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A Study on the Law of Contract: Cases and Scenarios

Question 1

1 “The law of contract is far too ready to sacrifice certainty in favour of flexibility and proportionality.”

2 Sebastian advertises an antique sideboard in his local newspaper for sale at a price of £1500. Prospero, who is interested in purchasing the sideboard, responds by email, resulting in email correspondence between Sebastian and Prospero that, so far as is material, reads as follows:

Prospero: “I would like to buy your sideboard. I offer £1000.”

Sebastian: “Agreed. Yours for £1500.”

Prospero: “I am really not sure I can go higher than £1250.”

Sebastian: “Forget it.”

Discuss in EACH of the following SEPARATE situations–

(a) A little later, Prospero responds agreeing to pay £1500, but Sebastian replies that, after the “forget it” email, Sebastian received and immediately accepted an offer from Caliban.

(b) A little later, Sebastian emails Prospero again as follows: “On further consideration, I agree on £1250. Deal done.” Prospero responds refusing to pay more than £1000.

(c) Prospero decides he is prepared to pay £1500. He attempts to email Sebastian but receives “delivery failed” messages. (It transpires that Sebastian’s computer has malfunctioned). The only means of communication provided in the advertisement are postal and email addresses. Sebastian is not in the telephone directory. Prospero, therefore, posts an acceptance. The following day, however, Prospero sees an advertisement for another sideboard that he would rather buy instead. He therefore emails Sebastian to say he has changed his mind about buying Sebastian’s sideboard. This email is successfully communicated. The following day Sebastian receives Prospero’s letter.

(d) Sebastian and Prospero subsequently agree on a price of £1750. The
sideboard, however, is stored in a lock-up garage where it is destroyed by
fire shortly before the sale contract is concluded.

(e) Sebastian and Prospero subsequently agree on a price of £1750, with Sebastian to deliver the sideboard to Prospero two weeks later. £500 is payable immediately and the balance on delivery. Ownership of (and therefore risk in) the sideboard is to remain with Sebastian until Prospero has made the completion payment. The sideboard is stored in a lock-up garage where it is destroyed by fire shortly after the sale contract is concluded.

3  (a) “It is unavoidable that the concept of lawful act duress, however delineated, will suffer from marked uncertainty. It is also clear that it can only ever apply in a very small number of cases. Such uncertainty is too high a price for so little benefit. The doctrine of duress should therefore be confined to unlawful threats.”

Question 2

(b) “The doctrine of constructive notice as discussed by the House of Lords in Royal Bank of Scotland v Etridge (No 2) strikes a fair balance between, on the one hand, protecting non-commercial sureties against various legal wrongs to which they may be exposed and, on the other hand, enabling banks to be confident of the enforceability of the security provided by such sureties.”

4 Explain and discuss the approach of the law of contract to EACH of the following terms–

(a) In a 5-year agreement for the sale of goods, a term that the price “will be agreed by the parties from time to time”.

(b) In a contract for the sale of goods to a food manufacturing company that in clause 2 identifies the goods being sold as “potatoes”, clause 46 which provides that “the parties hereby agree that the seller at its absolute discretion may substitute for potatoes any other growing crop”.

(c) In a contract for the sale of goods to be delivered in 60 instalments of equal quantity, a term that states: “It is a condition of this contract that each instalment is delivered punctually on the agreed delivery date.”

(d) In a contract for the sale of goods, a term that states: “The contract price is payable within 14 days of delivery. Payment no later than this date entitles you, the customer, to a ‘punctual payment’ discount of 10 per cent. Pay up or the price goes up!”

5 Arthur Ltd is a dealer in motor vehicles. Arthur’s standard terms include the following:

6. It is hereby agreed that prior to the formation of the contract the seller made no express or implied representation to the buyer.

7. Failure to notify the seller of any breach of contract within seven calendar days following the contractual delivery date shall be conclusive evidence that the seller has complied in full with every obligation owed under the contract.

8. Liability for any breach of contract is limited to £500.” Answer BOTH (a) AND (b). In each case, the contract of sale is concluded on Arthur’s standard terms and signed by the buyer.

(a) Bors Ltd buys a second-hand van from Arthur for £10,000. All negotiations occur by telephone with Bors making no physical inspection. Arthur tells Bors that “The van used to be owned by Percival Lancelot, the footballer. We believe it is in excellent mechanical condition.” In fact, the van was never owned by Percival Lancelot. Arthur knows this. The van, moreover, needs a new exhaust pipe as ought to be revealed by even a cursory inspection. Arthur should have known this but its mechanics were negligent when examining the vehicle.

Question 3

Bors takes delivery of the van on Monday. On Friday, the exhaust pipe fails so that the van cannot be used until it has been repaired. Bors therefore hires a replacement van from Carados Ltd for one week at a cost of £1,000. The following Wednesday, nine days after delivery, Bors contacts Arthur and demands that Arthur takes the van back, refunds the price, and reimburses Bors with the cost of hiring the replacement van. The owner of Bors has no interest in football.

Advise Bors with respect to its rights in (i) misrepresentation and (ii) breach of contract.

(b) Dinadan Ltd provides limousine services. It contracts with Arthur to buy three new limousines. Arthur, however, delivers the limousines one week late. Dinadan intended to use the limousines to expand its business generally, but was also relying on these new vehicles specifically for an exceptionally lucrative contract to provide transport to a visiting Middle Eastern dignitary and her family. This contract had been extremely difficult to win, and it stipulated the use of “new vehicles never previously used”. Dinadan had no alternative vehicles that complied with the visiting dignitary’s requirements, was unable to source any from elsewhere at such short notice, and therefore lost the contract. Dinadan did not tell Arthur about this contract when negotiating to buy the limousines.

6 Apollo Ltd is a company that organises events. It owns a significant quantity of equipment that it uses for its various events and hires such other equipment as it requires. Among the equipment that it owns (and insures against loss or damage) are six luxurious Olympus marquee tents.

Apollo enters into contracts with Bacchus, Cronos Ltd and Demeter to organise an event for each of them. The three contracts have certain common features. Each requires (a) the event to be held, coincidentally, on the same day, namely July 5,

(b) Apollo to “locate, contract for and be responsible for” an appropriate location, and (c) Apollo to provide certain essential facilities. In each case, those facilities are stated to include two Olympus tents. July 5 is the specified date for Bacchus because it is his 60th birthday. It is the specified date for Cronos because it is the 100th anniversary of the founding of the company. The date was also convenient for Demeter, although it has no particular significance for her. Each contract provides for payment of 20% of the agreed fee in advance and 80% against Apollo’s invoice after the event.

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