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©MNoonan2009 Supply of Goods and Services Module 3 Summer 2009-2010.

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1 ©MNoonan2009 Supply of Goods and Services Module 3 Summer

2 ©MNoonan2009 This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited.

3 ©MNoonan2009 Sale/Supply of Goods and Services In modules,3,4,and 5, we discuss The Contract for Sale/Supply of Goods and Services Product and service liability The law relating to performance of the contract At the end of these 3 modules, we will be able to advise a client on the appropriate legal action to resolve their problem: --in breach of contract where there is dissatisfaction by either party, --actions for breach of specific statutory rights with access to statutory remedies and --whether other legal solutions may be available e.g. negligence. --bearing in mind that there may also be preventative strategies, practical solutions and ADR that are relevant to an overall solutions

4 ©MNoonan2009 Legislation relating to the sale/supply of goods and services What is required knowledge of legislation?: A good understanding of and ability to work with: Most provisions of the Sale of Goods Act (NSW) Various provisions of the Trade Practices Act (Cth)-see outline Note also mirror provisions of the TPA in Fair Trading Act Sale of Goods (Vienna Convention) Act (NSW) for international sales Limited other references e.g Consumer Credit Code (linked credit provider)

5 ©MNoonan2009 SALE/SUPPLY OF GOODS and SERVICES Historically, our law is based on FREEDOM OF CONTRACT + FREEDOM TO CONTRACT IN or OUT However, SUPERIOR BARGAINING POWER lead to ABUSE WHICH LED TO: - CONSUMERISM (Note that this may extend to small business) WHICH RESULTED IN CONSUMER PROTECTION LEGISLATION COVERING SUCH THINGS AS  IMPLIED TERMS  RIGHTS TO COMPENSTION  PROHIBITION OF MARKETING ABUSES  UNFAIR CONTRACTS LEGISLATION

6 ©MNoonan2009 PRODUCT/SERVICE LIABILITY BREACH OF CONTRACT AGAINST SUPPLIER including EXPRESS conditions and warranties and/or those IMPLIED by law. DOES NOT MATCH DESCRIPTION/SAMPLE NOT FITNESS FOR PURPOSE NOT OF MERCHANTABLE QUALITY Sales of Goods, Trade Practices Act. Vienna Convention UNFAIR PRACTICES IN TRADE OR COMMERCE Misleading, deceptive, unconscionable Fair Trading, Trade Practices, Unfair Contracts Acts TORT- MISREPRESENTATION, NEGLIGENCE BREACH OF STATUTORY DUTY- does not match description, not fit for purpose, not merchantable, defective- usually against manufacturer, distributor.

7 ©MNoonan2009 PRODUCT AND SERVICE PRODUCT LIABILITY FACTS LAW REMEDIES Goods/services Consumer sale? Action in contract unsatisfactory Formation of contract -breach Rescission/Damages Express terms Equitable Implied-SOGA, TPA -Div 2,2A TPA Orders TPA s. 52 misleading,deceptive IT general law Intnl sale? Vienna Convention Fines ACCC Tort Financial Services? ASIC Act Goods defective TPA VA manufacturer liability TPA remedies causing loss, injury defective goods Defendant taken Unconscionable provisions TPA remedies advantage of 51AA, 51AB, 51AC TPA serious inequality Contracts Review Act harsh agreement Consumer Credit Act Untruthful representationTort/s. 52 TPA Damages/TPA Change in possession without transfer of titleBailment? Damages

8 ©MNoonan2009 IDENTIFICATION OF NATURE OF TRANSACTION In order to apply the correct law, we must first know what we have. Is it a SALE?-of goods,services,intangibles Is it an agreement to sell in the future? A SUPPLY?-but, not a sale? e.g.lease, Hire Purchase Is it a LICENCE? Is it something else? GIFT, BARTER, BAILMENT,FRANCHISE,SECURITY?

9 ©MNoonan2009 SALE OF GOODS JANSZ V. G M B IMPORTS (1979) VR GMB Imports was licensed tobacco wholesaler. 2. Licence expired On contracted to buy $5,000,000 tobacco. 4. And to sell $2,000,000 worth of that tobacco to Permewan. 5. Mid April 77, fulfilled obligation to Permewan. 6. Prosecuted for selling tobacco without licence. When had sale taken place? or April 77? COURT FOUND: Unascertained goods and so s.21 Goods Act (Vic) applied: “Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.” Promise to sell on ….agreement to sell only Sale not until later in 1977

10 ©MNoonan2009 SALE OF GOODS SYMES V. LAURIE (1985) 2 QD R 547 Laurie bought house from owner and sold it to Symes. Under Contract to take house to land and set it up. Damaged in transit. Whose risk? Who bears loss? Property of Symes or Laurie at relevant time?  Sale of “Goods” within Sale of Goods Act?  If so, risk & passing of title provisions in S of G Act apply. COURT FOUND Previous cases depended on relevant facts. No principle which could be applied. House already in existence. House attached and agreement to sever. QSOGA s.20 transferred at time intention to transfer. QSOGA s.21 rules for ascertaining intention. resulted in property passing at time of contract. RISK WITH SYMES.

11 ©MNoonan2009 SALE OF GOODS HEWETT V. COURT (1983) 149 CLR Hewett family contracted with Ogilby for construction of transportable house. 2. Cost $34,116 paid to $20, Ogilby part finished, money troubles, handed over unfinished house. 4. Ogilby went into liquidation. 5. Preference? 6. Equitable lien? “The distinction between a contract for the sale of goods and a contract for the provision of work and materials is frequently a fine one and the tests for distinguishing the one from the other are unsatisfactory and imprecise” Contract for work and materials? Contract for sale of goods? COURT FOUND: Contract for work. Equitable lien available nevertheless.

12 ©MNoonan2009 SALE OF GOODS ESSO PETROLEUM CO. V. CUSTOMS & EXCISE COMMISSIONERS (1976) 1 SLR 1 1. Esso promoted petrol 2. With loyalty gift 3. Coins with Soccer heroes 4. Collect the full set of thirty coins. One coin given when you bury four gallons of fuel 5. Coins sold to public and tax on sales appropriate? Legal relationship. Sale of goods? COURT FOUND  Coins not transferred for money consideration  Consideration was the making of another contract  To buy petrol  No tax applicable

13 ©MNoonan2009 DEFINITIONS We must acquaint ourselves with statutory definitions so that we can identify transactions within their scope. We must not assume that the ordinary meaning of a word is the same as the statutory definition. To illustrate, we will look at the following:

14 ©MNoonan2009 SALE OF GOODS THE CONTRACT DEFINITIONS cont.  SALE OF GOODS s. 6 SGA: A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. Where transfer at future time, or condition, contract is agreement to sell. Agreement to sell becomes a sale when time elapses or conditions fulfilled subject to which property is to be transferred.  MONEY CONSIDERATION Must be money involved Even if that is only part of consideration Note purchase of car-part trade-in, part money See Loyalty gift…Esso

15 ©MNoonan2009 SALE OF GOODS THE CONTRACT DEFINITIONS cont. Articles 1 and 2 of Vienna Convention 1. Convention applies to contracts of sale of goods between parties whose place of business are in different States. 2. Does not apply to sales:  Of goods bought for personal, family or household use  By auction  On execution or otherwise by authority of law  Of stocks, shares, investment securities, negotiable instruments or money  Of ships, vessels, hovercraft or aircraft  Of electricity

16 ©MNoonan2009 TPA s. 4 Definition “Supply” Supply when used as a verb, includes: a)in relation to goods-supply (including re- supply) by way of sale, exchange, lease, hire or hire-purchase; and b) in relation to services-provide, grant or confer; and, when used as a noun, has a corresponding meaning, and “supplied” and “supplier” have corresponding meanings.

