WITH REFERENCE TO THE STANDARD FORM CONTRACT (in isolation)

1. Explain the legal issue that clause 1 of the standard form contract is addressing and what it is aiming to achieve. Do you think it would be effective ?

2. Explain the legal issue that clause 9 of the standard form contract is addressing and what it is aiming to achieve. Do you think it would be effective ?

WITH REFERENCE TO THE SCENARIO (commenting on both the common law position and the effect of the standard form contract had it been adopted and ignore any aspects of insurance when advising who would bear the loss) ...                                               

Micro-Maker is a small company involved in the manufacture of microwave ovens. One of its main customers is a large department store called Lacey with many branches around the country. The business arrangements between buyer and seller have developed along the following lines:

Micro-Maker provide a demonstration model of each of its microwaves to the relevant Lacey store. Lacey does not pay for the demonstration models at this stage. Customers of Lacey who select Micro-Maker microwaves are given an approximate delivery date. Lacey then place an order to Micro-Maker together with a 10 per cent deposit on the value of the goods ordered and Micro-Maker sends microwaves to the relevant store via an independent carrier. Lacey pays the balance owing on each microwave on 60 days credit. Lacey delivers the microwave to the customer using its own van and driver.

When a demonstration model has been in the shop for some time, Lacey sells it off at a knock-down price and, at that stage, the price becomes payable to Micro-Maker. Micro-Maker is concerned that the volume of business has grown considerably since the start of the relationship and feels that it might be appropriate to formalise the contractual arrangements. They want to adopt a standard form contract and ask you for advice.

3.    Describe the legal rules for ascertaining ownership of goods and comment specifically on ownership and risk as regards the microwaves at each stage in the distribution chain.

4.    In view of the fact that Lacey will not be paying for the goods for some time, what advise would you offer Micro-Maker as regards the risk of non-payment ?

5.    if the goods were damaged in a fire while in the shop waiting to be sold, who would bear the loss - Micro-Maker or Lacey ?

6.    if the goods were stolen from the Micro-Makers' delivery van while in transit to one of Lacey's shops, who would bear the loss ?

7.    Micro-Maker delivers a consignment of general order microwaves to Lacey and Lacey discover that, although they are in good working order, they are a different model from the ones which were ordered. What rights would Lacey have ?

8.    Lacey discovers that on some of the models the outside of the microwave is slightly scratched. Some of Lacey's customers might protest and refuse to take delivery. Outline the remedies available to Lacey as regards these particular goods.

9.    Consider the following additional scenario ..

Micro-Maker is becoming concerned about Lacey's financial position. Although Lacey is not insolvent, it did not include the stipulated 10 per cent deposit with its latest order of general models. In addition, Micro-Maker has not received payment for several demonstration models which it believes Lacey has sold on to customers.

Micro-Maker is particularly worried as it has just arranged for several consignments of demonstration and general order models to be sent by road to various Lacey shops. The goods are still in transit and Micro-maker is concerned that it may not be paid for these goods. A further three consignments of demonstration models are waiting at the warehouse ready to be delivered to the independent carrier.

What if any steps can Micro-Maker take to protect their position in these circumstances?

10.   Micro-Maker has now learnt that Lacey is, in fact, insolvent.

(a)   What obligations would they have to deliver Demonstration models to the Warehouse?

(b)  What rights would they have to recover Models already despatched and in transit ?

(c)   What rights would they have to recover Models in Lacey's stores ?