Question 1

(a)Jackson Limited had contracted with Peterson Limited to construct a lorry for a fixed contract price of $2.1 million. After several months, due to the inflation of raw materials, including spare parts, metals, wheels, Jackson Limited refused to continue with the construction unless the contract price was increased to $2.5 million, although there were no clauses in the contract which stated that the contractual price would be increased in the event the raw material price increased. Peterson Limited agreed to pay the increased the contract price, because it was negotiating a notably profitable charter for which it wanted to use the lorry. After the completion of the lorry, Peterson paid the amount of $2.5 million to Jackson. Nevertheless, after several months, Peterson claimed the payment of the extra $0.4 million was made under economic duress.

Advise Peterson Limited of its legal position.

(30 marks)

(b)Larry was playing with his friend, Jacky in a Garden where people can enjoy cycling in the Garden. There is a path particularly for the cyclist called "cyclist path". However, Larry and Jacky want to play roller in the cyclist path. Jacky suddenly rushed to the cyclist path on his roller at high speed when Ann, a cyclist on the cyclist path was unable to stop and thus hurt Jacky with her bicycle. Afterwards, Larry stepped out two paces on his roller onto the cyclist path and was rolling a few meters on the cyclist path with his back to another cyclist, Tom. Given that the cyclist path was long and straight, Tom did not stop his cycling when Larry was in front of him and hurt Larry's back. Tom argued that since the path was for cyclist only, he had no fault on this issue. Jacky wants to sue Ann and Larry wants to sue Tom.

Advise each of them respectively.

(30 marks)

Question 2

(a)Many contractual clauses interpreted to exclude liability for injury, loss or damage.Explain the general rules which determine the effectiveness of such clauses.

(10 marks)

(b)As a result of previous satisfactory commercial relationships with New Enterprise Ltd, Wilfred entered into a contract with the company to install a new computer network including the provision of some new server in his offices.On the six previous occasions in the last two years when Wilfred has contracted with New Enterprise Ltd, the contract was always in writing and contained a clause stating that `New Enterprise Ltd is not liable for any financial or other losses caused by using any product supplied and installed by the company, whether as a result of negligence of the company or otherwise'.

The present contract between Wilfred and New Enterprise Ltd is not in writing, but when the new servers were delivered to Wilfred by New Enterprise Ltd, Wilfred was handed a delivery note by the New Enterprise Ltd's employee which contained a clause worded in exactly the same terms as the one quoted above.Wilfred did not read the delivery note.

The first time the new network was used after installation, a fire broke out in the office because of the negligent installation of the new server by New Enterprise Ltd's employee. Wilfred suffered serious burns as he escaped from the office and incurred expenses of $300,000 in refurbishing the damaged premises.

Wilfred sues New Enterprise Ltd for the breach of contract, but the company denies liability on the basis of the exemption clause in the contract.

Required

Advise Wilfred as to whether the exemption clause is incorporated into the contract with New Enterprise Ltd and whether it exempts New Enterprise Ltd from liability for the losses and personal injuries suffered by Wilfred.