17 ©MNoonan2009 DEFINITIONS TRADE PRACTICES ACT S. 4 Goods “Goods” includes: a) ships, aircraft and other vehicles; b) animals, including fish; c) minerals, trees and crops, whether on, under or attached to land or not; and d) gas and electricity;

18 ©MNoonan2009 SALE OF GOODS THE CONTRACT DEFINITIONS  GOODS s.5(1) SGA : Include all chattels personal other than things in action and money.The term INCLUDES Emblements (crops resulting from human labour)and things attached to or forming part of the land which are agreed to be severed prior to sale (House to be removed Symes). DOES NOT INCLUDE: Money (unless collection rather than currency) Intangibles Choses in action Intellectual property CAN INCLUDE FUTURE GOODS: S. 10: The goods which form the subject of a contract of sale may be either existing goods owned or possessed by the seller or future goods. Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.

19 ©MNoonan2009 IS A COMPUTER SYSTEM "GOODS”? TOBY CONSTRUCTIONS PRODUCTS PL V. COMPUTA BAR SALES PL  Package consisting of 3 items hardware ($14,390)and 2 items of software (business management and Wordstar ($2,160))  Vendor agreed to install, train staff and provide post sale service.  Plaintiff alleged breaches of conditions or warranties implied by SGA and TPA. Only applied if "goods".  Work to be done and materials provided and perhaps transfer intellectual property? Rogers J: Sale of this computer system comprising both hardware and software constitutes a sale of goods with both SGA and TPA. Important to him that the total system was off the shelf; not individually crafted.

20 ©MNoonan2009 SALE OF GOODS IS A COMPUTER SYSTEM "GOODS" ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL COMPUTERS LIMITED Court of appeal London 26/7/96 Council invited tenders for provision of computerized rate system. Faulty software led the council to believe that they had more ratepayers than in fact they did. Was the contract subject to any implied term as to quality or fitness for purpose, and if so, what was the nature of that term? Equivalent of Sale of Goods Act? Otherwise? Is software goods? (Software can involved a tangible disc onto which a program is encoded and the intangible program itself.) For purposes of English Sale of Goods Act and Supply of Goods and Services Act the definition of "goods" would include the disc but not the program.

21 ©MNoonan2009 SALE OF GOODS IS A COMPUTER SYSTEM "GOODS" ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL COMPUTERS LIMITED Court of Appeal London 26/7/96 Cont. Considered Toby Construction…sale of whole computer system…sale of Goods within NSW legislation. In this case however, defective program not sold and probably not hired. Employee went to council premises taking with him a disc and he transferred the program into the computer. Such a transfer was not a transfer of goods. Turned to the common law for situation when a term would be implied…..An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract…it must have been a term that went without saying….Found to be the case in this situation.

22 ©MNoonan2009 ASX operations P/L (ASXO) and Australian Stock Exchange Limited (ASX and Pont Data Australia P/L (1991)ATPR Pont supplies electronically disseminated financial information to stockbrokers market analysts etc. ASXO supplies electronic. Proceedings concerned a contract between these two for the supply of information by ASXO to Pont by electronically coded signals and allegations of behaviour contrary to ss. 45, 46 and 49 of TPA requiring Pont to take certain data if it was to take other data. On issue that affected and was discussed in the case was whether the provision of information concerned was “services” or “goods”. If services, no contravention of s. 49 and appeal would succeed. If “goods”, it would be otherwise. Given the TPA definition of “goods” includes electricity, does electricity include these encoded electrical impulses? While the trial Judge thought so; on appeal, the court thought not.

23 ©MNoonan2009 DEFINITIONS S.13 SOGA ASCERTAINMENT OF PRICE (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

24 ©MNoonan2009 DEFINITIONS S.14 SOGA AGREEMENT TO SELL AT VALUATION (1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided; provided that if the goods or any part thereof have been delivered to and appropriated by the buyer, the buyer must pay a reasonable price therefor. (2) Where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain an action for damages against the party in fault.

25 ©MNoonan2009 PRICE Consider the Following: At a price to be agreed by the parties in writing from time to time Price to abc=cost to xyz + percentage profit margin At valuation At a value to be fixed by a member of the Stock and Station Agents Association to be chosen by S, the seller I will take x million litres for y million dollars

26 ©MNoonan2009 PRICE Trawl Industries of Australia P/L v. Effem Foods P/L (T/A Uncle Bens of Australia) UBA had pet food factory and wanted to launch a new product using Jack Mackeral. UBA entered into an agreement with TIA to buy Jack Mackeral under which TIA would incur the expense of acquiring and installing a processing line conditional on UBA purchasing Jack Mackeral for the period at a price which would provide a reasonable commercial profit to TIA. These base Prices shall apply for calendar year In the course of Nov 1988 and each subsequent Nov up to and including Nov 1992, TIA and UBA shall confer and establish applicable prices for the immediately following calendar year using the following formula: Price to UBA = Cost to TIA + percentage profit margin Void for uncertainty? No, capable of being worked out by court. The fact that evidence would be required and might be difficult not a bar. Incomplete? No, formula is sufficient.

27 ©MNoonan2009 Vienna Convention Price Art 53. The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention Art 54. The buyers obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. Art 55. Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned. Art 56. If the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight. See also 9, 19, 57, 58 59

28 ©MNoonan2009 Trade Practices Act s. 4 Services “services” includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights benefits, privileges or facilities that are, or are to be, provided, granted or conferred under; a contract for or in relation to: the performance of work(including work of a professional nature), whether with or without the supply of goods; the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; a contract of insurance; a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or any contract for or in relation to the lending of moneys; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service;

29 ©MNoonan2009 TRADE PRACTICES ACT SECT 74 Warranties in relation to the supply of services ( 1) In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connection with those services will be reasonably fit for the purpose for which they are supplied. (2) Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result that he or she desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connection with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation's skill or judgment. (3) A reference in this section to services does not include a reference to services that are, or are to be, provided, granted or conferred under: (a) a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored; or (b) a contract of insurance.

