Distance Learning Module Planner

Commercial Law: Consumer Credit andAgencyCourse Code: MP–LD2026Module Leader: Stuart Williams

© University of Wolverhampton 2007

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ContentsHow to Use Your Module Planner 5

Topics Covered by Module 7

Skills to be Developed and Examined 8

Examinations 9

A Brief Guide to Study Skills 10

Introduction to Study Units 13

Reading List 14

Study Unit 1: Creation of Agency and Authority 16

Study Unit 2: Rights and Duties of Agents 19

Study Unit 3: Contractual Liability to Third Party and Tortious Liability 22

Study Unit 4: Termination of Agency 25

Study Unit 5: Consumer Credit: Essential Terminology 27

Study Unit 6: The Meaning of Multiple Agreements and LinkedTransactions. Protecting the Debtor Before the Contract is Made 30

Study Unit 7: The Making of a Credit Agreement 33

Study Unit 8: Liability for Breach of Contract and Misrepresentation;Matters Arising During Currency of Agreement 36

Study Unit 9: Breach and Termination of a Credit Agreement atCommon Law 39

Study Unit 10: The Statutory Regime Regarding Breach andTermination 41

Study Unit 11: Control of Credit Agreements: Judicial Control ofRegulated Agreements 44

Appendix to Study Units 47

Learning Project 58

Practice Question and Suggested Answer 63

Revision 69

Taking the Examination 73

Module Questionnaire 75

How to Use Your Module PlannerThe Module Planner is vital to your studies. It divides the work in each area into Units, and showsyou the minimum number of hours you should spend on each Unit, at the top right hand corner ofthe first page of each Study Unit, in order to understand the law involved. You should plan on de-voting a minimum of 150 hours to each module you study.

The section headed ‘Essential Reading’ contained in the Reading List and each Study Unit refersyou to the materials with which you are provided: the Textbook, 150 Leading Cases and StatuteBook. The materials listed in the Essential Reading are sufficient to enable you to complete thecourse very effectively.

The section headed ‘General Reading’ lists other books which, if you wish, you can read to giveyou other approaches to the law. These books are not provided but you should be able to pur-chase them from Hammicks Legal Bookshop, whose address, telephone number and website de-tails are provided in the General Reading section of the Reading List. They are not essential foryou to be successful on the course, but they may help to give you a different viewpoint of the lawinvolved in this module.

The Module Planner guides you through the course. Work through it logically, and in order, andmake sure you understand one Unit before you move on to the next. At the end of each Unit youwill find a set of Self-Study Questions. Test yourself on these and make sure you understand thembefore you move onto the next Unit.

At the end of the Study Units you will find the Learning Project. A compulsory question will be setin the examination in Section A of your paper on all or parts of the material covered by the Learn-ing Project, and this will count for 50 per cent of your overall grade, so it is essential that you en-sure you study and understand all aspects covered by it. The Study Units which relate to theLearning Project have been indicated to guide you through this material while you study.

The Module Planner is your guide to the topic of English law that it covers. Have it with you as youstudy and you will make the most of this opportunity to obtain the best law degree of which youare capable.

With this Module Planner you should have the following materials:

Commercial Law TextbookGriffiths (3rd edition 2003) Old Bailey PressCommercial Law 150 Leading CasesFletcher (2002) Old Bailey PressCommercial Law Statute BookCracknell (3rd edition 2002) Old Bailey PressCommercial Law Revision WorkBookFletcher (2nd edition 2002) Old Bailey PressIf you do not receive this set of materials, please contact:Distance Learning DepartmentHolborn CollegeWoolwich RoadCharltonLondonSE7 8LNTel: +44 (0) 208 317 6000Fax: +44 (0) 208 317 6003E-mail: dl@holborncollege.ac.uk

Topics Covered by ModuleThis module covers the following topics within English law.Creation of Agency and AuthorityRights and Duties of AgentsContractual Liability to Third Party and Tortious LiabilityTermination of Agency Consumer Credit:Essential TerminologyThe Meaning of Multiple Agreements and Linked Transactions.Protecting the Debtor Before the Contract is MadeThe Making of a Credit AgreementLiability for Breach of Contract and Misrepresentation; MattersArising During Currency of AgreementBreach and Termination of a Credit Agreement at Common LawThe Statutory Regime Regarding Breach and TerminationControl of Credit Agreements: Judicial Control of RegulatedAgreements

Skills to be Developed and ExaminedTo be successful in the end of module examination you need to show that you understand andcan apply the area(s) of law you have been studying. You must be able to demonstrate this to theexaminers by writing answers which communicate the points you wish to make accurately and ingood English. This is a key part of demonstrating that you have understood the points of law, thecases and the Acts of Parliament that you have studied.

Before you start to write your answer, identify the issues that are relevant to the question. Thesemust be clearly stated in your short introductory paragraph(s). When referring to case law andstatute law, you then need to explain the relevant legal principles in the context of the issues youidentified in your introductory paragraph(s). Finally, you need to write a concluding paragraphwhich brings your points together. Do not write everything you know about an area, or writeanswers that take the form of a series of notes. Your answer should be structured in the way de-scribed above and be written in good English.

For further guidance on how you will be graded please consult your Award Guide which containsan explanation of the criteria used to grade your work.

It is important that you practice answering questions and in particular take the opportunity to sub-mit a sample question for marking and feedback. This question is contained in the Practice Ques-tion section of the Module Planner.

ExaminationsThis module is assessed by one, two hour, unseen written examination. Examinations take placein September, January, and May of each year. The examination is in two parts: Part A is a com-pulsory question and counts for 50 per cent of the total grade, Part B has four questions of whichyou will be required to answer two only. Each of the questions in Part B is worth 25 per cent of thetotal grade.

The compulsory question in Part A is based on those topics which make up the Learning Project.You will find details of the Learning Project and the topic area covered by it at the end of the StudyUnits in this Module Planner. You should read this section carefully to identify those areas of themodule covered by the Learning Project.

You will, therefore, know in advance of the examination that there will be a substantial question onthe topics covered by the Learning Project. When you write the examination you should make surethat you devote 50 per cent of the time to the question in Part A. Your answer to this questionshould normally be about twice as long as your answer to the two questions in Part B.

The purpose of the Learning Project is to allow you to study a significant part of the syllabus indepth in the sure knowledge that you will be examined on it. In this way, hard-working studentswho have studied their materials thoroughly will be able to write an in-depth answer and have fullcredit for the work they have done reflected in the grade awarded.

There is no assessed coursework for this module. The total grade for the module is based uponthe unseen written examination. Although you should make sure that you cover the whole sylla-bus, it is particularly important that you study those syllabus topics which are covered by theLearning Project thoroughly so that you can write a complete answer to the compulsory questionin Part A and take advantage of the fact that this question is worth 50 per cent of the grade.

The examination is a two-hour examination with an additional 15 minutes reading time. It is an un-seen examination. You will, however, be able to take into the examination an unmarked copy ofyour 150 Leading Cases, Statute Book and Law Update (this means that you should not write onthese materials; you are only allowed to underline or highlight part of the text). As stated above,you will also know what topics will be covered by the compulsory question in Part A of theexamination, provided you have studied the details of the Learning Project at page 44 of this Plan-ner.

A Brief Guide to Study SkillsAs a distance learning student you will undoubtedly have other demands on your time. It is, there-fore, important that you use your time effectively. The following tips are intended to help you doso.

Time Management

Be realistic.Work out what time you have available for study; take out time for sleeping, eating, recrea-tion, etc.Try to plan ahead – do not leave everything to the last minute.Prioritise – do not do the easiest task first, but the one that really needs to be done first.Set objectives which are reasonable, and make sure that they are somewhere you seethem.Break large tasks into manageable sub-tasks and set target dates against each sub-task.Keep a wall planner chart.Try doing the most difficult things when you feel at your best.Remember the unexpected always happens, so be flexible – don’t get angry when planshave to change.

Effective Reading

Reading

Read with purpose (what questions have to be answered?).Read selectively – scan and skim – only read in detail what you need to.Mentally recite what you have just read.Make notes at appropriate points – bullet points, do not rewrite the whole book.

Review

Did I answer the questions I wanted to?Do I understand and remember what I read?

Studying

Where?

Choose somewhere that is conducive to study. You need: a large table or desk; a suitablechair; a bookcase; adequate, suitable lighting; adequate ventilation; reasonable tempera-ture – too cold,you can’t concentrate – too warm, you will go to sleep.Banish distractions – magazines, radio, telephone, TV.Decide where you study best, and try to keep to it.

When?

When you are alert.Not when you are too tired.When it is the best time of day for you – some people work better at night, others early inthe morning.

How?

Try studying for 50 minutes, break for 10 minutes, etc.Have all you need available – pens, pencils, dictionary, PC, etc.Avoid too much physical relaxation or you will go to sleep!Actively study – make notes, etc. It is difficult to just read for toolong; it makes you sleepy and you lose concentration.Remember to have breaks and do have time for relaxation.Set yourself targets, and give yourself rewards!

Practice Questions

At the end of each unit you will find Sample Questions, and at the end of the Planner is a PracticeQuestion and Suggested Answer. strongly advised to submit at least one answer to either a Sam-ple Question or the Practice Question for marking. Unless you do so you will not gain any insightinto your strengths and weaknesses.

Introduction to Study UnitsThe Study Units deal with the individual topics covered by the module. The module is brokendown into Study Units to enable you to look at each area of law in digestible parts. You must workthrough each Study Unit in order, ensuring that you understand the material covered by each Unitbefore progressing on to the next one.

Each Study Unit is broken down into four major sections.

Reading List

This indicates what reading you must do (Essential Reading) in order to cover all of the materialset in the Unit. All material listed in the Essential Reading is provided as part of your study materi-als. You can, if you wish, further your knowledge and understanding by completing the GeneralReading in each Unit. These materials are not essential for you to complete the course, but youmay find them useful in your study. Such materials are not supplied, and you are responsible forobtaining copies of the titles listed in the General Reading. Details are given in the Reading List ofsuppliers.

Case Law and Statutes

This section directs you to those cases and statutes that you will need to read and understand inorder to complete the Unit. All materials listed here can be found in your Textbook or 150 LeadingCases.

Self-Study Questions

These are questions designed to set the parameters of the Study Unit and to test your applicationof the basic principles.

Sample Questions

These may be essay or problem questions, often taken from past examination papers. You shouldattempt your own answers to all of these questions.

Reading ListThese are the titles that you will use throughout the course. They are referred to in the readingsection of each Study Unit, to guide you in your learning.

Essential Reading

All materials listed here must be read in order for you to understand the module. These books aresupplied as part of your study materials.

Commercial Law TextbookGriffiths (3rd edition 2003) Old Bailey PressCommercial Law 150 Leading CasesFletcher (2002) Old Bailey PressCommercial Law Statute BookCracknell (3rd edition 2002) Old Bailey Press

General Reading

These materials are not supplied, and are not essential to pass the module. You may, however,wish to refer to them to deepen your understanding of the topics covered by the course. You areresponsible for obtaining your own copies of these titles. If you choose to do so, you should beable to purchase them by contacting Hammicks Legal Bookshops at 192 Fleet Street, LondonEC4A 2NJ; tel: +44 (0)20-7405-5711 or you can order online at www.hammickslegal.co.uk.

