First Class Contract Law Undergraduate Essay (Problem Question)

Below, you will see an example of a first class contract law undergraduate essay addressing a problem question. You can use this sample essay to learn how to structure contract law essays relating to problem questions.

Introduction

This paper is going to advise Bunter how to recover the price paid for the Maple computer, bought from Wickwar Computers Ltd.  Bunter wants to return the computer primarily because the computer is not suitable for the operations it is needed for. In addition, the computer broke down after 3 weeks of usage and went to the guarantee repairs, where after eight weeks the fault was still not detected, which could also give grounds for a claim.

This essay is going to analyse the probability of Bunter’s claim’s success:

1. a) under the Sales of Goods Act s14(3)
2. b) on the grounds of SGA s14(2)

The third main point deals with the exclusion clause effect on Bunter´s rights.

Fitness for Purpose

Bunter approached Wickwar Computers Limited to purchase a computer for his research project. He asked for the cheapest but suitable model for the research project, which involved analysing documents in a number of languages. The salesman assumed that Bunter´s research involved word processing only and recommended a basic model. He did not ask any questions to confirm his understanding. Bunter bought the computer whilst relying on Wickwar´s recommendations. It later appeared that the machine was fit for the purpose.

SGA 14(3)[1] provides that the good has to be fit for particular purpose when the buyer has indicated the purpose to seller and it is reasonable to rely on seller. R&B Customs[2] states that seller is liable under s14(3)  when the particular type of sale is integral part of its business. This is also supported in the case Cammell Laird & Co Ltd v Manganese Bronze & Brass Co[3] obiter. Earlier cases Brown v. Edgington[4] and Jones v. Bright[5] also state that if the buyer trusts the manufacturer or seller, seller is liable. Wickwar’s trade is selling computers, hence sale of computers is integral to the business.

In addition, computers are continually improved and have a number of different parameters, which a non-specialist might not be able to pay special attention to. Therefore, in this particular industry, buyers often make the purchasing decision only as a result of the advice that is given by the salesperson. Bunter prima facie stated his particular purpose for the salesperson and relied on the professional advice and it was reasonable to do so. Accordingly Bunter is likely to be entitled to rely on SGA 14(3) and may repudiate the contract.

However, the following matters may complicate recovery under SGA 14(3).

First of all, Wickwar may claim that the representation about the purpose was so vague that there was no representation about the particular purpose at all, relying on the case Aswan[6]. Bunter mentioned that the computer was needed for “university research-analysing documents”, but did not state that the analysis was of statistical nature. It is suggested that, when the buyer indicates the range of purposes to the seller, the good has to be fit for all foreseeable purposes in that range.  This is also supported in case law in Ashington Piggeries[7], where the buyer asked animal food and mink was considered to be in a reasonably close category to “animal”. So, the question is whether statistical analysis falls in the reasonably close category in university research, which involves document analysis. The outcome of the ruling under SGA s14(3) is therefore dependent on how court determines this matter.

Secondly, Wickwar may claim that Bunter has already accepted the goods under s35(4)[8] and lost the right to reject them under s11(4). Bernstein v Pamsons Motors[9] case establishes that reasonable time in the context of s35 does include the time where all faults have to occur but the time that is reasonable to notice immediate conflicts with the contract terms.  Rougier J goes further stating that the particular defect is not relevant in determining reasonable time, but rather what is reasonable time to keep the ledger open with the particular good, so that it is fair for both sides[10]. Therefore, reasonable time largely depends on the nature and complexity of the goods sold, as also suggested in Clegg v Andersen[11]. Computers are highly technological devices and thus all faults may not occur immediately. Consequently, the question in this case is what is the reasonable to keep the “sale of computer” open in order to be fair for both sides.