30 ©MNoonan2009 Problems with Services - SMH 06/03/03 Big Pond Ripples with Angry Users by Sue Lowe Telstra has spent almost $2m compensating customers of its Internet cable service after widespread collapses in January and February….Telstra yesterday acknowledged repeated breakdowns of its high-speed cable network and offered customers a rebate of 25% on their typical $60 to $90 monthly bills. Telstra’s internet arm, Big Pond, is estimated to have between 70,000 and 80,000 cable internet customers.…. After a threatened class action lawsuit by customers of its broadband internet network ADSL in 2001 Telstra introduced a service guarantee for ADSL but it was not extended to the cable network. Under the ADSL guarantee customers are given a 10% rebate for every 7 hours and 24 minutes their service is unavailable.

31 ©MNoonan2009 TRADE PRACTICES ACT SECT 73 Linked Credit Provider (1) Where: (a) a corporation (in this section referred to as the supplier ) supplies goods, or causes goods to be supplied, to a linked credit provider of the supplier and a consumer enters into a contract with the linked credit provider for the provision of credit in respect of the supply by way of sale, lease, hire or hire-purchase of the goods to the consumer; or (b) a consumer enters into a contract with a linked credit provider of a corporation (in this section also referred to as the supplier ) for the provision of credit in respect of the supply by the supplier of goods or services, or goods and services, to the consumer; and the consumer suffers loss or damage as a result of misrepresentation, breach of contract, or failure of consideration in relation to the contract, or as a result of a breach of a condition that is implied in the contract by virtue of section 70, 71 or 72 or of a warranty that is implied in the contract by virtue of section 74 of this Act or section 12ED of the Australian Securities and Investments Commission Act 2001, the supplier and the linked credit provider are, subject to this section, jointly and severally liable to the consumer for the amount of the loss or damage, and the consumer may recover that amount by action in accordance with this section in a court of competent jurisdiction.

32 ©MNoonan2009 CONSUMER CREDIT CODE - SECT 117 (1) For the purposes of this Code, a "linked credit provider" of a supplier means a credit provider-- (a) with whom the supplier has a contract, arrangement or understanding relating to the supply to the supplier of goods in which the supplier deals, relating to the business carried on by the supplier of supplying goods or services or relating to the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services; or (b) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (c) whose forms of contract or forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or (d) with whom the supplier has a contract, arrangement or understanding under which contracts or applications or offers for credit from the credit provider may be signed by persons at the premises of the supplier.

33 ©MNoonan2009 S. 62 SOGA DEFINITION OF CONSUMER SALE In this Part, “consumer sale” means a sale of goods (other than a sale by auction) by a seller in the course of a business where the goods: are of a kind commonly bought for private use or consumption; and are sold to a person who does not buy or hold himself or herself out as buying them in the course of a business.

34 ©MNoonan2009 S. 63 SOGA ONUS OF PROOF In any proceedings arising out of a contract for a consumer sale, the onus of proving that the sale is not a consumer sale lies upon the party so contending.

35 ©MNoonan2009 “consumer” - goods-TPA 4B Unless contrary intention appears: a person taken to have acquired goods as a consumer if: Test 1 price does not exceed prescribed amount ($40,000) or where price exceeded prescribed amount, goods were of a kind ordinarily acquire for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle AND Test 2 Goods not for re-supply, using them up or transforming them in trade or commerce in the course of a process of production, manufacture repairing or treating other goods or fixtures

36 ©MNoonan2009 “consumer” - services-TPA 4B A person taken to have acquired services as consumer if: the price did not exceed prescribed amount OR where price exceeded prescribed amount- the services were of a kind ordinarily acquired for personal, domestic or household use or consumption

37 ©MNoonan2009 Aspects of Contract We will go over some general matters before examining specific terms of contracts and product/service liability. They are: Express terms of contract Conditions and warranties Implied terms Interaction of statute with the common law

38 ©MNoonan2009 Problems involving Contract When analysing problems involving Contract Understand whether there is a Contract If so, what are the express terms? Written/oral Does the law limit these in any way? Are there any implied terms? What are they? common law/custom/statute Is there any inconsistency between express and implied? Which ones prevail? Decide on the terms of the contract. Consider the problem in light of this contract. Is there any action in contract available?

39 ©MNoonan2009 SALE OF GOODS CONDITIONS AND WARRANTIES DISTINGUISH FROM: 1. Puffery 2. Mere representation 3. Leading to but not forming part of contract CONDITION  Essential  Breach gives right to end contract  And/or sue for damages WARRANTY Less important than condition  Ancillary to main object of contract  Breach gives right to damages

40 ©MNoonan2009 OSCAR CHESS V. WILLIAMS (1957) 1 WLR 370 Williams bought Morris secondhand. Traded it in on new Hillman from Oscar Chess. Williams told salesman Morris was 1948 model. Registration book showed Morris first registered £290 pounds allowed for trade in.18 months later OC discovered Morris was 1939 model. No difference in model OC sued for difference in trade-in price. DENNING J FOUND:  Both parties mistakenly assumed Morris was 1948  Fundamental to contract, but a term of contract?  If prompt, equity might have set it aside.  Now, only remedy damages and must prove warranty.  Warranty = binding promise.  Binding promise or only innocent misrepresentation?  Proper inference from known facts? Only latter. Loss must lie where it falls

41 ©MNoonan2009 SALE OF GOODS DICK BENTLEY PRODUCTIONS V. HAROLD SMITH (MOTORS) (1965) 1 WLR 623 Dealer, Smith sold second hand Bentley to B. Smith told B car had travelled only 20,000 miles since replacement engine and gearbox. Speedometer showed 20,000 miles. Mileage more like 100,000. INNOCENT MISREPRESENTATION? (NO DAMAGES) OR WARRANTY? (DAMAGES) Question depends on conduct of parties, their words and behaviour rather than thoughts.  Statement an inducement to act?  Smith in a position to know, or at least to find out, history of car.  Different to Mr. Williams in Oscar Chess in that respect.  Not dishonest, no fraud.  Statement as to 20,000 without foundation. Lord Denning found warranty in this case.

42 ©MNoonan2009 INTERMEDIATE OR INNOMINATE TERMS CEHAVE V. BREMER HANDELSGESELLSCHAFT (1976) 1 QB 44 Bremer sold 3,400 tons of citrus pellets to Cehave for £100,000. They were to be used for manufacture of cattle food. A clause in contract read: “Shipment to be made in good condition”. A small amount was damaged. Cehave rejected the lot and claimed a refund. The people holding the pellets sold them for £30,000 and that buyer sold them to Cehave for same amount. Lord Denning MR Was the clause in the contract a condition so that ANY breach entitled the buyer to reject the goods? No, this was what he called an Intermediate stipulation. No right to reject unless serious One is not entitled to reject something because it is not perfect. Citrus pellets were commonly bought for making cattle food. They were as fit for that as was reasonable; shown by eventual use. Some damaged, but not to such an extent to entitle rejection. Damage such as to entitle buyer to an allowance off price. Apply good commercial sense.

