BUSINESS LAWS
FORMATION 1 EXAMINATION - AUGUST 2011
NOTES:
You are required to answer Five Questions. (If you provide answers to more than five questions, you must
draw a clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first five
answers to hand will be marked).
TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.
INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.
Marks for each question are shown. The pass mark required is 50% in total over the whole paper.
Start your answer to each question on a new page.
You are reminded that candidates are expected to pay particular attention to their communication skills
and care must be taken regarding the format and literacy of the solutions. The marking system will take
into account the content of the your answers and the extent to which answers are supported with
relevant legislation, case law or examples, where appropriate.
List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.
The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
BUSINESS LAWS
FORMATION I EXAMINATION – AUGUST 2011
Time Allowed: 3 hours, plus 10 minutes to read the paper.
Number of Questions to be answered: FIVE. (Only the first five questions answered will be marked).
All questions carry equal marks.
1.
Outline the sources of law in the Irish legal system.
2.
Discuss the distinction between legal and equitable interests in the Irish law of real property.
[Total: 20 marks]
[Total: 20 marks]
3.
Seán decides he needs a new set of clothes for his job. He goes to Conor’s Male Outfitters, which he
believes to have the best selection of men’s clothing. In the window of Conor’s shop he notices a green
cardigan priced €100. Seán believes the cardigan is made by his favourite company, Bog Standard. There
is a sign next to the cardigan that says an extra 20% off the marked price of cardigans including Bog
Standard clothing. Seán goes into the shop to look for the cardigan. When he finds it he realises that it and
all of the other cardigans are marked at €100 with no mention of the 20% off.
Seán goes to Conor at the till with the cardigan and asks for the 20% off. Conor says that the 20% is only
off stock from the previous season and not from the cardigans from the current season.
Advise Seán as to whether he is entitled to the 20% off the marked price. Support your answer with
reference to relevant cases.
[Total: 20 marks]
4.
What are the remedies available in Irish law after the commission of a tort?
5.
(a)
Briefly explain Negotiable Instrument.
(b)
Describe the key legal aspects of each of the following negotiable instruments:
i)
Cheques
ii)
Bills of Exchange
iii)
Bank Drafts
[Total: 20 marks]
(5 marks)
(15 marks)
[Total: 20 marks]
6.
Discuss the key elements of company law with regard to:
(a)
(b)
7.
Articles of Association
Memorandum of Association
[Total: 20 marks]
What are the remedies available for the breach of a sale of goods contract under Sale of Goods Act 1893
and the Sale of Goods and Supply of Services Act 1980?
Consider both:
(a) Buyer’s remedies against the Seller
(b) Seller’s remedies against the Buyer
[Total: 20 marks]
END OF PAPER
Page 1
SUGGESTED SOLUTIONS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
BUSINESS LAWS
FORMATION I EXAMINATION – AUGUST 2011
SOLUTION 1
Outline the sources of law in the Irish legal system.
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of sources of law in Ireland as well as the
detail in which the students understand these sources and the hierarchy within them. The students are
expected to be descriptive in their answer. The question is relatively straightforward and in-depth analysis
is not required. Students should explain the various sources, domestic and international, in Irish law.
Solution
There are a number of different sources of law in Ireland. Importantly, Ireland is a common law system and
has many similarities to English law; the main differences between the systems come into force in the 1922
and 1937 Irish Constitutions. The sources of law in Ireland are; Constitution/Bunreacht na hÉireann, statutes
and legislation, case-law, European Union law and international Law.
Constitution/Bunreacht na hÉireann
The Constitution regulates the structure and function of the principal organs of government as well as
regulating the relationship of these organs to each other and those persons residing in the State. The
Constitution is the core source of law in Ireland. As the primary source of law, it has a higher status within
the jurisdiction it also sets out how legislation is passed. Any law that is found not to comply with the
Constitution by the Supreme Court or High Court will be declared invalid. The Constitution is in both official
languages but in the case of incompatibility it is the Irish version which will prevail. The Constitution also
contains a number of enumerated and unenumerated rights.
[4 marks]
Statutes/Legislation
Under Article 15.2 of the Constitution the Oireachtas has the sole lawmaking power within the State. Acts of
the Oireachtas are introduced through both houses of the Oireachtas, the Dáil and the Seanad. Each statute
introduced in the Oireachtas must be compatible with the Constitution and must be in both official languages
under Article 25. Laws which are enacted by the legislature, before they come into force, are known as bills.
