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Commercial Law

Question 1. Materials Ltd (“ML”) sell building materials and sold 200 tonnes of gravel to Builders Ltd (“BL”) for a price of £8000. BL bought the bulk of the gravel to use in the construction of a new warehouse for Olicana Ltd (“Olicana”) on a site owned by Olicana. BL agreed to sell 25 tonnes of the gravel bought from ML to Patel Builders (“Patel”) for £1750. The 200 tonnes of gravel was delivered to the Olicana construction site from ML’s storage facility containing 20,000 tonnes of gravel. The contract between ML and BL provided that payment was due within 14 days of the invoice which was sent to BL on delivery. BL are in financial difficulties and even though BL received an interim payment under their contract with Olicana towards on- going costs of construction including materials, BL failed to pay ML for the gravel. Payment to ML is now 3 months overdue. BL has become insolvent and there is no money to pay ML.

50 tonnes of the gravel has already been used in the construction of the foundations on the site; another 50 tonnes has been mixed with dry cement ready for use in the construction. The remaining 100 tonnes of gravel is on the site separated into 2 piles. A smaller pile of a 25 tonnes has been set aside for Patel who paid BL for the gravel, but the gravel is being stored for them by BL on the site for collection by Patel. Following several downpours of rain, the 2 piles of gravel have spread and grass and weeds have started to cover the small 25 tonne pile of gravel making it very difficult to remove.

The contract between BL and Olicana for the construction of the warehouse included a clause stating that ownership of any building materials on the site passed to Olicana immediately on payment of the first interim payment under the construction contract. The contract between ML and BL contained a clause stating that ownership in any goods supplied by ML does not pass unless and until the goods are paid for and in the case of any sub-sale, ML have the right to any proceeds of sale. Due to BL’s insolvency, Olicana have employed new contractors to finish the work and say all the gravel on the site, including that mixed with the cement, belongs to Olicana. Patel say that the pile containing 25 tonnes belongs to them as they have paid for it and ML say that all the gravel including that mixed with the cement and the proceeds of sale belong to them under the terms of their contract with BL. The liquidator for BL is arguing that all the gravel belongs to BL and that the clauses in the contracts with ML and Olicana are ineffective.

A) Advise ML as to the ownership of the gravel. In particular, whether they are entitled to remove the remaining gravel including that mixed with the cement and whether they can claim the proceeds of the sale to Patel. (1500 WORDS)

Question 2. William and Mary are brother and sister and together operate an estate agency business, “Homes R Us”. William started the business on his own 5 years ago and initially Mary worked as his part-time secretary. For the last 3 years, Mary has had a greater involvement in the business dealing with clients, suppliers and placing adverts on behalf of the firm. Mary receives a 25% share of the profits by way of a salary. They verbally agreed Mary would not spend over £1500 on behalf of the firm without William’s approval. Without consulting William, Mary recently contracted in the name of the firm to buy a digital camera for £4000 to take photos of properties the firm were selling and a fur coat for £3000 to keep her warm when escorting buyers on property viewings. In addition, Mary has been placing adverts with a local paper owned by her boyfriend and, unknown to William, has been receiving a 5% discount on all adverts which she has retained for herself whilst the firm has paid the full price. 3 weeks ago, William sold 2 laptop computers that he had advertised in the local paper as “nearly new, only 2 years old” to Ivan who has a part-time business re-furbishing and selling computers for £300. The computers had been used by William and Mary for both personal and business use. Ivan has complained that he wants his money back as one of the computers is not working at all and cannot be fixed and that the other is in fact 5 years old and this has been confirmed by an independent expert. Nothing was specifically agreed about the quality of the computers.

B) Advise William as to whether or not a partnership exists and, if it does, as to his take against Mary in respect of her actions.liability and the liability of Homes R Us in relation to the contracts and what action, if any he can (750 words)

C) Advise William as to the liability of Homes R Us to Ivan regarding the sale of the computers.
(10%)(250 words)

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