Legal Case Study: Contract Law, Sales Transaction, Damages and Agency

Question 1: Elements of a Contract and Legal Significance of Advertisements

Question 1 Jackson recently inherited an antique vase, which has an estimated value of around $50,000 to $100,000. However, he is not a collector of such antiques, and he decides to put it up for sale via an auction process that he will conduct himself. He intends to place an advertisement in the local newspaper to inform interested members of the public about the auction. Some of his friends are also interested to buy the vase, and he intends to invite them to the auction as well. He will then rent a venue to hold the auction, and hopefully find a buyer then. Although Jackson has a rough idea as to how to proceed with the auction, he is not sure how the contract of sale would be concluded during the auction process. He has come to you for advice, as he is aware that you have taken a course on Contract Law. Specifically, Jackson is concerned as to whether the bidder may change his mind and back out after submitting a bid. He wants to know when is the exact point in time in the auction process that he and the winning bidder would become legally bound to the contract of sale. Explain how and when the contract will be formed in this scenario between Jackson and the winning bidder during the auction process. In your answer, you should identify and discuss the four (4) elements of a contract. You should also explain the legal significance (if any) of the advertisement that Jackson will place in the local newspaper, and address Jackson’s specific concerns as mentioned in the scenario. (30 marks) Question 2 Terence recently bought a home. He was specifically looking for a full leather sofa for his living room as he reckoned that it would be more durable and comfortable. He also wanted the sofa to be gold in colour, as it will match the rest of his décor. As such a combination (of a gold and leather sofa) was unusual, Terence has been unable to find such a product thus far. One day, Terence came across a furniture shop owned and operated by a person called Steve, and he asked Steve whether he carried such a product. Steve enthusiastically informed Terence that he does carry such a product. Terence asked Steve, “Is the sofa made with genuine leather?” Steve replied, “Yes, absolutely! The sofa is one hundred percent covered with genuine leather.” Steve took out a sample (which is a cutout of about 5cm by 5cm) of the material used to cover the sofa, and showed it to Terence. Steve said, “See, you can feel it for yourself!” Unknown to Steve, Terence was actually an expert on leather products as he sold leather bags in his line of work. Terence inspected the sample material carefully, and confirmed that it was indeed genuine leather. Terence was excited to have finally found his gold-coloured sofa in full leather. He immediately placed an order with Steve. Steve issued a sales invoice to Terence, writing the following words on it: “Full leather sofa (gold look) for $1,000, to be delivered within one week.” When the sofa was delivered to Terence’s home a few days later, he discovered that it was not fully covered in the same leather material. While the front part of the sofa was indeed made with leather, the back of the sofa was made with a synthetic form of leather (called “plastic leather” or “pleather”). Compare terms and representations, and explain which category (i.e. term or representation) the statement “The sofa is one hundred percent covered with genuine leather” should be classified. In your answer, you should state and apply the basic test used to distinguish between terms and representations and all the five (5) guidelines from the case law. (25 marks) Question 3 Melvin is an entrepreneur. He buys toy figurines based on a character called “Swordsman” from an overseas supplier, and he subsequently sells them locally for a profit. As this figurine was issued as a limited edition item, it was highly sought after by collectors and had significant resale value. Yolanda owned a local hobby shop. She decided to buy 200 pieces of the Swordsman figurines (at the price of $100 per figurine) from Melvin as she could not find any other local suppliers. She excitedly told Melvin that she intended to sell 10 pieces of the figurines to a special customer of hers who was willing to pay her $500 per figurine. As part of the contractual agreement between Melvin and Yolanda, Melvin agreed to deliver the figurines to Yolanda by the end of the month. However, Melvin failed to deliver the figurines to Yolanda by the stipulated timeline. He claimed that he had some personal issues with the overseas supplier and was trying to sort it out. Yolanda was very unhappy about the failure in delivery. Her special customer could not wait indefinitely for the items and decided to cancel the order with Yolanda. This loss of the special order will cause Yolanda to lose an estimated $4,000 in profits. During this period, the resale value of the Swordsman figurine in the secondary market has also appreciated significantly, and it is now valued at $200 per piece. If Yolanda had managed to sell all the remaining 190 figurines (from her order with Melvin) to her walkin customers, she would have made $19,000 in profits from these walk-in sales. Examine and discuss the four (4) aspects of damages which Yolanda should consider if she wishes to claim against Melvin for (i) the loss of profits from her deal with her special customer and (ii) the loss of profits from her walk-in customers, due to Melvin’s failure to deliver the figurines. In your answer, you should also conclude with your view on whether Yolanda is likely to succeed in her claim. (25 marks) Question 4 Sonia owns a small bakery business, which has been growing exponentially as her baked products were well received by the market. Sonia also earned positive publicity as she sold her baked products at a substantial discount to various local nursing homes as a form of corporate social responsibility. With the increasing volume of baked products and also the increasing number of nursing homes that she has to deal with, Sonia decided to appoint an assistant to help her with this aspect of her business. Sonia appointed a fresh business graduate called Vanessa to handle all the dealings with the nursing homes. As Sonia wanted to ensure that the nursing homes were well taken care of, she expressly instructed Vanessa to ensure delivery to the nursing homes within three working days of their orders. After her first month in this role, Vanessa realised that the workload was significant and tedious, and so, she decided to hire (without informing Sonia) some students looking for part-time work to help her with the more menial tasks of liaising with the nursing homes and arranging for delivery to them. On one occasion, as Vanessa had a personal event that she was attending, she decided to take some of the baked products to bring to her event, without first informing Sonia nor paying Sonia for them. Vanessa had worked hard for the business, and therefore she felt that she should get some special benefits in return. When Sonia did an end-of-year audit on Vanessa’s work, Sonia discovered that Vanessa had failed on a number of occasions to deliver the baked products to the nursing homes within three working days. Sonia also found out that Vanessa had made some basic errors whereby some orders were not fulfilled as Vanessa had forgotten to process them. Furthermore, Vanessa sometimes used her personal bank account to receive payments from the nursing homes for the sale of the baked products. Discuss the duties of an agent (which are owed to the principal), and analyse whether Vanessa has breached these duties in her relationship with Sonia based on the given scenario. In your answer, you should also define the concept of “agency” and identify who is the principal, agent and third party (or parties) in this scenario