Regulatory orders or statutory instruments are known as secondary legislation. This is regulated under the
Statutory Instrument Act of 1947. This passes delegated power to a Minister, local authority or other body
under a Bill for a specific purpose. European Union Directives are often introduced into law in this manner.
Statutory Instruments are laid before one or both Houses of the Oireachtas for a period of time to ensure
awareness of any changes and to allow objections to be raised. The Seanad Select Committee on Statutory
Instruments examines these pieces of delegated legislation before they are introduced and become law.
[4 marks]
Case-Law
Case law or the common law is a system of law which is derived from the courts and its decisions. It is based
upon a number of core principles. Firstly the principle of stare decisis, this doctrine requires lower courts to
follow the decisions of superior courts where the facts of the case are the same or similar. This doctrine is
also based upon the hierarchy of courts system and may be referred to as the doctrine of precedent.
Precedent may be binding or persuasive. The authoritative element of a judgement is known as the ratio
decidendi and must be followed. Other elements of the judgement are known as obiter dictum and are not
necessarily followed by lower courts. This system allows superior courts to overrule or distinguish a
particular case and not follow the judgment of a lower court, or a court at the same level. The effect of joining
the European Union and the Council of Europe means that both the European Court of Justice and the
European Court of Human Rights also now have an impact upon case law.
[4 marks]
Page 2
European Union Law
Ireland became a member of the European Economic Community, as it was then known, in 1973. This has
meant that the Constitution has been supplanted in certain areas as the highest source of law in Ireland.
The law of the European Union has direct application in many areas of Irish law. Article 19 of the Constitution
incorporates the various EU treaties into Irish law. The secondary law of the European Union known as
regulations apply in Ireland directly without any action required of the Oireachtas to introduce legislation.
Directives on the other hand are required to be introduced through the Oireachtas, usually through statutory
instruments but also through legislation. Decisions, recommendations, and opinions are introduced into
Irish law by the Oireachtas but are not legally binding.
[4 marks]
International Law
Article 29 of the Constitution established the position of international law in Irish law. Article 29.6 requires all
treaties to be put before the Oireachtas before they become part of domestic law. For example, the
European Convention of Human Rights and Fundamental Freedoms (1950) was introduced into Irish law
through legislation. Article 29.3 states that Ireland accepts the general principals of international law, though
this is not generally enforceable through Irish Courts.
[4 marks]
Page 3
SOLUTION 2
Discuss the distinction between legal and equitable interests in the Irish law of real property.
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge of the different forms of ownership of real
property and their ability to distinguish between legal and equitable interests. Students are expected to
know the differences between the two forms of interests and the effect that they have. The students are
expected to give a descriptive answer. The question is relatively straightforward and in-depth analysis is
not required. Extra marks will be given for students who incorporate statutes or case law into their answers.
Solution
The distinction between the two forms of ownership has its origins in medieval law. Judges in the courts
of common law were more concerned with legal interests and the Chancellor of the Court of Chancery was
concerned with equitable interests. Even though these two systems were integrated towards the end of
the 19th century, the distinctions between the two systems remain deeply embedded in the law despite the
passage of several acts in the area. The introduction of the Land and Conveyancing Law Reform Act 2009
has lead to some recent changes to the law in this area and aims to remove the last vestiges of medieval
law from real property in Ireland however it maintains the doctrine of equitable interests in Irish law.
[4 marks]
The importance of whether rights are attributed with legal or equitable character has its origin in the time
when legal rights were those that were recognised exclusively by the courts of the common law, while
equitable rights were enforced by the courts of equity. Section 11 (7) of the Land and Conveyancing Law
Reform Act 2009 recognises that interests other than legal estates or interests may be recognised by the
Courts. Once a legal estate or interest has been created, it can be enforced against any and all persons
who later acquire rights in the land, irrespective of whether those subsequent rights were granted in return
for valuable consideration and also irrespective of whether the person who acquired them had any
knowledge as to the existence of the prior legal estate or interest. The common law takes a simple
approach to priority between two competing legal interests and that is that the one first created prevails.
When land (or an interest in land) is transferred to a third party, legal rights that previously attached to the
land remain attached to it and are as a result binding on the third party under Section 11(4) of the Land
and Conveyancing Law Reform Act 2009. The purchaser therefore has notice that ownership of the
property is subject to any other legal rights established by others. There are important differences between
legal and equitable interests in land. The fact that there is unregistered and registered land in Ireland further
complicates the legal and equitable ownership of land.
