PCLL CONVERSION EXAMINATION JANUARY 2014 Title of Paper : Commercial Law Part A Date : 8 January 2014 Time : 9:00 a.m. 9:10 a.m. (Reading Time) 9:10 a.m. 10:10 a.m. Instructions 1. Write your candidate number on the cover of each answer book. Do NOT write your name in the answer book. 2. Start each answer on a separate page of the answer book. 3. Write your answers only in the answer books provided. 4. This is a one-hour examination. 5. This is an open book examination. 6. Reading time for this paper is 10 minutes. Do NOT begin writing in your answer books during this period until you are instructed to do so. 7. This paper consists of 3 pages, including two questions. Candidates are only required to answer ONE question out of two. A total of 100 marks may be awarded. Candidates will score zero marks for that part if they answer more than one question from one part. 8. The passing mark for this paper is 50 marks. DO NOT OPEN THIS QUESTION BOOK UNTIL YOU ARE TOLD TO DO SO 1
Question 1 (100 marks) PCLL Conversion Examination January 2014 Commercial Law Part A: Sale of Goods By a written contract dated 10 th August 2013, Xavier Ltd ( X ) agreed to sell to Ming Ltd ( M ) one box of paper Xavier Grade A each month for a period of 12 months from September 2013 to August 2014 inclusive, at a fixed and stated price of HK$250 (HK Dollars Two Hundred and Fifty) for the 12 boxes. Each delivery was to be made on 1 st of each month with the first delivery to be made on 1 st September 2013 and the final delivery to be made 1 st August 2014. 4 deliveries have now made (1 st September, October, November and December) under this contract but X complains that on the 4 separate occasions M refused to accept delivery and has refused to even examine the goods. X tells you that for all 4 deliveries under this contract X delivered one box of Xavier Grade A paper to M s premises carefully packed and clearly marked Delivery for Ming Ltd. Each delivery was accompanied by a document headed Xavier Ltd. Partial Delivery Sale Slip (Client s Copy), addressed to M. This document stated the nature of the goods being delivered and the price payable for each delivery. On two occasions, this Partial Delivery Sale Slip (Client s Copy) document contained the following two statements:- 1. The following goods represent a partial delivery of an order for Ming Limited. The balance will be delivered as per the terms of the contract. 2. Property in the goods described above shall not pass to the buyer until delivery to the buyer. On all 4 delivery dates the box marked Delivery for Ming Ltd was loaded onto X s lorry with other boxes marked for delivery for 100 other Hong Kong Customers. On each occasion the box was carried inside M s office premises at which point M s employees refused to accept delivery and refused to sign the Partial Delivery Sales Slip Client s Copy. On the 4 th delivery scheduled for 1 st December 2013 X s lorry broke down. The delivery was delayed by 5 days and X did not inform M of the delay. On the 6 th December when the delivery was made the Managing Director came out of his office and complained: 2
You are 5 days late and we refuse to accept delivery of this box. You must make no more deliveries. My Company now treats this contract as cancelled. We have nothing to pay you as the contract is cancelled The Managing Director of Ming Ltd has now repeatedly informed X that the contract dated 10 th August 2013 is cancelled. Advise X. Question 2 (100 marks) How does the Sale of Goods Ordinance protect a consumer? Comment on whether you consider this aspect of Hong Kong commercial law is still suitable for twenty-first century Hong Kong. Give examples to support your arguments. ~ End of Examination Paper ~ 3
PCLL CONVERSION EXAMINATION JANUARY 2014 Title of Paper : Commercial Law Part B Date : 8 January 2014 Time : 10:25 a.m. 10:35 a.m. (Reading Time) 10:35 a.m. 11:35 a.m. Instructions 1. Write your candidate number on the cover of each answer book. Do NOT write your name in the answer book. 2. Start each answer on a separate page of the answer book. 3. Write your answers only in the answer books provided. 4. This is a one-hour examination. 5. This is an open book examination. 6. Reading time for this paper is 10 minutes. Do NOT begin writing in your answer books during this period until you are instructed to do so. 7. This paper consists of 3 pages, including two questions. Candidates are only required to answer ONE question out of two. A total of 100 marks may be awarded. Candidates will score zero marks for that part if they answer more than one question from one part. 8. The passing mark for this paper is 50 marks. DO NOT OPEN THIS QUESTION BOOK UNTIL YOU ARE TOLD TO DO SO 4
PCLL Conversion Examination January 2014 Commercial Law Part B: Personal Property Question 1 (100 marks) The use of the legal clause in a contract known as the Romalpa clause enables a seller to create a secret security device that succeeds in destroying all normal Hong Kong commercial law principles and should therefore be disallowed. Comment on whether you agree or disagree with this statement on Hong Kong commercial law and give examples to illustrate your arguments. Question 2 (100 marks) Section 2 of the Bills of Sales Ordinance (cap 20) reads as follows: In this Ordinance, unless the context otherwise requires- "bill of sale" includes bills of sale, assignments, transfers, declarations of trust without transfer, inventories of goods with receipt thereto attached, or receipts for purchase moneys of goods, and other assurances of personal chattels, and also powers of attorney, authorities, or licences to take possession of personal chattels as security for any debt, and also any agreement, whether intended or not to be followed by the execution of any other instrument, by which a right in equity to any personal chattels, or to any charge or security thereon, is conferred, but does not include the following documents; that is to say, assignments for the benefit of the creditors of the person making or giving the same, marriage