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L5M3 Managing Contractual Risk Paper *10.
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1.
Tee Ltd has contracted to use Vee Ltd's 'Grand Hotel' for a business conference. Which of the following would be regarded as a valid reason for the unavailability of the hotel on the agreed date under the law of frustration?
(i) The hotel was closed due to flood damage.
(ii) The hotel was double booked.
(iii) The hotel manager had arranged to have the hotel redecorated. The decorators had failed to complete the work by the agreed date.
2.
Which of the following statements is correct?
3.
Which of the following statements is incorrect?
4.
Josh contracts to sell a plot of land he owns to Happy Builders Ltd. At the very last minute Josh decides not to go through with the deal. What is the most appropriate remedy for Happy Builders Ltd?
5.
Which statement concerning the calculation of contractual damages is incorrect?
6.
James negligently drove his car down a busy high street and hit Sally, who was badly injured. Sally suffers from a rare disease which means that her body takes twice as long to repair itself as a normal person’s and because of this she could not work for eight months. As a highly paid city banker she claimed compensation for loss of earnings of £80,000 which is the equivalent of eight month’s salary. A normal person would have returned to work after four months. James thinks Sally’s claim is excessive, what is the legal position?
7.
Which of the following is/are incorrect?
(i) A liquidated damages clause will be void if it amounts to a penalty clause.
(ii) A liquidated damages clause will apply where it is a genuine attempt to pre-estimate the loss caused by a breach of contract.
(iii) A liquidated damages clause cannot be valid if it is for an amount in excess of the actual loss caused by the breach of contract.
8.
An advert in a newsagent's window read: 'Hoover 2012. £50 one. Tel: 0208 888 2124'. Karl rang the number and, having enquired about the Hoover said, 'I'll give you £25 for it.' Karl's statement is
9.
Where a company is looking for potential suppliers to do business with, which of the following will the business issue to suppliers?
10.
An offer is a promise by the offeror to do or abstain from doing something, provided that the offeree will accept the offer and promise to pay the price of the offer. An offer contains two ingredients. What are the two ingredients?
i. an intimation of willingness to be bound
ii. negotiation
iii. intention to be accepted
iv. Expression of willingness to enter into a contract
11.
BodygBodyglo Ltd is a company that specializes in the manufacture of ladies’ cosmetics and accessories. The company placed an advertisement in The Globe newspaper stating: “Miraculous Remedy. Blitz is here. We have manufactured a cream that clears acne overnight if used according to instructions. P200 will be paid to anyone whose acne does not clear overnight after using Blitz according to the instructions. P4,000 deposited with our bankers, Trust Bank, for that purpose. Hurry! Buy today! Use today.”lo Ltd is a company which specialises in the manufacture of ladies’ cosmetics and accessories. The company placed an advertisement in The Globe newspaper stating: ‘Miraculous Remedy. Blitz is here. We have manufactured a cream which clears acne overnight if used according to instructions. P200 will be paid to anyone whose acne does not clear overnight after using Blitz according to the instructions. P4 000·00 deposited with our bankers Trust Bank for that purpose. Hurry! Buy today! Use today’. After reading the advertisement, Pinkie bought Blitz and used it according to the instructions but her acne simply got worse and her face is now full of black spots. Karabo bought Blitz and used it according to the instructions. It irritated and burnt her skin. Thereafter she read the advertisement by Bodyglo. Lerato saw Blitz in Century Pharmacy, bought it and used it according to the instructions. Her acne is now worse. Lerato was informed about Bodyglo’s offer by one of her neighbours. Mock assessment 2: questions Pinkie, Lerato and Karabo have each approached Bodyglo for the reward of P200·00. Bodyglo claims that the advertisement was a publicity stunt and that they do not intend to pay anyone who has used Blitz. Lerato, Karabo and Pinkie wish to sue Bodyglo. Whose claim is likely to succeed?
After reading the advertisement, Pinkie bought Blitz and used it according to the instructions, but her acne worsened and her face is now covered in black spots. Karabo bought Blitz, used it according to the instructions, and it irritated and burnt her skin. She then read the advertisement by Bodyglo. Lerato saw Blitz at Century Pharmacy, bought it, and used it according to the instructions. Her acne worsened. Lerato had been informed about Bodyglo’s offer by one of her neighbors.
Pinkie, Lerato, and Karabo have each approached Bodyglo for the reward of P200. Bodyglo claims that the advertisement was a publicity stunt and that they do not intend to pay anyone who used Blitz. Lerato, Karabo, and Pinkie wish to sue Bodyglo. Whose claim is likely to succeed?
12.
Which of the following examples of performance amounts to good consideration?
i. The performance of an existing duty under the general law.
ii. The performance of an existing contract in return for a promise by a third party.
iii. The performance of an act, followed by a promise to pay for that act.
13.
Which ONE of the following is correct?
14.
Which ONE of the following does NOT discharge a contract?
15.
In the event of a breach of contract, what is the purpose of damages?
i. To punish the contract breaker.
ii. To compensate the innocent party.
iii. To put the innocent party in the same position as if the contract had been carried out correctly
16.
The general principle relating to penalty clauses is that they must be which of the following to be legally enforceable by the courts?
- Reasonable in the context of the losses incurred
- An adequate punishment for the supplier's failure
- Enough to justify any legal action against the supplier
- Sufficient compensation relative to the damages suffered
17.
A Ltd is worried about the risk exposure from the actions of one of its sub-contractors, B Ltd. Which of the following is most likely going to be used by A Ltd to mitigate the risk?
18.
When trying to protect against unforeseeable financial loss, a company is most likely going to use which of the following?
19.
In situations where there are many documents written by different stakeholders in long-term projects, where it is likely that individual stakeholders and points of contact, such as the project manager, may change, which of the following would be most appropriate to use to limit exposure to risk?
20.
Which of the following is known as a provision of a promise to the other party as to the quality of the goods or services being provided under the agreement?
21.
Which TWO of the following will help manage contractual risk?
(i) Threatening legal action for every breach that might happen
(ii) Ensuring that contract terms are only known by top level management
(iii) Having payment terms agreed in advance
(iv) By having all terms in the contract clearly worded
22.
Which TWO of the following are correct differences between documentary collection and letter of credit arrangements?
(i) It is cheaper and less complicated
(ii) It is riskier for the seller as there is no verification process and there are limited remedies in the event that the buyer or importer does not pay.
(iii) It is costly and more complicated
(iv) It is riskier for the buyer as there is no verification process and there are limited remedies in the event that the buyer or importer does not pay
23.
Offers a secure payment method for the exporter or seller by leveraging the creditworthiness of banks to ensure a smooth payment process is followed. Which of the following does the above statement best describe?
24.
An agreement between the buyer’s bank and the seller’s bank to transfer funds due under a contract upon presentation of valid documents, providing a guarantee that the payment will be made if valid documentation is presented. Which of the following does the above statement best describe?
25.
Which THREE of the following are true about Incoterms ®?
(i) Used for contracts that involve the delivery and transportation of goods by land, air or sea.
(ii) Both the buyer and seller, if agreed mutually, may refer to a previous edition of Incoterms®
(iii) Do not cover the delivery of services.
(iv) Incoterms® are legally binding
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