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©MNoonan2007 Commercial Transactions Module 5-performance and remedies Winter Session 2007.

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1 ©MNoonan2007 Commercial Transactions Module 5-performance and remedies Winter Session 2007

2 ©MNoonan2007 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 ©MNoonan2007 This module We will cover performance of the contract –including remedies for common non- performance events. e.g. what happens if the buyer does not accept? Seller does not deliver? An instalment is unsatisfactory? Then we will look at remedies when goods or services are unsatisfactory or defective.

4 ©MNoonan2007 PERFORMANCE OF THE CONTRACT

5 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 30,31 Duties of seller and buyer 30. It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Payment and delivery are concurrent conditions 31. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods.

6 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 32-Rules as to delivery 32. (1) Whether it is for the buyer to take possession of the goods, or for the seller to send them to the buyer, is a question depending in each case on the contract express or implied between the parties. Apart from any such contract express or implied, the place of delivery is the seller's place of business if the seller has one, and if not, the seller's residence: Provided that if the contract be for the sale of specific goods which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery. (2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. (3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that the third person holds the goods on the buyer's behalf. Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. (4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. (5) Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller.

7 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 33- Delivery of wrong quantity or mixed goods 33. (1) Where the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate. (2) Where the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or the buyer may reject the whole. If the buyer accepts the whole of the goods so delivered the buyer must pay for them at the contract rate. (3) Where the seller delivers to the buyer the goods the seller contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or the buyer may reject the whole. (4) The provisions of this section are subject to any usage of trade, special agreement, or course of dealing between the parties.

8 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 34-Instalment deliveries 34. (1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. (2) Where there is a contract for the sale of goods to be delivered by stated instalments which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated.

9 ©MNoonan2007 HAMMER AND BARROW V. COCA COLA (1962) NZLR 723  Hammer, a yo yo manufacturer contracted to sell 200,000 yo yos for a marketing campaign  85,000 sent to bottling company  Payment by regular monthly statement of account  80% yo yos delivered were defective-would not run down string  High probability future deliveries would be defective  Further deliveries refused  Hammer sued for non-acceptance Could CC refuse the remainder of the deliveries? 1. See Maple Flock for rights of buyer to refuse to accept delivery 2. Ratio quantitatively which breach bears to contract as a whole 3. The degree of probability or improbability that breach will be repeated 4. Whether acts and conduct evince an intention no longer to be bound to be decided in general in objective way by reference to relation of default to purpose of contract  Whole history of this matter was unsatisfactory.  Notwithstanding complaints and requests for replacement, nothing done to correct problems  Marketing campaign involved prestige of CC as between itself, its bottling companies, retailers and public  CC justified in rescinding contract

10 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 35- Delivery to carrier 35. (1) Where in pursuance of a contract of sale the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, is prima facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to the buyer, or may hold the seller responsible in damages. (3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods shall be deemed to be at the seller's risk during such sea transit.

11 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 36- Risk where goods delivered at distant place 36. Where the seller of goods agrees to deliver them at the seller's own risk at a place other than that where they are when sold, the buyer must nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit.

12 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 37-Buyer's right of examining the goods 37. (1) Where goods are delivered to the buyer which the buyer has not previously examined, the buyer is not deemed to have accepted them unless and until the buyer has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. (2) Unless otherwise agreed, when the seller tenders delivery of the goods to the buyer, the seller is bound on request to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.

13 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 38-Acceptance 38. (1) The buyer is deemed to have accepted the goods when the buyer intimates to the seller that the buyer has accepted them, or, subject to section 37, when the goods have been delivered to the buyer and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that the buyer has rejected them. (2) The buyer's acceptance of the goods as referred to in subsection (1) does not preclude rescission of the contract for an innocent misrepresentation, unless the acts constituting acceptance amount to affirmation of the contract.

14 ©MNoonan2007 HAMMER AND BARROW V. COCA COLA (1962) NZLR 723 See text extract Had CC lost the right to reject because it had “accepted” the yo yos? (a) Had it intimated acceptance? No. (b) Done an act inconsistent with ownership seller? (c) Retention without rejection for reasonable time? Hammer argued yes to (b) and (c). Court found that bottlers received yoyos as agent for CC. H not acting as agent for buyer, but as sellers when delivering to that agent. CC still had right to examine and reject. Delay reasonable in present case and circumstances. Some yoyos accepted. In that case, CC entitled to set up in diminution of price, claim for breach of warranty. Note discussion of appropriate damages-price v. unsound value.

15 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 39-Buyers not bound to return rejected goods 39. Unless otherwise agreed, where goods are delivered to the buyer and the buyer refuses to accept them, having the right so to do, the buyer is not bound to return them to the seller, but it is sufficient if the buyer intimates to the seller that the buyer refuses to accept them.

16 ©MNoonan2007 PERFORMANCE OF THE CONTRACT SOGA s. 40- Liability of buyer neglecting/refusing delivery 40. When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, the buyer is liable to the seller for any loss occasioned by the buyer's neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods: Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.

17 ©MNoonan2007 REMEDIES OF UNPAID SELLER (2)  MEANING OF “UNPAID SELLER” = S.41 AGAINST THE GOODS LIEN  Ownership passed (no lien over your own goods)  Seller still in possession  Or lawfully recovers possession  No possession, no lien  Ascertained goods only  Right can be lost s.45(1), s.49 WITHHOLDING DELIVERY  Buyer defaults  Ownership has not passed STOP GOODS IN TRANSIT  When are goods in transit? S. 47(1)  Available when buyer becomes “insolvent”  Meaning of “insolvent”  Revests possession and revives lien  Retake actual possession or notice to carrier RIGHT OF RESALE  Goods are perishable  Notice to buyer after exercise lien or stoppage  Expressly reserved right  s.50(3) Ward

18 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 41-Unpaid seller defined 41. (1) The seller of goods is deemed to be an ``unpaid seller'' within the meaning of this Act: (a)when the whole of the price has not been paid or tendered; (b)when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) In this Part the term ``seller'' includes any person who is in the position of a seller, as for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has paid or is directly responsible for the price.

19 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 42- Unpaid seller's rights 42. (1) Subject to the provisions of this Act and of any statute in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods as such has by implication of law: (a)a lien on the goods for the price while the seller is in possession of them; (b)in case of the insolvency of the buyer a right of stopping the goods in transitu after the seller has parted with the possession of them; (c)a right of resale as limited by this Act. (2) Where the property in goods has not passed to the buyer the unpaid seller has in addition to the seller's other remedies a right of withholding delivery similar to and co ‑ extensive with the seller's rights of lien and stoppage in transitu where the property has passed to the buyer.

20 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA ss. 43,44-Seller’s lien and part delivery 43. (1) Subject to the provisions of this Act the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: (a)where the goods have been sold without any stipulation as to credit; (b)where the goods have been sold on credit but the term of credit has expired; (c)where the buyer becomes insolvent. (2) The seller may exercise the seller's right of lien notwithstanding that the seller is in possession of the goods as agent or bailee for the buyer. 44. Where an unpaid seller has made part delivery of the goods, the seller may exercise the seller's right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien.

