Examiners’ report 2013

Examiners’ report 2013

LA1040 Elements of the law of contract – Zone A

Introduction
Many candidates answered the questions well. At times, however, some candidates
struggled. There were three common difficulties. The first was fundamental: an
inability to recognise that certain areas of law were involved in resolving the
problem. Candidates might, for example, fail to recognise that when asked to advise
party C given a contract between A and B (for the possible benefit of C) that the
primary issues involved were privity of contract and the rights of third parties.
A second difficulty was not carefully considering the facts presented in a problem
question. The resulting legal reasoning was often not directed at the given issues.
In some instances, a general discussion of a particular area of law was presented,
but without any attempt to apply this law towards the resolution of the problem
given. In other instances, candidates discussed, and attempted to apply, law which
was irrelevant to the issues raised in the particular problem.
A third was an inability to recognise the particular and specific issues involved
within a broad area of law which the candidate had recognised as relevant. At
times, this problem seemed to arise because candidates appeared to be covering
legal issues which had formed examination questions set in previous years. Some
candidates, in other words, appeared to be reproducing answers to past
examination questions. The purpose of the Examiners’ reports is to give an
indication of a method by which particular questions can be answered and some
indication of the law necessary to answer these questions. The reports are not
intended to form a base of specific knowledge which is to be recited as the answers
to future examination questions.
It is extremely important that candidates apply the law to the issues presented in a
problem. Such an answer displays not only knowledge, but also understanding of
the subject being examined. Candidates should consider the principles developed
within the relevant cases and the reasons behind these particular principles. These
must then be applied to the problem to resolve it. For many candidates, however,
their answer to a problem question resembled a ‘shopping list’ of cases. The
recitation and discussion of cases which are irrelevant to the question only
highlights a candidate’s uncertainty as to which issues are involved in the question.
In other instances, answers appeared chaotic, as if the candidate had hurried into
an answer without full consideration of the question as a whole. Candidates who
prepare a careful plan of their answer before writing it in full will find that the time
spent in making such a plan is repaid by the clarity of the final answer. Amongst
other things, this approach allows candidates to see the interaction of issues before
they have committed themselves to one course or another. It should also prevent
candidates from omitting points they had intended to discuss. Many candidates
struggled to answer essay questions thoroughly, often reciting everything they knew
about a particular subject. This shows an inability to discern the relevant from the

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irrelevant and a lack of analysis as to the underlying nature of the question.

Candidates must consider whether or not they are addressing their answer to the
question asked. A part of this answer will, necessarily, involve legal analysis.
In other instances, candidates were unable to answer the question asked and
attempted to adapt the question to a topic that they did know something about. This
results in low marks and also leaves the Examiners with the impression that the
candidates are unable to answer four questions from the examination paper.
Finally, many candidates suffered from an inability to budget their time. In these
instances two or three good answers would be followed by a weak (and in some
cases non-existent) effort to answer the rest of the paper. A number of candidates
did not appear to have sufficient knowledge of contract law to attempt four
questions.
Lastly, the Examiners wish to emphasise the importance of using clear handwriting.

Specific comments on questions

Question 1
On the 2nd of April, an announcement appears in the newspapers to the effect
that shares in Digger, a gold exploration company, may be subscribed for £5
each.
Later that day Goldbug sees the announcement and fills in the application
form in the newspaper requesting 1,000 shares. His application is received by
Digger the following day and the Company Secretary promptly sends the
share certificates to Goldbug by that morning’s post. However, Goldbug
changes his mind and on the same afternoon (the 3rd) he posts a letter,
withdrawing his application to Digger.
During the day a rich seam of gold is discovered by Digger in Cumbria and
the Company Secretary telephones Goldbug informing him that they do not
wish to accept his application and would like him to return the certificates
when they arrive.
By the time he receives the Secretary’s request, Goldbug has heard of the
gold discovery and wishes to buy the shares after all.
Advise Goldbug.
General remarks
This question is concerned with the formation of a contract and, in particular, the
effect of the various communications between Goldbug and the Digger company.
Has Goldbug a contract for the purchase of shares from Digger?
Candidates needed to ascertain the requirements necessary for an offer applying
the criteria established in cases such as Storer v Manchester City Council (1974),
Gibson v Manchester City Council (1979) and Centrovincial Estates v Merchant
Investors Assurance Company (1983). If an offer was made, at what point was it
made? Candidates needed to apply the legal criteria to the facts provided to resolve
this question. Digger’s advertisement is likely an invitation to treat but Goldbug’s
completion of the form and payment is likely an offer. An offer, to be effective, must
be actually communicated to the offeree (see, for example, R v Clarke (1927)).
It is said that a contract requires an acceptance of a particular offer and the next
issue which arises is whether or not Goldbug’s offer is accepted. In other words,

