Source of legal rights
Torts
Contract:
Express
Terms
Statute:
Consumer
Guarantees
Terms
Statement prior to contract
Representation
Misrepresentation:
Not contract
Possible action in
equity or statute (s18)
Term
Puff
Not contract
No action in equity
Possible action under
statute (s18)
Part of contract
Term or representation?


Objective test of intention
“reasonable man”

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR
41

Indicative factors include
1. Importance of statement
2. Time between statement and contract
3. Special knowledge or skill or access to
truth of one party
4. Inclusion of statement in any
subsequent document

Ellul &Ellul v Oakes (1972) 3 SASR 377
What kind of term?
A term may be either:

a Condition
Essential term
 Breach – entitlement to terminate/or
damages


a Warranty
Ancillary term
 Breach – damages, but no termination


an Innominate term
Intermediate term
 Breach – termination if sufficiently serious

Test: how essential was the promise?
“The question whether a term in a contract is a
condition or a warranty, i.e. an essential or a
non-essential promise, depends upon the
intention of the parties as appearing in or from
the contract. The test of essentiality is whether
it appears from the general nature of the
contract considered as a whole, or from some
particular term or terms, that the promise is of
such importance to the promisee that he would
not have entered into the contract unless he
had been assured of a strict, or a substantial,
performance of the promise, as the case may be,
and that this ought to have been apparent to
the promisor….
Jordan CJ in Tramways Advertising v Luna Park
‘
Tramways Advertising Pty Ltd v
Luna Park (NSW) Ltd (1938) CLR
633
Associated Newspapers Limited v Bancks (1951) 83 CLR 322
Warranty
 Bettini v Gye (1876) 1QBD 183 per Blackburn J said at 188:
“[a condition is] a stipulation
[which] goes to the root of the
matter, so that a failure to perform
it would render the performance of
the rest of the contract a thing
different in substance from what
the defendant has stipulated for.”
Innominate terms: Hong Kong Fir
“There are, however, many contractual undertakings of
a more complex character which cannot be categorised
as being “conditions” or “warranties”….Of such
undertakings, all that can be predicated is that some
breaches will, and others will not, give rise to an event
which will deprive the party not in default of
substantially the whole benefit which it was intended
that he should obtain from the contract; and the legal
consequences of a breach of such an undertaking,
unless provided for expressly in the contract, depend on
the nature of the event to which the breach gives rise
and do not follow automatically from a prior
classification of the undertakings as a “condition” or a
“warranty”.”
Diplock LJ 69/70
Innominate terms
 Approved by High Court in
 Koompahtoo Local Aboriginal Land Council v
Sanpine Pty Ltd [2007] HCA 61
Sale of Goods Act NSW (1923)
 Implies terms into
 Contracts
 For sale (money consideration)
 Of goods (not services)
 Cf Australian Consumer Law
13
What is implied?
 S17: title to sell
 S18: correspondence with description
 S19(1):fitness for purpose
 S19(2): merchantable quality
 S20: correspondence with sample
14
Eg s17Sale of Goods Act
 s 17 Implied undertaking as to title etc
 In a contract of sale, unless the circumstances of the contract are
such as to show a different intention, there is:
1)
an implied condition on the part of the seller that in the case of
a sale the seller has a right to sell the goods, and that in the
case of an agreement to sell the seller will have a right to sell
the goods at the time when the property is to pass,
2)
an implied warranty that the buyer shall have and enjoy quiet
possession of the goods,
3)
an implied warranty that the goods shall be free from any
charge or encumbrance in favour of any third party not
declared or known to the buyer before or at the time when the
contract is made.
Consumer?
 62 Definition
 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.
Relationship between legislation
and case law
 Common law system – use cases to understand/interpret
legislation
 e.g. What do terms such as ‘merchantable quality’,’ sale by
description’ and ‘reliance on seller’ mean?
 Find answers in case law such as:
 Ashington Piggeries v Christopher Hill [1972] AC 441
 Grant v Australian Knitting Mills (1935) 54 CLR 49
 David Jones Ltd v Willis (1934) 52 CLR 110
17
Australian Consumer Law
Revise: How to read a statute
E.g. Competition and Consumer Act 2010 (Cth) – s18
Misleading or deceptive conduct
(1) A person shall not, in trade or commerce,
engage in conduct that is misleading or deceptive or
is likely to mislead or deceive.
Elements of a section:
 Person
 In trade or commerce
 Engage in conduct
 Misleading or deceptive
 Defined by legislation (definitions section) or by
courts (case law.)
Legislation
 Competition and Consumer Act 2010 (Cth)
 Schedule 2 - Australian Consumer Law
 Application scheme
 Commonwealth Act – only applies to
corporations
 Why?
Application Scheme
 How does Australian Consumer Law (ACL) apply to all