The fact that the computer is not suitable for Bunter´s purposes only came clear in 11 weeks and it is doubtful whether this delay could be justified. For 8 weeks of this time period, the original computer was not in Bunter´s possession, but he had a substitute computer. In Bernstein[12] it was decided that 3 weeks was enough to deem the car to be accepted, despite of the fact that car is also a complicated product. There is also a question of public policy. It would not be fair and creates uncertainty in the business environment to allow the buyers to use a computer for free for almost 3 months and then legally return it.

Still, court may decide in this particular case that 3 weeks e.g. time before repairs did not constitute a reasonable time to deem the goods to be accepted. It could partly be supported by Bernstein[13], where Lord Justice Rougier highlighted that P only made two or three short trips with his new car for the purpose of trying it out and “had an opportunity to make more trips had he wished to do so”. If Bunter has used his computer reasonably often in these 3 weeks and break-down only occurred then, Bunter could claim that he did not have any other opportunity to test the product. Due to the nature of the product, computer defects may not become apparent in 3 weeks and therefore it may not be “reasonably soon” to close the ledger for the computer seller in 3 weeks. However, this is unlikely to effect the claim under s14(3), because Bunter had a substitute computer with same parameters also during the repairs and repairs did not affect Bunter´s ability to observe the good. Although case law sometimes suggests that repairs have to be taken into account when determining reasonable time, it does not form an obligation. In addition, it is not specified in the SGA that repairs have to be discounted from the total time when calculating reasonable time. Consequently, if court comes to the decision that 3 weeks does not constitute a reasonable time, Bunter still will most likely lose the right to terminate the contract under s14(3).

Bunter would still have a valid claim for damages for breach of warranty under s11(4)[14]. In Bernstein[15] the claimant lost the right to reject the car, but still had the right to receive damages which occurred as a result of the breakdown. In the current case, it is hard to determine what constitute Bunter’s damages and therefore could be recovered. He has had no direct expenses because of the breach of warranty, although he may claim that his expense is that he has to buy a new computer. It is unlikely that it is possible to repair the computer for it to be fit for the particular purpose. The court is unlikely to be willing to hold that the company has to change the current computer to the more expensive one which is capable of analysing documents, because it would be unfair towards the Wickwar Limited and would mean that Bunter gets the same remedy had he gotten when refused the computer within a reasonable time.

Satisfying quality

Bunter also has a possible claim under s14(2)[16].  This is going to be analysed separately from s14(3), because in its essence they differ from each other substantially. While s14(3) deals with tailored obligations, 14(2)  establishes the rules that each product has to satisfy[17].

According to section 14(2A) goods are of satisfactory quality when they meet the standards a reasonable person would regard as satisfactory[18]. Section 14(2B) states that durability and freedom from minor defects are important aspects of quality of goods[19].  In the present case, Bunter´s computer broke down in three weeks, which clearly is not the quality a reasonable person expects from a new computer. Thus, Bunter has established a breach of s14(2)  and is theoretically entitled to reject the goods, because s14(2) is an implied condition. However, there also might be issues in the current case which complicate the recovery.

First of all, consumer can terminate the contract for breach under s14 only when goods are not accepted. In this scenario Bunter needs to prove that:

1) 3 weeks did not constitute a reasonable time to deem the goods have been accepted (this is discussed above) or

2) Bunter has the right to reject the goods when repairs are performed.

Section 35(6) provides that goods are not deemed to be accepted only because the buyer has requested repairs[20]. However, the act does not cover the availability to reject the repairs and at what stage of repairs the buyer has the right to reject. In the recent case J&H Ritchie v Lloyd Ltd[21], Lord Hope concluded that after repairs have been performed, claimant has to be in the position to make properly informed decision about whether or not to accept the goods and even if the goods have been repaired, claimant can terminate the contract. In the current case, Bunter is unable to make the decision, if the goods have been brought into conformity with the contract of sale as SGA requires, because the fault is not found and therefore not repaired. Consequently, court may decide that Bunter has the right to rescind the contract relying on the principles established in Richie and SGA, because Bunter can in no means be sure that the computer is “as good as new“ after the guarantee repairs[22].