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when the Company Secretary posts the share certificates to Goldbug in the morning
post, is this an acceptance of Goldbug’s offer? An acceptance takes effect upon
communication but there are exceptions to this rule. One of these exceptions is the
postal acceptance rules and candidates needed to consider whether or not the
Company Secretary’s posting of the share certificates is within this exception. The
rules surrounding postal acceptance need to be analysed and applied to this
situation to resolve this issue. While many candidates simply referred to the
decision in Adams v Lindsell (1818), a detailed consideration of the decision in
Household Fire Insurance v Grant (1879) repaid the effort expended given the
factual similarities between that case and the facts provided. Many candidates
considered and referred to the later decision in Holwell Securities v Hughes (1974)
in order to develop a critical decision of the utility of the postal acceptance rules in
an area of instantaneous, and near instantaneous, communications.
The next issue presented by these facts is Goldbug’s next action when he then
purports to revoke his offer. Is this valid? If so, why is it valid? If the postal
acceptance rules apply on the basis set out above, a valid contract is formed when
the Company Secretary posts the share certificates with the result that Goldbug
cannot now purport to revoke his offer because it has been accepted and a contract
formed (see, for example, Byrne v van Tienhoven (1880) for such reasoning). This
is not a case in which Goldbug attempts to use a quicker method of revoking his
posted offer (and thus the reasoning in Dunmore v Alexander probably does not
assist greatly in the resolution of this point).
In addition Digger has attempted to withdraw its acceptance after it was posted but
before it is reached by Goldbug – is this attempt effective? In this instance the
offeree’s change of mind is communicated to the offeror using a faster method of
communication. There is an absence of English authority on this point although the
decisions in Dunmore v Alexander (1830) (Scotland) and Wenkheim v Arndt (1873)
(New Zealand) are of persuasive effect in England. These are not, however, binding
decisions and candidates are best advised to consider this as a matter of principle.
To this end, Treitel suggests that ‘the issue is whether the offeror would be unjustly
prejudiced by allowing the offeree to rely on the subsequent revocation’.
In this question, it is particularly relevant that when the Company Secretary has
telephoned Goldbug, Goldbug has already posted his own revocation. It seems
unlikely, as a matter of policy, that a court would wish to allow him to revoke the
revocation in light of the gold discovery.
Common errors
Reciting as many case names as possible without any attempt to analyse the cases
and apply the criteria to the facts presented in the problem. This was particularly
unfortunate where the cases recited were in no way relevant to answering the
particular issues raised in these facts.
A good answer to this question would…
take a critical view of the various rules presented by the cases concerned with offer
and acceptance to reach a more principled result in this case.
Poor answers to this question…
displayed an inability, or a reluctance, to identify and isolate the relevant issues
presented by the facts given.
Student extract 1
This candidate began their answer by stating that the question was concerned with
‘whether there has been a contract formed between Goldbug and Digger’. The
candidate then continued in the next paragraph to state that:

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‘the first element which the court may consider is whether the advertisement
which has been read by Goldbug amounts to an offer or an invitation to treat.
An offer is an expression of willingness to contract on certain terms which [is]
in turn accepted [and] must be acted upon by the offeror while an invitation to
treat is when some kind of transaction involves a preliminary stage which one
party invites the other to make a proposition.The answer then continued to
explain and consider how these statements of law were established by the
decisions in Storer v Manchester City Council and Gibson v Manchester City
Council.
Comment on extract 1
This extract demonstrates a good introduction to answering the question set. The
principal question to be addressed was set out in the first paragraph and the
relevant issues correctly identified. The candidate then successfully identified that
the first issue (or element) to be addressed was the effect of Digger’s
announcement in the newspaper. The candidate set out the possible effects as
either an offer or an invitation to treat and succinctly summarised what each was
and how they were distinct from each other. The relevant cases establishing these
propositions were then discussed and applied to the particular facts given, with the
correct conclusion reached – namely, that the announcement could not be an offer.
Student extract 2
The candidate began by stating that the question involved issues concerned with
contractual formation and then outlined Goldbug’s request for 1,000 shares. The
answer then stated that:
this offer by Goldbug may be said to be not accepted as the facts show.
When the secretary posted acceptance it may be said that the contract is
made. The general postal rule states that the offer is accepted when the post
is sent (Alder v George). However, if the court is persuaded to apply the
permissive rule stated in Shuey v USA – which states that the post when
received will constitute as an acceptance – then it may be established that
the offer is not accepted by the Digger and thus, no contract is formed.
Goldbug withdrew his offer before receiving the Digger’s post. If the rule in
Shuey v USA is applied then there is no breach of contract by Goldbug.
However if the general postal rule – as mentioned above – is followed then
Goldbug will be held liable for a breach of contract.
The situation gets even more confusing as Digger’s acceptance is not yet
received by Goldbug and Digger withdraws its acceptance.
Comment on extract 2
In contrast to the first extract, there are a number of unfortunate difficulties apparent
in the second extract. The candidate’s grammar is weak, a fact which mars the
candidate’s answer as the attempt lacks clarity and precision. The candidate
applies the postal acceptance rule without considering the circumstances in which
this rule is applied or that the rule is actually an exception to the general rule that
only a communicated acceptance creates a binding contract. An uncertain grasp of
the law is then presented when the answer cites the wrong authorities and, in so
doing, attributes propositions to them which these authorities do not support. The
answer also displays certain confusion as to what is necessary to form a binding
contract and when this contract would be formed. The same confusions were
repeated throughout the answer and the candidate concluded with an erroneous
statement, namely, that Goldbug would be entitled to succeed in a claim for the
specific performance of the contract. Altogether, so little knowledge and
understanding of the law surrounding contractual formation was displayed that this
candidate received a fail mark.

