`The University of the South Pacific          
 Exam
Semester 2 2004
Emalus Campus
 

 

 

SCHOOL OF LAW

 

 

COURSE NAME:                                   Contracts

 

 

COURSE NO:                                        LA202

 

 

TIME ALLOWED:                                  Three (3) hours

 

 

READING TIME:                                    Ten (10) minutes

 

 

NUMBER OF PAGES:                            Two (2) excluding this page

 

 

NUMBER OF QUESTIONS ON PAPER: Six (6)

 

 

NUMBER OF QUESTIONS TO BE ANSWERED: Five (5) only 

 

 

MARK ALLOCATED FOR EACH QUESTION:      Equal

 

 

TOTAL MARKS:                                    Fifty percent of result.

 

 

 

MATERIALS PERMITTED IN EXAMINATION ROOM:

 

None

 

 

 

 

 

SPECIAL INSTRUCTIONS

 

1.      Read the questions and the instructions carefully.

2.      All answers should be clearly written and should refer to relevant cases and/or statutory provisions.

3.      Some questions have a number of parts in which case all parts are to be attempted.

 

 

 

Question 1 (10 marks)

 

Joshua is in the prawn farming business. He has a business partner.  They have been together for just over five years.  Joshua was negotiating with his business partner over the purchase of his business partner’s car.  This car had been purchased some five years ago when the two of them first started their prawn farming business and the business partner has been using it as his personal vehicle ever since.  They agreed on the terms; Joshua transferred the purchase price into the personal bank account of his business partner and took possession of the vehicle.  When he went to transfer the registration it became apparent that he (Joshua) was in fact the registered owner of the vehicle. (It must have been registered in his name when it was first purchased).  He now seeks your advice as to whether he can get back the money he paid for the vehicle. (5 marks)

 

 

Soon after the incident concerning the car, Joshua decided that he wanted to take out a policy of life insurance on his business partner so that if the business partner died Joshua would have some financial backing to continue with the business.  He contacted the “Forever Young” life insurance company and asked for details concerning how much the premium would be for such a policy.  The insurance company gave him the details.  He went home and thought about it.  He decided to take out the policy and so completed the forms and took them into the insurance company office together with a cheque for the first month’s premium. At the time Joshua did this he was unaware (and so was the insurance company) of the fact that his business partner had died from a car accident the previous day.  The insurance company have refused to pay on the policy. (5 marks)  

 

Advise Joshua in respect of the two matters raised above.

 

 

Question 2 (10 marks)

 

Note: all parts of this question are to be attempted. Each part is worth 2.5 marks

 

(a)     What is the public policy basis for finding that a contract in restraint of trade is void.

 

(b)     What conditions need to be met in order for a court to find that such a contract is not void on the grounds of public policy.

 

(c)     What is meant by severance and how does it apply to contracts that are said to be in restraint of trade.

 

(d)     What are the consequences of a court finding that a contract is in restraint of trade.

 

 

Question 3 (10 marks)

 

Note: Both parts of this question are to be attempted. Each part is worth 5 marks

 

Part 1

James and Gary are friends.  Gary is well known for boasting and exaggerating. James has criticized him on a number of occasions about this. Gary offers his car to James for sale.  He has had the car since it was new.  He tells James that the car is just two years old and is a 2002 BMW.  James, who has little knowledge of cars, accepts the offer of $20,000 Fiji.  A month after the purchase of the car James takes it for servicing at the local garage where he discovers that the car is a 1999 model and is worth only around $10,000 Fiji.

 

Advise James as to what (if any) remedies he might have against Gary concerning the purchase of the car.

 

Part 2

What is undue influence and how does it differ from duress?

 

Question 4 (10 marks)

 

Note: Both parts of this question are to be attempted.  Each part is worth 5 marks

 

Part 1

The doctrine of frustration of contract is subject to a number of conditions being met.  Outline what these conditions are and give an example of each. In your answer refer to any relevant cases.

 

Part 2

What are the effects or consequences of a finding that a contract has been frustrated?  In your answer refer to any relevant cases or statutory provisions.

 

 

Question 5 (10 marks)

 

Joshua installed a domestic air conditioning service for Mary’s shop.  The cost of installation was $1,000 Fiji but due to faulty workmanship in the installation the air-conditioner only performed to 20% of its capacity.  The cost of rectification was $650 Fiji.  Joshua is demanding that Mary pay the agreed contract price of $1,000.  At the same time, Joshua contracted with Mary to deliver to her 250 electric fans.  The contract price was $2,500 Fiji (based on a price of $10 Fiji per fan). Due to a shortage with Joshua’s supplier he was only able to deliver 240 fans.  Mary has refused to pay the contract price.

 

Advise Joshua in relation to his claim for payment under the air-conditioning contract and advise Mary in relation to her refusal to pay for the fans.

 

 

Question 6 (10 marks)

 

Note: Both Parts of this question are to be attempted.  Each Part is worth 5 marks

 

Part 1

Distinguish between (a) liquidated and unliquidated damages; and (b) between liquidated damages and penalties.

 

Part 2

Explain the rule in Hadley v Baxendale (1854) 9 Exch 341

 

 

 

END OF PAPER