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1. Cloud Pleaser Ltd (CP Ltd) contracted with Vape Distribution Ltd (VD Ltd) for the delivery of 3000 units of vape liquid per month for one year. One of the terms stated that CP Ltd must approve the source of the products. Two months into the contract, VD Ltd did not seek approval for its latest source. A month later, CP Ltd was the subject of serious negative comments on social media platforms because it was revealed that CP Ltd’s vape liquid was sourced from a factory that uses child labour. Having suffered a serious loss of sales CP Ltd would like to be advised as to whether it has the right to end its contract with VD Ltd.
Your introduction should identify the issues raised by the question and your approach. This is about the right to terminate a contract following a breach. Since it is a case of defective performance, the outcome will be determined by the status of the term breached.
Start the main body with reference to the importance of the status of the term. This can include the conditions /warranties distinction with reference to Poussard v Spiers and Pond (1876) and Bettini v Gye (1876).
Now turn to the approach adopted by the courts which was confirmed in The Hansa Nord [1976] Bunge Corporation v Tradax Export [1981], and the comment by Hamblen LJ in Grand China Logistics v Spar Shipping [2016].
Take each step in turn (legislation, precedent and the parties intentions) with authority and explain how each applies. With each one, relate it to the facts of the question. With the intentions of the parties, include Aerial Advertising v Batchelor Peas [1938].
After addressing the classification approach, you will then arrive at the final element – the possibility of an innominate term. Explain the concept by detailing Hongkong Fir Shipping v Kawasaki [1962], how the test works and how it represents a proportionate remedy. Include the guidance on its application (Ampurius Nu Homes v Telford Homes [2013]).
Apply the test and you can make use of Aerial Advertising here too.
Finally conclude by explaining the likely outcome on the facts given.
2. Analyse the extent to which an innocent party can continue with a contract following a refusal to perform by the other party.
Your introduction should identify the issue and your approach. This is about the right to continue following an anticipatory breach and requires a detailed assessment of the rules from White & Carter (Councils) v McGregor [1962].
Start your main body by explaining that a refusal to perform results in two options for the innocent party and that the limits on the option to continue were recognised in White & Carter.
Detail the case. The facts, decision and reasoning. Detail the two limits from Lord Reid.
Address the criticism such as the uncertainty on ‘legitimate interest’ and resulting guidance (The Alaskan Trader [1983]); The Dynamic [2003]; The Aquafaith [2012]; and Reichman v Beverage [2006]).
Finally provide a conclusion that answers the question directly. It should acknowledge that the meaning of ‘legitimate interest’ is crucial to determine the right to continue.
3. Critically evaluate the extent to which an innocent party can end a contract following defective performance of the other party which results in a breach.
Your introduction should identify the issue and your approach.
Start the main body by referring to the approach adopted by the courts confirmed in The Hansa Nord [1976], Bunge Corporation v Tradax Export [1981], and the comment by Hamblen LJ in Grand China Logistics v Spar Shipping [2016]. Explain that it represents a classification approach initially, and then a consequential approach.
Lead with the classification approach and the conditions / warranties distinction with reference to Poussard v Spiers and Pond (1876) and Bettini v Gye (1876) before turning to explain the steps to be taken with the classification approach with examples. On the parties’ intentions, provide the guidance from Mustill LJ in Lombard North Central plc v Butterworth [1987] and also address the controversy represented by Schuler v Wickman Machine Tool Sales [1974].
Now turn to the consequential approach introduced by Hongkong Fir Shipping v Kawasaki [1962]. Explain the case, the test and guidance on how it works (Ampurius Nu Homes v Telford Homes [2013]).
Now evaluate the classification and consequential approaches highlighting the potential certainty from the classification approach but also the potential for unfairness. In contrast, explain the fairness (preventing economic opportunism) and proportionality of the consequential approach using The Hansa Nord [1976], but also the potential uncertainty from waiting for the consequences of the breach to materialise.
Finally, conclude with a direct reference to the question. It is clear that the seriousness of the breach determines the right to terminate following defective performance but it is initially the potential seriousness (based on the classification of the term breached) and failing that, the actual seriousness.