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Jacob and Marley are avid tennis players and decided to form a club called the Bond University Tennis Club. Jacob becomes the president and Marley the secretary. Malcolm, Jason and Alex and ten other people join the club as members. Each member pays a membership fee of $100.

The club organizes a tournament and all the members are invited to participate. At the tournament, the club supplies sports drinks to the players. Unfortunately, the drinks contain a contaminate and many players fall ill. It turns out that to save money, the club had purchased the drinks at a discount as they been recalled due to bacteria been found in some bottles.

Can the ill players bring an action in negligence against the club? If not, what remedy do they have? What would you have recommended Jacob and Marley to do differently when forming the club?

Question Two:

John is a foreign exchange trader working for a large bank. John and twenty-five of his workmates decide to leave the bank and start their own foreign exchange trading firm. They decide to operate as a partnership. Do you think this is a good structure for the business?

Question Three:

Darryl and Julia are both passionate chess players. They meet for the first time at a recent chess tournament. After a short discussion about their love of chess, they decide they should open a chess store together selling exotic chess products to other likeminded chess fanatics. Unfortunately, neither Darryl nor Julia have any money. Julia’s friend, Otis, told Julia he had saved some money and was looking to invest it in a business. Julia and Darryl approach Otis and pitch their chess store idea. Otis is completely blown away by the pair’s enthusiasm for the idea and agrees to invest $100,000. The three agree that Otis will not receive any interest on his investment, but will get 50% of the net profits generated by the business.

Darryl is given the responsibility of finding a suitable location for the business. He finds a store in Burleigh Heads and promptly enters a lease. As Julia is out of town on business, Darryl signs the lease in his name.

Darryl engages a firm of architects to prepare designs for the store.

When Julia returns, she is told about the new premises. She takes her good friend Glenda to check out the new premises. When they enter the store, Glenda trips over a broom that was left lying on the floor and severely injures her leg.

Julia is horrified by the new premises. She doesn’t like the location; it is too dark and it is too expensive. She tells Darryl that the whole chess store idea just won’t work and she has no interest in perusing the venture any further.

Who is liable for the lease obligations, the architects’ fees and Glenda’s injuries?

Question Four:

Which of the following is most likely to be deemed a partnership and why?

  1. (a) John and David start a business selling ducks. David is an excellent duck farmer and John is a superb duck salesperson. They agree that they will share the gross proceeds from sales on a 50/50 basis. David will be responsible for his costs associated with breeding the ducks and John will be responsible for his costs associated with selling the ducks.
  2. (b) Paul is a plumber. He owns all his equipment in his own name and runs the business in his name. Paul employs Matt and pays him $500 per week plus a bonus of $150 per week if clients are billed more than $5000 for the week.
  3. (c) Tory and James agree to start a restaurant business called “Sweet Alex”. They agree that Tory (who is a chef) will receive 60% of the net proceeds and James will receive 40%. While they have not yet opened the restaurant, they have located suitable premises and are in the process of remodelling it for the business.
  4. (d) Louie holds a business in trust for George and Peppa. Pursuant to the trust agreement, Louie is required to distribute the net profits of the business to George and Peppa in equal shares on the last day of each financial year.
  5. (e) Chris registers a company called Chris Pty Ltd to conduct a stockbroking business. Pursuant to the terms of the constitution, the company is required to pay a dividend every year to the shareholders in an amount equal to the net profits generated by the company that year.
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