Problem questions are common type of question in law units. When you get a problem question you will get a set of facts you have never seen before, and you will have to explain what will happen when the law is applied to the facts.
When you answer a problem question, you should divide your answer into four parts using the IRAC (Issues, Rule, Application, Conclusion) format:
ISSUES Here you state the legal issues that arise from the problem. These should always be framed in the form of short, simple questions – that is, the questions of law that the parties are arguing about. Examples of this are: ‘Is tom liable to Brad in contract?’, ‘Has Frank breached his duty to act in the best interests of the corporation?’, ‘Is Mary liable in negligence to Tom?’, ‘If Mary is liable to Tom, are and defences available to her?’ Note that because they are questions, they should end with a question mark.
When identifying the legal issues, you should think carefully about the law you have learned and ask yourself what parts of the law are relevant to the facts, as this will indicate to you what the legal issues are.
RULE In this section, you state the rules of law that are relevant to each of the issues you identified. Statutes are the most important source of law, followed by case law. Statutes and case law constitute binding authority, so you must cite these if they are available. When citing cases it is not necessary to explain their facts – the rule of law they contain is all that is needed.
If there are no relevant statutes or cases, you may cite textbooks and material from the subject Modules, but it should be remembered that whereas statutes and cases are binding sources of law, textbook writings and the Modules are merely persuasive.
Please also remember that when you are discussing the law you should do so in the abstract – you do not refer to the facts of the problem in the Law section of your answer.
Remember also to explain all the law you want to rely on in your answer in your Rule section – you should not introduce new law in the Application section.
APPLICATION In this section, you apply the law to the problem. Here you must refer both to the facts of your problem and to the law you discussed in your Law section, and in so doing show what the result will be when you apply the law to the facts.
CONCLUSION You should end your answer with a conclusion in which you write brief sentences answering the questions you formulated in the Issues part of your answer.
PLEASE NOTE: The law contained in the model question and answer given to you as an example relates to contract law. However, this model question and answer are provided as examples of the structure that an answer to a problem question should have, which would be the same irrespective of the branch of law concerned.
Frank needs a new house. He meets with Gordon, who is a builder. He looks at several house plans. He chooses one that he likes and asks Gordon if the house will have a steel roof, saying “This is really important to me, as this is a windy area”. Gordon assures Frank that he can build a house with a steel roof, and on 1 July they sign a 50-page contract in which this is listed as one of the specifications. The overall cost of the house is stated in the contract as being $ 250 000. On 5 July , Gordon sends to Frank a bulky set of documents containing site plans, house plans, agreed colour schemes and landscaping plans, all consistent with the contract that was signed. Unnoticed by Frank was a single sheet of paper included in the pile, headed “Standard Terms of Our Construction Contracts”, which contained a statement (which did not appear in the July 1 contract) as follows:
“The building contractor excludes all liability for consequential damages taking the form of financial loss in the event of a breach of this contract”.
The day the house is finished Frank notices that although all the other terms of the contract have been complied with, the house has a tile roof, not a steel one. It would take 3 months to take off the tile roof and put on a steel one, and it would cost Frank $ 6 000 to rent another house to live in while the work is done. Advise Frank fully as to the legal issues arising out of this scenario and his legal rights against Gordon.
Given that Gordon has not build a steel roof as required in the contract signed in 1 July, was there a breach of contract and, if so, was it a breach of a condition or a warranty?
Is the exclusion clause contained in the documents sent on 5 July effective?
Where a party to a contract has breached a term, it is important to determine whether the breach is of a condition or of a warranty, as different remedies are available in each case. The test for whether a term is a condition or a warranty is found in cases such as Bettini v Gye (1876) 1 QBD 183 in which a singer’s failure to attend rehearsals as required under a contract was held to be a breach of a warranty, as the actual performance was able to go ahead and Poussard v Spiers (1876) 1 QBD 410, where failure if an actress breached a term of the contract requiring her to be present to perform from the start of the run of the play she was due to appear in – which was found to be a breach of a condition. In these cases the courts formulated a test to distinguish between conditions and warranties which relates to how important the term was to the aggrieved party. If the term was of such importance that the aggrieved party would not have entered into the contract unless he or she knew it would not be performed, then the term is a condition. If it is less serious, it is a warranty. This test was applied in more recent cases such as Associated Newspaper v Bancks  HCA 24.
