QUESTION 1 (40 marks) Coffee Trading Limited (CTL) was incorporated in Hong Kong and carries on a trading business for many years. CTL's managing director, Peter, met with Mr Zhou, the managing director of Top Beverage Limited (TBL), which operates a chain of coffee shops in Discovery Bay, Lantau Island. Mr Zhou wanted to source some coffee beans with a unique fragrance but at an economical price to sell in his coffee shops. Peter recommended a brand of coffee beans, Caffe Vertigo Panaroma, to Mr Zhou. Although Mr Zhou had never heard of the brand, after trying a cup of that coffee, he was pleasantly surprised. He liked the strong coffee aroma and the distinctive hazelnut flavour. He was sure that it would sell very well in TBL's coffee shops under its own brand, Top Roast. Peter and Mr Zhou entered into an agreement for CTL to sell to TBL 5,000 bags of Caffe Vertigo Panaroma 500g Coffee Beans at the price of $100 per bag. CTL agreed to deliver 1,000 bags of coffee beans to TBL each month in five consecutive months. The total contract price was $500,000, payable in 5 equal instalments, 14 days before each delivery. Mr Zhou was keen to start selling coffee made with the new coffee beans in TBL's coffee shops, so it was agreed that the first shipment was to be delivered to TBL within 2 weeks. TBL transferred $100,000 to CTL's bank account. Peter called Mr Chan of Fast Delivery Limited (FDL) to arrange shipment of the coffee beans to TBL at the earliest date. They quickly agreed over the phone that FDL would arrange to pick up the coffee beans from CTL's supplier and to deliver it to the terminal for shipment to Discovery Bay, Lantau Island. A single sheet containing the order number, goods description and shipment information was sent by CTL to FDL by fax. FDL in turn engaged Quick Transport Limited (QTL) to collect the coffee beans and deliver it to the terminal. QTL's staff went to CTL's supplier with the authorisation document from CTL. CTL's supplier released 1,000 bags of Caffe Vertigo Panaroma coffee beans to QTL's staff, who transported the coffee beans to QTL's warehouse to store for the night before delivery to the terminal the next morning. During that night, there was only one member of QTL staff to keep watch at the warehouse. When he went out to buy dinner, some burglars broke in and stole all the goods (including the coffee beans) in the warehouse. There was no closed-circuit television (CCTV) surveillance on the premises and no insurance was taken out by QTL. CTL wanted to claim against FDL for the loss of the coffee beans. FDL believed that it was protected by the following clause in its standard terms and conditions: "The Company [FDL] shall only be responsible for any loss of or damage to goods or for any non-delivery or mis-delivery if it is proved that the loss, damage, non-delivery or mis-delivery occurred whilst the goods were in the actual custody of the Company [FDL] and under its actual control and that such loss, damage, non-delivery or mis-delivery was due to the wilful neglect or default of the Company [FDL] or its own servants."Peter contacted the supplier to order more coffee beans to fulfil the TBL order. The supplier said that they were temporarily out of stock for Caff Vertigo Panaroma coffee beans but could provide a different brand, Caff Lagano Deluxe, which tasted the same since both brands of coffee beans originated from the same region. Peter called Mr Zhou to explain to him the situation, offering to deliver Caffe Lagano Deluxe coffee beans, which could be delivered to TBL by the agreed delivery date. However, Mr Zhou refused to accept Caff Lagano Deluxe coffee beans and insisted on a refund of $100,000. (a) Explain whether CTL can claim against FDL for the loss of the 1,000 bags of coffee beans. (13 marks) (b) Explain whether TBL can refuse to accept Caff Lagano Deluxe coffee and can claim against CTL for breach of contract. (17 marks) () Assuming that TBL was entitled to reject the first shipment (1,000 bags) of Caffe Lagano Deluxe coffee beans in (b) above, explain whether TBL could cancel the entire agreement with CTL. (10 marks) Your answers to Question 1 should focus on the sale of goods law and topics of this course. Refer to relevant legal authorities to support your answers. You are not required to discuss misrepresentation, unjust enrichment or frustration of contract in your answers. Your answers to Question 1 MUST be structured using the IRAC" method as explained during the course. (" IRAC: Issues, Rules, Application and Conclusion)