jurisdictions in Australia?
 Why do we find it at Schedule 2 of the Competition
and Consumer Act 201o (Cth)?
Part 3-2: Consumer Guarantees
Division 1—Consumer guarantees
Subdivision A—Guarantees relating to the supply of goods
51
Guarantee as to title
52
Guarantee as to undisturbed possession
53
Guarantee as to undisclosed securities etc.
54
Guarantee as to acceptable quality
55
Guarantee as to fitness for any disclosed purpose etc.
56
Guarantee relating to the supply of goods by
description
57
Guarantees relating to the supply of goods by sample or
demonstration model
58
Guarantee as to repairs and spare parts
59
Guarantee as to express warranties
56 Guarantee relating to the supply of goods by
description
(1) If:
(a) a person supplies, in trade or commerce,
goods by description to a consumer; and
(b) the supply does not occur by way of sale by
auction;
there is a guarantee that the goods correspond with the
description.
(2) A supply of goods is not prevented from being a
supply by description only because, having been exposed
for sale or hire, they are selected by the consumer.
(3) If goods are supplied by description as well as by
reference to a sample or demonstration model, the
guarantees in this section and in section 57 both apply.
Common elements
a person supplies, in trade or commerce, goods
to a consumer
 Common Elements:
 Person/corporation
 Supply
 Trade or commerce
 Goods
 Consumer
S2:trade or commerce
trade or commerce means:
(a) trade or commerce within Australia; or
(b) trade or commerce between Australia
and places outside Australia;
and includes any business or professional activity
(whether or not carried on for profit).
 And case law
S2: goods
goods includes:
(a) ships, aircraft and other vehicles; and
(b) animals, including fish; and
(c) minerals, trees and crops, whether on,
under or attached to land or not; and
(d) gas and electricity; and
(e) computer software; and
(f) second-hand goods; and
(g) any component part of, or accessory to,
goods.
S3: consumer
(1) A person is taken to have acquired particular goods as a consumer if, and
only if:
(a) the amount paid or payable for the goods, as worked out under
subsections (4) to (9), did not exceed:
(i) $40,000; or
(ii) if a greater amount is prescribed for the purposes of this
paragraph—that greater amount; or
(b) the goods were of a kind ordinarily acquired for personal, domestic
or household use or consumption; or
(c) the goods consisted of a vehicle or trailer acquired for use
principally in the transport of goods on public roads.
(2) However, subsection (1) does not apply if the person acquired the goods, or
held himself or herself out as acquiring the goods:
(a) for the purpose of re-supply; or
(b) for the purpose of using them up or transforming them, in trade or
commerce:
(i) in the course of a process of production or manufacture; or
(ii) in the course of repairing or treating other goods or fixtures on
land.
Case law
 ‘of a kind ordinarily acquired for
personal, domestic or household
use or consumption’
 Carpet Call Pty Ltd v Chan
(1987) ATPR 41-025
‘ordinarily acquired for personal,
domestic or household use or
consumption’
 Not just personal use
 Business use as well
 e.g. Carpet in a nightclub (Carpet Call v Chan (1987) ATPR (Digest) 46025)
 Not just goods of a kind used in households
 Commercial versions of domestic products as well
 E.g. Commercial grade, decoratively coated insulation in
Bunnings warehouses (Bunnings v Laminex [2006] FCA 682)
 Mixed use? Common sense approach
 E.g even though ostrich egg incubator could be used for
home hobbies, if used commercially not consumer
(Crago v Multiquip (1998) ATPR 41-620 )
56 Guarantee relating to the supply of goods by
description
(1) If:
(a) a person supplies, in trade or commerce,
goods by description to a consumer; and
(b) the supply does not occur by way of sale by
auction;
there is a guarantee that the goods correspond with the
description.
(2) A supply of goods is not prevented from being a
supply by description only because, having been exposed
for sale or hire, they are selected by the consumer.
(3) If goods are supplied by description as well as by
reference to a sample or demonstration model, the
guarantees in this section and in section 57 both apply.
S56: elements
 Common elements
 Supply by description
 Guarantee of correspondence with
description
Case law
 UK Sale of Goods Act
 S19(2) Sale of Goods Act 1923 (NSW)
 s71(1) Trade Practices Act 1974 (Cth)
 Presumptions in statutory interpretation
Case Law
Ashington Piggeries v
Christopher Hill
[1971] 1AllER847
Sale/Correspondence
with description
Grant v Australian Knitting
Mills (1936) 54 CLR 49
Ashington Piggeries case:
 Viscount Dilhorne:
“Did
the presence of DMNA merely
affect the quality of the herring
meal or did it make a difference in
kind? If the former, then there was
no failure to deliver in accordance
with the description. If the latter,
there was.”
55 Guarantee as to fitness for any disclosed purpose etc.
(1) If:
(a) a person (the supplier) supplies, in trade or commerce, goods to a
consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the goods are reasonably fit for any disclosed purpose, and