21 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 45-Termination of lien 45. (1) The unpaid seller of goods loses the seller's lien thereon: (a)when the seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods; (b)when the buyer or the buyer's agent lawfully obtains possession of the goods; (c)by waiver thereof. (2) The unpaid seller of goods having a lien thereon does not lose the seller's lien by reason only that the seller has obtained judgment for the price of the goods.

22 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 46-Right of stoppage in transitu 46. Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, the seller may resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price.

23 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 47-Duration of transit 47. (1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier by land or water or other bailee for the purpose of transmission to the buyer until the buyer or the buyer's agent in that behalf takes delivery of them from the carrier or other bailee.(2) If the buyer or the buyer's agent...obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end.(3) If after the arrival of the goods at the appointed destination the carrier or other bailee acknowledges to the buyer or the buyer's agent that the carrier or other bailee holds the goods on the buyer's behalf and continues in possession of them as bailee for the buyer or the buyer's agent, the transit is at an end, and it is immaterial that a further destination for the goods may have been indicated by the buyer.(4) If the goods are rejected by the buyer, and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back.(5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case whether they are in the possession of the master as a carrier or as agent to the buyer.(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or the buyer's agent in that behalf, the transit is deemed to be at an end.(7) Where part delivery of the goods has been made to the buyer or the buyer's agent... the remainder of the goods may be stopped in transitu, unless the part delivery has been made under such circumstances as to show an agreement to give up possession of the whole of the goods.

24 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 48-How stoppage in transitu effected 48. (1) The unpaid seller may exercise the seller's right of stoppage in transitu either by taking actual possession of the goods or by giving notice of the seller's claim to the carrier or other bailee in whose possession the goods are. The notice may be given either to the person in actual possession of the goods or to the person's principal. In the latter case the notice to be effectual must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to the principal's servant or agent in time to prevent a delivery to the buyer. (2) When notice of stoppage in transitu is given by the seller to the carrier or other bailee in possession of the goods, the carrier or other bailee must redeliver the goods to or according to the directions of the seller. The expenses of the redelivery must be borne by the seller.

25 ©MNoonan2007 JOHANN PLISCHKE U. SOHNE V. ALLISON BROS (1936) 2 ALL ER 1009  Plischke agreed to sell linen to Napier  Term of contract “Free house, London”  Shipped from Germany to England  On arrival on 14.1, placed in warehouse  By Allison on instructions Napier  Napier entered arrangement with creditors  Plischke discovered this and  On 18.1, Plischke ordered Allison not to deliver to Napier  Allison refused 1. GOODS STOPPED IN TRANSIT? 2. HAD TRANSIT ENDED? 3. MEANING OF “FREE HOUSE, LONDON” Branson J  Free house means goods to be delivered to them and does not exclude right to indicate goods should be delivered some other place  Allisons acted as agent for Purchaser not Seller  Transit ended when goods collected by Allisons for Napier  Even if wrong, SGA s. 45(2)=NSWSGAs.47(2) determines the matter

26 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 49- Effect of subsale or pledge by buyer 49. Subject to the provisions of this Act, the unpaid seller's right of lien or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made unless the seller has assented thereto: Provided that where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, then if such last ‑ mentioned transfer was by way of sale the unpaid seller's right of lien or stoppage in transitu is defeated, and if such last ‑ mentioned transfer was by way of pledge or other disposition for value the unpaid seller's right of lien or stoppage in transitu can only be exercised subject to the rights of the transferee.

27 ©MNoonan2007 RIGHTS OF UNPAID SELLER AGAINST GOODS SOGA s. 50- Sale not generally rescinded by lien or stoppage in transitu 50. (1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of the seller's right of lien or stoppage in transitu. (2) Where an unpaid seller who has exercised the seller's right of lien or stoppage in transitu resells the goods, the buyer acquires a good title thereto as against the original buyer. (3) Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of the seller's intention to resell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may resell the goods and recover from the original buyer damages for any loss occasioned by the buyer's breach of contract. (4) Where the seller expressly reserves a right of resale in case the buyer should make default, and on the buyer making default resells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim the seller may have for damages.

28 ©MNoonan2007 REMEDIES OF UNPAID SELLER (1 )  MEANING OF “UNPAID SELLER” = S.41 AGAINST THE BUYER SUE FOR PRICE 1. Ownership has passed Ordinary debt s. 51(1) 2. Ownership has not passed, but specified payment day s. 51(2) DAMAGES FOR NON-ACCEPTANCE  Ownership has not passed s.52(1) Seller can resell  Measure of damages s.52(2) Loss directly and naturally resulting in ordinary course Charter  Presumption of difference Ward in contract/market prices s.52(3) Inappropriate if no available market (Lazenby)

29 ©MNoonan2007 ACTIONS FOR BREACH OF THE CONTRACT SOGA -s. 51-Action for price  51. (1) Where under a contract of sale the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods. (2) Where under a contract of sale the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract.

30 ©MNoonan2007 CONSOLIDATED RUTILE V. CHINA WEAL (1998) QSC 170 CRL and China Weal entered into contract for sale of 3,000 metric tonnes of zircon sand to be shipped in bulk July-Dec Agreed price AUD 700/tonne FOB Brisbane converted to USD price Jan using Hedge Settlement rate for day. Title passed on payment. Terms...If the buyer revises the shipping schedule…the Seller may invoice the Buyer for the appropriate tonnage of Zircon Sand not shipped as per the originally agreed schedule….payment becomes due 28 days after the invoice date…….Could CRL sue for price? s. 50(2) The provision in the contract enabling CRL to invoice should the shipping schedule be revised and, if it does so, require payment in 28 days, does not establish a day certain. The day is uncertain, governed by the decision of CRL whether and when to invoice. Accordingly, CRL has no entitlement under s. 50(2) of the Sale of Goods Act to sue for price. Is s. 50(2) Exhaustive of rights? No, SGA expressly saves the rules of common law. After examination of term….clear that parties intended that all of the zircon was to be shipped by 31/12/9797 and if not, because company had revised shipping schedule, CRL entitled to be paid before loading the zircon. …. “Once the parties agreed that payment was to be made 28 days after invoice….the conclusion seems inevitable that they agreed that CRL could thereby sue for the price”

31 ©MNoonan2007 ACTIONS FOR BREACH OF THE CONTRACT SOGA -s. 52-Damages for non-acceptance 52. (1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non ‑ acceptance. (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach of contract. (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or if no time was fixed for acceptance, then at the time of the refusal to accept.

32 ©MNoonan2007 CHARTER V. SULLIVAN (1957) 2 QB 117  Sullivan agreed to buy Hillman  from Charter  Profit 97 pound 17 shillings  Sullivan pulled out  Week later Charter sold  to Wigley for same price TRUE MEASURE OF DAMAGES?  Nominal damages? (difference between contract and market)  Loss of profit + (directly and naturally resulting in ordinary course) Jenkins LJ  Consideration of facts resulting in rejection of PF measure in favour of direct and natural loss.  Plaintiff did not prove loss of profit  Could sell all Hillman’s he could get his hands on  Judge concluded fixed profits same as they would have been if Sullivan carried out his contract.

