Question Two: 10 marks

Florence Nightingale is an accounting executive who is looking to live out her

lifelong dream of owning a café. After much searching online, she finds the

perfect café in St. Kilda and decides to sell her home to purchase the business.

In 2016, Florence approaches the current owner of the café, a property mogul

called Renzo Rocco. After some brief phone conversations, Florence met with

Renzo to discuss the terms of the sale. Florence was particularly interested in

the turnover of the café and the number of patrons that it could hold. She also

asks Renzo whether the café held a liquor licence. Renzo confidently told

Florence, ‘this café turns over $30,000 per week, sometimes more. It may look

small, but we are licenced to hold 70 patrons. We also have a liquor licence, its

right there on the wall.’

Florence was very impressed by the turnover and agreed to purchase the café

on a 90-day settlement. The requisite formalities were followed, and a written

contract signed on 17 June 2016. However, when Florence took possession of

the café, she realised that the café only held 50 patrons and that the liquor

licence had expired the previous month. She also finds that the weekly turnover

is closer to $10,000, significantly less than stated by Renzo. Upon a closer

inspection of the written contract, Florence realises that there are no terms in

relation to turnover, size or the business holding a liquor licence. She calls

Renzo to complain, but he refuses to take her calls.

After about 9 months of the café struggling financially, Florence decides it is

time to reinvigorate the café with a new fit-out that would attract more

customers. She engages an interior design firm from Richmond called GLO to

completely overhaul and modernise the cafe. She meets with Tim from GLO

and tells him that she is looking to redecorate the café with new, fresh colours,

timber flooring, modern art and stone-top benches. Tim tells Florence that this

wouldn’t be a problem, but that it would be expensive as GLO ‘only uses the

best materials and workmanship’. On 10 June 2017, Florence and Tim sign a

brief contract stating that ‘GLO will undertake all works described in Schedule 2

for a total cost of $200,000.’ Schedule 2 contained a general clause stating that

the works would include:

• Painting of all walls and ceilings in colour to be reasonably determined

by GLO;

• Installation of bamboo timber floating floors;

• Installation of new bench-tops for all bar, kitchen and patron tables;

• Purchase and installation of ‘modern’ artwork; and

• Installation of 26 pendent lights.

On signing the contract, Florence emphasises to Tim that the works will need to

be completed by 1 September 2017 as she could not afford to have the shop

closed for any longer period. Tim tells Florence that this shouldn’t be a problem.

GLO commences work on the café on 23 June 2017.

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Assessment information for Business and Corporations Law

Unfortunately, the project takes longer than expected and is not complete until

10 November 2018. Florence estimates that she has lost nearly $90,000 due to

the delay. To make things worse, when Florence reopens the store, she finds a

number of issues with the workmanship of GLO. The paint was already flaking

and of a colour that Florence did not like. The bench-tops were cheap laminate

and not stone as she thought was agreed. Additionally, a number of pendant

lights installed were not working and required replacement. Florence, unhappy

with GLO, decided to hire a local building firm called Fix to repair the issues.

The repairs totalled $75,000, which Florence was required to pay.

Florence has now received an invoice from GLO for the entire contract price

($200,000). Florence is furious and refuses to pay GLO a cent. She has now

come to you for advice. She is also annoyed at Renzo and is wondering whether

she would be successful in bringing a claim against him for the sale of the

business.

Using case law, advise:

a) whether Florence would be successful in any claims against Renzo;

b) whether Florence has any obligations to pay GLO; and

c) in both cases, whether Florence would have access to any remedies

under contract law.