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Question 2
Robbie runs a fairground, Toppers, and hires a big dipper from Fred for
£3,000 per annum. Times are tough, however, and the bad weather has
affected business at the fairground. Robbie asks Fred whether he can have a
reduction in rent until he gets on his feet again. He intends to use the money,
thereby saved to advertise the fairground more widely. Fred agrees to reduce
Robbie’s rent by £1,000 per annum until business improves. Delighted,
Robbie immediately spends £1,000 on advertising, in the hope that it will
attract more visitors. However, Fred now regrets his promise and demands
that Robbie pay him the full amount of rent.
Spooks operates the ghost train at the fairground and receives a 50% share of
the ticket sales. He wishes to buy his wife a new car and needs some extra
cash. He telephones Robbie and asks him to increase his share of the ticket
sales to 75% for a twelve-month period. Ghost train operators are specialists
and extremely hard to find. However, although Robbie does not want to lose
Spooks, he will find it a financial strain to fund the higher commission rate.
Robbie asks Spooks if he can think about this request for a few days. Spooks
agrees. The next day, however, Spooks gets an offer from another fairground,
offering a 75% share of the ticket sales to run their ghost train. He goes to
Robbie’s home and threatens to quit his job unless Robbie gives him the 75%
share of the ticket sales. Robbie agrees. Three months later he tells Spooks
that next month he will return to the 50% share of the ticket sales.
Robbie asks his cousin, Claude, who is a carpenter, to paint the big wheel. He
has often asked Claude to do jobs around the fairground and always pays
him. When Claude finishes, Robbie is delighted and says that he will pay him
£350. However, following a family argument, Robbie now refuses to pay him.
Advise Robbie.
General remarks
This problem question contains three parts. Each part deals with issues of
contractual formation, namely whether or not consideration is provided. In one
instance it is also relevant as to whether or not a promise unsupported by
consideration might be binding according to the principle in High Trees House.
The first part of the question asked candidates to address the law relating to
consideration and promissory estoppel. Candidates needed to examine Fred’s
promise to Robbie that he will reduce the hire fee of the big dipper from £3,000 to
£2,000 per annum ‘until business improves’. The question requires a consideration
and application of the criteria established in Central London Property Trust Ltd v
High Trees House Ltd (1947) and subsequent decisions to the facts given. A good
answer would also indicate that the effect of the decision in Re Selectmove (1995)
likely means that there can be no consideration in the form of a practical benefit
according to the reasoning in the decision of Williams v Roffey Bros & Nicholls
(Contractors) Ltd (1991). The facts presented here (namely Fred’s demand that
Robbie repay him) also indicate a further issue presented in relation to the principle
in High Trees House – namely, whether the outstanding amounts are permanently
extinguished or not. The decision of the Court of Appeal in Collier v P. & M.J. Wright
(Holdings) Ltd (2007) is of assistance in considering this particular point.
The second part of the problem deals with the variation of a contract and whether
consideration has been given for the modification such that the modification
constitutes a binding contractual obligation. Candidates needed to discuss whether
Robbie receives a ‘practical benefit’ that might constitute consideration in light of the
decision of Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991) and cases

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subsequent to this, notably Re Selectmove. A possible difficulty in the application of

Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991) is that Spook’s actions
might constitute economic duress. Candidates needed to consider whether or not,
according to the cases concerned with economic duress, that this was made out. If
his actions constituted economic duress, it seems on balance that there is no
practical benefit within the meaning of Williams v Roffey Bros & Nicholls
(Contractors) Ltd (1991) although it could be argued, based on the reasoning and
decision in Adam Opel GmbH, Renault S.A. v Mitras Automotive (UK) Limited
(2007) that even in the presence of duress a practical benefit can exist.
Finally, the third part of the problem required candidates to consider whether or not
there was an intention to create legal relations, given the relationship between
Robbie and Claude (they are cousins). An additional difficulty here is that Robbie’s
promise to pay Claude does not appear to be supported by consideration because
the consideration is past. It is possible, though, that the promise fits within the
exceptions to past consideration established by the criteria in the Privy Council’s
decision in Pao On v Lau Yiu Long (1980). A good attempt to answer the question
would consider the conceptual links between consideration and an intention to
create legal relations and the practical ramifications of these contractual doctrines in
this case.
Common errors
Reciting every major case concerned with consideration and promissory estoppel
without an examination of how, or why, such a case would be relevant to the
particular problem given. Such an error indicates a poor understanding of the
relevant law and how to apply it to the given facts.
A good answer to this question would…
isolate the relevant issues from the facts given and resolve these issues through an
application of the criteria in the case law to resolve these issues. A very good
attempt to answer these questions would examine the underlying conceptual links
between the different contractual doctrines presented by these facts and discuss
these links in relation to the facts given.
Poor answers to this question…
displayed an inability, or a reluctance, to identify and isolate the relevant issues
presented by the facts given.
Question 3
Honey is planning for her wedding in August and decides to visit Romantic
Weddings, a local shop that advertises itself as providing ‘Stress Free
Weddings or Your Money Back!’. Honey is particularly attracted by the shop’s
photos of romantic castles and lakes and asks Amir, the manager of
Romantic Weddings, for more information about a possible venue for her
wedding reception. Amir informs Honey that he can find her the perfect
setting for a romantic wedding, adding that ‘the sweet singing of the birds will
be the only noise to disturb the tranquillity of the day’. He suggests a venue,
Dagenham Manor, and advises that Honey visit it so that she can appreciate
the true beauty of the place for herself. Dagenham Manor is in Romstown, a
town near to where Honey lives. Honey knows Romstown well and is
surprised to hear that it would offer a tranquil and romantic location for her
wedding. However, she notices that she will get special rates if she books
that day and decides to book the venue immediately. Before paying, she asks
Amir how many guests Dagenham Manor will hold. Amir has never visited the
venue and rings a friend, Wayne, who had his wedding there last year. Wayne
tells Amir that it holds about one hundred people and Amir passes this news

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on to Honey. On hearing this, Honey is thrilled. She is expecting 80 guests

and realises Dagenham Manor will be perfect. She goes ahead with the
booking.
The wedding day is a disaster. Dagenham Manor is located on the junction of
a busy motorway and the noise of the passing vehicles reaches unbearable
levels. In addition, the venue is very small and can only accommodate 40
people. As a result, half of Honey’s guests are turned away from the venue.
Amongst those prevented from entering is Mr Bee, Honey’s boss. He is so
angry that he does not give Honey the wedding gift of £10,000 that he had
promised her.
Advise Honey.
General remarks
This question asked candidates to consider and apply the law relating to
misrepresentation. The problem is best dealt with by considering each issue in turn.
The first issue raised is whether Amir’s statements were warranties or
representations. Candidates needed to consider and apply the criteria in the
relevant cases (such as Heilbut, Symons & Co v Buckleton (1913), Oscar Chess
Ltd v Williams (1967) and Esso Petroleum Co Ltd v Mardon (1976)). In this
instance, it seems most likely that the statements are not warranties but are instead
representations or puff.
The next issue raised is the importance of determining, through an application of
the case law to the facts given, whether the statements are actionable as
misrepresentations. It is particularly important to consider a number of statements
made by Amir. These include the statement concerned with the beauty and
tranquility of the venue: is this mere puff or actionable as a misrepresentation? Is
the statement regarding the capacity of the venue an opinion? Is it an opinion which
can be actionable as a misrepresentation? Did either of these statements induce
Honey to enter into the contract? Does it matter that Honey could have verified and
examined the statements by visiting Dagenham Manor? Very good attempts to
answer this question could consider the effect, if any, of Romantic Weddings’
advertisement of ‘Stress Free Weddings or Your Money Back!’.
In the event that the requirements of an actionable misrepresentation can be met,
candidates would then need to consider the remedies available to Honey. This, in
turn, would depend upon the type of misrepresentation made by Amir. A good
answer would focus on the advantages for Honey in pursuing an action under s.2(1)
of the Misrepresentation Act 1967. A claim brought under this section is particularly
advantageous for Honey for two reasons. The first is the difficulty Amir will have in
showing that he had reasonable belief that his statement was true. The
interpretation of reasonable within s.2(1) by the court in Howard Marine & Dredging
v Ogden indicates the difficulties faced by Amir in this regard. A good answer would
compare the complexity of Honey proving a negligent mis-statement or fraud at
common law to the action brought under s.2(1) of the 1967 Act.
The second advantage to Honey in bringing an action under s.2(1) of the 1967 Act
is the calculation of damages, particularly the possibility of claiming damages for
unforeseeable losses. Candidates needed to consider Honey’s possible losses,
including the loss of Mr Bee’s wedding gift. Can damages for such a loss be
recovered under the statute?

