LU1004 LLB1 CONTRACT LAW

GENERIC FEEDBACK ON THE MAY 2012 EXAMINATION

Subject to whatever the external examiner may do, this year 207 students sat the May examination.
Of those, 2 got firsts (1%); 73 got a 2/1 of some sort (35.2%); 66 got a 2/2 of some sort (31.9%); 46
got a mark in the 40’s (22.2%); and 20 students failed (9.7%). The examiners would regard a split of
marks in these proportions as reasonably typical for a first year compulsory module, and actually as
a reasonably good year.

As a general comment, most students tended to be “in the right parish” at least some of the time, in
the sense of identifying the particular topic(s) which the questions they attempted were about.
Drilling down into the detail on each topic, the treatment was rather more varied. In terms of
balance within the scripts, the instances where the student had clearly run out of time and dashed
off the final question in very little time were fairly few and far between. So the advice to people to
use their watches in exams seems to be working!

Question 1

Relatively few students attempted this question. Answers were varied. Those which merely recited
the various case-law on offer and acceptance etc. did not particularly prosper. In order to get a good
mark (which some students did), it was necessary to keep a clear focus on answering the question,
to take a position and develop an argument. We think nobody referred to RTS Flexible Systems v.
Molkerei Alois Müller (SC2010), the key modern case relevant in this area.

Question 2

The consideration/promissory estoppel question was a popular choice (which does not surprise us).
Students feel a comfort zone in this Term1 field. Most people answered the question pretty well,
understood the law and were able to apply it to the facts with reasonable confidence.

Consideration and promissory estoppel generally go hand-in-hand, and to get a decent mark,
students needed to discuss both. More students than we might have expected examined one or
other of them, but not both.

The few people who thought some element of duress or undue influence had been applied by Bobby
against Anna seemed to be missing the point.

There were differing views about whether Anna had provided consideration for Bobby’s promise to
reduce the rent, about how long this changed arrangement might have been intended to last and
about whether it could survive in the changed circumstances. Consideration must, of course, move
from the promisee but does not have to move to the promisor, so if, in return for B’s promise to
accept reduced rent, A had promised to provide some benefit to some third party at B’s request,
that would have amounted to good consideration. There was nothing of that sort here. It was hard
to see any third party benefitting from what had been agreed. There were some very nice attempts
to find Williams v. Roffey style “practical benefit “ consideration for Bobby here (saves him the
trouble of having to go and find a new tenant in a maybe difficult lettings market, etc.), showing
good ability to think in a common sense, “feet on the ground” sort of way.
Most people reached the (to our mind right) conclusion that promissory estoppel would operate in
Anna’s favour to prevent B claiming the full rent for the period while she had been a student, but
that B could force a reverter to the original level of rent by giving a reasonable period of notice to A
once she had finally stopped studying.

Question 3

Relatively few students attempted this question, and a significant proportion of those who did did
not prosper very well with it.

There were a number of different contracts in play, the interaction between which was rather
important.

Most people worked out that BBL, in not completing the works at the hotel by the agreed
completion date, was in breach of contract. (N.b. in reality most building contracts provide for a
mechanism for the supervising “contract administrator” to grant extensions of time for completion
to the contractor for various permitted reasons beyond the contractor’s control (bad weather,
unexpectedly difficult sub-soil conditions, etc.). You were not expected to know that, and there was
no suggestion of any agreed extension).

It was then necessary to consider what remedies for BBL’s breach Eddy might have, which involved
considering what sort of contractual term the time term in the building contract was. Some people
went on to ask the condition/warranty question; innominate term was not a suggestion that
occurred to many people. Most decided it was probably a condition. Opinions differed about
whether that entitled him to terminate the contract without himself being in breach, or whether he
might have committed a breach in terminating in this way, and as to Eddy’s liability to pay BBL for
the work done so far and what if he had to pay more to a different builder to finish off the works.

