L5M3 Managing Contractual Risk Questions and Answers

Explanation

A variation clause and signed agreement by both parties is required to make the change. See p.16-17 for more information on contract variations. Note a 'notification of change' isn't valid unless it's accepted by the other party- so it's a good idea for both parties to sign to say they agree to the change.

Explanation

A Clause for Default 'allows the lender to demand full payment of the outstanding balance'. See p.102. And always read the small print before you sign a loan agreement :)

Explanation

The true statement is 'the decision made by the adjudicator is binding and usually communicated within 28 days'. The other three are false- adjudicators are usually experts in their field, the decision making process has a tight timescale and parties present their arguments in writing. This is the only written conflict resolution method.

Explanation

The correct answers are as follows:

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This is an anticipatory breach as the breach hasn't happened yet- it's about what will happen to the future summer order.

Explanation

Negotiation is usually the default method for resolving disputes. This is a direct quote from p.63

Explanation

Intention, Consideration and Capacity are the correct answers. A contract must contain 5 elements to be legally binding. As well as these three, the other two factors are offer and acceptance. P.2 of the study guide.

Explanation

The correct answers are as follows:

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This is 'Time is of the Essence' - failure to deliver the food on time will have consequences.

Explanation

Frustrated is when "a situation has occurred which means that the contract can no longer be per-formed". The situation is one which is outside of the control of either party and its no one's fault that this has happened. A common example of this is when contracts were unable to be performed due to Covid-19 and the national lockdown. The government mandated everyone 'stay at home' and therefore some business contracts were unable to be fulfilled, and were therefore 'frustrated' (for example the delivery of popcorn to cinemas- the cinemas were told by the government to close so the popcorn couldn't be delivered. This wasn't anyone's fault). See p. 47 for more information on Contract Frustration

Explanation

The correct answer is "only future obligations of the parties are excused and discharged" - all cur-rent and past obligations need to be fulfilled, or remedied (e.g. through liquidated damages). When an innocent party terminates a contract, they are still obliged to fulfil their own obligations. P.47

Explanation

"No - David's counter offer rescinded Barbera's offer" is the correct answer. Remember: "once a counter offer is made, the original offer is viewed as rejected" - p.6 of the study guide. What this means is when David goes back to Barbera about the £80,000 - he is now the offeror - and Barbera has the option to reject this. David is no longer in a position to accept or reject - Barbera is.

Explanation

Silence is not acceptance. Acceptance can be in writing, verbal or implied by conduct. The three other options are ways in which a contract could be accepted by conduct. See p.8 of the study guide

Explanation

The outcome is binding and enforceable is the correct answer. However the ruling can be appealed. Arbitration is a flexible approach, and the outcome doesn't set legal precedent. The role of the arbitrator is to reach a decision, only in mediation is the role of the third party to facilitate dialogue rather than reach a decision. See p.80 for more information on arbitration.

Explanation

"No- there has been a breach in warranty" is the correct answer. The key to answering this question lies in the fact that the specification in this example is a warranty rather than a condition of the contract. P.45 of the study guide explains that the Sale of Goods Act has implications on whether or not a specification is a condition, warranty or innominate term and it's all about whether the product is in 'good condition' and can be used for its intended purpose. In this example the eggs were used for their intended purpose and were in good condition (or Sarah wouldn't have put them in the cakes). Therefore in this example, the eggs needing to be free-range is a warranty of the contract not a condition. Therefore options A and B are both wrong. Answer C is also wrong because the question mentioned that the specification was included in the contract. If you want to know more about the implication of the Sale of Goods act on specifications see p.45.

Explanation

The correct answers are as follows:

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This is a condition as it is fundamental to the contract.

Explanation

The correct answers are as follows:

The answer is compromise as they're seeking a solution that will satisy everyone.