43 ©MNoonan2009 LEASON V. PRINCES FARM (1983) 2 NSWLR 382 Leason ran a stud. He wanted a filly sired by Grand Chaudiere. Princes advertised a filly for sale. Said it was sired by Grand Chaudiere. Leason bought the filly. 9 months later, he found out it was not true.Leason sought to return and get refund. Princes refused. Leason sued. COURT FOUND 1. No doubt an innocent misrepresentation. 2. Right in equity for rescission?-Discussion of cases, in theory not available in innocent misrepresentation after contract executed  This filly not what it wanted  Not what it was led to believe it was getting  Not what it paid for

44 ©MNoonan2009 The relevance of Leason- interaction between law of contract (both express terms and as implied by the SOGA, TPA and FTA) and “common law” (the law of Equity- remedies for innocent misrepresentation).The SOGA expressly preserves common law rules,but, should this be construed in a narrow sense to exclude equitable remedies?. In NSW, Leason was authority for wider interpretation. In equity, innocent representation does not give rise to damages; only rescission. Even then, if contract affirmed, may not be available. Contradictory authorities discussed in Leason, where it was decided rescission was available, despite delivery of horse. However,no affirmation after lack of correct breeding discovered. Debate continued. In 1988, NSW SOGA amended-s. 4(2A)- to make very clear that rules of equity relating to effect of misrepresentation apply to contracts for the sale of goods and permit rescission even where the misrepresentation has become term of contract and/or contract performed. The TPA (&FTA) have taken over now for many types of misleading / deceptive conduct. Also, TPA may provide damages for innocent misrepresentation; whereas equity does not. (damages available in Equity for fraudulent misrepresentation though).If next we turn to law of contract, we must look at express terms….including exclusion clauses to assess situation. If exclusion clause effective, then it may prevent remedy. Some of the implied terms and provisions of the SOGA can be modified in certain contracts and some cannot.See s. 16 (2) and (3) when condition may have to be treated as a warranty where buyer has accepted goods. In Leason, if this applied, returning the horse (breach of condition) may not have been an option and only damages would have been available (breach of warranty).The legislation and case law is not identical in the various Australian jurisdictions. For the purpose of our course, concentrate on NSW. For purposes of professional life; bear that in mind.

45 ©MNoonan2009 IMPLIED TERMS - TITLE S.17 SALE OF GOODS ACT 1923 IN A CONTRACT OF SALE UNLESS THE CIRCUMSTANCES OF THE CONTRACT SHOW A DIFFERENT INTENTION THERE IS: AN IMPLIED CONDITION… – In CONTRACT FOR SALE That SELLER HAS A RIGHT TO SELL – AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME PROPERTY IS TO PASS AN IMPLIED WARRANTY – BUYER SHALL HAVE AND ENJOY QUIET POSSESSION AN IMPLIED WARRANTY – GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE NOT DECLARED AT TIME CONTRACT

46 ©MNoonan2009 ROWLAND V. DIVALL (1923) 2 KB 5000 MR. DIVALL BOUGHT CAR SOLD IT TO ROWLAND WHO SOLD IT TO RAILSDON POLICE TOOK IT FROM RAILSDON STOLEN CAR Atkin LJ 1. TOTAL FAILURE OF CONSIDERATION 2. IMPLIED CONDITION SELLER HAD RIGHT TO SELL 3. SELLER NO SUCH RIGHT 4. NO SALE AT ALL 5. NO OBLIGATION TO RETURN CAR TO SELLER SELLER NOT ENTITLED TO COMPLAIN ABOUT BENEFIT TO BUYER OF USE 6. MONEY HAD AND RECEIVED ON FAILURE OF CONSIDERATION

47 ©MNoonan2009 Niblett Limited v Confectioners’ Materials Co Ltd (1921) 3KB 387 Confectioners’ sold 3,000 tins of condensed milk to Niblett’s on CIF Contract. Although the documents did not show which brand of condensed milk was the subject of the sale, Confectioners’ argued that under an oral contract, it would be one of three brands - “Freedom”, “Tucson”, “Nissley”. Confectioners’ delivered 2,000 cases of “Freedom” and then 1,000 tins of “Nissley”. In November, Niblett’s received a letter from Nestle, stating that “Nissley” imitated the Nestle trademark and asked Niblett not to sell it. It also threatened to take proceedings against Niblett. Niblett signed an undertaking not to sell, advertise or offer for sale the “Nissley” condensed milk. They then unsuccessfully asked Confectioners’ to take it back and unsuccessfully applied for an export license for it.

48 ©MNoonan2009 Niblett Limited v Confectioners’ Materials Co Ltd cont. Niblett claimed damages for breach of warranty: - 1. that the milk was of merchantable quality; 2. that Confectioners’ had a right to sell it; 3. that Niblett should have enjoyed quiet possession; and 4. there was an implied condition or warranty that the label on the milk would not infringe any trademark. Bankes N J, of the English Court of Appeal, found that there was a clear breach of Section 12 of the English Sale of Goods Act, 1893, (S. 17 SOGA) because Confectioners’ had no right to sell the goods as they were, and Niblett had never enjoyed quiet possession.

49 ©MNoonan2009 Microbeads v Vinhurst Road Markings Ltd (1975) 1 ALLER 529 Prismo held a patent for a machine for making white lines on roads. The complete specification was published in November It was entitled to institute proceedings for infringement in 1972, when the letters patent were granted. At the beginning of 1970, Vinhurst brought a machine for making white lines from Microbeads.. property in the machine passed before Nov Vinhurst knew nothing about the patent, it found the machine unsatisfactory and didn’t pay Microbeads. Microbeads sued for the price. Vinhurst alleged breach of the term of fitness for purpose, and claimed that Microbeads did not have the right to sell the machine and Vinhurst did not have quiet possession. Lord Denning found that because the sale had occurred prior to the grant of the patent, there was no breach of the condition that the seller had the right to sell the goods. They were entitled to do whatever they liked with them at the time. However, he found a breach of the implied warranty for quiet possession. He found that the words “to have and enjoy” applied not only at the time of sale but for to future enjoyment.

50 ©MNoonan2009 IMPLIED TERMS - TITLE S.69 TRADE PRACTICES ACT 1974  IN A CONTRACT OF SUPPLY OF GOODS BY A CORPORATION TO A CONSUMER OTHER THAN A S.69(3) CONTRACT THERE IS: AN IMPLIED CONDITION IN CONTRACT FOR SALE THAT SUPPLIER HAS A RIGHT TO SELL - AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME PROPERTY IS TO PASS AN IMPLIED WARRANTY CONSUMER SHALL HAVE AND ENJOY QUIET POSSESSION - EXCEPT FROM PERSON ENTITLED TO BENEFIT CHARGE OR ENCUMBRANCE DISCLOSED OR KNOWN BEFORE CONTRACT MADE AN IMPLIED WARRANTY GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE - NOT DISCLOSED OR KNOWN BEFORE CONTRACT MADE

51 ©MNoonan2009 IMPLIED TERMS - SOGA- TITLE-feeding the title PATTEN V. THOMAS MOTORS (1965) NSWR 1457 Miss P obtained a car on Hire Purchase from CAGA. She sold it to Dealer, Clinton Motors. After various transfers, TM bought it and sold to P in May 61. In August 61, Miss P obtained a loan from D&I purporting to give a Bill Of Sale over the car. She used the money to pay out the Hire Purchase agreement with CAGA On 09/08/61. Miss P did not repay D&I and they repossessed the car. P sued TM for Breach Of Warranty Of Title S. 17(1) SOGA In Sept 63. Breach Warranty rather than condition (Termination No Longer Possible). HAD ORIGINAL DEFECTIVE TITLE BEEN “FED” BY PAYING OUT HIRE PURCHASE CO? IF SO, ANY CAUSE OF ACTION UNDER S. 17(1) EXTINGUISHED. COLLINS J. YES, TITLE COULD BE FED IN THIS WAY. NO CAUSE OF ACTION.

