Background on Commercial Leases Act 2013

Question 1

In May 2013 the Queensland Government passed the Commercial Leases Act 2013 (Qld) [fictional] to regulate commercial leases within Queensland.  Section 4 of the Act provides that a retail shop is only permitted to open on Sundays, or a declared public holiday in Queensland, between the hours of 10.00am and 4.30pm. Section 5 of the Act provides that when opening on Sundays, a retail shop must only use staff that have volunteered to work on that day.

Roderick is the owner and operator of two duty free shops: one located in Brisbane City and the other located at Brisbane Airport on Commonwealth land.  Roderick’s lease for Brisbane Airport requires the duty free shop to trade on a continuous 24 hour basis to cater for the arrival and departure of international travellers.  The Brisbane City shop opens for trade on Sundays between 9.30am and 3.00pm.

The Brisbane Airport lease is made under the Commonwealth Airports Administration Act 2008 (Cth) [fictional] which operates in relation to all Commonwealth owned airports. Under Section 13 of the Act, the Federal Aviation Corporation may enter into a retail lease in respect of any airport terminal owned by the Commonwealth; and may do so on such terms as the Corporation may determine for the benefit of the travelling public. 

a. What is the effect of section 109 of the Commonwealth of Australia Constitution Act (“The Constitution”); and how does section 109 operate in relation to an Act passed by the Queensland Parliament?

b. What power/s does the Commonwealth Parliament have under The Constitution to enact the Commonwealth Airports Administration Act 2008(Cth)? As part of your answer, explain where constitutional disputes might be heard?

c. Does the Commercial Leases Act 2013 (Qld) impact upon the trading operations of either of Roderick’s two duty free shops?

The given case of Roderick is based on the two shops in the city of Queensland in Australia . Out of the two shops one of the shop deals with the commonwealth for the benefit of the public and the other one is located in the city of Brisbane. These shops are not covered by an duty payment provisions and have different working hours.

1. (a) In this question the applicability of Section 109 of the Australian Commonwealth act is being tested where there is a difference arising is in the state laws and the commonwealth laws of the state. The case is being interpreted on the basis of the requirement of the question and the application of the same in solving the case law of the two shops in Australia.

As per the laws in Australia the power to vest rests with both the state and the commonwealth laws, so both of them can exercise their powers in making of the laws. wealth laws. So both state and commonwealth have full power to make laws. But this might create a conflicting interest of both the houses as the law is being made on the similar provisions and issue. If both of them provide for different solution there might be conflict between the two.

Analysis of Constitutional Issues and Section 109

So solve the issue the applicability the Section 109 of the Act comes into light. The provisions of the section provide that there when there is a conflict between the state and the CommonHealth laws then the provisions of the common wealth law are being considered to prevail over the state laws in case of all conflicts. But this would be the case only for the inconstant part and all the others would remain the same.

In the case given the Section 109 of the constitution operates and the act passed by the government of Queensland is prevalent only to the limit of the inconsistent part with the state laws. (Government 2011)

1. (b) The parliament as named for Commonwealth parliament always works for the benefits of the nation and the public associated with it throughout the nation. It has various powers under the laws and the provisions to change or use a particular provision related to the Commonwealth Airports Administration Act 2008. But the authority should make sure that whatever powers are used should be in the interest of the public. Some of the enacted powers are

• Management of the operation hours of the airports.
• To resolve the conflicts arising from the state and the commercial laws of the state.
• To transfer the cases in case of the disputes that cannot be decided on the common reading of law.
• To take decisions regarding the extension of the provisions of the faculties for the people around Australia.

There is a constitutional dispute when there are various interpretation of the statues and the laws made by constitution and this creates conflict with the geranial laws in the operation. In such cases the reference to the superior authority such as the High Court becomes necessary as in the case provided. The high court being a superior authority can direct the state and the commonwealth laws in the favour of the benefits to the public at large. The high court gets to these cases after the state laws and the commonwealth body in Australia fails to take important steps in this matter or there is no proper jurisdiction to sit on the facts of the case that it had to be brought to the table of the high court for resolution. The cases that are not constitutional can be invalidated by the  High Court but that these can be done only after the case is properly analysed by the high court authority and if feels that these can be managed by the State or the Commonwealth then it can be handled by the respective authority and the will forward the case to be dealt with accordingly. In the other cases the high court will decide on the matter   (Office)

1. (c) Section 4 of the Commercial Leases Act 2013 provides that the retail shops can only be allowed to operate between 1030 hrs and 1630 hours on Sundays and holidays except the cases where the shop is located in the state of Queensland of Australia. The law also provides that the operation of the shops can only be done and operated by the hired and casual workers and not the regular employees of the company.

