Supply of Goods and Services
Module 3
Summer 2007-08
©MNoonan2008
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.
©MNoonan2008
Sale/Supply of Goods and Services
In modules ,3,4,and 5, we discuss
• The Contract for Sale/Supply of Goods and Services
• Product and service liability
• The law relating to performance of the contract
At the end of these 3 modules, we will be able to advise a client on the
appropriate legal action to resolve their problem:
--in breach of contract where there is dissatisfaction by either party,
--actions for breach of specific statutory rights with access to statutory
remedies and
--whether other legal solutions may be available e.g. negligence.
--bearing in mind that there may also be preventative strategies,
practical solutions and ADR that are relevant to an overall solutions
©MNoonan2008
Legislation relating to the sale/supply of
goods and services
What is required knowledge of legislation?:
A good understanding of and ability to work with:
Most provisions of the Sale of Goods Act (NSW)
Various provisions of
the Trade Practices Act (Cth)-see outline
Note also mirror provisions of the TPA in Fair Trading Act
Sale of Goods (Vienna Convention) Act (NSW)
for international sales
Limited other references
e.g. Contracts Review Act 1980(NSW),
Consumer Credit Code (linked credit provider)
©MNoonan2008
SALE/SUPPLY OF GOODS and SERVICES
Historically, our law is based on FREEDOM OF CONTRACT
+ FREEDOM TO CONTRACT IN or OUT
However, SUPERIOR BARGAINING POWER lead to ABUSE
WHICH LED TO: CONSUMERISM (Note that this may extend to small business)
WHICH RESULTED IN CONSUMER PROTECTION
LEGISLATION
COVERING SUCH THINGS AS
 IMPLIED TERMS
 RIGHTS TO COMPENSTION
 PROHIBITION OF MARKETING ABUSES
 UNFAIR CONTRACTS LEGISLATION
©MNoonan2008
PRODUCT/SERVICE LIABILITY
BREACH OF CONTRACT AGAINST SUPPLIER including
EXPRESS conditions and warranties and those IMPLIED by law.
DOES NOT MATCH DESCRIPTION/SAMPLE
NOT FITNESS FOR PURPOSE
NOT OF MERCHANTABLE QUALITY
Sales of Goods, Trade Practices Act. Vienna Convention
UNFAIR PRACTICES IN TRADE OR COMMERCE
Misleading, deceptive, unconscionable
Fair Trading, Trade Practices, Unfair Contracts Acts
TORT- MISREPRESENTATION, NEGLIGENCE
BREACH OF STATUTORY DUTY- does not match description, not fit for
purpose, not merchantable, defective- usually against manufacturer,
distributor.
©MNoonan2008
PRODUCT AND SERVICE PRODUCT LIABILITY
FACTS
LAW
REMEDIES
Goods/services
unsatisfactory
Consumer sale?
Formation of contract -breach
Express terms
Implied-SOGA, TPA -Div 2,2A
TPA s. 52 misleading,deceptive
Intnl sale? Vienna Convention
Tort
Financial Services? ASIC Act
Action in contract
Rescission/Damages
Equitable
TPA Orders
IT general law
Fines ACCC
Goods defective
causing loss, injury
Defendant taken
advantage of
serious inequality
harsh agreement
TPA VA manufacturer liability
defective goods
Unconscionable provisions
51AA, 51AB, 51AC TPA
Contracts Review Act
Consumer Credit Act
TPA remedies
Untruthful representation
Change in possession
without transfer of title
TPA remedies
Tort/s. 52 TPA
Damages/TPA
Bailment?
Damages
©MNoonan2008
IDENTIFICATION OF NATURE OF
TRANSACTION
In order to apply the correct law, we must
first know what we have.
Is it a SALE?-of goods,services,intangibles
Is it an agreement to sell in the future?
A SUPPLY?-but, not a sale?e.g.lease, Hire Purchase
Is it a LICENCE?
Is it something else? GIFT, BARTER,
BAILMENT,FRANCHISE,SECURITY?
©MNoonan2008
SALE OF GOODS
JANSZ V. G M B IMPORTS (1979) VR 581
1.
2.
3.
4.
5.
6.
GMB Imports was licensed tobacco wholesaler.
Licence expired 31.5.76.
On 31.5.76 contracted to buy $5,000,000 tobacco.
And to sell $2,000,000 worth of that tobacco to Permewan.
Mid April 77, fulfilled obligation to Permewan.
Prosecuted for selling tobacco without licence.
When had sale taken place?
31.5.76 or April 77?
COURT FOUND:
• Unascertained goods and so s.21 Goods Act (Vic) applied:
“Where there is a contract for the sale of unascertained goods no
property in the goods is transferred to the buyer unless and until the
goods are ascertained.”
• Promise to sell on 31.5.76….agreement to sell only
• Sale not until later in 1977
©MNoonan2008
SALE OF GOODS
SYMES V. LAURIE (1985) 2 QD R 547
Laurie bought house from owner and sold it to Symes. Under Contract
to take house to land and set it up.
Damaged in transit. Whose risk? Who bears loss?
Property of Symes or Laurie at relevant time?
 Sale of “Goods” within Sale of Goods Act?
 If so, risk & passing of title provisions in S of G Act apply.
COURT FOUND
Previous cases depended on relevant facts. No principle which
could be applied. House already in existence. House attached and
agreement to sever.
QSOGA s.20 transferred at time intention to transfer.
QSOGA s.21 rules for ascertaining intention.
resulted in property passing at time of contract.
RISK WITH SYMES.
©MNoonan2008
SALE OF GOODS
HEWETT V. COURT (1983) 149 CLR 639
1. Hewett family contracted with Ogilby for construction of transportable
house.
2. Cost $34,116 paid to $20,469.
3. Ogilby part finished, money troubles, handed over unfinished house.
4. Ogilby went into liquidation.
5. Preference?
6. Equitable lien?
“The distinction between a contract for the sale of goods and a contract
for the provision of work and materials is frequently a fine one and the
tests for distinguishing the one from the other are unsatisfactory and
imprecise”
Contract for work and materials?
Contract for sale of goods?
COURT FOUND:
• Contract for work.
©MNoonan2008
• Equitable lien available nevertheless.
SALE OF GOODS
ESSO PETROLEUM CO. V. CUSTOMS & EXCISE
COMMISSIONERS (1976) 1 SLR 1
1.
2.
3.
4.
Esso promoted petrol
With loyalty gift
Coins with Soccer heroes
Collect the full set of thirty coins. One coin given when you bury
four gallons of fuel
5. Coins sold to public and tax on sales appropriate?
Legal relationship. Sale of goods?
COURT FOUND
 Coins not transferred for money consideration
 Consideration was the making of another contract
 To buy petrol
 No tax applicable
©MNoonan2008
DEFINITIONS
We must acquaint ourselves with statutory definitions so that we
can identify transactions within their scope. We must not assume
that the ordinary meaning of a word is the same as the statutory
definition. To illustrate, we will look at the following:
SALE
SUPPLY
GOODS
SERVICES
CONSUMER
PRICE
CONSUMER
SALE
LINKED
CREDIT
PROVIDER
©MNoonan2008
SALE OF GOODS
THE CONTRACT DEFINITIONS cont.
 SALE OF GOODS
s. 6 SGA:
A contract of sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in goods to the buyer for a money
consideration called the price.
Where transfer at future time, or condition, contract is agreement to
sell.
Agreement to sell becomes a sale when time elapses or conditions
fulfilled subject to which property is to be transferred.