settlements, transfers or assignments of any ship or vessel or any share thereof, transfers of goods in the ordinary course of business of any trade or calling, bills of sale of goods in any place outside Hong Kong or at sea, bills of lading, India warrants, warehouse keepers' certificates, warrants or orders for the delivery of goods, or any other documents used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by indorsement or by delivery, the possessor of such document to transfer or receive goods thereby represented: Provided that- (Amended 23 of 1998 s. 2) (a) (Repealed 55 of 1967 s. 2) (b) an instrument charging or creating any security on or declaring trusts of imported goods given or executed at any time prior to their deposit in a warehouse, godown, factory or store, or to their being re-shipped for export, or delivered to a purchaser not being the person giving or executing such instrument, shall not be deemed a bill of sale, but nothing in this paragraph shall affect the operation of section 43 of the Bankruptcy Ordinance (Cap 6), in respect of any goods comprised in any such 5
instrument as is hereinbefore described, if such goods would but for this paragraph be goods within the meaning of that section; (Added 22 of 1914 ss. 2 & 3. Amended 5 of 1924 s. 20) [cf. 1890 c. 53 s. 2 U.K.; 1891 c. 35 s. 1 U.K.] Explain the meaning and the significance of section 2 of the Bills of Sales Ordinance (cap 20). Give examples to illustrate your analysis. ~ End of Examination Paper ~ 6
PCLL CONVERSION EXAMINATION JANUARY 2014 Title of Paper : Commercial Law Part C Date : 8 January 2014 Time : 11:50 a.m. 12:00 p.m. (Reading Time) 12:00 p.m. 1:00 p.m. Instructions 1. Write your candidate number on the cover of each answer book. Do NOT write your name in the answer book. 2. Start each answer on a separate page of the answer book. 3. Write your answers only in the answer books provided. 4. This is a one-hour examination. 5. This is an open book examination. 6. Reading time for this paper is 10 minutes. Do NOT begin writing in your answer books during this period until you are instructed to do so. 7. This paper consists of 3 pages, including two questions. Candidates are only required to answer ONE question out of two. A total of 100 marks may be awarded. Candidates will score zero marks for that part if they answer more than one question from one part. 8. The passing mark for this paper is 50 marks. DO NOT OPEN THIS QUESTION BOOK UNTIL YOU ARE TOLD TO DO SO 7
PCLL Conversion Examination January 2014 Commercial Law Part C: Consumer Credit and Protection Question 1 (100 marks) Mr. John Yu ( Y ) and Mrs. Sally Yu ( S ) are the 2 directors and shareholders of Kids Wear Import Ltd. ( K ), a small Hong Kong company. On 1 st January 2013 Y and S met HKBank s Commercial Loan Officer Mr. Chan ( C ) in his Sai Kung Office to apply for a HK$4 million loan for the company. C also happens to be a personal friend of Y as he went to school with him and lives next door to the Yu family in Sai Kung. The 2 directors showed C the profit and loss accounts for the past 12 months, the Business Plan and relevant Directors Resolutions. C is satisfied with the documents and agreed that HKBank will provide a HK$4 million loan on condition that the 2 directors provide a joint and several personal guarantee for the HK$4 million loan. After checking the documents C told them that he approved the Loan amount of HK$4 million to K to be supported by a personal guarantee by Y and S. He told them: The signing of the guarantee is a mere formality since you are personal friends of mine. But as Loan Officer I must tell you that you should get some legal advice on what the clauses in this guarantee mean. I am not a lawyer and I cannot advise you on the contents or on any legal obligations. It is the Bank s policy to tell all potential guarantors to get independent legal advice and it is in your best interest to do so. Y and S immediately signed the Loan Agreement and the supporting Contract of Guarantee and Indemnity but they paid no attention to C s comment that before signing the guarantee they should get independent legal advice. Y and S both trusted him as a long standing friend and neighbour. Y and S turned to each other in the HKBank and both agreed that they trusted C, had full confidence in K s new Business Plan and that any legal advice would just be a waste of money for the company and for them personally. They immediately signed the Loan Agreement and the Contract of Guarantee and Indemnity put before them by C without asking further questions. On 1 st November 2013 K defaulted on its monthly loan repayment On 1 st December 2013 HKBank issued a demand to K for the full payment of the outstanding balance of the loan which K was unable to pay. 8
On 1 st January 2014 HKBank issued a letter of demand to the Guarantors for full payment of the outstanding loan from Y and S as joint and several guarantors and sureties of the loan. The letter of demand stated: Under the terms of the indemnity entered into by you as joint and several guarantors and sureties in support of the Loan Agreement between HKBank and K for HK$4 million advanced to K on 1 st January 2013, we now make formal demand to you to make immediate payment of HK$3,800,000 (HK Dollars Three Million Eight Hundred Thousand) within 7 days of the receipt of this Letter of Demand. S seeks your urgent legal advice. She says she was pressurized by her husband Y and Loan Officer C into signing the documents as she is only a housewife and that in reality her husband Y runs the business entirely by himself. S also tells you she has no business experience at all, had no idea what she was signing, feels that she has been misled by her husband and C and that she does not read English well. Advise S on her legal position. Question 2 (100 marks) What is the relationship of the Unconscionable Contracts Ordinance (cap 458) to the Control of Exemption Clauses (cap 71) and how far, if at all, do these two Ordinances protect consumers in Hong Kong? ~ End of Examination Paper ~ 9