LAW6000 Case Study Analysis - Assignment Solution

Question 1

Part A

Jeff and Tina have signed the ‘Heads of Agreement’ (HOA) document, which briefs about the sale of brand of peach brandy along with the land it is being operated on. The document clearly states that the agreement is subject to preparation of formal contract of sales on the stated terms, which makes it legal. Tina has decided on not going ahead with the deal and the issue is whether she is legally bound to buy the business as she has signed Heads of Agreement.

As per the contract law, the intention to create a legal relationship gives rise to legally enforceable obligation. According to Sackar, J working for Supreme Court in New South Wales, emphasize that as per the principles related to Heads of Agreement are legally enforceable and binding when HOA is signed by both parties and the document itself is indication that parties are interested to enter into an agreement (Harley, 2014). The other condition includes that the document is drafted under the supervision of legal practitioners after the negotiations and considerations.

 In case of Tina, though the HOA was signed by both but it was not done under the supervision of a legal practitioner and hence Tina is not legally bound to the contract. As seen in the case Masters v Cameron wherein It was stated that terms and conditions will be accepted only after the solicitor agrees on the terms and conditions. The parties in the case reached an agreement on selling of a farming property and the  memorandum prepared stated that the agreement is subject to preparation of formal contract of sale that is acceptable to the solicitors. 

It can be concluded that Jeff and Tina though had signed HOA, but it was subject to preparation of formal contract for sale and hence Tina is not legally bound to purchase the business.

Part B 

Head of Agreement document is only meant to serve as an introductory agreement to basic terms of a transaction or partnership (Harley, 2014). If Tina had included the term stating ‘This agreement is subject to Tina obtaining suitable finance’ would have made Tina’s case stronger.

As per the contract law, there are six elements in a contract, which can make it legally bound and the elements are offer, acceptance, consideration, competence and capacity, mutual consent (Barron, 2014). In case of Tina, if the above term was included, Jeff would not have acted for taking any legal action against Tina as the term states that Tina would buy business only after she buys a suitable financer.

The term would have provided Tina more weightage and would have made her case stronger.

Question 2

 LightsBright Pty Ltd.’s managing director Phil accepted a large order of electrical fittings from CheepCheep Pty Ltd, which was in financial difficulty when the order was placed as the managing director was a friend of Phil. But CheepCheep Pty Ltd failed to make the payment and when into liquidation and did not pay the debt owned to Phil’s organization. The issue is whether Phil is to be held liable for unpaid debt or Robert is to be held liable. 

Tort of negligence is committed when a duty is imposed on an individual by law to act with care towards others (Australian Government, 2019).  Duty of care must be owed by one individual to other and must be a breach of duty of care (Federal Register of Legislation, 2016). The damages physical or financial must have been suffered as a result of breach of duty (Smith, 2007). As seen in case of Caparo Industries PLC v Dickman [1990] UKHL 2 wherein the accountant prepared accounts for the company in a negligent manner (Harvey, 2013). A firm of accountants appealed against decision of Court of Appeal wherein it was decided that accountants owed a duty of care to the shareholders of the company for whom they prepared audit report (Harvey, 2013). The report had misinterpreted the profits of firm and has caused loss for Caparo.