 MONEY CONSIDERATION
Must be money involved
Even if that is only part of consideration
Note purchase of car-part trade-in, part money
See Loyalty gift…Esso
©MNoonan2008
SALE OF GOODS
THE CONTRACT DEFINITIONS cont.
Articles 1 and 2 of Vienna Convention
1. Convention applies to contracts of sale of goods between
parties whose place of business are in different States.
2. Does not apply to sales:
 Of goods bought for personal, family or household use
 By auction
 On execution or otherwise by authority of law
 Of stocks, shares, investment securities, negotiable
instruments or money
 Of ships, vessels, hovercraft or aircraft
 Of electricity
©MNoonan2008
TPA s. 4
Definition “Supply”
Supply when used as a verb, includes:
a) in relation to goods-supply (including resupply) by way of sale, exchange, lease, hire
or hire-purchase; and
b) in relation to services-provide, grant or confer;
and, when used as a noun, has a
corresponding meaning, and “supplied” and
“supplier” have corresponding meanings.
©MNoonan2008
DEFINITIONS
TRADE PRACTICES ACT S. 4 Goods
“Goods” includes:
a) ships, aircraft and other vehicles;
b) animals, including fish;
c) minerals, trees and crops, whether on,
under or attached to land or not; and
d) gas and electricity;
©MNoonan2008
SALE OF GOODS
THE CONTRACT DEFINITIONS
 GOODS
s.5(1) SGA :
Include all chattels personal other than things in action and money.The
term INCLUDES Emblements (crops resulting from human labour)and
things attached to or forming part of the land which are agreed to be
severed prior to sale (House to be removed Symes).
DOES NOT INCLUDE:
•Money (unless collection rather than currency)
•Intangibles
•Choses in action
•Intellectual property
CAN INCLUDE FUTURE GOODS: S. 10:
The goods which form the subject of a contract of sale may be either
existing goods owned or possessed by the seller or future goods.
Where by a contract of sale the seller purports to effect a present sale of
future goods, the contract operates as an agreement to sell the goods.
©MNoonan2008
IS A COMPUTER SYSTEM "GOODS”?
TOBY CONSTRUCTIONS PRODUCTS PL V. COMPUTA BAR SALES PL
Package consisting of 3 items hardware ($14,390)and 2 items
of software (business management and Wordstar ($2,160))
Vendor agreed to install, train staff and provide post sale
service.
Plaintiff alleged breaches of conditions or warranties implied
by SGA and TPA. Only applied if "goods".
Work to be done and materials provided and perhaps transfer
intellectual property?
•Rogers J:
•Sale of this computer system comprising both hardware and
software constitutes a sale of goods with both SGA and TPA.
•Important to him that the total system was off the shelf; not
individually crafted.
©MNoonan2008
SALE OF GOODS
IS A COMPUTER SYSTEM "GOODS"
ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL
COMPUTERS LIMITED
Court of appeal London 26/7/96
• Council invited tenders for provision of computerized rate system.
• Faulty software led the council to believe that they had more
ratepayers than in fact they did.
• Was the contract subject to any implied term as to quality or
fitness for purpose, and if so, what was the nature of that term?
Equivalent of Sale of Goods Act? Otherwise?
• Is software goods? (Software can involved a tangible disc onto
which a program is encoded and the intangible program itself.)
• For purposes of English Sale of Goods Act and Supply of Goods
and Services Act the definition of "goods" would include the disc
but not the program.
©MNoonan2008
SALE OF GOODS
IS A COMPUTER SYSTEM "GOODS"
ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL
COMPUTERS LIMITED
Court of Appeal London 26/7/96
Cont.
• Considered Toby Construction…sale of whole computer
system…sale of Goods within NSW legislation.
• In this case however, defective program not sold and probably
not hired. Employee went to council premises taking with him a
disc and he transferred the program into the computer. Such a
transfer was not a transfer of goods.
• Turned to the common law for situation when a term would be
implied…..An unexpressed term can be implied if and only if the
court finds that the parties must have intended that term to form
part of their contract…it must have been a term that went
without saying….Found to be the case in this situation.
©MNoonan2008
ASX operations P/L (ASXO) and Australian Stock
Exchange Limited (ASX and Pont Data Australia P/L
(1991)ATPR
• Pont supplies electronically disseminated financial information
to stockbrokers market analysts etc. ASXO supplies electronic.
Proceedings concerned a contract between these two for the
supply of information by ASXO to Pont by electronically coded
signals and allegations of behaviour contrary to ss. 45, 46 and
49 of TPA requiring Pont to take certain data if it was to take
other data.
• On issue that affected and was discussed in the case was
whether the provision of information concerned was “services”
or “goods”. If services, no contravention of s. 49 and appeal
would succeed. If “goods”, it would be otherwise.
• Given the TPA definition of “goods” includes electricity, does
electricity include these encoded electrical impulses? While the
trial Judge thought so; on appeal, the court thought not.
©MNoonan2008
DEFINITIONS
S.13 SOGA
ASCERTAINMENT OF PRICE
(1) The price in a contract of sale may be fixed by the
contract, or may be left to be fixed in a manner
thereby agreed, or may be determined by the course
of dealing between the parties.
(2) Where the price is not determined in accordance with
the foregoing provisions, the buyer must pay a
reasonable price. What is a reasonable price is a
question of fact dependent on the circumstances of
each particular case.
©MNoonan2008
DEFINITIONS
S.14 SOGA
AGREEMENT TO SELL AT VALUATION
(1) Where there is an agreement to sell goods on the
terms that the price is to be fixed by the valuation of a
third party, and the third party cannot or does not
make the valuation, the agreement is avoided;
provided that if the goods or any part thereof have
been delivered to and appropriated by the buyer, the
buyer must pay a reasonable price therefor.
(2) Where the third party is prevented from making the
valuation by the fault of the seller or buyer, the party
not in fault may maintain an action for damages
against the party in fault.
©MNoonan2008
PRICE
Consider the Following:
• At a price to be agreed by the parties in writing
from time to time
• Price to abc=cost to xyz + percentage profit margin
• At valuation
• At a value to be fixed by a member of the Stock and
Station Agents Association to be chosen by S, the
seller
• I will take x million litres for y million dollars
©MNoonan2008
PRICE
Trawl Industries of Australia P/L v. Effem Foods P/L
(T/A Uncle Bens of Australia)
• UBA had pet food factory and wanted to launch a new product
using Jack Mackeral. UBA entered into an agreement with TIA to
buy Jack Mackeral under which TIA would incur the expense of
acquiring and installing a processing line conditional on UBA
purchasing Jack Mackeral for the period 1988-93 at a price which
would provide a reasonable commercial profit to TIA.
• These base Prices shall apply for calendar year 1988. In the
course of Nov 1988 and each subsequent Nov up to and including
Nov 1992, TIA and UBA shall confer and establish applicable
prices for the immediately following calendar year using the
following formula: Price to UBA = Cost to TIA + percentage profit
margin
• Void for uncertainty? No, capable of being worked out by court.
The fact that evidence would be required and might be difficult
not a bar. Incomplete? No, formula is sufficient.
©MNoonan2008
Vienna Convention
Price
• Art 53. The buyer must pay the price for the goods and take
delivery of them as required by the contract and this Convention
• Art 54. The buyers obigation to pay the price includes taking such
steps and complying with such formalities as may be required
under the contract or any laws and regulations to enable payment
to be made.