33 ©MNoonan2007 WARD V. BIGNALL (1967) 1 QB 534  Bignall agreed to buy 2 cars from Ward  Paid 25, went off to get 825  Changed his mind.  Warning that Ward would resell  Ward sold one, not the other  Sued for price Diplock LJ. Measure of damages? 1. Unpaid seller’s lien=price 2. Damages for non –acceptance =difference between contract and market s.50 Sale of one car was election to rescind contract. Damages for non-acceptance appropriate

34 ©MNoonan2007 LAZENBY GARAGES V. WRIGHT (1976) 1 WLR 459  Lazenby bought second hand car for 1,325  Wright agreed to buy it for 1,670  He pulled out  Lazenby resold for 1,770  Lazenby sued Wright for damages  Lost sale of another car to the second purchaser Lord Denning MR  Loss of profit on sale of another car?  No market for second hand cars  Prima facie measure did not apply (difference between contract and market)  Therefore loss directly and naturally in ordinary course  What would parties contemplate as natural consequence  Buyer could not have contemplated that dealer would sell one car less  He would contemplate possible loss on resale  No loss on resale; no damage

35 ©MNoonan2007 LEDGER V. CLEVELAND NOMINEES PTY LTD (2001) WASCA 269 Decision examining 48(2) WASOGA=NSWs51(2) Cleveland entered into an agreement with Ledger to sell a Porsche, but refused delivery. Cleveland claimed the price. Ledger appealed, claiming it was only entitled to damages as the preconditions of 48(2) were not met. Was the price payable on a day certain, irrespective of delivery? Normally, only remedy is damages under SOGA. Statutory exceptions in s.48 only two cases where one can sue for price. The contract contemplated that delivery would take place prior to the payment on or before 1 June 1997 (a date not made of the essence) then payment was not stipulated for “irrespective of delivery”. To construe the time provision as operating irrespective of delivery would be to construe it as creating an exception it does not express from the normal rule that “delivery of the goods and payment of the price are concurrent conditions”(s.28). There is nothing in the agreement to pay a “debt unconditioned by any right of performance by the other party”. Appeal by Ledger was successful and case remitted for new trial as to appropriate damages.

36 ©MNoonan2007 LEDGER V. CLEVELAND NOMINEES PTY LTD - the Letter Mr. K.F.Ledger 6 February 1995 C/- Chellingworth Porsche 252 Aberdeen Street,Northbridge WA 6005 Dear Kim, Re: Porsche 944 Turbo Racing Car Referring to our recent discussions regarding the 944 Turbo Racing Porsche I confirm our understanding as follows:- You will purchase the entire car for the amount of $75,000. The purchase includes the parts set out on the attached list of inventory.The purchase price is payable on or before the 1st June 1997.Until the payment of the purchase price has been completed the vehicle will not be raced in any local or interstate event and you will insure the vehicle with the insurance company noting my interest as unpaid vendor. Title to the vehicle will at all times remain with me until full payment of the purchase price has been received by me. You will transport the vehicle and the inventory from its current location at Wespeed to your Aberdeen Street premises and hold same in safe keeping for me pending the completion of the payment of the purchase price. You will at your expense prepare the vehicle to qualify as a Group A Porsche Cup race car. Yours faithfully,Cleveland Nominees Pty Ltd Clive Hartz signature I confirm my agreement to purchase the vehicle on the above conditions K.F.Ledger signature

37 ©MNoonan2007 SHEARSON LEHMAN HUTTON INC V MACLAINE WATSON & Co Ltd(No2) Text & (1990) 3 All ER 723 Correct measure of damages? S. 52(3) or (2)? M agreed to buy tin from S but failed to accept it. Common ground there was a market on date at which damages should be assessed. Was it an available market? What was the correct measure of damages? 52(3) difference between contract prices and market price or 52(2) difference between contract prices and prices at which they sold the tin plus carrying costs (financing, warehousing and insurance) the cost of swapping certain quantities of standard tin for high grade tin, or vice versa and cost of buying new tin, all as part of their selling strategy. Discussion and review of cases as to what is an available market. Situation very common in commodity markets…….where there was a market for tin, but as a practical matter, not possible to sell such a large quantity (7,755 tonnes) on one day. It would have had to have been filtered out over a few days. Decision: There was an available market despite the practical issues and to overcome the problems, assume sale proceeded over a number of days. If 52(3) applies, 52(2) not relevant. To determine actual price, a fairly wide range was decided ($3,000-$4,000/tonne) and then a price within that range chosen ($3,400).

38 ©MNoonan2007 REMEDIES OF THE BUYER 1. DAMAGES FOR NON-DELIVERY S.53 SOGA 2. DAMAGES FOR DELAY IN DELIVERY Note obligation to minimise loss 3. SPECIFIC PERFORMANCE Exceptional remedy Dougan v. Ley Only granted where damages inadequate 4. RETURN OF PRICE Moneys had and received for total failure consideration 5. DAMAGES FOR BREACH OF CONDITION/ WARRANTY  SOGA ss.54,55 Bostock  TPA

39 ©MNoonan2007 ACTIONS FOR BREACH OF THE CONTRACT SOGA -s. 53-Damages for non-delivery 53. (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non ‑ delivery. (2) The measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the seller's breach of contract. (3) Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or if no time was fixed, then at the time of the refusal to deliver.

40 ©MNoonan2007 ACTIONS FOR BREACH OF THE CONTRACT SOGA -s. 54- Remedy for breach of warranty 54. (1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods, but the buyer may: (a) set up against the seller the breach of warranty in diminution or extinction of the price; or (b) maintain an action against the seller for damages for the breach of warranty. (2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting in the ordinary course of events from the breach of warranty. (3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. (4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent the buyer from maintaining an action for the same breach of warranty if the buyer has suffered further damage.

41 ©MNoonan2007 ACTIONS FOR BREACH OF THE CONTRACT SOGA -s. 55-Interest and special damages SOGA-s.56-Saving of proceedings in Equity 55. Nothing in this Act shall affect the right of the buyer or seller to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover money paid where the consideration for the payment of it has failed. 56. Nothing in this Act shall affect any remedy in equity of the buyer or the seller in respect of any breach of a contract of sale or any breach of warranty.

42 ©MNoonan2007 WHERRY V. WATSON (1991) ASC Watson advertised Bentley for sale 2. Wherry said he wanted to buy 3. Deposit of 3,000 and balance in 2 weeks 4. Wherry gave cheque 5. Mistakenly dishonoured by bank 6. Watson immediately advised deal off 7. Wherry sued for specific performance Priestly JA  Agreement made  Seller within s.51  Unpaid seller within s. 41  Not restricted to rights in s. 42  On facts, deposit a term of contract  Dishonour was breach of an essential term  Watson entitled to rescind  Action taken effectively did so

43 ©MNoonan2007 DOUGAN V. LEY (1946) 71 CLR 42  Dougan agreed to sell taxi  Plus registration and licence  He pulled out  Sued by Ley, the purchaser.  For specific performance Specific performance available? Dixon J  Sale of chattel only?  Valuable privilege - limited number licences  Substantial proportion price for licence not chattel  Not article of unusual beauty, rarity, distinction  Similar to railway shares limited in number and not available on stock exchange  Within the scope of specific performance