52 ©MNoonan2009 IMPLIED TERMS - DESCRIPTION S.18 SALE OF GOODS ACT 1923 WHERE:  THERE IS CONTRACT FOR SALE OF GOODS BY DESCRIPTION THERE IS:  AN IMPLIED CONDITION THAT GOODS WILL CORRESPOND WITH DESCRIPTION IF SALE BY SAMPLE + DESCRIPTION NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION

53 ©MNoonan2009 IMPLIED TERMS - DESCRIPTION S.70 TRADE PRACTICES ACT 1974 WHERE:  THERE IS CONTRACT FOR SUPPLY OF GOODS (OTHERWISE THAN BY AUCTION) BY A CORPORATION IN COURSE OF BUSINESS TO A CONSUMER BY DESCRIPTION THERE IS: AN IMPLIED CONDITION THAT GOODS WILL CORRESPOND WITH DESCRIPTION IF SALE BY SAMPLE + DESCRIPTION, NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION. CAN STILL BE SALE BY DESCRIPTION EVEN IF ONLY EXPOSED FOR SALE OR HIRE AND SELECTED BY CONSUMER. S. 74(2).

54 ©MNoonan2009 IMPLIED TERMS - DESCRIPTION BEALE V. TAYLOR (1967) 1 WLR 1193 Mr. Taylor believed his car was a 1961 herald. He advertised it for sale as such. Mr. Beale bought it but found it was half of a 1961 herald and half an older one welded together. Mr. Beale sued for a refund. Both parties were innocent Seller said the sale was not by description but the sale of a car as seen, tried and approved. He denied the buyer had suffered loss or damage. SELLERS LJ IN COURT OF APPEAL 1.SALE BY DESCRIPTION 2.WITHIN SALE OF GOODS ACT 3.BUYER ENTITLED TO REFUND LESS SCRAP VALUE

55 ©MNoonan2009 IMPLIED TERMS - DESCRIPTION & SAMPLE NICHOL V. GODTS (1854) 156 ER 410 Nichol showed samples of oil to Godts. He described the oil as: ‘Foreign refined rape oil, warranted only equal to samples’ Godts entered into a written contract to buy 33 tons. The oil corresponded with the sample, but not the description. It was a mixture of rape and hemp oil. Godts refused to accept or pay. Nichol sued 1.ATTEMPT AT EXCLUSION 2.AGREED TO DELIVER FOREIGN REFINED RAPE OIL 3.DID NOT DO SO 4.CONTRACT NOT PERFORMED

56 ©MNoonan2009 IMPLIED TERMS - QUALITY OR FITNESS S.19 SALE OF GOODS ACT 1923  SUBJECT TO PROVISIONS OF ACT NO IMPLIED WARRANTY OR CONDITION AS TO QUALITY OR FITNESS EXCEPT WHERE: BUYER EXPRESSLY OR BY IMPLICATIONMAKES KNOWN PARTICULAR PURPOSE BUYER RELIES ON SELLER’S SKILL AND JUDGEMENT AND GOODS ARE TYPE IT IS SELLER’S BUSINESS TO SUPPLY THERE IS: AN IMPLIED CONDITION THAT GOODS ARE REASONABLY FIT FOR PURPOSE

57 ©MNoonan2009 IMPLIED TERMS - QUALITY OR FITNESS S.19 SALE OF GOODS ACT 1923 EXCEPT WHERE: GOODS BOUGHT BY DESCRIPTION and SELLER DEALS IN GOODS OF THAT DESCRIPTION THERE IS: AN IMPLIED CONDITION THAT GOODS SHALL BE OF MERCHANTABLE QUALITY EXCEPT WHERE BUYER HAS EXAMINED DEFECTS SHOULD HAVE BEEN REVEALED ON EXAMINATION  IMPLIED WARRANTY CAN ARISE BY USAGE OF TRADE  EXPRESS WARRANTY OR CONDITION  DOES NOT NEGATIVE IMPLIED WARRANTY OR CONDITION  UNLESS INCONSISTENT

58 ©MNoonan2009 IMPLIED TERMS - QUALITY OR FITNESS S.71 TRADE PRACTICES ACT 1974 Where: A corporation supplies goods to consumer (other than auction) in course of business buyer expressly or by implication makes known particular purpose There is: An implied condition that goods are reasonably fit for purpose Unless it is unreasonable for buyer to rely on seller’s Skill and judgement There is: An implied condition that Goods are of merchantable quality Except defects specifically drawn to attention of Consumer or where consumer examines goods, and defects should have been revealed on that examination

59 ©MNoonan2009 National Engineering V. Wellington orana Foundry P/L (2003) NSWSC 21 Part decision on whether a referee’s report should be accepted. In 1996, National entered into a sub contract with Multiplex for the fabrication and erection of structural steelwork for Stadium Australia. National ordered and purchased the cast forked ends from Wellington. It produced and delivered castings made in accordance with the shape requested by National. Upon testing they were found to contain defects. At this stage Wellington had cast about 600; some of which had been delivered. Wellington proposed that the design be modified and a revised price was agreed. Several castings of the roof needed to be replaced. National claimed a breach of s. 19(1)-not reasonably fit for the purpose. Did the buyer make known the particular purpose “so as to show that the buyer relies on the seller’s skill or judgement”?The National representative had provided drawings and specifications. What skill or judgement was left to the manufacturer? Was there reliance upon the seller as to whether castings could be cast or whether they could be cast to the appropriate standard?

60 ©MNoonan2009 IMPLIED TERMS - FITNESS FOR PURPOSE

61 ©MNoonan2009 IMPLIED TERMS - FITNESS FOR PURPOSE

62 ©MNoonan2009 Ashington Piggeries Ltd v Christopher Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (1972) AC441; (1971) 1ALLER847 Ashington Piggeries (AP) had a mink farm. They used Christopher Hill (CH)to make a compound food to feed the mink. It was an oral contract. The formula for the compound which specified the ingredients was provided by AP, (an expert in the nutritional requirements of mink). CH was in the business of compounding food stuffs for domestic animals but knew nothing about mink and had never compounded food stuffs for minks before. CH entered into a commodity contract with Nirdsirdmel (N) for them to supply a herring meat of “fair average quality of the season” for the compound. The herring meal contained DNMA which had been produced by a chemical reaction because of sodium nitrate used as a preservative. The DNMA was toxic for the mink, which died.