• Art 55. Where a contract has been validly concluded but does not
expressly or implicitly fix or make provision for determining the
price, the parties are considered, in the absence of any indication
to the contrary, to have impliedly made reference to the price
generally charged at the time of the conclusion of the contract for
such goods sold under comparable circumstances in the trade
concerned.
• Art 56. If the price is fixed according to the weight of the goods, in
case of doubt it is to be determined by the net weight.
• See also 9, 19, 57, 58 59
©MNoonan2008
Trade Practices Act s. 4 Services
“services” includes any rights (including rights in relation to, and interests
in, real or personal property), benefits, privileges or facilities that are, or are
to be, provided, granted or conferred in trade or commerce, and without
limiting the generality of the foregoing, includes the rights benefits,
privileges or facilities that are, or are to be, provided, granted or conferred
under; a contract for or in relation to:
• the performance of work(including work of a professional nature),
whether with or without the supply of goods;
• the provision of, or the use or enjoyment of facilities for, amusement,
entertainment, recreation or instruction; or
• the conferring of rights, benefits or privileges for which remuneration
is payable in the form of a royalty, tribute, levy or similar exaction;
• a contract of insurance;
• a contract between a banker and a customer of the banker entered into
in the course of the carrying on by the banker of the business of
banking; or
• any contract for or in relation to the lending of moneys;
• but does not include rights or benefits being the supply of goods or the
performance of work under a contract of service;
©MNoonan2008
TRADE PRACTICES ACT 1974 - SECT 74
Warranties in relation to the supply of services
(1) In every contract for the supply by a corporation in the course of a business of
services to a consumer there is an implied warranty that the services will be
rendered with due care and skill and that any materials supplied in connection with
those services will be reasonably fit for the purpose for which they are supplied.
(2) Where a corporation supplies services (other than services of a professional nature
provided by a qualified architect or engineer) to a consumer in the course of a
business and the consumer, expressly or by implication, makes known to the
corporation any particular purpose for which the services are required or the result
that he or she desires the services to achieve, there is an implied warranty that the
services supplied under the contract for the supply of the services and any materials
supplied in connection with those services will be reasonably fit for that purpose or
are of such a nature and quality that they might reasonably be expected to achieve
that result, except where the circumstances show that the consumer does not rely,
or that it is unreasonable for him or her to rely, on the corporation's skill or
judgment.
(3) A reference in this section to services does not include a reference to services that
are, or are to be, provided, granted or conferred under:
(a) a contract for or in relation to the transportation or storage of goods for the
purposes of a business, trade, profession or occupation carried on or engaged in by
the person for whom the goods are transported or stored; or (b) a contract of
insurance.
©MNoonan2008
Problems with Services - SMH 06/03/03
Big Pond Ripples with Angry Users by Sue Lowe
• Telstra has spent almost $2m compensating customers of
its Internet cable service after widespread collapses in
January and February….Telstra yesterday acknowledged
repeated breakdowns of its high-speed cable network and
offered customers a regate of 25% on their typical $60 to
$90 monthly bills.
• Telstra’s internet arm, Big Pond, is estimated to have
between 70,000 and 80,000 cable internet customers.….
• After a threatened class action lawsuit by customers of its
broadband internet network ADSL in 2001 Telstra
introduced a service guarantee for ADSL but it was not
extended to the cable network. Under the ADSL guarantee
customers are given a 10% rebate for every 7 hours and
24 minutes their service is unavailable.
©MNoonan2008
TRADE PRACTICES ACT 1974- SECT 73
Linked Credit Provider
(1) Where: (a) a corporation (in this section referred to as the supplier )
supplies goods, or causes goods to be supplied, to a linked credit provider
of the supplier and a consumer enters into a contract with the linked credit
provider for the provision of credit in respect of the supply by way of sale,
lease, hire or hire-purchase of the goods to the consumer; or
(b) a consumer enters into a contract with a linked credit provider of a
corporation (in this section also referred to as the supplier ) for the
provision of credit in respect of the supply by the supplier of goods or
services, or goods and services, to the consumer; and the consumer
suffers loss or damage as a result of misrepresentation, breach of
contract, or failure of consideration in relation to the contract, or as a
result of a breach of a condition that is implied in the contract by virtue of
section 70, 71 or 72 or of a warranty that is implied in the contract by virtue
of section 74 of this Act or section 12ED of the Australian Securities and
Investments Commission Act 2001,
the supplier and the linked credit provider are, subject to this section, jointly
and severally liable to the consumer for the amount of the loss or damage,
and the consumer may recover that amount by action in accordance with
this section in a court of competent jurisdiction.
©MNoonan2008
CONSUMER CREDIT CODE - SECT 117
(1) For the purposes of this Code, a "linked credit provider" of a supplier
means a credit provider-(a) with whom the supplier has a contract, arrangement or understanding
relating to the supply to the supplier of goods in which the supplier
deals, relating to the business carried on by the supplier of supplying
goods or services or relating to the provision to persons to whom
goods or services are supplied by the supplier of credit in respect of
payment for those goods or services; or
(b) to whom the supplier, by arrangement with the credit provider,
regularly refers persons for the purpose of obtaining credit; or
(c) whose forms of contract or forms of application or offers for credit
are, by arrangement with the credit provider, made available to persons
by the supplier; or
(d) with whom the supplier has a contract, arrangement or understanding
under which contracts or applications or offers for credit from the
credit provider may be signed by persons at the premises of the
supplier.
©MNoonan2008
S. 62 SOGA
DEFINITION OF CONSUMER SALE
In this Part,
“consumer sale”
means a sale of goods (other than a sale by auction)
by a seller in the course of a business
where the goods:
are of a kind commonly bought for private use or
consumption;
and
are sold to a person who does not buy or hold
himself or herself out as buying them in the course
of a business.
©MNoonan2008
S. 63 SOGA
ONUS OF PROOF
In any proceedings
arising out of a contract
for a consumer sale,
the onus of proving
that the sale is not a consumer sale
lies upon the party so contending.
©MNoonan2008
“consumer” - goods-TPA 4B
Unless contrary intention appears:
a person taken to have acquired goods as a consumer if:
Test 1
price does not exceed prescribed amount ($40,000)
or
where price exceeded prescribed amount, goods were of a kind
ordinarily acquire for personal, domestic or household use or
consumption or the goods consisted of a commercial road vehicle
AND
Test 2
Goods not for re-supply, using them up or transforming them in trade
or commerce in the course of a process of production, manufacture
repairing or treating other goods or fixtures
©MNoonan2008
“consumer” - services-TPA 4B
A person taken to have acquired services as
consumer if:
• the price did not exceed prescribed amount
OR
• where price exceeded prescribed amountthe services were of a kind ordinarily
acquired for personal, domestic or
household use or consumption
©MNoonan2008
Aspects of Contract
We will go over some general matters before
examining specific terms of contracts and
product/service liability. They are:
•
•
•
•
Express terms of contract
Conditions and warranties
Implied terms
Interaction of statute with the common law
©MNoonan2008
Problems involving Contract
When analysing problems involving Contract
Understand whether there is a Contract
If so, what are the express terms? Written/oral
Does the law limit these in any way?
Are there any implied terms? What are they?
common law/custom/statute
Is there any inconsistency between express and implied?
Which ones prevail?
Decide on the terms of the contract.
Consider the problem in light of this contract.
Is there any action in contract available?
