Problem Question: Alpha Ltd recently bought two used cars, which were both each six months old. The cars were bought for its executives to drive. Jack, managing director of Alpha Ltd, saw the cars at Shyster's Garage.He noticed that one of the cars, a Spider, had an oil leak. The other car, a Locust, he noticed had a water leak in the boot. Jack did not check the boot of the Spider.

Jack was assured by Mr Shyster that "they are good little buses. You can rely on them." Jack took the cars for a test drive and then signed two contracts to purchase the respective vehicles on behalf of Alpha Ltd.Jack left the Spider with Shyster Ltd for the oil leak to be repaired and drove away in the Locust.

Two weeks later Jack returned to collect the Spider and also to have the leak in the boot of the Locust fixed. The next day, Jack discovered that the Spider had a water leak in its boot. He also found out that the oil leak had not been fixed. In fact, the oil leak was irreparable, which meant that the entire engine would have to be replaced. Moreover, Jack found out that soon after the first owner of the Locust had bought the car it had been in an accident. The Locust had subsequently been treated by the first owner's insurance company as a 'write-off.'

After having discovered all these things, Jack informed Shyster's Garage that he was rejecting the cars and demanded the purchase price of the vehicles be returned to Alpha Ltd.

Instructions: (answer based on the tips mentioned below, please include at least 4 cases)

1. This question raised issues relating to potential implied terms of the contract; possible misrepresentation and breach of express term together with any remedies available to Alpha Ltd (to the extent this was covered in the textbook, Business Law).

Overall the issues arising were:

• Liability for breach of the conditions as to satisfactory quality and fitness for purpose.
• Liability (for an express term and/or misrepresentation) arising out of the statement about the cars being 'good little buses,' etc.
• The remedies available to the buyer, and in particular, whether there has been acceptance of the goods so as to preclude rejection.

One approach to the dealing with these questions would have been to discuss the (potentially) implied conditions (SoGA) before going to discuss the matter of an express term/misrepresentation, and then concluding with remedies.

This example answer proceeds on the basis that a separate contract was signed in relation to each care and, therefore that it was presumably intended the parties intended two distinct contracts.

2. Outline of analysis and application of the law for s14(2) SGA:Did the seller sell the goods in the course of a business, yes or no (no claim under s14(2))? If yes, where the goods of a quality which a reasonable person would regard as satisfactory etc., yes (no claim under s 14(2)) or no? If no then did the buyer examine the goods before making the contract, yes (ought the matter complained about have been revealed by this examination?) or no (buyer has a claim under s 14(2)).

3. Fitness for Purpose (s14(3) of SGA)

4. 'Good Little Buses'

Shyster's assertion that the cars were 'good little buses' arguably implied that the cars were in good condition. In respect of which support may be had from Andrews v Hopkinson (1957). It may have amounted to: an express term, either a warranty or a condition, of the contract; and a misrepresentation.

5. Misrepresentation: Only available if reliance was placed on Shyster's statement. A series of questions arise: any indication of an presence or absence of such reliance in the facts, e.g. inspection having been carried out; timing of statement in relation to the inspection (i.e. after inspection); subsequent test drives but consider inadequacy of a test drive to establish truth or otherwise of Shyster's statement? It would not have been necessary for reliance exclusively on Shyster's comment.

6. Remedies (apart from misrepresentation - see above)

Assuming, breach of implied term in either s 14(2) or s14(3) then Alpha had the right of rejection since both terms are implied conditions.