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
• 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.
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
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.
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