Examiners’ reports 2016

Examiners’ reports 2016

LA1040 Contract law – Zone A

Introduction
This examination contained a balance of questions across the full syllabus.
However, some questions were much more popular than others. Question 1 on
unilateral contracts was the most popular followed by Question 5 on
misrepresentation. The slightly different form of Question 1 with each character
raising separate issues in parts (a) – (e) helped candidates structure their answers
but also exposed any areas where the candidate had a lack of knowledge. Both
questions required a detailed and specific knowledge of the areas which was not
always present. Moreover, it was clear that candidates had revised selectively and
so were unable to address, or in some cases even identify the topic raised by, some
questions. The new form of Question 3 which offered a choice within the question
again rewarded candidates who had at their fingertips a detailed knowledge of the
particular doctrines to which the statements related. Lack of coverage in student
revision might also be inferred from the very small number of answers to Question 6
on the doctrine of restraint of trade. It would also appear to be the case that the
topic of remedies for breach of contract which is raised by Question 8 had been
neglected in revision.

Comments on specific questions

Question 1
The Head of the School of Textiles at Lastchance University thinks students
do not take enough exercise. On Monday he announces over Campus Radio
that he will donate a signed copy of his latest book to any student who cycles
from the University to the nearby Museum of Basket Weaving before the
weekend. On Tuesday he regrets his rash offer and puts up posters in the
School retracting his offer. On Thursday he announces the offer is withdrawn
over Campus Radio. Advise the following students:
a) Devi, who cycled to the Museum on Monday afternoon but was not
aware of the offer until she arrived.
b) Ellis, who, having heard the offer on campus radio on Monday,
trained all day Tuesday and cycled to the Museum on Wednesday.
c) Fred, who was told by another student about the withdrawal of the
offer just as he was about to set out on Wednesday. He said ‘they
can’t do that’ and completed the ride.
d) Gina, who, having heard of the offer on Monday, was too drunk on
Tuesday and Wednesday to go to the campus but who set out on

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 her bike on Thursday. She was half way to the Museum when she
heard the withdrawal over the radio.
e) As (d) but the prize offered was £5,000.
General remarks
The Head of School is making a unilateral offer. An answer should recognise this at
the outset, outline the general requirements of unilateral contracts before examining
each scenario individually.
Overall candidates answered (a) – (c) quite well but were less successful with the
(d) – (e).
Law cases, reports and other references the examiners would expect you to
use
(a) Devi: You cannot accept an offer of which you were unaware (R v Clarke).
Perhaps also discuss Williams v Cawardine (irrelevance of motive) and Gibbons v
Proctor (no conflict once it is recognised that transmission to superior officer was
the specified act).
(b) Ellis: Discuss Shuey with regard to the attempted revocation which is probably
ineffective.
(c) Fred: (Revocation by poster ineffective as with Ellis following Shuey.) However,
the actual communication of revocation by a third party (another student) is effective
according to Dickinson v Dodds (a bilateral contract case but still applicable).
(d) Gina: ‘There are restrictions upon when a unilateral offeror may revoke his offer
once the offeree has begun performance of the stipulated act.’ It was necessary to
imply such a term in Errington v Errington.
(e) There would be no breach of contract by the Head because the term just
described will not be implied where a large amount of money is offered for a
relatively small job – in Luxor v Cooper more than the Lord Chancellor’s annual
salary for a few hour’s work, in this scenario £5,000 for a short bike ride.
Common errors
Some scripts incorporated long and irrelevant discussions about the general
principles of offer and acceptance in relation to bilateral contracts.
A good answer to this question would…
focus immediately upon unilateral contracts and include a relevant discussion of
each factual scenario supported by authority. Good scripts discussed Gina’s
position well and exceptional ones recognised the issue raised in (e).
Poor answers to this question…
gave an unequal discussion to the different scenarios. Often they contained no
relevant discussion of (e) and often also failed to identify (d) as raising a revocation
issue.
Student extract
Q1(c)
The issue here is regarding communication via a third party. Fred, a potential
offeree, was warned about the withdrawal just before he started performing
(i.e. cycling). In the light of Dickinson v Dodds (1876) this would constitute a
perfectly valid revocation. Although this happened with Fred on Wednesday
and the ‘proper’ revocation was not made until Thursday, there seems no
reason why Fred should insist on the offer still having been open on
Wednesday when the revocation was timely brought to his notice. So long as
it has not already been accepted, an offer can be revoked validly by the

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offeror at any time they want unless consideration has been provided to keep
the offer open for a certain time period (Routledge v Grant)(1828). Here,
however, nothing of the sort was done, so Fred does not in any way seem
entitled to receive a signed copy of the book
Comments on extract
This candidate gave a concise and well supported answer without any words that
would not gain credit. The most relevant authority Dickinson v Dodds and the
principle for which it stands i.e. that revocation can be communicated by a third
party are dealt with in the first three sentences. The candidate had already dealt
with the Shuey point in Q1(c). There then followed a slightly speculative sentence
showing off a wider knowledge that the offer could not have been revoked if good
consideration had been received in exchange for a promise to keep it open. These
were not the exact facts of this scenario but following a concise and complete
answer to the exact point raised, even if they did not get actual credit, inspired
confidence in the examiner that the candidate knows her/his law very well.
This part of the question would merit a 1st class mark. This standard was almost,
but not quite, sustained through the other parts of the question and a very high
upper second class mark was achieved for the question overall.
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.
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

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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 part 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 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
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…
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.