44 ©MNoonan2007 BOSTOCK AND CO V. NICHOLSON AND SONS (1904) 1 KB 725  Bostock agreed to buy sulphuric acid commercially free of arsenic  Did not disclose purpose---- to make brewing sugars  Sugars sold to brewers who made beer  People who drank beer became ill or died  Not commercially free from arsenic. Damages recoverable? 1. Price paid for acid 2. Value of material used to make glucose and invert 3. Loss of goodwill as manufacturers 4. Damages brewer entitled to claim against them. Bruce J Contract for the sale of goods within SGA Implied condition goods should correspond with description Goods accepted. Breach of condition = breach of warranty Measure of damages for breach of warranty is estimated loss directly and naturally resulting in the ordinary course of events from breach.  Use of acid in food well-recognised and ordinary  1 and 2 are damages naturally resulting in ordinary course  Not limited by SGA where interest or special damages available under rest of law  Damages 3 not recoverable because did not flow from act of defendant. Flowed from act of Plaintiff in selling poisonous glucose to brewer  Damages 4 not recoverable because separate and distinct collateral contract with third person uncommunicated to wrong-doer  No special circumstances entitling plaintiff to special damages under s. 55

45 ©MNoonan2007 McWilliam’s Wines P/L v. Liaweena (NSW) P/L [1988] ASC SCNSW See text extract Liaweena sold “superior” corks to McWilliams. They were contaminated with TCA. Bottles sealed with these corks unsaleable because of corky smell and taste. Found to be unfit for purpose and of unmerchantable quality. Measure of damages? Liaweena said s. 54 (3)…maximum was purchase price…difference between value of corks and value if they satisfied implied conditions. McWilliams said s. 55…profits it would have made on sale of wine recoverable because within reasonable contemplation of parties at time of contract, as probable result of breach. The court agreed with McWilliams.

46 ©MNoonan2007 Auction sales SOGA s In the case of a sale by auction: (1)where goods are put up for sale by auction in lots, each lot is prima facie deemed to be the subject of a separate contract of sale; (2)a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner: until such announcement is made any bidder may retract his or her bid; (3)where a sale by auction is not notified in the conditions of sale to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid or to employ any person to bid at the sale, or for the auctioneer knowingly to take any bid from the seller or any such person: any sale contravening this rule may be treated as fraudulent by the buyer; (4)a sale by auction may be notified in the conditions of sale to be subject to a reserved price, and a right to bid may also be reserved expressly by or on behalf of the seller; (5)where a right to bid is expressly reserved, but not otherwise, the seller, or any one person on the seller's behalf, may bid at the auction.

47 ©MNoonan2007 Breach of contract- condition/warranty-express/implied Rejection, Rescission, Repossession, sue for Price/Damages Rights against manufacturers/importers SOGA-join to action TPA-statutory remedies Tort Unfair Conduct False, Misleading, Deceptive, Unconscionable/Unfair Other potential remedies Equitable, Bailment, Recharacterisation,Tort Remedies for problem goods and services: What and how?

48 ©MNoonan2007 REMEDIES  UNDERSTAND THE FACTS  UNDERSTAND LEGAL RELATIONSHIPS AND TRANSACTONS  Parties Relationships between parties? Any special relationships and duties?  Dates & sequence of events  Items in dispute Goods or services or other?  Sale/Supply/other Domestic? International? Consumer transaction?  Meaning of terms Contracts-express terms?-implied terms?  Conduct impacting on arrangements  IDENTIFY LEGAL ISSUES  Contract-express and implied terms Tort-negligence, misrepresentation  Statute-SOGA, Vienna,TPA,Factors Bailment,CCC,RIGA  Equity-fiduciary Other-criminal,  IDENTIFY APPROPRIATE REMEDIES  Rescission Damages in contract or tort Injunction and other equitable  TPA remedies including damages, injunction and other orders

49 ©MNoonan2007 Product and service 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 Financial Services? ASIC Act Tort Goods defective causing loss, injury TPA VA manufacturer liability TPA remedies Defendant taken Unconscionable provisions TPA remedies advantage of 51AA, 51AB, 51AC TPA serious inequality Contracts Review Act harsh agreement Consumer Credit Act Misleading/Untruthful representation Tort/s. 52,53 TPA Damages, TPA remedies Change in possession without transfer of title Bailment? Damages

50 ©MNoonan2007 TPA s.75A Rescission of contracts (1) Where: a corporation supplies goods to a consumer in the course of a business; (b) there is a breach of a Div 2 implied condition consumer is entitled to rescind by: (c) signed notice in writing served on the corporation or causing the goods to be returned with particulars of the breach. (2)... the purported rescission has no effect if:(a) the notice is not served or the goods are not returned within a reasonable time …or after delivery but before notice served:(i)goods were disposed of by the consumer, lost, were destroyed otherwise than by reason of a defect in the goods;(ii) the consumer caused goods to become unmerchantable or failed to take reasonable steps to prevent goods from becoming unmerchantable; or (iii)the goods were damaged by abnormal use; (3)Where contract rescinded (a)if property in the goods had passed to the consumer before the notice of rescission was served, or the goods were returned to, the corporation—the property in the goods re-vests in the corporation upon the service of the notice or the return of the goods; and (b)the consumer may recover from the corporation, as a debt, the amount or value of any consideration paid or provided by him or her for the goods. (4) The right of rescission is in addition to, and not any other right or remedy under TPA or other Act. Note: No equivalent in ASIC act as terms implied are warranties

51 ©MNoonan2007 TPA s. 80 Injunctions Subject to subsections (1A), (1AAA) and (1B) where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage in conduct that constitutes or would constitute:  a contravention of any of Part IV, IVA, IVB, VC,section 75AU or 75YA  attempting to contravene;  aiding, abetting, counselling or procuring a person to contravene  inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene;  being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or  conspiring with others to contravene such a provision the Court may grant an injunction in such terms as the Court determines to be appropriate.

52 ©MNoonan2007 TPA s. 80 injunctive power s. 80 is statutory remedy-not confined by normal equitable principles. See ICI Australia Operations Pty Ltd v. Trade Practices Commission (1992) 38 FCR 248, Gummow J,- noted some useful points of difference.  Parties entitled to seek injunction under s. 80 broadened to ”any person”.  s. 80 extends not only to contraventions, attempted contraventions, but also to those who have aided, abetted, counselled or procured a contravention; induced or attempted to induce a person to contravene a provision; have in any way directly or indirectly been knowingly concerned in or a party to the contravention; or, have conspired with others to contravene a provision.  s. 80(3) will allow the court to rescind or vary an injunction.  s.79(4) indicates that an injunction is available for consumer protection provision in Pt V-a departure from the traditional attitude to use of injunctions only in aid of the criminal law.  s. 80(6) and (7) represent changes to the usual practice of giving an undertaking as to damages as the price for the grant of an injunction.  s. 80(4) and (5) allow the court to grant an injunction whether or not it appears that the person will continue to engage in the conduct. At general law, normally not so.

53 ©MNoonan2007 TPA s. 80 injunctive power 3 limits. The power is confined by the scope, purpose, section of TPA. There must be sufficient connection between the contravention and the injunction granted. A Constitutional limitation requires that an injunction be related to the case the subject of the proceedings.

