Commercial Law Mock Examination PDF

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Commercial Law Mock Examination...

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Mock Examination – Question 1 Dear Starstruck Solicitors, Good to hear that you are able to help me out with this. As promised, I am following up our phone call with the information I have available to me at the moment. At Fast Fashion Ltd, we have successfully traded out of retail premises in Liverpool City Centre for the last 5 years. Our core business is selling new clothing and related goods to members of the public, but we also sell some second-hand items too. There are three contracts which I need your advice on. First, in September 2017 we sold a second-hand Gieves and Hawkes suit to Richard for £500. Frankly, this was a bargain, as a new Gieves and Hawkes suit would have cost him £2500. I confess, I didn’t check the suit too carefully, but it looked it perfect condition to me, so I added a label which said ‘good as new’. Unfortunately, Richard inspected the suit when he got home, and discovered a large stain on the trousers which subsequent cleaning failed to remove. Secondly, last month we sold a brand new tie, bearing a manufacturer’s label which said ‘made from Chinese silk’, to Steve (a lawyer and tie collector) for £50. Steve inspected the goods prior to buying them but is unhappy to discover that the tie is in fact manufactured from artificial materials produced in the UK. Thirdly, in November 2017 we sold a hiking jacket described as being wind and waterproof, to Ivy for £200. Ivy, a very experienced mountaineer, complains that the jacket is not wind- proof at all! By the way, please do make copious reference to the case law and any relevant legislation in your advice – I really want to sound knowledgeable when I meet with my customers! As I said on the phone, I will look into each of these contracts some more as a matter of urgency and revert as soon as possible. Additional Information:

Jonathon has reverted with additional information as follows: 1. Richard was particularly disappointed since he intended to wear the suit solely for his job (managing director of a fashion company). 2. Ivy spoke to one of our retail assistants in store before buying the Jacket. My colleague recommended the jacket to her for mountain climbing, but Ivy did not specify that she wanted the jacket to wear on an expedition to the Himalayan mountain range in Asia. Of course, the jacket is not suitable and she had to abandon her trip. Ivy has accepted that the jacket is entirely suitable for use in the UK.

Prepared by: Tze Kay Khern

Two types of scenarios: 1. Goods that has been damaged and destroyed 2. Insolvency situation – recover the goods Answer Outline: Richard Issue: second-hand Gieves and Hawkes for £500. Frankly, this was a bargain, new suit will costs him £2500. – discovered a large stain on the trousers which subsequent cleaning failed to remove. Additional information: was particularly disappointed since he intended to wear the suit solely for his job (managing director of a fashion company) – SGA 1989 will be relevant. Intrinsic satisfactory goods Pre-contract inspection – It happens after contract, it is only available to pre-contract situation. Satisfactory quality, S.14(2) SGA 1989 Fitness for purposes – S.14(3) SGA 1989 Cl egg,Hal eLJ:“ Thet esti swhet herar easonabl eper sonwoul dt hi nkt hegoods sat i sf act or y ,t aki ngi nt oaccountt hei rdescr i pt i on,t hepr i ce( i fr el evant )andal l ot her r el evantci r cumst ances:sees14( 2A) .Thequest i on,ast hej oi ntRepor toft heLaw Commi ssi onandt heScot t i shLawCommi ssi onexpl ai ned,i s“ notwhet hert he r easonabl eper s onwoul dfindt hegoodsaccept abl e;i ti sanobj ect i vecompar i sonof t hest at eoft hegoodswi t ht hest andar dwhi char easonabl eper s onwoul dfind accept abl e” .( 2pat ht est -obj ect i v est andar dt hatar easonabl eper sonwi l l find accept abl e,obj ect i v ecompar i sonoft hest at eoft hegoodst ot hatst andar d) I ndi cat i v ef act or s ,S14( 2B)SGA Pr econt r acti nspect i on-can’ tr el yont hi sasdef ence Possi bl yt hegoodswoul dn’ tmeett hest andar d,t hent her ewi l l bebr eachofS14( 2) , howev er ,ar guei ti sasecondhandgoods.

Prepared by: Tze Kay Khern

Steve Issue: sold a brand new tie, bearing a manufacturer’s label which said ‘made from Chinese silk’, for £50. Steve inspected the goods prior to buying them but is unhappy to discover that the tie is in fact manufactured from artificial materials produced in the UK. He is a lawyer and a tie collector. Reliance – tie collector – partial reliance is sufficient – he might have more knowledge than the seller – the court may not find there is a reliance to start with Two issues – broad gate for the seller – if he is a collector then CRA will be relevant – the decision stands on as they are both traders – one is specialist, one is generic.