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Question 3
Critically evaluate TWO of the following statements:
a) The supposed distinction between a mistake as to ‘identity’ and a
mistake as to ‘attributes’ is impossible to apply.
b) Only physical threats will constitute duress sufficient to vitiate a
contract; threats of mere economic harm will not.
c) The distinction between an invitation to treat and a contractual offer
is an elusive one.
d) The so called ‘parole evidence rule’ should be abolished.
General remarks
The substantive content of each is obvious. However, the question does call
expressly for a critical evaluation. The statements have been composed so that
there is considerable scope for the latter. Part (c) was answered best and parts (b)
and (d) were the least popular.
Law cases, reports and other references the examiners would expect you to use
Relevant cases include:
(a) Kings Norton Metal Company v Edridge; Cundy v Lindsey and, to a lesser
extent, Phillips v Brooks; Ingram v Little and Lewis v Avery.
(b) Atlantic Baron; Atlas v Kafco; Pao On v Lau Yiu Long.
(c) Partridge v Crittenden; Fisher v Bell; Gibson v Manchester City Corp and
Boots v Pharmaceutical Society of GB.
(d) AXA Sun Life Services v Campbell Martin; City and Westminster Properties
v Mudd.
Common errors
A significant number of students did not read and act on the instruction to discuss
two statements and chose instead to discuss a single statement (and so be marked
out of 50 per cent for this question) or to write about all four statements (when only
the best two marks were recorded). There were also a number of answers that did
not appreciate that the distinction in (a) was used in many cases of mistaken
identity through impersonation which raise issues of unilateral mistake, discussing
instead common mistakes as to quality in contracts for the sake of goods.
A good answer to this question would…
achieve a balance between describing the area of law involved and critically
evaluating the statement made about it as expressly required by the question.
Poor answers to this question…
often favoured description over critical analysis.
Student extract
Q3(c) – para 1 only
It was set out on the case of Brinkibon that an offer is accepted when it is
communicated from the offeree to the offeror. An invitation to treat places an
offer to the world or a specific segment and order bids to be made (Blackpool
and Fylde). A pharmacy, as in the case of Pharmaceutical Society v Boots
sets its scenario, contains many products and invited the customer to choose
what he prefers but when he arrives at the till, meaning when he has
committed on his choices, this turns into an offer and he accepts that offer by
paying for it. A customer can however withdraw form this offer. That wouldn’t

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 be the case if, as we have seen in Thornton v Shoe Lane Parking, the
customer accepts the ticket which allows him entry into the parking lot.
Vending machines are considered offers.
Comments on extract
This extract illustrates an answer from a candidate who has a good level of relevant
knowledge but does not present it in a very clear way. The first sentence is correct
but needs to be read twice to convince the examiner that there is not a basic
confusion between offer and acceptance. The analysis of the Boots case seems to
capture the point that in a self-service store an offer is made at the checkout till.
However the precise identification of the offer is unclear and it is not emphasised
that as a result of this analysis the presentation of goods on open shelves is an
invitation to treat. The contrast to the case of Thornton is better made.
The rest of the answer continues in a similar way and so the candidate achieves a
good pass overall when a higher mark would have been achieved with a clearer
presentation of the same knowledge.
Question 4
‘In the past the courts have used various devices to indirectly control the use
of exemption clauses. These techniques are now less important because of
the direct statutory regulation of this type of contractual clause.’
Critically evaluate this statement.
General remarks
This title invites a discussion of ‘indirect control’ by principles of incorporation and
construction, the latter including the doctrine of fundamental breach which were
used more extensively in the past. It was not a very popular question but those who
attempted it tended to do well.
Law cases, reports and other references the examiners would expect you to use
Incorporation – Chappleton v Barry UDC, Olley v Marlborough Court, Interfoto v
Stiletto, Thompson v London, Midland and Scottish Railway.
Construction – contra proferentem rule, Ailsa Craig Fishing v Malvern, Photo
Productions v Securicor and HIH Casualty v Chase Manhattan.
Statutory Regulation – Unfair Contract Terms Act 1977 (UCTA) ss.2,3, 11 and
Sch.1. Consumer Rights Act 2015 s.2 (defining trader and consumer), s.62
(defining an unfair term), s.64 (exceptions), s.65 (exclusion of liability for death and
personal injury), Sch.2 Part 1 (containing the expanded grey list of presumptively
unenforceable terms) and possibly OFT v Abbey National, Kasler v OTP and Aziz v
Caixa.
Common errors
Some candidates treated the question as if it had asked them to write all they knew
about exemption clauses with no attempt to adapt that knowledge to the evaluation
over time of indirect and direct control techniques.
A good answer to this question would…
discuss UCTA as a method of direct control and better students will be aware that
UCTA is now applicable only to business-to-business contracts and that exemption
clauses in business-to-consumer contracts are regulated by the modified version of
the Unfair Terms in Consumer Contracts Regulations 1999 provisions that have
been incorporated into the Consumer Rights Act 2015.

