FOUNDATIONS OF BUSINESS LAW
Assignment 2 2014(03)
Due Date: Week 10 – 9pm Saturday January 10 2015
READ THE FOLLOWING FACTUAL ACCOUNT AND ANSWER ALL THE QUESTIONS AT THE END:
James owns a shop that specialises in new and second hand musical equipment. Several months ago Max came into his shop with an Ibanez guitar for sale. Max said
that he had inherited the guitar from his uncle who used to play in a heavy rock band many years ago. He also said that he had no idea of its value. The guitar appeared to be a rare vintage genuine Ibanez Serpent like the one that Ozzie
Manson plays in the heavy metal band, Doomsday, and James knew he could easily sell it for up to $20,000. Before buying any second hand musical equipment James
would normally have an expert examine the piece to determine its authenticity, however, this time he was sure that the guitar was an original Ibanez Serpent.
James offered Max $1500 for the guitar which Max eagerly accepted. James then advertised the guitar in Guitar Hero magazine as follows:
Classic Vintage Guitar – the original Serpent Ibanez – the same one
as played by Ozzie Manson in Doomsday – price negotiable
Kim, the proprietor of a local night club, inquired about the guitar. As his club
supported the live music industry Kim thought that such a guitar on display in his
club would be a welcome attraction for both artists and patrons. Kim offered
$10,000 for it which James rejected saying: “This guitar is a genuine Serpent Ibanez
which I could easily sell for $20,000; however, I am prepared to sell it to you for
$15,000 and that includes having it serviced before sale”. Kim said that he needed to
sort out his finances so could he let James know by the end of the week? James
During the week James took the guitar to All Guitars – Services and Repairs to have
it serviced in readiness for sale. This was when he discovered that the guitar was
not an original Ibanez Serpent, but a clever copy. The manager of All Guitars
informed James that about the same time that the Ibanez Serpent was made in
Japan a number of imitations were also made in the United States. He also said that
only a few of them were made and that it would now be extremely rare to find an
original Serpent Ibanez for sale in Australia.
Kim returned at the end of the week to buy the guitar for $15,000. James failed to
mention that he had recently discovered it was a fake.
Kim displayed the guitar on the wall in his club proudly explaining to anyone who
inquired that “it was an original Ibanez Serpent just like the one that Ozzie Manson
plays in Doomsday”. The guitar did generate a good deal of interest and Kim had
many offers to buy it. One such inquirer was Robbie, the lead guitarist of a band
called The Rebellion. Robbie thought that the guitar would provide a good look for
the band, so he offered Kim $20,000 for it. Although Kim was sorry to part with it he
could not afford knock back such a generous offer.
Soon after purchasing the guitar several of the strings broke so Robbie had to take it
to All Guitars to have them replaced. The manager of All Guitars told Robbie that he
had only recently serviced the guitar, however, was not at all surprised that the
strings had broken. He told Robbie that the guitar was not an original Ibanez
Serpent, but an imitation, and was therefore of inferior quality. He told Robbie that it
was not suitable for heavy duty use and probably only worth around $800.
Robbie is now demanding that Kim return his money, however, Kim is refusing
because it is not his fault that the guitar is not an authentic Ibanez Serpent as this is
what he was told when he bought it from Max.
ANSWER ALL OF THE FOLLOWING QUESTIONS
1. Advise Robbie whether he is entitled to get his money back from Kim? [6 marks]
2. Advise Kim whether he has any cause of action against James?
3. Assuming that James never took the guitar to All Guitars for a service (so that he never found out that it was not an original) would Kim still have any cause of action against James upon discovering that the guitar was not an original Ibanez Serpent?
TOTAL: 20 MARKS
INSTRUCTIONS TO STUDENTS
All assignments must be submitted electronically using Turnitin by 9 pm January 10 2015.
This assignment comprises THREE questions that are based on the information
covered in class in: Week 5 (SAIBT) or Week 6 (EIBT) – Capacity, Consent & Legality
For the relevant information please refer to the lecture notes that are on the portal
for misrepresentation. The question is worth a total of 20 marks.
The maximum word limit for the assignment is 1000 words
Note: extra marks will NOT be given for additional information that exceeds the
word limit. Marks may in fact be deducted. This assignment must be answered using the IRAC method for analysing legal
You need to answer each question under the IRAC headings; however, you do not need to repeat the same rules if they have been referred to under RULES in previous
answers. As this is not a research assignment it is sufficient that you only refer to the
information in the lecture notes which can be referenced as: “FBL – Lecture Notes 2014”.
Wherever possible in your answer cases should be referred to in support of the principles of law that are applied to the facts.
Instructions for referencing cases:
When using a well-known legal principle it is necessary to refer to the relevant case
that the principle came from. This is done by providing the case name immediately after the principle (as shown below) or as a footnote. For example:
Equitable estoppel prevents a promisor from going back on a promise where the promisee has relied upon it to their detriment: Waltons Stores v Maher (1988) 164 CLR 387.
Note: You do not have to provide details about the case referred to; however, you
will need to provide the complete citation for that case. This is the reference for that particular case and it must either appear in text (as shown above), as a footnote or
in a reference list at the conclusion of the paper (as shown below). In the above example the citation was given immediately after the case name. If you choose to
do this then there is no need to provide a reference list of cases at the end of your paper.
If cases are listed in a reference list they must be listed in alphabetical order according to the first letter of the case name as follows:
Bolton v Madden (1873) LR 9 QB 55 R v Clarke (1927) 40 CLR 227 SVT v Best & Less (2001) 187 ALR 302
Williams v Roffey Bros & Nicholls (Contractors)  1 QB 1
If you choose to reference cases in a reference list (as above) rather than in text
they must be referenced in a separate list from other sources.