Exam, questions and answers - Commercial law exams 2012-2014 PDF

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Commercial law exams 2012-2014...

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MLL215 Commercial Law

Final Exam, T2, 2012

MLL215 Commercial Law Final Exam 2012 Answer all three questions – Time allowed: 2 hours Question One Abraham Lincoln runs a novelty goods store in Chadstone. Vampire Hunters Pty Ltd is a company that manufactures novelty goods. Abraham contracts with Vampire Hunters to purchase 5000 Dracula dolls and 4000 Frankenstein dolls. The contract is silent as to when property passes. Abraham has paid for the goods. Vampire Hunters load 3000 of the 5000 Dracula dolls onto a truck. The truck sets off for Abraham’s store, but on the way it has an accident and half the dolls are destroyed. (i)

Has property in the 3000 dolls passed to Abraham? (4 marks) 

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 

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ACL does not apply if o the goods are for the purpose of resale o the two parties are both traders Contract for the sale of goods? o S6  Yes S 22; property passes when the parties intended o No intention stated- silent when property was to pass Time of the contract; dolls are specified and ascertain o s 23(1)  Unconditional contract in a deliverable state property passes when the contract is made o Therefore property has passed to Abraham o Ascertained when they were loaded onto the truck S 25 the risk lies with the party at fault o Property has passed unconditionally IF another company’s truck is used  Therefore Abraham is responsible for the dolls o Property has not passed unconditionally IF Vampire’s truck is used  Therefore Vampires is responsible

Vampire Hunters sends off the 4000 Frankenstein dolls in another truck. When Abraham receives the dolls he notices that some of them look nothing like Frankenstein. Abraham sells some of the dolls to customers. The customers quickly report that they have contracted dermatitis from the dolls 1/4

MLL215 Commercial Law

Final Exam, T2, 2012

and that the dolls fall apart easily. Abraham discovers that many of the dolls have this problem. (ii)

Have Vampire Hunters breached either of the implied terms of merchantable quality or correspondence with description under the Goods Act 1958 (Vic)? (8 marks)

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Merchantable quality –s 19 o Fit for any one of the normal purposes  Doll used to play with or collect/display  Does dermatitis interfere with all purposes?  Merchantable quality is dependent on the purpose o For children: not merchantable  Especially if they were marketed specifically for children o For display: still merchantable

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Goods sold by description- s 18 o Identity:  If selling/buying a doll and receive a doll then it is goods by description  Dermatitis would not be detectable upon inspection (Knitting Mills) o Not a breach of s 18  If selling as a Dracula doll and does not look like Dracula then it would breach s 18 

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(iii)  

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Breach of s 18

Not fit for purpose Possible sale by description (can be argued either way)

Are the Frankenstein dolls of acceptable quality under the Australian Consumer Law? (6 marks) Implied conditions under ACL do not apply because they are for resale Fit for all purposes o Display or play?  Product test- s 54  Free from defect  Acceptable in appearance and finish  Doesn’t look how they should  Safety  Cause dermatitis  Durable S 54 (7)- inspection 2/4

MLL215 Commercial Law

Final Exam, T2, 2012

o Would have an inspection shown defects

The remaining 2000 Dracula dolls are at Vampire Hunters’ factory. The 2000 Dracula dolls are separated from about 15,000 other dolls. However, Abraham’s contract is not placed on the boxes in which they are packed. That day Vampire Hunters goes bankrupt and a liquidator is appointed. (iv)    

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Who owns the 2000 Dracula dolls? (2 marks) Case: gold case… Unascertained dolls o No property in unascertained goods More than setting the goods aside o federspiel 23(4) – in contract for the sale of specific goods, the seller is bound to put them in a deliverable state o Has not been done Abraham has title, not possession