Commercial LawBradgate (3rd edition 2000) Butterworths

An Outline of the Law of AgencyMarkesinis and Munday (4th edition 1998) Butterworths In addition, in each Study Unit you will finda list of cases which should be consulted. Summaries of these can be found in the 150 LeadingCases; cases marked with an * are referred to in the Textbook. If you have access to the Internetyou may wish to take advantage of the legal materials available via this source. See your AwardGuide for details.

For those students who have never studied the law, certain terminology used may be difficult tounderstand at first. As you progress through the course, you will learn a range of new words andphrases that are frequently used in the study of law. If you encounter any difficulties with the termi-nology used, however, you will find it useful to refer to a legal dictionary, which will explain themeaning of legal words and phrases in plain English. Mozley and Whitley’s Law Dictionary (12th

edition 2001) by Butterworths is very helpful, and can be purchased through Hammicks LegalBookshops.

Study Unit 1 Suggested minimum study hours: 10

Topic

Creation of Agency and Authority

Introduction

An agent is someone who acts for another (the principal) in the makingof contracts or other transactions with third parties. Whether or not anagent can bind the principal depends on the agent’s authority. Thisauthority depends on how the agency was created. In this Unit we lookat the methods of creation of an agency and the powers the agent thusacquires.

Objectives

a To analyse the scope of an agent’s authority by examining the way theagency was created.b To analyse the scope of implied actual authority.c To discuss the prerequisites for apparent authority.d To consider the problem of usual authority.e To discuss the condition for and effect of ratification.

Essential Reading

These titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 24 and 25Commercial Law 150 Leading Cases – (See listed cases)

General Reading

These titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)An Outline of the Law of Agency, Markesinis and Munday – RelevantChapter(s)

Case law and statutes

ACTUAL AUTHORITY

i Express* European Asian Bank AG v Punjab and Sind Bank (NZ) [1983] 2 All ER 508* Midland Bank v Reckitt [1933] AC 1ii Implied* Sorrell v Finch [1976] 2 All ER 371

APPARENT AUTHORITY

Armagas v Mundogas, The Ocean Frost [1986] 2 All ER 385; [1986] 2 WLR 1063* Attorney-General for Ceylon v Silva [1953] AC 461* Farquharson Bros v King & Co Ltd [1902] AC 325Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

USUAL AUTHORITY

i As an explanation of the extent of other types of authorityArmagas v Mundogas, The Ocean Frost (above)Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711ii As a separate head of authority* Daun v Simmins (1879) 41 LT 783Watteau v Fenwick [1893] 1 QB 346AGENCY BY OPERATION OF LAW* Great Northern Railway v Swaffield (1874) LR 9 Ex 132* Sachs v Miklos [1948] 2 KB 23

RATIFICATION

* Bolton Partners v Lambert (1889) 41 Ch D 215* Brook v Hook (1871) LR 6 Ex 89* Forman & Co Pty Ltd v The Liddesdale (Owners) [1900] AC 190Keighley, Maxsted & Co v Durant [1901] AC 240* Kidderminster Corporation v Hardwicke (1873) LR 9 Exch 13* Watson v Swann (1862) 11 CB BS 756The Commercial Agents (Council Directive) Regulations 1993 (SI93/3053)The Commercial Agents (Council Directive) (Amendment) Regulations 1993 (SI 93/3173)

Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.

Self-Study Questions

1 What is the test for the extent of implied actual authority?2 What is the relationship between apparent authority and estoppel?3 Explain Watteau v Fenwick.4 What is the effect of ratification?5 When is ratification necessary?

Sample Questions

1 ‘If an agent enters a contract without authority the principal can ratify

the unauthorised act. Between this unauthorised act and theratification, however, the third party is in a difficult position. He doesnot have a contract with the principal and yet cannot escape liability.He is in a kind of legal “no man’s land”.’

Describe the requirements for ratification and explain why thethird party in this situation is in this ‘no-man’s land’.

(Wolverhampton LLB by Distance Learning, May 1999, Question 2.)

2 ‘Usual authority, as shown in cases such as Watteau v Fenwick, ismerely a form of apparent or ostensible authority.’Discuss.

(Wolverhampton LLB by Distance Learning, May 2001, Question 3.)

Study Unit 2 Suggested minimum study hours: 7

Topic

Rights and Duties of Agents

Introduction

Agents have the right to be paid and indemnified and, where possible, can exercise a lien overthe principal’s property until this happens. The agent also owes certain duties to the principal.Many of these arise because the agency relationship is personal and is one of the utmost goodfaith, thus requiring the agent always to act in the principal’s interests.

Objectives

a To analyse the agent’s entitlement to remuneration.b To consider the agent’s indemnity and lien.c To apply the fiduciary nature of agency to factual situations.d To contrast the level of skill required of contractual and gratuitous agents.e To discuss the extent to which delegation is permitted.

Essential Reading

These titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 28, 29 and 30Commercial Law 150 Leading Cases – (See listed cases)

General Reading

These titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)An Outline of the Law of Agency, Markesinis and Munday – Relevant Chapter(s)

Case law

AGENT’S REMUNERATION

Alpha Trading Ltd v Dunnshaw-Patten Ltd [1981] 1 All ER 482; [1981] QB 290Luxor (Eastbourne) Ltd v Cooper [1941] AC 108

AGENT’S INDEMNITY

* Anglo Overseas Transport Ltd v Titan Industrial Corporation (UK) Ltd [1959] 2 Lloyd’s Rep 152

AGENT’S LIEN

* Rolls Razor Ltd v Cox [1967] 1 All ER 397

PERFORMANCE: AGENT’S DUTIES

Chaudhry v Prabhakar [1988] 3 All ER 718* Christoforides v Terry [1924] AC 566* Turpin v Bilton (1843) 5 Man & G 455

CONFLICT OF INTEREST

Attorney-General for Hong Kong v Reid [1994] 1 All ER 1; [1994] 1 AC 324 (PC)* Boardman v Phipps [1966] 3 All ER 721; [1967] 2 AC 46* De Bussche v Alt (1878) 8 Ch D 286Harrods Ltd v Lemon [1931] 2 KB 517Hippisley v Knee Bros [1905] 1 KB 1Kelly v Cooper [1992] 3 WLR 936; [1993] AC 205 (PC)* Logicrose v Southend United Football Club [1988] 1 WLR 1256* Mahesan v Malaysia Government Officers’ Co-Operative HousingSociety Ltd [1979] AC 374

DELEGATION OF AGENT’S DUTIES

* McCann (John) & Co v Pow [1974] 1 WLR 1634

AGENT’S DUTY TO ACCOUNT

Arab Monetary Fund v Hashim [1993] 1 Lloyd’s Rep 543

DUE CARE AND SKILL OF AGENT

McCullagh v Lane Fox and Partners Ltd (1995) The Times 22 December (CA)Merrett, Gooda Walker and Feltrim Cases [1994] 2 Lloyd’s Rep 468 (HL)

Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.

Self-Study Questions

1 Does the position of agent carry with it a right to remuneration?2 What is the difference between a particular lien and a general lien?3 What degree of diligence must be observed by an agent?4 To what extent may an agent delegate his authority?5 What is the distinction between a bribe and a secret profit?

Sample Questions

1 Prem appointed Arran his agent to sell two of Prem’s cars for not lessthan £9,000 each. Although Arran knew that Tim was looking for a carsimilar to one of Prem’s, he pretended to Prem that he could not find apurchaser for the vehicle but instead offered to buy it himself for£9,000. Prem agreed and sold the car to Arran. Arran then sold it toTim for £12,000.

Arran sold the second car to Sam for £10,000 after Sam hadpersuaded him to do so by paying for Arran to go for a week’s holidayin Europe. Prem has now discovered the nature of both thesetransactions.

Advise Prem of his rights, if any, against Arran, Tim and Sam.

(Wolverhampton LLB by Distance Learning, September 2001,Question 3.)

2 Distinguish between the decisions in Luxor (Eastbourne) Ltd vCooper and Alpha Trading Ltd v Dunnshaw-Patten Ltd.

(Wolverhampton LLB by Distance Learning Question.)

Study Unit 3 Suggested minimum study hours: 7

Topic

Contractual Liability to Third Party and Tortious Liability

Introduction

Generally it is irrelevant to the parties’ rights, duties and liabilities whether or not the agent dis-closes that he is acting in this capacity. There are, however, exceptions to this rule. In this Unit weexamine these exceptions. We also look at the circumstances in which the agent will be personallyliable on any transactions undertaken.

Objectives

a To consider when an agent may be personally liable even though he/she is acting for a dis-closed principal.b To analyse the circumstances in which an undisclosed principal may not be able to claim rightsunder the contract.c To explain the circumstances in which an agent will be liable in breach of the implied warranty ofauthority.d To apply the tortious liability of the principal for the acts of agents.e To consider the protection of agents by exemption clauses conferring an immunity on the princi-pal.

Essential Reading

These titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 27, 28, 29 and 30Commercial Law 150 Leading Cases – (See listed cases)

General Reading

These titles have not been supplied and are not essential reading, but you may wish to refer tothem to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)An Outline of the Law of Agency, Markesinis and Munday – Relevant Chapter(s)

Case law

DISCLOSED PRINCIPAL

* Santa Carina, The [1977] 1 Lloyd’s Rep 478* Swan, The [1968] 1 Lloyd’s Rep 5* Teheran-Europe v S T Belton Tractors Ltd [1968] 2 QB 545

UNDISCLOSED PRINCIPAL

Boyter v Thomson [1995] 3 WLR 36; [1995] 3 All ER 135; [1995] 2 AC 628 (HL)Dyster v Randall & Sons [1926] Ch 932* Fred Drughorn Ltd v Rederiaktiebolaget Transatlantic [1919] AC 203* Greer v Downs Supply Co [1927] 2 KB 28* Humble v Hunter (1842) 12 QB 310Keighley, Maxsted & Co v Durant [1901] AC 240

Said v Butt [1920] 3 KB 497

IMPLIED WARRANTY OF AUTHORITY

* Collen v Wright (1857) 8 E & B 647* Yonge v Toynbee [1910] 1 KB 215

THIRD PARTY’S RIGHT TO ELECT

Clarkson, Booker Ltd v Andjel [1964] 3 All ER 260; [1964] 2 QB 775

TORTIOUS LIABILITY

Lloyd v Grace, Smith & Co [1912] AC 716New Zealand Shipping Co Ltd v Satterthwaite (AM) & Co Ltd [1974] 1 All ER 1015; [1974] 2 WLR865* PCW Syndicates v PCW Reinsurers (1995) The Times 10 October (CA)Scruttons Ltd v Midland Silicones Ltd [1962] 1 All ER 1; [1962] 2 WLR

Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.

Self-Study Questions

1 What is the difference between acting for an unnamed principal and for an undisclosed principal?2 Can an agent be personally liable where he discloses the existence of the principal but does notname him?3 What rights does the third party have if he discovers that the person he contracted with was anagent?4 Distinguish Said v Butt and Dyster v Randall.5 Can the injured party sue both principal and agent?

Sample Questions

1 ‘Despite the exceptions, the general rule that there is no distinction between the rights, dutiesand liabilities of disclosed and undisclosed principals is still extremely important.’

Discuss.

(Wolverhampton LLB by Distance Learning, January 2001, Question 4.)

2 Without disclosing that she was acting as Paul’s agent, Ann sold Tan a consignment of Paul’sgoods. Tan had previously bought goods from Paul and, finding them unsatisfactory, had said thathe would never deal with Paul again. Furthermore, Ann owed Tan money from another, unrelated,transaction and Tan had intended to set-off this debt against the price of the goods. Tan has nowdiscovered that Ann was acting as Paul’s agent and does not wish to be bound by the contract.

