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MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision.

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Presentation on theme: "MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision."— Presentation transcript:

1 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision

2 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Acceptance Final & Unqualified Communication of acceptance Postal Rule

3 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Consideration What is it? Privity of Contract Value of consideration Past Consideration Part Payment of a debt Promise to perform an existing contract Certainty Courts will uphold a bargain if possible

4 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms of the Contract

5 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE What are the Terms Terms can be Express In writing Oral Partly in writing and partly oral Implied By the Courts By legislation

6 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Express Terms The terms of the contract are ascertained by examining the evidence Not all pre-contractual statements become terms of the contract

7 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Express Terms (cont.) Meaning of the terms may not be clear Where the parties have used language that is incapable of any precise meaning the contract may be void for uncertainty It is not the role of the Court to make a bargain for people However, the Courts are reluctant to destroy a bargain

8 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Pre-Contract Representations An oral statement can be a term Only promissory statements become terms All other statements are mere representations A statement does not have to be in the form of a promise to be promissory Remedies Term of contract – Remedy for breach of contract Representation – law of misrepresentation Mere puff – no remedy

9 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Reasonable Bystander Test Which statements and representations would a reasonable bystander, aware of the circumstances of the case, regard as promissory? The test is objective Parties actual intention is irrelevant

10 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Reasonable Bystander Test (cont) Guidelines Was the representation included in a written document When, in the negotiations, was the representation made Did the representation sound promissory How objectively important is the representation to the whole deal Did either party have special knowledge about the subject matter of the representation

11 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Was There a Written Document? If the statement was included in a document drawn up by the parties then this is good evidence that the parties regarded the statement as sufficiently important to be a term Alternatively, if it is left out, that indicates that the parties did not intend it to be a term. State Rail Authority of NSW v Heath Outdoor Pty Ltd (S&OR p131) This is not conclusive of itself, it is merely one matter to be considered

12 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE When was the statement made? How much time elapsed between the representation and the making of the contract? Statements made only once early in negotiations are less likely to become terms. Van Den Esschert v Chappel (S&OR p132)

13 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE How Important was the Statement Must be judged in the context of the negotiations Van Den Esschert v Chappel (S&OR p132) Hospital Products v United States Surgical (S&OR p134) What words were used The more precise the language, the more likely it is a term Ross v Allis-Chalmers Australia (S&OR p133)

14 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Did a Party have Special Knowledge? Did one party rely on the others expertise or special knowledge rather than form its own judgement Oscar Chess v William (S&OR p130) Esso Petroleum v Mardon (S&OR p134)

15 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Parol Evidence Rule Courts presume that written formal contracts that appear to be a complete record of the agreement, contain the whole agreement Courts will not let a party subtract from, add to or contradict the language of the written agreement

16 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms implied by the Courts Implied as a matter of lawImplied as a matter of fact Past DealingsBusiness efficacyTrade Custom Implied Terms Terms implied by Statute

17 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied by the Courts Cannot conflict with express terms Must not be unreasonable or unjust in the circumstances Implied as a matter of law Common situations which are so settled that terms go without saying Implied as a matter of fact Arise out of the particular facts of the case

18 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied as a Matter of Law Professionals and Clients Professional must use reasonable care and skill Service Contracts Provider must take reasonable care and skill in providing the service Service must be reasonably fit for the purpose for which it was acquired Costa Vraca v Berrigan Weed & Pest Control (S&O p159)

19 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied as a Matter of Law (cont.) Work and Materials Contractor must use reasonable care Services must be fit for the purpose for which they were acquired Materials must be of good quality Reg Glass v Rivers Locking Systems (S&O p158) Helicopter Sales v Rotor Work (S&O p158)

20 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied as a Matter of Law (cont.) Hire Contracts Goods are reasonably fit for the purpose for which they are hired Landlord & Tenant Landlord must give the tenant quiet enjoyment of the premise Tenant must Pay rent Act in tenant-like manner

