CONTRACT LAW WORKSHOP 2: WORKSHOP PLAN 1. PREPARATION, WORKSHOP AND CONSOLIDATION

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1 CONTRACT LAW WORKSHOP 2: WORKSHOP PLAN 1. PREPARATION, WORKSHOP AND CONSOLIDATION Overview i-tutorials Contractual terms, Exemption clauses and Remedies for breach 6 hours You studied these at the beginning of the course in order to obtain an overview of terms, exemption clauses and damages. You do not need to view them again but may do so if you wish to refresh your memory of the main principles. Manual study and activities 17 hours Prepare for Workshop 2 by studying the following sections of the Contract Law Manual and completing the activities : Unit 2 (with the exception of section 2.1 and section 3) up to and including Follow-up Activity 1. Do not attempt Follow-up Activity 2 at this stage. Unit 3 sub-unit 1 up to, but not including, section 2 on Action for an Agreed sum. NOTE: Activities 9 and 10 in Unit 2 and Activity 2 in Unit 3 will require you to have access to the internet. Test and Feedback 1 hour After completing your study of the Manual, you should complete the Test and Feedback exercises associated with Workshop 2, which you will find on ELITE. Other preparation for Workshop 1 3 hours Before attending the Workshop please prepare the activities attached to this Workshop Plan and bring your preparation with you to the session. Watch the programme on Ruxley Electronics v Forsyth which can be accessed via ELITE Workshop 2 3½ hours Attend Workshop 2 bringing with you the documents set out in section 3 of this Workshop Plan. 1415_cont_Ws_02_Pln_PTDW Page 1 of 8 The University of Law Limited

2 Consolidation 4.5 hours In Workshop 2 you will be given a Workshop Consolidation Activity related to Preparatory Activity 1. After the Workshop complete your answer to this activity in writing and submit it on or before the deadline noted in your Study Calendar. Review whether you have achieved the learning outcomes set out below. Complete Follow-up Activity 2 set out at the end of Unit 2 in the Manual. You can also attempt Question 1 of Follow-up Activity 1 at the end of Unit 3 sub-unit 1 in the Manual. Optional reading: section 2.1 Unit 2 of the Manual which deals with how terms may be implied into contracts by the courts. e-forum 3 hours Contribute to the e-forum in the week stated in your Study Calendar Advanced i- Tutorials Reasonableness test and Aspects of Damages 4 hours View the Advanced i-tutorial which looks in more detail at how the reasonableness test has been applied in commercial cases. View the Advanced i-tutorial which considers damages in more depth. 2. WORKSHOP ACTIVITIES In Workshop 2 we will review your answer to the two Preparatory Activities attached to this Workshop Plan. You will also be given some documentation relating to Preparatory Activity 1 and asked to advise the client on the validity of an exemption clause. Finally you will be given a Consolidation Activity to complete after the Workshop. 3. MATERIALS REQUIRED FOR THE WORKSHOP Please bring with you to the Workshop: The Activities attached to this Workshop Plan and your preparation Your Contract Law Study Manual The University of Law Limited Page 2 of _cont_Ws_02_Pln_PTDW

3 Your Statutory Extracts booklet 4. LEARNING OUTCOMES 1. Identify implied terms in commercial and consumer contracts involving goods and services. 2. Apply your knowledge of statute and case law in a practical context to advise a client on rights of action and the validity and effect of an exemption clause. 3. Explain when a third party to a contract may rely on an exemption clause in a contract. 4. Explain and apply the legal principles on the aim, remoteness and measure of damages. 4. Explain the difference between a specified damages clause and a penalty and the guidelines used by the courts. 1415_cont_Ws_02_Pln_PTDW Page 3 of 8 The University of Law Limited

4 WORKSHOP 2: PREPARATORY ACTIVITIES ACTIVITY 1 Joe Polding, owner of a members only fitness centre and an established client, has just telephoned you to discuss a recent problem he has had with two exercise bicycles he bought from Superfit Ltd. Superfit sent Joe a written quotation and he ordered the bicycles over the telephone (at the price quoted). The bicycles were delivered a few days later and Joe paid for the bicycles. Joe has had the bicycles a while but has discovered they are faulty as the pedals keep jamming. When he telephoned Superfit Ltd about this they referred him to an exemption clause on the written quotation and also on the invoice he was given later when the bicycles were delivered. Joe wants to know what his legal rights are in relation to Superfit. You have made an appointment for Joe to come in to discuss the matter with you. You asked him to bring along the quotation and invoice for the bicycles. Please prepare the following: Look at the attached note on how to deal with issues involving exemption clauses and prepare an answer to the various points as far as you are able to at this stage e.g. identify the type of contract between Joe Polding and Superfit Ltd and what term(s) Superfit may have breached. Make a list of further information you require from Joe in order to advise him. The University of Law Limited Page 4 of _cont_Ws_02_Pln_PTDW

