LAW172 Law Assignment

Ace Corporation (Ace) is the project manager of a project to refurbish an office for Midas Pty Ltd (Midas).

Ace entered into a contract with Midas on 21 February 2023. Under the contract, Ace agreed to hand over the refurbished office premises to Midas for occupation on or before 1 May 2023. The contract states:

“Ace Corporation acknowledges that Midas Pty Ltd requires the premises to be delivered on or by 1 May 2023, in order for Midas to vacate its current premises, as required by its landlord, by 2 May 2023”.

The contract between Ace and Midas also states:

“Subject to the occurrence of circumstances reasonably outside the control of Ace, and notified to Midas not later than 14 days before the completion of this contract, failure by Ace to complete all its contractual obligations by 1 May 2023 will be regarded as a fundamental default”.

On 3 April 2023, Ace enters into a contract with Infinity Fabrics (Infinity) under which Infinity is to supply and install carpeting on three floors (levels) of the office which is being refurbished for Midas. The contract between Ace and Infinity states that Infinity would begin installation of the carpets on 14 April 2023 and complete the carpet installation no later than 25 April 2023. Time for performance of the contract is stated to be “of the essence”. The contract between Ace and Infinity states:

“The premises [of the office refurbishment] are to be made available to Infinity by 14 April 2023, in a condition satisfactory for performance of the contract by Infinity”. The contract also states:

“Infinity will be provided with clear access to the premises for the purpose of performing the contract for the specified installation period”.

Infinity does not complete the carpeting of the premises by 25 April 2023. Carpeting of two floors has been completed but work has not begun on carpeting of the third floor.

On 26 April 2023, Ace informs Infinity that Infinity is in default of the contract to install the carpet. Ace states that unless the carpeting of the third floor is completed by 30 April 2023, Ace would be entitled to terminate the contract and seek damages. Infinity informs Ace that the remaining floor which has not yet been carpeted is covered with building debris and the carpet cannot be installed on that floor until the building debris is cleared.

By 1 May 2023, the day on which Ace was supposed to deliver the refurbished office premises to Midas, Infinity had still only completed the carpeting of two floors of the premises.

On 2 May 2023, Midas informs Ace that Ace is in default of its contract with Midas. Midas advises that delivery of the premises by 1 May 2023 was stated in the contract to be an essential term.

Ace contests Midas’s termination, arguing that the clause in the contract stipulating delivery of the premises to Midas by 1 May 2023 is not an essential term.

On 3 May 2023, Midas advises Ace that Midas has decided to allow Ace a further five (5) working days to complete the contract. If Ace does not complete the work within that period, Midas would proceed to terminate the contract and sue Ace for damages.

Ace immediately contacts Infinity to inform Infinity that they (Infinity) will be given another four (4) working days to complete the carpet installation. Infinity advises Ace that Infinity’s completion of the carpet installation is contingent upon clearance of the building debris on the third floor. By 7 May 2023, debris continues to cover the third floor and it remains uncarpeted.

Ace asks Midas to go ahead with a partial move into the two floors of the office premises where carpet has been installed, on the understanding that the third floor will be carpeted and available for Midas’s complete office relocation by 14 May 2023. Midas does not agree, saying: “Midas wants all floors to be ready for a simultaneous move”. Midas adds: “Even so, we are prepared to allow you until 14 May 2023 to have the premises ready for us to occupy”.

By 14 May 2023, only half of the third floor has been carpeted. Building debris continues to cover the other half of the third floor. Infinity informs Ace that Infinity could not complete the work because the building debris had not been moved as required. Infinity did, however, complete as much of the carpeting as it was able to do so given the state of the premises.

By 15 May 2023, no employees of Midas have moved to the partially refurbished premises. On 16 May 2023, Midas sends a letter to Ace giving notice that Midas is terminating the contract with Ace on grounds of failure to perform an essential term of the contract. The letter states that Midas will seek damages from Ace.

On 18 May 2023, Ace informs Infinity in writing that Infinity is in breach of their contract and Ace is commencing legal proceedings against Infinity.

On the basis of the above facts, ADVISE the parties on the following questions:

1. What are the respective rights and obligations of the parties (Ace, Infinity and Midas) under the express terms of the contracts between:
   • Midas and Ace; and
   • Ace and Infinity?
   
   <10>
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2. What terms, if any, could be implied into the contracts between:
   • Midas and Ace; and
   • Ace and Infinity?
   
   <10>
3. Is Midas entitled to terminate its contract with Ace on the grounds of failure to perform an essential term of the contract (as stated in Midas’s letter of 16 May)? <10>
4. Has Infinity breached any of the terms of its contract with Ace? <10>

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