In the given case of Roderick there are two shops and both of them are duty free in the country of Australia. The shop located in the corners of the Brisbane report is not being covered under the provisions of the the Commercial Leases Act 2013.  This shop near the airport can remain operative for 24 hours on all 7 days. This will not violate the provisions of the Commercial Leases Act 2013, as the common wealth laws are obeyed in the case of conflict on some matter so the shop will be legalise and the provision would not be applicable for this sop in Brisbane.

Powers of Commonwealth Parliament Under the Constitution

But the second shop would be covered by the Commercial Leases Act as located in the Brisbane City which is in Queensland and the Section 4 is attracted in this case. As there are no conflicts between the state and the constitutional laws so the normal provision would be effected, the reason for this applicability is the non existence of any conflicts between the constitutional laws and the state laws. In spite of the fact that the Brisbane City shop is a duty free shop but still it falls specifically under the state laws and thus the provisions of the state laws will be applicable in this case.

So the shop near the airport can be operated for 24 hours as no limits are being effected for that but in the case of the other shop the limits of the time should be allowed to them as the laws are applicable for it.

Sydney Harbour Rescue Pty Ltd (Sydney), a privately owned company, provides sea patrol and rescue services to the NSW Government under a highly profitable ten year contract.  

In January 2014, Sydney contracted with Brisbane Marine, a Queensland-based boat manufacturer, to build and supply a newly designed high speed wave-piercing catamaran. The contract price was $650,000. The contract specified that the new catamaran must be able to operate at a continuous speed of at least 50 knots full of fuel, with a crew of five; and have an operational range of at least 250 nautical miles. The contract also specified that the catamaran was required to be finished and delivered to Sydney by 30 June 2014; otherwise Brisbane Marine would pay liquidated damages of $80,000 per day up to the date of delivery. 

Four months into to the contract Brisbane Marine informed Sydney that it would not be able to complete the project on time without payment of an additional $85,000. Brisbane Marine indicated they would use the money to engage additional contractors to work on the catamaran.  In a brief face-to-face meeting, Sydney initially informed representatives of Brisbane Marine that it had a binding contract and would claim liquidated damages if the catamaran was not delivered on the specified date.

Three days after that meeting with Sydney representatives, Brisbane Marine informed Sydney in writing that no further work on the catamaran will be undertaken until the $85,000 is paid.   Reluctantly, Sydney pays the additional money, to ensure delivery of the catamaran by 30 June 2014 and to meet its contractual obligations with the NSW Government.

After delivery of the catamaran, Sydney found that it proved quite unsuitable for harbour patrol and rescue use. The new catamaran was very unstable in bad weather: it was slow and couldn’t exceed 30 knots, fuel consumption was excessive, and the engine broke down several times requiring expensive repairs of $30,000. After just five months use, Sydney had little option but to withdraw it from service. The catamaran was sold for just $200,000.

To avoid the risk of breaching its demanding harbour patrol and rescue contract, Sydney then bought a larger, more capable $1.3 million patrol boat from TasKat, a Tasmanian boat manufacturer.

Role of High Court in Constitutional Disputes

a. Is the liquidated damages clause in the contract with Brisbane Marine valid?

b. Could Sydney claim economic duress in relation to the additional payment? If not, would the additional payment be recoverable for lack of consideration?

c. Sydney seeks your advice as to whether it can sue Brisbane Marine for damages under Australian common law contract rules?

Liquidity damage refers to a compensation which is paid by one party to another. If there is a contract between them in which the former party could not complete the work within a stipulated period, then it has to pay to the later party a particular amount as compensation which is termed as liquidated damages. .  (Cruise, 2013)

However, liquidated damages do not come into the scenario when the party is intending to penalize the other party for any malpractice that would be Penalty and not liquidated damages. This was held in the case of Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd. (1915).

The liquidity damages clause would specifically indicate the loss (the details of loss, head of accounts) that the company has to bear if the other company does not complete the contract within the time specified, and also would provide that it is not a penalty but only a compensation as without completion of the task within the stipulated time would affect the company. (Rogers, 2012)

In this case, Sydney Harbour Rescue Pty Ltd has only provided in the contract with Brisbane Marine that if the later company could not finish the job and deliver the same by 30^th June 2014, a liquidated damage of $80,000 per day up to the date of delivery. The clause did not include what loss and in what head it would incur. The significance of providing the amount $80,000 is not mentioned, for which the liquidity damage clause did not hold good.