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Common errors
Not considering whether the statements were actionable as misrepresentations and
simply discussing various types of misrepresentation.
A good answer to this question would…
isolate the relevant issues from the facts provided, addressed these issues in turn
and recommend that Honey bring an action under s.2(1) of the 1967 Act.
Poor answers to this question…
set out everything the candidate knew about misrepresentation with little attempt to
apply the knowledge to resolve the issues which arose from this particular problem.
Question 4
‘Equity provides various forms of relief in cases of mistake but it will not
provide relief where the common law renders a contract void for common
mistake. This is not a desirable result.’
Discuss.
General remarks
This question required candidates to consider the doctrine of contractual mistake
and the different means by which law and equity respond to mistake. Mistake at
common law, if operative, renders a contract void but equitable relief is more
flexible and takes various forms. In particular, candidates need to consider the
nature of equitable relief and how, if at all, this has been affected by the Court of
Appeal’s decision in Great Peace Shipping v Tsavliris Salvage. Candidates also
needed, given the wording of the question, to consider whether or not rescission in
equity for a common mistake is a remedy which should be retained in English law.
Note that candidates should provide an answer directed to the particular title set
and not a general discussion of mistake in English law.
Common errors
An apparent inability to ascertain what the question called upon candidates to
consider. Also, an inability to structure the answer – many attempts resembled
shopping lists of major mistake cases with no attempt made to analyse the cases in
relation to the title set.
A good answer to this question would…
consider the nature of relief available in law and equity and how and why it differs. A
very good answer considered whether or not this distinction can be maintained and,
if not, how the common law should respond to a contractual mistake.
Poor answers to this question…
consisted of recitations of everything the candidate knew about mistake. In some
cases the material provided was largely irrelevant to answering the question.
Discussions focused entirely, for example, on mistake of identity were misplaced.
Student extract
This candidate began their answer to the question by establishing that while the
common law could find an apparent contract void for mistake, equitable relief for
mistake could take one of three forms. These forms were rectification, a refusal to
grant specific performance or rescission. These concepts were, for several pages,
knowledgeably discussed, with appropriate consideration and employment of
multiple cases concerned with each form of relief. The candidate then analysed the
effect of the House of Lords’ decision in Bell v Lever Bros and Lord Denning’s
consideration of this case in Solle v Butcher. It is at this point that the extract below
appeared:

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The decision of Solle v Butcher has influenced a lot of later decisions

