Marking Scheme for Law paper 3

Question 1
The issue of classification of terms should be recognised.

Candidates should then explain the differences between conditions and warranties (Poussard v Spiers
and Pond, Bettini v Gye, Sale of Goods Act 1979, as amended) and consider the consequences for each if
there is a breach. Candidates should then explore the various approaches used to determine the
difference: terms stated by the parties (Lombard v Butterworth) although these may not always be
conclusive (Schuler AG v Wickman Machine Tools Sales Ltd), terms decided by the courts (Bunge
Corporation v Tradax Export SA, The Mihalis Angelos), terms decided by previous course of dealing
(British Crane Hire corporation Ltd v Ipswich Plant Hire Ltd), terms decided by the ‘wait and see’ or
innominate term approach (Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, The Hansa
Nord).

Application of the law to the two situations should be made:

a) Savastores

The term has a wide meaning and could have serious or minor consequences, which will not be
apparent until the breach occurs (Hong Kong Fir). The use of the innominate term approach may
therefore be appropriate and, as the vast majority of the cargo is fine, candidates may conclude that it is
a breach of warranty which does not give right to reject the delivery (The Hansa Nord).

b) Hiretech

The term is not labelled as a condition or warranty but similar to Schuler AG v Wickman Machine Tools
Sales Ltd) the term could be broken in a serious or minor way dependent on the number of visits
undertaken. Candidates should conclude that as over sixty per cent of the visits have been missed this is
a breach of a condition giving Topfarm the right to repudiate. Some credit can be given for the
suggestion that contracts of this nature can sometimes be decided by a course of ‘previous dealing’ or if
terms are implied by statute.

To reach band 4 and beyond legal principles must be applied to the facts and logical conclusions drawn.

Question 2
Candidates should recognise that the focus of this question is on the issues of causation, remoteness of
damage and mitigation.

The extent to which Rainbow Paint Ltd are liable for Poppy’s consequential losses needs to be
addressed. Any discussion based solely on the assumed breach by Rainbow Paint Ltd will achieve only
minimal credit. Credit should be given for any brief outline of the aims of damages as a remedy, but
attention should then switch to the limitations of their award. Candidates should address causation
(County Ltd v Girozentrale Securities, Quinn v Burch Brothers (Builders) Ltd), remoteness (Hadley v
Baxendale, Victoria Laundry v Newman industries, The Heron II, Balfour Beatty Construction (Scotland)
Ltd v Scottish Power plc., The Achilleas) and the duty of the claimant to mitigate their loss (Brace v
Calder and British Westinghouse Electric Co. Ltd v Underground Electric Railways Co. of London Ltd).
Candidates should apply the law to the scenario and consider: Whether Rainbow Paint Ltd breach was
the cause of Poppy’s losses. This would appear so given there does not seem to be any intervening act
to disturb the chain of causation. Whether Poppy’s loss of normal and special contracts was reasonably
foreseeable to Rainbow Paint Ltd. Certainly the loss of everyday contracts would be in the reasonable
contemplation of Rainbow Paint Ltd as a consequence of the breach but surely not the lucrative special
contract with local government. Using the multi-factor approach of ‘The Achilleas’ would still not disturb
this conclusion. Whether Poppy could have mitigated her loss. It might have involved greater expense,
but was it possible to get supplies of paint elsewhere even at short notice? If it was a special kind of
paint as stated, then possibly not. Is Poppy entitled to the non-pecuniary loss she claims for mental
suffering? Candidates may conclude that this is unlikely given that it occurs in a commercial context
(Addis v Gramophone Co. Ltd).

Accurate detail of the law followed by clear application of principles and logical conclusions are required
to reach marks in Band 4 and beyond.