3/4

MLL215 Commercial Law

Final Exam, T2, 2012

Question Two Greendale Community College Pty Ltd is a small company that runs a local higher education institution in the Melbourne suburb of Greendale. Craig Pelton is the Director of Greendale’s higher education institution. City College Pty Ltd is a large corporation that runs a number of higher education institutions in Victoria. Greendale owns an old space simulator. City College asks if it can borrow the space simulator. Craig Pelton agrees to the request and lets City College take the simulator to one of their institutions. City College shows it to the public and lets them to use it. City College also invites people to estimate its value. Craig is aware that this is happening. A week later City College sells the space simulator to a wealthy collector.  (State Nemo Dat principle)  Exception o Estoppel; representation- has it been represented that they can actually estimate the value and sell it??  Craig is aware they are valuing it  Representation must be clear and unequivocal o No estoppel here  Negligence  Does silence stop title? o No –(case: Morgate o Mercantile agent  Must be in the ordinary course of dealing  Can a high school sell a simulator in the ordinary course of dealing o Not usually  Main purpose is to provide education  Voidable title  HOWEVER; can have a one of transaction- mortgage finance v richard o Nemo dat would apply

City College and Greendale agree to stage a paintball war on a part of Greendale’s campus. Tickets for the event are sold to the public. The event is a promotional activity for both Greendale and City College and it is a commercial activity. The prize money is set at $100,000. On the eve of the event City College requests that Greendale indemnify it for 4/4

MLL215 Commercial Law

Final Exam, T2, 2012

any damage caused during the paintball war. City College knows that Greendale has spent a substantial amount of money on advertising for the paintball war and that it will suffer a financial loss if the event does not go ahead. Craig Pelton reluctantly agrees. The paintball war is meant to take place in a designated part of Greendale’s campus which is confined from the main campus. Some City College employees take part in the paintball war. The City College employees encourage members of the public to shoot paintballs outside of the designated area. With the encouragement and participation of the City College employees the paintball war escalates outside the designated area and onto the main campus. Substantial damage is done to the Greendale campus and several Greendale students are injured. A City College employee claims the prize money on behalf of City College. It later emerges that City College had planned to damage Greendale’s campus from the outset of the event. Greendale needs the prize money to repair the damage. (i) (ii)

Does the sale of the space simulator fall within an exception to nemo dat? (10 marks) Are City College’s actions with regard to the paintball war unconscionable within the meaning of the Australian Consumer Law? (10 marks)

5/4

MLL215 Commercial Law

Final Exam, T2, 2012

Question Three Jeff Winger owns an animal shelter in Melbourne. Jeff has previously been insured with X Company and in 2008 he made a claim under his insurance contract when his shelter was damaged by his animals. In early 2012 Jeff sought insurance from Z Company. Z Company asked Jeff whether he had previously claimed under any other insurance contract. Jeff stated that he had not made any claims. Z Company provided Jeff with insurance for the animal shelter. It is a condition of the contract that the animals are to be securely caged at all times. One night Jeff fails to lock the cages. Some animals escape and damage the shelter. Jeff seeks to make a claim under the insurance contract with Z Company. Advise Z Company as to whether: (i) Jeff has breached his duty of disclosure; and  s 21A does not apply- as it is a business insurance  s 21 of ICA: insured must disclose every matter known to be relevant to the decision of the insurer OR a reasonable person would expect to be relevant even if not specifically asked o This includes suburbs of high risk and previous claims with THAT insurer o UNLESS it diminishes the risk or is known to the insurer  s 28- was asked specifically, and did not disclose (ii)

Whether Jeff has breached a term of the insurance contract.

 Breached the term that all the animals would be left in their cages and they be locked securely o The animals were not in their cage and the cages were not locked securely  s 54(2) the act or omission contributed to the loss  therefore insurer does not have to pay indemnity (20 marks).

6/4

MLL215 Commercial Law Final Exam

Trimester 2, 2013

QUESTION ONE Answer all parts of Question One. Question One is worth 20 marks

Ross is a dentist in Melbourne. Ross runs a very large dental practice which comprises a number of dentists and a very large number of patients. Ross hires Rachel to purchase dental supplies on his behalf. Ross places a price limit of $6000 on the amount that Rachel can spend in any given transaction. However, Rachel routinely exceeds the price limit by a few thousand dollars and Ross always accepts her explanations. One day Rachel buys dental supplies from Phoebe and she exceeds the price limit by ten thousand dollars. (i)

Ross seeks your advice as to whether this transaction is within Rachel’s actual implied authority. (5 marks)

