This document discusses a dispute between a bakery company and a supplier over a shipment of grain. The bakery had specific requirements for the grain's composition and color that were not fully met by the delivered shipment. The document analyzes whether the bakery has grounds to reject the goods under the implied conditions of description and merchantable quality in the Sales of Goods Ordinance. It also discusses whether an exemption clause included by the supplier would be enforceable, as both parties were acting in the course of business rather than as consumers.

1. B262F (1200) Tutorial Group 3
10419851 JIM Chng Yin
10463573 CHUNG Man Hei
10432340 IP Ming Chun
10427193 CHAN Yip Sing
10462607 Tuen Mo Joanne

2. Question A
 How to proceed with Kitty’s claim?
 Find a lawyer
 Bring the case to the court (turns to be an action or a
suit)
 Hence, Kitty = Plaintiff and Arthur = defendant
 The civil case:
 Should prove the case on a balance of probabilities

3. Question A
 How to prove?
Civil law > The tort of negligence > Arthur’s civil wrong
prove Arthur has a fault (breach of his duty to drive
carefully)
Compensation items
pain & suffering
medical expense
the lost legs
The earnings lost because of the disability

4. Question A
 Get compensation
 if the evidence which establishes that the plaintiff’s
claim is more probable than the defendant
 the civil court may order the defendant to pay damages
to Kitty as compensation for the injuries.

5. (b) Analyze whether Lily and Joe have been in breach of any
duties of a director
•Director bear TWO duties
1. Duty of skills and cares
2. Fiduciary duty
• Lily:
 Breach the Fiduciary duty
 Director must avoid taking corporate opportunities in
violation of their duty of loyalty
 Case: Regal (Hastings) Ltd v Gulliver
• Joe:
 Does not breach of any duties of a director
 Case: Re City Equitable Firm Insurance

6. (c) With regard to the legal action of Nico Hotel for recovering the
balance from Mr Sato, analyze the chance of success by the hotel and explain in detail
the legal principles that you base on for analysis.
 Mr Sato’s specific purpose
 That has been frustrated by the Hong Kong
Government
 The contract is furstrated

7. Similar case:
 Krnell v Henry {1903} 2 K.B.740.
 the Court of Appeal of England held that the contract
for hiring of a room for watching the coronation
procession of King Edward VII (the procession was
later cancelled) was frustrated because the whole
underlying objective had been destroyed

8. sections 16-18 of the Law Amendment and
Reform (Consolidation) Ordinance
 --money paid before the frustrating event is recoverable;
 --money payable before the frustrating event ceases to be
payable;
 --the court may allow a party to recover a just sum for
expenses incurred before the frustrating event in
performing the contract, provided that a sum has been
paid or is payable under the contract at the time of the
frustrating event; and
 --a party who has received a valuable benefit under the
contract before the frustrating event can be ordered to pay
to the other party whatever the court thinks just, not

9. Conclsion
 the money paid by Mr Sato to Nico Hotel can be
recoverable
 emaining balance to Nico Hotel should be cease to
payable
 Since Mr Sato has received a valuable benefit under
contract before the frustrating event
 Nico Hotel can recover a just sum for expense incurred
before the frustrating event.

10. (D)
Situation
 Expand the business to Japanese sushi
 Invited Mr. Sato to join the business
 Planned to set up a separate organization for the new
business
 Mr. Sato does not want to incur any personal liability
regarding to the new business

11. Differences Between
Limited Company and Partnership
 Legal Personality  Auditing
 Legal Liability  Share Transfer
 Setting Up  Successor
 Assets  Level of Freedom
 Management Rights

12. Legal Personality
 Limited Company  Partnership
 Legal entity itself  No legal personality
 Separate legal entities  Partners are legally
with its members inseparable from their
partnership

13. Legal Liability
 Limited Company  Partnership
 Members bear limited  Partners bear unlimited
liability towards the liability towards their
company’s debts partnership’s debts
 Members are not agents  Partners are agents for
for the company their partnership

14. Setting Up
 Limited Company  Partnership
 Relatively complicated to  Simply to set up
set up
 Can buy a “shelf company”
instead  Must
 Must  A business registration
 appoint a company certificate from the Inland
secretary Revenue Department
 Obey Companies  Obey Partnership
Ordinance Ordinance

15. Assets
 Limited Company  Partnership
 Belongs to itself  Belongs to its partners

16. Management Rights
 Limited Company  Partnership
 Board of directors  All Partners typically

17. Auditing
 Limited Company  Partnership
 Must have its accounts  No specific requirement
reviewed by auditors

18. Share Transfer
 Limited Company  Partnership
 Restrictions  No Restrictions

19. Successor
 Limited Company  Partnership
 Death or bankruptcy of  Death or bankruptcy of
company’s members will partners will dissolve the
not affect its operation partnership

20. Level of Freedom
 Limited Company  Partnership
 Governed by Companies  Governed by Partnership
Ordinance Ordinance
 Contains numerous  More freedom
provision, less freedom

21. (E)
Definition of Consumer Sale
 A sale to a person buying for his own use and
consumption and not in the course of business
 The Company
 Ordered the goods as an element to make the bakery
and resell it to the customer
 NOT a Consumer
 The supplier
 Seller
 Both of them are in the course of business

22. Sales of Goods Ordinance (SOGO)
 Two point of view
 Section 15
 Section 16(2)

23. Sales of Goods Ordinance (SOGO)
 Section 15
 There is an implied condition that the goods sold must
correspond with their description.
 Application
 Sales in the course of business
 Private seller

24. Special Requirement
 The company requirement
 70% cereal grains
 30% other seeds
 Brown in color
 Actual outcome
 71% cereal
 29% other seeds
 Beige in color

25. Similar Cases
 Beale v Taylor (1967) case
 The car did not correspond with the description
 Arcos Ltd. v Ronaasen and Son (1933) case
 The buyer is entitled to reject the goods for breach of s15
 The company is entitled to reject the goods.

26. Sales of Goods Ordinance (SOGO)
 Section 16(2)
 There is an implied condition that the goods supplied
under the contract are of merchantable quality
 Fit for the purpose
 Of such standard of appearance and finish
 Free from defects
 Safe
 durable

27. Merchantable Quality
 Slightly different of the good
 Is it possible to make the bread
 Relevant case
 Oracle Enterprises Ltd. v The Gosho Co., Ltd.
 Goods are capable of use for the purpose
 It is merchantable quality
 The company cannot reject the goods.

28. The Control of Exemption Clause
Ordinance (CECO)
 Section 11 (3)
 If neither of the contracting party deals as a consumer,
then liability for breach of these conditions can be
excluded or restricted if the relevant term is reasonable
 The supplier can include an exemption clause to
prohibit the rejection of goods into the contract but
the terms MUST be reasonable

29.  END