Question 3
Candidates may begin by defining the term minor and refer to the Family Law Reform Act 1969.
Candidates should emphasise the basic common law rule that contracts do not bind minors except in
certain circumstances. Candidates should then explain the categories of minors’ contracts, defining
terms and using relevant cases for each: Valid contracts include: necessaries (Nash v Inman, Chapple v
Cooper), beneficial contracts of service (Doyle v White City Stadium, De Francesco v Barnum, Clements v
London and North Western Railway Co.). Voidable contracts: (Corpe v Overton, Steinberg v Scala (Leeds)
Ltd). Credit should be given for knowledge of the Minors’ Contract Act 1987: Section 2 enforcement of a
guarantee and Section 3(1) remedy of restitution. Candidates may suggest that far from restriction, the
law gives minors the freedom to make significant contracts and there is no total rule of unenforceability:
• Necessary contracts mean minors are not disadvantaged and can acquire basic requirements of life
such as food and clothing. • Beneficial contracts allow minors the chance to make their way in life by
receiving an education, training or gaining employment. • Voidable contracts provide a workable
arrangement between minors and adults dealing fairly with them. Candidates may also support the
assertion in the question by appreciating the laws paternalistic approach in recognising the general
inexperience of youth and seeking to protect them from the actions of unscrupulous adults who might
use contracts to exploit them. Candidates may draw comparisons with the apparent ‘harshness’ in the
way adults who contract with minors are treated but it reinforces the point that the paramount aim of
the law in this area is to protect minors: • Minors are only bound to pay for necessary goods and
services and even then, only a reasonable price. • Minors can escape contracts of employment if terms
are on the whole onerous. • Minors can avoid long term contracts whenever they wish. • an adult’s
remedies are limited (Section 3 Minors Contract Act 1987).
Factual recall without evaluation of the reasoning behind the rules will result in maximum marks
allocated within Band 3.

Question 4
Candidates should be credited for making general comments about the freedom given to an individual
to withdraw an offer and explaining that contracts cannot exist without an offer and an unqualified
acceptance. Candidates should then identify the ways an offer can cease to exist. These can include
where the offeree accepts or rejects the offer, by the offeror notifying the other party of an intention to
revoke any time before acceptance (Byrne v Van Tienhovan) and this notification can be given by a
reliable third party (Dickinson v Dodds), by lapse of a reasonable time (Ramsgate Victoria Hotel v
Montefiore), by means of a counter offer (Hyde v Wrench), the failure of a precondition (Financings Ltd
v Stimson), death of the offeree (Reynolds v Atherton). To reach band 4 candidates should appreciate
the complexities of the law in this area. The factors outlined above may not necessarily bring an offer to
an end. Issues that could be explored include the difficulties posed in revoking unilateral contracts while
the offeree is performing (Carlill v Carbolic Smokeball Co, Errington v Errington and Woods), the factors
that determine what amounts to a reasonable time, a request for further information should not
extinguish the offer (Stevenson v McLean), who is considered a reliable third party?, the death of the
offeror might not always terminate the offer (Bradbury v Morgan).

Question 5
The focus of the question is on commercial agreements and only limited credit will be given for a
discussion of domestic agreements if mentioned by way of contrast. Candidates should explain that in
commercial agreements the law presumes that the parties intend to create legal relations and therefore
support the above proposition by exploring relevant cases (Esso Petroleum Co. Ltd v Commissioners of
Customs and Excise, J Evans and son (Portsmouth) Ltd v Andrea Merzario Ltd). However, the above
proposition can be challenged given the fact that the court can rebut the general presumption of
intention by finding very clear evidence to the contrary. The exceptions should then be explored –
Vague (Weeks v Tybald) or extravagant language (Carlill v Carbolic Smokeball Co), the use of honour
clauses (Rose and Frank v Crompton Brothers, Jones v Vernons Pools), agreements subject to contract
(Confetti Records v Warner Music UK Ltd), collective bargaining agreements (Ford Motor Co Ltd v
Amalgamated Union of Engineering and Foundry Workers, Trade Union and Labour Relations
(Consolidation) Act 1992).

Pure factual recall will receive marks limited to a maximum within band 3.