Reference no: EM132064605

Australian Law Context:

• Use IRAC method for answering (Issue, Relevant law, Apply law [cite cases] to facts to solve issues, Conclusion.)
• Footnote citing of cases

Question:

Carl's Car Wash, a well-established small business in Coogee, has been providing hand car wash services to residents of the area for many years. Carl, the proprietor, can frequently be seen strutting around his beachside lot in his boardshorts with a bucket and sponge in hand, cleaning and polishing everything from exotic supercars to family SUVs while showing off his tan.

In recent times, however, Carl's business has been gradually declining. Many of his wealthy Eastern Suburbs customers have become conscious of the threat which global climate change poses to their idyllic beachfront lifestyle and started taking their Hummers and Maseratis to more high-tech, eco-friendly businesses using biodegradable detergents, recycled rainwater washes and solar-powered car vacuums instead. Carl knew he had to revitalise his business to compete with these new trends.

One morning, while Carl was on the beach doing his morning yoga, he ran into Lisa who was out for a run. They had met many years ago while studying CLAW1001 and had become close friends, though they had not been in contact for several years. They decided to go and get breakfast at a local cafe, where, over green smoothies and avocado toast, they talked about each other's businesses. It turned out Lisa had left her job as a business law consultant to become an 'eco-entrepreneur', and had designed and marketed her own popular line of cleaning products under the brand name Mother Earth.

Hearing about Carl's business troubles, Lisa wasted no time in telling him about her newly launched, 100% biodegradable Mother Earth car detergent, wax and polish range. "Everyone in the car wash industry is talking about it", she said. "All my clients that have switched to using it have seen their sales go through the roof! Yours will too. I'm certain of it!"

This was good news for Carl, as the contract with his current supplier was about to expire and he was looking for a new supplier of car wash products. Lisa suggested to Carl an arrangement under which she would supply him with 36 ten-litre cartons of Mother Earth car cleaning products each month at her list price for a period of three years. Carl was delighted with this proposal, which he accepted. As they were leaving the restaurant, however, Carl began to have doubts about their agreement.

Carl: Three years is a long time to be stuck using the same products...

Lisa: All of my customers are signed on for 3 years - those are the standard terms for all my contracts. But look, just between friends, if it doesn't work out I'll let you out of the contract early - we'll sort it out if the time comes.

Placated, Carl went back to work. The first shipment of Mother Earth arrived soon after and Carl was immediately impressed with how it seemed to cut through dirt and grime with ease. He soon realised that he would need to upgrade to something a bit better than a bucket and sponge to get the most out of his new investment. Visiting Lisa's warehouse later that week, Carl entered into a written contract to lease a set of new "INST-A-CLEAN 2000" electronic high-pressure washer hoses with built in brush and detergent dispenser. The contract contained a long list of standard lease terms and conditions, with blank spaces for the start and end date of the lease to be entered. Lisa, conscious of Carl's earlier concerns, left the end date on the lease blank. Carl did not look at the agreement but simply signed the form.

Just as Carl was about to leave, Lisa mentioned that she knew of a startup, Dorn's Drones, who had developed a unique new solar-powered drone - the "Dominator" which could fly directly to where a customer's car was parked, spray it with water and detergent and wipe it clean, then fly back - all at the swipe of an app. "There are a few car washes in Melbourne using it but none in Sydney - you could be the first!" she suggested.

Carl thought this was a real opportunity to grow his business. He sent off an online enquiry and soon Dorn, the proprietor, flew up from Melbourne to give Carl a demonstration of the technology. Carl was extremely impressed, but balked when Dorn told him the price.

Carl: That's awfully expensive for a drone.

Dorn: Just a drone? Did you not see how much money we raised on Kickstarter for this?The number of patents we have on our advanced machine learning technology? Über and Amazon are both bidding to buy us out. I'll have you know this is no ordinary drone.

Carl: I'd love to buy one, I really would, but I'd have to borrow money to do so.

Dorn: Do what you want, but the price is the price.

After a few moments' thought Carl decided the price was worth it to allow him to be the first Sydney operator of Dorn's new technology. Dorn presented Carl with a written contract to purchase one "Dominator" drone from Dorn's Drones at the nominated price. Because Carl did not have the funds to finance the sale immediately, Dorn included the following clause into the contract:

Clause 127: This Contract of Sale is subject to the Buyer obtaining suitable finance.

A few weeks later, Dorn called Carl to enquire as to whether he had managed to obtain finance yet. Carl replied that he had not started looking yet and needed a few more weeks. In fact, all has not been well for Carl. A number of things have happened.

Advise Carl on contract law issues only arising from the following.

• Patronage at Carl's Car Wash has declined sharply. Despite advertising to promote his new, eco-friendly setup, Carl's customers do not seem to like the smell of the Mother Earth detergents and have turned to other establishments, despite Lisa's claims that sales would skyrocket.
• Carl has contacted Lisa to try and get out of the supply contract early, "just like she promised", but Lisa has refused, saying only that "you agreed to the terms - that's just too bad."
• Carl has discovered that the lease of the 1NST-A-CLEAN 2000" high pressure washer does not have an end date and has given Lisa notice of his intention to terminate this lease as well. Lisa has not responded to this and has continued to invoice Carl for the lease of the equipment.
• Realising his business is in dire straits, Carl has not bothered searching for suitable finance for his purchase of a "Dominator" drone from Dorn. He in fact has no intention of doing so and no intention of proceeding with the sale and has ignored Dorn's repeated calls and enquiries.