TERM 1 2008-09 EXAMINATION

NOVEMBER 2008

LGST101

BUSINESS LAW

(Professor: Saw Cheng Lim) Groups 3, 5 & 11

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INSTRUCTIONS TO CANDIDATES

The time allowed for this examination paper is 3 hours.

The first 30 minutes of the examination are for reading of questions and
planning of answers ONLY; students may begin writing in the answer booklet
AFTER the first 30 minutes.

This examination paper comprises three (3) pages including this instruction
sheet. You are required to answer all questions in this paper.

Write your Student Identification number and the question number on the cover
sheet of your answer booklet.

All the best to you!!!

Jim, a wealthy businessman who was looking to buy a new home, came across an
advertisement for the sale of a one-year old bungalow in the East Coast area.
Attracted by the advertisement, he visited the property one Sunday morning with
Kim, a family friend who is a trained Quantity Surveyor. Jim light-heartedly told
Kim that he was very keen on buying the house but he was also a little concerned
about its structural safety. Agreeing to do him a small favour, Kim made a quick
inspection of the house and informed Jim that the building was generally safe and that
no essential repairs were necessary. However, Kim, in her hurry, had failed to notice
an obvious structural defect in two of the bedrooms. Feeling assured, Jim
immediately purchased the house from the incumbent owner for $7 million and soon
moved in.
Jim visited the prestigious and exclusive Aria Art Gallery a short time later and
was served by Bravo, the employee on duty. Jim expressed interest in the life-size
bronze statue of The Thinker (which depicts a man sitting in thoughtful
contemplation). Based upon his vague recollection, Bravo, who is the lazy sort,
said: This sculpture is Auguste Rodins most famous work and was cast by him in
Paris during his lifetime. There are only 25 versions of it in the world and this one
on display, which is identified as Version 1/25, is the most valuable. Jim told
Bravo that he had, for a long time, wanted to acquire the works of Auguste Rodin
(1840-1917) and buying the most valuable version of The Thinker was like a dream
come true for him. The price quoted for the sculpture was $2 million.
Jim proceeded to sign the sale and purchase agreement which Bravo prepared.
Payment was to be made upon delivery of the sculpture, and the contract expressly
provided as follows: Item of Sale Auguste Rodin, The Thinker, Version 1/25.
There was also a provision in the contract in bold fonts which read: For other terms
and conditions, see back of invoice.
The Aria Art Gallery delivered the sculpture to Jims house one week later.
When Jim effected payment of $2 million, he was given a copy of the invoice, which
contained on its back the following clause:
Aria Art Gallery shall not be liable whatsoever for any defect in or damage to
the item of sale.
Jims luck suddenly took a turn for the worse. He has since been told by an
expert in the field that the sculpture he purchased from Aria Art Gallery was not
Version 1/25, but a less valuable Version 12/25 (which holds a market value of only
$1 million). He is also told that his sculpture was not cast by Rodin personally, but
is a reproduction cast by a Parisian art gallery in 2005 (although this does not affect
its value).

Jim has also discovered, after a detailed examination, that there is now a crack in
the sculpture which appears on the head of The Thinker. Jim is certain that there
was no such crack when he viewed the statue at the art gallery and that the crack was
caused by the negligent handling of the statue in the course of its delivery to his
house. When told of this defect, the expert was of the view that the sculpture was
likely to be worth only $500,000.
This is a great pity for Jim as Pete, his good friend and a die-hard fan of Auguste
Rodin, had recently offered to buy the sculpture (on the basis that it was Version 1/25)
from him at the price of $4 million, an offer that Jim would have found too irresistible
to refuse. This turn of events has also led Jim to suffer mental anguish and to
develop a severe form of migraine.
To make matters even worse, huge and dangerous-looking cracks have started to
appear in the walls and ceiling of Jims home. Jim had to incur additional expenses
by engaging outside contractors to patch up his walls and ceiling quickly, but just as
one defect was rectified by the workers, a new one started to surface elsewhere. In
view of all the hassle and bad luck, he eventually decided to sell the bungalow to a
third party for $5 million. Jim was later informed by an expert that the structural
defects in his home were likely to be attributable to the shoddy construction work of
PCK Pte Ltd, the developers for the housing project.
Jim has now come to you for legal advice.
(A) What rights, if any, does Jim have in contract against Aria Art Gallery?

In your answer, consider also the legal effect of the clause found on the back of the
invoice given to Jim.
(Note that you are not required to discuss issues arising under the Sale of Goods Act
(Cap. 393) and the Consumer Protection (Fair Trading) Act (Cap. 52A). You should
also disregard any issues relating to the vitiating factor of mistake.)

(B) Do the following parties owe Jim a duty of care in the tort of negligence:

(1) Kim; and (2) PCK Pte Ltd?

(Note that you are not required to discuss issues relating to breach of duty and
resulting damage in your answer.)

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