Examiners' Report 2014: LA3017 Commercial Law - Zone A

Examiners’ report 2014
LA3017 Commercial law – Zone A
Introduction
The Examiners feel obliged to repeat advice given in previous years, which not all
candidates have followed. It is important to read the questions carefully and ensure
that the answer is appropriate to that question. Some candidates write essays
which, while touching on the general area of the question, do not answer the
question and appear to have been prepared.
A few candidates did not answer four questions. This makes it very difficult to pass.
It is important at least to attempt four questions. Some candidates began to answer
a question, then changed their minds and started a different question. This wastes
precious minutes and points to the need to take a little time at the start in deciding
which questions to answer.
Candidates must support assertions that they make about the law with cases,
legislation or academic work. It is not enough simply to say, for example, ‘the agent
had apparent authority’ without explaining why. But candidates should not simply
provide a list of cases without showing an understanding of what principles were
decided in those cases and how they are relevant to the discussion. When
distinguishing between cases or preferring one decision to another, it is necessary
to explain the distinction or preference: many candidates simply said that they did
not agree with a particular decision without explaining why they did not agree with it.
It is important not merely to be able to repeat the rules, but also to understand
them: why do these rules exist, what purpose do they serve, how are they applied?
Understanding the rules makes it easier to remember them.
It was clear that not all candidates had read the Recent developments.
Note that the extracts from scripts provided below are reproduced with any spelling
errors or linguistic mistakes left as in the original.
Specific comments on questions