for any purpose for which the supplier represents that they are reasonably fit.
(2) A disclosed purpose is a particular purpose (whether or not that purpose
is a purpose for which the goods are commonly supplied) for which the goods are
being acquired by the consumer and that:
(a) the consumer makes known, expressly or by implication, to:
(i) the supplier; or
(ii) a person by whom any prior negotiations or arrangements in
relation to the acquisition of the goods were conducted or made; or
(b) the consumer makes known to the manufacturer of the goods either
directly or through the supplier or the person referred to in paragraph (a)(ii).
(3) This section does not apply if the circumstances show that the consumer
did not rely on, or that it was unreasonable for the consumer to rely on, the skill or
judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the
manufacturer, as the case may be.
S55: elements
 Common elements
 Particular purpose made known by
consumer
 Consumer relied on skill/judgement of
supplier
 Reasonable to rely
Case Law
Purpose made known?
 Obvious purpose?
 Underpants – Grant v
Australian Knitting Mills
Reliance on seller’s
judgement?
 Ashington Piggeries v
Christopher Hill
S54: Guarantee as to acceptable
quality
(1) If:
(a) a person supplies, in trade or commerce, goods to a
consumer; and
(b) the supply does not occur by way of sale by auction;
there is a guarantee that the goods are of acceptable quality.
(2) Goods are of acceptable quality if they are as:
(a) fit for all the purposes for which goods of that kind are
commonly supplied; and
(b) acceptable in appearance and finish; and
(c) free from defects; and
(d) safe; and
(e) durable;
as a reasonable consumer fully acquainted with the state and condition of
the goods (including any hidden defects of the goods), would regard as
acceptable having regard to the matters in subsection (3).
(3) The matters for the purposes of subsection (2) are:
(a) the nature of the goods; and
(b) the price of the goods (if relevant); and
(c) any statements made about the goods on any
packaging or label on the goods; and
(d) any representation made about the goods by the
supplier or manufacturer of the goods; and
(e) any other relevant circumstances relating to the
supply of the goods.
(4) If:
(a) goods supplied to a consumer are not of acceptable
quality; and
(b) the only reason or reasons why they are not of
acceptable quality were specifically drawn to the consumer’s
attention before the consumer agreed to the supply;
the goods are taken to be of acceptable quality.
(5) If:
(a) goods are displayed for sale or hire; and
(b) the goods would not be of acceptable quality if they were
supplied to a consumer;
the reason or reasons why they are not of acceptable quality are taken, for
the purposes of subsection (4), to have been specifically drawn to a
consumer’s attention if those reasons were disclosed on a written notice
that was displayed with the goods and that was transparent.
(6) Goods do not fail to be of acceptable quality if:
(a) the consumer to whom they are supplied causes them to
become of unacceptable quality, or fails to take reasonable steps to
prevent them from becoming of unacceptable quality; and
(b) they are damaged by abnormal use.
(7) Goods do not fail to be of acceptable quality if:
(a) the consumer acquiring the goods examines them before
the consumer agrees to the supply of the goods; and
(b) the examination ought reasonably to have revealed that the
goods were not of acceptable quality.
Case Law
 ‘fit for all the purposes for which
goods of that kind are commonly
supplied’
 Rasell v. Garden City Vinyl and
Carpet Centre Pty Ltd (1991) ATPR 41-152
 Carpet Call Pty Ltd v Chan (1987) ATPR 41-025
Remedies
http://shusmo.me/2010/02/13/those-darn-angry-customers
43
/
Remedies
 Breach of contract:
 Remedies on the contract
 e.g damages
 Breach of term implied into the contract:
 Sale of Goods Act
 Remedies on the contract
 Breach of statutory guarantee
 Australian Consumer Law
 Remedies provided by statute
Statutory Remedies
 The remedies relating to the consumer guarantees
are found in Part 5-4 of the ACL.
 Range from refunds and replacements to
compensation and costs.
 The appropriate remedy against suppliers of goods
and services varies depending on whether or not
the failure to comply with the guarantees is ‘major’
and whether it can be remedied.
Consumer Guarantees - remedies
 If the failure is major or cannot be remedied, the consumer (not the
supplier) may choose to reject the goods or may choose to keep
the goods but ask for compensation to make up the difference in
value caused by the failure: see section 259 (3).
 If the failure to comply with a guarantee is not a major failure and
can be remedied, the consumer may require the supplier to remedy
the failure within a reasonable time: see section 259 (2).
 The supplier may then choose to remedy the failure by repairing or
replacing the goods or refunding money paid for the goods: see
section 261.
Flooring:
Mavis was particularly interested in flooring as