©MNoonan2008
SALE OF GOODS
CONDITIONS AND WARRANTIES
DISTINGUISH FROM:
1. Puffery
2. Mere representation
3. Leading to but not forming part of contract
CONDITION
 Essential
 Breach gives right to end contract
 And/or sue for damages
WARRANTY
Less important than condition
 Ancillary to main object of contract
 Breach gives right to damages
©MNoonan2008
OSCAR CHESS V. WILLIAMS (1957) 1 WLR 370
Williams bought Morris secondhand. Traded it in on new
Hillman from Oscar Chess. Williams told salesman
Morris was 1948 model. Registration book showed Morris
first registered 1948. £290 pounds allowed for trade in.18
months later OC discovered Morris was 1939 model. No
difference in model 39-48. OC sued for difference in
trade-in price.
DENNING J FOUND:
 Both parties mistakenly assumed Morris was 1948
 Fundamental to contract, but a term of contract?
 If prompt, equity might have set it aside.
 Now, only remedy damages and must prove warranty.
 Warranty = binding promise.
 Binding promise or only innocent misrepresentation?
 Proper inference from known facts?
Only latter. Loss must lie where it falls
©MNoonan2008
SALE OF GOODS
DICK BENTLEY PRODUCTIONS V. HAROLD SMITH
(MOTORS) (1965) 1 WLR 623
Dealer, Smith sold second hand Bentley to B. Smith told B car had
travelled only 20,000 miles since replacement engine and gearbox.
Speedometer showed 20,000 miles. Mileage more like 100,000.
INNOCENT MISREPRESENTATION? (NO DAMAGES)
OR
WARRANTY? (DAMAGES)
Question depends on conduct of parties, their words and behaviour
rather than thoughts.
 Statement an inducement to act?
 Smith in a position to know, or at least to find out, history of car.
 Different to Mr. Williams in Oscar Chess in that respect.
 Not dishonest, no fraud.
 Statement as to 20,000 without foundation.
Lord Denning found warranty in this case.
©MNoonan2008
INTERMEDIATE OR INNOMINATE TERMS
CEHAVE V. BREMER HANDELSGESELLSCHAFT
(1976) 1 QB 44
Bremer sold 3,400 tons of citrus pellets to Cehave for £100,000. They
were to be used for manufacture of cattle food. A clause in contract
read: “Shipment to be made in good condition”. A small amount was
damaged. Cehave rejected the lot and claimed a refund. The people
holding the pellets sold them for £30,000 and that buyer sold them to
Cehave for same amount.
Lord Denning MR
Was the clause in the contract a condition so that ANY breach
entitled the buyer to reject the goods? No, this was what he called an
Intermediate stipulation. No right to reject unless serious One is not
entitled to reject something because it is not perfect. Citrus pellets
were commonly bought for making cattle food. They were as fit for
that as was reasonable; shown by eventual use. Some damaged, but
not to such an extent to entitle rejection. Damage such as to entitle
buyer to an allowance off price. Apply good commercial sense.
©MNoonan2008
LEASON V. PRINCES FARM (1983) 2 NSWLR 382
Leason ran a stud. He wanted a filly sired by Grand Chaudiere.
Princes advertised a filly for sale. Said it was sired by Grand
Chaudiere. Leason bought the filly. 9 months later, he found out it was
not true.Leason sought to return and get refund. Princes refused.
Leason sued.
COURT FOUND
1. No doubt an innocent misrepresentation.
2. Right in equity for rescission?-Discussion of cases, in theory not
available in innocent misrepresentation after contract executed
This filly not what it wanted
Not what it was led to believe it was getting
Not what it paid for
©MNoonan2008
The relevance of Leason- interaction between law of contract (both express terms
and as implied by the SOGA, TPA and FTA) and “common law” (the law of Equityremedies for innocent misrepresentation).The SOGA expressly preserves
common law rules,but, should this be construed in a narrow sense to exclude
equitable remedies?. In NSW, Leason was authority for wider interpretation. In
equity, innocent representation does not give rise to damages; only rescission.
Even then, if contract affirmed, may not be available. Contradictory authorities
discussed in Leason, where it was decided rescission was available, despite
delivery of horse. However,no affirmation after lack of correct breeding
discovered. Debate continued. In 1988, NSW SOGA amended-s. 4(2A)- to make
very clear that rules of equity relating to effect of misrepresentation apply to
contracts for the sale of goods and permit rescission even where the
misrepresentation has become term of contract and/or contract performed. The
TPA (&FTA) have taken over now for many types of misleading / deceptive
conduct. Also, TPA may provide damages for innocent misrepresentation;
whereas equity does not. (damages available in Equity for fraudulent
misrepresentation though).If next we turn to law of contract, we must look at
express terms….including exclusion clauses to assess situation. If exclusion
clause effective, then it may prevent remedy. Some of the implied terms and
provisions of the SOGA can be modified in certain contracts and some cannot.See
s. 16 (2) and (3) when condition may have to be treated as a warranty where buyer
has accepted goods. In Leason, if this applied, returning the horse (breach of
condition) may not have been an option and only damages would have been
available (breach of warranty).The legislation and case law is not identical in the
various Australian jurisdictions. For the purpose of our course, concentrate on
©MNoonan2008
NSW. For purposes of professional life; bear that in mind.
IMPLIED TERMS - TITLE
S.17 SALE OF GOODS ACT 1923
•IN A CONTRACT OF SALE
•UNLESS THE CIRCUMSTANCES OF THE CONTRACT
•SHOW A DIFFERENT INTENTION
THERE IS:
AN IMPLIED CONDITION…
– In CONTRACT FOR SALE That SELLER HAS A RIGHT TO SELL
– AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME
PROPERTY IS TO PASS
AN IMPLIED WARRANTY
– BUYER SHALL HAVE AND ENJOY QUIET POSSESSION
AN IMPLIED WARRANTY
– GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE
NOT DECLARED AT TIME CONTRACT
©MNoonan2008
ROWLAND V. DIVALL
(1923) 2 KB 5000
•
•
•
•
•
MR. DIVALL BOUGHT CAR
SOLD IT TO ROWLAND
WHO SOLD IT TO RAILSDON
POLICE TOOK IT FROM RAILSDON
STOLEN CAR
Atkin LJ
1. TOTAL FAILURE OF CONSIDERATION
2. IMPLIED CONDITION SELLER HAD RIGHT TO SELL
3. SELLER NO SUCH RIGHT
4. NO SALE AT ALL
5. NO OBLIGATION TO RETURN CAR TO SELLER
SELLER NOT ENTITLED TO COMPLAIN ABOUT BENEFIT TO
BUYER OF USE
6. MONEY HAD AND RECEIVED ON FAILURE OF CONSIDERATION
©MNoonan2008
Niblett Limited v Confectioners’ Materials Co Ltd
(1921) 3KB 387
Confectioners’ sold 3,000 tins of condensed milk to Niblett’s
on CIF Contract. Although the documents did not show
which brand of condensed milk was the subject of the sale,
Confectioners’ argued that under an oral contract, it would
be one of three brands - “Freedom”, “Tucson”, “Nissley”.
Confectioners’ delivered 2,000 cases of “Freedom” and then
1,000 tins of “Nissley”.
In November, Niblett’s received a letter from Nestle, stating
that “Nissley” imitated the Nestle trademark and asked
Niblett not to sell it. It also threatened to take proceedings
against Niblett. Niblett signed an undertaking not to sell,
advertise or offer for sale the “Nissley” condensed milk.
They then unsuccessfully asked Confectioners’ to take it
back and unsuccessfully applied for an export license for it.
©MNoonan2008
Niblett Limited v Confectioners’ Materials Co Ltd cont.
