LA2017 October ZA

Commercial law

Friday 30 October 2020

You will have TWO HOURS AND 45 MINUTES in which to answer the
questions, including 15 minutes reading time. You must answer all parts of a
question unless otherwise stated.

You will have an additional 30 minutes to download the examination paper and
to upload your saved answers to the VLE; this time should be used solely for
these purposes.

You must answer TWO of the following SIX questions.

© University of London 2020

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1. ‘Commercial law is concerned most of all with the creation and
preservation of rigid legal rules, whether or not they fit with commercial
practice.’

Discuss.

2. AB Refineries Ltd. buy and refine crude oil to make fuels and lubricants.
AB Refineries recently entered insolvent liquidation. Rao has been
appointed as liquidator.

Prior to insolvency, AB Refineries concluded:

(a) An agreement with CD Lubricants for “the current stock of 500,

five-litre containers of DW60 transmission fluid to be delivered on
pallets, maximum 200 containers per pallet, pallets to be shrink-
wrapped”.

Rao has discovered 500 x five-litre containers of DW60

transmission fluid stacked on a single pallet, which is not shrink-
wrapped. As a result, the goods could not be transported safely.
On top of the containers is a copy of the agreement between AB
Refineries and CD Lubricants. There are no other five-litre
containers of DW60 in stock.

(b) An agreement with EF Feedstock for 15,000 litres of isopropyl

octane, to be supplied in a pressurised tank container, to be
loaded free on board a named vessel at the port of Immingham.

Rao has found only one such container. That container has been
correctly filled from a larger stock of isopropyl octane and is
sealed and marked for EF Feedstock and ready for dispatch to
the port.

(c) The following agreements to supply fuel oil to:

i. GH Marine, “80,000 litres, currently held in Tank 4 of the

AB Refineries Tank Farm”, for which GH Marine have paid
50% of the contract price.
ii. IJ Bunker, “160,000 litres, currently held in Tank 4 of the
AB Refineries Tank Farm”, for which IJ Bunker have paid
the purchase price in full.
iii. KL Offshore, “100,000 litres, from AB Refineries or other
subsequently agreed Tank Farm”, for which KL Offshore
have paid 25% of the contract price.

Rao has discovered that Tank 4 contains only 150,000 litres of

fuel oil. Across the tank farm as a whole there are however
1,100,000 litres of fuel oil.

None of the buyers has received any of the goods ordered. They are
now seeking to take delivery.

Advise Rao.

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3. Alpha Metals Ltd. are a company that reprocesses scrap metals. Alpha
Metals entered into an agreement with Low Bank Recycling Ltd. to
supply 40 tonnes of mixed, clean aluminium and steel scrap, recovered
from the domestic waste stream, to include no more than 1% by weight
non-metal materials with no sheet metal to be more than 3mm in
thickness. The price agreed was £150 per tonne, £6,000 in total, which
was paid in full prior to delivery.

The proper sorting of recyclable material can be laborious. Low Bank

Recycling use a mix of hand and mechanical sorting. On 8 January 2020
they loaded and delivered to Alpha Metals 40 tonnes of scrap metal as
agreed. On arrival at the Alpha Metals facility, the truck carrying the
scrap metals discharged its load down a chute into an underground
storage facility. The load was not inspected or sampled. Alpha Metals’
recycling plant manager signed a delivery note which included a term
stating that, “all goods received in good order and condition in
accordance with contract specification and are accepted herewith by the
Buyer”.

On 10 March, Alpha Metals began processing the scrap metal –

separating aluminium from steel and melting it down into ingots. The
first five tonnes were processed without incident and showed little or no
contamination. It then became apparent that the remaining scrap metal
was dirty as a result of mixing with household waste, including sheets of
steel of up to 5mm in thickness, from commercial sources, and
comprised 2% scrap copper. Copper is substantially more valuable
(£3,000 per tonne) than aluminium and steel but difficult to separate from
them. Scrap metal dirtied by household waste can only be removed by
specialist equipment which Alpha Metals do not have and reduces the
value of any scrap metal by 30%.

Advise Alpha Metals.

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4. Stone Styles Ltd. is a company which supplies and installs stone
flooring. A typical installation will involve Stone Styles procuring stone
chosen by a customer, which is supplied in large sheets, cutting it to the
agreed size and then installing it using adhesives, procured by Stone
Styles from a third-party supplier. Occasionally, Stone Styles will install
flooring supplied by a customer, supplying only the adhesives and the
installation service.

All of the agreements Stone Styles have with their suppliers include
retention of title clauses in some form.

Stone is supplied to Stone Styles in large pieces, which they cut down
to the size required for a particular job. Stone tiles are laid using strong,
cement-based adhesives, which when dry are completely solid. As
natural stone can crack unexpectedly, Stone Styles usually supply 10%
more tiling than is required to account for this. Unused, leftover tiles and
any off cuts are left with the customer.

Most installations undertaken by Stone Styles are part of larger

refurbishment projects and they are not paid until the entire project is
complete. Typically, payment is not received for three to four months
after installation. In the last year a small number of customers became
insolvent owing substantial sums of money to Stone Styles. To guard
against this, they propose to add to their standard terms and conditions,
which are sent to customers alongside a quotation, the following
retention of title clause:

“All goods supplied by Stone Styles shall remain the property of Stone
Styles until payment is received in full for all goods and services supplied
under this and any other agreement between Stone Styles and the
Customer.”

If the Customer resells the goods supplied under this agreement before
all sums due on any account are paid, the Customer agrees that:

“it does so as fiduciary agent of Stone Styles and that all proceeds shall
be the property of Stone Styles and stored in a separate bank account”.

Stone Styles believe this is an appropriate and effective term to use.

Advise Stone Styles.

5. ‘The differing treatment of equitable and legal assignments of a chose in

action are well-founded.’

Discuss.

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6. ‘The statement of Wills J., in Watteau v Fenwick (1893) that, “once it is
established that the defendant was the real principal, the ordinary
doctrine as to principal and agent applies – that the principal is liable for
all the acts of the agent which are within the authority usually confided
to an agent of that character”, is heavily criticised, but the law is
seemingly based upon this position through its development of apparent
authority.’

Discuss.

END OF PAPER

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