Advise Tan of his rights and liabilities.

(Wolverhampton LLB by Distance Learning, May 2001, Question 4.)

Study Unit 4 Suggested minimum study hours: 7

Topic

Termination of Agency

Introduction

There are a number of ways in which an agency can be ended. In this Unit we examine theseways and look at the effects of termination on the parties’ rights.

Objective

To discuss the rules of termination and the concept of irrevocable agency.

Essential Reading

These titles have been supplied as part of your study materials.Commercial Law Textbook – Chapter 31Commercial Law 150 Leading Cases – (See listed cases)

General Reading

These titles have not been supplied and are not essential reading, but you may wish to refer tothem to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)An Outline of the Law of Agency, Markesinis and Munday – Relevant Chapter(s)

Case law and statutes

* Blades v Free (1829) 9 B & C 167Drew v Nunn (1879) 4 QBD 661* Sears Investment Trust Ltd v Lewis’s Group Ltd [1992] TLR 459* Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion MarineInsurance Underwriting Agency Ltd and Another [1995] 2 WLR 49;[1995] 3 All ER 21125Powers of Attorney Act 1971: s4Enduring Powers of Attorney Act 1985Insolvency Act 1986: Part IX (incorporating s45 Bankruptcy Act 1914)Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.Self-Study Questions1 When may the principal withdraw the agent’s authority?2 What remedy is open to the agent if his agency is terminated in breachof a contractual obligation to keep it open?3 What remedy is open to a third party who has contracted with theagent after termination of the agency?4 When does agency become irrevocable?5 What is the effect of the principal’s death?Sample Questions1 ‘The mere fact that an agent has been dismissed or has resigned doesnot necessarily end the agent’s power to bind the former principal.’Discuss.(Wolverhampton LLB by Distance Learning Question.)2 ‘Not all agencies can be ended unilaterally.’

Discuss.(Wolverhampton LLB by Distance Learning Question.)Commercial Law: Consumer Credit and Agency26

Study Unit 5 Suggested minimum study hours: 7TopicConsumer Credit: Essential TerminologyIntroductionThe Consumer Credit Act 1974 (CCA 1974) adopted a new approach tocredit contracts. It introduced a number of categories into which allsuch contracts can be placed. In this Unit we look at those categoriesand the meaning of the terminology adopted by the Act.Objectivesa To appreciate the differenct types of agreement.b To learn the basic vocabulary of the Act.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapter 17Commercial Law 150 Leading Cases – (See listed cases)Note: it is impossible to emphasise too strongly that careful study ofall pertinent provisions of the Consumer Credit Act 1974 is imperativeat all stages of this part of the course. For this Unit, especially ss8,10–13 and 189(1) are relevant.General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)27Case law and statuteTYPES OF AGREEMENTi Hire purchase agreementHelby v Matthews [1895] AC 471CCA 1974: s189(1)ii Conditional saleCCA 1974: s189(1)Note: Sale of Goods Act 1979: s25(2)iii Credit saleCCA 1974: s189(1)iv Financing loanBASIC VOCABULARYNote: see generally CCA 1974: s188 and Sch 2i Regulated agreement* Dimond v Lovell [2000] 2 WLR 1121 (HL)* Ketley v Gilbert (2001) The Times 17 January (CA)* Majeed v The Incentive Group [1999] CLY 2465CCA 1974: s8Note: individual: s189(1)Exempt agreement: s16 and CC (Exempt Agreements) (No 2) Order1985 and CC (Exempt Agreements) (Amendment) Order 1999ii CreditCCA 1974: s9iii ‘Functional categorisation’Fixed-sum/running-account: CCA 1974: s10Restricted/unrestricted-use: CCA 1974: s11Debtor-creditor-supplier: CCA 1974: s12Debtor-creditor: CCA 1974: s13iv Small agreementsCCA 1974: s17v Non-commercial agreementsCCA 1974: s189(1)SANCTIONS FOR BREACH OF THE ACTCCA 1974: ss167(1), 170(1) and Sch 1CONTRACTING OUT

CCA 1974: s173(1)Also note CCA 1974: s173(3)Commercial Law: Consumer Credit and Agency28GENERALCCA 1974: ss10–13Cases marked with an * can be found in the Appendix at the end of theStudy Units; all other cases can be found in your 150 Leading Cases.Self-Study Questions1 What is a regulated consumer credit agreement?2 How do you calculate the total charge for credit?3 What is the difference between debtor-creditor and debtor-creditorsupplieragreements?4 How does the Act distinguish between restricted use and nonrestricted use credit?5 Categorise the use of credit cards. Is such use DCS or DC? Fixed sumor running account credit?Sample Questions1 ‘The distinction between debtor–creditor agreements and between twoand three party debtor–creditor–supplier agreements is vital to thedebtor’s rights.’Explain the distinction between these types of agreement andanalyse why they are so important.(Wolverhampton LLB by Distance Learning, January 2001,Question 3.)2 Explain the implications of the categorisation of credit agreements inthe Consumer Credit Act 1974.(Wolverhampton LLB by Distance Learning Question.)Study Unit 529

Study Unit 6 Suggested minimum study hours: 10TopicThe Meaning of Multiple Agreements and Linked Transactions.Protecting the Debtor Before the Contract is Made.IntroductionIn this Unit we examine further definitions used in the 1974 Act andlook at the ways the legislation protects the debtor even before thecontract is made.Objectivesa To consider the purpose, details and merits of s18.b To analyse linked transactions and the total charge for credit.c To examine the administrative controls contained within the Act.d To discuss in what way the Act regulates the creditor’s conduct beforethe conclusion of any contract.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapter 17Commercial Law 150 Leading Cases – (See listed cases)General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)Case law and statutesTOTAL CHARGE FOR CREDITCCA 1974: s9(3) and (4)CCA 1974: s20CC (Total Charge for Credit) Regulations 198030MULTIPLE AGREEMENTS* National Westminster Bank plc v Story [1999] Lloyd’s Rep Bank 261 (CA)CCA 1974: s18LINKED TRANSACTIONSCCA 1974: s19

Note: relative: s189(1); associate: CCA 1979: s184LICENSINGHare v Shurek (1993) The Times 23 MayCCA 1974: Part III (note in particular ss21, 22, 32, 39 and 40)PRE-CONTRACT RULESi AdvertisementsCCA 1974: ss43–47ii CanvassingCCA 1974: ss48 and 49Cases marked with an * can be found in the Appendix at the end of theStudy Units; all other cases can be found in your Textbook.Self-Study Questions1 What is the purpose behind s18?2 How many categories of linked transaction are there?3 Why is it important to know whether a certain sum is within the totalcharge for credit?4 Are compulsory vehicle insurance premiums credit or charge?5 How does the licensing system work? How effective is it?Sample Questions1 Singh, a retailer of electrical goods, had not obtained a credit broker’slicence as all his customers paid by cash. One day, however, Tom, afriend of his, asked Singh to arrange a loan with a credit company toenable Tom to buy a television from Singh. Singh introduced Tom to alicensed creditor, Kwikash, which gave Tom the loan. Tom is nowrefusing to repay the loan on the grounds that Singh was unlicensed, afact of which Kwikash was unaware.Discuss the licensing provisions in the Consumer Credit Act 1974and advise Singh and Kwikash of their position in the followingseparate situations:Study Unit 631a this was the only time Singh had made such an introduction; andb Singh had made a number of such introductions in the past.(Wolverhampton LLB by Distance Learning, January 2001,Question 2.)2 Discuss the ways in which the Consumer Credit Act 1974 protects thedebtor before the credit contract is made.(Wolverhampton LLB by Distance Learning, May 2001, Question 2.)Commercial Law: Consumer Credit and Agency32

Study Unit 7 Suggested minimum study hours: 10TopicThe Making of a Credit AgreementThis Unit covers material contained in the Learning Project.IntroductionThe 1974 Act requires all prescribed information to be put on the formbefore the debtor signs. If the formalities are not complied with theagreement is unenforceable without a court order or, in some cases, iscompletely unenforceable. In some circumstances a debtor may cancelan agreement. This is to protect debtors from high pressuresalesmanship.Objectivesa To establish how an agreement is concluded in the context of regulatedagreements.b To consider the Act’s rules as to the revocation of an offer by the debtor(withdrawal).c To discuss the formalities imposed by the Act.d To discuss the philosophy behind cancellable agreements.e To analyse the availability, process and consequences of cancellation.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapter 18Commercial Law 150 Leading Cases – (See listed cases)

General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)33Case law and statutesFORMALITIES* Dimond v Lovell [2000] 2 WLR 1121 (HL)* Wilson v First County Trust Ltd (No 2) (2001) The Times 16 May (CA)CCA 1974: ss60–63, 65, 127(3) and 180* Human Rights Act 1998: art 6 and art 1 of the First Protocol(Schedule 1 HRA)CANCELLABLE AGREEMENTSMoorgate Services Ltd v Kabir [1995] CC LR 74CCA 1974: s67IMPACT OF CANCELLABLE STATUS ON FORMALITIESCCA 1974: ss64 and 127(4)CANCELLATION PERIODCCA 1974: s68PROCEDURE AND CONSEQUENCES OF CANCELLATIONCCA 1974: ss69–73EXEMPTIONSCCA 1974: s74NON EST FACTUMUnited Dominions Trust Ltd v Western [1976] QB 513Material marked with an * can be found in the Appendix at the end ofthe Study Units or in your Textbook; all other cases can be found inyour 150 Leading Cases.Self-Study Questions1 What formalities are imposed by the CCA 1974 on a notice ofwithdrawal?2 What is the effect of non-compliance with the Act’s proceduralrequirements in relation to the documentation?3 When is an agreement cancellable?4 How is an agreement cancelled?5 What is the consequence of cancellation of a D–C agreement?Commercial Law: Consumer Credit and Agency34Sample Questions1 How is the philosophy of the CCA 1974 reflected in, and achieved by,the requirements of the Act relating to formalities?(Wolverhampton LLB by Distance Learning Question.)2 Describe the circumstances in which a debtor can cancel a creditcontract and explain the method and effects of the cancellation on therights of both the debtor and the creditor.(Wolverhampton LLB by Distance Learning, May 1999, Question 5.)Study Unit 735

Study Unit 8 Suggested minimum study hours: 15TopicLiability for Breach of Contract and Misrepresentation; MattersArising During Currency of AgreementThis Unit covers material contained in the Learning Project.IntroductionThis Unit discusses the various rights and liabilities arising out of thecredit contract. Note the importance here of the distinction betweentwo and three party D–C–S agreements.Objectivesa To understand the triangular system of liability.b To examine in particular ss56 and 75.c To determine the role of the doctrines of affirmation and acceptance inthe law of consumer credit.d To consider matters arising during the agreement.

Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 19 and 20Commercial Law 150 Leading Cases – (See listed cases)General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)36Case law and statutesLIABILITY FOR MISREPRESENTATION AND BREACH OF CONTRACTi Dealer’s liability to debtorAndrews v Hopkinson [1956] 3 WLR 732ii Creditor’s liability to debtor1 In respect of dealer’s acts and statementsBranwhite v Worcester Works Finance Ltd [1969] 1 AC 552* Porter v General Guarantee Corporation Ltd [1982] RTR 384Royscott Trust Ltd v Rogerson [1991] 3 WLR 57* United Dominions Trust Ltd v Taylor 1980 SLT 28CCA 1974: s56CCA 1974: s75Supply of Goods (Implied Terms) Act 1973: s10 (as amended by reg 13of the Sale and Supply of Goods to Consumers Regulations 2002)2 In respect of the goods* Farnworth Finance Facilities Ltd v Attryde [1970] 1 WLR 1053* Karflex Ltd v Poole [1933] 2 KB 251Shine v General Guarantee Corp Ltd [1988] 1 All ER 911* Warman v Southern Counties Car Finance Corporation Ltd [1949] 2KB 576* Yeoman Credit v Apps [1962] 2 QB 508Supply of Goods (Implied Terms) Act 1973: ss8–11 and 14(1)SGA 1979: ss11(4), 12–15, 34 and 35 (as amended by the Sale andSupply of Goods to Consumers Regulations 2002)Unfair Contract Terms Act 1977: ss6 and 3Unfair Terms in Consumer Contract Regulations 1994 (as amended1999)iii Dealer’s liability to creditorCCA 1974: s75(2)SGA 1979: s14(3) especiallyMATTERS ARISING DURING THE CURRENCY OF AGREEMENTSi Duties to give informationCCA 1974: ss77, 78 and 80ii Appropriation of paymentsCCA 1974: s81iii Variation of regulated agreementsCCA 1974: s82Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.Study Unit 837Self-Study Questions1 What are antecedent negotiations?2 Who is a negotiator?3 When will s75 apply?4 In a two party D–C–S agreement what liability is incurred by thenegotiator?5 Distinguish between the application of affirmation and acceptance.Sample QuestionDavid went into Nigel’s garage where he saw a Carrera motor car,which he agreed to buy for £12,000. Nigel said ‘it is a good little carand very reliable but you must take it as seen’. David did not havetime to test drive the car, but he did make a thorough examination ofits exterior. Since David only had £4,800 he paid that as a deposit andsigned a hire purchase form with Carefree Finance Company Ltd forthe balance payable over 36 monthly instalments of £200. The hire

purchase form had already been signed by Carefree Finance CompanyLtd. David was given a photocopy of the agreement.On the way home, David was injured when the car crashedbecause the brakes were defective.David failed to pay any instalments under the agreement andclaimed substantial damages from Nigel and Carefree FinanceCompany Ltd. Carefree Finance Company Ltd sought payment of thearrears of instalments.Advise David.(Wolverhampton LLB by Distance Learning Question.)Commercial Law: Consumer Credit and Agency38

Study Unit 9 Suggested minimum study hours: 7TopicBreach and Termination of a Credit Agreement at Common LawIntroductionTo protect themselves, creditors often insert express terms in creditcontracts to cover cases where, for example, the debtor makes a latepayment. These are often dealt with by the courts using the commonlaw doctrine of penalties.Objectivesa To determine the quantum of damages payable by a debtor at commonlaw.b To analyse the distinction between breach and termination.c To discuss the legality of minimum and accelerated payments clausesat common law.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 20 and 21Commercial Law 150 Leading Cases – (See listed cases)General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)Case lawDAMAGESFinancings Ltd v Baldock [1963] 2 QB 104; [1963] 1 All ER 443* Lombard North Central plc v Butterworth [1987] 2 WLR 7* Overstone Ltd v Shipway [1962] 1 WLR 117; [1962] 1 All ER 5239* Yeoman Credit Ltd v Waragowski [1961] 1 WLR 1124; [1961] 1 QB 54THE BREACH/TERMINATON DISTINCTION* Bridge v Campbell Discount Co Ltd [1962] AC 600* United Dominions Trust Ltd v Ennis [1968] 1 QB 54; [1968] 3 All ER145TERMINATION BY DEBTOR UNDER A CONTRACTUAL POWER* Associated Distributors v Hall [1938] 2 KB 83* Bridge v Campbell Discount Co Ltd (above)MINIMUM PAYMENT CLAUSES* Anglo-Auto Finance Co Ltd v James [1963] 1 WLR 1042* Capital Finance Co Ltd v Donati (1977) 121 SJ 270ACCELERATED PAYMENT CLAUSES* Wadham Stringer Finance Ltd v Meaney [1980] 3 All ER 789Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.Self-Study Questions1 When does Financings v Baldock apply?2 Why, according to the House of Lords, did the debtor’s conduct in Bridge vCampbell Discount amount to a breach of contract? Are you convinced?3 Is it possible to have one minimum payment clause to cover allbreaches of contract by the debtor?4 What is an accelerated payments clause?5 What is equity’s attitude to forfeiture clauses?

Sample Questions1 ‘Even though creditors attempt to avoid the strict provisions of theConsumer Credit Act by the use of express terms such as accelerationclauses and minimum payment clauses, the courts interpret these sostrictly against the creditor that they are of little use.’Discuss.(Wolverhampton LLB by Distance Learning, September 2001,Question 4.)2 Explain the relevance of the common law doctrine of penalties in thecourts’ application of express terms in credit contracts.(Wolverhampton LLB by Distance Learning Question.)Commercial Law: Consumer Credit and Agency40

Study Unit 10 Suggested minimum study hours: 10TopicThe Statutory Regime Regarding Breach and TerminationThis Unit covers material contained in the Learning Project.IntroductionIn this Unit we examine the ways in which the 1974 Act protects thedebtor at the end of the credit agreement. The Act gives the debtor anumber of rights and controls the creditor’s rights to recover the goodswhich are the subject of the contract.Objectivesa To examine the various notices that the creditor may serve.b To discuss the effect on the agreement of the death of the debtor.c To analyse the protected goods provisions.d To consider the debtor’s rights of early settlement and termination.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 20, 21 and 22Commercial Law 150 Leading Cases – (See listed cases)General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.Commercial Law, Bradgate – Relevant Chapter(s)41Case law and statutesCREDITOR’S NOTICES IN THE ABSENCE OF ANY BREACH BY DEBTORCCA 1974: ss76 and 98DEFAULT NOTICESCCA 1974: ss87–89CC (Enforcement, Default and Termination Notices) Regulations1983/1561Note: CCA 1974: s111DEATH OF THE DEBTORCCA 1974: ss86, 90(6)(infra)PROTECTED GOODSBentinck v Cromwell Engineering Co [1971] 1 QB 324Capital Finance Co Ltd v Bray [1964] 1 WLR 323* Chartered Trust plc v Pitcher (1987) The Times 13 February* Mercantile Credit Co Ltd v Cross [1965] 2 QB 205; [1965] 1 All ER 577CCA 1974: ss90–92EARLY SETTLEMENTCCA 1974: ss94–97, 167 and Schedule 1CC (Rebate on Early Settlement) Regulations 1983/1562CC (Linked Transactions) (Exemptions) Regulations 1983/1560TERMINATION BY THE DEBTORCCA 1974: ss99–100Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.Self-Study Questions1 Under s99 when may the debtor terminate?2 What is the effect on a consumer credit agreement of the death of the

debtor?3 What conditions must be satisfied before the creditor can repossess?4 When do goods become protected?5 What is meant by early settlement?Sample Questiona Sunil entered a contract to acquire a television and video recorderon hire purchase. The total HP price was £900. Under theCommercial Law: Consumer Credit and Agency42agreement, Sunil agreed to pay £50 deposit and the balance of thesum after two years in equal monthly instalments. After makingpayments totalling over £300, Sunil was made redundant andmissed paying two of the HP instalments. He is now worried whatthe HP company may do and comes to you for advice as he wantsto keep the TV and video and tells you that he should be starting anew job soon.Explain to Sunil what course of action the hire purchasecompany can take and how he should respond.b How would your answer differ if Sunil tells you that he wants toterminate the agreement and have no further liability in thefuture?(Wolverhampton LLB by Distance Learning Question.)Study Unit 1043

Study Unit 11 Suggested minimum study hours: 10TopicControl of Credit Agreements: Judicial Control of RegulatedAgreementsIntroductionIn this Unit we look at further various ways in which the 1974 Actprotects the debtor by giving the court power to extend the period forpayment and to make consequential orders varying aspects of thecontract. We also look at the law relating to credit cards, bearing inmind that, when these are used to acquire goods or services, they arethree party D–C–S agreements.Objectivesa To consider the impact of the Act on the common law relating tosecurity.b To understand the distinction between securities provided by thedebtor and those provided by third parties.c To discuss the application of s106.d To consider, briefly, the provisions concerning credit tokens.e To discuss the wide range of judicial powers.f To examine the concept of an extortionate credit bargain.Essential ReadingThese titles have been supplied as part of your study materials.Commercial Law Textbook – Chapters 22 and 23Commercial Law 150 Leading Cases – (See listed cases)General ReadingThese titles have not been supplied and are not essential reading, butyou may wish to refer to them to further your understanding.44Commercial Law, Bradgate – Relevant Chapter(s)An Outline of the Law of Agency, Markesinis and Munday – RelevantChapter(s)Case law and statuteSECURITIESCCA 1974: ss189(1), 105, 113, 106 and 111CREDIT TOKENSCharge Card Services Ltd, Re [1988] 3 All ER 702; [1988] 3 WLR 764CCA 1974: ss14, 51, 64(4), 66 and 83–85JURISDICTIONCCA 1974: s141

COURT POWERSCCA 1974: ss127–136 and 142First National Bank plc v Syed [1991] 2 All ER 250Southern & District Finance plc v Barnes [1995] TLR 225 (CA)EXTORTIONATE CREDIT BARGAINSColdunell v Gallon [1986] QB 1184Davies v Directloans Ltd [1986] 1 WLR 823CCA 1974: ss137–140Cases marked with an * can be found in your Textbook; all other casescan be found in your 150 Leading Cases.Self-Study Questions1 For what type of breach would a s65 enforcement order be granted?2 What powers does the court have if it holds an agreement to be anextortionate credit bargain?3 What factors must be taken into account by the court in decidingwhether an agreement is an extortionate credit bargain?4 What is the effect of a protection order?5 What powers does the court have under ss135 and 136?Study Unit 1145Sample Questions1 Discuss the advantages, if any, of obtaining goods or services by usinga credit card as opposed to obtaining them by means of a loan under adebtor-creditor agreement.(Wolverhampton LLB by Distance Learning, May 2001, Question 5.)2 Donaldson MR in Wills v Wood described extortionate credit bargainsas denoting at least a substantial imbalance in bargaining powerbetween the parties of which the creditor has taken advantage.Describe the meaning of an extortionate credit bargain and discuss theimplications of Donaldson’s judgment.(Wolverhampton LLB by Distance Learning, September 2001,Question 5.)Commercial Law: Consumer Credit and Agency46

