Principles of Contract Law A
2015 Take Home Exam No. 2
Assume the following facts (which are a slight variation on an actual government proposal currently in the media):
(a) The NSW Government has a plan to connect the people of the north-west of Sydney to the city (i.e. CBD) of Sydney by rail as follows:
(i) Building an underground rail line from Bella Vista in the north-west to Epping.
(ii) Running trains between Bella Vista and Chatswood (via Epping) and back again. [Note that there is an existing train line between Epping and Chatswood.]
(iii) Building an underground rail line from North Sydney to Redfern (which will involve a tunnel underneath Sydney Harbour and the Sydney CBD).
(iv) Running trains from Chatswood to Redfern (via North Sydney) and back again. [Note that there is an existing train line between Chatswood and North Sydney.]
(b) Note that under this plan people will need to swap trains at Chatswood as:
(i) the train from Bella Vista will stop at Chatswood and return to Bella Vista; and
(ii) the train from Redfern will stop at Chatswood and return to Redfern.
(c) You should assume that the other north shore rail line running from Hornsby via Chatswood to the city still exists but doesn’t have the capacity between North Sydney and Redfern to handle the extra people coming from Bella Vista (thus requiring the building of the new rail line underneath Sydney Harbour and the Sydney CBD referred to above).
(d) In June 2010 the NSW Government enters into the following 3 contracts:
(i) A contract with Orange Builders Pty Limited (‘Orange’). The key features of the contract are that:
(A) Orange promises to complete the building of the rail line between Bella Vista and Chatswood by February 2015.
(B) The government promises to pay $10 billion for this work.
(ii) A contract with Aqua Builders Pty Limited (‘Aqua’). The key features of the contract are that:
(A) Aqua promises to complete the building of the rail line between Chatswood and Redfern by February 2015.
(B) The government promises to pay $20 billion for this work.
(iii) A contract with Steel Builders Pty Limited (‘Steel’). The key features of the contract are that:
(A) Steel promises to complete the building of enough new trains to cover the journey between Bella Vista and Chatswood and the journey between Chatswood and Redfern by February 2015.
(B) The government promises to pay $5 billion for this work.
(e) Back in January 2010 the NSW Government entered into an agreement with the Federal Government. The agreement contained various financial incentives for the NSW Government to invest in additional rail infrastructure (with the hope that this would reduce the number of cars on the road and, as a result, reduce the emission of greenhouse gases). The relevant term in the agreement was that if the NSW Government was able to commence running a train service from Bella Vista to the city by April 2015 then the Federal Government would provide the NSW Government with an additional $10 billion in funding. The agreement provided that the new train service could require passengers to swap trains mid-journey but could not use the existing rail line from North Sydney to Central via Wynyard and Town Hall (effectively requiring the building of a new rail line underneath Sydney Harbour).
(f) In April 2012 Orange entered into a contract with the Queensland Government to build a new rail line near Brisbane for $10 billion.
(g) In June 2014 Orange started to suffer a shortage in funds due to its parent company (Sun Infrastructure Limited, a company based in China) losing a lot of money on an investment in China. As a result of the shortage in funds, Orange calculated that:
(i) in the absence of additional income, it would only be able to finish either the NSW rail project or the Queensland rail project but not both; and
(ii) if it could increase its income from either project by $5 billion then it would be able to finish both projects.
(h) Orange was aware of the details of the agreement between the NSW Government and the Federal Government. Orange decided that the NSW Government was therefore more likely than the Queensland Government to offer Orange more money to complete its Bella Vista to Epping rail line (because the NSW Government would lose a lot of money if Orange did not complete the rail line on time).
(i) Orange told the NSW Government that it could not complete the Bella Vista to Epping rail line on time unless the NSW Government increased the price it was paying by $5 billion. The NSW Government realised that its only hope of meeting the April 2015 deadline was to remain contracted to Orange (as there was insufficient time to terminate the Orange contract and tender for a replacement builder). The NSW Government therefore decided to pay Orange the additional money to complete the project on time.
(j) Accordingly, the NSW Government and Orange entered into an agreement in July 2014 under which the NSW Government agreed to pay Orange an additional $5 billion in return for Orange agreeing to complete on time its obligations under the June 2010 Bella Vista to Epping rail line contract.
(k) Orange subsequently completed its obligations under its June 2010 contract on time, as did the other companies under the other June 2010 contracts. As a result, passengers were able to travel by train from Bella Vista to Redfern and back by the April 2015 deadline. The Federal Government therefore paid the NSW Government the agreed funding of $10 billion.
(l) Just before the NSW Government paid Orange the extra $5 billion there was a crash in NSW real estate prices which caused the government to panic about a significant drop in stamp duty over the next year.