This, I stress again, only applies when court decides that Bunter did not accept the goods before the repairs under s35 (1).

Irrespective of acceptance, Bunter could claim that repairs were not carried out within a reasonable time. Repairs took 8 weeks, which could hardly be justified. S48B(2) obligates the seller to carry out repairs within a reasonable time causing no significant inconvenience[23]. Bunter got the substitute computer during the repairs; therefore he only suffered a little. Still, reasonable time question prevails, especially because the initial fault was thought to be “a loose in connection“, which is a relatively minor defect. In addition, Wickwar did not provide an explanation for the delay and for the time the repairs are likely to be completed even after Bunter´s call. However, reasonable time is a question of fact under s11[24], therefore a specialist opinion in this area is probably going to be needed. He could specify what is an average period of repairs and only then could court make an adequate decision. Still, it is very likely that the specialist opinion is favourable towards Bunter and 8 weeks is not deemed to be reasonable. However, Bunter can only be claimed under s48, when the good does not meet the contract terms. In this case, therefore, the breach of s14(2) has to be established.

Bunter should also note s48E, which allows courts to come to the different conclusion if they find it to be unfair[25].  The court may believe that termination because of unreasonably long repairs is too severe to Wickwar and e.g. monetary damages for long repairs are more appropriate.

The Effect of Exclusion clauses

When court makes a favourable decision for Bunter it also has to consider the effect of clause 10 of the contract, since Wickwar accept no liability on manufacturer´s part and for any delay in repairs according to this clause. Thus, Bunter should not have any right to terminate under s14(2), because minor defect is most likely caused by manufacturer´s negligence,  and s48. Fortunately, Unfair Contract Terms Act 1977 (hereinafter UCTA), SGA  and common law provide  some protection.

First of all, Bunter could claim excluding liability on faults of manufacturer´s part is void relying on UCTA s6(2), which makes clauses excluding liability under SGA 13,14,15 ineffective. However, this only covers transactions, where the seller deals in the course of business and buyer as a consumer[26]. In addition, s5(1) establishes that in the case of consumer goods liability for damages cannot be excluded for defective goods[27].

This brings me to the next matter. From the facts of the case, it becomes apparent that University was not involved in the sale of computer. Therefore, we have to consider whether Bunter is a consumer. Relying on the case R&B Customs Brokers[28] it is unlikely that the court would hold Bunter dealing in a course of business, because buying computers isn´t integral part of Bunter activities nor can we say relying on the facts of the case that Bunter has bought computers in the past regularly. Under stricter principles established in the case Stevenson[29] Bunter may be considered as a „business“, because it is not purely private sale, since Bunter mainly needed the computer to write his research, for which he gets paid. However, it would not be reasonable, because most computers are partly used for work-related purposes and taking away the option to rely on s6 (2), s5(1) would be very disadvantageous for regular customers. Also s5(2)(a) provides that buyer deals in course of business for s5 purposes only when goods are exclusively used for purposes of business[30].

On the other hand, UTCCR s3(1)provides that consumer is only a buyer who is acting outside his trade. Bunter is a law lecturer, so its trade is fundamentally different. However, the purpose of the purchase was to acquire a computer to carry out a statistical research. Terefore, to some extent Bunter is not a consumer under UTCCR.

So, the outcome is again speculative, but the author of this paper believes that court is very likely to decide that Bunter dealt as a consumer, since his day to day activity differs fundamentally from buying computers and most people use their computers for work-related purposes.

Secondly, effect of exclusion clause accepting no liability on delay in repairs has to be considered, especially because breach of s48 is likely to be the most valid claim. UCTA 1977 s3(1) prohibits to exclude any liability arising from the sellers breach[31]. Clearly, it was Wickwar´s responsibility to perform repairs within a reasonable time under s48. This did not happen. Consequently, s3 is likely to be applied, which makes the exclusion clause ineffective. Still, s3 is only effective when the buyer is a consumer or the contract of sale was a standard form contract.  As earlier discussed, Bunter is very likely to be a consumer and consequently he most probably has a valid claim to reject the computer under s48, unless s48E is going to be applied.