63 ©MNoonan2009 Ashington Piggeries Ltd v Christoper Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (description) cont. CH, seller, sued AP, buyer, for price. AP, in cross action, sued CH - breach of contract alleging “King Size” did not correspond with description; not reasonably fit for purpose; and not of merchantable quality. In X action, CH joined N. CH admitted that sales of King Size were sales by description. Breach of implied condition that the goods supplied would correspond with description? The Court of Appeal had decided the goods complied with the description. HofL analysed: Did the presence of DNMA really affect quality or did it make a difference in kind? If the former, then in accordance with description. The contract said: “Norwegian herring meal fair average quality of the season, expected to analyze not less than 70% protein, not more than 12 % fat and not more than 4% salt”. HofL said: What was sold was Norwegian herring meal, despite the DNMA problem and it matched that description.

64 ©MNoonan2009 Ashington Piggeries Ltd v Christoper Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (fit for purpose) AP had made known to CH the particular purpose for the King Size, but had CH made that purpose known to N? Did the buyers rely on sellers skill & judgement? They made known they were compounding it for foodstuffs and it was common food for mink; but they did not explicitly state that. The majority decision-purpose made known. In dissent, Lord Diplock -purpose not specific enough as it could have been any one of a “range of purposes”.

65 ©MNoonan2009 Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd (1991) ATPR Mr. and Mrs. Rasell ordered carpet for their home from a carpet manufacturer. They specified that the carpet was to be a particular colour to match the interior décor of the house and the internal walls which were exposed brick. The carpet was supplied and there was no complaint as to its quality as carpet, but the colour of the carpet was different in patches and different from the colour specified. This was due to "pile reversal" or "watermarking"; a result of the manufacturing process. Did the customer have to accept the carpet? It was held that the carpet was not reasonably fit for the purpose of blending in with or matching the existing décor; a particular purpose made known at the time of purchase…. a breach of s. 71 (2) TPA. Further, since it was also not fit for one of the usual purposes for which carpet is purchased (matching existing décor) it was not of merchantable quality. Note also that it was new, high quality and expensive carpet.

66 ©MNoonan2009 IMPLIED TERMS - MERCHANTABLE QUALITY

67 ©MNoonan2009 IMPLIED TERMS - MERCHANTABLE QUALITY

68 ©MNoonan2009 W.M.Johnson P/L v. Maxwelton (Oaklands) P/L CASCNSW CA 40136/99 23/10/2000 Maxwelton farmed Tara, running cattle, sheep and fat lambs and growing cereal. Dixon (Manager) decided to acquire a hay baler. Hay is mown and raked into windrows. Then it is picked up by the baler, compressed into bales, and tied with twine…last is knotting system. He bought a used Heston 4800 baler "as is" for $35,000. Saw 3 faults. Seller reduced price by $1,000.Seller indicated that the baler was a good and reliable baler and had been in operational use in the previous season. Dixon picked it up, cleaned off chaff, changed the oil in the gear boxes greased the machine, adjusted the chains according to the operators manual, replaced a bolt and went to a baling school. Knotting system did not function. After attempts at repairs, abandoned use of it. s. 71(1) TPA "merchantability" Consumer for purposes of Act…Baler supplied in the course of a business. Not possible to see problem when not operating and so inspection could not reveal. s. 66(2)… goods are of merchantable quality if they are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price and all the other relevant circumstances. Calculation of price did not reflect a known inoperable essential component…""as Is" could not of itself exclude implied condition …still less "as per inspection"…in this case only covered the defects leading to the $1,000 reduction.

69 ©MNoonan2009 DRUMMOND AND SONS V. V AN INGEN AND CO (1887) 12 App Cases Van Ingen bought cloth described as “worsted coatings” and sold it to tailors who made coats Van Ingen wanted more for same purpose. Shown samples, bought in accordance with samples. Cloth delivered conformed to samples BUT No good for coats Lord Herschell "When a purchaser states generally the nature of the article he requires, and asks the manufacturer to supply specimens of the mode in which he proposes to carry out the order, he trusts to the skill of the manufacturer just as much as if he asked for no such specimens. And I think he has a right to rely, on the samples supplied representing a manufactured article which will be fit for the purposes for which such an article is ordinarily used, just as much as he has a right to rely, on manufactured goods supplied on an order without samples complying with such a warranty.” Implied warranty will be excluded if due diligence would have disclosed defect. What amounts to due diligence depends on circumstances. Nothing here which could reasonably lead them to anticipate problem.

70 ©MNoonan2009 Sale of Goods (Vienna Convention) Act 1986 Article 35 The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.

71 ©MNoonan2009 Incoterms 2000 A collection of essential trade terms compiled by the International Chamber of Commerce. If used in a contract, they have a uniform interpretation. There are 13 terms. In CT, knowledge of 3 only is required. EXW-ex works, FOB-free on board and CIF- cost, insurance, freight.

72 ©MNoonan2009 Sellers factory Sellers portBuyers port Buyers place of business C terms-risk stops at sellers port D terms-seller is responsible for delivery and so may be liable for breach of contract if goods lost or damaged on the way

73 ©MNoonan2009 EXW-Ex Works Goods are delivered at the seller’s premises- usually, factory, warehouse or place of business. Risk passes when goods are placed at buyer’s disposal as agreed. Seller must give adequate notice for delivery and mark and package goods appropriately at their own expense in conformity with the contract

74 ©MNoonan2009 FOB-Free on Board One of the most common terms used. The seller is free from responsibilities and risks once goods have passed over the rail of a named ship at a named port. Note that with container ships, sometimes containers do not pass rail, and so another term (FCA-free carrier) may be more appropriate. Lower than CIF price because price does not include insurance or freight.

75 ©MNoonan2009 CIF-Cost,insurance,freight Seller is responsible for costs, insurance and freight for transporting goods to agreed destination, but risks and additional costs incurred after goods have passed ship’s rail are borne by buyer. Seller must provide goods and documents, obtain export licence and complete formalities, make transport contract and arrangements, and insurance.

76 ©MNoonan2009 CAPITAL MOTORS V. BEECHAM ( 1975) 1 NZLR 576 Capital motors had 2nd hand car for sale. Beecham said he would buy if < 2 owners. Salesman said he thought so; would check. Holding deposit paid. Wife signed contract excluding precontractual "warranties representations or promises”. Salesman rang and confirmed only 2 owners. Beecham bought it. Two months later discovered it had had 5 owners. NEGLIGENT MISREPRESENTATION Cooke J: Duty of care? Special relationship?Relevance of failure by Beecham to ascertain for himself! Was the exclusion clause effective? Particular facts are important.Salesman acting in course of employment Salesman had direct financial interest in making a sale. Information of a kind that salesman could reasonably be expected to be particularly competent to supply.Not just offhand comment. He undertook to confirm, to make sure. Salesman undertook duty of care.Exclusion clause not effective on particular facts. Readily foreseeable assurance caused Beecham to buy.