Niblett claimed damages for breach of warranty: 1. that the milk was of merchantable quality;
2. that Confectioners’ had a right to sell it;
3. that Niblett should have enjoyed quiet possession; and
4. there was an implied condition or warranty that the label on
the milk would not infringe any trademark.
Bankes N J, of the English Court of Appeal, found that there
was a clear breach of Section 12 of the English Sale of Goods
Act, 1893, (S. 17 SOGA) because Confectioners’ had no right to
sell the goods as they were, and Niblett had never enjoyed
quiet possession.
©MNoonan2008
Microbeads v Vinhurst Road Markings Ltd
(1975) 1 ALLER 529
Prismo held a patent for a machine for making white lines on roads. The
complete specification was published in November 1970. It was entitled to
institute proceedings for infringement in 1972, when the letters patent were
granted.
At the beginning of 1970, Vinhurst brought a machine for making white lines
from Microbeads.. property in the machine passed before Nov 1970.
Vinhurst knew nothing about the patent, it found the machine unsatisfactory
and didn’t pay Microbeads. Microbeads sued for the price. Vinhurst alleged
breach of the term of fitness for purpose, and claimed that Microbeads did
not have the right to sell the machine and Vinhurst did not have quiet
possession.
Lord Denning found that because the sale had occurred prior to the grant of
the patent, there was no breach of the condition that the seller had the right
to sell the goods. They were entitled to do whatever they liked with them at
the time. However, he found a breach of the implied warranty for quiet
possession. He found that the words “to have and enjoy” applied not only at
the time of sale but for to future enjoyment.
©MNoonan2008
IMPLIED TERMS
- TITLE
S.69 TRADE PRACTICES ACT 1974
 IN A CONTRACT OF SUPPLY OF GOODS BY A CORPORATION TO A
CONSUMER OTHER THAN A S.69(3) CONTRACT
THERE IS:
• AN IMPLIED CONDITION
IN CONTRACT FOR SALE THAT SUPPLIER HAS A RIGHT TO SELL
- AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME
PROPERTY IS TO PASS
• AN IMPLIED WARRANTY
CONSUMER SHALL HAVE AND ENJOY QUIET POSSESSION
- EXCEPT FROM PERSON ENTITLED TO BENEFIT CHARGE OR
ENCUMBRANCE DISCLOSED OR KNOWN BEFORE CONTRACT
MADE
• AN IMPLIED WARRANTY
GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE
- NOT DISCLOSED OR KNOWN BEFORE CONTRACT MADE
©MNoonan2008
IMPLIED TERMS- SOGA- TITLE-feeding the title
PATTEN V. THOMAS MOTORS
(1965) NSWR 1457
Miss P obtained a car on Hire Purchase from CAGA. She sold it to
Dealer, Clinton Motors. After various transfers, TM bought it and
sold to P in May 61. In August 61, Miss P obtained a loan from D&I
purporting to give a Bill Of Sale over the car. She used the money to
pay out the Hire Purchase agreement with CAGA On 09/08/61. Miss
P did not repay D&I and they repossessed the car. P sued TM for
Breach Of Warranty Of Title S. 17(1) SOGA In Sept 63. Breach
Warranty rather than condition (Termination No Longer Possible).
HAD ORIGINAL DEFECTIVE TITLE BEEN “FED” BY PAYING OUT
HIRE PURCHASE CO? IF SO, ANY CAUSE OF ACTION UNDER S.
17(1) EXTINGUISHED.
COLLINS J.
YES, TITLE COULD BE FED IN THIS WAY. NO CAUSE OF ACTION.
©MNoonan2008
IMPLIED TERMS
- DESCRIPTION
S.18 SALE OF GOODS ACT 1923
WHERE:
 THERE IS CONTRACT FOR SALE OF GOODS BY DESCRIPTION
THERE IS:
 AN IMPLIED CONDITION
THAT GOODS WILL CORRESPOND WITH DESCRIPTION
IF SALE BY SAMPLE + DESCRIPTION
NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF
THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION
©MNoonan2008
IMPLIED TERMS
- DESCRIPTION
S.70 TRADE PRACTICES ACT 1974
WHERE:
 THERE IS CONTRACT FOR SUPPLY OF GOODS (OTHERWISE
THAN BY AUCTION) BY A CORPORATION IN COURSE OF
BUSINESS TO A CONSUMER BY DESCRIPTION
THERE IS:
• AN IMPLIED CONDITION
THAT GOODS WILL CORRESPOND WITH DESCRIPTION
IF SALE BY SAMPLE + DESCRIPTION, NOT SUFFICIENT FOR BULK
TO CORRESPOND WITH SAMPLE IF THEY DO NOT ALSO
CORRESPOND WITH DESCRIPTION.
CAN STILL BE SALE BY DESCRIPTION EVEN IF ONLY EXPOSED
FOR SALE OR HIRE AND SELECTED BY CONSUMER. S. 74(2).
©MNoonan2008
IMPLIED TERMS- DESCRIPTION
BEALE V. TAYLOR (1967) 1 WLR 1193
Mr. Taylor believed his car was a 1961 herald. He advertised it for
sale as such. Mr. Beale bought it but found it was half of a 1961
herald and half an older one welded together. Mr. Beale sued for a
refund.
Both parties were innocent
Seller said the sale was not by description but the sale of a car as
seen, tried and approved. He denied the buyer had suffered loss or
damage.
SELLERS LJ IN COURT OF APPEAL
1.
SALE BY DESCRIPTION
2.
WITHIN SALE OF GOODS ACT
3.
BUYER ENTITLED TO REFUND LESS SCRAP VALUE
©MNoonan2008
IMPLIED TERMS- DESCRIPTION & SAMPLE
NICHOL V. GODTS (1854) 156 ER 410
Nichol showed samples of oil to Godts. He described the oil as:
‘Foreign refined rape oil, warranted only equal to samples’
Godts entered into a written contract to buy 33 tons. The oil
corresponded with the sample, but not the description. It was a
mixture of rape and hemp oil. Godts refused to accept or pay.
Nichol sued
1.
2.
3.
4.
ATTEMPT AT EXCLUSION
AGREED TO DELIVER FOREIGN REFINED RAPE OIL
DID NOT DO SO
CONTRACT NOT PERFORMED
©MNoonan2008
IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923
 SUBJECT TO PROVISIONS OF ACT NO IMPLIED WARRANTY OR
CONDITION AS TO QUALITY OR FITNESS
EXCEPT WHERE:
• BUYER EXPRESSLY OR BY IMPLICATIONMAKES KNOWN
PARTICULAR PURPOSE BUYER RELIES ON SELLER’S SKILL
AND JUDGEMENT AND GOODS ARE TYPE IT IS SELLER’S
BUSINESS TO SUPPLY
THERE IS:
• AN IMPLIED CONDITION THAT
GOODS ARE REASONABLY FIT FOR PURPOSE
©MNoonan2008
IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923
EXCEPT WHERE:
• GOODS BOUGHT BY DESCRIPTION and SELLER DEALS IN
GOODS OF THAT DESCRIPTION
THERE IS:
• AN IMPLIED CONDITION THAT
GOODS SHALL BE OF MERCHANTABLE QUALITY
EXCEPT WHERE BUYER HAS EXAMINED DEFECTS SHOULD
HAVE BEEN REVEALED ON EXAMINATION

IMPLIED WARRANTY CAN ARISE BY USAGE OF TRADE

EXPRESS WARRANTY OR CONDITION

DOES NOT NEGATIVE IMPLIED WARRANTY OR CONDITION

UNLESS INCONSISTENT
©MNoonan2008
IMPLIED TERMS
- QUALITY OR FITNESS
S.71 TRADE PRACTICES ACT 1974
Where:
A corporation supplies goods to consumer (other than auction) in
course of business buyer expressly or by implication makes
known particular purpose
There is: An implied condition that goods are reasonably fit for
purpose
Unless it is unreasonable for buyer to rely on seller’s Skill and
judgement
There is: An implied condition that Goods are of merchantable
quality
Except defects specifically drawn to attention of Consumer
or where consumer examines goods, and defects should have
been revealed on that examination
©MNoonan2008
National Engineering V. Wellington orana Foundry
P/L (2003) NSWSC 21
•
•
•
•
•
Part decision on whether a referee’s report should be accepted.