Ivy Issue: we sold a hiking jacket described as being wind and water-proof, to Ivy for £200. Ivy, a very experienced mountaineer, complains that the jacket is not windproof at all! Additional information: Ivy did not specify that she wanted the jacket to wear on an expedition to the Himalayan mountain range in Asia. Of course, the jacket is not suitable and she had to abandon her trip. Ivy has accepted that the jacket is entirely suitable for use in the UK. Fi t nessf orpur posehi ki ngj ack et-wat erandwi ndpr oof-howev eri nt headdi t i onal i nf or mat i on,ex t r i nsi ct ot heor di nar ypur pose,notqual i t yi ssue,i sS10CRA2015. fit nessf orpur posei ssuebecauseshewant sanexpedi t i ont oHi mal ay anmount ai n r angeri nAsi a Defini t el yaconsumerasi ti sf orper sonal use–CRAwi l lber el ev ant Notsat i sf act or yqual i t yi ssueasj ack eti sent i r el ysui t abl ef orsuei nt heUK,i fnot ,i t wi l l bebr eachofS9ofCRA–i nt r i nsi cpr obl em oft hegoods WhynotS11?wi ndandwat er pr oof–i dent i f yofpr oductandnotaboutt oi t si dent i t y andqual i t yoft hepr oduct Towhatext entanyr el i ancei sr easonabl e ?Ivy didn’t communicate that she wants the jacket for special purpose – expedition to the Himalayan mountain range

Prepared by: Tze Kay Khern

Question 2 Dear Starstruck Solicitors, Thank you for your help in this matter. As I explained to Jayne on the telephone earlier, I am the general manager of Grab&Run Ltd. We specialise in sales of agricultural machinery, however, we are currently considering entering into sales of grain and other agricultural foodstuffs. As part of our decision-making process, we want to make sure we understand the legal position around the transfer of property within generic goods such as industrial crops. The senior management team and myself are due to meet later this week where the exact scope of the report we require from you will be confirmed, however it will definitely need to include an analysis of the rules relating to the passing of property in unascertained goods. I’ll confirm the exact scope of what we need in your advice on as soon as possible. Additional information: Yvonne has updated me as to the exact scope of the report they require. In addition to your analysis of the rules relating to when property passes in unascertained goods, they have also requested your analysis of when risk passes in unascertained goods and an explanation of the distinction between specific and unascertained goods.

What they can contract – how to protect themselves – S.20(A) – difference between Rule 5 Risk – S.20 SGA – it is capable to apply to both equally – ascertained and unascertained goods. Undivided shares, s. 20A(1) Section 20A(1) provides as follows: This section applies to a contract for the sale of a specified quantity of unascertained goods if the following conditions are met: (a)

the goods or some of them form part of a bulk which is identified either in the contract

or by subsequent agreement between the parties; and

(b)

the buyer has paid the price for some or all of the goods which are the subject of the

contract and which form part of the bulk. (*there must be a pre-paying purchaser)

After Re Wait, Law Commission inserted S.20A and Section 61(1) – Definition of ‘bulk’:

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“a mass or collection of goods of the same kind which (a)

is contained within a confined space or area, and

(b)

is such that any goods in the bulk are interchangeable with any other goods therein

of the same number or quantity.”

Speci ficgoods:“ Goodst hatar ei dent i fiedandagr eeduponatt het i meacont r acti s madeasbei ngt hesubj ectmat t eroft hecont r actwher et hepr oper t ypas sest ot he buy eratt het i met hepar t i est ot hecont r acti nt endi tt opas s. " 

“ goodsi dent i fiedandagr eedonatt het i meacont r actofs al ei smadeand i ncl udesanundi v i dedshar e,speci fiedasaf r act i onorper cent age,ofgoods i dent i fiedandagr eedonasaf or esai d” ,s. 61( 1)SGA

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Unascer t ai nedgoods :“ t hegoods ,whi c har enotsepar at el yi dent i fiedor as cer t ai nedatt het i meoft hemaki ngoft hecont r act ,ar eknownas ‘ unas cer t ai nedgoods. ’ Theyar ei ndi cat edordefinedonl ybydescr i pt i on.Pr oper t ypassesonl ywhent he goodsar eascer t ai nedandi nadel i v er abl es t at e.