[8 marks]
Legal estate or interests which have been established successfully have the strongest claim on property
and have the strongest right of enforcement. In contrast equitable ownership initially only confers rights in
personam or in person, which compels trustees to personally perform the trust. Equity also has developed
the notion of the bona fide purchaser for value as well as the doctrine of notice. This will grant some rights
to subsequent purchasers of land who have given consideration for the property. However in contrast to the
holder of the legal interest the equitable owner never holds an absolutely indefeasible title, therefore the
equitable owner’s claim to the title is never as strong as the legal owner.
[8 marks]
Page 4
SOLUTION 3
Seán decides he needs a new set of clothes for his job. He goes to Conor’s Male Outfitters, which he believes to
have the best selection of men’s clothing. In the window of Conor’s shop he notices a green cardigan priced €100.
Seán believes the cardigan is made by his favourite company, Bog Standard. There is a sign next to the cardigan
that says an extra 20% off the marked price of cardigans including Bog Standard clothing. Seán goes into the shop
to look for the cardigan. When he finds it he realises that it and all of the other cardigans are marked at €100 with
no mention of the 20% off.
Seán goes to Conor at the till with the cardigan and asks for the 20% off. Conor says that the 20% is only off stock
from the previous season and not from the cardigans from the current season.
Advise Seán as to whether he is entitled to the 20% off the marked price. Support your answer with reference to
relevant cases.
[Total: 20 marks]
General Comments
In this question the students should be able to give a detailed description of the law of offer and acceptance
and invitation to treat. This will include a detailed description how it operates in reality and its application to
the problem question. The question is asked in a clear manner and students should be able to give a
sufficient description of the relevant law in the area. Extra marks will be given to students who include
information on any relevant cases or statutes.
Solution
This is a question that deals with the law of contract, particularly the law regarding an invitation to treat,
offer and acceptance. An Invitation to treat is a statement that is not intended to bind the party making it in
any contract. It is not a manifestation of an intention to be bound, that is known as an offer. An offer is a
statement that the person making it is willing to contract on the terms stated. In the case of advertisements
such as the one in the window in this problem scenario it is possible that the sign may be an offer or an
invitation to treat. An offer may be made to one person a group or to the world at large, expressly or by
conduct though it presupposes at least two people, therefore an advertisement such as the one Connor’s
window maybe an offer. This was the case in Carlill v Carbolic Smokeball Co., here the Court decided that
where an advertisement is seriously meant than it will be an offer. However, courts usually find that
advertisements are mere invitations to treat such as in the case of Tansey v The College of Occupational
Therapists Ltd. If the window display was an invitation to treat, then Seán made an offer to Conor when he
went to the till to pay and it was open therefore to Connor to accept the offer or not. If the window display,
including the sign for 20% off was an offer, than Seán was entitled to accept it, as the Court would consider
it to an offer seriously meant.
The display of cardigans inside the shop is another important aspect to consider. The Court stated in The
Ministry for Industry and Commerce v Pim Bros Ltd that a display of goods is a mere statement of price
and nothing more and thus the display of cardigans would be an invitation to treat. When Seán went into
the shop and picked up the cardigan there is no contract until he went to Conor and stated that he wanted
to purchase it and the 20% off price. The court outlined this scenario in Pharmaceutical Society v Boots
Cash Chemists. In applying this to the facts before us in the problem question it would appear that Conor
was free to accept or reject Seán offer to purchase the cardigan at 20% off.
[10 marks]
If the Court found that either the advertisement in the window or the display of cardigans were seriously
meant and therefore offers it would be open to Seán to accept them. Acceptance occurs when there is an
unequivocal acceptance of the terms of the offer. Acceptance is generally divided between the fact of
acceptance and the communication of acceptance. As outlined in Billings v Arnott the fact of acceptance
may be inferred from the conduct of the parties As regards to communication, the fact of acceptance must
be stated to the offeror, though this may be waived if it is an offer to the world, such as in an advertisement.
In the situation before us it would seem that unless the advertisement or the display were offers and Seán
was able to accept those offers, including the 20% off offer, it was up to Connor to accept Seán’s offer when
he came to the till.