In 1996, National entered into a sub contract with Multiplex for the
fabrication and erection of structural steelwork for Stadium Australia.
National ordered and purchased the cast forked ends from Wellington. It
produced and delivered castings made in accordance with the shape
requested by National. Upon testing they were found to contain defects.
At this stage Wellington had cast about 600; some of which had been
delivered.Wellington proposed that the design be modified and a revised
price was agreed. Several castings of the roof needed to be replaced.
National claimed a breach of s. 19(1)-not reasonably fit for the purpose.
Did the buyer make known the particular purpose “so as to show that the
buyer relies on the seller’s skill or judgement”?The National
representative had provided drawings and specifications.What skill or
judgement was left to the manufacturer?Was there reliance upon the
seller as to whether castings could be cast or whether they could be cast
to the appropriate standard?
©MNoonan2008
IMPLIED TERMS
- FITNESS FOR PURPOSE
CASE
GRANT V. AUSTRALIAN
KNITTING MILLS
GRIFFITHS V. PETER
CONWAY
BARTLETT V. SIDNEY
MARCUS
PURPOSE
NOTE
WORN NEXT TO SKIN
AGAINST
RETAILER,
MANUFACTURER
NEGLIGENT
COAT TO BE WORN BY INSUFFICIENT TO
MRS. GRIFFITHS
MAKE KNOWN
PARTICULAR
PURPOSE
COAT TO BE WORN BY
A PERSON WITH AN
ABNORMALITY
MOTOR CAR TO DRIVE ALSO
ALONG THE ROAD
DESCRIPTION
REASONABLY FIT IF
SECOND HAND
ROADWORTHY
CAR
©MNoonan2008
IMPLIED TERMS
- FITNESS FOR PURPOSE
CASE
PURPOSE
CROWTHER V.
CAR TO DRIVE
SHANNON MOTOR ALONG THE ROAD
CO.
NEARING POINT OF
FAILURE
LEXMEAD
COUPLING FIT FOR
(BASINGSTOKE) V. TOWING TRAILERS
LEWIS
FITTED WITH CUP
OR RING
ATTACHMENTS
BALDRY V.
FAST CAR THAT
MARSHALL
WAS FLEXIBLE,
EASILY MANAGED,
COMFORTABLE,
SUITABLE FOR A
TOURING CAR
NOTE
ROADWORTHY+FOR A
REASONABLE TIME
ONLY FOUND OUT
AFTERWARDS
IMPLIED WARRANTY
NO LONGER
AVAILABLE BECAUSE
OF KNOWLEDGE OF
DEFECT
CONTRACT FOR
PURCHASE OF
BUGATTI
EFFECT OF TRADE
NAME V. DESCRIPTION
IN CONTRACT
©MNoonan2008
Ashington Piggeries Ltd v Christopher Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel
(1972) AC441; (1971) 1ALLER847
Ashington Piggeries (AP) had a mink farm. They used
Christopher Hill (CH)to make a compound food to feed the
mink. It was an oral contract. The formula for the compound
which specified the ingredients was provided by AP, (an expert
in the nutritional requirements of mink).
CH was in the business of compounding food stuffs for
domestic animals but knew nothing about mink and had never
compounded food stuffs for minks before. CH entered into a
commodity contract with Nirdsirdmel (N) for them to supply a
herring meat of “fair average quality of the season” for the
compound. The herring meal contained DNMA which had been
produced by a chemical reaction because of sodium nitrate
used as a preservative. The DNMA was toxic for the mink,
which died.
©MNoonan2008
Ashington Piggeries Ltd v Christoper Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel (description) cont.
CH, seller, sued AP, buyer, for price. AP, in cross action, sued CH - breach of
contract alleging “King Size” did not correspond with description; not reasonably
fit for purpose; and not of merchantable quality. In X action, CH joined N.
CH admitted that sales of King Size were sales by description. Breach of implied
condition that the goods supplied would correspond with description?
The Court of Appeal had decided the goods complied with the description. HofL
analysed: Did the presence of DNMA really affect quality or did it make a
difference in kind? If the former, then in accordance with description. The
contract said:
“Norwegian herring meal fair average quality of the season, expected to analyze
not less than 70% protein, not more than 12 % fat and not more than 4% salt”.
HofL said: What was sold was Norwegian herring meal, despite the DNMA
problem and it matched that description.
©MNoonan2008
Ashington Piggeries Ltd v Christoper Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel (fit for purpose)
AP had made known to CH the particular purpose for the
King Size, but had CH made that purpose known to N?
Did the buyers rely on sellers skill & judgement?
They made known they were compounding it for foodstuffs
and it was common food for mink; but they did not explicitly
state that.
The majority decision-purpose made known. In dissent, Lord
Diplock -purpose not specific enough as it could have been
any one of a “range of purposes”.
©MNoonan2008
Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd
(1991) ATPR 41-152
Mr. and Mrs. Rasell ordered carpet for their home from a carpet
manufacturer. They specified that the carpet was to be a
particular colour to match the interior décor of the house and the
internal walls which were exposed brick. The carpet was
supplied and there was no complaint as to its quality as carpet,
but the colour of the carpet was different in patches and different
from the colour specified. This was due to "pile reversal" or
"watermarking"; a result of the manufacturing process.
Did the customer have to accept the carpet?
It was held that the carpet was not reasonably fit for the purpose
of blending in with or matching the existing décor; a particular
purpose made known at the time of purchase…. a breach of s. 71
(2) TPA. Further, since it was also not fit for one of the usual
purposes for which carpet is purchased (matching existing décor)
it was not of merchantable quality. Note also that it was new,
high quality and expensive carpet.
©MNoonan2008
IMPLIED TERMS
- MERCHANTABLE QUALITY
CASE
DAVID JONES
V. WILLIS
QUALITY
DESCRIPTION
“WALKING SHOES” &
RELIED ON SKILL AND
JUDGMENT DESPITE
NOT
MANUFACTURERS
BROWN AND SON DIFFERENT USE
V. CRAIKS
ASSUMPTIONS. CLOTH
FOR UNDISCLOSED
PURPOSE OF
DRESSES
V.INDUSTRIAL.
DANIELS V. WHITE BOTTLE OF “R
AND TARBARD
WHITE’S LEMONADE”
SALE BY DESCRIPTION
NOTE
NOT FIT FOR
PURPOSE OF
WALKING EITHER
“THROWAWAY
PRICE”
AN INDICATION
GOODS NOT
MERCHANTABLE
QUALITY
NO RELIANCE ON
SKILL AND
JUDGMENT
SO (2) ONLY
©MNoonan2008
IMPLIED TERMS
- MERCHANTABLE QUALITY
CASE
WILSON V.