Appendix to Study UnitsNational Westminster Bank v Story [1999] Lloyd’s RepBank 261 Court of AppealFactsThe bank agreed to lend the defendants a total of £35,000 on threecredit facilities:• an overdraft to S;• two joint loans to both defendants. These loans were of £5,000 and£15,000 respectively;• by subsequent agreements, these loans were increased to a total of£456,012.The question before the Court was whether the joint loans were, orcould be, treated as being provided under separate agreements, eachfor credit not exceeding £15,000 (the previous level for a regulatedagreement) and thus be covered by the Consumer Credit Act (CCA) orwhether it was a single loan for £35,000, in which case the CCA wouldnot apply. If the loans were treated as being separate transactions andthus regulated, each agreement and any agreement varying it (that isthe increase to £456,012) would be regulated. In that case as theagreement did not comply with CCA formalities, it would beunenforcable.The defendants argued that each loan facility was of a distinct andseparate nature:• the overdraft to S was for running account credit under s10 CCA;• the joint loan of £5,000 was to re-finance an existing borrowing andwas therefore a restricted-use-credit (R-U-C) agreement unders11(1)(c) CCA;• the joint loan of £15,000 was unrestricted-use-credit (U-U-C) unders11(2) CCA. The defendants’ argument was that, as there were threeseparate facilities, there had been an agreement in respect of each of

these facilities. Each constituted a separate category of agreement andtherefore was regulated under the Act.47HeldThe Court of Appeal held that there was only the one agreement for£35,000. The object of the transaction had been to provide overallcredit of £35,000. This credit was granted for various purposes, partlyto replace existing borrowing and partly to provide new money, but theoverall borrowing had been negotiated, agreed and documented as onetransaction. As this one transaction was for £35,000 it was outside theCCA and was unregulated and therefore the bank could recover all themoney owing.CommentStory argued that the £5,000 loan was R-U-C as it was to re-financeexisting debtedness incurred for home improvements and was treatedseparately as it was eligible for tax relief. This argument was rejectedby the Court of Appeal as the agreement did not require Story to usethe £5,000 for this purpose and for an agreement to come within the RU-C category, it has to contain a term, express or implied, that theloan must be used for the purposes in question.However, the Court of Appeal did not look at the fact that Storyand his partner owed the bank £12,000 and this amount was to be refinancedin some way from the new facility totalling £35,000. In otherwords, the bank was not lending £35,000 on top of the existing debt.Thus, prima facie, ‘part’ of the facility came within different‘categories’. There was an R-U-C agreement for re-financing existingindebtedness and a U-U-C agreement for the remainder of the loan.Thus, if the £12,000 were to be re-financed from the £20,000 loan it isarguable that the arrangement could be treated as two loans, both ofwhich would be regulated. The Court of Appeal did not consider this.In relation to the meaning of ‘category’, Auld L J (obiter) said thatthis word must be construed as meaning disparate categories, eg R-UCand U-U-C are separate disparate categories. Unless the phrase wasconstrued narrowly all agreements would be multiple as even thesimplest credit agreement can fall into several broad categories. Forexample, a simple loan can be categorised as:• a personal credit agreement;• a consumer credit agreement;• a regulated credit agreement, and so on.With regard to the meaning of the word ‘part’ a broader interpretationcould be used, so that the only agreements which would not be in partsare those where the different uses are so interwoven that they couldCommercial Law: Consumer Credit and Agency48not be separated without affecting the nature of the agreement as awhole (eg credit cards).It is interesting to note that the first time that s18 (which isdesigned to protect debtors by stopping creditors using avoidancedevices) was used was by a debtor trying to avoid liability under aloan.Dimond v Lovell [2000] 2 WLR 1121 House of LordsFactsThe defendant crashed into the back of the claimant’s car. Thedefendant had no defence to a claim for negligence. The claimant madean agreement with First Automotive Ltd (a company which specialisesin hiring replacement vehicles to individuals whose cars, through nofault of their own, had been damaged by another driver’s negligenceand were off the road while being repaired). The agreement was that:• while the client’s damaged vehicle was being repaired, FirstAutomotive would provide a suitable alternative vehicle;• First Automotive would sue on the claimant’s behalf to recoverdamages from the defendant;• the claimant would not have to pay First Automotive any money untilthe claim against the defendant was settled. This claim would includeFirst Automotive’s charges and First Automotive would retain theircharges out of these damages;

• the maximum rental period would not exceed 28 days. The agreement,however, did not specify the cost of hiring the replacement car, thedelivery charge or the cost of collision damage waiver.The defendant’s insurance company paid the plaintiff the cost of therepairs to her car but refused to pay First Automotive’s charges of£346.63. The claimant (represented by First Automotive) sued.HeldThe House of Lords had to consider a number of issues.1 Was the agreement between the claimant and First Automotive aregulated agreement within the Consumer Credit Act? (Credit beingthe deferral of payment, which, in the absence of any agreement,would be immediately payable.)The House of Lords held that this was a regulated creditagreement because the claimant was given financial accommodation.The agreement was not exempt under s3(1)(a)(i) Consumer CreditAppendix to Study Units49(Exempt Agreement) Regulations 1989. Section 3(1)(a)(i) givesexemption from the Consumer Credit Act for fixed sum creditcontracts which provide for repayment in four or fewer instalments‘within a period not exceeding twelve months beginning with the dateof the agreement’. Clause 5 of the contract between the plaintiff andFirst Automotive provided that the claimant would be allowed ‘…credit on the hire charge until such time as a claim for damages hadbeen concluded …’. This period could be longer than twelve monthsbeginning with the date of the agreement. It depended on when theclaim for damages was settled. Therefore the agreement was notexempt. It was a regulated agreement under the CCA.2 Was the agreement enforceable?The agreement did not contain the prescribed terms (such as thehire charges and other costs) and was therefore unenforceable withouta court order. However, by s127(3) the Court has no power to make anenforcement order if the requirement of signature is not complied withunless some other document, containing all the basic terms, has beensigned by the debtor/hirer. In this case no such form had been signed.Thus the agreement was totally unforceable. (Now see Wilson v TheFirst County Trust Ltd at page 54.)3 Could an argument of unjust enrichment be maintained?It was argued by First Automotive that, as Dimond would not haveto pay for the car, she would have had free hire and therefore wouldhave been unjustly enriched at First Automotive’s expense. There wastherefore the potential that she might be sued by First Automotive andthis potential liability should be treated as a loss. The House held thatFirst Automotive could not rely on unjust enrichment, as this would beinconsistent with the purpose of s61(1) of the CCA. Parliamentcontemplated that, if a consumer credit agreement was improperlyexecuted then, subject to the enforcement powers of the court, thedebtor should not have to pay. In other words, Parliamentcontemplated that the debtor might be enriched and the court wouldnot reverse this by imposing a remedy at common law. The policy ofthe 1974 Act is to penalise creditors for not entering a properlyexecuted agreement and the fact that the debtor would benefit fromthis was within the Act’s contemplation.Thus First Automotive, representing Dimond, lost their action.CommentA number of points arise from the judgment in Dimond v Lovell, asexplained below.1 Neither of the parties knew they had created a personal consumerCommercial Law: Consumer Credit and Agency50credit agreement for fixed sum credit. It was a D-C-S agreement for RU-C. Furthermore, had it been capable of lasting for more than threemonths, it would also have been a regulated consumer hire agreement.The Court of Appeal in this case said that a consumer creditagreement is not restricted to cases where the debtor acquires goods orservices etc on credit or re-finances existing debtedness. Any

agreement where payment is deferred will be a credit agreement.2 If an agreement is both a regulated consumer credit and consumerhire agreement, it is arguable that the same agreement would requirethe owner to comply with the formality requirements for both types ofagreements, unless the Director General waived this need.3 The only way in which First Automotive would have proved that theiragreement with Dimond was enforceable would have been to show thatit was an exempt agreement under art 3(1)(a)(i) of the ConsumerCredit (Exempt Agreements) Order 1989. To do this they would havehad to show that the total number of payments made by Dimondwould not exceed four and that the repayment would have had to havebeen made ‘within a period not exceeding twelve months beginningwith the date of the agreement’. This they could not do.4 The decision in Dimond’s case meant that the business of firms whichhire cars to people whose own vehicle had been damaged by another’snegligence and who claimed the cost of hire from the negligent party’sinsurers, was effectively destroyed. Many of these companies haveattempted to show that their agreements were in fact exempt from theworkings of the CCA by virtue of art 3 of the Consumer Credit(Exempt Agreements) Order 1989. There have therefore been anumber of cases in which the court has been called upon to interpretart 3 of the Order. These are dealt with below.Majeed v The Incentive Group [1999] CLY 2465FactsThere was a car hire agreement similar to that in Dimond. The hirerwas to pay the hire charges either on completion of the relevant courtproceedings, or on failure to co-operate in the conduct of the courtproceedings, and, in any event, no later than 365 days from the date ofthe agreement. The agreement, however, did not specify the nature ofthe payment itself, ie whether payment had to be made in four orfewer instalments, nor did it contain the information required by theCCA to make it an enforceable credit agreement. The hire companyargued that the agreement came within art 3(1)(a)(i) and wastherefore exempt from the workings of the CCA. This argument failed.Appendix to Study Units51HeldThe court held that the words of the article are not capable ofincluding an implied condition for payment in four instalments. It saidthat ‘the agreement must set out in express terms that the paymentsare to be made in four instalments. The agreement must set out thenumber of instalments in an express manner’. In other words, themere fact that it is possible to pay off the debt in four instalments isnot sufficient to bring the agreement within the scope of art 3.Ketley v Gilbert (2001) The Times 17 January Courtof AppealFactsThe facts again were similar to those in Dimond. The hirer, followingan accident, hired a car from the hire company for a period of 17 days.Clause 5(1) of the agreement required the hirer to repay the chargesby a single payment when the claim against the defendant wassatisfied, or ‘on the expiry of 12 months starting with the date of thisagreement’, whichever was the earlier.The issue was whether this was a regulated agreement. If it was,the formalities did not comply with the CCA’s requirements, so thehire company would not be able to recover its charges from theclaimant and therefore could not rely on its right of subrogation torecover these costs from the defendant or her insurers. The hirecompany, however, argued that the agreement was exempt by virtue ofart (3)(1)(a)(i) of the Consumer Credit (Exempt Agreements) Order1989.HeldThe Court of Appeal held that the agreement was not an exemptagreement. Article 3(1) exempts agreements where payment is to bemade ‘within’ 12 months. In other words, payment has to be made

before the expiry of the period. Clause 5 of the agreement, however,allowed payment to be made on the ‘expiry’ of the period. In otherwords it permitted the final payment to be made after the period of 12months from the making of the agreement.The agreement, therefore, was not exempt. It was regulated and,as it did not comply with the CCA requirements relating to formalities,it was unenforceable. Thus the claimant had no liability to the car hirecompany and therefore the company could not be subrogated to hisrights against the defendant and her insurers.Commercial Law: Consumer Credit and Agency52CommentIt would therefore appear that, for the application of art 3(1)(a)(i) ofthe Consumer Credit (Exempt Agreements) Order 1989 the creditormust expressly state that full payment is to be made before the end of12 months beginning on the date of the agreement and that thesepayments must be made in four or fewer instalments. Anything lessprecise than this would mean that the agreement is not exempt underthis article.Consumer Credit (Exempt Agreements)(Amendment) Order 1999Previously, by s16 of the CCA, where a loan was granted on aninterest rate of less than 13 per cent or 1 per cent above the highestbase rate of London and Scottish Clearing Banks this agreement wasexempt from the workings of the CCA. The 1999 Order, however,repealed that category of exempt agreement. It replaced it withexemption for Debtor/Creditor agreements where the following applies.• The interest is no more than 1 per cent above the base rate of listedbanks (these are the major banks specified in the regulations).• The loans are not ‘offered to the public generally’.• The loans are offered only to a particular class or classes ofindividuals.The regulations derive from art 2.2 of the EC Consumer CreditDirective 87/102. It would appear, therefore, that the category ofagreement which is exempt under the Order is a low cost loan offeredto a group of people who share some characteristics, such as employeesof a common employer (eg the employees of a bank or building societyor members of a club).For the exemption to apply the agreement must provide thatinterest is the only item included in the total charge for credit and,although it is variable, interest cannot at any time exceed 1 per centabove the highest of any base rates of the listed banks. Thus there canbe no exemption for the following.• Loans at a fixed rate of interest. However low the rate of interest is, itcannot be said at the outset of the agreement that the rate ‘at anytime’ will not exceed the specified (variable) rate.• An agreement providing for an increase in interest rate on theoccurrence of a certain event. For example, if a low cost loan isprovided by an employer to an employee but, under the terms of theagreement, the interest rate will increase if the employment ends.Appendix to Study Units53• Loans where the charges other than interest are to be included in thetotal charge for credit. Thus, for example, if an agreement imposescompulsory insurance charges on the debtor and these charges areincluded in the total charge for credit the agreement will not beexempt.Human Rights Act 1998 (HRA)The Human Rights Act 1998 incorporates:• the Convention for the Protection of Human Rights and FundamentalFreedoms by the Council of Europe in 1950;• the Protocols to the Convention (1952).Article 6(1) of the Convention‘In the determination of their civil rights and obligations … everyone isentitled to a fair and public hearing within a reasonable time by an