54 ©MNoonan2007 TPA - s. 82-Actions for damages A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, (restrictive practices) IVA (unconscionable) IVB (industry codes) or V (Div 1, including 52,53) or s.51AC (unconscionable conduct in business transactions) may (subject to 87AB-professional standard limits re s.52, part VIA- proportionate liability where not intended or fraudulent and Part VIB limits re death or personal injury) recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. Note that Part V Division 2A impose direct obligation on manufacturer to compensate. And, to indemnify seller, see 74H. Also direct obligation in VA. In addition, there may be an action for breach of contract...breach of a term implied by Division V Part 2 (implied conditions and warranties 69-72,74), and/or tort.

55 ©MNoonan2007 TPA s. 82 damages power  Loss or damage essential. Loss commercial opportunity may be loss with present value.  Only compensation for actual loss or damage; not potential or likely damage.  Must suffer loss or damage ”by” the conduct of another that constitutes a contravention of Pr IV or V. ”by” has been interpreted to mean “by reason of” or “as a result of”-i.e. caused by the conduct.  s. 82 not restricted to loss of which the conduct was the sole cause-sufficient it was “”a”” cause.  No express provisions in s. 82 providing guidance to the court in assessing the amount of loss or damage suffered…measure approximates those recoverable in tort usually. However, also recognised that it is a statutory remedy and no justification for confining it in this way.  Exemplary damages are punitive rather than compensatory and are therefore not recoverable under s. 82. Aggravated damages may be recoverable. E.g. injury to feelings caused by insult or humiliation.  s.87 does not operate to take away or modify a right created by s. 82.

56 ©MNoonan2007 TPA s. 87 orders Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA, IVB or V, the Court may, whether or not it grants an injunction under s. 80 or makes an order under s. 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section)if the court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. Note difference with s. 82..has suffered and 87…is likely to suffer.

57 ©MNoonan2007 TPA s.87 range of orders (2) The orders referred to in subsection (1) and (1A) are: --an order declaring the whole or any part of a contract……..or of a collateral arrangement….to be void… --an order varying such a contract or arrangement --an order refusing to enforce any or all of the provisions of.. a contract --an order directing the person ….to refund money or return property…. --an order directing the person …..to pay to the person who suffered the loss or damage the amount of the loss or damage --an order directing the person…..at his or her own expense to repair or provide parts for, goods… --an order directing the person ……..at his or her own expense, to supply specified services --an order in relation to an instrument creating or transferring an interest in land, directing the person…..to execute an instrument that…varies…or terminates or otherwise affects….of the first mentioned instrument.

58 ©MNoonan2007 TPA s. 87 orders power Wide discretion given to the court  Order must be directed to compensating for loss or damage suffered.  Some technical limits. One example. Not applicable to apprehended conduct giving rise to apprehended loss or damage. E.g. does not permit injunctive relief unless such relief could prevent or reduce loss or damage flowing from past conduct.  A discretionary remedy and thus a court will be reluctant to make orders where damages are adequate to compensate.  Not limited by remedies available at common law. e.g. a right to rescind for breach or misrepresentation. Orders may be made against parties to contract OR third parties.

59 ©MNoonan2007 METALCORP RECYCLERS P / L V.METALMANUFACTURERS L Second slide-2003 NSWCA 213 Metalcorp sued MML for misleading or deceptive conduct in breach of s. 52 TPA…in failing to inform it during the 9am conversation, after inspection, that it believed the copper was stolen and that it would probably not pay. In the normal course of events, (common law nemo dat rule) Metalcorp could not have expected to recover anything because it could not give good title. CA (Handley JA, Hodgson JA, Gzell J; : A finding of misleading conduct is open where the conduct, word or deed conveys a misleading impression.The misrepresentation was conveyed by silence. Silence is to be assessed as a circumstance…have regard to all relevant circumstances; in particular the commercial relationship between the parties and their procedures. The conduct took place during a critical conversation. The critical conversation took place against the background of the longstanding business relationship…which had generated A substantial degree of mutual trust. The established course of business involved inspection and notification of complaints. In the circumstances, when the only complaint was short delivery, this was a representation that this was the only problem. MML was running no commercial risk, but knew that Metalcorp was about to take delivery of copper which might be stolen without having any idea of the risk it was running. Damages were recoverable because its loss was suffered by MML’s misleading conduct and Metalcorp had acted in reliance upon it.

60 ©MNoonan2007 METALCORP RECYCLERS P / L V.METALMANUFACTURERS L 2003 NSWCA 213 Metalcorp sold 77 tonnes of scrap copper cathode to MML. The companies had been doing business together for 10 years. The copper had been stolen from Western Mining (WMC) by persons unknown but had been acquired in good faith by Metalcorp from a third party with whom it had previously dealt.WMC informed MML about the theft and its suspicion that the copper had been stolen. MML inspected the copper after delivery, noticed that less than promised had been delivered and saw evidence it had been manufactured by WMC. MML passed this info to WMC by fax at 8.51am on Feb 2, 2001.The established arrangements between Metalcorp and MML were that deliveries by Metalcorp were quarantined until inspected and accepted and there was a procedure for disputes as to quality. During a telephone conversation between Metalcorp and MML about 9am on Feb 2, 2001 MML said that it had inspected the copper and asked about the short delivery. Metalcorp advised that it had received all the copper available. MML believed the copper stolen but said nothing about its belief, the theft WMC had advised it about, or the evidence it had found on inspection and had passed on to WMC. Metalcorp believed that, as a result of the 9am conversation, MML had accepted the copper and intended to pay for it. At 11.30am that day, it gave a cheque to the company which supplied it. MML refused to pay. Metalcorp was unable to recover the money it paid the supplier.

61 ©MNoonan2007 ACCC Action for Misleading & Deceptive Claims (taking from the news December 4, 2003) Australia’s biggest chain of impotence clinics was ordered to repay unsatisfied customers and publish six weeks of corrective newspapers advertisements after the Federal Court declared it engaged in misleading or deceptive advertising. Newspaper advertisements and promotional material contained many misleading and deceptive statements including that results were guaranteed, no needles were used (when they were regularly prescribed), Doctors were more experienced than claimed and refunds would be provided if a treatment was ineffective (when refunds were not paid to all dissatisfied patients). Patients typically were given fixed term contracts costing up to $2,300 a year and supplied with a nasal spray containing Apomorphine, a drug used to treat Parkinsons.

62 ©MNoonan2007 Holmac Sales Pty Ltd, trading as Dewlands Fruit Juice Products (taken from the news) Holmac Sales imported and distributed Dewlands Fruit Juice Products to outlets across Australia. The Dewlands products were marketed as 100% fruit juice range. ACCC concerned that composition was misrepresented. In particular, illustrations and representations on packaging created an overall impression that the juices were 100% of one kind. Many actually contained a blend of different fruit juices.Vitamin C added. Holmac provided ACCC with a court enforceable undertaking about future behaviour -correcting the packaging,publishing a corrective notice and implementing and maintaining a Trade Practices Compliance Program.

63 ©MNoonan2007 Taken from the news Harris Scarfe Admits to Misleading Consumers November 4, 2004 Sometimes, complaints can lead to an ACCC investigation and an operator ceasing conduct and/or fines apart from private remedies. In its catalogue HS claimed consumers would “save $x” on items such as boots, shoes, handbags, cutlery and perfume if they purchased during the promotion; after which prices would revert to the after sale price. When it came to the after sale price, certain items did not revert to that price or were not sold in any significant quantities because there was little or no stock. Customers complained and the ACCC believed the representations breached s. 52 and 53(e).“The courts have made it clear in previous litigation by the ACCC that when a business tells consumers they will receive price savings, those consumers will expect that the price offered is less than the price they would have paid at that same business before the promotion began.” ACCC Chairman Graeme Samuel.

