Epick Games enters into negotiations with big game developer Buzzard Games to develop an add-on for Buzzard’s smash hit game Kandy Krash. The add-on needs to be developed as quickly as possible, and the parties agree to a five-week deadline. The parties agree to this deadline on the assumption that Epick’s programmers will be able to work seven days a week. Buzzard agrees to Epick’s price of $100,000. The parties sign a contract containing Buzzard’s standard terms.

Epic employs talented programmer Sarah Bellum to lead the programming for the contract. The programming commences and for the first week everything is on schedule. Buzzard starts to promote the launch of the add-on.

However, the National Programmers’ Union finds out that Epick’s programmers are working seven days a week and it lodges a complaint with Fair Work (ignore any employment law that may be relevant in real-life). Fair Work declares that the programmers must only work five days per week and Epick has no choice but to comply.

As a result of this, the five weeks programming now takes seven weeks and costs Epick an extra $50,000. Epic submits an invoice to Buzzard for $150,000. Buzzard is unhappy because it had intended to release the add-on after five weeks and it claims that it is has lost money due to the delay and so it will only pay $50,000 in total to Epick.

Finance Manager, Holden Cash, comes to see you about the situation. He has heard about something called ‘frustration of contract’. He asks you if this would apply to the contract between Buzzard and Epick and, if so, what the outcome might be for Epick?

Alternatively, he asks you if it might be reasonable to assume that, even though Buzzard’s standard terms do not address this, there is an implied term in the contract that if the work costs more due to unforeseen circumstances beyond the control of the parties, Epick is entitled to charge more?

Human Resources Manager Peya Little also comes to see you. She has received a letter from Kronos Games about Sarah Bellum. Apparently, Sarah was employed by Kronos prior to her coming across to Epick and her employment contract with Kronos contained a restraint clause stating that:

“In consideration of the Employer paying the Employee 1 year’s additional salary upon any termination employment, the Employee agrees not to work for any of the Employer’s competitors in Australia for 1 year after termination.”

Kronos wants Epick to pay compensation for Sarah’s alleged breach of restraint. Peya asks you whether or not the restraint would be enforceable anyway?

Using the 4-Step Approach and with reference to relevant cases, advise as to the following:

1. a). Whether or not the contract was frustrated and, if so, any effect and, regardless, what Epick might expect to get paid;

2. b). Whether or not there is an implied term that Epick would be paid more for delays due to unforeseen circumstances beyond the control of the parties; and

3. c). Whether or not the restraint against Sarah would be enforceable and, regardless, if Epick would have to pay any compensation to Kronos.

• d). Use a separate 4-Step Approach for each of A, B, and C as each deals with different areas of law.

Answer rating: 100% (QA)

A Frustration of contract Issue The National programmers union has lodged a complaint which has restricted workers to 5day weeks affecting the project completion date resulting in 2 weeks delay and co... View the full answer