independent and impartial tribunal established in law.’First Protocol to the Convention (Schedule 1 HRA)Article 1 guarantees the right to the peaceful enjoyment of one’spossessions and the right not to be deprived of these possessionsexcept in the public interest.The relevance of the Human Rights Act to the Consumer CreditAct was considered in the case below.Wilson v First County Trust Ltd (No 2) (2001) The Times16 May Court of AppealFactsW obtained a loan from FCT, pawn brokers. The loan was for £5,000and was to be repaid over six months at an APR of 94.78 per cent. FCTalso charged a ‘document fee’ of £250 and, with the agreement of W,this £250 was added to the loan. The agreement therefore stated thatthe credit advance was £5,250 (rather than the actual figure of£5,000). W signed the agreement and pawned her BMW car to FCT assecurity for the loan.W did not repay the loan to FCT and she herself issuedproceedings against FCT claiming that by virtue of s127(3) of the CCA,the agreement was unforceable against her.The basis of W’s argument was that the CCA requires regulatedcredit agreements to comply with the formalities in the ConsumerCommercial Law: Consumer Credit and Agency54Credit (Agreements) Regulations 1983. If the agreements do notcomply with these formalities, s65 of the CCA provides that they canonly be enforced by a court order. In deciding whether or not to grantsuch an order, the court has the discretion to take into account thecreditor’s blameworthiness and any prejudice caused to the debtor byvirtue of the failure to comply with the formalities.However, by s127(3) CCA the court shall not make an enforcementorder under s65(1) if the document was not signed or, if signed, did notcontain the minimum basic terms of the agreement. These minimumbasic terms are set out in Schedule 6 of the Consumer Credit(Agreements) Regulations 1983 and include ‘a term stating theamount of the credit’. The £250 ‘document fee’ was an item entered aspart of the ‘total charge for credit’ and so it should not have beenincluded as part of the credit advanced. Thus, as the agreementwrongly stated that the credit was £5,250 the agreement was notproperly executed and, by s127(3), the Court had no power to make anenforcement order against the debtor. Thus, even though W had notbeen prejudiced at all by the error, the loan (and the security givenunder it) was wholly unenforceable. In other words, W did not have torepay the loan and the security she had given (her BMW car) could notbe enforced.HeldThe Court of Appeal held that it was arguable that s127(3) infringesart 6(1) of the HRA and/or art 1 of the First Protocol. In relation to art6, it was arguable that the absolute prohibition on enforcement incases such as this is a disproportionate restriction on the rights of thelender to have the enforceability of the loan determined by the court.This right exists in all other cases where the agreement is improperlyexecuted except where the improper execution occurs by virtue of thelack of the minimum basic terms. The complete inflexibility of s127(3)if the defect fell into the specified category violates art 6.It was also arguable that there was a violation of art 1 of theProtocol. FCT lent money which had been in its possession to W onterms which, it thought, would entitle FCT to recover the moneywithin six months. Section 127 (3) deprived FCT of that possession.The Court of Appeal pointed out that it is unlawful for a court toact in a way which is incompatible with a Convention right unless theprovision of the primary legislation which so offended against s6(1)cannot be read, or given effect to, in a way which is compatible withConvention rights, ie the court must not interpret an Act in a waywhich is incompatible with the Convention unless it has no otherchoice but to do so. In this case, the Court of Appeal held, it was not

possible to interpret s127(3) in a way which was compatible with theAppendix to Study Units55rights granted under the HRA. In these circumstances, the Court hadto make a declaration of that incompatibility both to protect itself andto enable remedial action to be taken by the Secretary of State.Thus, although s127(3) was incompatible with the Conventionrights, in that it excluded any judicial consideration of a case withoutregard to prejudice or culpability and, in fact, adopted a purelymechanistic approach, the Court had to apply the law as clearly statedin this section.In other words, the Court of Appeal had to apply s127(3) as it waswritten. This meant that W did not have to repay the loan nor did shehave to hand over her BMW car which she had used to secure the loan.In effect, she kept both the money and her BMW. However, the Courtof Appeal did make a declaration of incompatibility stating thats127(3) was incompatible with the rights granted under the HRA.CommentBy s4(6) HRA, a declaration of incompatibility does not affect thecontinuing validity of the condemned provision. Furthermore, there isno compulsion on the Government to act to change the law and removethe incompatibility. The Government has the power to do this but isnot required to do so. However, following the declaration ofincompatibility and the reasoning in Wilson v First County Trust,there is a strong possibility that s127(3) CCA will be amended so thatin all cases of improper execution, regardless of whether the minimumbasic terms are included or not, the court will have the power toenforce the agreement having regard to the degree of the creditor’sculpability and the harm suffered by the debtor as the result of theprocedural irregularity.The Wilson case also has implications for Dimond v Lovell (seepage 49). In the Dimond case, the House of Lords held that the hireagreement was unforceable by First Automotive against Dimondbecause the agreement lacked the some of the minimum basic termsand therefore s127(3) applied. The question mark now hanging overs127(3) will affect the Dimond decision.The decision in the Wilson case could also have implications for thelaw relating to cancellation of regulated agreements. By s127(4) CCAif notice of the right to cancel a cancellable agreement has not beserved then the court ‘shall not’ grant an enforcement order. Again thecourt has no power to enforce such an agreement regardless of theculpability of the creditor and the harm, if any, caused to the debtor bythis procedural irregularity. Section 127(4) adopts the samemechanistic approach as adopted by s127(3). Under the law as itstands, if a cancellable D-C agreement does not contain notice of theright to cancel the creditor will be unable to enforce the loan or anyCommercial Law: Consumer Credit and Agency56interest charged under it. Because of s127(4) the debtor will be able tokeep the money and would not have to repay either that or anyinterest. As with s127(3) this may be an infringement of the creditor’srights as stated in art 6 of the Convention, incorporated by the HRA.The decision could also have implications in relation to protectedgoods (s91 CCA). Recovery of protected goods without a court orderends the agreement and requires the creditor to repay the debtor allsums the debtor has paid under that agreement. The creditor has nopower to ask the court to consider the case and to look at the harm (orlack of it) suffered by the debtor because of this seizure of the goodswithout a court order. Again, the section requires the courts to adapt apurely mechanistic approach without considering the rights or wrongsin that particular case. Thus s91 could also be considered under theHRA.Appendix to Study Units57

Learning Project Suggested minimum study hours: 50

In common with all the modules that form part of the LLB by DistanceLearning programme this module involves a Learning Project.Undergraduate students at the University of Wolverhampton arerequired to demonstrate that they are capable of independent researchbefore they can be recommended for the award of a degree. Fordistance learning students this is assessed by reference to theLearning Project you undertake in respect of each module.It requires you to pay specific attention to a list of defined reading.Commonly covering a range of cases and statutes you are required todemonstrate your mastery of the area(s) of law concerned byundertaking a compulsory question as part of the end of moduleexamination. This will commonly take the form of an extended legalproblem and require you to demonstrate not only that you understandthe areas of law concerned but are able to apply them clearly andwithout error. It could also take the form of an essay questionrequiring you to demonstrate an ability to comment on linked areas oflaw. Particular attention will be paid to the accuracy with which youcite the law and the arguments of those responsible for itsdevelopment. You will also be expected to demonstrate that youunderstand, and have not been confused by, the ambiguities andcontradictions that exist in the undergraduate study of the law.This question, which will change with each examination paper,will account for 50 per cent of the overall grade and require you todevote one hour of the two-hour examination period to it. Please notethat for each examination you are allowed 15 minutes’ reading time ontop of the two hours you have to write your answers. You may alsotake into the examination the relevant 150 Leading Cases and StatuteBook. Please note that these may not contain any additional notes ormarkings.58Learning Project for Consumer Credit and Agency:The Making of, and Liability Under, a RegulatedConsumer Credit AgreementEssential ReadingCommercial Law Textbook (Chapters 18, 19, 20, 21 and 22) Griffiths(3rd edition 2003) Old Bailey PressCommercial Law 150 Leading Cases (Relevant Chapter(s)) Fletcher(2002) Old Bailey PressGuidance notesThis Learning Project is covered by Units 7, 8 and 10 in your ModulePlanner. In carrying out your reading and research you should havespecial regard to the following key points.• The nature of two party and three party D–C–S agreements.• The formalities required for creation of credit agreements,particularly in relation to cancellation.• The restricted circumstances in which a credit contract iscancellable.• Procedure for cancellation and the debtor’s rights and duties uponcancellation.• The common law position in relation to creditor’s liability fordealer’s misrepresentation.• The significance of deemed agency in s56.• Creditors’ liability for faulty goods in a hire purchase contract.• Creditor’s liability for faulty goods or services in a three partyD–C–S agreement.• Effect of exclusion clauses on creditor’s liability.• Meaning and significance of default notices.• Implications for creditor of goods being protected.• The meaning and implications of early settlement andtermination.Learning Project59Case law and statutesFORMALITIES* Dimond v Lovell [2000] 2 WLR 1121 (HL)