RICKETT
COCKERELL
BEER V.
WALKER
THORNETT &
FEHR V. BEERS
AND SON
QUALITY
“A TON OF COALITE”
SHOULD NOT
EXPLODE. QUITE
CLEARLY
CONSIGNMENT NOT
MERCHANTABLE.
RABBIT CARCASSES
SHOULD NOT ARRIVE
PUTREFIED.
VEGETABLE GLUE
SHOULD NOT BE
DEFECTIVE. WERE
THEY EXAMINED?
NOTE
ANOTHER EXAMPLE
WHERE FITNESS FOR
PURPOSE WOULD
HAVE FAILED
A PERSON SELLING
HUMAN FOOD
WARRANTS FOOD IS
GOOD ON ARRIVAL.
SAW BARRELS, DID
NOT EXAMINE
BECAUSE OF TIME.
DEFECT WOULD HAVE
BEEN IMMEDIATELY
APPARENT.
©MNoonan2008
W.M.Johnson P/L v. Maxwelton (Oaklands) P/L
CASCNSW CA 40136/99 23/10/2000
Maxwelton farmed Tara, running cattle, sheep and fat lambs and growing
cereal. Dixon (Manager) decided to acquire a hay baler. Hay is mown and
raked into windrows. Then it is picked up by the baler, compressed into
bales, and tied with twine…last is knotting system. He bought a used
Heston 4800 baler "as is" for $35,000. Saw 3 faults. Seller reduced price by
$1,000.Seller indicated that the baler was a good and reliable baler and
had been in operational use in the previous season. Dixon picked it up,
cleaned off chaff, changed the oil in the gear boxes greased the machine,
adjusted the chains according to the operators manual, replaced a bolt and
went to a baling school.
Knotting system did not function. After attempts at repairs, abandoned use
of it.
s. 71(1) TPA "merchantability"
Consumer for purposes of Act…Baler supplied in the course of a business.
Not possible to see problem when not operating and so inspection could not
reveal. s. 66(2)… goods are of merchantable quality if they are as fit for the
purpose for which goods of that kind are commonly bought as it is
reasonable to expect having regard to any description applied to them, the
price and all the other relevant circumstances. Calculation of price did not
reflect a known inoperable essential component…""as Is" could not of
itself exclude implied condition …still less "as per inspection"…in this case
only covered the defects leading to the $1,000 reduction.
©MNoonan2008
DRUMMOND AND SONS V. V AN INGEN AND CO
(1887) 12 App Cases 284
1883 Van Ingen bought cloth described as “worsted coatings” and sold it
to tailors who made coats. 1884 Van Ingen wanted more for same purpose.
Shown samples, bought in accordance with samples. Cloth delivered
conformed to samples BUT No good for coats
Lord Herschell "When a purchaser states generally the nature of the article
he requires, and asks the manufacturer to supply specimens of the mode
in which he proposes to carry out the order, he trusts to the skill of the
manufacturer just as much as if he asked for no such specimens. And I
think he has a right to rely, on the samples supplied representing a
manufactured article which will be fit for the purposes for which such an
article is ordinarily used, just as much as he has a right to rely, on
manufactured goods supplied on an order without samples complying with
such a warranty.”
Implied warranty will be excluded if due diligence would have disclosed
defect. What amounts to due diligence depends on circumstances. Nothing
here which could reasonably lead them to anticipate problem.
©MNoonan2008
Sale of Goods (Vienna Convention) Act 1986
Article 35
The seller must deliver goods which are of the quantity, quality and
description required by the contract and which are contained or
packaged in the manner required by the contract.Except where the
parties have agreed otherwise, the goods do not conform with the
contract unless they:
(a) are fit for the purposes for which goods of the same description
would ordinarily be used; (b) are fit for any particular purpose expressly
or impliedly made known to the seller at the time of the conclusion of the
contract, except where the circumstances show that the buyer did not
rely, or that it was unreasonable for him to rely, on the seller's skill and
judgement; (c) possess the qualities of goods which the seller has held
out to the buyer as a sample or model;(d) are contained or packaged in
the manner usual for such goods or, where there is no such manner, in a
manner adequate to preserve and protect the goods.
The seller is not liable under subparagraphs (a) to (d) of the preceding
paragraph for any lack of conformity of the goods if at the time of the
conclusion of the contract the buyer knew or could not have been
unaware of such lack of conformity.
©MNoonan2008
Incoterms 2000
A collection of essential trade terms compiled
by the International Chamber of Commerce.
If used in a contract, they have a uniform
interpretation.
There are 13 terms. In CT, knowledge of 3
only is required.
EXW-ex works, FOB-free on board and CIFcost, insurance, freight.
©MNoonan2008
C terms-risk
stops at
sellers port
D terms-seller is responsible for
delivery and so may be liable for
breach of contract if goods lost or
damaged on the way
Sellers
factory
Sellers port
Buyers port
Buyers place of
business
©MNoonan2008
EXW-Ex Works
Goods are delivered at the seller’s premisesusually, factory, warehouse or place of
business. Risk passes when goods are
placed at buyer’s disposal as agreed. Seller
must give adequate notice for delivery and
mark and package goods appropriately at
their own expense in conformity with the
contract
©MNoonan2008
FOB-Free on Board
One of the most common terms used. The
seller is free from responsibilities and risks
once goods have passed over the rail of a
named ship at a named port. Note that with
container ships, sometimes containers do
not pass rail, and so another term (FCA-free
carrier) may be more appropriate. Lower
than CIF price because price does not
include insurance or freight.
©MNoonan2008
CIF-Cost,insurance,freight
Seller is responsible for costs, insurance and
freight for transporting goods to agreed
destination, but risks and additional costs
incurred after goods have passed ship’s rail
are borne by buyer.
Seller must provide goods and documents,
obtain export licence and complete
formalities, make transport contract and
arrangements, and insurance.
©MNoonan2008
CAPITAL MOTORS V. BEECHAM
( 1975) 1 NZLR 576
Capital motors had 2nd hand car for sale. Beecham said he would buy
if < 2 owners. Salesman said he thought so; would check. Holding
deposit paid. Wife signed contract excluding precontractual
"warranties representations or promises”. Salesman rang and
confirmed only 2 owners. Beecham bought it. Two months later
discovered it had had 5 owners.
NEGLIGENT MISREPRESENTATION
Cooke J: Duty of care? Special relationship?Relevance of failure by
Beecham to ascertain for himself! Was the exclusion clause effective?
Particular facts are important.Salesman acting in course of
employment
Salesman had direct financial interest in making a sale. Information of a
kind that salesman could reasonably be expected to be particularly
competent to supply.Not just offhand comment. He undertook to
confirm, to make sure. Salesman undertook duty of care.Exclusion
clause not effective on particular facts. Readily foreseeable assurance
caused Beecham to buy.
©MNoonan2008
LANGRIDGE V. LEVY
(1837) 150 ER 863
Langridge wanted gun for himself and 3 sons. He visited Levy, gunmaker and told him this. Levy showed him a gun. Said it had been
made by Nock for George IV. Said it was safe and secure. Both
statements false to his knowledge. Langridge bought gun and took
it home. He and sons used it occasionally for 6 months. One day
second son used it. Barrel exploded.
No privity of contract
Fraudulent misrepresentation
Parke B
Levy knowingly made a false warranty that it could be safely done,
in order to effect the sale. Langridge, on the faith of that and
believing it to be true used the gun as described.
