Question 1:6 marks

Frank was concerned about the heavy drinking habits of his favourite nephew, Nick. So, in June, in an effort to break Nick of his routine drinking, Frank offered to pay Nick $1,000 if Nick abstained from alcohol for one month starting on 1 July. Nick had himself become concerned for his health and just before his uncle's proposal, had joined Alcoholics Anonymous ('AA'). As one of the conditions for membership of the AA group, Nick had signed a document promising to use his best efforts to abstain from alcohol.

Nick did not drink alcohol at all during the month of July. He admits that this was more out of concern for his health and the promise to the AA group than any thought of financial reward. However, he nonetheless wants to know the legal position with respect to any claim against his uncle for the $1,000.

Advise Nick fully as to whether he has a binding contract with Frank.

Question 2:

Donald and Hugh were both members of gemstone clubs. They met at a meeting. Hugh had a stand with the sign:

For Sale: Mixed Gemstones at Marked Prices

Donald was looking for a stone suitable for setting in a ring. He selected a stone priced $450.00 and purchased it from Hugh. The stone Donald purchased was later identified as a topaz. Donald wishes to return the stone to Hugh and claim his money back.

Discuss Donald's rights and the legal implications of each of the following possible situations.

a.Although there was no discussion, both Donald and Hugh believed it was a rough diamond. (3 marks)

b.Donald believed the stone was a rough diamond but did not discuss his belief with Hugh, who knew it was a topaz. (3 marks)

c.Donald told Hugh he was pleased to find a diamond. Hugh did not correct him. (2 marks)

d.Hugh was the club's expert on diamonds and offered the stone to Donald assuring him that it was a diamond, as he honestly believed it to be. (4 marks)