* Wilson v First County Trust Ltd (No 2) (2001) The Times 16 May (CA)COLLATERAL CONTRACTAndrews v Hopkinson [1956] 3 WLR 732CREDITOR’S LIABILITY TO DEBTOR FOR DEALER’S ACTS AND STATEMENTSBranwhite v Worcester Works Finance Ltd [1969] 1 AC 552* Porter v General Guarantee Corporation Ltd [1982] RTR 384Royscott Trust Ltd v Rogerson [1991] 3 WLR 57* United Dominions Trust Ltd v Taylor 1980 SLT 28CREDITOR’S LIABILITY TO DEBTOR IN RESPECT OF THE GOODS* Farnworth Finance Facilities Ltd v Attryde [1970] 1 WLR 1053* Karflex Ltd v Poole [1933] 2 KB 251Shine v General Guarantee Corp Ltd [1988] 1 All ER 911* Warman v Southern Counties Car Finance Corporation Ltd [1949] 2KB 576* Yeoman Credit Ltd v Apps [1962] 2 QB 508PROTECTED GOODSBentinck v Cromwell Engineering Co [1971] 1 QB 324Capital Finance Co Ltd v Bray [1964] 1 WLR 323* Chartered Trust plc v Pitcher (1987) The Times 13 February* Mercantile Credit Co Ltd v Cross [1965] 2 QB 205; [1965] 1 All ER 577Consumer Credit Act 1974: ss56, 60–82, 86–92, 94–100, 111, 127, 167,180 and 189Consumer Credit (Rebate on Early Settlement) Regulations 1983/1562Consumer Credit (Linked Transactions) (Exemptions) Regulations1983/1560Consumer Credit (Enforcement, Default and Termination Notices)Regulations 1983/1561Supply of Goods (Implied Terms) Act 1973: ss8–11 and 14(1) (asamended by the Sale and Supply of Goods to ConsumersRegulations 2002)Unfair Contract Terms Act 1977: ss3, 6 and 7Sale of Goods Act 1979: ss11(4), 12–15 and 34–35Cases marked with an * can either be found in your Textbook or theAppendix at the end of the Study Units; all other cases can be found inyour 150 Leading Cases.Commercial Law: Consumer Credit and Agency60Sample Questions1 Ben went to Electronics plc to buy a scanner and printer to use withhis computer. As he knew little about computers, Ben took thespecifications of his model with him and showed them to Sim, theowner of Electronics. Sim recommended equipment which, he said,was compatible with Ben’s computer and would produce high qualitywork. Both the printer and the scanner were normally used forprofessional purposes. Acting on Sim’s recommendation, Ben decidedto buy both items.The scanner cost £1,300, and Ben decided to pay for it by means ofa loan from his bank. He discussed the loan with his bank managerwho agreed to advance Ben the money. The manager gave Ben anapplication form to complete and sign at home. Ben did this andreturned it to the bank the next day. The manager then signed onbehalf of the bank, gave Ben a bank draft for £1,300 payable toElectronics plc but forgot to give him a copy of the loan agreement.Under the terms of the agreement, Ben was to repay the loan in 24monthly intervals.Ben took the draft to Electronics and bought the scanner. He alsobought the printer, which cost £700, paying £600 by means of his Visacredit card and the balance of £100 by cash. The contract he signed forboth pieces of equipment contained a term, which stated that allequipment was ‘bought at the customer’s sole risk’ and thatElectronics accepted no liability for any defects.Both the scanner and the printer proved unsatisfactory. Neitherwas compatible with Ben’s computer and, when he tested theequipment with a friend’s computer with which it was compatible, Bendiscovered that both the scanner and the printer produced work ofvery poor quality.

Ben immediately returned to Electronics to complain but foundthat the company had gone out of business.Advise Ben.(Wolverhampton LLB by Distance Learning, January 2001,Question 1.)2 Anton’s old electric oven had broken down so, when he saw anadvertisement placed in the local paper by Electronics plc offering ‘thelatest modern ovens’ for £1,500, he decided to acquire one. Theadvertisement also promised £300 off customer’s old ovens ‘whatevertheir condition’ and said that hire purchase terms could be arrangedwith Kwikash plc.Anton telephoned Electronics and, referring to the advertisement,ordered a new oven, saying that he wanted it on hire purchase. It wasLearning Project61agreed that he would fill in the Kwikash proposal form whenElectronics’ representative called to deliver the new oven.The next day the representative arrived and, while he wasinstalling the new oven, described the merits of the equipment toAnton and also helped him with various points on Kwikash’s proposalform which Anton eventually completed and signed. The total pricewas reduced by the £300 trade-in for Anton’s old oven, which was infact worth only £20 as scrap. The representative gave Anton the topcopy of the proposal and took away the rest of the form to send toKwikash for its approval. He also took Anton’s old oven and a chequefrom Anton for £150 as a deposit on the new goods.Advise Anton in the following circumstances.a Anton paid the first instalment but then lost his job and so couldnot afford to make any further payments. He therefore wanted toend the contract with Kwikash. Since the new oven had beeninstalled, Anton had not received any further communication fromeither Electronics or Kwikash. In fact Kwikash had posted thesecond copy of the agreement (which they had signed) to Anton butthis had been lost in the post.b How would your answer to (a) differ if all the negotiations for theoven and the hire purchase agreement had been undertaken overthe telephone and Electronics’ representative had merely handedAnton the Kwikash proposal but had not discussed the oven or theproposed credit agreement with him? Furthermore, Antondiscovered that the oven was not ‘the latest model’ but was, in fact,an older model, which had such serious design defects, that thistype of equipment was no longer made by the manufacturer.(Wolverhampton LLB by Distance Learning, September 2001,Question 1.)Commercial Law: Consumer Credit and Agency62

Practice Question and SuggestedAnswerThe following test is designed for practice only and does NOT count aspart of the assessment regime. A Suggested Solution is, however,offered in the following section. Students are advised not to consultthis solution until they have completed the test. It is expected that youwill return your answer to the College for marking and feedback.Unless you undertake such work you will not gain an insight into youracademic strengths and weaknesses before you attempt theexamination.Before attempting your answer, please ensure that you understandthe assessment criteria explained in the Award Guide, and theguidance contained in the section of the Module Planner headed ‘Skillsto be Developed and Examined’.QuestionTwo years ago Lam acquired a car under a four-year hire purchasecontract with Ready Finance (RF). The cash price of the vehicle was£15,000. Lam, who had a bad credit record, agreed to pay interest of 80

per cent APR on the deal. So far Lam has paid all the monthlyinstalments on time but, last month, the firm he works for told itsemployees that they would all have to take six months unpaid leave.This meant that Lam could not pay this month’s instalment to RF. Heexplained his position to RF, which told him he had to pay, served himwith a default notice and demanded the return of the car. Lam,however, wants to keep it.A week before he received the news from his employers of thetemporary loss of his job, Lam had made another hire purchasecontract with Sunny Credit plc for the acquisition of a digital camera.Lam had seen the camera in Klickers shop and had been told by thesales assistant that it was the latest in digital technology and wasabsolutely compatible with Lam’s computer, the details of which Lamhad provided.When Lam took the camera home, he found that he could not useit with his computer and, when he talked about the problem to a friendwho was an expert in this type of equipment, he was told that thecamera was a basic model, which gave poor reproduction. As he hadexplained to Klickers’ assistant, Lam wanted to develop a photography63business and the assistant had assured him that the camera was idealfor this purpose. This assurance was false. Having temporarily lost hisjob, Lam cannot keep up the payments on the camera but, in any case,he wants to end this contract so that he can acquire more suitableequipment. Klickers refused to accept any liability.Advise Lam:a what is the meaning and significance of the default notice he hasreceived and what steps should he take to try to keep the car; andb what are his rights against Klickers and Sunny Credit plc inrelation to the camera?(Wolverhampton LLB by Distance Learning, May 2001,Question 1.)Commercial Law: Consumer Credit and Agency64

Suggested Answer to PracticeQuestionNB: Do not consult this solution until you have completed the test.Outline AnswerIdentify contracts as being two party D–C–S agreements.a Define and explain the implications of these to Lam.• Meaning, effect and contents of default notice.• Time order – explain and apply to the problem.• How would this benefit Lam?• Not an extortionate credit bargain – Lam is a bad risk.• Protected goods – explain meaning and effect of this.• How would it help Lam?• Conclusion and cases.The answer to this question should have started by identifyingboth these contracts as being two party D–C–S agreements. Thedefinition of a regulated agreement (s8 CCA) should have beengiven and applied, and the implications of the contracts being twoparty D–C–S agreements explained.The meaning, effect and contents of a default notice shouldhave been discussed. In particular, given Lam’s wish to keep thecar, the answer should have referred to the possibility of himapplying for a time order (s129). This should have been explainedand applied to the problem. The case of First National Bank v Syedshould have been discussed and applied, as should the courts’powers under s136 to make consequential orders relating, forexample, to accruing interest, time of repayment, etc. Thepossibility of the agreement being an extortionate credit bargainshould have been discussed in the context of Lam’s bad creditrecord, which may prevent the APR being regarded asextortionate.

Lam has had the car for two years of a four-year hire purchasecontract and has paid regularly, and thus he has paid over one65third of the total hire purchase price. This means that the goodsare protected goods. The meaning and effect of this should havebeen explained and applied to the problem.b Sunny Credit liable for the camera.• Possible breach of s9 SG(IT)A.• Breach of s10 SG(IT)A – Lam made known purpose to creditbroker.• Also liable for Klickers’ misrepresentation – s56 – explain andapply.• Action against Klickers in collateral contract.• Meaning and effect of such a contract.The contract for the acquisition of the camera is also a twoparty D–C–S contract (this being a contract of hire purchase).There is a possible breach of subsections 9 and 10 of the Supply ofGoods (Implied Terms) Act 1973. Lam made known his purpose tothe credit broker. The goods are not fit for this purpose nor arethey of satisfactory quality. This should be explained and applied.There is also a possibility of a breach of the implied condition as todescription.The finance company is also liable for Klickers’misrepresentation by virtue of s56. This section should have beenexplained and applied.Lam could also bring an action against Klickers in collateralcontract (Andrews v Hopkinson) and the meaning and effect ofsuch a contract should have been discussed.AnswerNote: this answer is based on one written by a distance learningstudent covering the question set as part of an examination.A consumer credit agreement is an agreement according to CCA 1974s8, between an individual (the debtor) and any other person (thecreditor) by which the creditor provides the debtor with credit notexceeding £15,000.In considering Lam’s issue, one needs to first establish whether histransactions are governed or regulated by the CCA 1974. Thus Lamacquiring a car under a hire purchase contract with Ready Finance(RF) is seen as a D–C–S agreement. For this purpose, a D–C–Sagreement is a regulated consumer credit agreement according to s12.This is where the debtor wishes to purchase the goods from theCommercial Law: Consumer Credit and Agency66supplier, but goes to the finance company to finance the goods. For thisto take place there should be a pre-existing arrangement between thegarage and RF. Thus, in this instance, the garage sells the car to RF,who in turn lease it to the debtor – in this case Lam. This is clearlyseen as a two party D–C–S agreement. A two party D–C–S occurswhere RF is both the supplier and the finance house. Also, this is seento be a restricted use credit agreement (s11). A restricted use creditagreement in a D–C–S (s12b) is one made by the creditor under a preexistingarrangement, or in contemplation of future arrangements,between himself and the supplier. For this reason, the creditarrangement is seen as a two party D–C–S, restricted and being that itis not over £15,000, it then falls within the Act, and is thereforeregulated. Lam is said to have kept up with payments but could notpay last month. Can this be seen as a repudiatory breach? It isunlikely because it is just one month’s default and therefore could notreally be termed as fatal. Again, if he was not prepared to pay infuture, he wouldn’t have told RF about his difficulties.However, service of a default notice arises due to a breach by thedebtor or hirer of a regulated agreement (s87). The notice specifies thebreach, the capability of remedy, or a sum required to compensate forthe breach (s88). It is significant because it specifies the evidence thatLam has defaulted, and if he doesn’t comply with the default notice thegoods may be repossessed and the contract terminated by the creditor.