subsequently leading to the decision in Associated Japanese Bank v Credit
du Nord. The flexibility in this case created tension over the relationship
between mistake of law and of equity. This rancor led to the decision in the
leading case of Great Peace Shipping Ltd v Tslaviris Salvage (International)
2002 generally referred to as the Great Peace. This case involved two ships.
One of the ships suffered very severe damages and it was feared that it
might sink. The defendant was recruited to salvage the sinking ship. To this
end they contracted the services of the Great Peace to act as a standby for
the purpose of salvaging lives. At the time the defendant engaged the
claimant he mistakenly believed that the ships were only 35 miles apart.
Immediately after the signing of the contract it was discovered that the ships
were over 400 miles apart. When they contacted a closer substitute ship, the
defendant refused to honour his part of the bargain. The defendant during the
trial proceedings argued that the contract was void for mistake at law and
voidable in equity by reason of mistake. The Court of Appeal in their
judgment reviewed the cases of Bell v Lever Bros and Solle v Butcher. The
concept of equity was extensively evaluated both before and after the case.
The Court found it difficult to reconcile the two and therefore the appeal was
squashed. The ramifications of this decision are yet to be fully determined.
The bottom line is if equity by virtue of this decision lacks the flexibility and
latitude to provide relief, it is difficult to envision circumstances in which any
contract will be affected as to the quality of the subject matter. The doctrine of
the Great Peace has been applied in more recent decisions and the
conclusion derived in that there is effectively no threshold or ambit for the
doctrine of mistake.
In summary, therefore, as a means of conclusion, it is clear that an equity
court can be in a position to rectify an agreement. It can also order or refuse
to order specific performance and can also rescind a contract. However since
the decision in the Great Peace it is clear that the capacity of an equity court
to rescind a contract remains terribly in doubt. This is definitely an
undesirable situation as the law should be consistent to ensure equity and
fair play.
Comment on extract
The strength of this answer can be seen in the manner in which the underlying
issues are considered in the above extract. The candidate successfully identified
the tensions between the common law position and the equitable position. The
answer observes that while some forms of equitable relief are not effected by the
decision in the Great Peace, the ability to rescind a contract for a common mistake
appears to have been removed. The candidate is critical about the current direction
that the law appears to have taken in the Great Peace, a case applied and followed
in subsequent decisions. The essential problem presented by the decision in the
Great Peace – that it appears unlikely that a case of mistake can ever arise if the
case is to be followed – is correctly identified. Although the candidate’s attempt to
answer the question would have been strengthened by a more detailed examination
of Lord Phillips’ judgment in the Great Peace, the attempt was given a high upper
second class mark.

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Question 5
‘Although the doctrine of privity is simple in practice, attempts to circumvent
it introduced unnecessary complications into English law. The Contracts
(Rights of Third Parties) Act 1999 has done little to simplify English law in this
area.’
Discuss.
General remarks
This question required candidates to consider the doctrine of privity and the means
by which its effects can be avoided. Candidates need to consider both how privity
(and, really, the related rules concerned with damages) could be circumvented at
common law and the nature of the rights which can be conferred under the
Contracts (Rights of Third Parties) Act 1999. There have been sufficient cases
decided pursuant to the 1999 Act that it was desirable for candidates to
knowledgeably discuss these cases.
Common errors
Attempting to answer the question by paraphrasing, or even copying out, the
Contracts (Rights of Third Parties) Act 1999. Not only was this an inadequate
attempt to answer the question set but it resulted in attempts which displayed so
little originality and thought on the part of the candidate that little in the way of
marks could be given for the result.
A good answer to this question would…
consider the nature of privity and discuss the various means by which parties can,
at common law, circumvent the operation of privity of contract or the rules
concerned with damages (e.g. the Dunlop v Lambert exception) and assess the
efficacy of these circumventions. A good answer would also attempt to address the
issue of whether the 1999 Act, as interpreted by the cases, rendered the law more
or less complex than it had been at common law.
Poor answers to this question…
either copied out the Act (see above comment) or simply provided a general
discussion of privity of contract in English law without attempting to address the
particular question set.
Question 6
Milo wants to landscape the garden of his house and requires a new
lawnmower. He notices that the local garden supply shop, Lawnz, has special
offers on garden equipment. He enters the shop and immediately notices a
top-of-the-range lawnmower on display. A sign above it states ‘Special Offer!
Terms and Conditions apply – ask within’. Milo asks the shop assistant,
Sebastian, for more information. Sebastian informs Milo that the lawnmower
is being sold at £200 (half the recommended retail price) and that the shop’s
website gives full information on the terms and conditions of all the shop’s
sales. Fearful of missing out on such a great bargain, Milo decides to
purchase the lawnmower immediately. As he is waiting at the cash desk,
Sebastian gives Milo a number of papers and informs Milo that he will find the
lawnmower’s operating instructions amongst them.
Milo wishes to use the lawnmower that afternoon and consults the operating
instructions as soon as he gets home. Amongst the papers he also finds
Lawnz’ terms and conditions of sale. These include the following two terms:
1. Lawnz is not responsible for any damage whatsoever or howsoever
caused when using its products.

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2. Lawnz reserves the right to replace faulty products with a substitute