64 ©MNoonan2007 Misleading signs The ACCC has nominated certain signs as misleading-as implying no right to refund or compensation, or no rights in relation to services being rendered with due are and skill. See their website for their publications. No refunds No refunds after 7 days We will exchange or repair or give credit notes but we do not refund.No responsibility for loss or damage Goods left for repair at your own risk All care but no responsibility Warranties are limited to our warranties expressed here Goods must be returned in the original packaging

65 ©MNoonan2007 Unconscionable conduct  TPA s.51AA Statutory enactment of unwritten law e.g. Commercial Bank v. Amardio (1983) 151 CLR,447 and ACCC v. Berbatis(2003) 197 ALR 153  TPA s.51AB Prohibition of unconscionable conduct in “consumer type” transactions  TPA s.51AC Prohibition of unconscionable conduct connected to small business  See also CCC and Contracts Review Act

66 ©MNoonan2007 TRADE PRACTICES ACT s.51AA Unconscionable Conduct within the meaning of the unwritten law of the States and Territories (1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by section 51AB or 51AC.

67 ©MNoonan2007 Unconscionability CG Berbatis Holdings Pty Ltd v. ACCC (2001) FCA 757 A shopping centre landlord acted unconscionably in refusing to agree to the grant of a lease of a shop to prospective purchasers of a business, unless the vendor release the landlord from litigation in the Commercial Tribunal of WA. A full court reversed the conclusion because it drew a distinction between an opportunistic approach to strike a hard bargain and acting unconscionably. It concluded the fact that the lease was due to expire was not appropriately characterised as a special disadvantage. In upholding the full court, the majority of the High Court gave a narrow interpretation of the term ‘unconscionability’. They focussed on the difference between the notion of a special disability which they felt would attract protection and a hard bargain which the Court felt was a commercial reality and not the concern of the Court. See decision for discussion of what is “unconscionable”. Note current movement to strengthen unfair concept.

68 ©MNoonan2007 TRADE PRACTICES ACT 1974 s.51AB Unconscionable Conduct (1) A corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. (2) Without in any way limiting the matters to which the Court may have regard ….the Court may have regard to: (see separate slide) (3) A corporation shall not be taken.. to engage in unconscionable conduct...by reason only that the corporation institutes legal proceedings... (4)..(a) the Court shall not have regard to any circumstances that were not reasonably forseeable at the time of the alleged contravention; and (b) the Court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.(5) A reference in this section to goods or services is a reference to goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption.(6)...does not include a reference to the supply or possible supply of goods for the purpose of re- supply or for the purpose of using them up or transforming them in trade or commerce. (7) Section 51A applies for the purposes of this section in the same way as it applies for the purposes of Division 1 of Part V.

69 ©MNoonan2007 TPA s. 51AB-court may have regard to cont. a) the relative strengths of the bargaining positions of the corporation and the consumer; (b) whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation; (c) whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation.

70 ©MNoonan2007 Unconscionable ACCC v. Lux Pty Ltd Scope of s.51 AB An agent of Lux came to the Standings residence to service an old vacuum cleaner. Mrs. S was home alone. The agent examined the vacuum cleaner and told her that it would “blow up”. He then demonstrated a new vacuum cleaner and Mrs. S agreed to purchase it. The ACCC alleged contravention of s.51AB and undue harassment and coercion in contravention of s.60.Nicholson J. “The word unconscionable... bears its ordinary meaning of showing no regard for conscience, irreconcilable with what is right or reasonable.” Mrs.. S substantially illiterate and did not understand commercial matters in any depth. Should have been apparent. She had trouble filling out the form. She was not offered the opportunity of independent advice, nor were the terms explained to her. The court granted a declaration that Lux had engaged in unconscionable conduct. ACCC press release: “Businesses and sales agents have a responsibility to ensure that they do not take unfair advantage of vulnerable consumers.”

71 ©MNoonan2007 TPA s.51AC Unconscionable Conduct-Business Transactions 1) A corporation must not, in trade or commerce, in connection with:(a) the supply or possible supply of goods or services to a person (other than a listed public company); or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company); engage in conduct that is, in all the circumstances, unconscionable. (2) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a corporation (other than a listed public company);or(b) the acquisition or possible acquisition of goods or services from a corporation (other than a listed public company);engage in conduct that is, in all the circumstances, unconscionable. (3) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation or a person (the supplier ) has contravened subsection (1) or (2) in connection with the supply or possible supply of goods or services to a person or a corporation (the business consumer ),the Court may have regard to:(see separate slide)

72 ©MNoonan2007 TPA s. 51AC-court may have regard to for both business consumers and small business suppliers (a) relative strengths of the bargaining positions (b) conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the business consumer able to understand documents (d) whether any undue influence or pressure or unfair tactics (e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct consistent with the supplier's conduct in similar transactions (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, (i) the extent to which the supplier unreasonably failed to disclose (i) any intended conduct of the supplier that might affect the interests of the business consumer;and(ii)risks arising (being risks that the supplier should have foreseen would not be apparent to the business consumer); and (j) the extent to which the supplier was willing to negotiate (k) extent to which supplier & business consumer acted in good faith.

73 ©MNoonan2007 High risk situations for unconscionable conduct See ACCC small business guide to unconscionable conduct available at When you do not completely understand the transaction-read documents, insist on disclosure and plain language and obtain independent advice. When you have no real opportunity to bargain-but distinguish unfair from unconscionable When a contract is excessively one-sided-little or no benefit to the other. When a business imposes differing terms, prices on similar businesses. When a business uses its position of power to impose unreasonable terms or conditions, or to extract an unreasonable deal-look for best deal amongst competitors, try to negotiate, if you are being treated differently, find out why, use an independent mediator to negotiate, be prepared to walk away When you are dependent on a single purchaser or supplier

74 ©MNoonan2007 Proportionate Liability & Contributory Negligence Clerp 9 introduced reforms theoretically aimed at improving the availability and affordability of professional indemnity insurance and to limit the “deep pockets” syndrome. Damages for economic loss or property damage arising from s.52 of the TPA reduced if part of loss caused by claimant’s failure to take reasonable care. To extent Court thinks just and reasonable having regard to claimant’s share in the responsibility of the loss (s.82 (1B)).

75 ©MNoonan2007 Proportionate Liability v. Joint & Several Liability Joint and Several Liability means where the acts or omissions of a number of persons have contributed to loss or damage. The full amount of the loss or damage can be recovered from any one of them irrespective of the extent of that person’s degree of fault or responsibility (there may be a right of contribution by one defendant against the others but this is a separate action). This leads to the “deep pocket syndrome”. Under a proportionate liability system, liability for loss or damage is apportioned between parties according to the share of responsibility for the loss or damage.