Economic duress is threatening the party involved in a contract to do something as per demand of the other party who are in the contract with them. In an economic duress, unless the demand of the party is fulfilled, they threat to cancel the agreement. (Ohrenstein)

The background of the case explains that Brisbane Marine (Brisbane) claimed $85,000 from Sydney saying they would need such amount for completion of the project to engage additional labour. Later Sydney informed Brisbane to deliver the same within stipulated period. After 3 days Brisbane informed in writing to Sydney that until $85,000 is paid to them, they will not work further in that project. Sydney paid such amount to them unwillingly, but later after delivery of the Catamaran, it was found that it is quality wise very low and is unable to perform well, engine broke down and $30,000 expended; later it was sold for $2, 00,000.

In this case, there was a continuing contract between the parties; Brisbane has informed Sydney that they need the amount so that they can complete the catamaran within fixed time. It was not an act of coercion, but they said they would stop their work if the amount was not paid. Sydney, if did not pay the amount, the contract could not have been completed and delivered within 30^th June 2014. The intention of Brisbane to do harm to Sydney was not evident from this case as the employment of labourers to complete the contract could have been necessary. But Sydney had no option as it would have otherwise subjected to contractual obligation of government. (Tan, 2002)

Lack of consideration was involved as Sydney unwillingly paid $85,000 to Brisbane. In this decision, there was no mutuality involved. However, the amount was paid so that the project continues. The amount could be recovered only if Sydney can prove that the amount was taken by doing fraud or coercion.

In the backdrop of the case, the catamaran which was delivered by Brisbane Marine to Sydney was not as per the agreement entered into the contract for following reasons.

• The catamaran did not exceed 30knots whereas it was mentioned in the agreement that it must be able to operate at a continuous speed of 50knots.
• The engine broke up a couple of times and a repair costing $ 30,000 was incurred after just five months.

The work performed by Brisbane did not result well as the catamaran was not efficient and up to the mark. It was later sold for only $2, 00,000 whereas the contract price was $6, 50,000. Later, Sidney bought a more capable patrol boat from TasKat, a Tasmanian boat manufacturer.

Sydney can claim damage if it successfully proves that Brisbane could not meet as per contractual terms and conditions. Consideration in a contract refers to a promise made by one party to another in a contract. Here, the agreement was entered and the resultant catamaran was not as per the terms and conditions of the agreement. On the basis of this, Sydney Harbour Rescue Pty Ltd can claim damage or sue Brisbane Marine for not complying with the agreement. (Markovits, 2004)

The agreement entered before must be signed by the competent authority making contract otherwise, the reasonableness of presence of contract would not be present and damages could not be claimed. In the process of claiming damages or suing, the company has to inform the other company (who has breached the contract) in a notice before going for a court proceeding. The Australian Common Law of Contract rules presently broadened the scope by introducing guarantee to consumers, remedy to unfair trade, liability of manufacturers etc.

In this situation, the catamaran was sold in loss. The breaching company took an extra amount from the other company to deliver the product in time; the product was delivered on time but suffered from many difficulties. Thus, Sydney can claim damages from Brisbane by addressing on the particular issues that their loss has been incurred due to non performance or mistake from the part of Brisbane. (Alan Schwartz, 2003)

Common law misrepresentation overlaps with the statutory misleading conduct provisions.

a. Explain how section 18 of The Australian Consumer Law differs from an actionable claim for misrepresentation under general common law?

b. Explain how remedies under The Australian Consumer Law for a breach of section 18 differ from the remedies available for misrepresentation under general common law?

3. (a) Section 18 of Consumer Law as well as the general law both provide for relief in the case of misrepresentation in case of contractual obligation earlier decided. The common law tends to provide remedies through the provisions of Consumer and protection Act 2010. This common law tends to provides relief by the mode of actionable claims over the parties in case of contracts are covered by the common law which are generally non commercial in nature. The claim of representation that arises during the contract of commercial nature where a fact induces a person to enter to a contract which is false in nature is generally covered by the Section 18 of the consumer law instead of general law. So section 18 pays a special intention on trade or commerce related contracts and provides rules for actionable claims on such cases only.

The coverage area forms the basis of difference for the remedy provided under the common law and the commercial law which is covered under Australian Consumer law. The actionable claim under the common law is being more consumers oriented and focused on solving the issues of the consumers and people around. So the action taken by the different bodies would differ in both the cases and would therefore be handled by two laws for the purpose of the representation. The sale and trading related contracts would be taken care by the Consumer Law where as the other part would be dealt by the general commercial laws of the state. This would ensure better consultancy to the cases where consumers are a part.

