Commercial
Transactions
Module 5-performance and remedies
Summer Session 2009-10
©MNoonan2009
This presentation and Copyright therein is the
property of Maureen Noonan and is prepared for
the benefit of students enrolled in the Commercial
Transactions course conducted by the Law
Extension Committee and is available for their
individual study. Any other use or reproduction,
including reproduction by those students for sale
without consent is prohibited.
©MNoonan2009
This module
We will cover performance of the contract
–including remedies for common nonperformance 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.
©MNoonan2009
PERFORMANCE
OF
THE CONTRACT
©MNoonan2009
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,
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
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
©MNoonan2009
the whole contract or whether it is a severable
HAMMER AND BARROW V. COCA COLA
(1962) NZLR 723
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Hammer, a yo yo manufacturer contracted to sell 200,000 yo yos for a marketing campaign
85,000 /200,000 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?
See Maple Flock Co v. Universal Furniture Products (Wembley) Ltd (1934)1 KB 148 for
rights of buyer to refuse to accept delivery
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Ratio quantitatively which breach bears to contract as a whole
The degree of probability or improbability that breach will be repeated
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
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
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
©MNoonan2009
Delivery by instalments
How do we decide if the buyer is entitled to treat the contract as repudiated?
Apply the factors in Maple Flock
Ratio quantitatively of breach to contract as a whole?
80% of 80,000 out of 200,000
Degree of probability breach will be repeated?
Early failure to produce yo yos of appearance required, failure to run down string
freely, nothing done quickly or eventually at all
Whether acts etc evidence an intention not to be bound an objective test to be
determined by considering the Relation of default to purpose of whole contract?
Usual situation exacerbated by the importance of advertising campaign, work and
expense put into it, efforts to fix it, suitable replacements could not be found easily or
quickly elsewhere. Coca Cola justified in rescinding rather than risking further
unsatisfactory deliveries.
©MNoonan2009
Delivery by instalments
What is the situation if the buyer is not entitled to treat the whole contract as
repudiated because small percentage of deliveries problematic and
likelihood of future deliveries being defective is low?
We can treat it as a severable breach using s. 34(2) and claim damages for
that breach.
Note that s. 34(2) only applies if each instalment is to be separately paid for.
If payment is on completion of all of them, still apply terms of contract, the
Maple Flock criteria as to right of repudiation, (if not covered in express
terms..e.g. no more than 3% problem items) and claim damage for loss
without using 34(2) and without terminating whole contract.
©MNoonan2009
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. ©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
ascertaining whether they are in conformity
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©MNoonan2009
for an
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.
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
delivery amounts to a repudiation of
the
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
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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
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Goods are perishable
Notice to buyer after exercise lien or stoppage
Expressly reserved right
s.50(3) Ward
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
them until payment or tender of
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.
©MNoonan2009
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 ©MNoonan2009
given by
JOHANN PLISCHKE U. SOHNE V. ALLISON BROS
(1936) 2 ALL ER 1009
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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
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
may have for damages.
REMEDIES OF UNPAID SELLER (1)
 MEANING OF “UNPAID SELLER” = S.41
AGAINST THE BUYER
SUE FOR PRICE
1. Ownership has passed
2. Ownership has not passed,
but specified payment day
Ordinary debt s. 51(1)
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
 Presumption of difference
Charter
Ward
in contract/market prices s.52(3)
Inappropriate if no available market (Lazenby)
©MNoonan2009
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 ©MNoonan2009
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 1997. Agreed price AUD 700/tonne FOB
Brisbane converted to USD price Jan 15 1997 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” ©MNoonan2009
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
©MNoonan2009
market or current price at the time or times
CHARTER V. SULLIVAN
(1957) 2 QB 117
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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
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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.
©MNoonan2009
WARD V. BIGNALL
(1967) 1 QB 534
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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
©MNoonan2009
LAZENBY GARAGES V. WRIGHT
(1976) 1 WLR 459
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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
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
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).
©MNoonan2009
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
©MNoonan2009
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
©MNoonan2009
by the difference between the contract
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.
