Examiners’ reports 2022
Examiners’ reports 2022
LA2017 Commercial law – Zone A
Introduction
As in previous years, a proportion of candidates produced very good responses,
demonstrating substantial knowledge of the law and the ability to critically analyse
and apply it. However, as in previous years, too often, candidates repeated
mistakes that have been noted several times in these reports. Notably, a tendency
to not answer the question set and the unacceptable and continued use of pre-
prepared answers.
Many candidates appeared to use answers they had prepared with other
candidates, ‘model answers’ to past questions or ‘model answers’ to similar
questions taken from the internet. All are examples of extremely poor academic
practice, which could result in investigation for academic misconduct. Candidates
must be clear that a failure to answer the question, or to use material that is clearly
not the candidate’s own to do so, is extremely serious and results in answers of a
poor quality, that is reflected in the marks awarded. The purpose of an examination
is to test your knowledge and your ability to use that knowledge to solve problems
and critically analyse the law.
Comments on specific questions
Question 1
‘It may once have been true that commercial law was focused on facilitating
commerce but the Consumer Rights Act 2015 is clear evidence that that is no
longer the case.’
Discuss.
General remarks
This is an essay question attempted by a large proportion of candidates. The
question required candidates to consider whether the more protective approach
taken towards consumers by the CRA (and the creation of something close to a
code) could be considered as evidence of a shift within commercial law as a whole,
towards a less facilitative and more regulatory approach. Note that this question
was really intended to prompt candidates to consider the syllabus as a whole
through the lens of the CRA rather than the CRA in isolation, cf. Question 3.
Law cases, reports and other references the examiners would expect you to use
Candidates should have made extensive use of the CRA and the documents that
informed the creation of the CRA as well as academic material offering analysis of
the CRA. Candidates should also have drawn on case law and commentary that
explores the nature and function of commercial law.
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Common errors
Many candidates did not take the time to fully consider what the question was really
asking and took it as a prompt to discuss the CRA in isolation. Many candidates
offered little or no analysis of the CRA or the law more widely, choosing instead to
simply describe the legislation.
A good answer to this question would…
consider the nature and function of commercial law as a whole, utilising a wide
range of material and then turn to consider the nature and function of the CRA
before considering whether the CRA really does mark a significant change in
commercial law at all. There are many possible approaches here and many
possible conclusions but a good answer would show a wide-ranging knowledge of
the topic as a whole, insightful discussion and a sound conclusion.
Poor answers to this question…
did little more than describe various aspects of the CRA, failing to get to grips with
the wider points about commercial law raised by this question. They also displayed
very limited understanding of how to construct an essay.
Question 2
Saran Ltd are a major manufacturer and supplier of food processing
equipment. Boland plc, who are food manufacturers, have designed a new
range of frozen vegan burgers made from pea protein. To preserve flavour,
the pea protein must be partially and rapidly dehydrated before cooking and
freezing. Specialist, high-speed dehydration equipment is needed for this
process.
Boland purchase several million pounds of manufacturing equipment each
year and have purchased numerous friers and blast freezers from Saran
before. They have never purchased dehydration equipment. Saran only sells a
small range of general dehydration equipment. Boland shared with Saran
significant amounts of information about their new product and asked them to
recommend a suitable dehydrator. Boland agreed to buy a Menschel XF45
convection-type dehydrator from Saran for £430,000.
Soon after the new production line was started, it became apparent that the
dehydrator was not removing sufficient water from the pea protein which
affected their taste, although the burgers were entirely safe to eat. Many
customers, including leading supermarkets, returned defective goods worth
£203,000, which Boland disposed of at a cost of £14,000. A further customer
withdrew from negotiations for a contract worth £760,000. Boland temporarily
halted production of the burgers which meant £13,000 of pea protein was also
wasted.
