given instance, the seller cannot be held liable because he took necessary care and even then the sulphite content could not be traced. It was during the manufacturing process that the problem arose and hence they are supposed to compensate Bob for his sufferings.

We can conclude this matter on the observation that Bob cannot sue the retailer for his damages though he can definitely bring about a cause of action against the manufacturer and the producer of the wool because the traces of sulphite were made available in the wool in that process itself.


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