Contract Law Questions

Reply Wed 13 Aug, 2014 05:39 am
The Scenarios
Scenario one
Danielle has bought a new washing machine. Accompanying her washing machine was a ‘User Manual’ which
contained various instructions and a written 12-month guarantee. This guarantee was on the back page of the
‘User Manual’ and contained a number of terms in size ten, black font, one of which provides that:
“The protection afforded by NEW MACHINES LTD under this guarantee covers defective machinery or
mechanical failure but it does not extend to any loss or damage caused by accidental damage or
general wear and tear.”
Danielle installed the machine herself by reading the installation instructions at the front of the ‘User Manual’
but she didn’t read the guarantee. Three months after she bought her washing machine, Danielle found that it
was not draining properly. She called NEW MACHINES LTD who sent an engineer to inspect the machine. The
engineer checked the pump and found a hair clip had fallen into the pump and stopped it working. The
engineer asked Danielle to pay a £550 call-out charge at which point she checked the manual and saw the guarantee. The engineer directed Danielle to the above term and claimed that the defect he had discovered
was not covered, so she had to pay.
Danielle is absolutely furious and promises to sue NEW MACHINES LTD. With explicit reference to applicable
case law, advise Danielle whether she will be able to rely on her guarantee in light of the exclusion clause.
Do not make any reference to the Sale of Goods Act 1979.
Scenario two
Abdul decides that he wants to invest in shares. He contacts his stockbroker, Paul, by telephone who advises
him to invest in MEGAMONEY – a payday loan company. Abdul asks Paul why he should invest in
MEGAMONEY and he is told that ‘the company has a superb asset book and I myself have invested several
hundred thousand pounds in them’. Abdul decides to wait a week to decide but then he telephones Paul and
tells him ‘I’ve thought about what you said and it sounds very promising – I’ll invest!’ Paul sends by email a
written contract to Abdul confirming the purchase of the shares which Abdul signs and returns by email the
same day. There is no reference in the contract to the telephone calls between Abdul and Paul.
To Abdul’s disgust, MEGAMONEY becomes embroiled in financial difficulties almost immediately and his
shares have halved in value by the time he decides to minimize his loss and sell them. Abdul demands an
explanation from Paul, who said that he was at a loss to explain the difficulties as he had read an article in
Stockbroker Monthly on the same day as their first telephone call which spoke glowingly about MEGAMONEY’s
asset book. Paul did admit, howeber, that his recommendation to Abdul was based almost solely on this article
and that he had not, in fact, ever owned shares in MEGAMONEY.
With explicit reference to applicable case law and with regard to possible misrepresentation, advise Abdul
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