she had difficulties keeping her slate tiles clean.
She searched for low maintenance flooring and
after extensive shopping decided on single sheet
vinyl flooring. She saw just the thing at Discount
Lino Barn, close to Kylie’s home. Kylie indicated
that she didn’t share her mother’s preference for
vinyl flooring as it was cold underfoot and had
suggested kitchen carpet. Kylie and Mavis spoke
to Mike at Discount Lino Barn who suggested
under-floor heating could address Kylie’s
temperature issues. Kylie provided details of the
under floor heating options while her mother
left the conference room to offer slices of her
coffee cake to the other staff….
She is also angry about the flooring she has had
installed. Despite Kylie’s protests she went with
the single sheet vinyl, and did not have under
floor heating installed. The vinyl, while easier to
clean than the slate, is marking and scuffing
badly however. She has only had it down 6
months, and already there are a number of wear
marks. Her cupcake classes – which she runs 5
times a week and more often in school holidays –
are now so popular that she has at least 20
students per class. Because of her renovations
she has room for them all around her lovely new
island bench, but the vinyl around the island
bench almost looks like a race track.
It is as if her students have worn a path around
the bench – and in only 6 months.
The vinyl was quite expensive – as she had heavy
grade domestic installed – but Mavis is very
unhappy. She hasn’t yet paid the bill for the vinyl
as she has been arguing with the company. They
are, according to Mavis, now getting nasty, and
want their $45,000 immediately.
Fridge
She also advised that her mother was having
problems with Whitegoods World from which she
had bought her fridge. Kylie advised that her
mother required a “French door” fridge with
freezer drawers underneath to accommodate the
large baking trays she used for her cakes. She had
ordered the fridge she needed from Whitegoods
World but had experienced delivery problems.
Her oven purchase was much more successful than her
fridge which, on the very day it was due to be delivered –
not only did not arrive, but the shop called her to advise
that delivery was delayed for one month. Mavis said to
the shop keeper: “Well that’s no good to me. I ordered
that fridge for today. I need that fridge today. I told you
when I needed the fridge. The only reason I ordered
from you was that you told me I could have it today. If
you can’t give it to me today, you can just keep your
fridge!! I don’t want it anymore.” Mavis then rang Quick
Fridge and ordered and received another fridge that
afternoon– suitable for her requirements.
However, one month later, Whitegoods
World delivered the fridge originally
ordered and demanded payment.
Mavis refused to accept the fridge or to
pay, and advised them that the order
had been cancelled. They are
threatening to sue Mavis for the price
of the fridge - $5,500.
Oven
Mavis returned to the conference room. She
advised that she had had to make a large coffee
cake that morning, even though her preference
would have been to make cup-cakes. In fact, one of
her legal problems was her cup-cake oven. Cake
Cookers is a specialist retailer which sells products
designed for those who like to cook cakes. It retails
a number of specialist pans and other baking
utensils – many imported from America and not
readily available in Australia - as well as a special
range of cake ovens.
They are located in Broome – and
Mavis lives in NSW, but Cake
Cookers sells throughout Australia
by catalogue. Mavis wanted a special
cake oven in her new kitchen. She
saw an oven that looked perfect for
her in their catalogue – the picture
showed 8 slide out patty pan trays
instead of oven trays – exactly what
she wanted.
She rang the store and spoke to Cathy. She told
Cathy all about her cupcakes, her favourite
recipes, and her interest in the patty pan oven
in their catalogue. Cathy told her that the
patty pan oven had eight slide out patty pan
holders – instead of oven racks – and that each
patty pan holder would take one dozen patty
pans. Even better, they came with self cleaning
silicone inserts. Mavis was delighted about the
self cleaning but concerned that each tray
would only take one dozen patty pans.
Although after discussion with Cathy, she was
convinced that the overall capacity of the oven
was appropriate, and so she placed an order….
Mavis advised that even if she had known about
the cake order she would have had difficulty
fulfilling it because of problems with her newly
installed cake oven. When the oven arrived she saw
that instead of Australian sized delicate patty pan
holders, the cake trays were American size muffin
holders – and two trays were even jumbo sized
Texas muffin size holders. This is not what Mavis
wanted at all.
Mavis rang Cathy and told her the oven was not
what she had wanted at all, and not suitable for the
cakes in which she specialised. Cathy said she was
sorry that Mavis was disappointed, but there is
nothing that they can do about it now. Mavis wants
to know if she still has to pay the $8,000 for the
special cake oven.