The above cases also show that whether it is a condition or a warranty that has been breached has a significant effect on the remedies that the aggrieved party can obtain. Breach of a warranty entitles the aggrieved party to enforce the contract (by means of an order of specific performance requiring the other party to perform as agreed) and to claim damages (Latimer, 2001, pp. 434-5).
Breach of a condition gives the aggrieved party a choice either to terminate the contract and claim damages or to enforce the contract and claim damages (CSU LAW110 Modules, 2013, Topic 8). If the aggrieved party chooses to terminate the contract then they are rejecting the defective performance by the other party, do not have to perform themselves, and can claim damages.
The amount that can be claimed in damages, in accordance with cases such as Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 and Victoria Laundry Ltd v Newmann Industries Ltd  2 KB 528 is however much is necessary to put the aggrieved party in the same position they would have been in had the contract been properly performed, so long as the losses are reasonably predictable consequences of the breach (Latimer, 2011, pp. 484-6).
So far as exclusion clauses are concerned, under the common law, an exclusion clause is effective if it was part of a written contract (as in L’Estrange v Graucob  2 KB 394), as a party is presumed to have read what they signed. If the contract is not a written one, then the effectiveness of the exclusion clause depends on whether it was drawn to the other party’s intention when the contract was being entered into and before agreement was made, as is shown by Thornton v Shoe Lane Parking Ltd  2 QB 163. An exclusion clause which a party becomes aware of only after they have entered into the contract is not part of the contract and is thus void, as is shown by Olley v Marlborough Court Hotel Ltd  1 KB 532 and eBay International AG v Creative Festival Entertainment Pty Ltd  FCA 1768. Such an exclusion clause cannot be relied upon to limit the plaintiff’s rights to sue or recover damages (Latimer, 2011, p. 453).
Applying the test of materiality, or importance, established by cases such as Bettini v Gye (1876) 1 QBD 183 and Poussard v Spiers (1876) 1 QBD 410, and the fact that the material used to make the roof was specifically expressed as being an important issue by Frank, it is likely that a court would find that the term relating to the steel roof was a condition rather than a warranty, as Frank would have been unlikely to proceed with the contract had Gordon not agreed to that specification.
The remedies provided for under the common law provide Frank with a choice (CSU LAW110 Modules, 2013, Topic 8). Frank can either terminate the contract, which means that he rejects the house and does not pay for it and can sue for damages suffered which would be the cost of renting a house while another house is built (which would obviously be longer than three months); or he can elect to maintain the contract and ask a court to give an order of specific performance requiring Gordon to complete the work, and claim damages from Gordon to cover his reasonably predictable living expenses ($ 6 000) until the roof is put on. In either event, the principle of restitution contained in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 means that Gordon will have to put Frank back in the same position he would have been in had there been no delay in giving occupation of the house – in other words, Gordon will need to pay Frank’s rent as a reasonably predictable consequence of the house not being completed in accordance with the contract.
Applying the critical rule used in determining whether an exclusion clause is part of a contract – that is is whether it was part of the contract when it was agreed to (Olley v Marlborough Court Hotel Ltd  1 KB 532) would lead one to find that since the exclusion clause was contained in a document sent to Frank after he and Gordon had entered into the contract, it was not part of the contract and so it would not limit Gordon’s liability.
Gordon has breached a term of the contract. The term is likely to be found to be a condition, entitling Frank to terminate and seek damages or enforce the contract and seek damages. The exclusion clause will not be effective.
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