Examiners’ reports 2019

Examiners’ reports 2019

LA2017 Commercial law – Zone A

Introduction
The Commercial law examination followed the same format as previous years with
candidates required to answer their choice of four out of eight questions, the
questions being a mix of both essays and problems.
As in previous years, many candidates achieved scores below their potential as a
result of three common but costly errors.
The first is in relation to time management. Many candidates answered only three
questions fully and, in some cases, only two. Whatever the quality of these
answers, it is very difficult to achieve even a pass when one or more questions has
not been attempted or is little more than a series of hurried bullet points. It is
essential to ensure you give yourself sufficient time to give four complete
answers.
Secondly, many candidates are not answering the questions set. This manifests in
three ways.
Not reading the question carefully, for example, confusing a question concerning
‘transfer of title’ with a question on the ‘passing of property’, or applying the Sale of
Goods Act to a problem question centred around defective goods sold to a
consumer. In these instances, a minor misreading of the question will probably
mean the candidate’s answer is well below the pass standard.
Not reading the instruction carefully, for example, disregarding the instruction to
‘analyse’ the law and instead simply describing it. Answers like this may pass but
cannot achieve a high mark.
Using learned or pre-prepared answers. Usually, these answers totally fail to
address the question set, or fail to engage with it in any substantive way, and the
answer will invariably be below the pass standard.
Finally, in relation to problem questions, candidates must bear in mind that
identifying the relevant law is only one part of the task. The more skilled part of the
task (the part that carries higher marks) is applying the law to the facts to offer a
reasoned solution to the problem. Too often, candidates simply assert or describe
potentially relevant law without explanation and with little or no analysis of the
problem at hand.

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Comments on specific questions
Question 1
‘A theme that runs through our law of contract is that the reasonable
expectations of honest men must be protected.’ (Steyn J in First Energy Ltd v
Hungarian International Bank (1993)).
Discuss the extent to which this is correct in relation to commercial law.
General remarks
This question was attempted by many candidates and many good answers were
seen, although very often the focus was on the case mentioned in the question
rather than the question itself.
Law cases, reports and other references the examiners would expect you to use
This question invites candidates to think about commercial law as a whole and the
themes within it. As such almost any aspect of the law covered in this module could
be relevant here if used effectively.
Common errors
The most common error in relation to this question was a failure to follow the rubric,
using the quotation from First Energy as a prompt to discuss that case, or instances
of apparent authority or the law of agency in isolation. Agency is a potentially good
example of how the law is shaped by commercial norms and the expectations of
commercial people but this was often not considered. Where candidates did discuss
the law more widely, there was a tendency to describe an area of law with which
they were familiar, as opposed to explaining what that area of law might tell us
about the nature and function of commercial law as a whole.
A good answer to this question would…
select a range of examples from the syllabus, provide some description of them to
show understanding but most importantly analyse them to understand whether
‘fulfilling the expectations of honest men’ really is a ‘theme’ that runs through the
law, or just something we might see in isolated instances, or not at all.
Poor answers to this question…
described an aspect of commercial law but offered no analysis or explanation as to
what it tells us about ‘reasonable expectations’, or simply discussed apparent
authority as a result of misreading or misunderstanding the question.
Question 2
‘The concepts of “ownership” and “possession” are what is really at the heart
of commercial law.’
Discuss.
General remarks
This question aimed to examine some of the new material on the syllabus in relation
to concepts of property and possession and invited candidates to consider how the
commercial importance of interests in property influenced the development of rules
and doctrines of commercial law more widely. Most answers to this question
confined themselves to a discussion of the basic principles or the rules on passing
of property. Almost no answers offered the wider analysis the question called for.
Law cases, reports and other references the examiners would expect you to use
All answers should have included a discussion of the basic concepts of ‘ownership’
and ‘possession’ and the concepts of ‘interest’ and ‘title’ as the foundations of their
answer. From that point, there is a range of material candidates could call on to

