THE CHARTERED INSTITUTE OF LEGAL EXECUTIVES UNIT 2 CONTRACT LAW *

Transcription

1 9 June 2014 Level 6 CONTRACT LAW Subject Code L6-2 THE CHARTERED INSTITUTE OF LEGAL EXECUTIVES UNIT 2 CONTRACT LAW * Time allowed: 3 hours plus 15 minutes reading time Instructions to Candidates You have FIFTEEN minutes to read through this question paper before the start of the examination. It is strongly recommended that you use the reading time to read the question paper fully. However, you may make notes on the question paper or in your answer booklet during this time, if you wish. All questions carry 25 marks. Answer FOUR only of the following EIGHT questions. The question paper is divided into TWO sections. You MUST answer at least ONE question from Section A and at least ONE question from Section B. Write in full sentences a yes or no answer will earn no marks. Candidates may use in the examination their own unmarked copy of the designated statute book: Blackstone s Statutes on Contract, Tort & Restitution , 24 th edition, Francis Rose, Oxford University Press Candidates must comply with the CILEx Examination Regulations. Full reasoning must be shown in answers. Statutory authorities, decided cases and examples should be used where appropriate. Information for Candidates The mark allocation for each question and part question is given and you are advised to take this into account in planning your work. Write in blue or black ink or ballpoint pen. Attention should be paid to clear, neat handwriting and tidy alterations. Complete all rough work in your answer booklet. Cross through any work you do not want marked. Do not turn over this page until instructed by the Invigilator. * This unit is a component of the following CILEx qualifications: LEVEL 6 CERTIFICATE IN LAW, LEVEL 6 PROFESSIONAL HIGHER DIPLOMA IN LAW AND PRACTICE and the LEVEL 6 DIPLOMA IN LEGAL PRACTICE Page 1 of 8

2 SECTION A (Answer at least one question from this section) 1. Critically analyse the doctrine of privity of contract and assess its continued significance in the light of the exceptions to the doctrine. 2. When the courts said to the big concern [the large company], "You must put it in clear words," the big concern had no hesitation in doing so. It knew well that the little man would never read the exemption clauses or understand them. George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd (1982) Lord Denning MR. In the light of Lord Denning s comments consider whether the little man is adequately protected against exclusion clauses: (a) by the common law; and (12 marks) (b) by statute. (13 marks) (Total: 25 marks) 3. Critically analyse: (a) (b) the law governing the circumstances in which a contract may be found to be frustrated; (18 marks) the effect of frustration on the contract and the obligations of the parties. (7 marks) (Total: 25 marks) 4. Assess the extent to which the current test in relation to remoteness of damage is sufficiently certain. Page 2 of 8

3 SECTION B (Answer at least one question from this section) Question 1 Michael is an art dealer who specialises in street art. He recently acquired one of the prints from the collection of prints entitled Barely Legal by a well-known graffiti artist. Rather proud of his latest acquisition, Michael displayed the print in the window of his Shoreditch gallery. He sent a letter to Laura, who was one of his main clients and the administrator of a private collection. He offered to sell the print to Laura for 12,000. Laura received the letter on a Tuesday. She telephoned Michael immediately and offered to purchase the print for 10,000. Michael refused but did say he would be prepared to sell it for 11,500. Laura requested some time to see if she could acquire the extra funds. Michael agreed to leave the offer open until 10 am on Friday. On Wednesday, when Michael was attending a meeting elsewhere, his assistant, Peter, sold the print to a passing customer for 15,000. When Michael returned, he instructed Peter to telephone Laura to withdraw the offer immediately. Peter did not feel comfortable telephoning Laura, so he sent a withdrawal of offer to her by post instead. Laura managed to secure extra funding for the print late on the Thursday afternoon. She immediately sent an to Michael agreeing to pay 11,500 and asking Michael if he would store the print until she could find a place to house it. She attached a hardcopy of the to one of her standard order forms and sent it to Michael in the post that evening. Laura received the written withdrawal of offer on the Friday morning. Michael did not receive Laura s accepting the offer until the Saturday because Peter had incorrectly installed a firewall on the company s computer which had the effect of delaying Laura s . Laura s letter arrived the following Monday. Advise Laura. Turn over Page 3 of 8