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Prepared by: Tze Kay Khern

Question 3 Advice to Smith+Smith Management Consultancy Memo to Starstuck Solicitors December 2017 To Whom It May Concern at Starstruck Solicitors, Many thanks for your help with this matter – I know your team charge by the hour, so I’ll keep this brief. We, (Smith+Smith) have been asked to complete a project looking into the Consumer Rights Act 2015. We are still deciding the precise scope of the enquiry but it appears to us as though the 2015 Act has done very little to enhance the law of sale of goods. We are aware that it has made more fundamental changes around unfair contract terms and enforcement, but do not want you to address those issues. Instead, we want your analysis of what changes the 2015 Act has introduced around the sale of goods. In particular, we would like from you an analysis of whether the Act has substantially modified the law as previously applied in the Sale of Goods Act 1979. I am sorry to not be able to give you a more specific brief at this time – I am meeting with the Project Team later this week where we will agree the final terms of reference for your report. I will confirm as soon as possible.

Additional Information: Alan has met with the Project Team. As his memo last week indicated, the scope of your report should be an analysis of the impact of the Consumer Rights Act 2015 on the Sale of Goods Act 1979. In particular, however, Alan has asked for a detailed analysis of at least one area where the 2015 Act has led to improved protection for the customer and at least one area where the Act has made no changes.

Improved protection for the consumer Undoubtedly, the main impact of the CRA in relation to the supply of goods will be as a result of the new three-tier remedy structure that will usually apply when a trader breaches the standards contained in the Act. This replaces the current two-tier system available under the Sale and Supply of Goods to Consumers Regulations 2002 ("SSGCRs"). The three-tier structure generally operates as follows: 1. Short term right to reject This is a brand new statutory remedy which is available within the first thirty (30) days of the goods being supplied, unless the expected life of the goods is shorter (e.g. in the case of highly perishable goods). The consumer is entitled to treat the contract as at an end and receive a refund, but must make the goods available for collection by the trader. The trader is normally responsible for the cost of collecting the goods from the consumer, unless the contract requires the consumer to return the goods to the place where they took possession

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of them, or the consumer takes the goods there voluntarily. The short term right to reject does not apply where the only breach relates to incorrect installation. 2. Right to repair or replacement This remedy already exists under the SSGCRs. The trader must provide the repair or replacement within a reasonable time, without causing significant inconvenience to the consumer and at no cost to the consumer. Note that the consumer cannot choose a replacement over a repair or vice versa if the chosen remedy is disproportionate compared to the other remedy. If the consumer requests a repair or replacement within the first thirty (30) days of the goods being supplied then the short term right to reject is paused. On provision of the repaired or replaced goods the consumer has either the remainder of the thirty (30) day period or seven (7) days, whichever is the longer, in which to reject the goods if they still do not conform to the contract. Unlike the SSGCRs, the CRA and associated guidance have clarified that the consumer only has to accept one repair or replacement. If the goods still do not meet the consumer's rights, whether because the original issue persists or a new one has arisen, the consumer can exercise their right to a price reduction or final right to reject (see below). 3. Right to a price reduction or final right to reject This remedy also already exists under the SSGCRs and is available where a repair or replacement is unsuccessful, impossible or not provided within a reasonable timeframe or without significant inconvenience to the consumer. Essentially, the consumer chooses either to keep the goods and claim a reduction in price or return them and claim a refund. The reduction in price must be an appropriate amount taking into account all of the circumstances and can usually take into account any use that the consumer has had from the goods. However, no deduction for use can be made where the goods are rejected within six (6) months of supply except in the case of motor vehicles. In the case that the trader breaches the requirement that it has the right to supply the goods, a longstanding requirement under the SGA that has been imported into the CRA, the consumer is entitled to reject the goods for a full refund. It is worth bearing in mind that the statutory remedies in the CRA (whether relating to goods, services or digital content) do not prevent the consumer from seeking other remedies, such as suing for breach of contract, but there can be no double recovery.

