In July 2020, Ethical Developments Pty Ltd ('Ethical'), a large farming conglomerate which owns 1/3 of...

 

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In July 2020, Ethical Developments Pty Ltd ('Ethical'), a large farming conglomerate which owns 1/3 of Queensland's available farming land, engaged Farmers Projects Pty Ltd ('Farmers) to be the project manager for the construction of a commercial dairy on site in the north west region of Queensland. The development consisted of 10 milking sheds, each one to service 200 milking cows per day. Farmers had been the project manager on several of Ethical's previous projects. Farmers and Ethical entered into a written agreement headed Project Management Agreement' ('the Agreement'). The Agreement contained the same standard terms and conditions as the agreements signed by Farmers and Ethical for previous projects. By clause 2 of the Agreement, Farmers was appointed Ethical's agent for the purpose of providing the project management services as set out in the Agreement. One of the services specified was to arrange for the provision of the necessary plant, materials, goods and labour to complete the erection and fitting out of the 10 milking sheds in accordance with the plans and specifications, subject to the written approval of Ethical'. The Agreement also provided that Farmers would make payments directly to various goods and services providers and that Ethical, on receipt of a monthly statement of costs from Farmers, would authorise its bank to provide funds to Farmers as required. In April 2021 Farmers entered into the following contracts, without seeking approval from Ethical: • a contract with Potters Machinery Pty Ltd ('Potters') to supply and fit milking machinery at a total price of $145,000. In April 2021 Farmers entered into the following contracts, without seeking approval from Ethical: • a contract with Potters Machinery Pty Ltd ('Potters') to supply and fit milking machinery at a total price of $145,000. • a contract with Bobs Cement Pty Ltd ('Bobs') for the supply and laying of 2000 cubic litres of mixed cement which was to form the base floor of the 10 milking sheds for a total price of $152,000. • A contract with Jim's Sheds (Jim's Sheds) Pty Ltd for the supply and erection of 10 pre-built milking sheds which included the walls, roof and supporting beams for a total price of $198,000. Despite the terms of the Agreement, on past projects Farmers had only ever sought written approval from Ethical for contracts with a value of over $200,000. For contracts over $150,000, Farmers's Projects Manager obtained approval from Ethical's Site Manager over the phone, but no prior approval at all was ever sought for contracts under $150,000. Ethical had never objected to this in the past. (a) (b) Both Potters and Bob were not aware that Farmers was contracting as a Project Manager. Jim's Sheds however, were dealing directly with Ethical in relation to supply and erection of 10 pre-built milking sheds, and was aware that Farmers was providing project management services to Ethical in relation to the milking sheds. Indeed, Ethical's Site Manager, Billy Buster, had a number of conversations with Jim's Sheds managing director Tony Smith about the various options available for the milking sheds. In a conversation which took place shortly before the contract was entered into, Billy Buster said that he was happy to leave the final decision on the design of the milking sheds to Farmers. In another conversation, which took place in June 2021, Tony Smith told Billy Buster that Farmers had decided to go with Swedish design for the milking sheds. Billy Buster replied that it sounded like a very good deal. In December 2022, Ethical's Managing Director, Marcia Markle, comes to you for advice about the contracts with Potters, Bobs and Jim's Sheds. Ms Markle's is concerned that the milking machinery delivered by Potters are based on last year's model, and do not incorporate the new technical advances that are now available for milking cows. She is also not happy about the type of cement that has been provided and laid by Bobs, as it doesn't have the finished polished look she expected it to have. She also has concerns as to whether the Swedish design milking sheds will accommodate the milking of 200 cows per day per shed. Advise Ms Markle as to: whether Ethical is bound by the contracts with Potters, Bob and/or Jim's Sheds? whether Ethical has any rights against Farmers in relation to the contracts? In July 2020, Ethical Developments Pty Ltd ('Ethical'), a large farming conglomerate which owns 1/3 of Queensland's available farming land, engaged Farmers Projects Pty Ltd ('Farmers) to be the project manager for the construction of a commercial dairy on site in the north west region of Queensland. The development consisted of 10 milking sheds, each one to service 200 milking cows per day. Farmers had been the project manager on several of Ethical's previous projects. Farmers and Ethical entered into a written agreement headed Project Management Agreement' ('the Agreement'). The Agreement contained the same standard terms and conditions as the agreements signed by Farmers and Ethical for previous projects. By clause 2 of the Agreement, Farmers was appointed Ethical's agent for the purpose of providing the project management services as set out in the Agreement. One of the services specified was to arrange for the provision of the necessary plant, materials, goods and labour to complete the erection and fitting out of the 10 milking sheds in accordance with the plans and specifications, subject to the written approval of Ethical'. The Agreement also provided that Farmers would make payments directly to various goods and services providers and that Ethical, on receipt of a monthly statement of costs from Farmers, would authorise its bank to provide funds to Farmers as required. In April 2021 Farmers entered into the following contracts, without seeking approval from Ethical: • a contract with Potters Machinery Pty Ltd ('Potters') to supply and fit milking machinery at a total price of $145,000. In April 2021 Farmers entered into the following contracts, without seeking approval from Ethical: • a contract with Potters Machinery Pty Ltd ('Potters') to supply and fit milking machinery at a total price of $145,000. • a contract with Bobs Cement Pty Ltd ('Bobs') for the supply and laying of 2000 cubic litres of mixed cement which was to form the base floor of the 10 milking sheds for a total price of $152,000. • A contract with Jim's Sheds (Jim's Sheds) Pty Ltd for the supply and erection of 10 pre-built milking sheds which included the walls, roof and supporting beams for a total price of $198,000. Despite the terms of the Agreement, on past projects Farmers had only ever sought written approval from Ethical for contracts with a value of over $200,000. For contracts over $150,000, Farmers's Projects Manager obtained approval from Ethical's Site Manager over the phone, but no prior approval at all was ever sought for contracts under $150,000. Ethical had never objected to this in the past. (a) (b) Both Potters and Bob were not aware that Farmers was contracting as a Project Manager. Jim's Sheds however, were dealing directly with Ethical in relation to supply and erection of 10 pre-built milking sheds, and was aware that Farmers was providing project management services to Ethical in relation to the milking sheds. Indeed, Ethical's Site Manager, Billy Buster, had a number of conversations with Jim's Sheds managing director Tony Smith about the various options available for the milking sheds. In a conversation which took place shortly before the contract was entered into, Billy Buster said that he was happy to leave the final decision on the design of the milking sheds to Farmers. In another conversation, which took place in June 2021, Tony Smith told Billy Buster that Farmers had decided to go with Swedish design for the milking sheds. Billy Buster replied that it sounded like a very good deal. In December 2022, Ethical's Managing Director, Marcia Markle, comes to you for advice about the contracts with Potters, Bobs and Jim's Sheds. Ms Markle's is concerned that the milking machinery delivered by Potters are based on last year's model, and do not incorporate the new technical advances that are now available for milking cows. She is also not happy about the type of cement that has been provided and laid by Bobs, as it doesn't have the finished polished look she expected it to have. She also has concerns as to whether the Swedish design milking sheds will accommodate the milking of 200 cows per day per shed. Advise Ms Markle as to: whether Ethical is bound by the contracts with Potters, Bob and/or Jim's Sheds? whether Ethical has any rights against Farmers in relation to the contracts?

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a Whether Ethical is bound by the contracts with Potters Bob andor Jims Sheds To determine whether Ethical is bound by the contracts entered into by Farmers with Potters Bob and Jims Sheds we need to ... View the full answer