Hypothetical Problem

  Question One (worth 25%) John, Paul, George and Bingo were musicians in a band called the Beagles. The Beagles were about to release their latest smash hit album called Sgt. Salt and Pepper's Happy Hearts Club Band (Salt and Peppers). In January 2022, to promote the Salt and Peppers album, the Beagles started a world tour called, Lucy in the Sky with Diamonds (LSD Tour). The first stop of the Tour was Australia. To travel around Australia, the Beagles decided to purchase a double-decker second-hand school bus and Catamaran boat and trailer from Jimbo’s Used-Vehicles (Jimbo). The bus was 10 years old, but appeared to be in good condition. The boat and trailer were much older, but described as ‘built to last a lifetime – We guarantee it’. The Bus was priced at $150,000 and the boat and trailer were together priced at $40,001. The Beagles signed two separate contracts. The first contract was for the bus and the second contract was for the boat and trailer. At the bottom of both contracts, the following disclaimer was in large print: ‘It is your responsibility to fully inspect any vehicle before purchase. We strongly advise you to seek a comprehensive inspection from the National Roads and Motorists’ Association (NRMA). Under no circumstances will refunds be provided. All vehicles supplied by us are considered by us to be commercial vehicles. The Australian Consumer Law does not apply to you.’ The Beagles quickly inspected the vehicles before purchase, but did not seek an inspection from NRMA. One week into the Tour, the Beagles drove the bus with boat and trailer up the coast of New South Wales. Along the way, they drove on a bumpy dirt road for over 10km. The road was being repaved. Shortly after they noticed that an error message reading ‘Cruise Control failure’ appeared on the dashboard of the Bus. When the cruise control was switched on the bus started to speed up and slow down at irregular intervals, instead of maintaining a constant speed. When they arrived at a service station, the owner, who was a retired mechanic, informed the Beagles that the cruise control system was faulty and this was ‘something well known in this model of bus’. The owner also informed the Beagles that he noticed ‘a large amount’ of rust at the back of the boat near the motor and that the boat was unlikely to be seaworthy. The owner also said that the hitch for the trailer was damaged and should be not used as it was ‘too dangerous to continue to drive’ with the trailer. The Beagles informed the owner that they needed to continue with their Tour, and whether he could fix the hitch or provide a replacement part. The owner said that he could not fix the hitch, nor could he (or anyone) provide a replacement as this model was no longer made. The Beagles immediately took the bus, boat and trailer back to Jimbos and demanded a refund for all three vehicles. One week after the LSD Tour, John and Paul visited their favourite music store called Wilsun Guitars. John wanted a new electric guitar. He saw next to a stand what was described as a black T-100 Fender Electric (T-100). The sign read only $1,000, but the price tag read $1,100. The sign also read ‘great value’ and that ‘Slash from GNR says that this is a great guitar’. John took the guitar to the counter and he was served by the store owner Murray. Murray said that the T-100 came was a two-week manufacturer’s warranty and that if anything broke during this time, John could have the guitar repaired. John asked about the price difference between the tag and the sign, and Murray responded that it was a mistake and the real price was $1,100. John reluctantly paid $1,100 for the T-100. He took the guitar home and started to play it. Unfortunately, the guitar blew up after two weeks and one day. John discovered that the T-100 was not a T-100, but rather a T-10. Both guitars look similar to each other, but the T-10 was a much cheaper guitar than the T-100. Moreover, John was horrified to learn that Slash never said that it was a ‘great guitar’, but rather that it was a ‘great guitar for smashing’. John took the guitar back to Wilsun Guitars. Murray, the store owner said to John ‘Sorry mate. I only own the store. I don’t make the guitars. I am only passing on the model information from the manufacturer’. I am not responsible for this. John asked if he could have the guitar repaired, but Murray said, ‘sorry this model (the T-10) is outdated and there are no repairs for this type of guitar and no spare parts’. John then asked if he could have a refund, but Murray refused saying that John had no right to a refund, as the manufacturers’ warranty had expired a day earlier. John took the guitar home and did what Slash suggested and smashed the guitar. When visiting Wilsun Guitars, Paul saw a classic five-string Fender Bass guitar (Bass) in the corner of the store. He walked over to the guitar and saw a tag, which said, ‘This Bass is for rent only’. Paul walked over to the counter and spoke to Murray. Paul said ‘I want to rent this Bass for 6 months’. In response, Murray said, ‘the Bass is only available for rent for 12 months.’ Paul reluctantly agreed. Murray provided Paul with the following terms of rent that were located on page 27 of the Rental Agreement in small font: Standard Terms of Rent 1. The rental fee for the BASS is $100 per month. 2. You must sign up to a rental contract for at least 12 months. 