of their choice.
Despite several attempts at operating the lawnmower Milo cannot get it to
work. He takes it back to Lawnz where Sebastian does some electrical work
on it. Unfortunately, Sebastian has done the work incorrectly and when Milo
attempts to use the lawnmower again it explodes, damaging an expensive
sculpture in his garden. Milo returns to Lawnz and demands that it replaces
the lawnmower and compensates him for the damage caused by the
explosion. Lawnz refuse compensation but offer to give Milo a replacement
lawnmower. The replacement lawnmower is a second-hand one and of far
inferior quality than the one originally purchased by Milo.
Advise Milo.
General remarks
This was a popular question and asked candidates to discuss the law relating to
contractual terms. The following particular issues arose: first, whether or not terms
were implied into contract; second, whether or not Lawnz’s terms had been
incorporated into the contract; third, whether or not the terms were applicable to the
circumstances that have arisen; and, fourth, the statutory regulation of the terms.
The first issue required a consideration of whether or not the contract contained
terms implied by the Sale of Goods Act 1979, particularly s.14, which requires that
goods sold by a seller in the course of his business be of satisfactory quality. Is the
lawnmower purchased by Milo of satisfactory quality?
The second issue was whether terms have been incorporated into the contract. This
required a consideration of the rules and case law relating to incorporation by
reasonable notice. Two issues are relevant in such a consideration: the information
from Sebastian that terms can be consulted on the website and the fact that the
terms are handed to Milo – before purchase, but within the pack of papers given to
him by Sebastian. A good answer identified that it was not clear that there were
contractual documents within the pack of papers. If there were not, what effect
would this have?
If incorporation can be established, it then needed to be established if the terms,
properly interpreted, covered the liability that has arisen. Good answers discussed
the approach of English courts to exemption (in contrast to limitation) of liability
clauses (clause 1) and the approach to clauses which attempt to exclude or limit
liability for negligence.
Candidates should then examine and apply the statutory controls (the Unfair
Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer Contracts
Regulations 1999 (UTCCR)) and the cases which have interpreted these two pieces
of legislation. In relation to the damage to the garden sculpture (and any attempt by
Lawnz to rely on term 1), discussion of UCTA s.2(2) and the test of reasonableness
under s.11 and Schedule 2 is relevant, as is case law that interprets s.11 (e.g.
Mitchell v Finney Lock Seeds). Good answers also mentioned that although
Schedule 2 only applied to ss.6 and 7 UCTA, it has been applied as a general guide
to reasonableness (e.g. Granville Oil v Davis Turner). It also needed to be
considered whether the UTCCR applies and, if so, whether term 1 might be
considered unfair under reg.5(1) UTCCR.
In relation to the replacement lawnmower, and any attempt to rely on term 2,
candidates needed to discuss whether the UTCCR apply and, if so, whether the
term would be considered unfair under reg.5(1). Good answers should also
consider whether term 2 falls within the indicative list of Schedule 2 UTCCR.

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LA1040 Elements of the law of contract

Common errors
Addressing only the first of the issues set out above – namely, whether or not the
terms were incorporated into the contract.
A good answer to this question would…
set out the issues with clarity and apply not only the relevant statutory provisions to
the terms in question but also undertake this application with a consideration of the
cases interpreting the legislation. Good answers to this question would also address
the question of which party bore the burden or proof in establishing reasonableness
and unfairness.
Poor answers to this question…
recited, or copied out, the statutory provisions the candidate believed could be
applied to the particular terms in this contract.
Question 7
Arthur was a supplier of horsemeat who was registered as required by the
(fictitious) Horsemeat Supply and Distribution Act 2003. Arthur supplied 150
kilos of horsemeat to Beatrice for the agreed price of £400. However he did
not include the statutory invoice recording the sale, as required by the Act
since Beatrice had told him that, as between friends, such formalities were
unnecessary. Beatrice now refuses to pay Arthur for the horsemeat.
Arthur delivered to Charles 1,000 kilos of horsemeat. The meat was
accompanied by the required statutory invoice. Charles processed the meat
and sold it as ‘organic beef burgers’. This misleads consumers who would
not otherwise eat horsemeat for ethical reasons. Charles now refuses to pay
Arthur.
Arthur delivered to Davina 20 kilos of horsemeat to be fed to her dogs. The
delivery was not accompanied by the relevant statutory invoice, the
horsemeat was tainted with bacteria and caused one of Davina’s dogs to fall
seriously ill. Davina is required to pay £200 to the veterinarian to care for the
dog.
Advise Arthur.
To what extent, if any, would your advice differ if Arthur’s registration had
expired before the above transactions were entered into, although Arthur was
unaware of this?
General remarks
This question, attempted by a good number of candidates, was concerned with
illegality. The question called for a determination of the extent to which courts will
enforce a contract despite the taint of illegality. Here the illegality is created by
statute. The initial starting point in such an answer is to consider the purpose
behind the statutory requirements. Following St John Shipping v Rank, the issue to
be considered in relation to Arthur’s dealings with Beatrice, Charles and Davina is
the purpose behind the statute. Is the statute intended to penalise conduct or to
prohibit contracts? The question also contained a variant which must be considered
– namely, what was the effect upon these transactions if Arthur’s registration had
expired?
Arthur supplied Beatrice with horsemeat and failed to provide the invoice required
by the legislation. Beatrice refused to pay him. Is the contract illegal as formed or
illegal as performed? Would the purpose of the statute be furthered by denying
Arthur the remuneration due under the agreement with Beatrice? Arthur may be
able to recover on a quantum valebat basis for the goods supplied (Mohammed v