An independent inspection has found that despite minor defects in its
conveyor system, the dehydrator is functioning correctly but that it is not an
appropriate type of drier for pea protein products – a ‘dry cool jet’ type should
have been specified. Boland are now seeking to reject the dehydrator and
claim damages of £1,420,000.
Advise Saran plc.
General remarks
This was a Sale of Goods Act problem question with a particular focus on the
implied terms as to the quality and fitness of goods. This question was attempted by
a significant number of candidates. Most candidates correctly identified that this
question was concerned with the implied terms, fewer candidates were able to
effectively apply the law, even fewer gave proper consideration to the question of
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Examiners’ reports 2022
remedies, which is always important to provide a complete answer to an implied
terms problem question.
Law cases, reports and other references the examiners would expect you to use
SGA, ss.2,14, 53 and the extensive case law related to the latter two provisions, in
particular. Some consideration of s.35 but note timescales were deliberately omitted
to discourage extensive discussion of this and encourage a focus on damages.
Common errors
The most common error was not in identifying the relevant law but in omitting to
analyse the facts at hand, appreciating every dispute on the implied terms is on its
own facts to some degree and in omitting to consider remedies, specifically,
damages.
A good answer to this question would…
identify that this was a problem concerned with the implied terms as to quality and
fitness, and quickly focused in on s.14(3) as the likely most expedient path to a
remedy (although s.14(2) could have been used the outcome is less certain). A
good answer would have noted that ss.12 and 13 were unlikely to be relevant and
spelt this out clearly.
A good answer would then have set out the requirements of s.14(3) succinctly and
applied those to the facts, identifying that the most challenging aspect here is the
likely state of knowledge of each party but concluding that the law would probably
expect a manufacture of food equipment – including what is already a fairly
specialist product – to be able to make reliable recommendations when supplied
with detailed and extensive information.
A good answer would then continue to discuss remedies with a particular focus on
damages here, which would be as important as any right to reject the goods for
breach of s.14(3).
Poor answers to this question…
did little more than describe various provisions of the SGA, not clear on which were
relevant here or giving a great deal of thought to how they applied to the problem at
hand. In effect, poor answers did not solve the problem, just described some
possibly relevant law.
Question 3
‘It has only been seven years since the Consumer Rights Act 2015 came into
force but it is obvious that it is an unfinished project that now urgently needs
completion to finalise the consumer code that was first contemplated.’
Discuss.
General remarks
This was an essay question, attempted by a good proportion of candidates, entirely
focused on the CRA and prompting discussion of the extent to which it functions as
a comprehensive consumer law code.
Law cases, reports and other references the examiners would expect you to use
CRA, VLE materials, CRA-related commentary and preliminary work, Law
Commission work on reform of passing of property in consumer sales, relevant
sections of the SGA.
Common errors
The only common error was in technique rather than content – a failure to really
analyse or engage with the question and, instead, to produce a generic/descriptive
account of the CRA, which is not what the question calls for.
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A good answer to this question would…
closely examine the CRA and identify the numerous gaps in it which are filled by the
SGA, focusing on those that are of greatest practical concern, e.g. passing of
property and passing of title, considering the consequences of this. Good
candidates would also note anomalies, such as the CRA having its own hierarchy of
remedies but then allowing the use of the SGA remedies too. A good answer would
then look at the wider picture and question whether these gaps meant the CRA was
in fact an unfinished project or a pragmatic response to the need to allow consumer
law to evolve while remaining in step with the SGA.
Poor answers to this question…
failed to grasp what the question called for and simply described the CRA and its
provisions in varying levels of detail.