Last but not least, Bunter may claim that term 10 was not incorporated into the contract, because its effect was not brought to buyer´s attention, although the term was onerous and severe, relying on the Interfoto[32] authority. The author of this paper is not going to deal with it further, because it is most likely that the exclusion clause effect will nevertheless be ineffective under UCTA.

Conclusion

Bunter situation is twofold and largely dependent on the court´s view of reasonableness. Still, Bunter has most likely lost the right to rescind under s14(2) by the lapse of time. He still may recover under s14(3), when court makes a favourable decision that 3 weeks was not reasonable time to deem the computer to be accepted. The most probable claim, however, is that court decides that repairs took unreasonable long under s 48 and Bunter  can as a result return the computer. This option is only available when court decides that exclusion clause is ineffective.

Bibliography

Beale, H.G, Bishop, W.D, Furmston, M.P , 2008 “Contract. Cases and Materials” 5th edition Oxford University Press

McKendric, E. 2007 “Contract Law” 7th edition,  Palgrave MacMillan

Sale of Goods Act 1979

Unfair Contract Terms Act 1977

Unfair Terms in Consumer Contracts Regulations 1999

Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441

Bernstein v Pamson Motors (Golders Green) Ltd [1984] [1986] R.T.R. 384

Brown v. Edgington [1841] 133 E.R. 751

Aswan Engineering Establishment Co v Lupdine Ltd

Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd [1934] AC 402

Clegg v Anderson [2002] EWHC 943 (QB

Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433

J&H Ritchie Ltd v Lloyd Ltd [2007] UKHL 9

Jewson Ltd v Boyhan [2003] EWCA Civ 1030

Jones v Bright [1829] 130 E.R. 1167

R&B Customs Brokers Co v United Dominions Trust Ltd [1988] 1 WLR 321

Stevenson v Rogers [1999] QB 1028

[1] Sale of Goods Act 1979,  s14(3)

[2] R&B Customs Brokers Co v United Dominions Trust Ltd [1988] 1 WLR 321

[3] Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd [1934] AC 402

[4]Brown v. Edgington [1841] 133 E.R. 751

[5] Jones v Bright [1829] 130 E.R. 1167

[6] Aswan Engineering Establishment Co v Lupdine Ltd

[7]  Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441

[8] Sale of Goods Act 1979, s35(4)

[9]Bernstein v Pamson Motors (Golders Green) Ltd [1984] [1986] R.T.R. 384

[10] Above, footnote 9, per Lord Rougier

[11] Clegg v Anderson [2002] EWHC 943 (QB)

[12] Above, footnote 9

[13] Above, footnote 9

[14] Above footnote 1, s11(4)

[15] Above footnote 9, per Lord Rougier

[16] Above footnote 1, s14(2)

[17] Jewson Ltd v Boyhan [2003] EWCA Civ 1030

[18] Above footnote 1, s14(2A)

[19] Above footnote 1, s14(2B)

[20] Above footnote 1, s35(6)

[21] J&H Ritchie Ltd v Lloyd Ltd [2007] UKHL 9

[22] Anonymous, 2008, Case law analysis: repaired goods obligations: J&H Ritchie v Lloyd, Contract Journal; 06.02.2008, Accessed online at http://www.contractjournal.com/Articles/2008/02/06/57628/case-law-analysis-repaired-goods-obligations-j.html 25.12.2008

[23] Above footnote 1, S48B(2)

[24] Above footnote 1, s11

[25] Above footnote 1, s48E

[26] Unfair Contract Terms Act 1977, s6(2)

[27] Above footnote 26, s5(1)

[28] Above footnote 2

[29] Stevenson v Rogers [1999] QB 1028

[30] Above footnote 26, s5(1)(a)

[31] Above footnote 26, s3(1)

[32] Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433