Assignment Task
Learning outcomes (LO)
LO1 Analyse ethical dilemmas in the financial services industry and apply ethical values, principles and guidelines to business decisions and conduct.
LO2 Examine the powers, functions and operations of the relevant financial markets and regulatory bodies.
LO3 Analyse obligations and liabilities in the financial services industry in relation to common law, legislation and financial market rules.
LO4 Apply various common law rules, legislation and financial market rules to a given scenario.
Apply various common law rules, legislation and financial market rules to a given scenario.
Sparkling Harbour Boat Cruises Pty Ltd (SHBC) is a scenic cruise company operating in Sydney Harbour. They own a small fleet of modern boats. Its flagship boat, the MV Cassiopeia, was badly damaged in February 2016 while it was moored, when a careless (and uninsured) yachtsman motored into it. SHBC have decided to expedite the repairs to the boat instead of waiting for a court order for damages, which might never be paid in any case. After a six week search for a suitable repairer, involving discussions with five possible contractors; SHBC settled on Port & Starboard Shipworks (PSS) to do the work. The decision was based, in part, on the quality of the workmanship they saw on completed boats; as well as PSS’s reputation within the industry.
Further, PSS had bought the inventory of the Cassiopeia’s now defunct builder and could use ‘new’ old stock parts for some of the repair work to bring it back to near new condition. Above all, PSS also advised that it could potentially have the work completed in four months from receiving the boat, in time for the summer tourist season and end of year parties.
In May 2016, PSS verbally quoted Todd McMaster, SHBC’s fleet manager, the sum of $250,000 for repairs to the Cassiopeia. Todd asked PSS to send over a written contract for their consideration.
In its covering letter dated 18 May 2016, PSS wrote to SHBC:
The enclosed contract is for the repair work to SHBC’s boat, the MV Cassiopeia. Upon reviewing the scope of works, the quote given to Todd McMaster is insufficient to complete a fully seaworthy repair. The contract and attached diagrams explain the work that will be done, for a total cost of $350,000. In order to accept this contract, please sign and return the contract within 10 business days of the date of this letter.
Todd received the letter and contract on 20 May 2016, and immediately handed them to George Bismarck, SHBC’s chairman and chief executive. On 31 May 2016, George spoke to Todd about the PSS contract. He told Todd that he was happy to proceed with PSS given their reputation, but that the price increase was not acceptable. He pointed to two other quotes they had received in April 2016 undercutting PSS for the same scope of works, though those repairers had an 8 to 12 month turnaround on the repairs, and would use repair parts that were a ‘best fit’ rather than a new-for-old replacement. He expressed the belief that PSS were gouging SHBC and could do the work for $250,000, and as an experienced businessman, seaman and negotiator; he believed their original quote to Todd was the fairest assessment of the cost.
Three days later, George returned the contract to Todd. George had changed the price by hand on the contract to $250,000, signed and dated the contract 1 June 2016, and wrote in big letters on the cover page ‘We accept. GB, on behalf of SHBC’. Todd put the contract in the post to PSS that day.
Two weeks later, PSS had not responded to SHBC, and would not take their calls. George and Todd were understandably concerned, as with each passing week the repairs would be delayed, eating into the lucrative end of year operations.
They have come to you, a contract lawyer, asking for your advice on the contract. They believe they have engaged PSS to do the work, and that they have a contract that can be enforced. Your task is to give SHBC comprehensive advice on whether they have a valid and enforceable contract with PSS for the repairs in their current position.
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