Legal Issues Arising from Sales and Audits

Part 1

Queries relating to the coursework should be directed in the first instance to your tutor either in class or via email or by making an appointment to see the tutor face to face.

Part 1

Jacob and his friend Eve are having coffee in a Lola Love’s Coffee bar.  They are discussing laptops, as Eve has recently started University and requires a laptop for her studies.  Eve does not know much about laptops, and asks Jacob to find a reputable laptop for her, as a favour.  Jacob finds a 2-year-old laptop from a local second hand supplier, and recommends it as a good purchase to Eve.  A week after Eve purchased the laptop, it failed to start up.  A member of the ‘geek-squad’ at the local electronic shops checked the laptop over, and informs Eve that the laptop has a number of mechanical defects, and that it had been repaired badly after a previous failure. 

Question

Advise Eve, who wishes to know if she has any recourse in law against Jacob, who she believes acted as her agent in the purchase of the laptop.  Use legal sources and case law to support your answer.

Part 2

Gemstone jewellers suffered a technical malfunction on their website that reduced the price of all the items on its website to just £9.99 overnight.

Diamond rings and other expensive items such as watches that cost thousands of pounds were reduced to less than £10 at the online checkout.

A media frenzy quickly escalated, with customers posting on Instagram and Twitter that they had managed to purchase a variety of expensive items at a massive discount.

The management team were horrified when they were alerted to this issue. The website was closed down the following morning to correct the technical error.

Many customers had ordered goods for collection using the click and collect option, and picked up their purchases from Gemstone jewellers stores from 9am the following morning.

When the management team realised the mistake, they told staff not to hand over orders.

Layla, a customer who had placed an order wrote on a deals website “when I arrived to collect my order, a member of staff at the company had threatened to charge me the full amount for the goods. Surely this is not my problem that they have poor IT functions!”

Another customer, Charlie said "Gemstone just called me and said if I don't bring the items back and get refunded what I've paid they are going to charge me the full amount. I have a receipt. Are they allowed to do that? Please help me, I can’t afford to pay thousands of pounds."

But later the company said in a statement: "We have reviewed all transactions and those customers affected are being contacted today and issued a refund. This does not affect any customers that have already received a delivery or collected their goods."

Lynne, 65, of Sully in Penarth, bought a sterling silver watch for her husband, which has a retail price of £999.99, for just £9.99.

She was sent a confirmation email and a shipping invoice which said the item had been “quality checked and packed, and [is] now on the way to you.”

Lynne said: “It seemed like too good a deal to ignore. It’s obviously disappointing they won’t honour it.”

Required:

1. What is the legal position regarding both Gemstone jewellers Limited and the customers who have ordered goods at the really low prices?
2. Include details of all the elements needed to form a contract.
3. Does it make any difference whether the goods have been delivered or not?

Part 3

Accountancy firm Fairhurst & Co. signed off the audit of the accounts of Happy Day Holiday Group Ltd, a group of travel agents, whose accounts showed sound financial health.  Within months of this Happy Day Holiday Group Ltd had collapsed.

Legal proceedings have begun and Franco’s Bank have sued Fairhurst & Co. for negligence because they say that Fairhurst & Co should have identified the severity of Covid-19 on Happy Day Holiday Group Limited.

The claim of negligence was based on the fact that Fairhurst & Co had failed to discover fraudulent overstatements of the group’s true financial position.

Fairhurst & Co had included a clear note within their audit report that “it is management’s responsibility to addresses the going concern of Happy Day Holiday Group, and they held no responsibility to anyone else for their audit work”.

Required:

1. What is the current legal position regarding negligence by professionals in the UK and how has this developed over the years?
2. Are Franco’s Bank likely to be successful in their law suit, and why?