76 ©MNoonan2007 Proportionate Liability & Contributory Negligence New Part VIA relating to Proportionate Liability. Applies to an “apportionable claim” - for damages for economic loss or property damage arising from a breach of s.52 TPA where more than one “concurrent wrong-doer”. s.87 CD - Proportionate Liability

77 ©MNoonan2007 PROPORTIONATE LIABILITY PROFESSIONAL INDEMNITY INSURANCE Proportionate liability and professional indemnity insurance. Proportionate Liability and Professional Standards legislation intended to operate on a consistent basis with a common goal of placing downward pressure on the cost of professional liability insurance. See the Professional Standards Act 1994 (NSW). The purpose is “…focus on minimising claims against professionals by improving professional standards, requiring risk management strategies, compulsory insurance cover, ongoing professional education and appropriate complaints and disciplinary mechanisms, in return for limited liability”. (Explanatory memorandum to Bill 2003.)

78 ©MNoonan2007 The Personal Injuries & Death Act (2004) (Commonwealth)-TPA amendments A personal injury claim under the TPA was, until these amendments generally considered easier than under Common Law. TPA claim not subject to Common Law Personal Injury Principles. It did not require proof of intention, recklessness, negligence or dishonesty, nor was it limited by the NSW Civil Liability Act. The TPA Amendment introduces shorter, stricter time limits for filing TPA claims regarding personal injury and death under Parts IVA (unconsionable conduct) and V-Div. 1A and Div. 2A and VA (product liability).Limitation of damages for non-economic loss to $250,000 (and only that in extreme cases), capping damages for loss of earning capacity twice average full-time weekly earnings. Note different potential damages if litigant who suffers injury makes a claim both under Part VA (defective product)-see limits above and s ,or 87 damages possible. Now 2 different limitation periods to remember. See also new definitions for Personal Injury, Non-Economic Loss, Personal Injury Damages, Date of Discoverability (of a claim), Long-Stop Period.

79 ©MNoonan2007 Exclusion/Limitation Clauses An express term of the Contract How does it interact with and effect rest of express terms and implied terms? First, work out what the potential liability is and then see how the clause affects that.

80 ©MNoonan2007 Sale of Goods Exclusion Clauses - Non-Consumer Sales Contracting out can be done by a global provision or specifically. Key terms implied by SOGA that parties may wish to negative are: - Stipulations that time of payment are not deemed to be time of the essence…”; - Implied condition that they have the right to sell; - Implied warranty as to quiet possession; - Implied warranty that goods are free from encumbrance; - Implied condition that equipment corresponds with description; - Risk passes when property passes; - Delivery of the equipment and payment of the price are concurrent conditions; - Place of delivery; - Implied condition as to quality/fitness; and - Delivery obligations of Buyer.

81 ©MNoonan2007 CONSUMER SALES SOGA s. 62 Definition and s. 63 Onus of proof 62. 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: (a)are of a kind commonly bought for private use or consumption; and (b)are sold to a person who does not buy or hold himself or herself out as buying them in the course of a business. 63. 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.

82 ©MNoonan2007 CONSUMER SALES SOGA s. 64 Conditions, warranties, exclusion void  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) An express warranty or condition in a contract for a consumer sale does not negative a condition as to merchantable quality implied by this Act.  (3) Without limiting the meaning of the expression ``merchantable quality'', goods of any kind which are the subject of a contract for a consumer sale are not of merchantable quality if they are not as fit for the purpose or purposes for which goods of that kind are commonly bought as is reasonable to expect having regard to their price, to any description applied to them by the seller and to all other circumstances.  (4) In a contract for a consumer sale there is no implied condition that the goods are of merchantable quality as regards defects brought to the buyer's notice before the contract was entered into.

83 ©MNoonan2007 SOGA 64 ORDERS AGAINST A MANUFACTURER ( 5) Where, in proceedings arising out of a contract for a consumer sale (not being a consumer sale of second ‑ hand goods), it appears to the court that the goods, at the time of delivery to the buyer, were not…. of merchantable quality, the court may add the manufacturer …. as a party to the proceedings and, if of the opinion that the defect should be remedied by the manufacturer, may make against the manufacturer either: (a)an order requiring the manufacturer to pay to the buyer an amount equal to the estimated cost of remedying the defect; or (b)(b) an order requiring the manufacturer to remedy, within such time as may be specified in the order, the defect and, in default of compliance with that order, require the manufacturer to pay to the buyer an amount equal to the estimated cost of remedying the defect, and may make such other ancillary orders against the manufacturer as to the court seem proper. (6) In subsection (5), ``manufacturer'',... includes a person who resides or carries on business in the Commonwealth and who received those goods from outside the Commonwealth otherwise than from a person who resides or carries on business in the Commonwealth…..

84 ©MNoonan2007 Trade Practices Act 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; (a) the application of all or any of the provisions of this Division; (b) the exercise of a right conferred by such a provision; (c) any liability of the corporation for breach of a condition or warranty implied by such a provision; or (d) the application of section 75A is void. (2) A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division or the application of section 75A unless the term does so expressly or is inconsistent with that provision or section.

85 ©MNoonan2007 Clauses likely to infringe s. 68 See ACCC Information Circular 32 This warranty is given in lieu of all other conditions and warranties, express or implied which might otherwise be binding on the company The company accepts no responsibility for loss or damage through any cause whatsoever All care but no responsibility No refunds This one year warranty is specifically in lieu of all other express warranties on the part of the company, and no person including any dealer, agent or representative of the company is authorised to make any representation or warranty concerning the company on behalf of the company, except to refer the purchaser to this warranty.

86 ©MNoonan2007 Relationship between ss. 68, 52 Term of contract that purports to exclude, restrict or modify the application of Div 2 may not only be void under s. 68, but may also be misleading and contrary to s. 52 SeeTrade Practices Commission v. Radio World Pty Ltd (1989) 16 IPR 407, where a “no refund” sign found to be misleading under ss 52 and 53(g)

87 ©MNoonan2007 TPA s. 68A-certain limits possible (1) Subject to this section, (fair and reasonable limit in (2),(3)) 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) to: (a) in the case of goods, any one or more of the following: (i) the replacement of the goods or the supply of equivalent goods; (ii) the repair of the goods;(iii) the payment of the cost of replacing the goods or of acquiring equivalent goods;(iv) the payment of the cost of having the goods repaired; or (b) in the case of services; (i) the supplying of the services again; or (ii) the payment of the cost of having the services supplied again.

88 ©MNoonan2007 TPA 68B-limit possible- recreational services (1) A term of a contract for the supply by a corporation of recreational services is not void under section 68 by reason only that the term excludes restricts or modifies or has the effect of excluding, restricting or modifying (a) the application of section 74, (b) or the exercise of a right conferred by s. 74 (c) any liability of the corporation for a breach of warranty implied by s. 74 so long as (d) the exclusion restriction or modification is limited to liability for death or personal injury… Inserted in 2002 to arrest increase in public liability insurance premiums. See also VIA re proportionate liability for misleading and deceptive conduct, VIB limits for death and personal injury.