Question 4
Merrett Ltd is a manufacturer of electrical components for domestic
appliances. Merrett has been placed in insolvent liquidation and Quinn has
been appointed as liquidator. Quinn has discovered numerous unpaid
invoices relating to contracts for goods which Merrett have purchased. These
include:
a) A contract for 550 x 20kg bags of white PVC beads which contains the
following clause: ‘Until all goods supplied under this or any other
agreement with the Seller are paid for in full, the Buyer recognises
that title to the goods (including equitable and beneficial ownership)
shall remain vested in the Seller and shall consider itself Bailee of the
goods until that time.’ One hundred bags of the white PVC beads have
been opened and mixed with other PVC beads in a large metal storage
container. The remaining bags are stored in the Merrett’s warehouse
with their general stock and not separated.
b) A contract for two tonnes of natural rubber which contains the
following clause: ‘Goods supplied pursuant to this agreement remain
the property of the Seller until the receipt, in full, of any sums
outstanding on any account. The Buyer acknowledges the legal title of
the Seller in any goods manufactured from or in any way
incorporating the goods supplied under this or any other agreement.’
The rubber has been melted down and combined with various
additives then applied to copper wires to make electrical cable.
The same seller separately supplied six tonnes of rubber in three, two
tonne shipments, all of which have been paid for in full but remain
unused. The contracts relating to those shipments contain the same
clause.
c) A contract for 500 programmable circuit boards which included a term
stating, ‘the Buyer receives all goods as the Seller’s fiduciary agent
and shall hold them as Bailee until full payment is made for all
outstanding sums. In the event any goods are re-sold prior to
payment, the Buyer shall hold the resulting funds separately from its
own, as trustee for the Seller as beneficiary.’ The circuit boards have
not been paid for, Merrett re-sold the circuit boards on its own
standard terms of business at a profit and deposited the money in a
separate account.
General remarks
This was a retention of title problem question prompting candidates to consider the
effect of a range of RoT clauses on a series of transactions. In each case, the
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candidate should consider the validity of the term and, with that in mind, whether or
not it is effective to retain title in the goods concerned.
Law cases, reports and other references the examiners would expect you to use
Key cases on RoT in general include Aluminium Industrie v Romalpa, Armour v
Thyssen, Clough Mill v Martin, Re Bond Worth and cases with specific, potential
relevance here including Re Peachdart, Modelboard v Outerbox, Chaigley Farms
Ltd v Crawford, Pongakawa Timber v NZ Forest Products, Re CKE Engineering,
Pfeiffer v Arbuthnot Factors, Tatung v Galex Leisure, Compaq v Abercorn.
Common errors
This question was generally well answered but still many candidates offered a
lengthy narrative on RoTs in general rather than a clear set of solutions to the
various aspects of the problem. Some candidates were not clear that
manufactured/materially changed goods will almost certainly will not be caught by a
RoT and struggled to explain why clauses that seek to retain title in proceeds of
sale will most likely fail.
A good answer to this question would…
open with a brief overview of RoT clauses (as this information is a common basis
for all parts of the question) noting the relevant, founding case law and, crucially,
setting out broadly what will determine the validity of a RoT. A good answer would
then continue to clearly tackle each part, beginning each section with an analysis of
the RoT clause – commenting on its validity and what it appears to attempt to do,
whether this is legally possible and then applying the law to the facts, using the
case law to make an informed judgement on whether the term will be successful in
this context to what extent it can retain the good in question (or not).
Poor answers to this question…
Tended to provide an overview of the relevant law rather than addressing the
problem at hand, not offering the fictional client the advice that is required and often
not engaging in any substantive way with the problem. This is a particular issue in
RoT problem questions because the basic principles are quite simple but an
understanding of how they apply to different facts requires an in depth
understanding of a wide range of often quite complex case law that cuts across
company law, equity, property and contract law.
Student extract
The question is generally concerned with the use of retention clauses in the
set out in agreements for sale of raw materials and other goods. The
reasoning why the sellers would use retention and why a seller will choose
not to include one in their agreement.
