Julio has a businessrepairing bicycles and he operates from his garage at home. He is getting somuch
Question:
Julio has a business repairing bicycles and he operates from his garage at home. He is getting so much business he decides to rent a small workshop in North Hobart. He signs a six-month lease with Sasha with rent due on the 10th of each month at $800 a month.
After two months, Julio is approached by Henry who owns a bike shop two blocks away called Henry's Bikes. Henry sells all types of bicycles and his shop is the most popular shop in Hobart. Henry has heard reports from his customers how great Julio is at repairs and maintenance and he invites Julio to think about joining him in his business and working out of Henry's premises. Henry would like to offer a full service to his customers, so they buy from him and then come back for repairs etc.
Part A
Julio is not sure what to do and asks you to provide written advice on these issues:
1. What are his obligations under his lease with Sasha?
2. Julio is concerned that if he does not join Henry at his bike shop that he might be subject to a
restraint of trade action as he had opened his present repair business within two blocks of an existing similar business. What does this mean term 'restraint of trade' mean and is it an issue he needs to be concerned about?
Now assume Julio has joined Henry's business. The shop is renamed H&J Bikes. Business is great and they are making good money. So much in fact that after 12 months Julio decides to visit his mum in Barcelona. He arranges for a temporary bike mechanic called Walter to cover for him whilst he is away for a month. Henry and Julio agree to pay Walter $600 a week. Whilst Julio is away, Henry has the opportunity to buy five limited edition road bikes at $35,000 each. Henry is sure he can resell these bikes for $50,000 and make a great profit. Henry signs a contract with the bike manufacturer in the USA and the bikes are delivered the day Julio returns to work after his holiday. Payment for the five bikes is due within 3 weeks. Unfortunately, Walter was no good at bike repairs and many customers have come back complaining about wheels falling off and accidents. Julio has to do many repairs again for free. This makes cash flow tight. Further, Julio does not agree with the purchase of the five bikes given how much money is involved. What's worse, Walter wore Julio's repair apron each day at work (which said in the top left 'Julio'). One customer came in and asked about sponsorship for his mountain bike competition and Walter said it would be fine to sponsor first prize with a bike to the value of $5000. The customer had said to Walter "where's Julio" when he first walked in.
Part B
Julio now comes to see you and asks:
3. Is he bound by the contract Henry signed for the five bikes? If yes, outline the nature of the relationship he has with Henry and explain why he is bound, referring to case law and legislation in Australia
4. Is he bound by Walter's statement that the bike shop would sponsor the mountain bike competition?
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman