Examiners’ reports 2016

Examiners’ reports 2016

LA1040 Contract law – Zone B

Introduction
This examination contained a balance of questions across the full syllabus.
Notwithstanding this, it was clear that candidates had revised selectively and so
some topics were much more popular than others. Question 1 on agreement and
consideration was the most popular (with Question 5 on misrepresentation the
second most popular). However, it seemed that candidates were not perhaps
prepared for a question that raised issues of agreement and consideration.
Questions such as Question 3, which gives candidates a choice, give an advantage
to students who have revised broadly so that they can select the two statements
that make best use of their knowledge. There were some areas, perhaps perceived
to be difficult ones, which candidates did not revise as thoroughly as agreement,
consideration and misrepresentation. Candidates who ‘dropped’ mistake (Question
2) and remedies for breach of contract (Question 8) found their choice of questions
to be severely curtailed.

Comments on specific questions

Question 1
Lord Aristo is an art collector. His favourite painting, Bacon’s ‘Pope Pious’, is
stolen. Lord Aristo places an advertisement in the Times newspaper offering
a reward of £100,000 to anyone who is able to locate the painting. Advise Lord
Aristo in each of the following alternative circumstances:
a) Canon, a private investigator, is employed by Lord Aristo’s
insurance company to recover the picture. Canon locates the
picture and claims the reward.
b) Devi sees the advertisement, locates the picture and claims the
reward. Devi does not see an advertisement placed in the
Independent newspaper withdrawing the offer of a reward before he
finds the picture.
c) Vera, a police detective working on the theft, locates the picture and
claims the reward.
d) Baron Bluster, a friend of Lord Aristo, begins an extensive search for
the painting. He telephones Lord Aristo to tell him that he will be
meeting an informer that evening who will tell him where the
painting is. Lord Aristo tells Baron Bluster not to bother because he
has changed his mind about the reward. Baron Bluster goes ahead
with the meeting, gets the information and claims the reward.

1
General remarks
This question combines elements of agreement and consideration. Students should
identify that Lord Aristo’s advertisement is the offer of a unilateral contract. The
elements of a unilateral contract should be discussed at the outset and then the four
different alternatives discussed as below. The question provides its own structure
with the introductory discussion of unilateral contracts followed by separate sections
dealing with Cannon, Devi, Vera and Baron Bluster. The relevant issues are:
(a) Does Canon supply good consideration when the act he performs is the
performance of a pre-existing contractual duty owed to a third party (his employer,
the insurance company)?
(b) The issue here is what are the requirements for the revocation of a unilateral
offer?
(c) The issue here is whether Vera has provided good consideration when she
performs a pre-existing duty fixed by law generally.
(d) Has Bluster commenced performance of the act stipulated? If so, is revocation
possible?
Most candidates answered this question and did so reasonably well.
Law cases, reports and other references the examiners would expect you to
use
(a) Students should refer to cases such as the Eurymedon and Pao On v Lau Yiu
Long. Very good answers may notice that the consideration supplied by Canon is
the act of performing, rather than the promise to perform, a contractual duty owed to
a third party (his employer, the insurance company).
(b) Students should discuss the principle endorsed in Shuey that actual
communication is when the same notoriety is given to the revocation as was given
to the offer.
(c) Cases such as Collins v Godfroy, Glasbrook v Glamorgan Bros, Reading
Festival v West Yorks Police can be discussed.
(d) Here the cases which might be discussed include: Errington v Errington, Luxor v
Cooper.
Common errors
A good answer to this question would have a good introduction that demonstrated a
knowledge of the general requirements of unilateral contracts and then followed this
with a discussion of (a) – (d) that showed a good understanding of some of the
subtler distinctions and doctrines. Examples of this higher level knowledge and
application include: in (a) very good answers would recognise the two distinct
principles that the Eurymedon and Pao On stand for: respectively, that the act of
performing and the promise to perform, a pre-existing contractual duty owed to a
third party can constitute good consideration and in (d) an understanding that the
principle that a unilateral offeror is prevented from revoking the offer once the
offeree has begun performance of the stipulated act depends upon the implication
of a term to that effect as explained by the House of Lords in Luxor.
A good answer to this question would…
begin with a short introduction to unilateral contracts and then be able to ‘spot’ the
one significant issue raised in each part of the question and support a discussion
focused on that scenario with 2–3 appropriate authorities.
Poor answers to this question…
failed to note at the outset that this was a unilateral contract where acceptance was
by the performance of the stipulated act. Section (a) was not answered well with

2
 Examiners’ reports 2016

many answers simply failing to see the consideration point. Surprisingly, many
weaker answers also failed to spot the issue of revocation in (d).
Student extract
This question concerns the area of offer and acceptance under the law of
contract.
The modern thinking in assessing whether an agreement has been reached
is done objectively and not subjectively. The outward visible signs are looked
at while the mental element is disregarded (Centrovincial Estates v
Merchant). The objective element may be qualified by a subjective element
(Hartog v Collin and Shields). This was the orthodox approach by the House
of Lords in Gibson v Manchester City Council.
Thus an offer must first be established with acceptance on identical terms,
unconditionally. An offer is defined as a firm undertaking to be bound in the
event its terms and conditions are accepted by the other party. It must be
final, certain and unambiguous. Unlike in the case of Gibson where the words
‘may be prepared to sell’ lacked the finality needed to be construed as an
offer. In Storer v Manchester City Council however, all details were certain
including price, thus it amounted to an offer.
Also not considered an offer are invitations to treat in the form of a display of
goods (Fisher v Bell), advertisements (Partridge v Crittenden), a supply of
information (Harvey v Facey) or a statement of intention (Harris v Nickerson).
Comments on extract
The extract above is the first third of an answer to this question. It is included to
illustrate the importance of only discussing areas of law and cases that are relevant
to the question being answered. The extract above is accurate, contains numerous
authorities but is largely irrelevant and so gains little credit. It is an account of the
concept of a legal offer and is illustrated with examples drawn from bilateral
contracts throughout, when this question involved a unilateral contract. Further, it
provides detail in respect to the question whether a contractual offer is ascertained
subjectively or objectively which is not in issue in this case. As a result, this long
discussion gains no credit. Credit is only given for accurate and relevant knowledge;
there are no charity marks. Fortunately, the rest of the answer was more focused
and discussed relevant principles resulting in a 2:2 mark overall for that answer.
Question 2
Ahmed says to Jane, ‘Would you like to buy my computer for £300?’ Jane
agrees to buy it. Advise Ahmed in each of the following alternative
circumstances:
a) Jane intends to buy the laptop computer that Ahmed was using
when he made the offer. Ahmed intended to sell an old desktop
computer that he has at home and no longer uses.
b) Ahmed only owns one computer. English is not his first language
and he often confuses the words three and nine when speaking.
Jane realises that Ahmed has probably made a mistake in that he
meant to sell his computer for £900.
c) Ahmed thinks that his mother has bought him a new computer as a
birthday present. In fact she has bought him a new television.
d) Unknown to Ahmed his only computer was destroyed in a gas
explosion at his home which took place an hour before his
conversation with Jane.

3
 e) Both Ahmed and Jane think that Ahmed’s only computer has the
latest Pentium 10 processor. In fact it has a much less powerful
Pentium 6 processor.
General remarks
This question involves issues of mistake. This is a particularly difficult area of law to
understand. The key to success here after identifying the general issues raised in
the different scenarios as involving mistake is being able to categorise the different
types of mistake involved. This task is made easier by the way the question is
structured with five different factual scenarios. (a) Involves a ‘cross purposes’
mistake where the issue is to ascertain whether any agreement was reached; (b)
involves a unilateral mistake, i.e. a mistake of one party which is known to the other;
(c) involves a common or shared mistake where both parties make the same
mistake, here as to the subject matter of the contract as does (d) with the difference
that in (c) the goods never existed while in (d) they once existed but subsequently
perished; and in (e) there is another common mistake but this time as to some
quality that the contractual subject matter is assumed by both parties to possess.
Those who correctly analysed the facts as raising issues of mistake generally
scored good marks, with their best often being (e) which raised the issue of a
common mistake as to quality. Answers to parts (c) and (d) were often very similar.
Law cases, reports and other references the examiners would expect you to
use
Relevant cases include:
(a) Cases supporting the general objective approach to agreement include: Smith v
Hughes and Centrovincial Estates. If, even after consideration of the reasonable
man test, no agreement can be seen then no contract comes into existence as in
Raffles v Wichelhaus.
(b) One party’s awareness that the other has made a mistake which is the definition
of a unilateral mistake will not affect the validity of a contract unless the offeree
either knew, or should have known that the offeror was mistaken as to the terms of
the contract. See respectively Hartog v Collins and Shields and Scriven Bros v
Hindley.
(c) Courturier v Hastie and McCrae v CDC need to be discussed here and
particularly the question whether, when there is a common mistake as to the
existence of the contractual subject matter, the contract is always void or whether
this conclusion depends upon a proper construction of the contract as explained in
McCrae.
(d) This situation is dealt with by statute so reference should be made to the Sale of
Goods Act 1979 s.6.
(e) The leading case on common mistakes as to quality is Bell v Lever Bros but
reference should also be made to the Great Peace.
Common errors
A substantial minority of students missed the point entirely and wrote about offer
and acceptance rather than mistake. Those who realised the question was about
mistake generally scored well but often repeated the same answer for (c) and (d).
Indeed in (c) many were side-tracked to talk about a contract with his mother, or
assumed he could still sell his ‘old’ computer even though he didn’t get a ‘new’ one.
A good answer to this question would…
display knowledge of the different categories and sub categories of mistake.
(Classification is very important in mistake.) After identification, the discussion must
be supported by relevant authorities and engage with some of the more difficult

4
 Examiners’ reports 2016

questions these cases throw up such as in (c) whether a common mistake as to

existence of the subject matter of a contract renders the contract void at common
law as Courturier was first thought to suggest or whether the High Court of Australia
was correct in McCrae in suggesting that this all depends upon a proper
construction of the contract. Strong answers to (d) will also appreciate that the Sale
of Goods Act s.6 is based upon the broader interpretation of Courturier above but,
according to its own terms, is only applicable to goods which once existed but
subsequently perished and not to goods that never existed.
Poor answers to this question…
Poor answers failed to realise that all the factual variants raised different issues
about mistake. They also failed to identify the different categories of mistake and
displayed little knowledge of the distinct principles of law applicable to each.
Question 3
Critically evaluate TWO of the following statements:
a) It is very difficult to rebut the presumption that an agreement
concluded between family members or friends was not, and that
one concluded in a commercial setting was, intended to have legal
effect.
b) Silence can never amount to acceptance.
c) The definition of ‘necessaries’ in the context of minor’s contracts is
unclear and antiquated.
d) The rules concerning so called ‘anticipatory’ breaches of contract
are difficult to state and even harder to defend.
General remarks
The area of law to be discussed is expressly identified so it is not a question where
candidates should ever discuss the wrong area of law. However, each scenario
requires a discussion of the precise area of law or concepts identified. The
instruction is to critically evaluate the statements which to different degrees
overstate a point and so should be easy to criticise.
Law cases, reports and other references the examiners would expect you to
use
These will include:
(a) Most obviously, Balfour v Balfour should be discussed but this can be supported
by a number of different cases including: Jones v Padavatton; Merett v Merett and,
more recently, Granatino v Radmacher or Atrill v Dredner Kleinwort.
(b) Most obviously, Felthouse v Bindley but also Rust v Abbey Life.
(c) Nash v Inman and the Sale of Goods Act 1979 s.3(3).
(d) Most obviously, Hochester v de la Tour and White and Carter Councils v
McGregor and cases illustrating the ambit of Lord Reid’s qualification of the
innocent party’s ability to tender an unwanted performance and sue for the contract
price in debt, i.e. that the claimant must be able to tender the performance without
the co-operation of the other party and that he should have a legitimate interest in
doing so.

5
Common errors
The areas of law to be discussed are identified precisely so discussion of adjacent
and related areas will gain little or no credit. The instruction is to critically evaluate
each chosen statement. Many candidates had too much descriptive (i.e. what the
law is) and not enough critical comment.
A good answer to this question would…
be precise and very strong answers will contain an excellent level of detailed
knowledge, e.g. in (a) a knowledge of recent, as well as older, cases, in (b) an
awareness that the proposition that silence can never amount to acceptance is
probably too broad because in some circumstances the offeror should be able to
waive the right to have acceptance communicated to him. This indeed seems to be
the basis of unilateral contracts. Felthouse v Bindley obiter dicta applies the same
principle to bi-lateral contracts and was mentioned in several very good answers, in
(c) an attempt to consider the older cases in the context of modern day living and in
(d) an awareness that the qualifications mentioned only by Lord Reid necessarily
form part of the ratio of White and Carter.
Poor answers to this question…
did not have a sufficiently detailed discussion of the two selected statements and/or
were insufficiently critical. Some candidates even failed to answer two parts as
instructed with disastrous consequences.
Student extract
Q3(b)
Acceptance is defined as an ‘unqualified assent to the terms of an offer’. It
must be unconditional (Chillingworth v Ecche), communicated in actual fact
(Felthouse v Bindley), on identical; terms of the offer (Hyde v Wrench) and
the offeree must have knowledge of the offer (R v Clarke – Australian case).
Acceptance can take place in the form of words or conduct (Day Morris
Associates v Voyce) where performance of the terms of the offer can
constitute acceptance. Thus acceptance need not be communicated in actual
fact in every instance, depending on the scenario.
In the case of Felthouse v Bindley the Court laid down the longstanding rule
that silence will not amount to a valid acceptance. Such is the position
currently followed yet exceptions were laid down.
In the Hannah Blumenthal case Lord Steyn stated that the Felthouse silence
rule was not an absolute one. He continued on to state that in certain
circumstances silence may amount to a valid acceptance. For instance his
Lordship stated that the offeror may be able to treat the offeree’s silence as
acceptance where the offeror holds the belief that he may prescribe such a
method to be so and thus acts accordingly.
However, such a view may create unfairness or it may result in contracts to
which the offeree did not intend to accept thus leading to a complication in
the negotiation process as well.
When instituting the Felthouse rule, certainty is guaranteed as a legitimate
answer is required to either accept or reject the offer thus creating no room
for error or uncertainty in the negotiation process.
This effectively safeguards the position of the offeree.
Comments on extract
This extract is included to illustrate the danger of not doing the required number of
parts of a question. The discussion above addresses the topic of the question with a

6
 Examiners’ reports 2016

very good level of detail on the question whether mere silence can amount to
acceptance. The standard of discussion and level of detail would merit a mark of
upper second class standard. However the candidate failed to answer two parts of
the question as directed to. The consequence is that a good upper second class
mark for half of the question becomes a fail mark for that question overall when the
required second part is not answered.
Question 4
‘The distinction between conditions and warranties should be abandoned and
all contract terms should in the future be regarded as innominate terms.’
Critically discuss this statement.
General remarks
This answer calls for a description of the types of term described in it. Conditions,
warranties and innominate terms should be described functionally and their sources
outlined. Each category should be illustrated by examples. The critical part of the
essay should build upon the earlier part and emphasise the certainty of conditions
and warranties compared to the proportionality of innominate terms. These
advantages can only all be captured in a system which has a tripartite classification.
Law cases, reports and other references the examiners would expect you to
use
Conditions may be illustrated by statute including the Sale of Goods Act 1979 ss.13,
14 and 15 and the equivalent obligations imposed by Consumer Protection Act
2015 upon traders who contract with consumers. Further illustrations will be: where
the parties classify the term themselves as in Schuler v Wickman and Lombard v
Butterworth, trade custom as in the Mihalis Angelos and time stipulations in
commercial contracts as in Bunge v Tradax. Warranties are of course all other
terms the remedial consequences of which are stipulated in advance. Where the
consequences of breach are not known in advance, the term is classified as
innominate or intermediate. The emergence of such terms is associated with Hong
Kong Fir Shipping v Kawasaki.
Common errors
There were no particular recurrent errors.
A good answer to this question would…
act upon the instruction to ‘critically discuss’ the statement. The advantages of, on
the one hand conditions and warranties, which promote certainty, will be contrasted
with innominate terms which appear to promote proportionate justice between
contractors.
Poor answers to this question…
often lack structure and descriptive detail and any developed critique of law as
expressly required by the question.
Question 5
Lady Godiva is short of money and so decides to sell a painting, her Rolls-
Royce car and a gun. Three potential purchasers visit her on 1 February,
Charles, Sabena and Toby.
Charles, a well-known collector of modern art, arrives to view the painting of a
fish. Lady Godiva says it is one of a series of paintings of ‘Topes’ (a type of
fish) by Ham, a famous painter. Charles tells Lady Godiva he will think about
it and leaves.

7
Sabena arrives to view the Rolls-Royce car. Lady Godiva tells her that it was
the car the Queen rode in at her Silver Jubilee celebrations (which Lady
Godiva believes to be true) and that there are pictures of the event in the car’s
‘glovebox’. Sabena tells Lady Godiva that she remembers the event well as
she watched it on TV. Sabena does not inspect the pictures but immediately
resolves to buy the car. However, she pretends not to be interested in the
hope that Lady Godiva will reduce the price. ‘I may be interested, I’ll be in
touch’, says Sabena.
Toby comes to look at the gun which Lady Godiva says ‘is in perfect
condition’ and ‘so accurate it will make anyone look like an expert shot’. Toby
has embarrassed himself many times when shooting and so is very interested
despite noticing a crude repair to the barrel of the gun. He says he will get in
touch.
On 1 April Lady Godiva receives phone calls from her three visitors. Sabena
offers to buy the car for £250,000, Charles, the painting for £500,000, and
Toby, the gun for £50,000. Lady Godiva accepts these offers and the goods
are all collected the next day.
A year later the following events occur:
a) Charles is visited by Ham who laughs when he sees the painting and
says it is a fake. Lady Godiva was in fact aware that it was a copy.
Charles is especially annoyed because he had been offered another
picture at the same time for the same price which he turned down to
buy the fake ‘Tope’. The other painting which Ham confirms was
genuine recently sold for £2 million.
b) Sabena, who had completely forgotten about the pictures in the
glovebox, discovers them. They clearly show the Queen in a
different car. Sabena has been using the car to hire out for wedding
parties and so had resprayed the car in pink and gold.
c) While Toby is shooting, the gun explodes but he is not injured.
Advise Charles, Sabena and Toby why any statements made to them might be
classed as ‘mere representations’ rather than terms and, if so classified, what
remedies for misrepresentation may be available to them.
General remarks
The question is about misrepresentation. This is made clear by the instruction at the
end of the question which directs the candidate to discuss whether any statements
made were ‘mere representations’ (i.e. they were not terms of the contract) and if so
what remedies for misrepresentation may be available. Discussion of other issues
that are not relevant to these questions will fail to gain credit.
The factors that determine whether a statement is regarded as a term or a mere
representation must be considered and applied (see below) before outlining the
general requirements of an action for misrepresentation (see further below).
The question was reasonably well answered but many answers were poorly
structured and lacked detail.
Law cases, reports and other references the examiners would expect you to
use
With regard to the issue whether the statements were terms or mere
representations the factors to be applied are:
(1) Any time lag between the making of the statement and the eventual
conclusion of the contract, e.g. Routledge v McKay.

8
 Examiners’ reports 2016

(2) Whether the representor or representee had greater skill and knowledge in
relation to the thing said, e.g. Oscar Chess v Williams; Dick Bentley v
Harold Smith Motors; Esso v Mardon.
(3) The importance of the thing said, e.g. Bannerman v White.
(4) Whether the statement was accompanied by a recommendation that it be
verified, e.g. Ecay v Godefroy.
The general requirements of a misrepresentation should be outlined, i.e. a
statement of fact that induces the contract.
Charles – misrepresentation is fraudulent so Derry v Peake. Right to rescission not
subject to bar of lapse of time: Leaf v International Galleries or the
Misrepresentation Act s.(2)
Sabeena – no fraud within Derry v Peake. For rescission, consider inability to make
restitution Erlanger v New Sombrero and the Misrepresentation Act s.2(2). For
s.2(1) damages consider Howard Marine Dredging v Ogden and Gran Gelatto v
Richcliff on contributory negligence.
Toby – is the contract induced by the misrepresentation? Consider Atwood v Small.
If misrepresentation is made out, rescission may be unavailable due to inability to
make restitution, see Erlanger above and, for damages under s.2(1), consider
possible reduction for contributory negligence as in Gran Gelatto above.
Common errors
Several answers ignored Toby altogether because they presumably could not
identify any legal issue raised. With regard to remedies the discussions were often
jumbled with little structure.
A good answer to this question would…
Use a number of authorities to back propositions of law and very good answers by
the ability to recognise the parallel availability of remedies (say damages and
rescission or different routes to the recovery of damages say under the
Misrepresentation Act s.2(1) and for the tort of fraud) and to state which would be
the best to pursue.
Poor answers to this question…
often lack structure and fail to examine in a clear way the availability of different
remedies for misrepresentation arising from the same set of facts. Weak answers
also failed to distinguish the claims of the different characters. Other answers spent
too much time discussing the question whether the statements were terms or mere
representations and so did not spend sufficient time discussing liability and
remedies available for misrepresentation.
Question 6
‘The old common law ‘exceptions’ to the doctrine of privity of contract are
irrelevant now that we have the Contracts (Rights of Third Parties) Act 1999.’
Critically evaluate this statement.
General remarks
This question required a balance between description and of the law and criticism of
it. The descriptive part will commence with a statement of the doctrine noting that it
has two parts: contracts may not be enforced by third parties and third parties are
not subject to burdens arising from contracts to which they are not a party. An
account of the common law exceptions to the doctrine should follow, especially to
the part which prevents third parties receiving the benefit of a contract to which they
are not a party. A good account of the provisions of the 1999 Act should follow.

9
Law cases, reports and other references the examiners would expect you to
use
The general rule is supported by Dunlop v Selfridge and Tweddle v Atkinson. The
exceptions will require a discussion of Beswick v Beswick; The Eurymedon;
Scruttons v Midland Silicones; Jackson v Horizon Holidays and in better answers
Linden Gardens v Lenesta Sludge. This should be followed by a discussion of the
Contracts (Rights of Third Parties) Act 1999 starting with the exception introduced
in s.1(1) especially that in s.1(1)(b) and the requirements of the double intention
test. Some early cases considering the Act could include: Nisshin Shipping v
Cleaves and Prudential Assurance v Ayres. Other important sections are s.1(3) on
express identification of the third party, s.2 on variation and cancellation and the
preservation of: the old common law exceptions under s.7(1) and under s.4 rights of
the contracting party which, if exercised, would effectively secure for the third party
the benefit of the contract to which he is not a party.
Common errors
There were no obvious recurrent errors beyond a lack of detailed knowledge.
A good answer to this question would…
distinguish between the true exceptions to the rule such as: the trusts exception,
assignment, agency and an action in tort and the ‘quasi exceptions’ of action by the
promisee that will effectively secure for the third party the benefit of a contract to
which they were not a party. Very strong answers might engage in a discussion of
what constitutes an ‘exception’.
Poor answers to this question…
Weaker answers are often over general and unable to distinguish between the
‘benefit’ and ‘burden’ sides of the doctrine, between exceptions and analogous
circumstances and do not appear to have a sufficiently deep and detailed
understanding of the provisions and operation of the 1999 Act.
Question 7
The Strolling Bones are an ageing rock band who now enjoy the better things
in life. They contract with Excess University Student Law Society to appear at
their annual dinner for a fee of £200,000 and 20 cases of Chateau Latour wine.
It is agreed that the fee shall be payable and the wine deliverable in two
stages: half on signing and half on the day of the performance. The Student
Law Society make the first payment but do not deliver any wine to the band.
The Strolling Bones pay a non-refundable deposit of £5,000 when they book
two large lorries to transport their equipment. The Student Law Society spend
a large sum of money on publicity. The venue at which the annual dinner is to
take place fails its safety inspection the day before the performance and the
dinner is cancelled.
Advise the Strolling Bones as to their rights and liabilities.
General remarks
The question is about the effect upon a contract of an event that took place after
the contract was signed. The timing of the event after, and not before the signing of
the contract means that there is no issue of mistake. Further, as this event (the
failed safety inspection) is not caused by the fault of either party, the issue to be
discussed is frustration rather than breach. Students should introduce the doctrine
in general terms and quickly discuss its application to the specific facts of this case.
Awareness of the Gamerco case should have caused students to ‘think frustration’.
However, a significant number of answers missed the frustration issue completely
instead writing broad descriptive answers about consideration, the part payment of

10
 Examiners’ reports 2016

debts (presumably based upon the failure to deliver the wine) and some about
anticipatory breach. Those who wrote about frustration generally scored well.
Law cases, reports and other references the examiners would expect you to
use
The contract is frustrated because the performance of the contract has become
illegal. The Spolka case can be mentioned but the most relevant is the Gamerco
case.
Under the Law Reform (Frustrated Contracts) Act 1943 s.1(2), it would appear that
the £100,000 paid is recoverable and that the other £100,000 payable ceases to be
payable. There is, however, a proviso to s.1(2) which gives the court a broad
discretion to allow some of the £100,000 to be retained to offset expenses incurred
such as the non-refundable deposit. The wine raises an issue a better answer
should spot (see below).
The final remedial issue is whether there is any ‘valuable benefit’ to the band from
the publicity for which they may have to pay for under s.1(3) as in BP v Hunt.
Common errors
The major error was failing to identify the question as raising frustration. However,
some of those who had a basic knowledge of when frustration occurred did not
have an equal understanding of the rights and remedies of the parties both at
common law and under the 1943 Act.
A good answer to this question would…
display a sound knowledge of the different categories of frustration and that these
facts belonged to the category where performance of the contract has become
illegal. Strong answers displayed a good knowledge of the key subsections of the
1943 Act.
The wine raises an issue a better answer should spot. Section 1(2) will not apply to
the obligation to supply the wine because the section only applied to payments of
money. Therefore, the common law applies and so, while the obligation to supply
the second instalment of wine is discharged, the obligation to supply the first
instalment has already accrued and so is enforceable. Chandler v Webster is the
most obvious authority that strong answers may refer to here.
BP v Hunt is a very difficult case and better answers distinguished themselves with
a good discussion of this case in relation to s.1 (2).
Poor answers to this question…
Poor answers lacked detail throughout but especially with regard to the operation of
the different provisions of the Law Reform (Frustrated Contracts) Act 1943.
Question 8
In January 2015, Professor Dim signed a contract with Cambridge Academic
Press (CAP) to write a book on contract law in their prestigious Masterclass
series. Dim was to be paid £20,000 and CAP had an option to employ Dim to
write a companion book on property law for a £25,000 fee. Over the next year
Dim spent £5,000 on books and travel to libraries while working on his new
book. In January 2016 in breach of contract CAP terminate the contract with
Dim because CAP had recently contracted with Professor Genius to write a
contract law book in the Masterclass series. CAP invited Dim to publish his
contract book for a fee of £100 in a new series aimed at school students. The
Head of the School of Law had promised Dim that he would receive a special
payment of £10,000 if his book was published in the Masterclass series. Dim
writes to CAP telling them he feels humiliated by the way he has been treated

11
and pointing to a clause in their contract which he had inserted before the
parties signed and which CAP overlooked:
If the contract is terminated by the publishers in breach of contract, they shall
pay to the author a penalty of £10,000.
Advise Dim as to what remedies he is entitled to in respect of CAP’s breach of
contract.
General remarks
This question was about remedies for breach of contract. The instruction at the end
of the question made this clear; candidates were expressly directed to advise Dim
as to the remedies he is entitled to as a result of CAP’s breach of contract.
Consequently, no credit can be gained for discussing any other contract doctrines.
Many candidates seemed to miss this important and obvious pointer and so the
question was very poorly answered in the main. This might reflect a tendency to
attach less importance to remedies for breach of contract in teaching and revision,
perhaps because it is often placed at the end of a course.
Law cases, reports and other references the examiners would expect you to
use
Is Dim entitled to specific performance (SP)? SP is not usually available for breach
of a contract of personal service: Giles v Morris and the principle of mutuality would
prevent the specific enforcement of a contract when specific performance would not
be ordered against the party now seeking it: Page One Records v Britton.
Can Dim seek liquidated damages under the contract clause? The contractual
description as a penalty is irrelevant Dunlop v New Garage. The main authority is
now Cavendish Square Holdings BV v Makdessi and Parking Eye Ltd v Beavis
[2015] UKSC 67 and full credit should be given to students who refer to the decision
in the Supreme Court. Students might note that he SC chose to restate, but not to
abolish, the penalty rule. Further, the previous rule that in a contract between
‘properly advised parties of comparable bargaining power’ (Phillips HK v A-G HK)
there should operate a ‘strong initial presumption’ of enforceability was endorsed.
If Dim seeks unliquidated damages, he could claim his reliance £5,000 losses
Anglia TV v Reed, McRae v CDC. Alternatively, (he could not claim both C & P
Haulage v Middleton) he could seek expectation losses which could include: the
£25,000 fee, possibly something in respect of the lost chance of publishing the
companion book (Chaplin v Hicks, Giedo van der Garde v Force India Formula 1)
and also the lost £10,000 bonus. If this ‘promised’ bonus was a matter of
entitlement if the book were published, its recovery from CAP would depend upon
the application of the remoteness rules: Hadley, Victoria Laundries, Heron 11 and
the Achilleas.
Dim might also seek damages for non-pecuniary loss but these are more commonly
awarded in consumer contracts, Jackson, Jarvis, etc. though the test applied in
Farley v Skinner is now more generous to recovery. Unliquidated damages would
be subject to reduction if Dim had not acted reasonably to mitigate his own losses.
This might extend to accepting the offer to publish in the less prestigious series:
Payzu v Saunders.
Common errors
Many students simply failed to discuss remedies and instead wrote about exclusion
clauses.
A good answer to this question would…
discuss the availability of specific performance, liquidated damages and
unliquidated damages. There was an opportunity for students to display a
knowledge of the recent decision of the Supreme Court in Cavendish Square

12
 Examiners’ reports 2016

Holdings BV v Makdessi and Parking Eye Ltd v Beavis [2015] UKSC 67 which is the
first time the UK’s highest appellate court has addressed the availability of
liquidated damages for almost a century. Full credit was given to any students who
were aware of the decision. Strong answers also distinguished themselves by their
discussion of unliquidated damages and their understanding and application of the
principles of remoteness of loss.
Poor answers to this question…
included irrelevant material despite the clear instruction directing them to the
relevant areas of law. There was no exclusion clause in the factual scenario but this
did not stop some candidates from writing at some length about the different
mechanisms for the control of exemption clauses.

13