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Subject: Business Law , Accounting

Question 3 (25 marks) Fanny owns two townhouses in Sai Kung and they are adjacent to each other. In June, she entered into a contract with a local university for renting the townhouses for the coming academic year for use as student accommodation. The university paid Fanny HK$60,000 as a deposit, with the monthly rent to 2 be paid at the end of each month. Fanny then engaged Success Decoration Ltd (SDL) to carry out renovation of the townhouses which is to be completed by October which marks the beginning of the academic year. She paid SDL HK$100.000 and the balance of HK$300,000 is to be paid on completion of the renovation work. In mid-August, when SDL had completed work on the first townhouse, but had not started on the second townhouse, the latter was struck by lightning which caused a fire to destroy both townhouses. Required (a) Advise Fanny on the legal effect of the above event on her contracts (19 marks) (b) Same facts as in (a), except that the townhouses have not been destroyed. However, the university admitted fewer students for its programs than expected as a result of an unexpected restriction on student numbers imposed by the government. In mid-September the university told Fanny that they had excess student accommodation units and they no longer need to rent her townhouses and requested the rental deposit to be returned to them. Advise Fanny. (6 marks) Question 3 (25 marks) Fanny owns two townhouses in Sai Kung and they are adjacent to each other. In June, she entered into a contract with a local university for renting the townhouses for the coming academic year for use as student accommodation. The university paid Fanny HK$60,000 as a deposit, with the monthly rent to 2 be paid at the end of each month. Fanny then engaged Success Decoration Ltd (SDL) to carry out renovation of the townhouses which is to be completed by October which marks the beginning of the academic year. She paid SDL HK$100.000 and the balance of HK$300,000 is to be paid on completion of the renovation work. In mid-August, when SDL had completed work on the first townhouse, but had not started on the second townhouse, the latter was struck by lightning which caused a fire to destroy both townhouses. Required (a) Advise Fanny on the legal effect of the above event on her contracts (19 marks) (b) Same facts as in (a), except that the townhouses have not been destroyed. However, the university admitted fewer students for its programs than expected as a result of an unexpected restriction on student numbers imposed by the government. In mid-September the university told Fanny that they had excess student accommodation units and they no longer need to rent her townhouses and requested the rental deposit to be returned to them. Advise Fanny. (6 marks)