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show the importance (or not) of property rights in commercial law. Discussion of
passing of property, security, retention of title clauses are areas of particular
relevance, good answers might also have analysed the nemo dat exceptions too.
Common errors
A number of candidates clearly did not really understand the question or chose to
disregard it and just replicate the rules of passing of property or the nemo dat
exceptions.
A good answer to this question would…
identify and explain the nature of property and interests in it before considering how
concern for property rights or the safeguarding of property rights have shaped the
law, looking at obvious examples such as passing of property and securities, for
example, but also considering other more complex examples, such as the nemo dat
exceptions, in the context of well-structured discussion.
Poor answers to this question…
simply described an area of law such as passing of property or transfer of title while
offering no discussion as to how or why this was relevant to the question posed.
Question 3
Bonnie purchased a used car from Sellars’ Garage Ltd for her personal use.
The car was one-year-old and had covered only 4,000 miles. It was an
upmarket saloon and cost £50,000. Bonnie paid a deposit and she settled the
balance in full before taking delivery of the car on 1 February 2019.
In the course of the first two weeks of her ownership, Bonnie experienced a
number of faults. On two occasions, the engine has cut out while driving at
high speed. Investigations show that this is likely to be caused by an
intermittent fault with an engine sensor but could also be caused or
exacerbated by excessive levels of impurities in the fuel being used by
Bonnie. On one occasion, the ‘auto locking’ feature, designed to
automatically secure the car when the driver walks away with the key, had
locked the car with the key inside it. Various pieces of interior trim, on closer
inspection, also seemed to be looking very worn for such a new and lightly
used vehicle and the cars upholstery, a form of manmade leather, appears to
have been discoloured as a result of being in contact with certain of Bonnie’s
clothes.
On 1 April, Bonnie took the car to Sellars’ who agreed to make good the
defects. Bonnie collected the car on 3 April. Sellars’ explained that they had
cured the fault with the engine and locking system, although they declined to
explain the nature of the faults, but claimed that the wear to the interior and
any discolouration of the upholstery were entirely the result of her use of it
and did not amount to any sort of defect.
The engine fault recurred. On 27 April, Bonnie once again returned the car to
Sellars’ for inspection. Sellars’ claimed to find no evidence or cause of the
faults and reasserted that the interior showed no premature wear.
The problems have not been remedied. Bonnie has continued to use the car
as she has no other means of transport but is very unhappy with it. She has
not raised the continuing problems with Sellars’ since 27 April.
Advise Bonnie.
General remarks
Many candidates attempted this question. Too often candidates used the wrong law
(Sale of Goods Act 1979 as opposed to the Consumer Rights Act 2015) and scored
very low marks as a result. Many candidates tried to apply both regimes either

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together or at different points in the question. Often, the approach taken was to
describe the law rather than solve the problem.
Law cases, reports and other references the examiners would expect you to use
Consumer Rights Act 2015 (ss.2, 9, 10, 11, 19–24) and, where appropriate, Sale of
Goods Act case law elaborating the meaning of the terms implied by ss.13, 14 and
15.
Common errors
Many candidates did not see that this was a Consumer Rights Act 2015 question
and not a Sale of Goods Act 1979 question and therefore used the wrong law.
Even when the Consumer Rights Act 2015 was correctly identified, the remedies
from the Sale of Goods Act were used or remedies were not discussed at all.
Without discussion of remedies there is no solution to the problem.
A good answer to this question would…
identify clearly from the outset that Consumer Rights Act was applicable, noting the
definition of a consumer, before continuing to the appropriate implied terms, making
reference, where appropriate to the Sale of Goods Act case law, noting that the
provisions under both Acts in this regard are identical. Work through the relevant
implied terms systematically, adopting a structure that mirrors the legislation. Be
clear on whether there is a breach and, if there is, identify the available remedies,
considering which is available and which is most appropriate.
Poor answers to this question…
applied the Sale of Goods Act and often (even if candidates did apply the
Consumer Rights Act) only described the law, often considering only the implied
terms, totally ignoring the need to discuss the available remedies for this to be of
any use.
Student extract
The approach of the implied terms has shifted from ‘caveat emptor’ (buyer
beware) to ‘caveat venditor’ (seller beware) more so in relation to implied
terms regarding reasonable quality of goods and fitness for a particular
purpose. Since Bonnie has bought the car for personal use, her contract will
be governed by the Consumer Rights Act but the Sale of Goods Act and its
case law will also apply. Under s.14(2) the seller must sell goods in the
course of business, but it is not necessary to sell what the business normally
trades in. Sellars Garage Ltd is a business that deals in automobiles and
therefore it can be said it is a business selling goods in their ordinary course
of trading activities.
Comments on extract
This extract exemplifies confusion of many candidates around the Consumer Rights
Act and Sale of Goods Act. Only one can apply. If it is the Consumer Rights Act,
Sale of Goods Act case law maybe relevant but only Consumer Rights Act
provisions and remedies can be referred to. Initially, it may appear that this is what
the candidate is suggesting but as the answer continues, it becomes clear there is
confusion about the relevant law and a low mark results.
This answer also shows a general lack of detail and is not well focused. For
example, the opening lines are not really relevant to a problem question (if you were
Bonnie, would it be helpful to be told this?) and there is no explanation as to why
they might be.
Whether it is a Sale of Goods Act case, or a Consumer Rights Act case, the seller
must be selling as a business but the candidate does not explain this and does not

