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Suggested Answers – June 2009

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Suggested Answers – June 2009 UNIT 2 – CONTRACT LAW Suggested Answers – June 2009 Note to Candidates and Tutors: The purpose of the suggested answers is to provide students and tutors with guidance as to the key points students should have included in their answers to the June 2009 examinations. The suggested answers do not for all questions set out all the points which students may have included in their responses to the questions. Students will have received credit, where applicable, for other points not addressed by the suggested answers. ILEX is currently working with the Level 3 Chief Examiners to standardise the format and content of suggested answers and welcomes feedback from students and tutors with regard to the ‘helpfulness’ of the June 09 Suggested Answers. Students and tutors should review the suggested answers in conjunction with the question papers and the Chief Examiners’ reports which provide feedback on student performance in the examination. Section A 1. Candidates should have explained that only the parties to the contract are bound by it and these parties can benefit from it. 2. Candidates should explain that an invitation to treat is merely asking people to make an offer for that which is being advertised or displayed case example (e.g. Partridge v Crittenden). A unilateral offer is an advertisement which contains some type of definite promise, which if certain conditions (the promise) are met by the person accepting the unilateral offer. The person making the unilateral offer will be bound as soon as that person starts acting upon that promise, e.g. Carlill v Carbolic Smoke Ball Co 1893. 3. Candidates should explain that a promise to pay for something that has already been carried out is not valid consideration. (Simply stating it is something done before the promise is acceptable). 4(a) Candidates should explain that it is generally accepted by the courts that agreements between family, social and close friends are not intended to be a legal contract. (No legal intention) (e.g. Balfour v Balfour 1919). 4(b) Candidates should explain any two of the following if the parties to the agreement although family, are separated or divorced if one has been disadvantaged as a result of the agreement if the agreement involved some type of payment such as entry fees. Case examples could include Merritt v Merritt (1970), Parker v Clark (1960), Simpson v Pays (1955). Page 1 of 8 5. Candidates should explain by Custom – As a result of local or trade usage. (Candidates could include some or all of the following) The criteria examined when considering whether to imply such a term include the following. This is most likely between parties in the same trade or with same bargaining power. Duration of use whether or not it is reasonable to imply such use whether or not the term is inconsistent with an express term. That such a term is actually used in practice the implication of such a term is acceptable to the court. By the courts – because case law has established that these terms always appear in these type of contracts. By reference to the intentions of the parties. (i.e. the contract would be unworkable without that term) Case example ‘The Moorcock 1889’. Unlikely in consumer contracts. 6. Candidates should explain that the innocent party can repudiate the contract (treat it as being at an end) and claim damages for any loss. Case example Poussard v Spiers and Pond 1976. 7. Candidate should explain that traditionally the only remedy available was rescission. However under the Misrepresentation Act 1967 s2(2) the courts may now award damages in lieu (in place) of rescission, but it is entirely at the courts discretion. Courts cannot award both rescission and damages. 8. Candidates should include by Performance, by Breach, by Agreement, by Frustration. 9. Candidates should explain any three of the following a court order compelling the performance of a contract would not be ordered where damages would be adequate. It would not be granted if constant supervision by the court would be needed to enforce it’. Not available for contract of personal services. Not available for agreement made by deed. Not granted to a minor. Case examples may be quoted e.g. Ryan v Mutual Tontine Westminster Chambers Association (1893), Ponser v Scott-Lewis (1986) Page 2 of 8 Section B Scenario 1 1(a)(i) Candidates should explain that a contract requires offer, acceptance, consideration and intention to create a legal agreement. Relate to the scenario by explaining there has been a valid offer by reliant builder. They could mention that the material costs are not fixed, but are set independently of the two parties and are not vague. There is intention to create a legal agreement. The offer was accepted by Simon Mallory so there is a valid contract. Case example Dunlop Pneumatic Tyre Co v Selfridges Co Ltd 1915. 1(a)(ii) Candidates should identify the contract had already been formed before there was a request to fix the tiles as well. Reliant Builders offered to fit them at no cost, therefore there was no consideration offered or agreed, therefore there could be no valid contract. (Promise to the future). Mention could be made that past consideration is not valid. e.g. (Roscorla v Thomas 1842). 1(b) Candidates should explain that the contract was between Brandon Mallory and the tile shop and the relevant act would be Sale of Goods Act 1979 s14 (2). 2(a) Candidates should explain supply of Goods and Services Act 1982, s13 Reasonable care and skill, s14 performed in a reasonable time, s15 Reasonable charge. 2(b) Candidate should relate the following to the scenario SGSA 1982 s13 applies insufficient care, SGSA 1982 s14 reasonable time. Unlike in the SGA 1979 these are just called ‘terms’ and common law rules apply - if service performed badly contract will be treated as at an end. e.g. Davey v Cosmos Air holidays (1989). 3(a) Candidates should explain that when it is considered a condition rather than a warranty, when contract expressly or impliedly says so, after the agreed due date for performance has been met (ultimatum), in circumstances which show that time is of an essence. 3(b) Candidates should explain that acceptance was on the basis of a finishing time, the actual finishing time not mentioned but implied as two weeks which could be construed as a fixed date. In this scenario it could be argued that it was a warranty rather than a condition. If it was a condition breach entitled contract to be repudiated. If it was a warranty, breach only allows damages to be claimed. 4(a) Candidates should explain frustration is an unforeseen circumstance which arises after a contract has been made which prevents if from being carried out. Fault lies with neither party. The non availability of workmen is an organisational problem not an unforeseeable occurrence, therefore these circumstances could not be seen as a frustrating event. Case examples and/or explanation of frustrating events if used could include e.g. Condor v Barron Knights (1966) Taylor v Caldwell (1863) Krell v Henry (1903). Page 3 of 8 4(b) Candidates explanation should include the main remedy would be damages under common law if it was established that time was of the essence. Remedies under the SGSA 1982, specific performance could be considered under equitable remedies but would be unlikely. Alternatively, the fact that the original contract had not been met, if Simon Mallory notified reliant Builders that time was of the essence and gave them an ultimatum (a further contract) with a new deadline. If now Reliant Builders do not meet the new deadline Simon Mallory can cancel the contract and sue for damages. Page 4 of 8 Scenario 2 1(a) Candidates should explain it is more than just an invitation to treat, it is a unilateral offer, made to the whole world. It is specific – if you do this I promise that, it is accepted as soon as the person starts to complete the offer AND before the deadline. Case example Carlill v Carbolic Smoke Ball Co (1893). 1(b) Candidates needed to explain, this was a universal offer. Based on the purchase of £15 worth of goods during the specified week. They embarked on the offer as soon as they made the first purchase, and completed it provided they purchased more than £15 worth of goods before the expiration date and time, therefore the customer could claim the free bottle of wine. 1(c) Candidates should explain, frustration means that if after a contract has been made, unforeseen circumstances arise which prevent it from being carried out through the fault of neither party, it is said to be frustrated. It is not frustrated simply because it turns out to be difficulties with staff, or because it will cost more to hire in more labour, or is self induced such as not ordering enough wine etc. Case examples e.g. Davis Contractors v Fareham UDC 1956, Taylor v Caldwell 1863. 2(a) Candidates should explain this is a unilateral offer therefore as soon as a person embarks on the terms of the unilateral offer, it is not possible for revocation of the offer to take place. Therefore anyone who has already started by visiting the shop and purchasing goods, cannot be refused the offer. It is possible to prevent further persons taking up the offer, but only if they can be informed that the offer is revoked. This would need the original offer being revoked by publicising it in a similar fashion to the original and to the same group of people.
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