This examination contains one (1) problem question with four (4) parts
Max is a farmer who grows curcurbits (species of fruit and vegetables) at his farm in north western New South Wales. He orally contracts with WeGrow, a commercial nursery, to germinate seeds that he purchases from a seed supplier and has sent to them. In 2016 Max ordered “80,000 watermelon seedlings at least 6 inches in length”. The contract price was $120,000 charged on a per seedling basis ($1.50 per seedling). These are delivered 2 months later and Max plants them on his farm. Problems appear shortly afterwards, and it turns out that the seedlings are contaminated with a soil borne disease (Fusarium oxysporum f. sp. niveum (“FON”)). which constricts the plants’ water uptake. It is not fatal to the plant but causes wilting, reduces fruit number, size and quality and decreases the amount of fruit that the plant produces. It is likely that the disease originated in WeGrow’s nursery.
Max has both long term and short-term financing needs. In 2014 XBank had made a loan of $350,000 secured over all Max’s present and future acquired property. At the time, XBank registered a financing statement on the Personal Property Securities Register. Max also needs some short-term financing to cover his operating costs. He talks to his wealthy and well-known friend Fred about his financial problems. Fred agrees to help him with some short-term finance. Fred draws up a bill of exchange in the following form:
|No 112 15/08/2017 $50,000 90 days after date pay Safe Bank or order the sum of Fifty Thousand Dollars To Max Smith Fred Brown
He gives it to Max who writes “accepted” on the front of the bill, signs and dates it and returns it to Fred. After a couple of weeks, Fred decides he was a little hasty in lending Max the money. He signs his name on the back of the bill and sells it to Kevin, an investor, for $45,000. On his way home from a restaurant, Kevin drops the bill on the street. It is found by David an out of work banker. Although it is a little dirty and has some footprints on it it is still readable. David persuades an old workmate of his to give him $30,000 for the bill, and the workmate thinks that it is worth the risk, having seen that Fred’s name is on it.
Max needed a large earthmoving machine to prepare his land. He was unable to obtain further finance in his own name and so his friend Aaron bought the machine in his own name securing it with a mortgage over his (Aaron’s) home. He has allowed Max to use the machine in the business, with Max making the necessary payments to cover the loan amount. Of the total cost of $250,000 Max has so far paid about $40,000. The equipment is parked on the farm.
For many years Max has been buying and using over the counter pain medication, such as Panadeine as a means of relaxation and to help him sleep. He sometimes exceeds the recommended dosage of 8 tablets every 24 hours but thinks that as he has been doing this for so long that there are no problems. He has taken out “key man” business insurance to cover the risk of injury to him and loss of or impact on his farm’s harvest, the policy covering “the impact of environmental factors including flood, drought and bushfires”. In his proposal he answered “no” to the question of whether he regularly took medication or vitamin supplements and also answered “no” to the question of whether there was any other issue to disclose”.
It is becoming clear that the impact of FON on his farm will be devastating. Max has 50% fewer watermelons to sell and additionally, his land has been contaminated with FON and will need further treatment to regain its ability to produce quality produce. He has stopped making the payments on both the bank loan and for the earthmoving equipment and has also stopped answered the phone to customers and creditors.
Do not discuss any rights, liabilities or remedies that may arise under the Competition and Consumer Act 2010 (Cth).
- Discuss the rights and obligations arising under the contract for the supply of watermelon seedlings (10 marks)
- If Max is unable to meet his financial obligations what will happen about the Bank’s security interest and Aaron’s earthmoving equipment? (10 marks)
- The insurance company is refusing to pay Max’s claim for the losses caused by the FON infestation. Advise him. (10 marks)
- Discuss the rights and obligations arising under the bill of exchange (10 marks)
Due date: Tuesday 14 November, 2017 8pm SHARP. In the absence of a successful application for special consideration no late examinations will be accepted, nor will extensions of time will be granted.
It is YOUR responsibility to ensure that the correct file is submitted and you should double check that you have received a submission receipt and have submitted the correct file BEFORE the due time. Students who submit an incorrect file will receive a mark of zero for this assessment.
WORD LIMIT: 2000 WORDS including footnotes
- Markers will not read any material in excess of 2000 words. The actual word count must be noted on the paper. You need not write 2000 words if you can answer the question in fewer words.
- Bibliography is NOT required.
- Formal citation is not required for case names but you must provide references for direct quotes and where you have referenced the work of others.
Over the counter addiction
Amputates fingers in accident while “zoned” “buzzed”
The bill of exchange