77 ©MNoonan2009 LANGRIDGE V. LEVY (1837) 150 ER 863 Langridge wanted gun for himself and 3 sons. He visited Levy, gun- maker and told him this. Levy showed him a gun. Said it had been made by Nock for George IV. Said it was safe and secure. Both statements false to his knowledge. Langridge bought gun and took it home. He and sons used it occasionally for 6 months. One day second son used it. Barrel exploded. No privity of contract Fraudulent misrepresentation Parke B Levy knowingly made a false warranty that it could be safely done, in order to effect the sale. Langridge, on the faith of that and believing it to be true used the gun as described. Levy liable for the consequences of his fraud.

78 ©MNoonan2009 NEGLIGENCE 1. EXISTENCE OF DUTY OF CARE recognised by the law requiring conduct of a certain standard to protect others from unreasonable risks. 2. BREACH OF THAT DUTY 3. MATERIAL INJURY RESULTING FROM BREACH 4. LOSS NOT TOO REMOTE 5. THE BREACH BEING THE PROXIMATE CAUSE. Note: Defence of contributory negligence, limitation periods and civil liability limits legislation, other possibilities.

79 ©MNoonan2009 BREACH OF STATUTORY DUTY PLAINTIFF IS PERSON TO WHOM DUTY OWED INJURY type WITHIN RISK STATUTE AIMED AT DEFENDANT IS PERSON CAUGHT BY STATUTE CAUSAL LINK BETWEEN BREACH AND INJURY PROOF OF BREACH OF STATUTORY DUTY MAY BE EVIDENCE OF BREACH OF DUTY IN NEGLIGENCE EXAMPLES TRADE PRACTICES ACT-companies s. 52AUnconscionable conduct s. 52 Misleading or deceptive s.53False representation s.55 Misleading conduct under Industrial Property Convention (Paris Convention for the Protection of Industrial Property as revised at Stockholm in 1967) FAIR TRADING ACT NSW - individuals

80 ©MNoonan2009 STATUTORY LIABILITY MANUFACTURERS, IMPORTERS TRADE PRACTICES ACT 74AInterpretation 74BFitness for particular purpose 74CFalse description 74DUnmerchantable quality 74ENon-correspondence with samples 74FFailure to provide repair facilities,parts 74GNon compliance with express warranty 74H-LDetails- right to recover, time, and indemnity for seller

81 ©MNoonan2009 LIABILITY FOR DEFECTIVE GOODS Strict Liability No fault required No proximity of contract required Defects usually in manufacturing design or warning. Defective = safety less than community entitled to expect Marketing and purpose Packaging Use of any mark Instructions or warnings Time when product supplied

82 ©MNoonan2009 EXCLUSION and LIMITATION IMPLIED CONDITIONS / WARRANTIES GENERAL RULES: SALE OF GOODS ACT MAY BE EXCLUDED EXCEPT IN CONSUMER SALE S. 62DEFINITION OF CONSUMER SALE S. 63ONUS OF PROOF WITH PARTY CONTENDING IT IS NOT A CONSUMER SALE S. 64PROVISIONS PURPORTING TO EXCLUDE SS. 18,19,20 (EXCEPT 19(4)) IN CONSUMER SALE IS VOID TRADE PRACTICES ACT NOTE: Usually only apply to consumers CANNOT BE EXCLUDED BUT SOME LIMITS POSSIBLE See s. 4B for acquiring goods as consumer ss. 68 and 68A re exclusion and limitation

83 ©MNoonan2009 LIMITS ON EXCLUSION IMPLIED TERMS - SOGA S. 64 (1) Any provision in, or applying to, a contract for a consumer sale and purporting to exclude or restrict the operation of all or any of the provisions of sections 18, 19 and 20 (section 19(4) excepted) or any liability of the seller for a breach of a condition or warranty implied by any provision of those sections is void. (2) express warranty or condition in consumer sale does not negative a condition as to merchantable quality implied by Act (3)…expression “merchantable quality”… (4) No implied condition of merchantable quality for defects brought to buyer’s notice before contract (5) Re merchantable quality….court may add manufacturer as a party….make order that manufacturer pay…remedy

84 ©MNoonan2009 LIMITS ON EXCLUSION IMPLIED TERMS - TPA S. 68 (1) Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying- 1. the application of all or any of the provisions of this Division; 2. the exercise of a right conferred by such a provision; 3. any liability of the corporation for breach of a condition or warranty implied by such a provision; or 4.the application of section 75A is void.

85 ©MNoonan2009 LIMITATION OF LIABILITY permitted -TPA S. 68A(1) Subject to this section, a term of a contract for the supply by a corporation of goods or services other than goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 68 by reason only that the term limits the liability of the corporation for a breach of a condition or warranty (other than a condition or warranty implied by section 69…title…) to: (a) in the case of goods, any one or more of the following--the replacement of the goods or the supply of equivalent goods;the repair of the goods; the payment of the cost of replacing the goods or of acquiring equivalent goods;the payment of the cost of having the good repaired; or (b) in the case of services the supplying of the services again; or the payment of the cost of having the services supplied again. Subsection (1) does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the corporation to rely on that term of the contract. (relative bargaining positions, availability equivalent goods or services, suitable alternative sources of supply).

86 ©MNoonan2009 NRMA Terms and Conditions April 2000 All conditions and warranties, whether express or implied and whether arising under legislation or otherwise, as to the condition, suitability, quality, fitness or safety of any goods or services supplied under the Program are expressly excluded to the full extent permitted by law. Any liability NRMA may have to you under legislation in respect of such goods and services which cannot be excluded is limited, where permitted, to supplying, or paying the cost of supplying, the goods or services again or repairing, or paying the costs of repairing the goods, at NRMA’s option.

87 ©MNoonan2009 CONTRACTS REVIEW ACT S. 9 In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard: - to the public interest; to all the circumstances of the case; including such consequences or results as those arising in the event of: compliance with any or all of the provisions of the contract; or non-compliance with or contravention of, any or all of the provisions of; and the contract. In assessing these matters, the court must have regard to certain matters without affecting the generality of the need to consider all the circumstances.

88 ©MNoonan2009 Contracts Review Act s.9 - Factors to be Taken into Account material inequality in bargaining power whether provisions subject to negotiation whether reasonably practicable to negotiate for alteration or rejection conditions unreasonably difficult to comply with or not reasonably necessary for protection whether or not any party not reasonably able to protect interests because of age, physical, mental capacity relative economic circumstances, educational background and literacy physical form and intelligibility of language independent legal advice extent of explanation given and understanding provisions and effect undue influence, unfair pressure or unfair tactics conduct parties commercial or other setting purpose and effect

89 ©MNoonan2009 Student Question 1 Is it possible to contract out of SOGA or the TPA? Yes, to some extent. SOGA- Yes, everything for non “consumer sale”. Yes, everything other than ss. 18, 19, 20, in the case of a “consumer sale”. TPA-No, but bear in mind some provisions only apply to a “consumer” e.g. 69,70,71,72,74 and Div 2A and some limits possible e.g. 68A and 68B

90 ©MNoonan2009 Student Question 2 Mr. Mendel said that one could get the ACCC to take action under s. 53 TPA but not s. 52. Please explain. See s. 75AZC in Part VC Criminal Offence provisions to line up with Commonwealth Criminal Code. Mens rea required. s. 75AZC is a -Mirror provision of s. 53. Can be offence with fine. No equivalent criminal Part VC provision for s. 52.

