Jan 2019

Question 3

Save The Earth Pte. Ltd. ("STE") is a socially conscious enterprise that seeks to recycle plastic waste materials obtained from local collection centres located in Southeast Asian countries, and use them in the manufacture of a special fabric called "Corduron" which can subsequently be used in the manufacture of laboratory coats that STE sells to research laboratories around the world. STE obtains its supply of plastic waste materials from a company called Plastic Waste Collectors Ltd ("PLWC"). Under the contract between STE and PLWC, PLWC is required to supply STE with 5 tonnes of plastic waste materials for a total price of $10,000.

Unfortunately, a typhoon struck certain areas in the Southeast Asian region and affected PLWC's ability to collect plastic waste materials from its local collection centres. The typhoon persisted for a month. Coincidentally, PLWC has a buffer stock of plastic waste materials in its warehouse and is in a position to use this to fulfil the order to STE. However, PLWC decided that it would not use its buffer stock to fulfil its order to STE, as PLWC wanted to use the buffer stock for other more profitable purposes. PLWC therefore informed STE that PLWC was not going to fulfil the order due to the typhoon. STE has already made payment of $10,000 to PLWC under the contract, but PLWC refused to return this sum of money, claiming that it has incurred significant expenditure in the performance of the contract. PLWC did not reveal to STE that the expenditure comprised only $6,000 for employee salaries.

(a) Examine the circumstances and explain if STE's contract with PLWC would be discharged by the doctrine of frustration. (6 marks)

(b) Assuming that the contract is frustrated, discuss whether STE would be able to recover the $10,000 it has paid PLWC. (6 marks)

(c) Assume that the contract between STE and PLWC also contains the following Clause 5:

"If any unforeseen event ("Force Majeure Event") affects the supply of plastic waste materials under this Contract, the contracting parties agree that PLWC shall, for the duration that the Force Majeure Event is operating, not be held responsible for the non-performance of the contract, provided that if the Force Majeure Event does not exceed 90 days, the contracting parties' obligations shall resume to the extent possible after such Force Majeure Event has ceased to operate. If the Force Majeure Event exceeds 90 days, this Contract shall be terminated."

Explain how Clause 5 would affect your analysis and answer to (a) above. (13 marks)

Question 4

Profit Orient Pte. Ltd. ("PO") is a shipping company, providing customers with ocean shipping and container transportation services. They wanted to hire a new account manager to handle some of their regular clients which are big corporations. The account managers are authorized, through PO's staff policy, to engage with clients under their account. PO hired Clarice, who had worked as an account manager with a bank previously. As Clarice's previous work experience was in the banking (and not shipping) industry, Monica (who is the Managing Director of PO) told Clarice that Clarice must always check with her before signing any contract with clients.

Monica and Clarice attended a meeting with an important client, Aces Logistics ("AL"). During that meeting, Monica told Sandra, the general manager of AL, that Clarice is an "experienced" account manager, and will (in Monica's words) "take care of all their business requirements". Sandra was assured to hear these words from Monica. A day after the meeting, Sandra called Clarice and insisted that AL's business contract with PO must be quickly prepared and signed within the next few days, as Sandra had to travel overseas soon. Given the circumstances, Clarice quickly prepared the contract, and Clarice signed it on behalf of PO. In her haste, Clarice forgot to check with Monica before signing the contract.

(a) Describe and explain two (2) ways in which the agency relationship between Clarice and PO could have arisen in the above scenario. Support your answer with specific examples based on the above scenario. (18 marks)