Question

After this Mr Choden decides he needs a new car, He attends a car fair in order to buy one and sees a Lexus motor vehicle that he likes, He contracts with the seller, Fraser, to buy it for $20,000.

He and Fraser agree on all the terms including agreeing that Mr Choden will pick up the car from Fraser’s home on Monday night at which time Mr Choden will pay for the car in full. This is upon the condition however that Fraser obtains a new warrant of fitness for the car.

Fraser takes the “For sale” sign off the car and drives it home, stopping at his mechanics garage on the way to obtain a warrant of fitness. He parks it at home on Saturday afternoon. He locks it securely and sets the alarm. That night the car is broken into by thieves who disconnect the alarm. They take the car to a workshop on the other side of Auckland and break it down for spare parts which they sell.

The police investigate but are unable to find the thieves. In the course of their enquiries however the police discover that the thieves have sold the car stereo to the local second hand store. The manager of the store had no idea that the stereo was stolen when he paid for it.

Fraser tells Mr Choden that he is still liable to pay the sale price of the car despite the loss.

QUESTION FIVE: (Total: 15 marks. 540 words maximum)

(i) Discuss who is the owner of the Lexus, who is at risk for the loss of the Lexus, and whether Mr Choden is liable for payment of the purchase price.

(10 marks. 360 words maximum)

(ii) Explain what kind of property the car stereo is and who is its true owner.

(5 marks. 180 words maximum)

Answer 1

(i) As per the terms of contract between Mr.Choden (the Buyer) and Fraser (the seller), Mr.choden the buyer will buy the Lexus from Mr Fraser for a consideration of $ 20000 under the condition that

   a) Mr.Chooden will pick up the car from Fraser’s home on Monday night

   b) Mr Choden will pay for the car in full before Monday night

c) Fraser obtains a new warrant of fitness for the car before delivery.

As per the Law of contract an agreement giving rise to obligations which are enforced or recognised by law.   There are 3 basic elements to a contract   (i) agreement (ii) contractual intention and (iii) consideration.

The first requisite of a contract is that the parties should have reached agreement. Generally speaking, an agreement is reached when one party makes an offer, which is accepted by another party. In deciding whether the parties have reached agreement, the courts will apply an objective test.

In this case there is an agreement, an offer and an acceptance by both the parties Mr.Choden the buyer and Mr.Fraser the Seller and there is a contractual intention.   Hence it is a valid contract under the law.

There is an offer to sell and it has been accepted by the buyer under certain certain terms and conditions.   Both the parties to the contract are liable for the fulfilment of the terms of contract. There is a contractual obligation for fulfilment of the contract.

As per the agreement Mr Fraser agree on all the terms including agreeing that Mr Choden will pick up the car from Fraser’s home on Monday night at which time Mr Choden will pay for the car in full. This is upon the condition however that Fraser obtains a new warrant of fitness for the car.

In this case a) Mr.Fraser has not been obtained fitness for the car b) did not delivery the car as agreed to Mr.Choden.   Mr.Choden has time till Monday to make good the consideration and take delivery of the car.

The ownership of the vehicle still lies with Mr.Fraser since he has not made delivery of the vehicle and the consideration as per the contract also does not passed from the buyer to the seller.   The ownership passes from the seller to the buyer only after fulfilment of the conditions of the agreement, which is absent in this case.

The consequences of an act before passing ownership of goods to the buyer lies with the seller.  

The ownership of the Lexus lies with Mr Fraser and he is at risk for the loss of the Lexus.   Mr.Choden is not liable for payment of the purchase price.

ii) Car stereo is part of the car Accessories and Fraser is the true owner of the car and hence is owns the ownership of the accessories.