Digital Content The CRA introduces a new regime specifically for digital content – defined as data which is produced and supplied in digital form – and offers some welcome clarity as previously it was often unclear as to whether digital content should be categorised as goods or services in certain contexts. Digital content will often be supplied in tangible form (e.g. music on a CD), but is increasingly being provided in intangible form (e.g. an mp3 music download). It can even include virtual goods in computer games where they have either been bought with real money or with virtual currency that the consumer has paid real money to obtain. The CRA also makes it clear that digital content can be provided for a one-off payment or ongoing subscription. The standards which apply to digital content, which are clearly inspired by the goods standards, are that it must be of satisfactory quality, fit for purpose and as described. A two-

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tier statutory remedy structure has been introduced in the event that those standards are breached:

1. Right to a repair or replacement As with the goods provisions, the trader must provide the repair or replacement within a reasonable time, without causing significant inconvenience to the consumer and at no cost to the consumer. Again, the consumer cannot choose a replacement over a repair or vice versa if the chosen remedy is disproportionate compared to the other remedy. However, unlike with goods, there is no cap on the number of repairs or replacements that the trader can provide before the consumer is entitled to a price reduction (see below). 2. Right to a price reduction This remedy is only triggered if repair or replacement is impossible or not provided within a reasonable timeframe or without significant inconvenience to the consumer. The reduction in price must be an appropriate amount taking into account all of the circumstances and can be anything up to the whole price paid.

S.14(2) CRA 2015 – what is the mischief that it is intended to remedy? Historically before the court – different term – description vs quality, intrinsic vs extrinsic – we don’t need that protection – secret profit rule – agency Unfair contract terms Change: streamlining of the existing law and addition of new categories of terms that are likely to be considered unfair to a so-called gray list. At present, the law on unfair contract terms is enshrined in the Unfair Contract Terms Act and the Unfair Terms in Consumer Contract Regulations. The Act will consolidate what is deemed "unfair" in consumer contracts. The "fairness test" remains at the center of the law. Essentially, a term that causes a significant imbalance in the parties’ rights and obligations, to the detriment of the consumer, will be excluded from the contract and will not be binding on the consumer. But see comments above on the requirement for certain terms to be "prominent" and "transparent". As with previous legislation, the Act provides a blacklist of terms that will always be considered unfair as well as a gray list of terms likely to be considered unfair. The blacklist remains largely the same (e.g. restriction of liability for death or PI resulting from negligence). The Act does add the following three terms to the gray list that may be considered unfair: disproportionately high prices where the consumer decides not to conclude or perform the contract (e.g. disproportionate cancelation charges) terms which allow the trader to determine characteristics of the goods after the consumer has entered into the contract and terms which allow the trader to determine the price of the goods after the consumer has entered into the contract Traders should review their standard terms and conditions ahead of the Act coming into force for any terms that may fall under one of these new categories.

Prepared by: Tze Kay Khern

Essential reading: https://www.fieldfisher.com/publications/2015/09/consumer-rights-act-2015-what-haschanged https://www.dlapiper.com/en/uk/insights/publications/2015/10/law-a-la-mode-issue-17/ukconsumer-rights-act-2015-seven-key-changes/

The act has made no changes 

Core principles of Sales of Goods Act 1989

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TheCRAmer gest hev ar i ousr ul esundert heUnf ai rCont r actTer msAct1977 ( " UCTA" )andt heUnf ai rTer msi nConsumerCont r act sRegul at i ons1999( t he " UTCCRs " )whi chgi v econsumer spr ot ect i onagai nstcont r act ual wor di ngt hat coul dbeusedt ogi vet r ader sanunf ai radv ant age.Whi l stmuchoft hel aw r emai nst hesame,t heCRAhasal soi nt r oducedsomel i mi t edchanges .

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Nemo dat rule – Ingram v Little – solution – tension between property and possession- majority and minority- Shogun- inapplicability- S27 of Hire Purchase Act to purchase third party purchaser- debtor- S27 requires a debtor- SGA can’t amend this problem- Hire purchase is outside the scope- CRA deals with all the supply contract- all the exceptions to nemo dat- update the language – move away from mercantile agent

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Implied term- the substances are unchanged – S14(2) CRA- but they did an extension- substantively CRA does not done anything to the change of the implied terms of SGA- i.e. satisfactory quality, fitness for purpose.

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Actually for both of this area – statutory term and passing of property – the problems in the mid 90s by the Law Commission – two consultation paper – criticism – it didn’t need any changes to this area as it is resolved in SGA

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Fundamentally, area unaffected by CRA is the passing of risk – S20A – depends on whether it is SGA or S29 CRA – risk passes...