Question 1 (10 Marks)
Flyways Airlines Ltd signs a contract with Boeing Corporation Ltd for Boeing to build a
new aircraft. On average, Flyways would make $500,000 profit per day from using such
The contract has 678 terms. Term 65 says that the plane must be able to travel 9,000 km
at 700 km per hour. Term 457 says that the aircraft must have an in-flight video system
capable of showing 27 channels of entertainment to passengers.
After the contract is signed, Boeing sends to Flyways a package containing a large
number of documents, including the contract itself and examples of the color scheme that
will be used. In the middle of these documents there is also a new document headed
‘Liability Limitation’, the key part of which states as follows:
The liability of Boeing Corporation Ltd for breach of contract is capped at $400,000.
When the plane is delivered, its engines are as required, but, due to confusion at the
factory, the wrong software has been loaded into the entertainment system, which has
only 21 channels. It would take a week to re-configure the software.
Advise Flyways Airlines fully as to what its legal position is, citing relevant case law.
Question 2 (15 Marks)
Bob runs a company which manufactures and sells computer equipment. He relates the
following set of facts to you:
On 1 January Bob receives an email from Mike Jones which reads: “I offer to purchase
30 Toshiba Satellite laptops for $ 300 each, inclusive of GST, delivery and insurance”. In
response, on 2 January Bob sent an email to Mike saying “I accept your offer, but the
price would have to be $300 plus GST. On 3 January Mike sends an email back saying
“No, I can’t agree to that”. On 5 January Bob then sends an email saying “OK, I accept
your offer of 1 January”, however when he sends the computers to Mike with an invoice
for $9,000, Mike sends the computers back and refuses to pay for them, saying that he
has purchased computers elsewhere.