LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
AY 2022-23 Term 2 Mid Term
Date / Start Time
27 March 2023 / 9am – 1 March 2023 / 9am
Course
LGST101 Business Law
Group
G5
Instructor
Soh Kian Peng
INSTRUCTIONS TO CANDIDATES
1
There are a total of 6 number of pages including the instruction sheet
2
Answers: You are required to answer all parts of the question. Read it carefully and plan
your answer before writing.
3
Word Limit: The word limit is 2000 words.
4
File submission: Upload your answers in Word (Microsoft Word) to the e-learn dropbox.
5
Code of Conduct: You are reminded that breaches of the SMU Code of Academic Integrity
will be sanctioned. Your submission will be checked by Turnitin for plagiarism.
1
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
Question 1
Since he was young, Bobby Baxelrod has a fascination with money. This was unsurprising since
his father was a banker. Bobby spent his time thinking about new and innovative ways to earn
money. In particular, he developed an interest in trading stocks when he was serving National
Service ("NS") and would always read up extensively about the latest stocks to invest in, as well
as various investment and trading techniques. He invested 50% of his monthly NS allowance and
grew his portfolio to include stocks, bonds, cryptocurrencies and NFTs. Very soon, from a paltry
sum of $10,000 comprising his savings while in school and from his NS allowance, Bob eventually
grew his wealth 10 times and made his first $100,000 by the end of NS.
Bobby decided to pursue a double major in finance and economic theory at the School of Banking
(“SOB”). Bobby hoped that a business and economic background would put him in good stead to
work for some of the biggest hedge funds in the country. Meanwhile, he continued to hone his
trading skills and grow his capital. However, given his busy university schedule and having to
study for multiple classes and taking 8 modules in a semester, Bobby couldn’t find the time to
monitor his stocks, especially those in the US Markets. Just as he was about to give up, he had an
idea: automatic trading algorithm program. Of course! If Bob couldn’t monitor his stocks actively,
why not build a computer program to automate his trading activities instead!
Bobby, of course, was not simply content with a mere computer program. Being an extremely
lazy person, he wanted a machine which he could turn on, and press the start button which would
activate the trading program, thus generating profits for him with a single click of the mouse.
Bobby has read up extensively on the new computer chips made by Tongo Semi-Conductors
(“TSM”) which boasts superior computing power and are suitable for executing lightning fast
trades.
Bobby, however, does not know how to code. Nor does he know how to build his own computer
– in fact he is probably better at breaking things than building them. Bobby’s true talent lies in
getting other people to do the work for him. So Bobby went onto the ASK.SOB Telegram group
and posted the following message:
I need someone to build me a custom computer for trading, as well as a customised
trading algorithm for me! Advanced coding skills preferable. PM for further details.
Will pay good $$$ for your skills and time <3<3
Mikey Wagner, a 3rd year student from the MSU School of Computing Science, who happened to
be a member of the ASK.SOB telegram group, saw Bobby’s message. As he planned to travel
2
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
overseas with his girlfriend during the summer holiday, Mikey thought that this would be a good
opportunity to earn some cash. He sent Bobby the following messages:
Mikey: Hey there! Saw your message looking for someone to help build the
computer and code a program. I’m interested.
Bobby: Hello, yes its quite urgent! I do need someone to help me build the
computer with specific parts and code an automated trading software that can
execute trades for me without me having to actively monitor the stock market. For
the software, I can describe to you my trading strategies if you accept this job, and
you code the app according to how I describe the trading strategies. We can talk
more if you choose to accept the job.
Mikey: Ok, sounds interesting. I’ve helped a friend of mine code a commodities
trading app before, so my experience should be somewhat relevant. I’ve also built
my own custom computers so that should be a breeze.
Bobby: Omg is it StonkX? I bought some of my sneakers from there before! Its such
a fantastic app! You must be a legend for coding that app!
Mikey: ����
Bobby: anyways, you’re keen on this project, right?
Mikey: yeah, but before I confirm, can I ask about the timeline and the salary?
Bobby: Well, it’ll be great if you can code this before summer starts. Errr…say by
mid-April? And as for your salary, I will pay you in tranches. So $2000 when you
created the basic software, $3000 for coding the various trading techniques, and
a final $3000 once a successful trial run of the program is completed. I will also
give you a bonus of 1% of my profits if the trading program works well.
Mikey: Swee bro…but April is rather soon, and as you know, we both have classes
during the sem … if its mid-May, will you be ok?
Bobby: Ok then, by mid-May. I will draft up a simple contract to reflect what we’ve
agreed upon.