21 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied as a Matter of Law (cont.) Employment Contracts Employer must Provide a safe system of work Not require employee to do an unlawful act Employee must: Obey reasonable instructions Use reasonable level of skill and competence Act in good faith to employer Keep employers trade secrets confidential

22 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Terms Implied as a Matter of Fact Past dealings Custom or trade usage To make the contract effective

23 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Past Dealings Term is clearly identifiable Previous dealings are numerous and consistent Present dealing fits into the course of dealing No conflict between implied term and an express term Henry Kendall v William Lillico (S&O p181)

24 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Custom or Trade Usage Can state term with precision Custom is so well known & widespread that all contracts can be said to have the term Custom is reasonable No conflict with an express term British Crane Hire v Ipswich Plant Hire (S&O p161)

25 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE To Make a Contract Effective Term is capable of clear and precise expression The term is necessary to make the contract effective not just reasonable The term is obvious (officious bystander test) The term is fair & equitable to both parties No conflict with an express term The Moorcock (S&O p162) Codelfa Constructions v State Rail Authority (S&O p163)

26 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Exemption Clauses A clause that limits or excludes the consequences of a breach of a partys obligations Courts are biased against them Bias is less noticeable in commercial contracts Courts adopt a 2 step process Has the exemption clause become a term of the contract? If so, does it cover the breach in question?

27 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Is It a term of the contract? Essentially the same test as for all terms An exclusion clause cannot be incorporated after the contract has been made (e.g. parking ticket) Past dealings may imply an exemption clause but the Courts are reluctant to do this Signed documents will usually be binding even if the party was unaware of the term unless Signed document could not reasonably be regarded as likely to contain contractual terms Estoppel exists Exemption clause has been misrepresented See Curtis v Chemical Cleaning Co (S&OR p142)

28 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Is It a term of the contract? Unsigned exemption clauses will be binding if The innocent party was aware of it; or reasonable notice of it has been given to the innocent party before the contract is made.

29 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE What is reasonable notice (cont) What is reasonable notice depends on: The nature of the document; The nature of the transaction; and The nature of the exemption clause. Would it be reasonable to expect the document to contain an exemption clause (e.g. a receipt)

30 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE What is reasonable notice Is the transaction one where you would expect an exemption clause to exist The wider the exemption the greater the steps to be taken to bring it to the attention of the other party Cases Thornton v Shoe Lane Parking (p144) Parker v South Eastern Railway (p126) Oceanic Sun Line Special Shipping v Fay (p127) DJ Hill & Co v Walter H Wright Pty Ltd (p124)

31 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Does the Clause Cover the Breach? Courts will examine the clause carefully to determine its effect and limit its scope where possible Generally, the Courts will give effect to the parties intentions as evidenced by the natural and ordinary meaning of the words There are 3 rules that courts use to limit exemption clauses: The Contra Preferendum rule Negligence Clauses The Four Corners Presumption

32 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Contra Preferendum Rule Any ambiguities in the exemption clause will be construed against the party seeking to rely on the clause Andrews Bros v Singer Car Co (S&OR p145) Alex Kay v General Motors Acceptance Corp & Hartford Fire Insurance (S&OR p145)

33 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE The Negligence Rule Liability for negligence may be expressly or impliedly excluded but if the words could reasonably be applied to protect against some ground of liability other than negligence, then liability for negligence will not be excluded White v John Warick & Co (S&OR p146) To exclude liability for negligence, clear words are required Tech Pacific v Air Pacific (S&OR p146)

34 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE The 4 Corners Presumption The exemption clause will only cover matters within the 4 corners of the contract Whether an event falls outside the contract depends on the reasonable person test – would a reasonable person aware of the terms of the contract conclude that the parties must have had the relevant event in mind in drawing up the contract. Sydney Corporation v West (S&OR p148) TNT v May & Baker (S&OR p149) Darlington Futures v Delco Australia (S&OR p149)

35 MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Statutory Reforms In many cases, it is Illegal to attempt to exclude terms implied by statute e.g. Trade Practices Act Attempting to exclude statutory liability (where not permitted) may be misleading and deceptive conduct contrary to section 51 of the Trade Practices Act


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