Question 1 (60 marks) a Mary is desperate to sell her beauty business, SnowBeauty. She has heard that Lily, a nearby business rival, is interested in expanding her beauty empire. Thinking that she may be able to interest Lily in buying SnowBeauty, Mary asks a mutual friend, Holy, to inform Lily that the business is ‘a gold mine and is a great investment.’ In fact, owing to the recent establishment of two additional beauticians on the same street, Mary has been rapidly losing her client base. Her accountant has recently written to her with information on her declining profits, but Mary has been too busy to read the accounts. Holy passes the information and Lily goes to visit SnowBeauty. She inspects the premises and notices that some structural renovation is needed. Mary informs Lily that she will be contacting builders to make the necessary repairs before the sale. Lily asks Mary about her yearly profits. Quickly making up a figure, Mary tells her that last year’s turnover was HK$10 million, since she is the only beautician around. Lily is impressed, but also surprised, since she knows that Mary’s business has nearby competitors. She nevertheless decides to buy the business. On occupying the premises Lily notices that the renovations have not been completed and discovers that Mary did not have time to contact the builders before the sale. The renovations will cost her HK$200,000. Six months on, the profits are non-existent. In fact, Lily is losing over HK$500,000 per month.
2 LAW B262 Business Law I Required: Advise Lily on whether she can rescind the contract and explain the relevant principles of law and cases involved. (30 marks) b Zen, a chef, enters Cook IT, a cooking apparatus store, in order to buy some cookware for an important event that he is hosting in his restaurant. He seeks advice from Yan, a shop assistant, about the quality of the pans in which he is interested. Yan tells him that ‘these pans are the best in the range. They can sustain the hottest temperatures on earth!’ Zen decides to purchase a set of these pans and a range of very sharp knives. As Zen is paying for the items at the cashier, he asks for them to be delivered to his restaurant. He is handed a sheet of paper with confirmation of the delivery details. At the bottom of the delivery note are the following terms: • Cook IT does not accept any responsibility whatsoever for statements made by employees prior to entering into the contract. • Cook IT does not accept responsibility for any damage or injury caused by defects in the quality of our products. • No terms will be implied as to the quality of the goods sold. On the night of the event, Zen finds that the pans do not sustain high temperatures at all and much of the food is burned, making it completely inedible. In addition, the handle on one of the knives is loose and causes Zen’s hand to slip when cutting some onions. He badly injures his finger and has to be rushed to the hospital. As a result of these events, the evening is a disaster and Zen’s business reputation is so badly affected that he fears his restaurant will have to close. Required: Zen wants to sue Cook IT. Advise Zen on his rights and remedies based on the Contract Law, the Control of Exemption Clauses Ordinance and the Sale of Goods Ordinance. You need not consider the Unconscionable Contracts Ordinance. (30 marks) Question 2 (40 marks) Cindy, a popular ballet dancer, was walking to a dancing studio. As she was in a hurry, she crossed a busy road when the traffic light for pedestrians was red. Cindy was knocked down by Jimmy, who was driving a taxi at a high speed. She suffered a minor injury on her right arm. 10 minutes after the accident, an ambulance came and took Cindy to the nearby Healthy Hospital. Unfortunately, due to the carelessness of the ambulance driver Paul, it collided with another car. As a result of the Assignment File 3 collision, Cindy suffered serious injuries and lost both legs. She could never dance again. Jimmy is the owner of the taxi and Paul is an employee of Healthy Hospital. Both Jimmy and Paul were later convicted of careless driving and fined by the Shatin Magistrates’ Courts. Cindy now wants to take legal actions to seek damages for the injuries she suffered. Required: Advise Cindy on whether an action for negligence is likely to succeed and against whom. You also need to explain the relevant principles of law and cases involved in the action, as well as whether there are any defences against the claim from Cindy