I've been playing U7 using Exult and items seem to disappear for no reason. The first time was the contract for the woodcutter to stop cutting down silverleaf trees. So I started the game again and this time the pocketwatch has disappeared. Also, in Forge of Virtue, the command "Bind" is missing so that the Black Sword can't be made.
The game is not downloaded from anywhere - I bought it years ago on CD, and years before that on floppy. I loved it back then and was so excited to find Exult.

Has anyone else had this sort of problem? Does anyone know how to fix it?

did you check the exult forum ?
You're likely to find more experienced users there.