Graduate Diploma in
Purchasing and Supply
Legal Aspects in Purchasing
and Supply
LEVEL 6
L6-10/May 2009
MARKING SCHEME
May 2009
‘Maid Corp’
L6-10: Maid Corp
SECTION A
Maid Corp
Q1
Question aims:
This question is designed
ƒ
to test the candidate’s knowledge of contract law and specific contract
clauses and third party rights
ƒ
to test the candidates application of these laws to the scenario
presented
Syllabus Reference(s): 1.2 2.5
Answers might include:
Maid’s action would primarily be contractual. Lure have broken the contract in
relation to the delayed luggage. The major issue is whether Lure will be able to
exclude liability based on the Liability Clause (clauses 24). The clause has been
incorporated into the contract. If the contract was based on UK law, Lure will
have to demonstrate that it is reasonable. Relevant sections of the Unfair
Contract Terms Act 1977 (S3, S11 and Schedule 2) will be explained by stronger
candidates. Supporting case law would b appropriate.
(10 marks)
The contractual claim in relation to the lack of food raises a different issue since
there is no expressed provision in the contract promising to provide it. This
raises the issue of implied terms. Answers should define and distinguish
between expressed and implied terms. The courts might be prepared to imply
a term based on business efficacy although a strong answer might discount
this because the contract was still performed (i.e. the flight). Implying a term
based of the officious bystander test or previous dealings is likely to be more
productive. Supporting case law would be expected e.g. Liverpool City Council
V Irwin, the Moorcock or other similar cases.
(10 marks)
Outstanding answers might refer to Jackson V Horizon Holidays providing a
basis for Maid to make a claim on behalf of its employees. A claim by Maid’s
against Holyoak (a third party) based on negligence should be dismissed since
the loss suffered was purely financial. Some credit should be given for
reference to the Contract (Rights of Third Parties) Act though it is unlikely to
apply. Some credit for discussion for Supply of Goods and Services Act 1982,
potential force majeure clause and assessment of damages
(5 marks)
Total 25 marks
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L6-10: Maid Corp
Q2
Question aims:
This question is designed
ƒ
to test the candidate’s knowledge of negligence
ƒ
to test the candidate’s knowledge of anticipatory breach of contract
ƒ
to test the candidate’s application of these laws to the scenario
presented.
Syllabus Reference(s): 1.4 2.5
Answers might include:
Q2
(a)
Jenny’s claim is likely to be based on negligence. The three main
components of negligence should be discussed – duty of care, breach of
the duty and resultant damage. Excellent answer will also include the
fourth test of whether is it fair, just and equitable to allow the claim.
Each component should be supported by relevant case law, especially
Donoghue V Stevenson and applied to the scenario. Prime facie, Jenny
appears to have a claim.
(11 marks)
Jenny’s claim could be against the airport since it is vicariously liable for
the negligent actions of its employees. Jenny might also consider a
claim against Lure on the same basis. However double-compensation
would not be allowed. Both the airport and Lure may have a partial
defence if they could demonstrate contributory negligence. I.e. Jenny
was partly to blame for her own injuries e.g. failing to take reasonable
care or being under the influence of alcohol. In such circumstances, the
compensation would be reduced.
(4 marks)
Total 15 marks
Q2
(b)
This question is based on contractual issues. Goldstar have committed
an anticipatory breach of contract.
This should be defined and
compared with an actual breach. Under such circumstances, Maid can
accept the breach immediately and sue for breach of contract or wait
until performance of the contract was due and take action at that time.
Case law such as Hochester V De La Tour would enhance an answer. An
answer might refer to mitigation of loss.
(7 marks)
Essentially there is probably nothing that can be practically done since
even if a claim for breach of contract is made, Maid would be classed as
an unsecured creditor and therefore unlikely to recover much, if
anything. Answers might refer to insurance but such policies rarely
cover this situation.
(3 marks)
(10 marks)
Total 25 marks
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L6-10: Maid Corp
Q3
Question aims:
This question is designed
ƒ
to test the candidate’s knowledge of sale of goods legislation
ƒ
to test the candidates application of sale of goods legislation to the
scenario presented.
