Examiners’ report 2013

Examiners’ report 2013

LA3017 Commercial law – Zone A

Introduction
As in all examinations, it is important to read the questions carefully and ensure that
the answer is appropriate to that question. It is not acceptable to write essays
which, while touching on the general area of the question, do not answer the
question and appear to have been prepared in advance.
It is also important to attempt the correct amount of questions. Do not begin to
answer a question, then change your mind and start a different question. This
wastes precious minutes and points to the need to take a little time at the start in
deciding which questions to answer.
It is also worth reminding candidates to support assertions that they make about the
law with cases, legislation or academic work. On the other hand, candidates should
not simply provide a list of cases without showing an understanding of what
principles were being decided and how the cases are relevant to the discussion.
When distinguishing between cases or preferring one decision to another, it is
necessary to explain the distinction or preference.
Note that the extracts from scripts provided below are reproduced with any spelling
errors or linguistic mistakes left as in the original.

Specific comments on questions

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as consumer protection law (in the narrow sense of ‘consumer’: e.g. the Consumer
Protection Act 1987). Since this is an examination on commercial law and that term
is defined in a particular way in the subject guide, it is that upon which candidates
are assessed, not other aspects of law, except in so far as they feed into
commercial law.
A good answer to this question would…
Determine how commercial law might best serve business, but might also consider
whether protections are needed to some parties (e.g. third parties). Are the ends of
commercial law best served by certainty or by flexibility or both? In what ways is
commercial law certain or flexible? Give some examples drawn from the course.
Candidates are not required to come to a particular conclusion.
Poor answers to this question…
Did not address the question and so failed to identify the issues, or did not argue
the positions they took by reference to cases, statutes, etc, drawn from the course.
Student extract
For businessmen, it is more important that a rule is certain than what the rule
is (per Lord Mansfield in Varlipp v Wheeler (1774). This is because
merchants enter into a massive amount of transactions every day which often
are of enormous value. It follows that it is essential for the law to be
predictable not subject to ever-changing values and opinions on part of the
lawmakers and the judges. A prime example for the law trying to establish
clear and unequivocal rules is the nemo dat quod not habet principle
according to which, generally, and only subject to clear and defined
exceptions, no one can give a better title than he himself possesses (per Lord
Denning in Bishopsgate Motor Finance v Transport Brakes (1949)); see also
Jerome v Bentley (1952) and Cundy v Lindsay (1878). But this law’s
response to the need of commercial predictability is most obvious in respect
of documentary credits.
Comment on extract
The candidate begins with an interesting assertion (the importance of certainty) and
then seeks to explain it a little further by reference to the practical needs of
merchants who want predictability in the law. Finally, the candidate seeks to
demonstrate the truth of these general assertions by reference to illustrations, the
first of which is the nemo dat rule and then documentary credits (the candidate goes
on further with the discussion of this latter topic). The reference to Denning in
Bishopsgate does not perhaps support the argument since, if examined more
closely, he talks about the need to balance the rights of the true owner against the
rights of the innocent third party who buys the goods unaware that they are being
sold by someone who is not the true owner. More useful might have been the quote
from Lord Goff in the subject guide where he says that the main principle is nemo
dat and that the exceptions are minor exceptions. No need to give dates for the
cases.
Question 2
Why might the parties to an international sale contract favour a contract on
c.i.f. terms rather than a contract on f.o.b. terms?
General remarks
This required candidates to show they understood the terms cif and fob and then
compare them from the perspective of the parties. It might be concluded that each
has merits and disadvantages and/or that these depend on which party (seller or
buyer) is the focus.