Levy liable for the consequences of his fraud.
©MNoonan2008
NEGLIGENCE
1. EXISTENCE OF DUTY OF CARE recognised by the law
requiring conduct of a certain standard to protect others
from unreasonable risks.
2. BREACH OF THAT DUTY
3. MATERIAL INJURY RESULTING FROM BREACH
4. LOSS NOT TOO REMOTE
5. THE BREACH BEING THE PROXIMATE CAUSE.
Note: Defence of contributory negligence, limitation periods
and civil liability limits legislation, other possibilities.
©MNoonan2008
BREACH OF STATUTORY DUTY
•
•
•
•
PLAINTIFF IS PERSON TO WHOM DUTY OWED
INJURY type WITHIN RISK STATUTE AIMED AT
DEFENDANT IS PERSON CAUGHT BY STATUTE
CAUSAL LINK BETWEEN BREACH AND INJURY
PROOF OF BREACH OF STATUTORY DUTY MAY BE EVIDENCE OF
BREACH OF DUTY IN NEGLIGENCE
EXAMPLES
TRADE PRACTICES ACT-companies
s. 52A Unconscionable conduct
s. 52 Misleading or deceptive
s.53
False representation
s.55
Misleading conduct under Industrial Property Convention
(Paris Convention for the Protection of Industrial Property as revised
at Stockholm in 1967)
FAIR TRADING ACT NSW - individuals
©MNoonan2008
STATUTORY LIABILITY
MANUFACTURERS, IMPORTERS
TRADE PRACTICES ACT
74A
Interpretation
74B
Fitness for particular purpose
74C
False description
74D
Unmerchantable quality
74E
Non-correspondence with samples
74F
Failure to provide repair facilities,parts
74G
Non compliance with express warranty
74H-L Details- right to recover, time, and indemnity
for seller
©MNoonan2008
LIABILITY FOR DEFECTIVE GOODS
Strict Liability
No fault required
No proximity of contract required
Defects usually in manufacturing design or warning.
Defective = safety less than community entitled to
expect
Marketing and purpose
Packaging
Use of any mark
Instructions or warnings
Time when product supplied
©MNoonan2008
EXCLUSION and LIMITATION
IMPLIED CONDITIONS / WARRANTIES
GENERAL RULES:
SALE OF GOODS ACT
MAY BE EXCLUDED EXCEPT IN CONSUMER SALE
S. 62 DEFINITION OF CONSUMER SALE
S. 63 ONUS OF PROOF WITH PARTY CONTENDING IT IS NOT A
CONSUMER SALE
S. 64 PROVISIONS PURPORTING TO EXCLUDE SS. 18,19,20
(EXCEPT 19(4)) IN CONSUMER SALE IS VOID
TRADE PRACTICES ACT
NOTE: Usually only apply to consumers
CANNOT BE EXCLUDED BUT SOME LIMITS POSSIBLE
See s. 4B for acquiring goods as consumer
ss. 68 and 68A re exclusion and limitation
©MNoonan2008
LIMITS ON EXCLUSION IMPLIED TERMS
- SOGA
S. 64
(1) Any provision in, or applying to, a contract for a consumer
sale and purporting to exclude or restrict the operation of all
or any of the provisions of sections 18, 19 and 20 (section
19(4) excepted) or any liability of the seller for a breach of a
condition or warranty implied by any provision of those
sections is void.
(2) express warranty or condition in consumer sale does not
negative a condition as to merchantable quality implied by
Act
(3)…expression “merchantable quality”…
(4) No implied condition of merchantable quality for defects
brought to buyer’s notice before contract
(5) Re merchantable quality….court may add manufacturer as a
party….make order that manufacturer pay…remedy
©MNoonan2008
LIMITS ON EXCLUSION IMPLIED TERMS
- TPA
S. 68 (1)
Any term of a contract (including a term that is not set out in
the contract but is incorporated in the contract by another
term of the contract) that purports to exclude, restrict or
modify or has the effect of excluding, restricting or
modifying1. the application of all or any of the provisions of this
Division;
2. the exercise of a right conferred by such a provision;
3. any liability of the corporation for breach of a
condition or warranty implied by such a provision; or
4. the application of section 75A is void.
©MNoonan2008
LIMITATION OF LIABILITY permitted -TPA
S. 68A(1) Subject to this section, a term of a contract for the supply
by a corporation of goods or services other than goods or services of
a kind ordinarily acquired for personal, domestic or household use or
consumption is not void under section 68 by reason only that the
term limits the liability of the corporation for a breach of a condition
or warranty (other than a condition or warranty implied by section
69…title…) to:
(a) in the case of goods, any one or more of the following--the
replacement of the goods or the supply of equivalent goods;the
repair of the goods; the payment of the cost of replacing the goods or
of acquiring equivalent goods;the payment of the cost of having the
good repaired; or
(b) in the case of services the supplying of the services again; or the
payment of the cost of having the services supplied again.
Subsection (1) does not apply in relation to a term of a contract if the
person to whom the goods or services were supplied establishes that
it is not fair or reasonable for the corporation to rely on that term of
the contract. (relative bargaining positions, availability equivalent
goods or services, suitable alternative sources of supply).©MNoonan2008
NRMA Terms and Conditions
April 2000
All conditions and warranties, whether express or
implied and whether arising under legislation or
otherwise, as to the condition, suitability, quality,
fitness or safety of any goods or services supplied
under the Program are expressly excluded to the
full extent permitted by law. Any liability NRMA may
have to you under legislation in respect of such
goods and services which cannot be excluded is
limited, where permitted, to supplying, or paying the
cost of supplying, the goods or services again or
repairing, or paying the costs of repairing the
goods, at NRMA’s option.
©MNoonan2008
CONTRACTS REVIEW ACT S. 9
In determining whether a contract or a provision of a contract
is unjust in the circumstances relating to the contract at the
time it was made, the Court shall have regard: • to the public interest;
• to all the circumstances of the case;
• including such consequences or results as those arising in
the event of:
• compliance with any or all of the provisions of the contract;
• or non-compliance with or contravention of, any or all of the
provisions of; and
• the contract.
In assessing these matters, the court must have regard to
certain matters without affecting the generality of the need to
consider all the circumstances.
©MNoonan2008
Contracts Review Act s.9
- Factors to be Taken into Account
•
•
•
•
material inequality in bargaining power
whether provisions subject to negotiation
whether reasonably practicable to negotiate for alteration or rejection
conditions unreasonably difficult to comply with or not reasonably
necessary for protection
• whether or not any party not reasonably able to protect interests
because of age, physical, mental capacity
• relative economic circumstances, educational background and
literacy
• physical form and intelligibility of language
• independent legal advice
• extent of explanation given and understanding provisions and
effect
• undue influence, unfair pressure or unfair tactics
• conduct parties
• commercial or other setting purpose and effect
©MNoonan2008
John is a farmer and he needs to place a 1,000kg piece of equipment
in his barn. The equipment must be lifted thirty feet into a hayloft.
He goes to Mitre 10 hardware and tells them that he needs some
heavy-duty rope to use on his farm. They recommend a 2cm thick
nylon rope and John purchases 100 m of it.
John ties the rope around the piece of equipment, puts it through a
pulley, and with the aid of a tractor lifts the equipment off the ground.
Suddenly the rope breaks. In the crash to the ground, the equipment
is severely damaged.
John wants to take action against Mitre 10 because the rope was not
fit to do the job.
Advise him.
©MNoonan2008