SUMMER EXAM Question 1:
John secured a contract of supply of beverages to Myway. David is a distributor of Shaolin Cola in Victoria. John entered into a supply agreement with David on February 2. Pursuant to the agreement, John ordered 12,000 cases of Shaolin Cola from David, 1,000 cases to be delivered on February 6 and 1,000 cases on the first day of each month thereafter. The agreement requires John to pay $20 per case, i.e., $20,000, on receipt of each delivery. Discuss the following separate scenarios.
A. David sent the first delivery of 1,000 cases to John on February 8. Assume that the Agreement contained a “time is of the essence” clause. Is John justified to cancel the contract and refuse further delivery from David?
B. On February 3, David advised John that he was unable to fill John’s orders due to a shortage of supply. What legal options are available to John?
C. On February 3, John advised David that he was unable to accept any delivery from David as Myway was in liquidation. On February 6, John refused to accept the first delivery of 800 cases from David. David sent 6,000 cases six months later. John refused to accept the delivery. What legal options are available to David?
Examination marking guide
Question 1: Part A
The issue: whether John has a right of termination of the contract upon a breach of a condition by David?
Test of condition: Tramway and Associated Newspapers
Law on time stipulation in the contract
Conclusion: Termination of K and refusal to accept delivery justified
Question 1: Part B
The issue: what are the options available to John upon David’s repudiation of the contract?
Anticipatory breach: Foran v Wright
Repudiation: Laurinda, Bowes v Chalayer, Carr v JA Berriman
Conclusion: Election by the innocent party, John:
1. Accept the repudiation and terminate the contract and seek damages
2. Affirm the contract and be willing and able to perform the contract
Question 1: Part C
The issue: whether David has any claim against John after his defective performance of the contrac?
Initial repudiation by John
Election by the innocent party:
· Accept the repudiation and terminate the contract and seek damages
· Affirm the contract and be willing and able to perform the contract Election by David
Affirmation by David
· Defective performance
Breach by David
Conclusion: John’s refusal to accept the delivery was justified: Bowes v Chalayer,
Some students have opted to focus on frustration issue. Good understanding of frustration will be given less than 40% of the mark.
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