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Law cases, reports and other references the Examiners would expect you to
use
It requires an understanding of provisions on passing of property and risk in the
Sale of Goods Act 1979 and how they apply to each type of contract. Pyrene
indicates the different types of fob contract, and Johnson v Taylor Bros & Co Ltd or
Scottish & Newcastle International Ltd v Othon Ghalanos Ltd are useful on cif. But
see Chapter 7 of the subject guide.
Common errors
There was a tendency simply to list the features and obligations arising under fob
and cif contracts without addressing the question.
A good answer to this question would…
Compare the various features of each type of contract (and, perhaps, note that the
features of each type are not necessarily easy to identify, so that it can be difficult to
determine if a contract is fob or cif) and show an understanding of how those
features might be viewed by each of the parties.
Poor answers to this question…
Failed to make a comparison between fob and cif contracts or to distinguish
between them clearly. Some candidates muddled the features, mixing fob with cif.
Question 3
“The law relating to undisclosed principals and agents does not fit
comfortably into the law of contract or into other aspects of the law of
agency.”
Discuss.
General remarks
This question was generally done quite well, but some candidates did struggle with
their understanding of undisclosed principal/agency and did not give a clear account
of the circumstances in which it arises.
Law cases, reports and other references the Examiners would expect you to
use
See the materials discussed in Chapter 3 of the subject guide. It was particularly
important to understand at least one of the cases in which the law is summarised,
such as, Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199.
Common errors
Many candidates seemed not to know the basic requirements set out in Siu Yin
Kwan and merely asserted that an undisclosed principal was one who had not been
disclosed. There is more to it than that. Many treated Watteau v Fenwick as an
example of an undisclosed principal which emphasized the failure to understand the
basic requirements.
A good answer to this question would…
Set out the basic requirements that allow an undisclosed principal to intervene in a
transaction. The key case of Siu Yin Kwan v Eastern Insurance is an obvious place
to start, and the issues raised here can then be elaborated by reference to cases in
which there was an undisclosed principal and those in which there was not.
Student extract
An undisclosed agency is the type of agency where the principal is not known
to the third party. The third party enters into a transaction without the
knowledge of the existence of any agency, that is he thought he was dealing
with the other party as the principal. According to Siu Yin Kwan v Eastern,
under the undisclosed agency (1) the principal can be sued and sue if the

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agent entered into the transaction with actual authority (2) the agent must
have intended to act for the principal (3) the agent can also be sued and sue
(4) any defence the third party has against the agent is against the principal
(5) the principal can expressly be excluded from the transaction.
Comment on extract
This candidate has attempted to take the essential step of setting out clearly the
circumstances in which undisclosed agency arises. The candidate does struggle a
bit in the explanation provided, but received credit for the attempt to explain the key
decision cited. The essay then proceeds to develop further the issues mentioned
here, illustrated by reference to cases.
Question 4
“Property in goods can pass only if the goods are specific or ascertained.”
Discuss.
General remarks
It is important to demonstrate an understanding of the basic rules operating in
relation to the passing of property: what is the general principle?
Law cases, reports and other references the Examiners would expect you to
use
See subject guide, Chapter 4. An important starting point would be s.16 of the Sale
of Goods Act 1979. What is the effect of other rules (e.g. s.20A) on that general
rule?
Common errors
A lot of candidates omitted any discussion of what is often called quasi-specific
goods (part of a specified bulk).
A good answer to this question would…
Probably start with the general principle, which is that property will not pass where
the goods are not ascertained (s.16), and would explain what this means: what is
the distinction between goods that are ascertained and goods that are not
ascertained? It would then explain the exception to this in s.20A where the goods
are part of a specific bulk.
Poor answers to this question…
Would fail to explain clearly how s.20A operated and how it modifies the general
principle in s.16.
Student extract
Property to goods lies as the heart of sales law and this is confirmed by
s.2(1) SGA 1979 which defines the contract of sale by reference to the
transfer of property. Property – in the way in which the term is used in the
Sale of Goods Act – means the seller’s title (whatever the title’s strength may
be) to the absolute interest in the chattel to be sold and the rules governing
the transfer of property are found in ss.16-20B SGA.
Comment on extract
This is the opening paragraph and it packs in quite a lot of information, some of
which is discussed later on in the answer. The important point is that the candidate
has attempted to explain the importance and nature of the term ‘property’ in relation
to sale of goods. This seems a very good way to start a discussion of property. The
alternative of starting with a discussion of the provisions in ss.16–20B might have
left the reader uncertain as to the meaning of property and its function in a sales
contract. If one were being critical one might have liked the candidate to summarise
(not copy out) the definition in s.2(1).