Firstly, we need to understand what is a retention clause and relevant
legislation behind it. A retention of title clause is a clause included in an
agreement to sell or contract for sale of the purpose of asserting retention (or
reservation) of title in the goods sold. The retention clauses are governed by
the principal [sic] of which has been set out in s.17 of the SGA 1979, which
refers to the fact that property in the goods passes when the parties to the
agreement intend it to pass. The relevant clauses are contemplated by s.19
of the SGA which gives rise to the seller[‘]s right to include such clause into
the contract and reserve the right to the goods until certain conditions are
met. The most common condition that is used in retention clause is retention
of title until the goods have been fully paid [for].
In this way the sellers guard themselves against the possibility of those
conditions not being met (i.e. not getting paid), in cases such as insolvency of
the buyer.
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The leading case for retention clauses is the case of Aluminium Industries
Vassen BV v Romalpa Aluminium Ltd. This initial case addressed the
validity and enforceability of the clauses, as a result of which retention
clauses are sometimes referred to as Romalpa clauses.
Comments on extract
This extract illustrates a common issue with this question and other problems in this
paper – the tendency to treat as a problem as an essay and fail to appreciate the
questions require different skills (and a different) style to answer well.
Here, the candidate should begin with a very short introduction explaining what a
RoT clause is, its basis in law and why it is used before quickly moving to analyse
each aspect of the problem. Instead, a significant amount of work has been done on
a lengthy introduction that does not in fact really look at RoT clauses but at the
basis for them, which is very much a background issue to this question. The
candidate correctly makes reference to the Romalpa decision but note how that
case is dealt with here – there is no discussion of the facts of the case (not critical)
but there is also no discussion of the basis or content of the judgment – so little
evidence to really demonstrate the importance of the case. In so many areas of
commercial law, case law is vitally important and a detailed understanding of the
facts of the cases and especially the judgments is the foundation of the best
answers. This answer received a mid-third mark.
Question 5
‘A seller of goods, especially high value goods, should favour traditional
security interests, namely a floating charge, over retention of title clauses.
The latter provide a ‘comfort blanket’ but do not truly shield a seller from a
non-paying buyer.’
Discuss.
General remarks
This question invited candidates to demonstrate their knowledge of RoT clauses (a
quasi-security) alongside their knowledge of true securities such as pledge, lien,
mortgage, etc. and to consider which might be favoured by sellers and why. In
essence, what candidates needed to show was that they understood that different
security interests were more or less suited to different commercial contexts. Indeed,
this question was primarily concerned with real securities rather than RoT.
Law cases, reports and other references the examiners would expect you to use
Candidates would be expected to show a knowledge of the case law that
establishes the nature of various real securities, e.g. Romalpa, Yorkshire
Woolcombers, etc. as well as the foundational principles and rules of RoT clauses
and case law that shows the limitations on their use.
Common errors
The most common error here was treating this purely as an opportunity to discuss
RoT, without any comparison to other security interests, or to introduce both RoT
clauses and securities but then not to explore the question – why should a seller
use one over the other? Why might a real security be favourable to RoT, or not, and
when? It is in engaging with those questions that the highest marks are to be found,
whereas a description of the law will always be, by comparison, a more limited
answer.
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A good answer to this question would…
show recognition from the start that this question required consideration of a range
of security interests, set out what an RoT clause is, compare and contrast this at a
high level to a range of real securities, showing in all cases, knowledge and
understanding of the founding case law and then building up from this base
arguments as to why sellers of high value goods (i.e. those where non-payment
poses the greatest risk to the seller but where it is essential to provide some form of
deferred payment to facilitate the transaction) might favour real securities and what
the advantages may be over the simple ‘self-help’ remedy of RoT, explaining why
and how the courts have sought to hem in RoT, e.g. by limiting the extent to which
proceeds of sale can be traced. Some understanding of the commercial purpose of
securities was apparent in many good answers.
Poor answers to this question…
did little more than describe RoT clauses, often limited to a description of the
founding case law, e.g. Romalpa showing little wider knowledge of securities or
really engaging with the question.
