1. Roderick is the owner of Snacks Pty Ltd a successful food catering business. In January 2012 Roderick entered into a contract with the Queensland Government on behalf of the company to supply food to State Trains for a period of three years. The contract price per meal was $3.85, inclusive of delivery.
Six months after entering into the contract an industrial dispute between the company and its employees resulted in the court awarding to the employees pay increases of $20 per week. During this time the Queensland Parliament passed the Clean Food Act 2014 requiring caterers to modernise food preparation areas to meet new food standards and regulations. However, under the Act, Snacks could apply for a 12 month exemption to enable it to upgrade its food facilities.
Roderick needs to increase the price of each meal for the remaining 5 months of the contract to recoup some of the upgrade costs. The contract with State Trains is watertight and no price increases are permitted during period of the contract. In discussions with representatives from State Trains, Roderick indicates that the company will not be able to supply the meals owing to changes in the State food laws. He informs the representatives that an increase in the price would allow the company to make alternative arrangements to continue the supply of the meals. The representatives indicate that State Trains will not fund a price increase owing to current restrictions in the organisation’s budget.
Two days after the meeting, Roderick writes to the State Trains to say that the contract had been frustrated owing to changes under the Clean Food Act. A week after receiving the letter, the company’s factory is destroyed by a fire caused by an electrical fault in one of the company’s ovens.
(a) Advise State Trains as to the remedies it might have under the common law.
(b) Assume that State Trains is unable to find another caterer to supply meals, what advice would you provide to State Trains if it reluctantly accepted the additional cost?
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