Syllabus Reference(s): 2.1 2.2
Answers might include:
Q3
(a)
Each section should be defined. In terms of both sections, answers
should mention that both parts only apply where a sale has been made
in the course of a business and therefore private sales are excluded.
Major parts of S14 (2) should be discussed including a definition of
satisfactory quality (standard that a reasonable person should expect
taking into account description, price etc). Strong answers will identify
the factors the courts are obliged to consider to determine satisfactory
quality.
Such factors as fitness for the purpose for which goods of that kind of
commonly bought durability, appearance and finish, safety and freedom
from minor defects. Excellent answers might also mention the
exclusions contained in S14 (2) that include defects drawn to your
attention or defects which a reasonable examination ought to reveal.
(8 marks)
S14 (3) is concerned with Fitness for the purpose. It applies where a
buyer expressly or by implication makes known to the seller a particular
purpose for which goods are required, there is an implied condition that
goods are fit for the purpose.
The section will not apply if the buyer did not rely on the seller’s skills
and judgment or it was unreasonable to do so. If there is only purpose
for the goods then S14 (3) will be automatic e.g. underpants. Supporting
case law on either section will be given credit. Minor credit will be
awarded for reference to Nemo Dat even though inapplicable to this
question.
(4 marks)
(12 marks)
Q3
(b)
This part of the question essentially concerns the remaining two implied
terms, S15 (sale by sample) and S12 (title). Answers should be able to
define S15 and explain that that the ‘bulk’ must correspond with the
sample. Clearly this is not the case and means an implied condition has
been breached. The problem for Knight is that goods might be deemed
to have been accepted. S15 states the buyer must be given a reasonable
opportunity to compare the bulk with the sample. Arguable this has
been granted and would therefore make any breach a breach of
warranty. This would allow Knight to claim for damages but not cancel
the contract.
(8 marks)
In terms of the ownership issue, S12 would be relevant. This provides
that sellers must have the right to sell the goods. This does not mean
ownership, it is possible for non-owners to sell goods providing they
have the permission of the owner (expressed or implied). Supporting
case law such as Godley V Perry would enhance an answer.
(5 marks)
(13 marks) Total 25 marks
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L6-10: Maid Corp
SECTION B
Q4
Question aims:
This question is designed
ƒ
to test the candidate’s knowledge of discharge of a contract
ƒ
to test the candidates ability to differentiate between different methods
of discharge or termination of a contract.
Syllabus Reference(s): 1.4
Answers might include:
The answer should refer to the four main ways a contract can be terminated.
Performance - Each party is under a duty to perform precisely and exactly
what has been agreed, otherwise the contract is not discharged and no
payment can be claimed. Cases like Cutter V Powell could be used as examples.
Good answers will refer to the exceptions to this rule including the doctrine of
substantial performance, (cases such as Hoenig V Issacs could be used to
support this point), where partial performance is accepted, where performance
is prevented by the other party (cases such as Planche V Colburn could be used)
and divisible or instalment contracts.
(8 marks)
Frustration - The three main conditions for frustration to apply should be
outlined. i.e. the event was unforeseeable, it was neither party’s fault (not selfinduced) and it destroyed the whole basis of the contract or made it impossible
to perform. Cases such as Krell V Henry, Taylor V Caldwell could be used as
examples of frustrating events. Strong answers will identify that frustration will
not apply simply because performance becomes more difficult or expensive.
Cases such as Tsakiroglou & Co Ltd V Noblee, Davis Contractors V Fareham
UDC could be used in support.
Strong answers will discuss the legal effect of a frustrating event. (contract is
brought to and end immediately) and explain how losses in terms of sums due,
sums paid and expenses are allocated. Exceptional answers will be able to refer
to the Law Reform (Frustrated contracts) Act 1945.
(8 marks)
Agreement - This is the normal method of contractual release if a contract
cannot be performed. Clearly answers should that an agreement is needed i.e.
all parties to the contract need to agree to release each other from the contract.
Answers should point out there is no legal obligation to do this, unless
provision has been made in the contract (e.g. a force majeure clause)
Such an agreement must be supported by consideration if it is to be legally
enforceable. An exceptional answer will be able to identify that the
consideration would be releasing the other party(s) from future contractual
obligations.