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identify the relevant provision of the Act, so it is not clear why this is relevant. A
well-structured answer makes clear to the reader what is being shown or discussed.
Question 4
Professor Atiyah has stated that ‘the law relating to the transfer of the title to
goods is in a complex and confused state.’
Discuss.
General remarks
A substantial number of candidates attempted this question that specifically asks
that transfer of title be discussed. Too often, this was misunderstood as passing of
property. Many candidates failed to discuss Professor Atiyah’s remark and instead
just described or set out the relevant law.
Law cases, reports and other references the examiners would expect you to use
Factors Act ss.1 and 2; ss.21–25 Sale of Goods Act; relevant sections of the Hire
Purchase Act and the case law that interprets those statutory provisions.
Common errors
The main error was confusing ‘transfer of title’, i.e. the statutory exceptions to the
nemo dat rule with the rules on ‘passing of property’, therefore offering little of
relevance to the question.
A good answer to this question would…
identify and explain the basic rule of nemo dat quod non habet and explain that a
range of exceptions had grown up around it (and why). A balanced answer would
describe these exceptions and how they had come to be understood but place
particular emphasis on the subtle distinctions that they draw, their complexity and in
some cases, the difficulty in proving them (as shown by the case law) before
offering an overall analysis of how they operate as a coherent scheme to deal with
the fundamental problem famously expressed by Lord Denning in Transport Brakes.
Poor answers to this question…
either misunderstood the question (see above) or simply replicated the statutory
provisions from the statute book, offering no examination or analysis and failing to
answer the question.
Student extract
There are some critics who think Denning’s view in this area is apt, while
others think Lord Goff’s view establishing that the exceptions are only minor
in nature and does not affect the main principle is rather a better reflection of
what really exists.
In my view, even though complicated, the exception generally do not
undermine the nemo dat principle too much.
Comments on extract
This quotation came at the end of lengthy essay where the candidate had primarily
just described the statute, often quoting the statute at length. The lack of structure
and analysis of the law earlier means that these concluding remarks do not fit well
into the essay, it is important to not just set the law out but to analyse it at every
stage and explain how this analysis relates back to the question.
More importantly, this extract, while it shows some knowledge of judicial analysis of
this area, lacks detail. It does not show real knowledge of these potentially
important sources and, without detail, the analysis that is offered is superficial.