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Question 5
“It is the duty of the seller to deliver the goods.” (s.27, Sale of Goods Act
1979)
Discuss the nature of this duty and how the seller must perform it.
General remarks
In tackling this type of question it is important to demonstrate a clear understanding
of the relevant law and this requires a good knowledge of the Sale of Goods Act in
relation to delivery.
Law cases, reports and other references the Examiners would expect you to
use
See the subject guide, Chapter 5.2, and the cases mentioned there.
Common errors
Several candidates did not properly explain what delivery meant and so did not
have a solid foundation for their answers.
A good answer to this question would…
Demonstrate an understanding of what delivery involves and how it is performed.
The best candidates also showed an awareness of the connection between the
obligation to deliver and the obligation to pay (s.28), and the significance of express
terms in the contract on these issues.
Poor answers to this question…
Did not show a clear grasp of the various issues and their interrelationship (e.g.
between the duty to deliver and the duty to pay); failed to consider the
consequences of under/over-delivery and delivery by instalments where this was
not contracted for.
Student extract
Although generally unless there is an agreement to the contrary, time is not
of essence (s,10(1)), there is a presumption in commercial sales that time of
delivery is of essence if there is a stipulation to that effect in the contract
(Hartley v Hyams) and this is a condition (Bowes v Shand) breach of which
entitles the buyer to reject the goods and repudiate the contract unless the
breach is waived (Charles Rickards v Oppenheim). It is clear, however, that if
there is no agreement to the contrary delivery and payment are concurrent
conditions (s.28 SGA 1979) and this means that the seller can withhold
delivery until the buyer is ready to pay. Similarly, the seller does not have to
deliver the goods if he accepts an anticipatory breach by the buyer (Gill &
Duffus v Berger). If the parties have agreed that the seller is bound to send
the goods to the buyer, but no time is fixed for sending them has been
agreed, the seller is bound to send them within a reasonable time (s.29(3)).
Comment on extract
The candidate attempts a clear description of the principles involved in relation to
the issue of the time for delivery, starting with a general principle and then looking
at how it works and the exceptions to that principle. While the discussion is not
entirely accurate, it does cover a large part of the law and gives a good general idea
of the main issues. The candidate seeks to support the assertions by reference to
cases and the Sale of Goods Act.
Question 6
Waterloo Ltd is a furniture dealer and wishes to buy some delivery vans from
Pancras Ltd, a dealer in such vehicles. Waterloo’s authorised buyer says to
the Pancras salesperson, “We want to keep our running costs down, so we