The next week, while Rachel is out visiting dental suppliers she notices some artwork that is listed for sale at an art gallery. Rachel talks to the gallery’s owner, Chandler Bing, and then buys two paintings on Ross’s behalf. The paintings need to be packed before Rachel can take them from the gallery. Chandler gives Rachel a receipt for the paintings. Rachel tells Chandler that she will pick up the paintings the next day. Later that day Ross finds out what Rachel has done. Ross is incensed and tells Rachel to cancel the transaction. An hour later Chandler discovers that Rachel probably did not have the authority to purchase the paintings and he calls to cancel the transaction. Ross does not answer the phone and so Chandler leaves a message. Ross is busy and does not listen to the message. Ross later discovers that the paintings are worth more than the amount paid by Rachel. Ross ratifies Rachel’s conduct. Ross then listens to Chandler’s message. Ross calls Chandler and tells him that he will be collecting the paintings. (ii)

Advise Chandler as to whether Ross’s ratification is effective. (5 marks)

Before Ross can collect the paintings from Chandler, the gallery is visited by Monica Gellar. Monica is entranced by the paintings and demands that Chandler sells them to her. She is unaware that Ross has purchased them. Chandler sells the paintings to Monica who immediately takes them away. (iii)

Assuming that property i n the paintings has passed to Ross can Monica rely upon an exception to nemo dat? (6 marks)

(iv)

If Monica has to return the paintings to Ross would she be able to sue Chandler under any provision of the Australian Consumer Law? (4 marks)

1/4

MLL215 Commercial Law Final Exam

Trimester 2, 2013

QUESTION TWO Answer all parts of Question Two. Question Two is worth 20 marks.

Part A Leonard was an intern at Hawkeye Prudential Investments (HPI). HPI is one of Australia’s leading investment banks. Each year thousands of eager undergraduates and graduates seek to be interviewed for an unpaid internship. The unpaid three month internship is a prerequisite for being considered for a graduate job at HPI. During his time at HPI Leonard worked under three different partners. The partners were each quite demanding with their work tasks and were often entirely unaware of the work agendas of the other partners. Similarly, the human resources officer in charge of the interns only spoke to Leonard on an infrequent basis. Leonard often worked 80 hour weeks at HPI. From time to time Leonard and other interns would voice their concerns to the human resources officer and other partners. The partners were aware that the interns did substantial unpaid work. Many of the partners at HPI and other senior staff were aware that the interns worked under very stressful and demanding conditions. One week Leonard worked for 72 straight hours over the course of three days. During this time he worked for three different partners. One partner expressed concern about Leonard’s wellbeing. On the fourth day Leonard suffered a massive heart attack. Leonard is now severely unwell and is likely to be unable to engage in stressful work in the future. (i)

Leonard seeks your advice on whether HPI’s actions were unconscionabl e within the meaning of s 20 of the Australian Consumer Law. (10 marks)

Part B Arnold is a fence builder from Balwyn. Arnold was recently hired by Kimberley to build a fence at her property in Kew. After Arnold had commenced work, but before he had been paid, he had a major dispute with Kimberley. Arnold has now left Kimberley’s property with the fence half built. Arnold wants to take the fence away, but his employee Willis has suggested that this might not be possible under the law. Arnold is not sure what Willis is talking about. (ii)

Arnold seeks your advice on whether his contract with Kimberley is a contract for work or a contract for the sale of goods. (6 marks).

Arnold buys the wood for his fences from Daphne’s Timberyard Supplies (DTS). He recently paid $5000 for an order of wood. However, Arnold has recently heard that DTS is having financial troubles. Does Arnold own the wood he has paid for if: (iii)

It has been set aside for him in the DTS yard, but Daphne has not yet called him to tell him to collect the wood; (2 marks) or (Question continues overleaf) 2/4

MLL215 Commercial Law Final Exam

(iv)

Trimester 2, 2013

Daphne is required to paint the wood blue, which she has done. However, it is stolen before she can call him to tell him to collect the wood. (2 marks)

3/4

MLL215 Commercial Law Final Exam

Trimester 2, 2013

Question Three Answer all parts of Question Three. Question Three is worth 20 marks.