(4 marks)
Breach - Answers might state that a breach of contract is a failure to perform
any contractual obligation. However, not all breaches automatically result in the
contract being discharged. This will depend upon whether a condition,
warranty or Innominate term has been broken. Each might be defined. Good
answers will distinguish between an actual breach (takes place at the time
performance is due) and anticipatory breach (where the innocent party receives
L6-10/May09/Maid/MK
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L6-10: Maid Corp
advance warning that the contract will not be performed). The innocent party
then has a choice, it can wait until the date has passed and sue for actual
breach or alternatively, it can sue for contractual damages immediately by
accepting the breach. (Cases such as Hochester V De La Tour could be used as
support). Some marks for assessment of damages
(5 marks)
Total 25 marks
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L6-10: Maid Corp
Q5
Question aims:
This question is designed
ƒ
to test the candidate’s knowledge of the changes introduced by the
Public Contract Regulations 2006
ƒ
to test candidates knowledge of the changes introduced by the Freedom
of Information Act 2000.
Syllabus Reference(s): 3.2 3.3
An answer might include:
Q5
(a)
The question referred to changes introduced by the regulations and
therefore few marks should be awarded for provisions in place pre-2006.
The main changes should be highlighted and include:
The Shortening of some response times e.g. procurement =37 days.
The introduction of the Competitive dialogue procedure; answers
should suggest how this is designed to allow for greater supplier
involvement particularly for when engaged in large-scale, complex
contracts.
Strong answers will also explain the changes to the
Evaluation Criteria in terms of publications of weightings and the
inclusion of social and environmental criteria.
(8 marks)
Answers should include the introduction of the Standstill procedure
after the Alcatel judgement which allows for a minimum 10 day
standstill period between tender decision and the formal contract award.
procurement /eAuctions, central purchasing bodies (consortia) and
recognition of framework agreements will be discussed by the stronger
candidates.
(7 marks)
(15 marks)
Q5
(b)
An answer should mention the main right for any individual to access
information held by a public body (SUBJECT ACCESS RIGHT). The
individual need not a vested interest in receiving the information. Good
answers would mention the duty to on public authorities to publish a
publication scheme and the 20 working days response time. (5 marks)
The body of an answer is likely to refer to absolute and qualified
exemptions, especially confidentiality and commercial information
exemptions. Reference might be made to the public interest test.
(5 marks)
(10 marks)
Total 25 marks
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L6-10: Maid Corp
Q6
Question aims:
This part of the question is designed
ƒ
to test the candidate’s knowledge of the main methods of resolving
commercial disputes
ƒ
to test the candidate’s ability to distinguish between different forms of
dispute resolution.
Syllabus Reference(s): 1.5
An answer may include:
The main methods for resolving commercial disputes may include:
Litigation as a means of resolving disputes has both advantages and
disadvantages. The main advantages are legal certainty, legal expertise, full
legal representation and legally binding and final decisions. Disadvantages
would include cost, delays, publicity and the adversarial nature of the process.
(7 marks)
Arbitration should be defined. It was intended to be cheaper, quicker, less
formal and less public that litigation. It allows for the appointment of specialist
arbitrators, especially where technical disputes were involved. An arbitrator’s
decision is binding unless there are serous irregularities. The disadvantages
include lack of certainty (no need to follow precedent) and the process can still
end up in litigation. It also might prove a costly method of resolving disputes.
In terms of international disputes, arbitration has other benefits including being
able to choose which law is applicable and which country would hear the
dispute. The disadvantages would include problems of enforcement and
language difficulties.
(7 marks)
Mediation is a system whereby a third party attempts to find common ground
between the parties. It is non-adversarial and normally each party will have a
separate room with the mediator moving between them. The main advantages
are cost, speed and confidentiality. The main disadvantage is any final decision
is not legally binding. Conciliation is similar to mediation but a conciliator will
make a recommendation. Tends to be more investigative. ACAS is a good
example.
(7 marks)
Adjudication is similar to arbitration except it is quicker and makes greater use
of technical experts. Any adjudication is not legally binding (unless the parties
have agreed). Other alternatives methods such as negotiation and expert
determination (even though a process of adjudication) would also receive
credit.
(4 marks)
Total 25 marks
END OF MARKING SCHEME
L6-10/May09/Maid/MK
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