Assignment Details:

Read the following scenario carefully and answer all parts of the question below. It is important to support your answers with specific examples based on the scenario below, to demonstrate your understanding and application of the relevant concepts. You may make reasonable assumptions, as part of your analysis.

Question 1

Abby decided to purchase a second-hand washing machine from an auction as these are typically more affordable than new equipment. She saw a notice for an auction by a hotel of its old furniture and equipment, including laundry machines. When she arrived at the auction, she registered, and was handed a numbered tag and a catalogue setting out the lot numbers and the descriptions of the items and some sheets of paper titled “Terms and Conditions”. It was an auction without any reserve prices, although Abby did not read the documents carefully and hence, did not know about it.

She was told by the staff that she just had to raise her tag during the auction to indicate a bid. When the auctioneer started to announce a 30-kilogramme automatic washing machine at an opening price of $200, she raised her tag. Each time, the auctioneer announced an increased bid from another person, Abby raised her tag. She was determined to buy the washing machine. At the same time, she was busy looking up the retail prices of a similar model via the internet on her smartphone.

As the auctioneer announced $1,400, Abby subconsciously raised her tag as a reflex action. At the same time, she saw that a similar model, which was indicated as being brand new, was being advertised online by Kotts for “only $1,000 (subject to terms and conditions)”. She quickly put down her tag and signaled to the auctioneer that she had changed her mind. However, the auctioneer did not see her signal. Instead, he had only seen her raise her tag. As there were no other bids, he announced “Sold!” and moved onto the next item.

She quickly left the auction, hoping to avoid signing a written contract, and went to Kotts. She met Bernard, a salesperson, and asked about the advertised washing machine. He told her that there was only one unit left for that model.

Abby wanted to check out the prices of that model at other shops, so she asked Bernard to reserve that last unit for two days while she considered her options. Bernard agreed. While many other shops sold a similar model, none were selling it at such a low price. Hence, she went back to Kotts two days later. However, Bernard told her that he had just sold that unit to another customer. Abby was upset but asked him to recommend some other models with similar functions.

Bernard recommended Model XGD-248 which was being offered at a promotional price and exclaimed, “it is the best washing machine ever!” Abby explained that she intended to purchase the machine for use by her entire family (comprising three generations living together under one roof) and hence, it must be capable of handling large loads. Bernard repeatedly assured her that it can handle a full 30-kilogramme load efficiently and showed her the brochures relating to the machine. He noted that there was a 5-year warranty for repairs needed due to manufacturer defects, and that there was free basic installation. Noting that the benefit of free installation is available only for the next two weeks, Bernard said, “The installation will be done by a Kotts technician, I think, with more than 10 years’ installation experience”. He even told Abby to check out their customers’ reviews posted online as “there were never any problems with other customers using this machine.”

After a few minutes of browsing other models, Abby decided to buy the recommended washing machine and proceeded to the cashier to make payment. As the cashier handed Abby the receipt, Abby noticed an A3-sized sign on the wall directly behind the cashier that stated the following in bold print: “All purchases are subject to Kotts’ terms and conditions of business.”

A technician from Kotts installed the washing machine the next day. While chatting with Abby during the installation, he admitted that he had only one year of installation experience. Abby found that after three weeks of regular use, the washing machine started to make a loud noise and water leaked from it, causing extensive damage to her kitchen’s floor and backyard. In addition, each time she put in any load that was more than 19 kilogrammes, the machine refused to start. She had to switch off the power source and wait for a few minutes, before restarting the machine. She experienced an electric shock and injured her hand one time when she was restarting the machine.</p.

These problems were frustrating and Abby went online to search for possible solutions. From some online chat forums, she found out that the specific model which she had bought had about 25% negative (1-star and 2-star) reviews, mainly about the same problems which she had experienced. The balance 75% of the reviews were either neutral or favourable (i.e., 3-star and above).

Abby called Kotts and asked them to repair the washing machine. She also asked for compensation for her injured hand and the extensive damage to her kitchen floor and backyard. However, the manager refused to do so and referred her to the following Clause 12 of Kott’s terms and conditions of business:

“Clause 12: Kotts shall not be liable for any injury, loss or damage (including indirect or consequential loss, property damage, financial loss, loss of profits or loss of use) arising from the contract or from the goods or their use.”

In your analysis, you can assume that both the auction house and Bernard were fully authorized to act on behalf of the hotel seller and Kotts respectively.

(a) Analyse whether there is a valid contract between the auction house (on behalf of the hotel seller) and Abby. As part of your analysis, identify and discuss the four (4) elements of a valid contract. (25 marks)

(b) Discuss whether Bernard (on behalf of Kotts) was legally obliged to reserve the last unit for Abby. Support your analysis with appropriate case law and reasons. (5 marks)

(c) Analyse the relevant statements made by Bernard (on behalf of Kotts) to Abby and identify the nature of these statements (i.e. whether it is a puff, a representation or a term).

Explain why you have identified each of these statements as a puff, a representation
or a term. (25 marks)

(d) Assuming that there is a valid contract between Abby and Kotts, analyse the exemption clause and state your views on whether it is valid and enforceable with respect to Abby’s claim for the damage caused to her kitchen floor and backyard, and the injury caused to her hand.

In your answer, you should identify the exemption clause and support your analysis with case law and the relevant provisions of the Unfair Contract Terms Act, Cap. 396 of Singapore. (30 marks)

(e) Identify one (1) possible ground on which Abby can rescind the contract with Kotts. Analyse and conclude whether Abby would be able to successfully rescind the contract. (15 marks)