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Alaga) but not if public policy would prevent such a restitutionary recovery (Awwad
v Geraghty & Co). However, if Arthur’s registration had expired, the contract is
illegal as formed and thus unenforceable by either party (Re Mahmoud and
Ispahani, 1921).
Arthur’s supply of horsemeat to Charles was accompanied by the invoice but
Charles used the meat for an illegal purpose. Is such a contract against public
policy and within Pearce v Brooks (1866)? Is Arthur able to recover payment for the
meat?
With regard to Arthur’s sale to Davina, Arthur has again failed to provide the
statutory invoice. Here, however, Davina will seek to sue upon the contract. The
question is, therefore, whether she (as an apparently innocent party) can maintain
the suit. Courts are generally much more sympathetic to a suit brought by an
‘innocent’ party. See, for example, Archbolds (Freightage) Ltd v Spangletts Ltd
(1961). Again, however, if Arthur’s registration has expired, the contract is illegal as
formed and thus unenforceable by either party (Re Mahmoud and Ispahani, 1921).
Common errors
An inability to discern that issues concerned with illegality were relevant to
answering this question.
A good answer to this question would…
set out the issues and apply the law with clarity to resolve the particular issues. A
very good answer would analyse the underlying practice of the courts in an attempt
to posit a rational solution to the issues posed.
Poor answers to this question…
simply set out various cases concerned with illegality upon contractual formation
without any consistent attempt to resolve the particular issues posed by the
problem.
Question 8
Miles, a famous television presenter, has decided to treat himself to a special
teeth-whitening procedure at his dentist’s surgery, Smiles Ltd. He discusses
the options with Roman, the dentist. Roman advises him that the bleaching
powders, known as Bleachit, are the most time consuming treatment, but
provide the best result. The procedure requires ten separate visits and, after
the final visit, Miles will have permanently whitened teeth. Roman warns
Miles, however, that it is only on the final treatment that Miles’ teeth will turn
white, and that during the course of treatment Miles’ teeth will be yellow. The
cost for the treatment is £3,000. Miles agrees to this procedure and pays
£2,000 immediately. The balance is due at the end of the ten treatments.
Miles undergoes the first five treatments. He finds that his teeth start to go a
very bright yellow. The day before Miles arrives at his sixth appointment, the
results of an enquiry into the cosmetic surgery industry are published. The
report reveals that the company that manufacture Bleachit have not followed
the relevant safety procedures for licensing. The UK government therefore
announce that Bleachit is to be banned from public use. Roman is rather glad
about this news as Bleachit had recently increased their prices so much that
he was operating at a loss on his clients’ treatments. He telephones Miles and
informs him that he will not be able to continue with his treatment. Miles is
furious. Unable to work with yellow teeth he is sacked from his job. He
demands a refund and compensation from Roman.
Advise Roman.

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LA1040 Elements of the law of contract

General remarks
This question was concerned with the non-performance of the contract between
Roman and Miles and the doctrine of frustration. The first issue concerns the UK
government ban and whether this is such to frustrate the contract. Candidates
should examine the cases that are relevant to determining the scope of frustration
(eg. National Carriers Ltd v Panalpina and Davis v Fareham UDC). Relevant to the
resolution of this issue was whether other bleaching products were available to
finish the treatment or whether Bleachit was the only possible product.
If the frustration doctrine does apply in these circumstances, then candidates
needed to discuss and apply the Law Reform (Frustrated Contracts) Act 1943
s.1(2), and the relevant cases interpreting it. Section 1(3) would be applicable to
whether Roman can claim anything for the ‘valuable benefit’ conferred on Miles.
The question would be whether yellow teeth would be deemed a valuable benefit
under this section. In this regard the decision in BP Exploration (Libya) v Hunt is
relevant and should be considered and applied.
If frustration did not apply in these circumstances, candidates needed to discuss
whether Roman would be liable for breach of contract and whether Miles would
have a claim for damages.
Common errors
Common errors exhibited in attempting to answer this question was to disregard
entirely the possibility that the contract might have been frustrated.
A good answer to this question would…
address the limited scope of the doctrine of frustration and the reluctance of courts
to allow parties to escape from poor bargains.
Poor answers to this question…
copied out portions of the Law Reform (Frustrated Contracts) Act 1943.

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