Epick Games enters into negotiations with big game developer Buzzard Games to develop an add-on for Buzzards 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 Epicks programmers will be able to work seven days a week. Buzzard agrees to Epicks price of $100,000. The parties sign a contract containing Buzzards 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 Epicks 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 Buzzards 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 years additional salary upon any termination employment, the Employee agrees not to work for any of the Employers competitors in Australia for 1 year after termination.

Kronos wants Epick to pay compensation for Sarahs 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. Whether or not the contract was frustrated and, if so, any effect and, regardless, what Epick might expect to get paid;

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

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

• Question 2: 10 Marks

  Epick CEO, DanTate, shows you the draft subscription terms for Epicks game Animal Crossroads. Subscribers will pay a monthly fee to access the game. The terms are as follows:

1. The subscription term is 12 months.

2. The subscription fee is $29.99 per month, debited from the subscribers credit card

   on the first of each month.

3. If any fee payment is declined, the full balance of the remaining subscription term

   will become due and payable immediately.

4. After 12 months the subscription will renew for another 12 months unless cancelled

   by the subscriber.

5. Due to the varying costs of providing online services, the subscription fee is subject

   to change by up to 10% per month without notice to the subscriber and any fee

   increases will be payable by the subscriber.

6. Subscriptions cannot be cancelled prior to the expiry of the subscription term or any

   renewed subscription term

7. Subscriptions may only be cancelled in writing in the last month of the subscription term.

8. Epick can cancel a subscription at any time and for any reason.

9. Epick is not liable for any disruption in services, no matter how caused.

10. Subscription fees will not be reduced to compensate for any disruptions in services.

Write a memo to the CEO stating whether or not the terms above could be considered Unfair Contract Terms pursuant to legislation and why / why not. If you consider any terms to potentially be unfair, suggest some changes that could alleviate any problems. Include AGLC referencing in this memo.