89 ©MNoonan2007 TPA s.68 & 68A Qantas Airways Ltd v. Aravco Limited (1996) HCA 12 Does s.68 of the TPA void a contractual term which required Aravco to indemnify Qantas against all liabilities incurred by Qantas arising out of or in any way connected with the performance of services by Qantas to Aravco? Qantas entered into contract with Aravco to perform services to an aircraft. As a result of Qantas’ negligence the aircraft suffered damage. The owner (BAT Industries Plc) sued Qantas, Qantas admitted liability but sought indemnity under Clause 4 in its contract with Aravco. Aravco pleaded s.74 warranty that services be rendered with due care and skill. And that s.68 made void the indemnity clause. Qantas did not dispute that s.74 implied a warranty. Nor did it dispute that it had breached that warranty. But it contends that Aravco did not sue it for breach of warranty nor contend in its cross-claim that it was a defense to the claim under the indemnity. If it did, because of the limits to the costs of the services being supplied again, the damages would be less than $5,000.

90 ©MNoonan2007 TPA s.68 & 68A Qantas Airways Ltd v. Aravco Limited (1996) HCA 12 Cont. Qantas contended that the indemnity did not purport to exclude, restrict or modify the s.74 warranty. Because Aravco could still bring proceedings for breach of the warranty. The High Court supported Qantas. The s.74 warranty was not relevant to the claim that Qantas made against Aravco under the indemnity. But obtaining the indemnity did not affect Qantas’ liability to Aravco for breach of the warranty implied by s.74. Aravco could have answered the claim for indemnity with a cross-claim based on the s.74 warranty. No doubt Qantas would have pleaded Clause 7 by way of a limit. Aravco would then have relied on s.68A (2), and contend that it was not fair or reasonable for Qantas to rely upon it. However Aravco did not cross-claim for damages for breach of the warranty.

91 ©MNoonan2007 Qantas Airways Ltd v. Aravco Ltd - Clauses Clause 4: “The operator agrees regardless on any negligence on the part of Qantas to release, hold harmless and indemnify Qantas from and against all liabilities, claims, damages, losses, costs and expenses of whatever nature howsoever occurring which may accrue against or be suffered by Qantas arising out of or in any way connected with the performance of the said services unless caused by wilful misconduct on the part of Qantas or any of its servants or agents acting within the scope of their employment”. Clause 7: Stated that pursuant to s.68A of the TPA, this clause applies in respect of any goods and services not of a kind ordinarily acquired for personal, domestic or household use or consumption. Liability is limited in the case of services to supplying the services again or the payment of the cost of having the services supplied again.

92 ©MNoonan2007 Toll (FCGT) Pty Ltd v.Alphapharm Pty Ltd Signing terms and conditions-evidence of intent to be bound Effect of a signature in determining whether parties had entered into a contract and whether an indemnity and exemption clauses were included in that contract. “In deciding the facts that a party has signed a document which purports to be a contractual or part of a contractual arrangement…is a powerful indication of intention to be bound by it at a later point of achieving finality…because of well known cultural practices about the use of one signature as a token of assent” - especially so in a commercial context. Facts and circumstances may show it was not. These facts and circumstances include: - reasonable notice of clause and brought to attention; - s.52 of the TPA, Misleading and Deceptive Conduct - where there is a series of documents, which ones or parts are intended to be part of the Agreement. - doctrine of mistake - Contracts Review Act - Unconscionable Conduct TPA

93 ©MNoonan2007 International Sale of Goods (Import to Australia) Ginza Pte Ltd v. Vista Corporation Pty Ltd (2003) WASC 11 Ginza, Singaporean Co supplied contact lens solution (goods) to Vista, a wholesaler, in Australia. Part of action concerned a similar transaction with Kontack. Ginza sued for invoiced cost of goods. Or, if liable,Vienna Convention displaces SOGA and liability limited…to reduced price of batches actually tested and found not sterile. Vista claimed breach of warranty in extinction of price plus damages. (Note s.52SOGA and Articles 50 & 74 Vienna) Vista pleaded express term of agreement that goods be manufactured according to requirements of Australian Therapeutic Goods Administration (TGA) and be sterile and claimed breach of implied terms as to merchantable quality and fitness for the purpose, under either SOGA (WA) s.14 or Vienna Convention. Also, in the alternative, negligence.

94 ©MNoonan2007 Was there an agreement? Yes Breach of express terms? Yes, not manufactured in accordance with requirements of TGA; nor were a number of tested batches sterile…gross contamination….fact of no customer complaints not relevant. Breach of implied terms? Yes, not fit for the purpose. What were they? Does the Vienna Convention displace the SOGA? Yes, because to extent of inconsistency Convention prevails. See Article 35-seller must deliver goods of quantity, quality and description and goods do not conform if not fit for the purpose ordinarily used or expressly or impliedly made known. Article 45 for remedies (rights in Articles 46-52) and damages Articles Article 50, buyer may reduce price in same proportion as value of goods actually delivered had at time of delivery bears to value conforming goods. Article 74 damages is sum equal to loss, including loss of profit as consequence of breach..not to exceed foreseeable loss. Can rely on both. In accordance with Art 50, price reduced to zero. Is liability limited under Vienna as claimed? No, problem so widespread so bad that all goods deemed non-conforming, not just part. What is the correct measure of damages? Same whether measured in contract or tort. Heads of damage claimed by Vista: The invoiced costs of recalled goods. Yes The lost profit margin on resale of goods to retailers Yes, but Kontack rather than Vista. Note discussion of calculation re commission.The direct costs of recalling goods. Yes. Lost reputation, goodwill and future sales. No, because no guarantee of continuity of supply, small market share, depended on personal relationships, other problems which lead to receivership. Lack of evidence. If there is no agreement, is Ginza liable in negligence? Yes, owed duty of care to manufacture in accordance with requirements of TGA and to be sterile. Ginza(2)

95 ©MNoonan2007 Appropriate remedies (see text) Clyde Industries P/ L v. Golden West Refining Corp An illustration of a case where it was not possible to imply fitness for purpose because there was not reliance on skill and judgement, but another remedy was available pursuant to TPA ss 52 and 82. Golden West refined gold using a process involving hydrochloric acid. It was important that there was not any fluorine in the acid as glass vessels and condensers were used. Daly Laboratories supplied acid to Golden from CSBP, but needed ore than they could supply. So it turned to Ajax, a division of Clyde. When Golden used the Ajax acid, condensers and vessels were damaged and $62, worth of solution containing gold was lost. Trial judge found no reliance for the purpose of implying term of fitness for purpose. Golden did not rely on Daly representation that Ajax acid was same as CSFB acid and did not contain fluorine because executives of Golden knew from their own experience that Ajax acid might contain some fluorine. So, this representation did not cause the damage and so no s.82 damages available for breach of s. 52. However, they did rely on the technical data sheet put out by Clyde that the acid may contain up to, but not more than, approximately 100ppm fluorine. At that level, it would not cause damage.

96 ©MNoonan2007 Situations where remedy in contract may not be available due to effective exclusion clause. Milford Astor P/L v. Machinery Developments Ltd [2003] NSWSC 301 Milford sold 20 printing machines, (print labels on vacuum packed meat as part of bagging process) but only partly paid. They sued for the balance. Machinery cross claimed for breach of implied terms…machines not fit for the purpose… and misleading and deceptive conduct. Exemption clause in contract formed part of contract and wide enough to exclude implied terms. Luckily for Machinery, it was not necessary in case to go into that because s. 52 TPA provided a remedy.Machinery had been mislead and would not have entered into the contract had it known the true position.


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