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Question 5
Southern are an importer of pistachio nuts. Their standard written terms of
business contain the following clause:
It is agreed until full payment for the goods is made by Buyer, Seller
retains title to: goods supplied under this contract; any goods that
result from the processing of those goods or incorporate them and
the proceeds of any sale of the goods supplied under this contract,
which it is agreed are made by Buyer as fiduciary agent of Seller.
Southern contracted to sell to Nut Processors Ltd three tonnes of raw,
unshelled, fresh pistachio nuts, all to be Grades B or C.
One tonne of raw nuts was shelled and the resulting kernels placed in a
storage container with 14 tonnes of Grade B shelled pistachios previously
supplied under two other agreements, one for 20 tonnes and one for four
tonnes, with two other suppliers.
One tonne of nuts was roasted, shelled, then salted and sold to Nut Traders
Ltd.
Nut Processors’ contract with Nut Traders includes a clause that is
substantially the same as the one found in Southern’s agreement. The
proceeds of sale remain in the bank account of Nut Processors.
The other tonne of nuts was ground to form a paste and mixed with sugar and
vegetable oil. The resulting mixture is now stored in a vat with 50 tonnes
derived from nuts purchased from other suppliers.
Nut Processors Ltd are now in insolvent liquidation.
Southern’s invoices for the goods remain unpaid.
Southern are now seeking advice on the enforceability of their retention of
title clause.
Advise Southern.
General remarks
This question was widely answered and most candidates were clear that it
concerned retention of title clauses and were able to construct a solid answer to it.
However, in general, answers needed to improve their structure and there was a
lack of understanding of some of the more nuanced points, particularly those
discussed in Clough Mill and those raised by claims to proceeds of sale. Most
candidates seemed to grasp the issues around claims to altered or manufactured
goods and were familiar with a range of relevant case law.
Law cases, reports and other references the examiners would expect you to use
Discussion of Romalpa and Clough Mill as founding cases in this area, noting
relevant Sale of Goods Act provisions, which allow for RoT clauses. Case law
considering when goods supplied lose their character (Re Peachdart, Modelboard v
Outerbox, Borden v Scottich Timber, etc.). Case law considering effectiveness of
terms claiming proceeds of sale (Romalpa, Tatung v Galex, Pfeiffer v Arbuthnot,
Compaq v Abercorn). Case law considering the effect of mixing (Indian Oil v
Greenstone, Mercer v Craven Grain; for general principles Hendy Lennox v
Grahame Puttick, Re CKE Engineering).
Common errors
Some candidates tackled this not as a retention of title problem but from the
perspective of the unpaid seller’s statutory remedies or less frequently as a nemo
dat problem, neither approach was correct. Candidates tended to provide lengthy
description of the law without any serious application of the law to the facts.

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A good answer to this question would…

begin with a concise overview of the nature of RoT clauses, noting the founding
cases in this area, before working systematically through the problem dealing with
each batch of nuts separately and in turn, explaining the relevant principles for
each, applying the law and coming to a clear conclusion and demonstrating an
understanding that it is in the nature of this area of law that each case, including this
one, turns on its own facts.
Poor answers to this question…
tended to do no more than explain what an RoT clause was with some descriptive
discussion of Romalpa, often setting out the facts at length with little or no
discussion of the problem, or a very brief discussion with no analysis and weak
conclusions.
Question 6
Pete has recently acquired a coffee shop from Arya. Previously, Arya was
both owner and manager, she has continued to act as manager. Pete wants
the coffee shop to become more profitable by reducing its costs. Pete has
instructed Arya to renegotiate with suppliers, achieving at minimum a 12 per
cent reduction in their prices.
Pete has returned from holiday to find Arya has done the following:
1. Achieved a saving of 12 per cent on a contract for the supply of
almond milk but also agreed that the coffee shop will accept
deliveries weekly instead of daily and buy an agreed minimum per
week.
2. Purchased a new refrigerator to store fresh milk and fresh salads
after the old refrigerator broke down. The new refrigerator cost
£500. Arya tried to have the old one repaired, but the repair
company refused to help after hearing that she had asked all
suppliers to reduce their prices. Quickly buying a new refrigerator,
however, meant that food worth £300 did not have to the thrown
away.
3. Terminated a contract with a cleaning company to provide cleaning
services for 10 hours per week and entered into a new contract with
another company, who she had worked with years before. Under the
new contract, cleaners will provide services for 15 hours per week,
but the cost will increase by just 10 per cent. The manager of the
new cleaning company was not sure why the coffee shop needed
the extra hours of cleaning but was reassured when Arya told her
‘don’t worry, I know the business, after all it’s been my coffee shop
for many years.’
Advise Pete.
General remarks
This question was widely answered and the majority of candidates were clear that it
concerned the law of agency, specifically, different forms of authority. Candidates
tended to describe the law rather than applying it and did not always scrutinise the
facts closely, making errors particularly on the third part.
Law cases, reports and other references the examiners would expect you to use
Rama Corp v Proved Tin, Freeman Lockyer v Buckhurst Park Properties, Watteau v
Fenwick, Queen v Kane, Hely-Hutchinson v Brayhead, Armagas v Mundogas, First
Energy v Hungarian National Bank, The Winson, The Choko Star.