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Poor answers to this question…

involving exemption clauses tend to be over general, fail to engage with the detail of
specific provisions and demonstrate no knowledge of recent changes to the law.
Question 5
Lord Grantam is short of money. He decides he will have to sell the cherished
motorcycle his uncle gave him. His uncle told him it was the motorcycle that
won the last Le Mans race before the Second World War began and was in
‘perfect original condition’.
Lord Grantam takes the motorcycle to ‘Vintage Motorcycle Sales’. While a
garage employee, Mike, is inspecting a motorcycle, Lord Grantam says:
‘Don't worry old boy. I can assure you that it is a perfect pre-war motorcycle
and has never had a crash. I know you need to be sure so keep it for a week
to check it out.’
As he left Lord Grantam gave Mike a thick file of documents about the bike.
The following evening Lord Grantam invites his uncle to dinner to tell him that
he is going to have to sell the motorcycle. Lord Grantam is concerned that his
uncle may be upset but his uncle tells him not to worry as he had made up
the story about it being a famous race winner. In fact it is made up from parts
obtained from motorcycles that crashed after the war.
Next week Vintage Motorcycle Sales’ expert valuer is off sick and nobody
looks at the documentation. An inspection by an expert would have
immediately revealed that it was made of post-war parts and the documents
would have confirmed that it was not the famous race winner.
When Lord Grantam returns to Vintage Motorcycle Sales he is offered and
accepts £50,000 for the motorcycle which is in fact worth only £500. The true
value of the motorcycle is only discovered several months later. If the
motorcycle had been the famous race winner Lord Grantam originally
believed it to be it would have been worth £100,000.
Advise Vintage Motorcycle Sales.
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).
This was a popular question and many answers included a sound, if sometimes
over general, account of the law of misrepresentation.
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.

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 (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.
The failure to inspect the documents does not, on the authority of Redgrave v Hurd,
deprive the representee of the remedy of rescission.
The availability of rescission should be discussed and in particular any possible
‘bars’ that might have arisen. The discovery of the statements’ untruth several
months later should prompt a discussion of affirmation and lapse of time. Good
answers will be aware that lapse of time is not applicable to fraudulent
misrepresentation. These statements were not fraudulent when first made but might
be regarded as so by application of the principle of a continuing representation
(With v O’Flanagan, Spice Girls v Aprilia) combined with Lord Grantam’s later
knowledge acquired when he had dinner with his uncle.
If the garage chooses or is unable to rescind the contract, the different routes to
damages should be discussed: the Misrepresentation Act s.2(2) damages in lieu of
rescission including the open question whether such damages remain available
after the right to rescind is barred; damages for fraudulent misrepresentation (Derry
v Peek) and damages under the Misrepresentation Act s.2(1). Stronger answers will
compare the advantages of these different claims with respect to what must be
proved and by whom, as well as the associated measure of damages and the
application of any limiting factor such as contributory negligence. The reversed
burden of proof Howard Marine dredging v Ogden and the fraudulent measure of
damages Royscott v Rogerson make the action under s.2(1) most attractive.
Common errors
Some candidates discussed the potential liability of Lord Grantam’s uncle to Lord
Grantam which is not relevant as the instruction was to ‘Advise Vintage Motorcycle
Sales’.
A good answer to this question would…
give a well-structured account of first the principles that determine whether a
statement made in negotiations became a term of any resulting contract and then
the law of misrepresentation. Better answers also included a discussion of
Redgrave v Hurd as well as With v O’Flanagan and Spice Girls v Aprillia.
Poor answers to this question…
often ‘launched’ into an over general account of misrepresentation without
discussing the prior question as to whether the statements made were terms or
mere representations. Weaker answers often failed to include a proper discussion
of the remedies available for misrepresentation.
Question 6
‘The doctrine of restraint of trade performs a valuable role in relation to
contracts of employment but less so in relation to contracts for the sale of a
business.’
Critically evaluate this statement.

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General remarks
This question calls for a knowledge of the doctrine of restraint of trade and how it
operates in these two key areas. The question was attempted by very few students
suggesting that the topic is not often revised (or maybe often not taught) despite the
fact that it remains on the syllabus.
Law cases, reports and other references the examiners would expect you to
use
Contracts of employment – Herbert Morris Limited v Saxelby; Mason v Provident
Clothing & Supply Company Ltd; Wyatt v Kreglinger and Fernau Proactive Sports
Management Ltd v Rooney.
Sale of a business – Nordenfelt v Maxim Nordenfelt.
Common errors
So few candidates answered the question that these cannot be identified.
A good answer to this question would…
describe the two areas of application in the title but also would address the question
whether the doctrine of restraint of trade performs a more valuable function in
relation to employment contracts than where the sale of a business is involved.
Poor answers to this question…
fail to include relevant case law and do not engage with the precise question asked.
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
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.

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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…
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
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.

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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 £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
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.

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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.

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