[10 marks]
Page 5
SOLUTION 4
What are the remedies available in Irish law after the commission of a tort?
[Total: 20 marks]
General Comments
In this question the students should be able to give a detailed description of remedies available in the result
of a successful tort claim. This will include a detailed description how of the two main types of remedies
available, damages and an injunction. The question is asked in a clear manner and students should be able
to give a sufficient description of the relevant law in the area. Extra marks will be given to students who
include information on any relevant cases or statutes.
Solution
The two main types of remedies available for a tort action are damages and injunctions. The circumstances
when both of these are available vary and these will be outlined below.
Damages
Damages are the most common remedy available for plaintiffs. Tort damages are determined by the courts
not by the parties prior or during the action. The measure of damages is the amount of money that the court
will grant to the plaintiff to compensate for the injury or to return them to their original position. Damages
are usually divided into five main categories. Real damages/compensatory damages which aim to
compensate the plaintiff for any loss, damage or injury suffered, it includes any future loss that maybe
incurred to the plaintiff. The court awards exemplary damages if a sum beyond the amount necessary to
compensate for any loss, damage or injury is awarded in order to punish the defendant for their tortious
action. This sometimes is granted to the court if the defendant has benefited from the tort or where
defamation has occurred. The court may grant nominal damages if there has been a tort committed, though
no real damage has been suffered by the plaintiff the court will award a small sum to the plaintiff. General
Damages cover compensation for pain and suffering resulting from injuries which were sustained by the
claimant in the accident. Lastly, special damages cover areas such as loss of earnings, medical expenses,
out of pocket expenses and vehicle damage costs. In serious cases there may also be future loss of
earnings, future expenses, etc.
[10 marks]
Injunctions
An injunction is an equitable remedy and is thus a discretionary remedy. Therefore it is open to the court
whether or not to apply this remedy, whereas with damages a plaintiff will be entitled to damages as a legal
right. Injunctions may require a party to refrain from an action, this is a prohibitory injunction. An example
of this could be to stop publication of an article. An injunction that requires a party to take some action is
known as a mandatory injunction. An interlocutory injunction is used by the court to maintain the status
quo. This is usually used to ensure that the circumstances do not change or become worse before the
action can come to trial. A perpetual injunction on the other hand is usually granted at the end of an action
and is granted to, either in a mandatory or prohibitory form, to prevent the tort from being committed again
in the future. An example of prohibitory perpetual injunction could be an order by the court to prevent a
mining company from blasting near another party’s land indefinitely. The courts generally will not grant an
injunction if the party seeking the injunction have themselves exacerbated this action or is not acting
‘equitable’ or fairly as the Court sees it. If damages would be an adequate remedy, the Court is also unlike
to grant an injunction.
[10 marks]
Page 6
SOLUTION 5
(a)
(b)
Briefly explain Negotiable Instrument.
(5 marks)
Describe the key legal aspects of each of the following negotiable instruments:
i)
Cheques
ii)
Bills of Exchange
Bank Drafts
iii)
(15 marks)
[Total: 20 marks]
General Comments
This question is designed to test students’ knowledge in the area of documentary intangibles particularly
negotiable interests. The question requires a descriptive answer. Students are expected to set out any
general issues regarding documentary intangibles and negotiable instruments before going on to explain
what Bills of Exchange, Cheques and Bank Drafts are. Extra marks will also be awarded if students can
refer to any relevant secondary legislation.
(a)
(b)
i)
ii)
Solution
Negotiable Instruments are transferable commercial documents that enable individuals and companies to
transfer money or property. They have been created through statute and through custom. It is defined in
the Bills of Exchange Act 1882 as ‘a chose in action, the full and legal title to which is transferable by mere
delivery of the instrument with the result that complete ownership of the instrument and all the property it
represents passes free from equities to the transferee, provided the latter takes the instrument in good faith
and for value.’ The title to a negotiable instruments is passed on delivery if the instrument is payable to the
bearer or by delivery and signature of the previous holder. Transferees have an unqualified right to payment
of the full amount and are entitled to sue on the instrument in their own name. They do not include postal
or money orders.
