Canberra’s Hardware Home - Law Assignment Help

Assignment Task

The Problem:
Tom has decided to buy a well-established hardware business called Canberra’s Hardware Home in Canberra’s North. He has had his eye on the business for some time and believes that with higher vaccination rates and greater optimism finally returning to Canberra, there will continue to be high demand for building materials in the city as some normality returns. 

As the owner of the business, Joseph has advertised the sale at a total price of $1.35 Million. In preparation for sale, Joseph has prepared a contract. The total price is apportioned in this contract as follows:
Shop and real estate: $600,000
Business and Goodwill: $400,000
Fixtures and fittings: $200,000
Stock (estimated) $150,000

Tom is sure that there will be a great deal of interest in the business and is keen to express his interest in buying the business on the terms set out in the contract. The agent wishes to see an exchange of contracts take place on or before 10 September 2021 with completion of the sale (i.e. final settlement) to follow on Friday 29 October 2021.

When the agent provides Tom with his copy of the contract (so that he might seek legal advice and sign the contract in preparation for exchange) Tom sees his lawyer and, after some negotiations with Joseph’s lawyer, contracts are duly signed and exchanged on 10 September 2021. Upon exchange, the most relevant clauses in the contract provide as follows:

Clause 1 Special Conditions: “The Purchaser agrees to complete this purchase on 29 October 2021. The Vendor acknowledges that the Purchaser will require finance of at least $50,000 to complete the purchase and the Vendor agrees that completion of the sale is therefore subject to the Purchaser obtaining finance of at least $50,000 from Canberra Bank by Tuesday 26 October 2021. The Purchaser undertakes to take all steps necessary to obtain this finance by 26 October 2021.”

Clause 2 Fixtures and Fittings: “The Purchaser acknowledges that he has inspected the shop and premises and agrees to accept all fixtures and fittings as they have been inspected.”

Clause 3 Valuation of Stock: “The Vendor and Purchaser agree to meet on or about Thursday 28 October to value all stock in the shop, but the Vendor warrants that stock to the total value of $150,000 will pass to the Purchaser upon completion of the sale.”

On Thursday 28 October, Tom arrives at the shop to value the stock. It becomes apparent, as the stocktake proceeds, that a good proportion of the best stock has been sold down by Joseph and that Joseph is valuing the remaining stock at an unrealistically high level in order to value total stock at $150,000. Tom also notices at the stocktake that one of the six large display stands that were inspected earlier and included in the valuation of fixtures has been removed by Joseph. Each of the six display stands is valued at $4,000. Although the six display stands are movable, they are also extremely heavy and bolted firmly to the floor in order to carry heavy stock and prevent any movement.

To add to Tom’s concerns, he has just learnt that although his finance of $50,000 has been approved by the Canberra Bank he will now be required to make loan repayments monthly - rather than six-monthly, as originally negotiated - making a significant difference to his cash flow in the first two years of operating the hardware business.

In these circumstances, Tom would now prefer to get out of the contract altogether and consider the purchase of an alternative business. He knows that Joseph will not agree to this however as there is only a very small market for this shop in these difficult times.
Advise Tom as to whether he might now avoid his contractual obligations to purchase the business, and as to whether he has any further rights in contract law.

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