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Common errors
A common error was describing the law of agency in general but largely ignoring
the question set, not actually analysing the problem or identifying the particular
rules and cases that are relevant.
A good answer to this question would…
briefly outline the nature of agency and particularly the nature of authority, avoiding
a lengthy description of the different forms and go on to identify the most likely form
of authority for each part.
For the first part, identify that the focus should probably be on the agent’s actual
implied authority, defining this concept and explaining why this is the case,
potentially noting how close actual implied and apparent authority can be, such that
this could also be an instance of apparent authority. A really good answer would
explore this fine distinction in detail through careful analysis of the facts.
For the second part, explore the possibility of agency of necessity but consider
whether this could really be relied on with modern communications. If not, consider
apparent authority, establish requirements, working through them systematically.
For the third part, consider whether this could be apparent authority (again
explaining the nature of the concept and its requirements) but note that, with an
undisclosed principal, this may be impossible, leaving this as a rare case when
Watteau v Fenwick might apply. Explore that case and the criticism of it before
reaching a reasoned conclusion as to its value as a precedent.
Poor answers to this question…
offered only a general description of the law of agency, often disorganised, with
very little analysis of the question beyond a few token sentences at the end of the
answer.
Question 7
‘Real security is always worth more than a personal one.’
Discuss.
General remarks
Very few students attempted this question, which required candidates to show an
understanding of these different types of security and the rights that they create to
consider whether a real security is preferable to a personal one.
Law cases, reports and other references the examiners would expect you to use
Discussion of at least one form of real security – lien: Hammonds v Barclay,
Tappenden v Artus, Re Coslett (Contractors) Ltd); pledge: Coggs v Barnard, Official
Receiver of Madras v Mercantile Bank of India; charge: Swiss Bank Corporation v
Lloyds Bank Ltd, Re Cosslett (Contractors) Ltd; mortgage: Santley v Wilde,
Downsview Nominees Ltd v First City Corporation Ltd; and the requirements for
their validity and subsequent discussion of personal security: Yeoman Credit Ltd v
Latter; Actionstrength Ltd v International Glass Engineering SpA.
Common errors
Conflating securities with remedies under the Sale of Goods Act and retention of
title clauses was a common error.
A good answer to this question would…
define the different forms of security, providing at least one example of each, and
being clear on their differing formalities and the rights that they confer on those who
seek them.

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Poor answers to this question…

failed to grasp what the question was really calling for and confused securities with
remedies.
Question 8
Analyse the approach taken by the common law in identifying the nature of ‘a
bank’.
General remarks
Very few candidates attempted this question, which addressed a relatively small
amount of material new to the syllabus. Of those who did answer it, many made few
or no legal references, instead talking generally about the commercial nature of the
banking business. An answer to a legal essay or problem must always be based on
the law.
Law cases, reports and other references the examiners would expect you to use
Answers ought to make reference to United Dominions Trust v Kirkwood, Re Roe’s
Legal Charge, Ladbroke & Co v Todd, Woods v Martins Bank Ltd, Foley v Hill and
Joachimson v Swiss Bank Corporation.
Common errors
A common error was describing the business of banking without any or enough
legal discussion about the nature of banks. Not offering the analysis that the
question calls for.
A good answer to this question would…
consider how the concept of a bank has developed through the case law, which
places emphasis on the core activity of deposit-taking and a particular relationship
with customers; contrast how this definition has been refined and shifted as a result
of modern banking regulation, which centres on regulated activity. Potentially
consider how changes in the banking sector might further challenge this definition.
Poor answers to this question…
discussed the commercial nature of a bank or simply the business of banking with
few or no references to the law.