3. (b) As the main principle of the formation of this Australian Consumer law is to differentiate the remedies that are available under the general commercial law and Section 18 of the Australian Consumer law.

The ACL prohibits the misleading representations that are being provided by the act as any misrepresentation of the trade of commerce of the property that is to be sold which of violating nature would be considered as violating the provisions of the act. The law provides for any wrong disclosure of wrong trade policy to the consumer which might enable the public o enter into the contract. The remedies provided by the act are being governed by the law as it might cause an injunction order to be passed in the name of the party committing the fault. The remedies available are injunction orders, claiming the damages from the defaulting party. In the case of the general law the remedies depend on the type of fault and the motive behind the representation of the case and generally consist of the rescission of contracts and claim for damages. So the remedy in Section 18 is more illustrative and conceptual and does not provide for the cancellation of the contract easily by the people. The general law is less strict as it does not deal with the consumers and hence contractual parties can get rid of the contract easily without any issue. So the law had been providing remedy on the basis of the person dealing with it and this enables better judicial features.

ABC Limited (“the Company”) is a small goods manufacturer in Brisbane. The company wants to appoint an agent to source international buyers specifically in the Asian market for the purchase of its small goods.  The agent will have authority to enter into contracts up to $5 million on behalf of the Company.

a. What general advice would you give to the Company regarding the agency appointment? Include in your answer advice regarding the duties and rights of the incoming agent?

b. Outline the significance of any restrictions of the agency appointment. Include in your answer any remedies available to the Company if the agent exceeds the restrictions?

In January 2014, ABC Limited appointed Xerxes under a two year express agency agreement, to the advertised position of sole agent for the Asia region. 

In April 2014, Xerxes obtained, on her own initiative, a highly profitable twelve month contract for an Icelandic company, Chilled Invested Limited to purchase a variety of small goods from ABC Limited.  The contract was to commence 1^st June 2014. The contract sum was $5 million.

In September 2014 ABC Limited had second thoughts about continuing to sell the goods to Chilled Invested Limited.

c. Is ABC Limited able to withdraw from the agreement? Is there a valid purchase contract in place?

4. (c) In the month of January 2014 ABC limited appoints Xerxes in a two year contract in order to secure contracts in the Asian region. The agent procured a 12 month contract from a buyer named as Chilled Invested Limited (Assumed Iceland Buyer, non Asian region). The main issue is here is that is ratification possible over and above the Here the discussion is that whether the principal can ratify the agent’s work above the authority vested in it. Here it is given that the company ABC Limited started the trade from Iceland also. So even if the acts of the agent Xerxes were exceeding its authority yet the contract was ratified by the principal. There is no issue in this case

The reason for the agreement that was entered between the principal ABC Limited and the agent Xerxes for 2 years and the principal can withdraw from the agreement before maturity only on the fulfilment of the conditions specified therein the agreement.

The reason for this is that the agent does not have the authority of entering into a contract with a Non Asian Buyer during the period of contract

Note: If we assume the Chilled Invested Limited is an Asian Buyer then it is a Valid Contract.

References

Australia, Government of. Australian Government. https://www.alrc.gov.au/publications/alrc-80-legal-risk-international-transactions/8-australian-remedies-misappropriation-an.

Government. “Changeling aspects.” 2011. https://www.changelingaspects.com/PDF/The%20Australian%20Constitution%20Conflict%20of%20Laws.pdf.

Office, Parliamentary Education. PEO. https://www.peo.gov.au/learning/closer-look/the-australian-constitution/the-constitution-and-the-high-court.html.

Alan Schwartz, R. E. (2003). Contract Theory and the Limits of Contract Law. Yale Law School Legal Scholarship Repository-Faculty Scholarship Series , 595-597.

Cruise, R. (2013). Penalty clauses and liquidated damages: Traps for the unwary. Shoosmiths-Home-Client Resources-2013 legal updates , 1-2.

Markovits, D. (2004). Contract and Collaboration. The Yale Law Journal , 1-2.

Ohrenstein, D. (n.d.). KEY DEVELOPMENTS IN CONTRACT LAW:ECONOMIC DURESS. Radcliffe Chambers , 1.

Rogers, B. (2012). Liquidated Damages Clause Example. The Contracts Guy , 1.

Tan, D. (2002). CONSTRUCTING A DOCTRINE OF ECONOMIC DURESS. Construction Law Journal , 1-3.