EASB Institute of Management

Fundamentals of Banking Law(Diploma in Finance)

BF 1028

Group 8 members:

Le Hoang Vu 0807/3816Liu Jinhong 0807/3768Liu Pengfeng 0809/4234Gu Weina 0807/3694

Lecturer: Mrs. Olivia Chan

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Part one:

On January 30th, Choc-O-Lite Ltd ordered a load of cocoa from a Ghanaian supplier, to arrive in

Singapore on May 30th. An exchange of emails confirmed the contractual term for the sale, but nothing

was said about terms of payment. In his three previous dealing with the Ghanaian supplier, he had

always paid for Cocoa within 60 days of delivery ( a standard practice in the industry too). On May

20th, the Ghanaian supplier sent an email confirming the dispatch of the cocoa and its anticipated arrival

on May 30th, but the Ghanaian supplier demanded payment on May 30th (with financial penalties for

late payment). Choc-O-Lite Ltd’ budget for onward sale to a local supplier in Singapore did not forecast

for this expenditure on May 30th. This is because the payment structure that had been set out by as in

previous contract.

Overview:

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A representation is a statement of fact made by one party which induces the other to enter into the

contract. If it turns out to be incorrect the innocent party may sue for misrepresentation.

Following the contract law, Choc-O-Lite Ltd has already accepted the contract with Ghanaian supplier

that means both parties need to follow all the agreement include in the contract. But because in the

contract does not include the term of payment so Ghanaian does not have the right to make demand

payment on May 30th and charge the penalties for late payment to Choc-O-Lite Ltd. In fact, Choc-O-

Lite Ltd does not need to pay the money at this point of time and the delivery still going on and will pay

for cocoa within 60 days of delivery. In order way, if the Ghanaian stopped the delivery then Choc-O-

Lite Ltd can sue for breaking the contract. It is not good for both parties because the Choc-O-Lite Ltd

does not have enough cocoa to sale to a local supplier in Singapore and Ghanaian will be cost a lot of

money for penalties of breaking contract, cost of delivery good and loss the loyalty customer as Choc-

O-Lite Ltd ( got three previous dealing with Ghanaian ). However, sometimes a term which has not

been mentioned by either party will nonetheless be ‘included’ in the contract, often because the contract

doesn’t make commercial sense without that term.

Solution:

The parties my agree that the contract should be terminated at a point in time before full performance

from both sides. The contract thus terminated may or may not be replaced with a new contract

concerning this subject matter of the old.

If both parties still want to continue the negotiation that will be a good point for each other to sit down

and talk rather than go to court. Because this time, both parties were not clear with the agreement in the

contract was agreed by each other so for the next trade the contract must be written down the term of

payment and more better than, presented it in writing and signed by both parties.The current deal keeps

doing as in the contract. Especially for Ghanaian to keep the relationship with Choc-O-Lite Ltd,

Ghanaian still delivery the good to Choc-O-Lite Ltd on time as in the contract and must prepare

carefully for the next deal if they want to make a demand payment on time as delivery day. Choc-O-

Lite Ltd will have to pay the money within 60 days of delivery as previous deal with Ghanaia

Relevant case law:

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Hutton v Warren [1836] 1 M. & W. 466; 150 E. R. 517

The landlord gave his farmer tenant six months notice to quit, but insisted that he continue to cultivate

the land. The tenant sought compensation for his seeds and for his labour during the notice period. The

written lease said nothing on these issues. Held: The tenant succeeded. Parke B said: "extrinsic

evidence of custom and usage is admissible to annex incidents to written contracts, in matters with

respect to which they are silent. "and applying that rule: "by the custom of the country, a tenant was

bound to farm according to a certain course of husbandry for the whole of his tenancy, and at quitting

was entitled to a fair allowance for seed and labour on the arable land; and was obliged to leave the

manure, if the landlord would purchase it."

Summers v Commonwealth (1918) 25 C.L.R. 144

The defendant was building Australia house in London. There was a contract that stated the builder

would supply and set the marble for the front of the house. The term stated that the marble block would

be certain size. However, the builder supplied smaller blocks and argued that it was custom to provide

blocks that size. Court held that this term could not be implied as it contradicted an express term.