91 ©MNoonan2009 Student Question 3 When we are considering “goods”, we have both the SOGA and TPA. When is it better to bring an action under one or the other? When there is only one available. E.g. a non consumer may only have the implied terms of the SOGA, if any at all. When a choice provides a better, easier, cheaper action or more appropriate remedy.

92 ©MNoonan2009 Assignment Question Bagger Limited (BL) is a NSW company which makes and supplies a machine called a "bagger". It makes plastic bags for vacuum packing meat. In January 2007, Meat Market Limited (MML), a meat processing company in Goulburn NSW informed Richard, the Managing Director of BL, that it would like to place an order for baggers, but would only do so if BL could also supply networkable thermal printers (which would place relevant information directly on the plastic as each piece of meat was bagged) and organise installation during their annual close down in August. Richard went to a trade show in Melbourne to see a demonstration of a new thermal printer known as a Whabble; supplied by a US company via their NSW agent, PTR Limited (PTR). Richard asked T, the PTR representative at the show, whether one control unit could control 6 printers. "No", said T "each is a dedicated unit. But, you can put them in a separate area as they come with 30m cables". "That’s good", said Richard, "because that will suit the configuration of the MML plant perfectly. Can they be networked?" "Definitely", said T, "I have been involved with 2 networked installations in Australia already." ""What is the price?" asked Richard. "$11,000, installed", said T. In April, 2007 BL sent an quotation to MML for the supply of 18 baggers and 18 Whabbles at a cost of $12,000 per bagger and $11,000 per Whabble, installed. MML accepted the quotation by return . BL placed an order with PTR for 18 Whabbles the same day. The baggers and Whabbles were delivered by their respective companies on August 2. The baggers were installed in 3 days and T attended for 8 days to install the Whabbles. T did not have the expertise to network the printers as he had never been involved in networking printers. The cables between printer and control unit were 2m; not 30m. MML asked him to leave after 3 days and engaged another consultant at a cost of $124,000, who finally networked the printers after 3 months work. During these 3 months, MML had to divert 50% of meat processing to a competitor. MML has refused to pay BL for the Whabbles; claiming it is offsetting the additional costs incurred. BL has in turn, refused to pay PTR. PTR has brought an action in contract claiming $202,000 from BL and reminding Richard of the following clause contained on the back of their invoice. "The Company shall not be liable for any loss or damage or injury, direct or consequential, whether in contract, tort, by statute or otherwise and whether at law or in equity, and whether caused or arising out of or through the negligence, breach acts or omissions for the Company, its servants or agents or otherwise and of whatsoever nature and to whomsoever or whatsoever caused arising out of the manufacturing and supply or supply only of any goods to the Customer or out of or through the use of any such goods by the Customer." Advise BL.

93 ©MNoonan2009 Assignment /exam marking CT EXAM March 2008 SECTION B QUESTION 1 Bagger and Whabble Understood Q (product liability, s.52 conduct) 2 Answered the Q 2 BL re MML refusal to pay for Whabbles 9 Breach of contract-express terms and implied BL refusal to pay PTR and defence to action in contract 9 Misleading and deceptive conduct s. 52 TPA Exclusion clause-would exclude s. 19 SOGA but not 52 because conduct prior to contract Reasoning and other 3 TOTAL 25 Most students correctly identified that fitness for purpose, and false/misleading and deceptive claims were involved. Students were expected to cover s. 19 SOGA and s. 52 TPA as a minimum;. Some students applied s. 71 of TPA or Div 2A despite the fact that no consumer was involved in the transactions. Some students dealt with BL v. PTR only and ignored the MML refusal to pay.

94 ©MNoonan2009 Other questions/problems John is a farmer and he needs to place a 1,000kg piece of equipment in his barn. The equipment must be lifted thirty feet into a hayloft. He goes to Mitre 10 hardware and tells them that he needs some heavy-duty rope to use on his farm. They recommend a 2cm thick nylon rope and John purchases 100 m of it. John ties the rope around the piece of equipment, puts it through a pulley, and with the aid of a tractor lifts the equipment off the ground. Suddenly the rope breaks. In the crash to the ground, the equipment is severely damaged. John wants to take action against Mitre 10 because the rope was not fit to do the job. Advise him.

95 ©MNoonan2009 Exam Sept 2006 A3 Understood the Q (contract, product liability) 2 Answered the Q 2 Contract- when formed, terms, to sell or sale, outcome 6 SOGA application 6 TPA application 6 Reasoning 2 Other e.g. negligence, contributory, instalment contract 1 TOTAL 25

96 ©MNoonan2009 Sept 2006 Q A3 cont The steps to successfully answering this question were: Ascertaining whether there was a contract between Huntley and Glassworks and if so, what was the nature of it and what were the terms? At the time of the quotation, was it an agreement to search for a manufacturer as specified (service, or agreement to sell)? When did it become a sale of goods? Who made the offer? Did Huntley accept offer from Huntley or vice versa? Counter offer? Could all the terms coexist? Exploration of traditional offer/acceptance in commercial context, and whether last shot, global more appropriate? Depending on the answer, students would have then gone on to analyse whether Huntley would have been able to make a claim in contract using the express terms. Or any terms implied by SOGA or TPA. Were any implied? If so, what and how did they apply? If not, why not? Because of the consumer limitations in the TPA, the SOGA was more relevant. Students should also have explored other potential claims. E.g. s. 52 (which would open up access to TPA remedies), negligence Students should then have dealt with remedies appropriate to their conclusions, and given a view as to likely outcome. Many students who answered this question as an assignment the following semester had worked out that Goodman Fielder v. Cospak (2004) NSWSC had been my inspiration for the facts of this Q.

97 ©MNoonan2009 Sept 2006 QA3 cont. Weaknesses noted in answers: A very superficial knowledge of the implied terms of the SOGA and TPA, leading to incorrect conclusions and applications. An example would be that a student believed there was a general condition that goods be fit for a purpose, without covering that this purpose had to be made known and the purchaser had to rely on the sellers skill and judgement. The buyer had to be a consumer for s. 71 to apply (TPA). The term might have been excluded. A student might jump straight to the implied terms without drawing a conclusion on what the express terms were (e.g. whether the exclusion clause applied, and if so, to what extent?). An incorrect view- as to the application of the SOGA and TPA. E.g. thinking that if corporations were involved, the TPA (and not the SOGA) applied and if individuals were involved, the SOGA (and not the TPA) applied. Some students discussed possible application of the TPA but not SOGA, or vice versa, rather than both. A few students were creative in deciding that the contract was one for services and not goods…..to procure someone else to make the bottles, not to supply them. The correct action if there is a breach of an implied term is an action in contract and not for breach of statute. For this reason, if one is implying a term via s. 71 TPA, the remedies of ss. 80, 82 and 87 are not available. It is a common law action in contract for termination and damages as it was too late to rescind.


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