5 HOW TO DEAL WITH ISSUES INVOLVING EXEMPTION CLAUSES When dealing with an issue involving exemption clauses you should consider both common law rules and statute. Try to give some sort of structure to your advice e.g. 1. Who are the parties to the contract? 2. Start by finding a cause of action. Have any terms (express and/or implied) been breached? 3. Is the exemption clause incorporated into the contract? - is the clause in a signed contractual document? (If so likely to be incorporated provided legible and not misrepresented) - if not then it is a question of notice (actual or constructive) - have reasonable steps been taken to bring the clause to the other party s attention? Consider such things as e.g. the nature of any document containing the clause position of clause in document prominence of clause is clause unusual or onerous - when were the steps taken (must be at/before contract unless there has been a consistent course of dealings). - If the steps were taken after the contract was formed then consider whether there was a consistent course of dealing between the parties. 4. Does the clause cover the breach and damage alleged? Look carefully at the wording of the clause. If it clearly does cover breach and damage alleged then say this if there is doubt then state and apply any relevant rule of construction. 5. Consider the Unfair Contract Terms Act 1977 s.2 s.3 which sections apply? s.6/7 Is the reasonableness test (s.11) relevant? If so state the test and apply to the facts. What guidelines and factors will the court look at? 1415_cont_Ws_02_Pln_PTDW Page 5 of 8 The University of Law Limited

6 6. Do the Unfair Terms in Consumer Contracts Regulations 1999 apply? If so then consider the Regulations briefly. 7. Remedies. 8. Think about whether it is possible to bring an action against a person who is not a party to the contract in the tort of negligence. If so can that person rely on the exemption clause? Consider the Contracts (Rights of Third Parties) Act Come to a conclusion. The University of Law Limited Page 6 of _cont_Ws_02_Pln_PTDW

7 ACTIVITY 2 Penny Thrower owns a nursery business. Two years ago her business was doing well with a profit of 48,000. Penny realised that there was a growing market for hothouse conservatory type plants such as orchids and miniature lemon trees and so she decided to expand into this area. She entered into a contract with Andy Brookes of Brookes Greenhouses and Conservatories, who agreed to construct two greenhouses with heating systems at a cost of 35,000. Penny told Andy that she expected to be able to double her profit with the new venture and wanted to start as soon as possible. Andy agreed that the greenhouses would be ready for use by 1 October He also agreed that if there was any delay he would pay Penny 8,000 as compensation. In fact, Andy did not complete the greenhouses until 8 weeks after the agreed date. He refused to pay any money to Penny saying the delay was due to shortage of labour and not his fault. Because of the delay Penny s estimated loss of profit was 12,000 which included 4,000 lost when she had to turn down an especially lucrative contract to supply orchids to decorate the church and reception venue at a society wedding. After the greenhouses were completed, Penny had further problems as follows, (a) She found, to her horror, that the entrance to greenhouse 1 was facing east instead of south as specified in the contract. Penny is an ardent follower of Feng Shui which decrees that ideally entrances should face south in order to bring good luck. Penny admits that physically this will not make any difference to the growing conditions of the plants but it is something she feels strongly about. When she asked Andy to reconstruct the greenhouse so that the entrance could face south, he refused and told her in no uncertain terms what his views were on the subject of Feng Sui. Penny rang round other contractors and found that it would cost 6,000 for the alterations to be made. (b) The door to greenhouse 2 faces in the correct direction but the heating system had been incorrectly installed. Two months after the greenhouse was constructed the heating system failed during the night. All the plants in the greenhouse were severely damaged by frost and none could be saved. Penny asked Andy to repair the heating system but he refused. Penny obtained 2 quotations from other contractors. One was for 2,500 but the contractor could not start work on the repairs for another six weeks. The second quotation was for 4,000 but the contractor could start work immediately and guaranteed to have the work finished in a week. Penny 1415_cont_Ws_02_Pln_PTDW Page 7 of 8 The University of Law Limited

8 selected the second quotation. A week later the work was finished and Penny paid the 4,000. (1) What term, or terms, of the contract have been broken? (2) Penny wants to know: (a) if the compensation clause in the contract is valid When answering this question you should consider the guidelines laid down in the case of Dunlop Pneumatic Tyre Co. Ltd v New Garage (1915). (b) (c) (d) if it is not, whether she can recover the full 12,000 loss of profit she suffered because of the delay in completing the greenhouses to what extent, if any, she can recover in respect of the entrance to greenhouse 1 whether she can recover for all of her losses in respect of greenhouse 2. Advise Penny, explaining her legal position. The University of Law Limited Page 8 of _cont_Ws_02_Pln_PTDW