4 Question 2 Jet Set Shuttle Ltd ( Jet Set ) is a company that provides a limousine shuttle service to airports for business customers. Unfortunately, Jet Set has been trading at a loss for over a year. Six months ago, Jet Set commissioned an audit in an attempt to restore its profitability. The audit revealed that one of Jet Set s suppliers, Top Cat Limos Ltd. ( Top Cat ) was charging more than three times the market rate for the limousines that it supplied. Last November, Jet Set contacted Top Cat, in order to renegotiate the hire agreement. Following heated discussions and an indication by Jet Set that it would be forced to take its custom elsewhere, Top Cat reluctantly agreed to a one third reduction in hire charges from December until such time as Jet Set was trading profitably again. The audit also highlighted a decline in bookings on one particular route. The cause of the decline was Rick, one of Jet Set s drivers, who was reported to be generally uncooperative and rude to customers. Jet Set provided Rick with an incentive to improve by promising him that if he would carry out his duties and treat customers with respect, Jet Set would pay him a bonus on any additional takings. To save on its cleaning costs, Jet Set promised to pay its office staff a bonus on any savings made to the company, if the office staff promised to keep the offices clean during their own time. Six months on, Rick has kept his word and the bookings on his route have returned to normal. The office staff have kept the offices clean and Jet Set s cleaning costs have halved. Jet Set has failed to pay any of the bonuses. Top Cat has discovered that Jet Set is trading profitably again and has written to Jet Set seeking recovery of the full hire charge, backdated to December. Advise Jet Set as to: (a) (b) whether it will have to pay the bonuses to Rick and the office staff; and (14 marks) whether it will be obliged to pay the backdated hire charges to Top Cat and whether it will have to pay the full hire charges in future. (11 marks) (Total: 25 marks) Page 4 of 8

5 Question 3 In preparation for a business trip to India, Cheung visited a local computer store, Computer Universe plc ( Computer Universe ). He asked the assistant for a strong case that would protect his laptop during his trip. Cheung purchased the case that the assistant provided. Although, at 200, it cost ten times the price of a standard case, the label explained that it was a heavy-duty product constructed from aluminum alloys. Cheung also asked the assistant to supply him with a camera suitable for taking holiday snaps. He specifically asked for a camera that he would be able to connect to his laptop. Cheung was not entirely convinced that the assistant knew very much about cameras but he did purchase the camera that the assistant recommended. On his arrival in India, the laptop case broke due to a defective handle. On closer inspection, Cheung noticed that the case was in fact made of plastic and had been coated in an aluminum foil. Cheung also found that the camera was too complicated to use. He has since discovered that the camera was designed with the professional photographer in mind. Cheung is unable to connect the camera to his laptop as it only works with specialised software, which he cannot afford. When Cheung returned home, he asked a local firm, Oxford Computer Systems ( OCS ), to service his laptop. The engineer OCS sent round was unable to perform the service on site and told Cheung that he needed to take the laptop back to the laboratory. Cheung expressed his concern about how long the service would take but the engineer reassured Cheung that it would probably not take more than a few days. It was only when the engineer had left with his laptop that Cheung realised he had failed to ask how much the service would cost. Computer Universe is refusing to exchange or refund the cost of the laptop case and the camera. Cheung has received an invoice from OCS for 250. The accompanying letter states that OCS will return the laptop within 28 days of receiving payment. OCS s main competitor charges 50 for a similar service and guarantees a turn around period of less than five working days. Advise Cheung as to whether Computer Universe and Oxford Computer Systems are in breach of any of the statutory implied terms. Page 5 of 8 Turn over

6 Question 4 Colin, a wealthy car enthusiast, wished to buy a car to add to his collection of Italian sports cars. He visited Italia Styling Ltd. ( ISL ), a company specialising in Maserati sports cars. When he was looking at one of the cars he was approached by the chief salesperson, who said to Colin No need to examine that one, she s a limited edition Gransport MC Victory. She also told Colin that in her opinion the car was in great condition and that Colin could read the engineer s report if he did not believe her. Colin did not examine the report. If he had, he would have discovered that the engine was in a poor state and that the bodywork was badly rusted as the car had been used in the Dakar Rally. Colin did not buy the car immediately as he wished to discuss the purchase with his personal mechanic. He returned three days later to buy the car with a bankers draft made out for 85,000. The written contract made no reference to the statements made during Colin s initial visit. Some time later, Colin noticed that the car let in water when it rained. After taking a closer look, Colin s mechanic reported that there was severe rusting on the underside of the chassis and that the engine was unlikely to last another 10,000 miles. His mechanic also discovered that the car was not a limited edition Gransport MC Victory but rather a standard edition Gransport with an MC Victory badge attached to the rear. The Gransport typically retails for less than a third of its limited edition counterpart. ISL has offered to repair the car but it is not prepared to give Colin his money back. Colin has decided he no longer wants the car and would rather own a Ferrari. Advise Colin as to any action he may have against ISL in misrepresentation. End of Examination Paper 2014 The Chartered Institute of Legal Executives Page 6 of 8

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