HA2022 Business Law Tutorial Questions Assignment 2 Answer
|Contract Act, Consumer Protection Act and Insurance Act|
Question 1: Capacity of parties
Advice for the purchaser:
In the given case, the seller of a farm makes a representation to the purchaser that the farm has the capacity of carrying 5000 cows. On the basis of this representation, the purchaser made a contract with the seller for the purchase of the farm. Later the purchaser found that the judgment of the seller is incorrect. In this case, the following actions can be taken under this contract:
The misrepresentation made in the contract has three types:
1. Fraudulent misrepresentation: Under this case, the seller fraudulently provides incorrect judgment. In this case, the purchaser has the right to cancel the contract as it is a void contract and has the right to sue the purchaser for his loss.
2. Negligent misrepresentation: Under this case, if the seller provides judgment neglecting the fact that the farm is never used as a cattle station. In this case, the contract of purchase of the farm will be canceled and both parties on the same position before the contract. Both parties have no liability for each other (Larreguy, Marshall, & Querubin, 2016).
3. Innocent misrepresentation: If the seller provides judgment innocently as he is providing justice to the best of his knowledge then in this case both parties have the right to cancel the contract or complete the contract of purchase of the farm.
Therefore, in the above case, the purchase can cancel the contract of purchase of a farm on the basis of misrepresentation under the contract.
Question 2: Exclusion clauses:
The exclusion clauses under the contract reduce or limit the liability of the parties. An exclusion clause is valid when it is mentioned in the contract at the time of the signing of the contract.
The decision as per the principle of exclusion clauses in the contract:
In the given case, Shirley bought a brand new car from Leyland Motors and as per sale contract Leyland Motors has not to guarantee the quality or fitness of the car, and the purchases are made at the risk of the buyer.
This exclusion clause is mentioned in the sale of contract at the time of signing of the contract. Therefore, Shirley had already read this clause of the contract. In the given case, Shirley claims that the car is not brand due but a used demonstrator model which is not related to the exclusion clause mentioned in the contract. As per the exclusion clause, Leyland motors have no liability for the quality or fitness of the car which is not excuses the seller from all liabilities. If Leyland motors have sold a demonstrator model then Leyland motors are liable for it and Shirley can cancel the contract and claim the amount of loss from Leyland motors (Master, & Resnik, 2013).
Question 3: Doctrine of frustration:
The law of frustration of contract and its consequences:
Under the contract act, some circumstances occur due to which it is not possible to complete a contract or contract will be brought to an end. The circumstance is beyond the control of the parties.
A frustrated contract is a contract that is at the time of formation the parties of the contract are able to perform the contract, however, due to some unforeseen reason the contract is terminated without the fault of any party. The contract under this situation is not void ab initio, in this situation parties do not have future obligations.
The doctrine of frustration is applied only in a limited range, as the contract is terminated only when the basic fundaments of contract on which parties are agreed have changed and the reasons are not anticipated by the parties at the time of contract.
The example of the doctrine of frustration:
As per contract law, there are following examples in which the doctrine of frustration is applied to the contract and contract will terminate automatically:
- A contract is established between A & B with respect to the display of a movie in the theatre. A agrees to display a movie of B who is a producer of movie as on 25th march 2020 in his theater. However at the start of the month March 2020, there are worldwide pandemics of coronavirus impact due to which to maintain social distancing, the government announces the complete lockdown in the city. This is an unforeseen situation that is beyond the control of both parties. Therefore in the given case, the contract between A & B will automatically be terminated and there is no need to perform the contract as on 25th March 2020 (Conlen, 2012).
- A contract is established between A & B where B agrees to purchase of building owned by A after 3 months from the present day. However, after 2 months from the date of the contract, and attacks of terrorists take place in which the building is completely destroyed. This is a situation of the doctrine of frustration as the fundament of the contract is the purchase of the building and in the current situation, the building has no existence. Therefore the contract will automatically be terminated because the basic fundaments of contract on which parties are agreed have changed.
Question 4: Remedies for consumers:
A consumer can claim a remedy from the retailers, manufacturers, or importers if the products do not match the quality as promised and there is a fault in the product.
Remedies available to consumers from the retailer:
For the protection of the interest of consumers, the remedies are provided to the consumers in case of faulty goods and services. Remedies are the right of the consumer under the consumer protection act.
In the given case, the following remedies are available to consumers from the retailer of a faulty pair of sports shoes:
- The consumer can claim for removal of defects
- Claim for replacement of products with new product
- Claim for refund of price money including losses incurred to the consumer
- A complaint about unfair trade practice.
- A complaint about stopping sales of faulty pairs of sports shoes.
Conditions for claiming remedies directly from the manufacturer or importer:
The following condition must be fulfilled by the consumer for claiming remedies directly from the manufacturer or importer of faulty sports shoes:
- The product is not as per acceptable quality
- The product is not as per matching description
- The extra promises of performance, conditions, and quality are not fulfilled
- Manufacturers or importers are responsible for after-sale services or parts of products.
In the given case, if the fault in a pair of sports shoes is a result of the manufacturing process then the consumer can directly demand remedies from consumers (Schmitz, 2011).
Question 5: Insurance law:
The key terms in insurance law:
Under the insurance law, there are various key terms that are needed to understand before any insurance contract. The key terms are as follows:
1. Insurable interest: The insurable interest is the interest of receiving a sum of money by a person or business organization for loss or damage suffers by them.
2. Indemnity: An indemnity is a form of compensation provided by the insurance company for the loss and damages that occur to the policyholder by the third party.
3. The doctrine of utmost good faith: Under the insurance contract act, both parties i.e. insurer and person who purchase insurance must disclose all information and have good faith for each other.
4. The doctrine of Subrogation: As per the insurance contract act, the principle of subrogation means the insurer has the right to sue to the third party for the loss or damage occurred to the policyholder after making payment for loss and this principle is applied only in case of fire insurance or vehicle insurance (Larreguy, Marshall, & Querubin, 2016).
The brief explanation of the key terms of the insurance contract act:
1. Indemnity: The amount of compensation that is paid by the insurance company to indemnify for loss or damage occurs to the policyholder by the act of the third person. Indemnity is the basis of the general insurance contract in which value is determined at the date of loss. The policyholder can take different insurance policy as per need. For example, over-insurance, under which a high amount of premium is paid by the policyholder to get cover on the value of assets or replacement and to recover amount to the extent of the loss. Another type of indemnity is a double indemnity in which insurance cover on the same asset is taken from two or more insurance providers. However, at the time of loss, benefits are available from one insurance provider (Master, & Resnik, 2013).
2. The doctrine of utmost good faith: The principle of utmost good faith refers that both parties of insurance must have good faith in each other and discloses complete information in respect of the policy. For example, if any person takes health insurance from an insurance provider then he must disclose his health issues clearly and the insurance provider also discloses all critical terms of the insurance contract. Under the insurance contract, disclosure is required of all material facts that increase risk.