Question 1
‘Commercial law is successful if it provides practical solutions to practical
problems facing commercial parties.’
Discuss by drawing on the materials you have studied in this module.
General remarks
Some candidates treated this simply as an opportunity to write about commercial
law in broad terms without addressing the question. An answer to this question
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LA3017 Commercial law
needs to show a good grasp of commercial law and an ability to deploy examples
taken from the module which illustrate the arguments being made.
Law cases, reports and other references the Examiners would expect you to
use
See the subject guide. Some candidates drew on cases and statutes not covered
by the module – many, for instance, referred to law on consumer protection.
Common errors
As mentioned above, candidates used as illustration law relating to purely
consumer issues; but, more importantly, candidates did not always address the
question asked.
A good answer to this question would…
show an understanding of the question and the issues underlying commercial law. It
was perfectly acceptable to challenge or to agree with the issue, or, as some did, to
say there are arguments on both sides. The Examiners were looking not for a
particular answer; they were looking for a discussion that addressed the question
and was based on well-chosen illustrations drawn from the areas studied in this
module.
Poor answers to this question…
did not address the question. Some answers just described a number of different
areas of commercial law without showing how they were linked to the question.
Question 2
‘Although the law of agency requires the consent of the principal for the
creation of an agency, the law may hold that consent to have been given,
even if neither the principal nor the agent has expressly given consent and
even if an agency was not contemplated by them as arising from their
relationship.’
Discuss.
General remarks
Many candidates did not address the question asked, failing to consider whether
and in what circumstances consent is required in agency, and instead talked
generally about different types of agency.
use
See subject guide, Chapters 2 and 3, particularly Section 2.1.
Common errors
Failure to address the question asked, which is to discuss the need for consent, and
failure to show a good understanding of the relevant cases.
This is a fairly broad question and so there is no single approach that might be
taken in writing the essay. Nevertheless, it is important to address the issue
highlighted by the question and, rather than writing broadly about agency, to
discuss whether or not consent is a general requirement in the law of agency, and
how it might be said that an agency exists even though a principal might not have
intended its creation (e.g. apparent agency, agency of necessity). A good answer
might also consider why agency may arise in such situations.
largely ignore the question and write generally about agency without considering
the role of consent.
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Question 3
Discuss the remedies available to a seller of goods to whom the price has not
been paid.
General remarks
The issue of the remedies for breach is an important area of law – after all it is what
clients are interested in. But it requires a solid understanding of how the Sale of
Goods Act works and how the relevant sections interrelate.
use
See subject guide, Chapter 6, particularly Section 6.3.
Common errors
While those candidates who answered this question generally had a reasonable
understanding of the relevant parts of the Sale of Goods Act, most did not refer to
any cases – see the subject guide and Sealy & Hooley (cited in the guide).
discuss the provisions in the Sale of Goods Act by accurately referring to the
sections and explaining/illustrating their application by reference to cases.
A few candidates treated this as a question concerned with the implied terms in
ss.12–15, ignoring the wording of the question. Some candidates wrote on the
remedies available to both sellers and buyers.
Question 4
Why might buyers and sellers favour a contract on c.i.f. terms rather than one
on f.o.b. terms?
General remarks
This needs a clear understanding of what is a cif contract and what is an fob
contract before it is possible to discuss the difference between them and why
buyers and sellers might prefer one above the other. The difficulty is to balance a
description of these contracts with a discussion of their relative merits.
use
See subject guide, Chapter 7, particularly Sections 7.2 and 7.3.
Common errors
Failure to show a clear understanding of fob and cif contracts, which made it difficult
for the candidate to discuss why one might be preferred above the other. In
addition, many candidates assumed the assertion in the question was correct and
did not think about why parties might use fob contracts.
provide a clear definition of cif and fob, discuss how they differ and how they
overlap, and give a sense of why and in what circumstances parties might favour
one above the other.
failed to show an understanding of the distinction between these types of contract
or their functions.
Student extract
A contract on CIF (cost, insurance, freight) means that the total price
agreed on the contract already incorporates the cost of goods, the cost of
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shipping the goods from the seller’s location to the buyer’s preferred
delivery location and the insurance cover associated with the shipment. As
these costs are already in the contract price, the seller will bear these costs
in the pure CIF contract. On the other hand, in a pure FOB (free on board)
contract, the buyer will arrange for the carrier which should be made
available at the point of location as agreed in the contract where the seller
is supposed to load the subject of goods in the contract to the provided
carrier. It is the responsibility of the buyer to pay for the freight and the
seller has to bear the cost up to the point of completing the loading of the
goods to the carrier provided by the buyer.
Comment on extract
This is the opening paragraph of the candidate’s answer, and, while not accurate in
all respects, it provides an excellent start in that it immediately tells the Examiners
what these contracts are and gives a basic view of the distinction between them.
The candidate went on to show how these ‘pure’ forms of CIF and FOB are, in
practice, often less ‘pure’ and can be difficult to distinguish. The candidate also
referred to case law to illustrate these issues.
Question 5
Are the circumstances under which a buyer may reject goods for breach of
condition adequately defined by sections 34 and 35 of the Sale of Goods Act
1979?
General remarks
This was not generally done particularly well with some candidates writing answers
entirely concerned with the implied terms in ss.12–15 and showing almost no
understanding of how ss.34–35 work.
use
Chapter 6 of the subject guide.
Common errors
See above, and also many candidates did not refer to any cases and so were
unable to explain how the sections work in practice.
show a clear understanding of what these sections say, which would enable the
candidate to embark on a discussion of how the sections work.
fail to consider ss.34–35 and talk only about the implied conditions in ss.12–15.
Question 6
Jackie is a buyer for Macbeth Ltd (‘Macbeth’), which sells parts for motor
cars. While she is told that she may buy any goods ‘of the type sold by
Macbeth’, she is instructed to obtain the consent of the chief executive officer
of the company, Mary, before she makes any purchase above £10,000. Jackie
undertakes the following transactions.
(i) Brown offers to sell Jackie a consignment of parts for
aeroplanes, which Brown no longer needs. Since Brown wishes to get
rid of these parts quickly, he offers them to Jackie for £15,000, which
is a quarter what they would normally cost. Jackie admits to Brown
that she does not have authority to agree a purchase above £10,000
and says she will immediately telephone the chief executive officer.
Unfortunately, Mary is unavailable, but believing she would not wish
4
to lose such a good deal, Jackie says to Brown, ‘Mary has agreed the
purchase, so we can go ahead.’ Later that day, Brown happens to
meet Mary at a party. He mentions the deal and Mary says, ‘I never
agreed to this.’ At this point the conversation is interrupted and they
do not speak again. The next day, Brown gets an offer of £35,000 for
the parts from Rory. He telephones Jackie and says he has found out
that she did not have authority to make the deal and he is withdrawing
his offer. A few hours later, Mary talks to Jackie about the transaction
