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Question 1:

Just over two years ago, Jane bought a rundown coffee shop business and the premises at
which the business was carried on. Soon after buying the business and premises, she had the
shop refitted. This was done by her husband, Edward, who runs a redecorating business. The
cost of refitting the shop was $40,000. Jane did not pay this amount to Edward despite the fact
that the original term orally agreed between them was that Jane would pay the full amount to
Edward within a year. It was also orally agreed at the time that no interest would be payable on
the debt.

The coffee shop business has proved very successful. Six months ago, the shop next door to
Jane’s was put on the market for sale. Jane saw this as a great opportunity to expand her
business. She spoke to her bank manager about obtaining a loan to finance the purchase and
redecoration of the adjoining shop. The bank manager was concerned that Jane had not yet
paid her outstanding debt to Edward. Furthermore, if Jane did pay this debt, it seemed that she
would not have quite enough capital to meet the bank’s lending rules.

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Jane explained this situation to Edward. She said she was very keen to buy the shop but she
could only do so if he would accept $10,000 in full and final settlement of the outstanding debt.
Edward agreed to this and they wrote their agreement on a sheet of paper and both signed it.
Edward’s reason for agreeing to this arrangement was partly because he wanted to help his
wife and partly because he assumed that she would hire him to redecorate the new shop.

Jane produced the signed written agreement to her bank and, because of it, was able to get a
bank loan and go ahead with the purchase of the shop next door. Jane then arranged for the
shop to be redecorated but she did not engage Edward to do this. Instead, she hired Max who
operates a decorating business across the road from Jane’s coffee shop business. Jane has
paid Max $25,000 for redecorating the shop.

Jane has since spent a lot of time socially with Max and has now declared her wish to end her
marriage to Edward and start a new relationship with Max.

Edward is outraged at Jane’s declaration and his first response has been to sue her for the
$30,000 that he claims is outstanding from his refitting the coffee shop.

Advise both parties about their legal position in respect to this dispute between Edward
and Jane.

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