Mikey: solid bro, talk soon!
2 days later, Bobby sent Mikey the following contract:
The parties to this agreement are Bobby Baxelrod and Mikey Wagner. On this 15th
day of January 2022, the parties hereby agree to the following terms:
3
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
1. This agreement envisages the engagement of Mike’s services as a software
coder and custom computer builder for Bobby.
Building the computer
2. Mike is to build a computer capable of running the algorithm which he is to
code.
3. Mike is to use the latest TSM chips.
Building the Software
4. Mike’s task is to code an automatic trading algorithm for Bobby to be used to
assist Bobby with the execution of trades without manual input or monitoring
by Bobby.
5. In this aspect, Mike will take reasonable care to ensure that the software is up
to Bob’s specifications, and that the features which Bob has requested for are
coded seamlessly into the software.
6. The project commences from today, 15 January 2022.
7. Payment will be made in the following manner:
Payment for the computer
a. Mike will be paid $5000 upon successful delivery of the computer.
Payment for the software
b. The first payment of $2000 will be made when Mike codes the basic
framework for the software.
c. The next $3000 will be paid to Mike once he has converted the various
trading techniques requested by Bob into the program.
d. The final $3000 will be paid once a successful trial run of the program is
completed.
Having read the contract, and remembering part of his business law knowledge (Mike can’t
remember much because he was playing truant and skipping classes to go to the nearby LAN
shop), Mike wanted to protect himself and therefore requested for the following clauses to be
added:
8.
Bobby hereby agrees to absolve Mike of all liabilities associated with Mike’s
negligence or breach of contract causing Bob to suffer financial losses.
9.
Bobby also agrees that Mike will not be liable for any injury or death arising
from the use of the bespoke computer.
4
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
Having also not paid attention in business law class, Bobby thought nothing of these clauses and
agreed to add it into the contract.
Accident
Over the course of the next few months, Mike proceeded to build the bespoke computer. Mike,
however, was careless – he ordered what he thought were the latest TSM chips. But it turned out
there was actually a newer version with a better 5% computing performance. Mike, however, did
not tell Bobby about this.
Bobby also shared with Mike his proprietary trading techniques, which Mike then utilised to code
the program. On the first week of May 2022, Mike finally finished coding the program. By this
time, Bobby had also paid Mike a total of $5,000. The program’s testing was scheduled on 6 May
2022. On that day, Bobby opened the custom computer, linked his trading account with the
software and pressed the start button. At first, the program worked well, and trades were
executed on several stocks that Bobby thought were good trading calls. Bobby’s bank account
began to grow.
However, a glitch suddenly occurred, and the program started to short sell millions of Tesla
shares. This was very bad for Bobby as the price of Tesla was trending upwards. Bobby was
looking at an enormous loss. Bobby was losing his cool – this was not supposed to happen. In
desperation, Bobby ran over to the power socket and pulled out the plug. He thought that by
doing so, the program would stop running and his losses would be erased. Unfortunately for
Bobby, Mike had forgotten to put in the safety circuit breakers. These breakers were necessary
because the computer consumed such vast quantities of electricity – they ensured that sudden
unplugging from the socket would not result in electrocution. Unfortunately for Bobby, there
were no breakers to save him, and as a result, he received quite a shock and was severely injured.
Consequently, Bobby found out that Mike’s program had wreaked havoc on his bank account. He
was now in debt for $10m USD. That was not all. Bobby, once a dashing young lad, was now a
burnt out husk (literally) having been electrocuted to a crisp. It was a miracle he survived.
Bobby is understandably shocked and frustrated that all his hard work over the past few years
went down the drain, that all his hard-earned money was gone, and that he is now undeniably
ugly. Bobby decides to sue Mike for his losses.
5
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
You are a lawyer. Bobby has come to you seeking advice. In particular, he would like to know
the following:
(a) Whether a contract was formed between Bobby and Mike?
Answer: For a contract to be formed, there needs to be an identifiable agreement that is
complete and certain, consideration and intention to create legal relations (Gay Choon Ing). In
this case, there is an identifiable agreement which is the contract that Bobby has created with all
the terms and clauses clearly stated in it. There were no further negotiations or counteroffer
regarding the contract offered since Bobby agreed to add Mike’s clauses into the contract,
reaching consensus ad idem. Additionally, in commercial agreements, there is a rebuttable
presumption that parties do intend to create legal relations (Gay Choon Ing) and in this context,
the presumption is not rebutted. As such, a bilateral contract between Bobby and Mike is formed
at that point in time.
