Examiner’s Comments
March 2015
Contracts
Question 1
This question required students to work through the facts to determine if any of the events
constituted a breach of contract (this also involved determining whether certain statements had
become terms), whether any breach gave rise to a right to terminate by reference to the tripartite
classification of terms and whether that right had been lost by an election.
The problem was generally well done. However, many students ignored the instruction at the front
of the paper to discuss all relevant issues. Too many took the view that Adrian had elected to affirm
and therefore did not discuss the breach issues. The weaknesses in answers were as follows:
1. Poor statements of legal principle. Very few students noted that the test of essentiality has two
components with the second being that the promisor ought to have known of the importance the
promisee placed on the term. For the few that stated this requirement only a handful went on to
apply it. The fact that Barbara approached Adrian could have been relied on more.
2. No application of those principles by way of analysis to the facts. Too often students took the view
that a statement of the relevant legal principle together with a conclusion constitutes analysis, eg,
'clearly time was of the essence as Adrian would not have entered into the contract unless of
assured of strict performance of time'.
3. Conclusions drawn about election without ever stating what 'election' is and how it arises on the
facts. And students were too ready to conclude there was an election, eg Adrian using existing
supplies to fulfil an order was thought to be a clear election by many without them first thinking
what else he was to do in order for him not to be in breach of his contracts with restaurants. Most
assumed that the later orders were an election to affirm, which may right but it required some
analysis, were there any counter arguments?
4. Little to no discussion of repudiation by many students when a long series of breaches was clearly
evident.
5. Many students said that no standard for the goods was agreed so none applied. It is necessary for
students to think through the ramifications of their answers, logically this conclusion would seem to
suggest Barbara could have performed by supplying rotten fruit.
6. Students classified a term as a condition but then concluded that the breach was not serious
enough to warrant termination when any breach of a conditions results in such a right. If that was
their view they needed to focus on the standard of performance, eg, did it only require substantial
performance? Also many students classified the condition of the fruits as a condition for one breach
(3) and an intermediate term for (4). When students classified the condition of the fruit as an
intermediate term they did not clearly state whether they thought that the right to terminate
depended on that breach as it related to that severable part or as it related to the whole contract.
Similarly with repudiation as regards the failure to deliver.
Question 2
This was the most difficult question in the paper. The answer needed to discuss what might be the
terms of the contract (and why - many discussed the statement about company scouts by reference
to misrepresentation but did not then suggest what that meant for remedies; few considered the
reference to 'guaranteeing' their presence as regards incorporation and classification according to
Luna Park and how that might impact on the advice); whether there was a repudiation by Edgar and
any election to terminate by #Brown. Whether #Brown was driven to terminate as performance
required the cooperation of Edgar which was not provided, they essentially trespassed on his
property to perform. Did this distinguish the facts of White & Carter Councils? Was #Brown's reply to
the high school concert an election; and should they have accepted it as an act of mitigation. Was
there a breach by Edgar prior to an election to terminate as his action appears an anticipatory
breach, if no breach then what was the impact for damages and the activation of the liquidated
damages clause? Was there another breach you could rely on. Was the $5000 liquidated damages
clause a penalty, key issues were that it was payable for any breach but at the same time given that
at the time of contract there was no way of working out the contract price as it was based on future
ticket sales would it nevertheless pass the Dunlop test?
Students were also asked to consider some heads of damages, eg, reliance, loss of chance and loss of
enjoyment, these needed to be addressed by reference to causation and remoteness and any
general principles relevant to these heads of damages. Generally statements of principle here were
very poor and attempts to apply the principles of remoteness by reference to the cases in the course
outline was not well done. Many, however, provided good statements about loss of chance and loss
of enjoyment. But reliance loss was not as well done, especially its relationship to expectation
damages, was this a case where it would have been difficult to assess expectation loss thus allowing
for recovery of reliance loss, Amann?
Question 3
This was a relatively easy question but overall poorly done. This question raised issues of
incorporation of terms (principally by notice, reference and course of dealing), the construction of
exclusion clauses, and the rights of third parties.
Students seemed comfortable with discussing notice (Thornton) and course of dealing (DJ Hill, a few
also raised Henry Kendall by way of contrast) but found difficulty in discussing the relationship
between these when incorporation by reference was also thrown into the mix. However, very few
made the point that incorporation by course of dealing is based on consent. Quite a few noticed that
the heading over the terms of the exclusion clause in the head office seemed to refer to a different
company (as if Fridge had used some other terms as a boilerplate). Even if one got over most hurdles
would this of itself lead a client to confusion such that no sufficient notice was being given.
The biggest problem with answers was not there was very few who really attempted to construe the
clauses. Many could state the Darlington test but not take it any further. What was the natural
meaning of this clause, was it relevant in construing 'howsoever caused' that negligence was
expressly mentioned only in the limitation clause, did this narrow 'howsoever caused' in clause 7?
Did clause 7 only protect Fridge and not Freezer? Was there any ambiguity to raise the contra
preferentum rule? While Freezer was guilty of negligence was Fridge? Or had they breached a strict
obligation to comply with an industry standard? Was the four corners rule relevant as regards Fridge
relying on either clauses 7 or 8 in failing to comply with that standard? Too many described this as a
rule of law rather than a rule of construction.
Although a number saw that they had to discuss cases such as the Eurymedon in relation to Freezer,
few worked methodically through those principles to draw a conclusion.