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only want vans that do not use a lot of fuel.” The salesperson recommends
the Vanno. Waterloo buys ten Vannos.
After using the vans for a while, Waterloo discovers they are not suitable for
carrying furniture because only small items will fit in, and their consumption
of fuel is above the average for similar vans available from other dealers.
Some of the vans are also found to suffer from a defect in the gearbox which
only becomes apparent after they have covered 5,000 miles.
Discuss.
General remarks
This is a question which is mainly concerned with the issue of quality. It is clear that
there is a contract for the sale of goods and so candidates should not waste time
going through the definition in s.2(1). When there is no issue involved, this can be
either passed over without comment or dealt with in a sentence.
Law cases, reports and other references the Examiners would expect you to
use
See the subject guide, Chapter 5 and the cases and legislative provisions
mentioned there. It is important to show a complete understanding of the relevant
sections and not merely copy them out into the examination answer book.
Common errors
There was some confusion over the effect of, and the differences between,
subss.14(2) and 14(3), which suggested some candidates should have studied
these important provisions more carefully. Some candidates did not mention any
cases when explaining the meaning of the various provisions – cases provide an
insight into how the courts interpret the statute.
A good answer to this question would…
Deal carefully with subss.14(2) and 14(3). In relation to the latter, did the buyer
make known the purpose of the goods to the seller? There was mention of fuel
consumption, but perhaps not of their use in carrying furniture (but vans would be
used for carrying goods which might be expected to include things such as
furniture). Did the buyer rely on the seller? The best answers also discussed
remedies: had the buyer accepted the goods and could, therefore, no longer reject
them?
Poor answers to this question…
Made no reference to cases and, therefore, had very little explanation as to the
meaning of the subsections being discussed or their application to the facts. Some
candidates did not recognise the importance of discussing remedies and the issue
of acceptance.
Student extract
According to section 14(2) of SGA 1979, goods are of satisfactory quality if
taking into account the description, price and other relevant circumstances a
reasonable person will conclude it to be of such quality. According to
Bramshill v Edwards the reasonable person is someone who is in the position
of the buyer with his knowledge, in this problem that is someone in the
position of Waterloo Ltd and with his knowledge.
Comment on extract
This candidate did not merely copy out s.14(2) but instead summarised its key
features and then went on to explain some of those key features by reference to
cases. In the extract, the meaning of a reasonable person is explained by reference
to the decision in Bramshill. Following this extract the candidate proceeded to apply
the section to the facts in the problem by discussing latent defects and the relevant

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case law. This approach illustrates a good way of reaching a clear view of the law
and its application to a particular set of facts: setting out briefly what the law is and
then discussing how it might apply to the problem.
Question 7
Lambeth Ltd provides cars for its sales staff and replaces those cars every
two years. Lambeth tells its manager, Jack, to sell some of these two-year-
old cars, but says that he must not sell them for less than £5,000 each.
Advise Lambeth in each of the following separate situations.
(i) Jack sells one car to Shoreditch Ltd, a rival business, with whom, as
Jack knew, Lambeth never wants to do business.
(ii) Jack is planning to go away on holiday and so, anxious to complete
the sales, he sells one car to Westminster Ltd for £2,000.
(iii) Jack buys a car from Southwark Ltd on credit, saying that it is for use
by Lambeth in its business. Southwark, which had sold cars to Jack
in the past for use in Lambeth’s business, is unaware that Jack is no
longer the owner of Lambeth.
General remarks
Candidates struggled with Watteau v Fenwick (here in relation to (iii) and possibly
(ii)). While the case is probably not authority for anything and has not been
followed, it does provide an opportunity for candidates to show a good
understanding of agency law, but, in spite of its frequent appearance in examination
papers, candidates do not show confidence in dealing with the case and many
simply treat it as authoritative.
Law cases, reports and other references the Examiners would expect you to
use
See the subject guide, Chapters 2 and 3.
Common errors
Many candidates provided a very long introduction in which they engaged in writing
a general essay on agency before they turned to the issues raised in the question,
which were dealt with rather briefly. While a very brief introduction may be
appropriate, candidates should spend the bulk of the answer engaging with the
specific issues in the question.
A good answer to this question would…
In (i) a good answer might contrast Said v Butt with Dyster v Randall in order to
explain why the courts reached different answers and which answer might be
preferred. In (ii), a good answer would discuss apparent authority, and might even
point out that there is no undisclosed agency because there is no actual authority.
(iii) invites a discussion of Watteau v Fenwick.
Poor answers to this question…
An uncritical use of Watteau v Fenwick was very common in answers, as was a
failure to appreciate the need for actual authority to establish undisclosed agency.
Student extract
(iii) This situation is not a case of disclosed agency as the buyer thinks Jack
is the principal. This case is very similar to that of Watteau v Fenwick
thought, it should not be advised to Lambeth that the same result would be
given in this case. Here Jack has no actual authority to buy a car on credit. In
Watteau the case was decided by Willes J to be a case of usual authority
leading to apparent authority where Humble contracted with Fenwick where
Fenwick thought, as is the case here, that Humble was a principal and not an

