Hard2 marksMultiple Choice

The law of obligationsThe law of obligationsBreach of contract

This question is part of a case study — click to read the full scenario(Case 46)

Section B - Scenario 1

NovaStream Ltd is a tech startup developing AI software. On 1st May, NovaStream emails a supplier, DataCore, offering to buy 50 servers for £100,000, stating 'Please reply by 5th May'. On 2nd May, DataCore posts a letter accepting the offer. On 3rd May, NovaStream finds a cheaper supplier and emails DataCore revoking the offer. DataCore's letter of acceptance arrives on 6th May.

Has a binding contract been formed between NovaStream Ltd and DataCore?

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ACCA · Question 48 · The law of obligations

Section B - Scenario 1

NovaStream Ltd is a tech startup developing AI software. They hire a freelance coder, Ben, to write a specific algorithm for £5,000, payable on completion. Ben completes 80% of the work but then abandons the project. NovaStream has to pay another coder £2,000 to finish the work.

What is Ben entitled to claim under the contract?

Answer options:

£4,000, representing the 80% of the work he completed.

£3,000, which is the contract price minus the cost of completion.

Nothing, because the contract is an entire agreement and he has not substantially performed it.

£5,000, as NovaStream can use the code he has already written.

How to approach this question

Apply the rule of entire obligations (Cutter v Powell) and consider if the exception of 'substantial performance' applies.

Full Answer

C.Nothing, because the contract is an entire agreement and he has not substantially performed it.✓ Correct

The general rule (Cutter v Powell) is that if a contract requires entire performance, no payment is due until the work is completely finished. While the doctrine of 'substantial performance' (Hoenig v Isaacs) allows payment minus the cost of defects, abandoning a project at 80% is generally not considered substantial performance. Therefore, Ben is entitled to nothing.

Common mistakes

Assuming a pro-rata payment is automatically due for partial work.

Question 47 All questions Question 49

Practice the full ACCA LW — Corporate and Business Law Practice Exam 6

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