(b) Advise Bobby on his rights against Mike, in particular:
a. Can he successfully sue Mike for breach of contract?
Answer: The law is predominantly concerned with the objective intentions of a party, and not his
subjective or actual intentions. Objectively speaking, the intention of Bobby in regards to the
contract was to get Mike’s help to build a computer and create an automated trading software
that can execute trades for him without him having to actively monitor the stock market. All of
which is as expressed in term 2 “Mike is to build a computer capable of running the algorithm
which he is to code” and term 4 “Mike’s task is to code an automatic trading algorithm for Bobby
to be used to assist Bobby with the execution of trades without manual input or monitoring by
Bobby.”
Thus, although Mike breached term 3 of the contract in which “Mike is to use the latest TSM
chips”, Bobby may not be able to successfully sue Mike for breach of contract as a result of the
breach of term 3. This is because term 3 can be considered a minor term of the contract as
ultimately Mike managed to build the computer using the wrong TSM chips and it did not hinder
Bobby in running the software. Thus, the breach of a minor term does not give Bobby the right
to terminate the contract and he cannot sue Mike for the breach of contract.
However, Bobby can sue Mike for a breach of contract on the argument that term 4 is a condition
of the contract as if Mike cannot build the software that could help him trade without much
monitoring as agreed upon, Bobby would not have entered the contract in the first place. The
objective approach determines a party’s intentions by looking at all of his words and conduct
directed towards his counterparty from the perspective of a reasonable man versed in business.
6
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
In this case, Bobby agreed to hire Mike mainly due to the conversation in telegram where Mike
shared that he “helped a friend of mine code a commodities trading app before, so my experience
should be somewhat relevant. I’ve also built my own custom computers so that should be a
breeze”.
In the end, although Mike managed to build the computer, he failed to create a software that
can assist Bobby in trading as he promised he could and has thus breached term 4. Taking into
consideration Andrew Phang JA’s analysis in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd,
Situation 3(a): Condition approach where the intention of the parties to the contract was to
designate that term as one that is so important that any breach, regardless of the actual
consequences of such a breach, would entitle the innocent party to terminate the contract.
Therefore, Mike’s breach of term 4 entitles Bobby the right to terminate the contract and
successfully sue Mike for breach of contract.
b. What is the effect of clauses 8 and 9? Do they apply in the present case?
Answer: Clause 8 stating “Bobby hereby agrees to absolve Mike of all liabilities associated with
Mike’s negligence or breach of contract causing Bob to suffer financial losses”, is an exemption
clause that seeks to exclude Mike’s liability from Bobby’s financial losses associated with his
negligence or breach of contract completely. It applies in the present case as even though there
was a glitch in Mike’s program, which caused Bobby to be in debt for $10m USD, Bobby cannot
hold Mike liable for his financial losses as a result of clause 8.
However, Mike cannot exclude liability for anything and everything. Although Mike added clause
9 into the contract stating that “Mike will not be liable for any injury or death arising from the
use of the bespoke computer”, under section 2 of UCTA, the clauses cannot exclude or restrict
liability for death or personal injury due to negligence. By law, Mike is hence liable for death or
injury. In this case, it was indeed Mike’s negligence for forgetting to put in the safety circuit
breakers that would ensure sudden unplugging from the socket would not result in electrocution.
Thus, resulting in Bobby’s severe injury which he can sue Mike for the losses and cost incurred
by his injury.
c. Because Bobby was furious, he has not paid Mike the last instalment of $3000
pursuant to clause 7 (d) of the contract. Mike is now demanding payment. Bob
wants to know if he has to pay Mike.
Answer: Bobby does not have to pay Mike the last instalment of $3,000 pursuant to clause 7 (d)
of the contract which states “The final $3000 will be paid once a successful trial run of the
program is completed”.
7
LGST101: Business Law Midterm Exam (G5)
AY2022-2023 (Term 2)
In regards to clause 7 (d), Mike did not fulfil the requirement of a successful trial run. On the day
of the program’s testing on 6 May 2022, though the program worked well initially, a glitch
occurred, and the program started to short sell millions of Tesla shares. This clearly shows that
the trial run of the program was not successful and does not fulfil clause 7 (d) in the contract. As
such, Mike is not entitled to receive the last instalment of $3,000 unless he fixes the glitch and a
successful trial run of the program is completed. Therefore, Bobby does not have to pay Mike.
Please keep your answers short and to the point. Bobby’s injuries means that his addled brain
cannot process information as efficiently as before. Unnecessarily long pieces of advice confuse
him and make him angry.
8