3. You must pay upfront a minimum of $1200 rental amount for the BASS, regardless of whether you return the BASS before the end of the 12 months. 4. You must pay upfront a further deposit of $2000 in case you cause loss or damage to the Bass during the rental. 5. If you damage the BASS while it is rented, you must pay all fees for repair or replacement, and forfeit your $2000 deposit, regardless of whether the cost of repair or replacement is less than $2000. 6. Wilsun Guitars can vary any term in this contract at any time without notification, and may cancel the agreement at any time without prior notification. 7. You may cancel your rental at any time, provided that you give Wilsun Guitars 30 days’ notice in writing and pay a cancellation fee of $1,200. 8. You must return the BASS guitar in its original case, as given to you. If you fail to return the Bass in its original case, you will forfeit your $2000, and pay a further $500 for inconvenience to Wilsun Guitars. Paul signed the Rental Agreement and paid the $1200, plus the $2000 deposit, but never read all of the terms of the agreement (after all, Paul was a musical genius, not a lawyer). Advise: Q1(a) the Beagles whether Jimbo has non-complied with any provisions of the Australian Consumer Law (ACL) and whether the Beagles is entitled to a refund for the bus, boat, and/or trailer. (9 marks) Q1(b) John whether Wilsun Guitars have contravened and/or non-complied with any of the provisions of ACL in relation to his circumstances. (8 marks) Q1(c) Paul whether Wilsun Guitars have contravened and/or non-complied with any of the provisions of ACL in relation to his circumstances. (8 marks)           Question Two (worth 25%) John, Paul, George and Bingo were musicians in a band called the Beagles. One day George searched online for a new electric sitar (i.e. a type of guitar). After searching the internet for about 10 minutes, he found what he thought was the perfect sitar, namely the T-1000. The T-1000 was made by a company called Sound Check, which was registered in the United States. Sound Check did not have a place of business in Australia, and had only sold guitars on an infrequent basis over the last 20 years. The T-1000 was advertised for $10,000 (AUS) and was described on the website as made from the ‘highest quality’ and ‘totally new’. The T-1000 was also described as the ‘No. 1 electric Sitar in the galaxy, no the universe’. At the bottom of the description read ‘The T-1000 can be used as both an electric and acoustic guitar, and was made in ‘United States’. When George went through the checkout for payment, the final price was $10,000 (US). When he converted the price, he actually paid $15,000 (AUS) for the T-1000. George called the number on the phone, and spoke to a customer service representative from Sound Check. George said ‘Hey, I have rights under the ACL.’ The representative responded and said ‘sorry the contract that you signed online clearly stated in clause 21 that the law governing the contract was the law of Texas, not Australia. George hung up the phone. Two weeks later, after the T-1000 arrived, George immediately realised that it was not made from quality material and it looked like someone had been using it. Worse yet, the T-1000 was not even electric, and had a sticker on the back, which said all parts were sourced from Brazil, but assembled in the United States. On a later date, a musician named Gibbo (who played the drums in a band called the ‘Gibsons’) was interviewed on the television program 60 Minutes. During the program (and to the shock of his fans), Gibbo made a number of statements about being diagnosed with brain cancer. Gibbo said that he only had a ‘few years to live’ and that he would ‘donate all the profits to several cancer charities’ from his upcoming tour (called the ‘The Whole Gibbo Tour’). Gibbo told the interviewer that he already donated $100,000 to a boy named Jazz, who also had brain cancer. Gibbo showed the interviewer a photo of Jazz in hospital. Gibbo set up an App (‘Gibbo App’) so fans could all donate money to cancer research. Bingo saw the 60 Minutes program and was devastated. He was a big fan of Gibbo (who helped him out on playing the drums in the Beagles Let it Be Free album). Bingo purchased a ticket to Gibbo’s upcoming concert, The Whole Gibbo Tour for $500. Bingo also donated $1,000,000 through the Gibbo App. At the time of the concert, Bingo was disappointed, as Gibbo walked on stage for less than 3 minutes. He spoke to the crowd and told them that he was not feeling well, and then walked off stage. No refunds were given and concert-goers were told that they had no right to refunds given the circumstances. One year later, a personal assistant of Gibbo (named Gobbo) went on 60 Minutes for an interview. During the interview, he revealed that Gibbo was never diagnosed with cancer and never donated money to cancer research or the charities of the boy name Jazz (who apparently never existed). The photo was of some boy called Razz who went to the hospital for treatment of the flu. Advise: Q2(a) George whether Sound Check has contravened any provisions of the Australian Consumer Law (ACL) (10 marks). Q2(b) George whether Sound Check will likely be successful in a defence that the ACL does not apply to it, as it is an American company, and in any event, the contract with George was subject to the law of Texas. (5 marks); and Q2(c) Bingo whether Gibbo has contravened and/or non-complied with any of the provisions of the ACL? (10 marks).