Reference no: EM131380711

Brie is about to open a cheese shop, for which she needs a fridge. She contacts Kelvin, who imports fridges, and asks for a quote on a large model that is good for displaying cheese. Kelvin recently sold one of the same model and uses those details to prepare a quotation for $15 000, including installation, with delivery by 31 July 2016. He sends the quotation to Brie by email. Brie emails back, stating: 'Quote accepted, go ahead. Thanks, Brie'.

Kelvin orders a fridge from Germany and is surprised to discover that the cost has gone up by more than 30 per cent. He sends the following email to Brie:

'Dear Brie,

I am going to have to increase the price of the fridge as the manufacturer has put the price up. I should have checked this earlier, sorry. The cheapest that I can do it for is $18 000. Can you please confirm that the new price is acceptable, otherwise the sale is off'.

Brie immediately calls Kelvin to complain, saying:

'That's not fair, you originally said the price was $15 000. It's not like I have spare money at the moment. Things are really tight. The best I can do is offer you another $1 000, provided you guarantee to deliver it by the end of July as we are opening in mid-August'.

Kelvin replies that he would still be losing money at that price but will think about it.

Usain, who knows both Brie and Kelvin, hears about their situation. He wants the opening for Brie's shop to go well. Without telling Brie, Usain approaches Kelvin and asks him to go through with the sale at the original price. They have the following conversation:

Kelvin: 'I spoke with my sister, who did legal studies at school, and she says I don't have to go ahead if the supplier's costs have changed'.

Usain: 'I did legal studies as well and I'm telling you that she's wrong, you should honour the quote'.

Kelvin: 'I don't know, maybe you're right. But to put it bluntly: this is her problem, not mine. She's the one who wants to fridge by the end of July. She should just pay the $18 000 and be done with it'.

Usain: 'Brie tells me she offered to pay $16 000'. Kelvin: 'She did, but that's still not enough'.

Usain: 'Look, if you go ahead and deliver the fridge on time, I'll pay you an extra $1 000 out of my own pocket. Don't tell Brie though, just accept her offer'.

Kelvin: 'Maybe, but I'm not making any promises. Can I get your offer in writing?'

Usain: 'You've known me for 20 years; you don't need it in writing'.

Kelvin: 'OK, but I have your firm promise that you will pay the $1 000 if I deliver the fridge on time?'

Usain: 'Definitely'.

Kelvin: 'OK. I'll think about it, though I'm not promising anything'.

Kelvin thinks about it and decides to go ahead with the sale. He does not tell Usain but he contacts Brie, and asks her: 'Are you still willing to go up to $16 000?'

Brie replies: 'I am, if you deliver on time'.

Kelvin states: 'OK, well at that price we have a deal'.

Kelvin goes on to deliver and install the fridge by the end of July.

Meanwhile, Brie's sister Frida has a problem. Frida works as a graphic designer. One of her regular clients is Mistral Pty Ltd, who sometimes uses her work when submitting tenders. In early 2016, the CEO of Mistral, Johannes, contacts Frida and asks her to do the design work on the documents for a particularly large project that they are tendering for.

Johannes tells Frida: 'This tender is worth a lot of money and we want every element - including the design work - to be of the highest quality. If your work is good and we get the contract, in addition to our base fee of $3 000 we'll give you a bonus that reflects how much we value your work'.

Frida puts a lot of extra time and effort into creating designs for the project. When Johannes sees them, he describes them as 'excellent, just what we need'.

Mistral is successful in tendering for the project, however by that point Johannes has accepted a higher paying job at another company and is no longer the CEO. Mistral sends Frida a cheque for $3 000 for her work on the tender documents.

Frida contacts Johannes and says to him: 'You guys promised me a bonus if you were successful, and I put in a lot of extra work, but all I received is a cheque for $3 000'.

Johannes replies: 'I'd love to help but I no longer work at Mistral. You'll have to speak to the new CEO'. The new CEO refuses to pay a bonus to Frida.

Questions- Provide advice on the following matters, taking into account only what you have studied:

1. How much is Brie required to pay Kelvin for the fridge?

2. Is Usain required to pay $1 000 to Kelvin?

3. Is Mistral Pty Ltd required to pay a bonus to Frida? (You may assume that Johannes had the authority to contract on behalf of Mistral while he was CEO).