Keenan and Riches’BUSINESS LAW

Chapter 8Types of business contract

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1 For each of the examples given below identify:
(a)the different kinds of contracts described; and
(b)any statutory provisions which apply to them.
(i) Fixit Ltd agrees to install gas central heating
in Jim Frost’s bungalow for a price of
£1,200. £400 is to be paid in advance, with
the balance due on completion of the work.
(ii) Kylie buys a new Jaguar X-type from Smiths
Motors by trading in her Y-reg Ka, topped
up by £30,000 in cash.
(iii) Kelly, Murphy & Co, Solicitors, enter into a
two-year agreement with Copytech Ltd for
the use of a photocopier. Copytech Ltd
agrees to keep the equipment ‘in good
repair’.
(iv) Newtown Industrials plc employs Lorna
Doone as a Sales Representative for the
south-western region.

(v) Bill Archer orders 500 kg of fertiliser for

use on his farm from Greener Fields Ltd.

Payment is to be made within one month

of delivery.

(vi) Kate buys a bottle of lemonade from her

corner shop for £1.20p. She gets 5p back

on the bottle if she returns it to the shop

for recycling.

(vii) Jack and Jill, up and coming young fashion

designers, buy shop premises in Bath, with

the aid of a loan secured on the property

from their bank, West Country Bank plc.

2 Explain the differences between the following:

(a)a general agent and a special agent;

(b)a mercantile agent and a del credereagent;

(c)actual authority and ostensible authority;

(d)agency by ratification and agency by necessity.

Self-test questions/activities

1 When Eddy gets into financial difficulties, he agrees
to sell his farm to Agri-Enterprises Ltd. Eddy is
installed as farm manager and the farm continues to
trade under its old name, Hill Top Farms. It is agreed
that Eddy can enter into contracts on behalf of the
company in respect of the day-to-day running of the
farm, but that if he needs to purchase farm machinery
in excess of £50,000, he must obtain the prior approval
of Agri-Enterprises Ltd. During the harvest, the
farm’s combine harvester breaks down and cannot
be repaired. Eddy is unable to hire a replacement at

such short notice and so he agrees to buy a new

combine harvester from Farm Machines Ltd at a cost

of £120,000. Eddy has dealt with Farm Machines Ltd

on many occasions in the past. Agri-Enterprises Ltd

is now refusing to pay for the harvester.

Advise Farm Machines Ltd.

2 Explain what is meant by the term ‘standard form

contract’.

What are the advantages and disadvantages of

Standard form contracts

Specimen examination questions

http://www.oft.gov.ukThe responsibilities of the Office of
Fair Trading (OFT) include consumer credit and general
consumer protection.

http://www.fsa.gov.ukThe Financial Services Authority
(FSA) is an independent body which is responsible under
the Financial Services and Markets Act 2000 for regulating
the financial services industry.

http://www.abi.org.ukThe Association of British Insurers

(ABI) is the trade association for the insurance industry in

the UK.

http://www.bba.org.ukThe British Bankers’ Association is

the main trade association for the UK banking industry.

http://www.cml.org.ukThe Council of Mortgage Lenders

is the trade association for UK mortgage lenders.

Website references