(654 words)

Part 2:

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Cho-O-Lite Ltd entered negotiations with Saturn Ltd in relation to the supply of cocoa for their future

sales. A contract price was agreed per ton of cocoa but this contract was subject to a rise and fall clause,

that is, Saturn Ltd reserved its right to increase the price by up to 5%, three months in to the contract.

Saturn’s marketing manager, Mr. Wong, promised, however, by mobile, not to pass on this price

because, the company, Cho-O-Lite have been such an excellent customer over the years. As a result of

this generous gesture, Choc-O-Lite Ltd purchased some cocoa from Saturn Ltd rather than his usual

Ghanaian supplier. Choc-O-Lite Ltd mentioned this in later conversation with Mr. Wong. Later at the

end of the supply, Saturn charged Cho-O-Lite Ltd for the cocoa at the 5% higher price, ignoring the

promise made by Mr. Wong, who has now left Saturn.

Overview:

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An offer is a statement by one party of term on which he will become bound if the other party accepts

his offer that not intended to create a binding contract if accepted, but merely intended to induce the

other party to make offers. Thus the price list by a seller of goods will not normally be regarded by an

offer, but merely an innovation to treat.

An offer between Mr. Wong and Choc-O-Lite Ltd only validated when he still in charge in the current

deal. Assume that the promise was made by Mr. Wong is not validated because Choc-O-Lite Ltd

purchased the cocoa from Saturn since he has already left the company. By the way there is nothing to

argue that Choc-O-Lite got the promise from Saturn to not increase the price of cocoa as the promise

was made by Mr. Wong just a phone call which is no recorded and there is no warranty that Saturn will

not charge the 5% higher price since he is not there anymore, it means there no consider as contract was

held in between him and Choc-O-Lite Ltd. So far only can say that, Choc-O-Lite Ltd has to be charged

5% higher price of cocoa by Saturn toward the contract.

Conclusion:

Choc-O-Lite Ltd cannot give any argue for the promise held by Mr. Wong and also cannot sue Saturn

or Mr. Wong. According to Mr. Wong, there is nothing to do with him since Choc-O-Lite Ltd got the

contract with Saturn, Mr. Wong only representative for Saturn at this time when he made the promise

which is only passed by him and then after he left the company, there is no more available. Let’s say if

there was a contract between Choc-O-Lite Ltd and Mr. Wong then the Saturn got no right to charge 5%

higher price. In another hand, if a direct contract was sign by Choc-O-Lite Ltd and Mr. Wang, the

correct conclusion on the facts would have been that Mr. Wang gave to Choc-O-Lite Ltd the warranties

substantially in case if he is not in Saturn anymore. There may not be an enforceable warranty between

Choc-O-Lite Ltd and Saturn supported by the consideration that Saturn should cause Mr. Wong to enter

into a contract with Choc-O-Lite or that Saturn should do some other act for the benefit of Choc-O-

Lite.[1]

Case law relevant:

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Shanklin Pier Ltd v Detel Products Ltd:

Shanklin Pier Ltd hired a contractor to paint Shanklin Pier. They spoke to Detel Products Ltd about

whether a particular paint was suitable to be used, and Detel assured them that it was, and that it would

last for at least seven years.[1] On the basis of this conversation Shanklin Pier Ltd instructed the

contractors to use a particular paint, which they did. The paint started to peel after three months, and

Shanklin Pier attempted to claim compensation from Detel Products.[1] This was complicated by the

fact that there was no direct contract between the two companies, only between Shanklin Pier and the

contractors, and between the contractors and Detel Products.

Roscorla -v- Thomas [1842] EWHC KB J74; (1842) 114 ER 496

The plaintiff contracted to buy a horse from the defendant which the defendant said was free of vice.

Instead it was very vicious, restive, ungovernable and ferocious. Held: Absent an express promise no

warranty would be implied, but in this case there was an express promise: "the question is, whether that

fact will warrant the extension of the promise beyond that which would be implied by law; and whether

the consideration, though insufficient to raise an implied promise, will nevertheless support an express

one. And we think that it will not."

( 615 words)

References:

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Business law:  By David Kelly, Ann E. M. Holmes, Ruth Hayward

Business law: By Peter Gillies

The Law of Contract: By Laurence Koffman, Elizabeth Macdonald

http://www.swarb.co.uk/lisc/Cntrc18001849.php

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