Question 6
Bokul took, on hire purchase terms, a car from Apex plc. Bokul agreed to pay
for the car in 36 monthly instalments of £800 with an optional final payment of
£50. Bokul struggled to make the payments each month and after 30 months
sold the car to CA Motors Ltd, a motor dealer. Bokul did not disclose that he
had taken the car on hire purchase and a check of a hire purchase agreement
register did not reveal any agreements registered against the car.
CA Motors sold the car to Derek. Derek did not take delivery of the car and
owing to an error by an employee, the car was re-sold by CA Motors to Eric, a
doctor, who wanted to use it for his commute to work. Eric paid for the car in
full. He was about to go on holiday so rather than drive it away he took the
keys and registration document.
Subsequently, Eric took a job closer to home and decided to sell the car,
advertising it online. A few days later, a potential buyer, Finn, arranged to
inspect the car. The potential buyer claimed that he lived very close by and
also worked as a doctor in the hospital where Eric was about to start his new
job. All of this was untrue. ‘Finn’ was in fact a rogue. He had found out about
Eric’s new job via social media and stolen the personal details and
chequebook of a doctor who lived nearby, pretending to be that person when
buying the car.
Eric agreed to sell the car to ‘Finn’. Eric accepted payment in full by cheque.
‘Finn’ re-sold the car two days later to Gael who paid for it in cash. The stolen
cheque was dishonoured a week later. Eric immediately informed the police.
One night, burglars broke into Gael’s home with weapons and made violent
threats against him and his family. The burglars demanded that he sign a
contract showing he had sold them the car for a fair price and told him that if
he told anyone about the robbery, they would carry out their violent threats.
Gael did not report the robbery until a month later.
In the meantime, the thieves sold the car to Haris. After Gael reported the
robbery, the police recovered the vehicle. Apex plc have now been informed
of this and are seeking its return.
Advise Haris.
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General remarks
This was a problem question covering transfer of title/exceptions to the nemo dat
rule. Candidates needed to work through the problem systematically, determining at
each stage, who had the better title, in order to advise Haris. A good proportion of
candidates attempted this question, most appreciated the need to tackle it in
sequence and most correctly identified the relevant exception at each stage. Far
fewer candidates were able to apply the law consistently and reach a clear
conclusion at each stage, thereby allowing them to reach a clear and correct
conclusion at the end.
Law cases, reports and other references the examiners would expect you to use
SGA, ss.12, 24 and 25 and related case law on the meaning of the various words
used in each). Important case law would include Newtons of Wembley, Pearson
Rose v Young, Stadium Finance v Robbins, Debs v Sibec, Shogun Finance, Cundy
v Lindsay, Lewis v Averay, Ingram v Little, Caldwell, Gerson Leasing, The Saetta),
concept of bailment the HPA and the concept of estoppel by representation.
Common errors
There was a tendency to describe the law and not apply it. A lot of candidates
provided lengthy introductions about the nemo dat exceptions in general, including
needless reproduction of the statutory provisions. This is not required when
answering a problem question, you must focus only on what is relevant to the
problem and on providing a solution to the problem itself. Some candidates wrongly
interpreted the question as concerning passing of property rather than passing of
title.
Good answers to this question…
have a clear, disciplined structure, dealing with each transaction in turn. Avoiding
repetition of the question, they would identify the relevant exception, then work
through the requirements of the exception, at each stage analysing the problem to
understand whether title would pass as a result. Good answers would show
command of the nuanced language used in each exception and understand that
case law has played an important role in defining the language used in the statutes.
Very good answers would have sought to engage with particularly challenging last
point, which required consideration of when an estoppel can arise, in general, and
especially in the context of extreme coercion.
Poor answers to this question…
discussed the problems of title conflicts in general, described some or all of the
exceptions but did not really address the problem properly, or did so only in a very
superficial way. For example, stating that s.24 was applicable and then outlining an
outcome without explaining the requirements of s.24, how they have been
interpreted and, crucially, how they apply to the problem.
