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Question 1 (10 Marks)
Better Brakes Manufacturing Ltd (the manufacturer) entered into an exclusive contract (the
contract) for the sale and distribution of its premium brakes with Steve Auto Supplies Pty Ltd (the
dealer).
Under the contract the dealer agreed:
1. not to give a discount greater than 10% off the recommended retail price set by the
manufacturer to any of its retailers, and
2. to obtain an undertaking from its retailers that they would not sell below the
manufacturers price.
The contract was mutually advantageous for both the manufacturer and the dealer until one of its
retailers, Mick’s Mechanics, (the retailer) started to discount the brakes by up to 20% off the retail
price set by the manufacturer.
The manufacturer is outraged and wants to sue both the dealer and the retailer for breach of
contract.
Advise the manufacturer and give reasons for each of your answers:
1. whether it will be able to enforce the recommended retail price condition in its contract
upon the dealer and the retailer,
2. Whether your answer would be different, if the retailer was a party to the contract,
3. Whether your answer would be different, if the retailer was an agent of the dealer.
Refer to relevant case law and legal principles. Apply the Common Law only. Do not apply the
Competition and Consumer Act 2010, nor any other piece of legislation.
Question 2 (10 Marks)
Sweeney Pty Ltd. ABN 350032 (Sweeney), a building and construction company, received advice that
it should invest in the share market as part of its overall risk management plan for future growth and
tax effectiveness.
With that objective in mind, Sweeney’s directors met with and agreed to appoint Quality Merchant
Brokers Ltd (the stockbrokers) to be its stockbrokers. A written contract was prepared by the
stockbrokers. One of the questions on the contract was whether Sweeney authorised the Brokers to
trade at its discretion. The other question was whether Sweeney authorised the Brokers to operate a
discretionary account. Sweeney’s directors answered ‘No’ to both questions and signed the contract
on behalf of Sweeney.
The Broker engaged in ‘day trading’ investing in risky commodities in the hope that those
commodities would increase in value before the end of trade, making profits. By the end of the first
day’s trade, the broker had made a significant loss. Without authority, one of its employees
continued trading over many weeks and losses exceeding one million dollars were sustained by
Sweeney.
You have been asked to advise Sweeney whether it will be successful if it sues the Brokers on the
contract. You have read the contract and note that the following two exclusion clauses are in the
contract:
‘6. [Sweeney] …. acknowledges that [the Brokers] will not be responsible for any loss should
[Sweeney] follow any of [the Brokers’] trading recommendations, nor any loss, in the case of
discretionary accounts arising from trading by the [Broker] on [Sweeney’s] behalf.’
‘7. any liability on [the Broker’s] part or on the part of its servants or agents for damages arising out
of the contract, however such liability arises, shall not exceed one hundred dollars.’
Advise Sweeney:
1. What is meant by an exclusion clause,
2. Whether Clauses 6 and 7 are effective exclusion clauses, which the brokers can use to defend a
claim for breach of contract by Sweeney. Refer to the rules developed by the Common Law to
interpret exclusion clauses.
Important: Do not advise Sweeney on the law of negligence
Do not refer to the Competition and Consumer Act 2010, the Australian Consumer law, the
Corporations Act 2010, nor any other legislation in answering this question.
Research and presentation (5 Marks)
Students will be marked out of a total of 5 (over both questions) for compliance with Appendix A –
Style guide and written submission outline, Course Outline. This includes:
Demonstrating research beyond the text book
Clarity of structure and argument
Appropriate use of footnotes and referencing (including a bibliography).
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