[5 marks]
Cheques
The Bills of Exchange Act 1882 is still the foundation of the law of surrounding the use of cheques and
other negotiable instruments. The Cheques Act 1959 is also relevant in relation to banks and their liabilities
with regard to cheques. Under the Act a cheque is defined in section 73 as ‘a bill of exchange drawn on a
banker payable on demand.’ Generally cheques are not used as negotiable instruments that often, but are
instead used as a direct method of payment and lodged to the payee's account. A bank may become what
is known as a holder in due course if the bank has taken a cheque in good faith and for value and without
notice of any defects in the title of the person who negotiated the cheque originally and may have better
title than the original cheque holder. Under the Cheques Act 1959 the balance of liability generally is in
favour of the bank. The use of cheques as negotiable instruments does open up the possibility of fraud. The
Bills of Exchange Act under Section 76 provides for the crossing of cheques to increase the security of the
cheque as a method of payment. Cheques can be crossed by simply drawing two parallel lines. The phrase
“not negotiable” on the face of the cheque which is accompanied by the general crossing provides for
further security. Another form of crossing, an account payee crossing has the effect of rendering the cheque
non-transferable and valid only as between the parties.
[5 marks]
Bill of Exchange
A bill of exchange is defined in s. 3(1) of the Bills of Exchange Act 1882 as, ‘an unconditional order in
writing, addressed by one person to another, signed by the person giving it, requiring the person to whom
it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to
the order of a specified person, or to the bearer.’ Originally the most important aspect of the bill of exchange
was its negotiability. A bill of exchange can be transferred once it has been endorsed without the need for
formal assignment or transfer and the holder of the bill of exchange is entitled to bring an action before the
courts on the basis of the instrument. This is an exception to the law of privity of contract. Once the new
holder of the bill of exchange has taken the bill in good faith and for value or some worth and without notice
of any defects in the title or ownership of the person who negotiated the bill then they become known as a
holder in due course and may have better title than the original holder. In ordinary usage cheques have
generally taken the place of bills of exchange; however their use is still important as cheques are generally
not intended to be negotiated, though there are instances where cheques may be.
[5 marks]
Page 7
iiI)
Bank Draft
A bank draft is an order to pay money drawn by one branch of a bank on another. They are not cheques
since there is no distinct drawer and drawee as defined under S.3 of the Bills of Exchange Act, 1882. The
holder of a draft may, however by virtue of S.5 (2) of the Act treat the draft as either a promissory note or
as bill of exchange and use them in the same manner as they would one of those documents. Drafts fall
within the various protections afforded to banks under the Cheques Act 1959 in order that Banks avoid
being the victims of fraud. Bank drafts have some advantages over cheques. A bank draft is in some
circumstances more creditworthy than a cheque as the bank is regarded by the payee as a more
substantial and reliable creditor than the drawer of a cheque. In both commercial and private transactions
where there are substantial debts bank drafts have become the most common method of discharging those
debts.
[5 marks]
Page 8
SOLUTION 6
Discuss the key elements of company law with regard to:
(a)
(b)
Articles of Association
Memorandum of Association
[Total: 20 marks]
General Comments
This question is designed to test students’ knowledge in the area of company law and the core rules
applying the running of a company. The question requires a descriptive answer. Students are expected to
set out any general issues regarding the articles of association and the memorandum of association. Extra
marks will also be awarded if students can refer to any relevant secondary legislation.
SOLUTION 6
(a)
Articles of Association
The articles of association deal with the internal running of a company as well as the rights of shareholders.
The Articles of Association bind a company and its members to its content. The Articles are also relevant
to those outside the company as it confers authority on the directors to act of behalf of the company and
when directors act outside of their parameters they are acting outside of their remit. Companies are free to
draft their own articles of association. However companies may also adopt the articles of association that
are contained in Table A of the Companies Act 1963, and these will be the default articles if a company
does not specify set out or exclude some of its contents. Generally the articles deal with the division of
capital, shareholder’s rights, transfer of shares, appointment and removal of directors, directors’ powers
and duties, the appointment and removal of secretaries, declaration of dividends, preparation of accounts
and the winding up of the company. Once registered with the Registrar of Companies the memorandum
and articles of association are binding on all the members of the company. The Articles of Association may
be altered by the company by special resolution or under the Companies Acts and these changes must be
sent to the Registrar of Companies. Any attempt to change this right by the articles themselves or through
a shareholder’s agreement will be void.