Molly and Desmond bought a new house together. They paid the vendor’s agent the deposit on the day of the auction, and signed a contract for a 90 day settlement period. They then arranged bridging finance with a financial institution. Because the current owners had sufficient insurance coverage, Molly and Desmond applied for cover which would start on the day of settlement, in 90 days time. Molly and Desmond received an insurance policy and form from King Insurance. The policy includes a statement that: ‘Where indicated the new Insurance Contract Amendment Act applies to this policy.’ Prior to questions 3 – 9 of the form it reads, ‘The new Insurance Contracts Amendment Act applies to all disclosures and representations made by you, the applicant.’ Question 4 of the form asks ‘Is the property in an area that is prone to flooding?’ Molly and Desmond consulted the vendor’s disclosure statement where they found no reference to flooding either in it or in the attached certificates, one of which was a commissioned ‘natural hazards’ report. They therefore answered ‘No.’ Question 6 asks: ‘Are you aware of any other periodic natural hazards to which the area is exposed?’ Molly and Desmond again answered ‘No.’ Molly and Desmond submitted the form and before the end of the week rece ived confirmation of their coverage, and a copy of their policy contract dated to 90 days subsequent to the day of application, which they signed, returned one copy of and retained one copy for their own records. The insurance policy provides, at clause 30: ‘This insurance policy does not provide coverage for water damage to the insured property in the case of water which has escaped from a water storage device either on the property itself, or on a neighbouring property.’

Prior to the day of settlement torrential rains caused severe flooding in some nearby suburbs. Newspapers reported that ‘the annual rains were heavier than usual, but certainly nowhere near as bad as records indicate.’ Molly and Desmond’s neighbour’s property contained a large underground water tank. The tank was so overfilled that water backed up in the system. Two days after settlement Molly and Desmond could only watch in horror as water rose through boards of their wooden floor to the level of the windows, remained there for 48 hours and finally subsided. A report on the damage confirmed that the cause was leakage from the neighbouring water tank. (i) (ii)

Molly and Desmond cl aim on the insurance policy for flood damage. The insurer wants to avoid payment. Advise King Insurance. (12 marks) Would your advice be different if all the relevant amendments to the Insurance Contract Act were in force? (8 marks)

4/4

MLL215 Commercial Law

Trimester 2, 2014

MLL 215 COMMERCIAL LAW Examination Trimester 2, 2014 Special Instructions This examination is OPEN BOOK. Calculators are ALLOWED. Writing time is 2 HOURS. Reading time is 15 minutes This examination comprises 4 questions. You are required to answer all questions. The questions are worth the following marks: Question 1 - 10 marks Question 2 - 25 marks Question 3 - 10 marks Question 4 - 15 marks. This examination constitutes 60 % of your assessment in this unit. In answering the questions, please ensure that you use relevant primary (and secondary) sources to support your analysis and conclusions reached. Please use the script booklet/s provided for your written responses, making sure that each question is clearly numbered.

This examination question booklet must be handed in with any used answer booklets. Page 1 of 7

MLL215 Commercial Law

Trimester 2, 2014

Question 1 Tony is a director of Eye Spy Pty Ltd (Eye Spy), a private provider of protective services. On 2 October, Julia, the sales manager of Worldly Ltd, approached Tony offering to sell high tech surveillance equipment to Eye Spy. Tony informs Julia that, while he does not have authority to contract on behalf of the company, he will take the offer to the Board of Directors of Eye Spy. Tony informed the Board of the offer. The Board resolved to accept the offer and informed Julia of this by letter dated 10 October. However, unbeknown to the rest of the Board, Julia had, on 9 October (precisely 24 hours prior to the Board’s resolution), informed Tony by telephone that she was withdrawing the offer because she had found another purchaser. The Board of Eye Spy claims that the withdrawal was ineffective and seeks to have the contract enforced. (a) Advise Eye Spy Pty Ltd of its rights, if any, against Julia.

(5 marks)

(b) Would your advice be different if Tony, acting outside his scope of authority (as he is prone to do), purported to accept Juli a’s original offer on behalf of Eye Spy Pty Ltd? Explain. (5 marks) (Recommended time to spend on question 1: 20 minutes)

Page 2 of 7

MLL215 Commercial Law

Trimester 2, 2014

Question 2 Joe Hickey is a budding artist in Victoria who opened a small art shop in December 2013. In April 2014, Joe gave two landscape paintings to Bill Short, a reputed art teacher and enthusiast, to critique and put a value on them so that he (Joe) could sell them to potential customers. Bill had sold paintings for Joe before Joe started his own business, but Bill’s ...