However, repossession is only possible by a court order. In thiscircumstance if the creditor repossesses, the debtor may be free fromall liabilities. But according to the facts, Lam wants to keep the car,and therefore he needs to take certain measures to do this.First, he can pay off early ahead of time (s94) and in doing so, hemay be entitled to a rebate. Alternatively, he can ask the permission ofthe court to extend his minimal repayment. However, the court canonly grant this where there is a possibility in the future that he will beable to pay. It therefore seems unlikely that he would be granted thisbecause he has lost his employment and the proceedings may beexpensive.Alternatively, he can pay up to one third of the cost of the car inorder to protect it from being repossessed. Also, it seems in his casethat he has paid two years’ instalments, which amounts to half thetotal payment. He is, therefore, qualified to keep the car fromrepossession, and on the ground of extortion principles he may begranted time and minimal repayments.Lam has a hire purchase contract with Sunny Credit (SC) which isseen as a D–C–S agreement as noted above, consisting of regulatedand restricted use credit.Lam relied on the advice for the acquisition of the digital camera,Suggested Answer to Practice Question67and one can see here the principle contained in the Supply of Goods(Implied Terms) Act s10(2) which deals with fitness for purpose,durability, safety, etc. In this case, the camera is not in accordancewith the implied terms and the production is poor; it is also not fit forLam’s particular purpose (SGA s10(4)). This is particularly importantbecause Lam made his purpose known. However, since his purposewas business-like, UCTA 1977 will not protect him from any exclusionclause. But Sch 2 of UCTA, which deals with the reasonable test,would suffice.Lam, who wants to end his contract, may rescind the contract onthe basis of misrepresentation by the negotiator. In common law, thenegotiator is not the agent of the creditor. For this reason, the CCA, ins56, renders the negotiator as a deemed agent. Therefore, the creditoris also as liable (s75 CCA) as the negotiator. Thus, Lam can rescindthe contract for negligent misstatement and can sue the creditor whois at the same time the supplier under a D–C–S (two party)agreement. They would have had a defence had they tested the cameraor made Lam aware of any defect the camera had. But in the absenceof this, the creditor is held liable.Marker’s comment on Student AnswerThis was a reasonably well-answered question but it made a numberof errors. For example, in (a), as this was a two party D–C–Sagreement, it is not necessary to show that there is a pre-existingagreement between the parties. The student states that Lam ‘can payup to one third of the (price) in order to protect it from beingrepossessed’. On reading the question, it will be seen that Lam hasalready done this.In the final paragraph the student mentions s75 CCA. This iswrong. Section 75 applies exclusively to third party (not two party)D–C–S agreements.Thus, although this answer was reasonable, it could have beenimproved had the student taken greater care and applied the law morecarefully to the facts of the problem.Commercial Law: Consumer Credit and Agency68

Revision

What to revise

Consider carefully what you have been told about the format of the examination. How many ques-tions will you be required to answer in what length of time? Work out how long you are likely tohave to write an answer to any one question.

Look at past exam papers. A sample can be accessed via the School of Legal Studies websitewww.wlv.ac.uk/sls. They may help you to identify the questions which are most likely to appear onyour exam; and on which you can concentrate your revision. This is known as question spottingand, although this is not advisable, it may sometimes be necessary. If you have to do this, youshould revise two additional topics just in case: the question on one of the topics on which youhave concentrated most may be phrased in such a way that you are not certain how to answer it.It is, however, safer to deal with every topic in the module so that you are prepared for all ques-tions.

By looking at past exam papers you may also be able to determine whether certain topics tend tobe examined by way of problem scenarios or general discussion questions. Structure your revisionto accommodate the different approaches those two different types of question require.

Look closely at the topics covered by the module. Those topics which have been given the great-est emphasis are a good bet to appear in the exam.

The question in the Learning Project is compulsory so make sure that your revision is thorough onthe topic, or topics, it covers.

Planning your revision

The best method of revision is to revise continuously throughout your study of a module, butwhether you revise continuously or prefer the last minute approach, try to relax on the day beforean exam. To do well you need to be both physically and mentally fit.

Well before the exam period make yourself a revision calendar. Make sure that the revision periodyou plan is long enough to cover all of the modules you have studied, and gives you regularbreaks away from your studies. You need to start your revision at least two weeks before the ex-amination period. It is not wise to plan to revise for more than an hour at a time without a shortbreak. You should build in some days in which you put revision aside altogether and do somethingwhich will take your mind off the upcoming exam period.

Don’t just divide the revision period equally between topics. Make a realistic appraisal of whichtopic(s) you are weakest in and plan to give them the most time. In deciding how much time togive each topic you should also take into account how much the exam counts towards your overallmark. In other words, plan your revision to do best on exams which will give you the most benefitin terms of your overall results.

Do not concentrate all your revision of any one topic in a solid block. You will find that your con-centration will be better if you rotate your revision from topic to topic.

Plan your revision of any one topic in stages. The first stage is to acquire a knowledge of the topic.This involves re-reading your notes and whatever is necessary in your books. The second stage isto break that knowledge down into easily remembered key components. The third stage is to honeyour ability to identify issues and relate them to those key components. This is best accomplishedby writing answers to past exam questions.

How to revise

If you have any general problems with your studying, don’t just sit there hoping it will come right inthe end; contact the Module Leader or the College.

There are a number of stages in the revision process. First you have to ensure that you have anadequate knowledge of the topics. This is a matter of re-reading notes and filling in gaps by read-ing relevant sections of your Textbook or other materials until you have reached the point whereyou understand the material being dealt with.

While you are reviewing your notes and other study materials, you should be identifying and mark-ing key points which you can return to when you start to make your revision notes.

Remember: revision can only be effective if it is based on a previously acquired basic knowledgeand understanding of the topics.

The second stage of revision is to create a set of revision notes.

These will be aimed at (1) setting out key points and (2) relating these to each other in such a waythat they form a coherent picture of a particular topic (3) identifying key cases and/or statutory pro-visions which you need to know details of.

There are numerous ways of structuring revision notes. Which you choose will be a matter of per-sonal preference. The basic aims, however, are to create a set of notes which you can reviewquickly many times; and one from which you can retain a vivid mental image so that you will beeasily able to recall them in the examination.

Therefore your revision notes should be made up of key words and phrases. Each entry in thenotes should represent a condensation of information about the topic at hand. Strike a balancebetween brevity and comprehensiveness. Some concepts may be too complicated to rememberwithout a detailed note. Others readily lend themselves to summing up in a phrase of even a wordor two. A rule of thumb is to confine all the revision notes on one topic to one page or less of A4paper.

Using different colours for different topics, or writing the notes so that they create a distinctive pat-tern on the page, is a way of creating a vivid mental image of your notes. During the exam youmay be able to recall the particular information you need by calling up a ‘picture’ of the informa-tion. A stepped outline or a spider diagram are two of the ways you can create a pattern which willhelp you to recall information by focussing on the image and the way it was written down. Spiderdiagrams are especially useful for creating an image of the way ideas or rules link together.

Your friends may think you have become very eccentric but it is a good idea to stroll about yourroom reciting out loud the contents of a page of revision notes. This, after all, is how actors learntheir lines before a performance, and you are doing the same thing when you set out to learn yourrevision notes before an exam.

You may be tempted to shortcut the process of building up a set of your own revision notes bybuying one of the many revision guides which are available. These can be extremely useful to giveyou a very condensed overview of a topic, but remember this: what makes for exam success isdisplaying to the examiner your own knowledge of the topic. The only way to create your ownknowledge of the topic is to create your own set of revision notes using all those other sources

The third stage of revision is self-testing. Pick a question from a past exam – and this is wherehaving made a considered choice about which topics to revise is essential – and write an answerto it under ‘exam conditions’: ie taking the length of time you would be given to do the question in

the exam. Then go back over your revision notes on that topic and see what you have left out,what you did wrong and what you put in that was not really relevant to the question asked.

You may want to return to your original notes from lectures and reading and have another look atthat material. After half an hour or more break, pick another question on the same topic and writean answer to it. Go through the same review process again. Repeat the whole process once ortwice more. The advantages of doing this will soon become apparent. You will identify weakness-es in your knowledge and/or understanding. You will see how some components of an answer to aquestion on a particular topic will re-appear over and over again no matter how the question isworded, and you will have written those bits down often enough that you will not have to spendtime in the exam trying to work out how to phrase that part of your answer.

The benefit of self-testing is enormously enhanced if you do it as part of a group. Three or four ofyou working together will amongst you have a very comprehensive knowledge of any topic. Whatyou are weak on, you can pick up from one of the others and vice versa. There is also the psycho-logical boost which comes from working as part of a team. You will find that some of the thingsyou thought it was important to write about completely eluded other members of the group. Also,you will not have seen some important point which they did. Discussing all of your answers togeth-er will help you to craft a complete answer to all of the aspects of the question. If you are not incontact with fellow distance learning students, ask members of your family or friends to test you.As well as helping you, this will give them a valuable insight into how much your studiesmean to you and the hard work involved.

Taking the Examination

Hints for Answering QuestionsThe very first thing you must do is to read the whole question. If the question is a problem:

DOAsk yourself:• Why am I being asked to advise this person?• What has gone wrong?• What are the areas of law involved?

If the question is an essay:

DOAsk yourself:• What area of law does the essay cover?• Which part of that area of law is the essay asking me to discuss?• Which points do I have to focus on in answering the question?

DO NOT, IN EITHER TYPE OF QUESTION• Start writing before you have read the whole question.• Identify one area of law and write all you know about that area without putting it into the contextof the question.

The next step is to write an outline plan of your answer. In this plan, you should identify the mainpoints in the problem. If you do not want the plan to be taken into account in your answer, thencross it through and your examiner will ignore it. When you are writing your answer, follow yourplan. This will help you avoid discussing areas of law which are not relevant to the question. It willalso help you ensure that you cover all the points raised in the question and do so in a

logical, reasoned way. After you have read the question and written your outline plan you shouldre-read the question and then attempt the answer.

WRITING THE ANSWER

In writing your answer, start at the beginning and work through to the end. Make sure that youdeal with each issue raised and that you apply the law to the relevant points. Reach a conclusionat the end. Do not start with your conclusion as you may find, part of the way through your answer,that you realise your original conclusion was wrong and you will have to start again.

Always give authorities for your answers. These authorities will be statutes and/or cases.

DO• Address the issues from the start of your answer.• Start at the beginning and work through to the end.• Reach a conclusion at the end.• Relate your answer to specific points in the question.• Give authority for every point of law you make.• Write clearly and in good English.• Time your answers.

DO NOT• Write all you know about the area before you start actually answering the question; you will onlyhave to write it out again in dealing with the specific points in the question.• Reach a conclusion at the beginning.• Move away from the structure of your outline plan.• Give unsupported statements of law.• Spend so long answering one question that you do not have enough time to answer the rest.• Write in note form (unless you have spent too much time on your previous answers and are leftwith insufficient time to write a full answer).• Copy large amounts of material from the books you are allowed to take into the examination.Make sure that you put all quotations in quotation marks otherwise you may be thought to havebeen cheating.

Module Questionnaire

Commercial Law: Consumer Credit and Agency

The School of Legal Studies and Holborn College attach great importance to your views. Wewould, therefore, be grateful, if now that you have finished studying this module, you would an-swer the following questions and return them to the address give below. Your answers will be con-sidered by the distance learning teaching team and used in updating teaching materials.

1 What two things did you find most useful about the materials you were provided with for thismodule?________________________________________________________________

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2 What two things did you find least helpful about the materials you were provided with for thismodule?________________________________________________________________

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3 Please identify any typographical errors you encountered in using this planner (please make ref-erence to appropriate page numbers).________________________________________________________________

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Return to:External Programmes AdministratorSchool of Legal StudiesUniversity of WolverhamptonArthur Storer BuildingMolineux StreetWolverhamptonWV1 1SBUnited KingdomYou may if you wish e-mail your answers to in4655@wlv.ac.uk