Some people thought that BBL’s not finishing the works by the agreed date meant the contract
between Eddy and the American birdwatchers was frustrated (but then were generally not too sure
what the consequences of that would be). With respect, that cannot have been right. Certainly the
builders’ delay was a factor beyond Eddy’s control, but there is a foreseen/foreseeability
requirement in frustration too. Eddy had clearly foreseen the risk of the builders over-running (“As
Eddy had feared, BBL had indeed not completed the refurbishment works by the end of March….”
(third paragraph of the question)). Had he foreseen this at the time of making the building contract
though (that is the relevant time for foreseen/foreseeability in frustration)? If he had not himself
foreseen it at that time, would it have been foreseeable at that time to a reasonable hotelier in
Eddy’s position. This was not an issue that people who raised frustration as an issue discussed. In any
event, Eddy had clearly decided to take the risk of the hotel not being ready by the time the
American visitors were due to arrive (and had not made that contract conditional on the works being
finished), and this had backfired on him.

There were a few references to the possibility of his paying the builders more money if they would
finish on time, and the consideration aspects of this: Williams v. Roffey in the back of people’s
minds! On the facts, however, there was no suggestion this had been considered, so this was
irrelevant.

Most people identified that Eddy would be in breach of contract with the Americans in cancelling
their booking, and would be liable to pay them damages for breach of contract (but did not go on to
say that (i) if the Americans had had to pay more for similar accommodation in the area, the extra
they had to pay out would be the amount of their loss but (ii) if they had found other
accommodation in the area at the same or a lower price, they would have suffered no loss as a
result of Eddy’s breach, apart, perhaps, from inconvenience/distress/loss of amenity (not such nice
surroundings) etc. (and refer to the difficulties in relation to damages with non-financial losses).

The implications of the contracts (or lack of contracts) with the customers at the hotel on Eddy’s
damages claim against BBL were in the main not very precisely handled.

- There is a causation point that Eddy would have to show that the builders’ over-run was
the cause of his being in breach of contract with the American guests (i.e. that, but for
that, he would have been entirely ready to receive them on the agreed dates).

- There is a foreseeability/remoteness point: probably the loss of profit on ordinarily

profitable lettings of hotel rooms in the circumstances at this time of year would have
been recoverable from BBL under the first limb of Hadley v. Baxendale (follows in the
natural course of things from the breach; because anyone would have expected the
hotel to be open for business and making some profit on lettings in early April). For Eddy
to recover the loss of profit reflecting what appear to have been unusually profitable
lettings (high price being charged to the Americans), Eddy would have had to show that
BBL had been aware that he had extremely profitable business dependent entirely on
their finishing on time (Hadley v. Baxendale, second limb: Victoria Laundry (Windsor)
Ltd. v. Newman Industries). There was no suggestion on the facts that the builders had
been made aware of that. On that basis, only the lower level of “loss of profit on
hypothetical normally profitable lettings” at this time of year would have been
recoverable from the builders. I think we saw no reference at all to Transfield Shipping v.
Mercator Shipping: it would have been interesting to have seen what effect people
thought the principles of that case might have in a situation like this.

- In damages for breach of contract, the expectation is that the claimant will have taken
reasonable steps (but not unreasonable steps) to mitigate his loss, and will not recover
damages to the extent he has not done so. Eddy refusing to accommodate the muddy
mountain bikers (who seemed willing to live in the middle of a building site if they could
pay next to nothing for the privilege) may or may not have been failing to take
reasonable mitigation steps. If a reasonable hotelier in his position would have had a
real concern about the reputation of the hotel in doing such business, maybe the refusal
to take the mountain bikers and their bikes in would not have amounted to a failure to
mitigate.

All in all, a question with more in it than met the eye for most people.

Question 4

A classic misrepresentation question, which most people did reasonably well but where some
misunderstandings were nevertheless generally visible.

Most people dealt with the “is it a misrepresentation and has Lara been induced by it to buy?” and
the possible effect of Ken’s expert knowledge fairly well. One or two people concluded that the
latter made the description of the mirrors into a term of the contract, and referred to the Sale of
Goods Act implied terms in relation to sales by description: rather sophisticated stuff. But if people
did that, they were meant to consider the alternative that the statements/descriptions had not
become terms of the contract and so were misrepresentations instead. Some considered both
alternatives; some did not.
Some people went into some detail on the effect of advertisements in shop windows as invitations
to treat rather than offers, but did not seek to demonstrate how this might be relevant to
misrepresentation (the examiners’ view is that it is irrelevant).