(m) The lawyer for the NSW Government has advised the government that there is no legal obligation to pay the additional $5 billion to Orange as there was no consideration for that promise (and therefore no contract) and the promise was not enforceable in estoppel. The NSW Government is unsure whether this legal advice is correct and comes to you for a second opinion.
(n) As a result of the NSW Government not paying the additional $5 billion to Orange, Orange was not able to finish the Queensland rail project on time. As a result, the Queensland Government terminated the contract. Orange was only paid $3 billion (instead of $10 billion) for the partially completed work and is now being sued by the Queensland Government for $1 billion to cover losses suffered by the Queensland Government due to Orange’s failure to perform the contract on time.
(a) Advise the NSW Government whether the promise to pay the additional $5 billion to Orange is enforceable as a contract. In you answer you should assume that all the requirements of a contract other than consideration are definitely satisfied. So this question is really asking you whether Orange provided consideration to the NSW Government for the government’s promise to pay the additional $5 billion. You should mention all principles of consideration which are potentially relevant (and leave out principles which have no relevance to these facts).
(b) Advise the NSW Government whether (on the assumption that there is no binding contract) the government’s promise to pay Orange the additional $5 billion is binding in promissory estoppel (i.e. equitable estoppel). In your answer assume that the approach of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 was adopted by all the judges in that case and is therefore the law. You should therefore discuss these 6 principles. You should also cover any other relevant principles from any other cases.
(c) You must comply with the referencing style set out in the Australian Guide to Legal Citation (‘AGLC’).
(d) You must use Times New Roman font – 12 point for the main text and 10 point for footnotes.
(e) You must use one and a half line spacing for the main text.
(f) Footnotes are to be single spaced.
(g) You must use white A4 size paper for the hard copy.
(h) An appropriately sized margin must be used on all four sides of each page.
(i) Each page (other than the cover sheet) must be numbered and printed in portrait.
(j) Please only print on one side of the paper.
(k) You must staple your take home exam in the top left hand corner only. Do not put it in a plastic binder or a plastic sheet.
3. Marking Guide
(a) This assignment is worth 15 marks. 10 marks are for substance. 5 marks are for style.
(b) To receive a HD for substance you need to correctly identify and apply all relevant legal principles to the facts. However, if a given principle needs to be applied more than once during your answer then just mention the principle the first time and the second and later times you just need to mention how it applies rather than repeating the whole principle.
(c) To receive a HD for style you need to write an answer that is logically explained, has depth or argument where it is needed, cites enough cases and uses correct footnotes. You also need to include a Bibliography. When footnoting a legal principle, it is best to refer to the case it comes from. If you took it out of a textbook or my notes and can’t find a case then use the textbook or my notes.
4.1 A few points re footnotes using cases
(a) The name and the ‘v’ are italicised.
(b) If a case is reported in several reports you don’t need to include all the reports – it is best to just refer to the authorised reports – e.g. for High Court cases that are reported in the CLRs then use the CLR reference and don’t use the ones in the ALRs, Austlii, etc. For example:
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 93 CLR 546
(c) In the above example, 1954 is the year of the case, 93 is the volume number of the law reports and 546 is the page in the law reports on which the judgment starts.
(d) If you including a quote from the judgment then add the page number for the quote and the judge or judges who you are quoting from. For example, if you were quoting from page 457 of the joint judgment of Dixon CJ, Williams, Webb, Fullagar and Kitto JJ then you would write:
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 93 CLR 546, 457 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ).
(e) Remember to use ‘judgment’ not ‘judgement’ when referring to a decision in a court case.
(f) For more details see Rule 2 in AGLC.
4.2 A few points re footnotes using textbooks
(a) All authors use their surnames. Some use their initials and some use their first names. Copy the author’s name as it appears in the book – e.g. J W Carter or Stephen Graw.
(b) In footnotes the first names or initials go before the surname. For example:
John Gooley, Peter Radan and Ilija Vickovich, Principles of Australian Contract Law (LexisNexis Butterworths, 3rd ed, 2014) 100.
(c) In the above example the ‘100’ means you took the principle from page 100 in the book.
(d) Note that the title of the book is in italics. In the brackets you put the publisher, the edition (unless it is the 1st) and the year of publication.
(e) In the Bibliography you move the surname of the first author before their first names or initials. For example:
Gooley, John, Peter Radan and Ilija Vickovich, Principles of Australian Contract Law (LexisNexis Butterworths, 3rd ed, 2014).
(f) This assignment deals with Australian law. You are unlikely to find that in books or websites relating to other countries so don’t use them.
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