Assignment 2 of Diploma in Business Administration--Business Law and Ethics
Answer the following 2 questions in not more than 500 words each:
1. Briefly explain the common law control over the validity of exemption cause in a contract of sale of goods.
2. George has worked for Hong Kong Jeweler Shop (‘HAKES”) as an account clerk at its Tsimshatsui branch for the last four years. Recently HAKES informed him that the Tsimshatsui branch would be closed and he would be transferred to the head office in Yuen Long to work as a salesman.
George refused to accept the transfer and HAKES terminated his employment by giving him one month written notice.
Advise George of his rights under the Employment Ordinance. (In Hong Kong)
Give the words count at the end of your answer to each question.
The following note is sample answer and format for your reference.
29/3/07 Sample Answers
Question 1 (Textbook Question)
What do you understand by equity? What reasons led to the creation and growth of the Court of Chancery?
Answer 1
Rough Notes:
1. Definition of equity: supplementary to common law.
2. Creation of Court of Chancery: petitions to King; reference to Council, then Chancellor; Court set up by end of fifteenth century
3. Growth: Earl of Oxford's case 1616; principles established, case law developed
4. Judicature Act, 1873-5; now Chancery Division.
Equity in a general sense corresponds to natural justice or fairness in the adjustment of conflicting interests or controversies. As administered in the courts, however, equity means that portion of natural justice which eventually formed itself into technical rules operating according to certain clear-cut principles. Before the Judicature Acts, 1873-5, equity comprised those rules administered and enforced by the Court of Chancery in cases where the courts of common law gave no remedy or gave an inadequate remedy to a plaintiff notwithstanding that there was a right, based on conscience, to relief. In this sense, therefore, equity may be looked upon as a gloss (or appendix) to the common law, filling in the gaps and making the English legal system more complete.
The germ of the idea of equity lies in the notion of the King as "fountain of justice" to whom a subject could present a petition for relief in any cause and for any reason. Where no relief was obtainable in the common law courts or under the common law, a subject sent his petition to the King. The petitions became numerous and were sometimes examined by the King and his Council, relief being granted, as a matter of grace, or refused. Owing to pressure of business in the Council the petitions were sent to the Chancellor who, as Chief Secretary of State and Keeper of the King's Conscience, eventually dealt with them alone.
By the end of the fifteenth century the Chancellor had established his own court, the Court of Chancery, and assumed a jurisdiction in disputes, applying his own procedures (e.g. subpoena and interrogatories) and granting relief by decree (e.g. specific performance of contracts and injunction). In due course of time the Chancellor's jurisdiction grew because of its popularity. Eventually his jurisdiction competed with and conflicted with the common law itself, and resulted in open dispute in the celebrated Earl of Oxford's case (1616) in which the King personally interposed his will. Thereafter, where the rules of common law and equity conflicted, equity prevailed.
Despite its initial popularity, equity as administered in the Chancery Court came under criticism. Jurisdiction grew, but abuses occurred and there were frequent delays in dealing with cases, so that in course of time the Court became the exact opposite of its original intention and purpose.
Finally the Judicature Acts, 1873-5, were passed which brought into being a new system of courts and a fusion of the administration of law and equity. The Court of Chancery was abolished, but was re-created as one of the divisions of the High Court and named the Chancery Division. It retained most of its original jurisdiction, but may now grant in any case coming before it not only its traditional equitable remedies (referred to above) but also common law remedies.
Question 2 (Problem Question)
Explain the contractual position in each of the following unrelated situations:
(a) Chan sends a letter to Wong the contents of which involve an offer to sell a LCD TV for $25,000. This letter is posted on the 1st July 2006 and is received and read by Wong on the 4th July 2006. Wong posts his letter of acceptance on the 5t July 2006 which Chan receives on the 8t July 2006. However, in the meantime Chan has sold the TV to Cheng for $30,000.
(a)Any promises to sell her antique Rolex watch to Betty for $10,000. Betty accepts. It is later discovered that the watch worth $100,000 at market price.
(c) Fanny receives unsolicited goods through the post with a notice saying that it will be assumed that Fanny has bought them unless they are returned to the sender, Great Products Ltd, within seven days. Fanny takes no action.
Answer 2
a) The initial issue here is whether a contract has been formed by the postal dealings of Chan and Wong. Contracts may be made orally, in writing, by conduct or any combination of these. Certain contracts require a deed, though this is not necessary in this situation. The essentials of a simple contract are:
Ø Offer
Ø Acceptance
Ø Consideration
Ø Intention to create legal relationship
Ø Capacity
Ø True consent
Here the dealings are by post and a special rule applies to the construction of the contact. The agreement, if there is one, is constituted by an offer and an acceptance. As a general rule an acceptance must be communicated to the offer or by the offered. Exceptionally an act may suffice as in Cargill v. Carbolic Smoke Ball Co (1893).
The problem posed raises an issue concerning the postal rule. This states that where the dealings are by post the letter containing the offer is effective when the offered receives it However, the letter of acceptance is effective when it is validly posted and not when it arrives. The consequence is that communication of the acceptance may not have occurred at the time of contract. This is well illustrated by Byrne v. Van Eindhoven & Co. (1880). Even if the letter of acceptance never arrives the logic of the rule must mean that there is still a contract: Household Fire Insurance v Grant (1879).
The postal rule can create difficulties in relation to revocation as an offer may be revoked at any time until acceptance, though a notice of revocation will not be effective until communicated to the offered. Therefore an offer or may opt out of the rule by prescribing the mode of acceptance that, for example, no contract shall exist until the acceptance is communicated to the offer or.
It appears that Chan has sent a letter containing an offer to sell a LCD TV to Wong and that the letter of acceptance is posted on the 5th July 2006. On this date the contract is made (al other things being equal). There has been no effective revocation prior to the date.
There is sufficient consideration to support the contract, namely Chan promises to pay $25,000 to Wong in return for his promise to sell the LCD TV to him. There is nothing on the facts to show that that parties have no intention are not intending to enter into a legally binding contract In the absence of any vitiating factors such as lack of legal capacity or mistake which negate the true consent, Chan will be in breach of the contract
(b) This scenario raises a point about the adequacy of 'consideration. The rule is that consideration must be valuable but need not be adequate. This means that the courts will not assess market values in deciding whether a contract exists. Cleary an antique Rolex watch is likely to have a market value far higher than $10,000, but if this is the agreed price a contract exists between Amy and Betty.
(c) The rule here is that silence cannot be acceptance: There must be communication of acceptance to the offer or unless an act has been specified as acceptance: Cargill v. Carbolic Smoke Ball Co (1893). There is no contract between Fanny and Great Products Ltd.
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