and Mary now wishes to proceed with the purchase.
(ii) Jackie buys car parts from Green, who is an agent for Red Ltd.
Green says they are ‘genuine parts produced by Rolls Royce’. This
statement is not repeated in the subsequent written agreement drawn
up by Green. After delivery it becomes clear that the parts were not
produced by Rolls Royce. When Jackie contacts Red, they say Green
no longer works for them, adding ‘we cannot be held responsible for
things he said.’
General remarks
Too many candidates opened their answers by giving a long description of the law
of agency before eventually addressing the particular questions asked. Candidates
should refer only to those aspects of agency law that are relevant to the question.
use
See Chapters 2 and 3 of the subject guide.
Common errors
Some candidates lacked the essential knowledge and understanding of key
principles that were needed to discuss the question. Most particularly, there was a
lack of understanding of ratification: many candidates asserted that in any situation
where P acknowledges and agrees to be bound by the act of A, then P has ratified
A’s agreement with T and T is bound. This is not correct. Candidates struggled with
(ii) – in what circumstances is a principal liable for the misrepresentations made by
its agent? In addition, many failed to discuss the consequences of such
misrepresentation for the contract.
It is important to show an understanding of what principles of law may arise and
what may not, so it was acceptable for candidates to discuss whether or not
apparent authority applied and also to consider ratification, but it is always
necessary to provide a clear understanding of these doctrines supported by
relevant cases.
either did not refer to the possibility of ratification or, although referring to
ratification, did not give any clear indication of when it applied and whether it
applied in the facts as provided.
Student extract
A principal may become bound by the unauthorized act of agent, if he
ratifies the agent’s act. Ratification is a powerful doctrine because it works
retrospectively so that the authority of agent is backdated to the moment at
which the act was performed y agent. Ratification puts the parties into the
position they would have been in had the act been authorized from outset
and ratification while it works is equivalent to previous authority. Ratification
puts the parties in the position they would been as if the act had been
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authorised from the outset, there it relates back to the original moment of
the contract.
Comment on extract
This passage is the opening of an answer to (i) of this question. It is a little
disorganised in the repetition at the end – almost the same sentence is repeated.
But more important is the failure to explain the circumstances that give rise to
ratification: when can P ratify the act of A? As has been said, the failure to give
consideration to this issue led many candidates to assume there were no limits to
ratification – any act of T could be ratified by P. The candidate does refer to the
retrospective operation of ratification, but gives no authority for this and does not
suggest any limits.
Question 7
Cookum Bakery buys from Linman Ltd what is called in the sale contract ‘a
conveyor belt suitable for use in the manufacture of all types of food
products’, having seen one of these machines at a trade fair. After delivery it
becomes clear to Cookum that the machine is several years old.
Cookum installs the conveyor belt to convey bread from its ovens. Eight
months after the installation of the conveyor belt there is a fire at Cookum’s
factory, which was caused by particles of bread becoming trapped in the
conveyor belt. The problem would not have arisen if Cookum had cleaned the
machinery regularly, but Linman had not given instructions that this was
necessary.
It emerges that there had been reports of fires through similar causes in
conveyor belts used by other bread makers, and that many bakers avoided
this by making simple adjustments to prevent bread particles from falling into
the machinery.
As a result of the fire Cookum’s factory is destroyed and the firm loses orders
from supermarkets for bread and an order to supply bread to a royal banquet,
which would have brought great publicity to the firm’s products.
Discuss.
General remarks
Although (unlike essay questions which are broader in nature) such questions
provide a guide to the precise issues that the Examiners wish the candidates to
discuss, they can often cover a fairly broad area (as does this) and that is designed
to test the candidate’s ability to discuss issues precisely and concisely.
use
See Chapters 4 to 6 of the subject guide.
Common errors
Many candidates discussed the implied terms but did not tackle the thing that most
interests a client, namely the remedy (or remedies).
A good answer is precise and concise, recognising the key issues – description,
quality, remedy (including acceptance) – and avoids being sidetracked by things
that, while not entirely irrelevant, are not points of difficulty here (e.g. some
candidates spent far too long discussing whether or not this was a sale in the
course of business).
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While most candidates identified that the question involved the implied terms in
ss.13–14, some were unable to provide a discussion of the case law explaining how
those sections work. There were also several answers that did not talk at all about
the remedies available to the buyer, assuming that there were breaches of the
conditions.
Question 8
Advise Romeo, who manufactures cars, concerning the following situations.
(i) Romeo contracts for the purchase of 500 tons of steel, which is part of
the stock owned by Ayrton Ltd and held in its warehouse. Before
delivery Ayrton Ltd becomes insolvent.
(ii) Romeo contracts for the purchase of 1,000 tons of steel from Stelyton
Ltd, which, at the time of the contract, was part of a cargo of 5,000
tons on board the ship, The Enterprise. Subsequently, deliveries of
4,000 tons are made to other purchasers, but before delivery can be
made to Romeo the ship sinks with the loss of the cargo. Stelyton Ltd
is insolvent.
(iii) Romeo contracts for the purchase of machinery at a factory owned by
Factyron Ltd. Immediately after the sale has been agreed the factory
burns down destroying the machinery.
General remarks
Candidates tended to assume things that were deliberately not stated: for instance,
in (i) we are not told whether Romeo has paid in full or in part for the steel, so it
cannot be assumed that he has or has not made a payment, and, of course, this is
relevant for the operation of s.20A – therefore, both possibilities need to be
considered. Often the Examiners will deliberately not provide sufficient information,
obliging candidates to discuss a number of possibilities.
use
See Chapter 4 of the subject guide. This question requires a good knowledge of the
rules on passing property.
Common errors
Apart from the issue mentioned above, very few candidates discussed the issue in
(i) of what is meant by ‘bulk’. Although it seems likely that the steel is part of a bulk,
it is worth referring to the issue, if only briefly, as part of a discussion of the
requirements of s.20A. Many candidates assumed that the machinery in (iii) was
unascertained, but there is too little information to make that assumption – it might
be specific but in an undeliverable state.
demonstrate to the Examiners that the candidate has a firm grasp of the issues and
of the relevant or potentially relevant law applicable to those issues. Although the
Examiners are not looking for candidates merely to repeat what the statute says, it
is important to show that in answering the question the relevant issues have been
considered (e.g. since s.20A might apply, what must be shown for it to apply and
what are the consequences if it does and if it does not apply?)
assumed that since payment is not mentioned in (i) no payment was made and
s.20A did not apply; some asserted that insolvency rendered the contract void.
Many assumed that (iii) involved unascertained goods without discussing the
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possibility that this was a sale of specific goods. Both possibilities are worth
exploring, but it seemed that some candidates did not clearly understand how to
distinguish between unascertained, ascertained and specific goods.

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Examiners’ report 2014

Examiners’ report 2014

LA3017 Commercial law – Zone A

Specific comments on questions

Poor answers to this question…

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