Reference no: EM132361128 , Length: word count:2000

Contract Law Assignment -

PROBLEM FACTS: Simon And Dianne Lee (SADLee) were experienced small business operators running a fish and chip shop, A Salt & Battery, at leased premises in the Runaway Bay Shopping Centre. The owner and lessor of the Centre was CashMax Pty Ltd, a large corporate player in the Queensland property industry; the directors were Megan And Nigel Nees (MeaNNees). Several of the lessees in the Centre, including SADLee, had complained about excessive management fees being charged by CashMax and started an action to recover the excessive fees. Most tenants stood to recover about $3,000, SADLee thought they might recover more.

Sadly, SADLee's 3-year old daughter, Violet, had contracted encephalitis; the condition was difficult to treat and expensive, and the family was experiencing significant stress. SADLee had mentioned this to MeaNNees on several occasions. After Violet's last medical appointment, SADLee were told Violet would not survive without expensive treatment available only in Mexico. They had to sell the business. The problem was that their lease only had about 12 months left to run, and no purchaser would buy the business without the security of a lease with a longer term.

SADLee told MeaNNees about their plight and asked if they could sign a fresh 7-year lease so that they would be able to offer an assignment of the lease to a prospective purchaser. MeaNNees indicated they would be amenable; however no lease documentation was prepared.

Some time elapsed. SADLee received only one offer (of $65,000) for their business from Dutch, a quirky but apparently cashed-up fellow who heard about the SADLee family predicament on local radio. In early November 2018 SADLee concluded a Sale of Business contract with Dutch. Settlement was to occur on 2 December 2018. The contract contained a condition requiring SADLee to produce an executed Deed of Consent to Assignment from CashMax, to enable transfer of a 7-year Lease from SADLee to Dutch. The radio station interviewed Dutch about the deal, which he very much enjoyed.

In mid-November 2018, SADLee asked MeaNNees to prepare the Lease and Deed of Consent to Assignment. They told MeaNNees of their great happiness about being able to take time off, and take their daughter to Mexico. It also suited CashMax; it needed the lease because it was losing tenants from the Centre over the dispute, and several shops had closed. However, when MeaNNees went to their solicitors, the solicitors recommended (i) they insert a clause into the Deed of Consent to Assignment requiring SADLee to provide a full release of any and all legal claims it may have against CashMax; (ii) the rent in the Lease be increased by CPI or 2.5%. This was just good business common sense they said. MeaNNees sent the documents with release clause and increased rent to SADLee.

SADLee sent the documentation to their solicitors, who advised against signing it with the release and increased rent. Signature would mean SADLee could not pursue their litigation to recover the excessive management fees. Increased rent was inappropriate as rent in the Centre was decreasing, not increasing, because of the fee dispute. On the morning of 1 December 2018, SADLee asked MeaNNees to remove the offending clauses from the documentation. SADLee were angry and stressed, given that their sale was to go through the next day. MeaNNees said that, so far as they were concerned, 'due consideration' had been given by allowing the sale of business to proceed. The parties signed the documents at midday on 1 December 2018, without amendment (including the clauses on release and increased rent). The sale agreement was to settle at 3pm, 2 December 2018.

QUESTION 1: Assume for this question the following further facts. At 3pm on 2 December 2018, Dutch attended at settlement but said he would not proceed as he actually had no money, repudiating the sale agreement. He said he just wanted to be on the radio. A rich relative then stepped in to pay all Violet's medical fees, and gave SADLee $100,000 to start a new business, so their personal and financial pressures were alleviated. This left SADLee with a 7-year lease with CashMax, with increased rent, that they no longer wanted. Advise SADLee whether they may avoid the Lease on the basis of unconscionable conduct (do not address any issues of statutory unconscionable conduct, real property law, or other legal issues).

QUESTION 2: For this question, assume the facts in question 1 did not occur. Instead, the following facts occurred. In the afternoon of 1 December 2018, after hearing SADLee tell their pitiful story of family illness and corporate ill treatment on the radio, MeaNNees had a change of heart. They emailed their solicitors to prepare fresh documentation without the release or increased rent. The solicitors counselled against it. 'It's the right thing to do,' the MeaNNees insisted. 'Plus, we have to get our company's reputation back or we'll lose more tenants. We can go on talk radio tomorrow and tell everyone. It'll be good business.' Fresh documentation was prepared without the release or increased rent.

On the morning of 2 December 2018, Simon had a nervous breakdown with all the stress. He grabbed daughter's toy gun and burst into MeaNNees' office. 'I want the Deed without the release clause! And no increased rent! Or else!' he said, his pupils dilated and sweating profusely, pointing the tiny pink plastic gun at them through his coat pocket. MeaNNees looked at each other, and slid over the fresh documentation for him to look at. 'We already prepared this,' they said. 'Good! Now sign! Or else!' Simon yelled. They did so. Simon left, elated. SADLee signed. Settlement of the sale proceeded.

On 3 December 2018, MeaNNees were walking across the street, were hit by a bus, and died instantly. Almost a year later, the new directors of CashMax decide they want to avoid the Lease and Deed without the release and increased rent clauses. Advise the Directors of CashMax if they would succeed in duress (do not address any other legal issues apart from duress).

Attachment:- Contract Assignment Files.rar