[10 marks]
(b)
Memorandum of Association
The memorandum of association is a document unique to the company that details how the company will
operate with regard to the outside world. Section 6 of the Companies Act 1963 requires that it includes: the
Name clause, the Objects clause, the Limited liability clause, the Share capital clause and the Association
clause. The name clause is company’s chosen title. Where there the company is limited by shares or by
guarantee, limited or teoranta must also form part of the name. For public limited companies the name must
contain ‘public limited company’ or ‘cuideachta phoiblí theoranta’. The name of the company must be
approved by the Minister for Enterprise Trade and Employment. The objects clause sets out the aims of
the company. This is important as it is only for the purpose of fulfilling these aims that the company may
enter into contracts otherwise the company will be considered to have acted ultra vires or beyond its
capacity. A third party may still be able to enforce the contract if they were unaware that the company was
acting beyond its authority. This is not only part of Irish law but also the European Communities (Company)
Regulations 1973. The Share capital clause states the amount of proposed share capital and its division
into different classes worth different amounts. The Association Clause contains the witnessed signatures
of the original subscribers, the amount that they are subscribed for and asserts that they agree to be bound
by the memorandum.
[10 marks]
Page 9
SOLUTION 7
What are the remedies available for the breach of a sale of goods contract under Sale of Goods Act 1893 and the
Sale of Goods and Supply of Services Act 1980?
Consider both:
(a)
Buyer’s remedies against the Seller
Seller’s remedies against the Buyer
(b)
[Total: 20 marks]
General Comments
The aim of this question is to examine the students’ knowledge and understanding of the Sale of Goods
Act 1893 and the Sale of Goods and Supply of Services Act 1980. The question focuses upon the area of
remedies and tests the student’s understanding the difference between remedies for buyers and sellers.
Extra marks will be given for students who refer to relevant case law in their answers.
[10 marks]
A contract for the sale of goods or the supply of services is treated the same as a normal contract with the
exceptions of the explicit exceptions that are set out in the Sale of Goods Act 1893 and the Sale of Goods
and Supply of Services Act 1980. A contract for the sale of goods is defined under the 1983 Act as ‘a
contract whereby the seller transfers or aggress to transfer the property in goods to the buyer for a money
consideration called the price.’ The parties to a contract for the sale of goods are entitled to the usual
common law and equitable remedies. At the same time the seller also possess statutory rights under the
Sale of Goods legislation
[4 marks]
a)
Buyer’s Remedies against the Seller
There are a number of remedies available to the buyer of goods under the two Acts. In an instance where
a seller is in breach of a condition of a contract, a buyer is entitled to reject the goods and rescind the
contract however if the buyer has accepted the goods or part of them they buyer looses this right under
s.35 of the Act. The buyer is also entitled, in such an instance to sue for damages. Under s.54, if the
consideration has failed, for example if the seller in fact had no title to the good, the buyer is entitled to the
price to be returned. If there arises a situation where a contract is for specific goods then the buyer can ask
for specific performance, however the Courts are slow to grant specific performance if damages would be
a more appropriate remedy, unless the buyer can prove that the goods are, in some manner, unique. If the
seller refuses or neglects to deliver goods, a buyer is entitled to claim for non-delivery, the damages in such
an instance are based upon the difference between the contract and market price on the date of delivery
or the date of refusal to deliver. In the case that a seller is in breach of a warranty under the contact, a buyer
may be obliged, or alternatively they may choose to treat the situation as a breach of warranty, the buyer
is entitled to sue for the loss or instead reduce the consideration paid to the seller in respect of the breach
of warranty.
[8 marks]
b)
Seller’s remedies against the buyer
There are a variety of circumstances in which a seller may gain a remedy against a buyer. The first set of
circumstances is related to two situations where a seller is entitled to sue a buyer for the contract price.
The first is if when the ownership of the goods was passed to the buyer and the buyer refuses, wrongly, to
pay the consideration under the contract. The second is in a situation where the consideration is payable
on a particular date and the buyer wrongfully neglects or refuses to pay; this is not related to the delivery
of the actual goods. A seller may also sue for damages if the buyer wrongfully neglects or refuses to accept
and pay consideration for the goods. In such circumstances, as in the situation where the seller neglects
or refuses to deliver the goods, the remedy available is the difference between the contract price and the
market value on the date on which acceptance was due to take place and if there was no fixed date, when
there was a refusal to accept the goods. In a situation where the buyer is insolvent, under the Sale of goods
an unpaid seller may gain a lien on the goods, a right to stop the goods or a right of resale.
END OF PAPER
Page 10