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agent. The problem with this cases as has been noted numerous times is that
it cannot be a case of usual authority in apparent authority given that where
the third party contracts with the seller believing him to be acting as principal,
there can therefore be no representation by the principal as to the authority of
the agent.
Comment on extract
This candidate tries to tackle the difficult case of Watteau v Fenwick, which has
often been very poorly handled in examinations. The point of examination papers
returning to what seems (and is) an obscure case is that it tests candidates’
knowledge of the constituent features of the different types of agency. For example,
in this answer the candidate discusses whether or not Watteau or the facts in the
problem fall within apparent authority. To test this the candidate states that
apparent authority requires a representation by the principal to the third party and
notes that this was not present in Watteau. The candidate goes on in the section
following this extract to consider other possibilities and other explanations for the
decision in Watteau, as well as the Sign-O-Lite case in Canada. Although there is
some confusion in the discussion, such an approach will attract good marks,
particularly since most candidates still refer to Watteau as if no controversy
surrounded that decision.
Question 8
Kingsway Ltd supplies paper to Holborn Ltd. Holborn uses only some of this
paper to print books and sells the rest to other printing firms. Kingsway is
aware of both aspects of Holborn’s business. The normal terms upon which
Holborn buys paper allow 30 days for payment. Kingsway wants to insert a
retention of title clause into the sale contract.
Discuss how this may be achieved.
General remarks
While this question requires an understanding of retention of title clauses, it also
requires an awareness of how they operate and whether they provide sufficient
protection – do they, for instance, prevent resale of the goods by the buyer?
Law cases, reports and other references the Examiners would expect you to
use
See subject guide, Chapter 6 Section 6.4, and the cases mentioned there.
Common errors
Failure to examine properly the objective of the seller in using such clauses and
their effectiveness. Does the seller wish to prevent the buyer from selling the
goods? Here Kingsway is, perhaps, aware that Holborn resells and may not wish to
prevent this because it is one way in which Holborn raises the funds to pay for
them. But what is the consequence of that for the effectiveness of the clause?
A good answer to this question would…
Analyse the different types of retention of title clause and their objectives and how
effective each is in achieving that objective. A good answer would also recognise
the potential problem of passing possession of goods – can the buyer in possession
pass good title to a third party who buys in good faith and for value irrespective of
the retention of title clause?
Poor answers to this question…
Would not properly analyse the retention of title clause and so would be unable to
discuss its effectiveness in achieving the objectives of such a clause. Poorer
answers would not follow up the consequences of the clause only creating a charge
over the goods.

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Student extract
it may be possible for K to insert in the contract with Holborn Ltd (H) a clause
to the effect that property in the original goods will be retained until payment
for the paper is properly made. The validity of such clauses has been
confirmed in Romalpa and later cases. It follows that it is unproblematic if the
clause only purports to retain title in respect of the paper. The only question
that remains is whether such a clause will also cover the books which are
made using the paper. It has been held that a clause in respect of original
goods will cover the original product which is incorporated into another
product so long as the original goods remain identifiable or are used in a
reversible manufacturing process (Clough Mill v Martin). Thus in Hendy
Lennox v Grahame Puttick, a camshaft which was fitted to an engine but
which could be easily unbolted was held to be covered by a retention of title
clause. If, however, the manufacturing process is irreversible or the original
goods become unidentifiable or mixed with similar goods, title to them will be
lost (Re Peachdart, Re Andrabell, Borden v Scottish Timber).
Comment on extract
The extract comes from well into the candidate’s essay, but illustrates a sound
approach to writing an essay. The candidate begins with an assertion (title can be
retained to the original goods). This is followed by discussion as to when this
assertion is correct and when it is not correct. The discussion is supported
throughout by reference to cases (although these do not always support the text).