Some people did not mention the different types of misrepresentation at all; others were vague
about the differences and why the classification matters. Surprisingly few people majored on s.2(1)
Misrepresentation Act; many did not mention it at all. Those who did tended to be aware in a
general way that it is the claimant’s favourite basis of claim, but in the main were not sure exactly
what advantages it gives to claimants.

Remedies for misrepresentation were tackled rather patchily. Most people knew to mention
rescission (though not many were clear quite how it works) and that Lara might have lost the right to
rescind. The treatment of damages for misrepresentation was more mixed, with some people
erroneously assuming the principles work in the same way as for damages for breach of contract
(Hadley v. Baxendale etc.) and very few wrote knowledgeably about s.2(2).

The exclusion clause: many people thought Lara was buying as a consumer, when they had been told
she was buying for use in her interior design business. While more and more consumer law tends to
equate micro-businesses with consumers in consumer protection terms, the issue should have been
spotted.

Most people were sound on the incorporation and interpretation points; treatment of s.3 MA1967
and the connection with the UCTA reasonableness requirement was more patchy.

Question 5

This was a popular choice. There were two elements to the question, (1) in the absence of an
express term as to “seaworthiness”, could a term to that effect be implied and, if so, what term?;
and (2) the effect (if any) of the exclusion clause. Most people spotted the exclusion clause angle
(and in the main dealt with that fairly well). Most referred to the implied term point to some extent,
though some made no reference to it at all.

The implied term: the people who identified this as an issue in the main dealt with it pretty well.
References to the Supply of Goods and Services Act 1982 were a sign of a quality answer. Detail of
whether the implied term is strict liability based or based on a duty of care was not discussed. Far
more people, however, referred to the fitness for purpose/satisfactory quality implied conditions in
the Sale of Goods Act: nice try, sort of getting close (we gave credit accordingly), but this was hire of
goods not sale of goods! The two are different.

Some people seemed to get UCTA unreasonableness twisted up with the test for implying a term at
common law (which is necessity not reasonableness) and reasoned that, because they thought an
exclusion of an implied term would be unreasonable, there must be an implied term.

The people who simply said, without more ado, “any reasonable person hiring a pleasure boat would
expect it to be watertight and not sink” were applying good common sense, but not going the
further step to trying to slot that idea into contract law.

As to the exclusion clause: the “ticket” etc. cases on incorporation had been well understood,
though people recited the facts of those cases in what we thought was generally too much detail
rather than moving on to other issues (feeling happy in a comfort zone, maybe?). A heartening
number of people considered but sensibly dismissed the possibility of a term being implied through
a historic course of dealings between the boat yard and Harry’s parents. Most people identified that
s.2(1) UCTA was relevant, though hardly any spotted that if that section operates, a clause drafted in
the way this one was (“no liability will be accepted….for any loss howsoever occurring”) would be
completely ineffective without anything further (the severance rules on illegal contracts (the “blue
pencil” test) mean the court in such a case simply treats the offending clause as crossed out, and
does not write back into the contract a less drastic clause which it would regard as reasonable).
Strictly speaking, then, references to s.2(2) on this clause were obiter dicta!

There were few references to the Unfair Terms in Consumer Contracts Regulations 1999. The people
who did appeared to understand them quite well.

Most people concluded (we think rightly, on the facts) that the exclusion clause was not effective.
Few people went on from there to consider for what sorts of losses Harry and Jack might be able to
obtain damages (personal injury, costs of medical care for Jack, damage to watch, damages for loss
of enjoyment Jarvis v. Swan Tours-style, etc.)

Only a small number of people identified that Jack (the son) was almost certainly not a party to the
contract between Harry (his father) and the boatyard, so that some way of enabling him to sue the
boatyard (or possibly Harry claiming on his behalf as well as in respect of his own losses) would have
to be found.

Question 6

Almost nobody attempted this question. Those who did found it did not suit them.

JPS
23rd May 2012
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