©MNoonan2009
(4) The fact that the buyer has set up the breach of warranty
in
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
©MNoonan2009
sale or any breach of warranty.
WHERRY V. WATSON
(1991) ASC 56-048
1. 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
©MNoonan2009
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
©MNoonan2009
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
©MNoonan2009
McWilliam’s Wines P/L v. Liaweena (NSW) P/L
[1988] ASC 55-695 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.
©MNoonan2009
Auction sales
SOGA s. 60
60. 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
©MNoonan2009
may also be reserved expressly by or on behalf of the
Remedies for problem goods and
services: What and how?
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
©MNoonan2009
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
©MNoonan2009
Product and service liability
FACTS
Goods/services
unsatisfactory
LAW
Consumer sale?
Formation of contract -breach
Express terms
Implied?SOGA, TPA Div 2,2A
TPA s. 52 misleading,deceptive
Intnl sale? Vienna Convention
Financial Services? ASIC Act
REMEDIES
Action in contract
Rescission/Damages
Equitable
TPA Orders
IT general law
Fines ACCC
Tort
Goods defective
causing loss, injury
TPA VA manufacturer liability
TPA remedies
Defendant taken
advantage of
serious inequality
harsh agreement
Unconscionable provisions
51AA, 51AB, 51AC TPA
Contracts Review Act
Consumer Credit Act
TPA remedies
Misleading/Untruthful representation
Tort/s. 52,53 TPA
Change in possession
without transfer of title
Bailment?
Damages, TPA remedies
Damages
©MNoonan2009
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
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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 VIAproportionate 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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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. www.accc.gov.au
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
©MNoonan2009
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
©MNoonan2009
TRADE PRACTICES ACT 1974 ----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.
©MNoonan2009
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.
©MNoonan2009
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 resupply 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.
©MNoonan2009
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.
©MNoonan2009
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.”
©MNoonan2009
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)
©MNoonan2009
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 ©MNoonan2009
faith.
High risk situations for unconscionable conduct
See ACCC small business guide to unconscionable conduct
available at www.accc.gov.au
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
©MNoonan2009
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)).
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
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.)
©MNoonan2009
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. 52-.82,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 ©MNoonan2009
Period.
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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©MNoonan2009
no

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…..
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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)
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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.
©MNoonan2009
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
©MNoonan2009
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.
©MNoonan2009
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 74-77. 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)
©MNoonan2009
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 $62,132.46 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.
©MNoonan2009
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.
©MNoonan2009
Exam QA3 Sept 07
Pool Visions Pty Ltd (Pool) is a manufacturer of fibreglass swimming pools. All 17 purchasers of
pools in 2006 suffered serious leaks and commenced legal action against Pool for breach of the
conditions of merchantable quality and fitness for purpose under the Trade Practices Act (TPA).
Pool in turn said that if there were any defects in the pools they were caused by faulty fibreglass
gun rovings which were purchased from Sunlight Chemicals Pty Ltd (Sunlight).In turn Sunlight
blamed the manufacturer of the gun rovings, a Spanish company, Vibrex Espana SA (Vibrex) and
their local Australian sales agent IX Services Pty Ltd. (IX).
Rovings are used to create a fibreglass product by combining the rovings with resin using an
applicator gun. Evidence showed that when the product left the gun it formed clumps rather than a
smooth layer, trapping air and containing excessive moisture.
The general conditions of sale of each of the relevant agreements for purchase of the rovings
chose NSW law as the law of the contract, did not exclude liability of any type and did not exclude
the Sale of Goods (Vienna Convention) Act.
You are asked to advise on:
The relevant provisions of the Trade Practices Act which might be relied upon by the
purchasers against Pool, Pools statutory defences and the likely outcome financially and
otherwise of any claim under the TPA against them..
Whether they can bring a claim against Sunlight, Vibrex and/or IX to compensate them for
any successful judgement against them by the purchasers of the pools? Please explain
your answer and provide any relevant details of suitable claims and potential remedies.
©MNoonan2009
Exam QA3 Sept 07-marking
Understood QTPA,SOGA
2
Answered Q
2
(a) TPA re Pools –S 71,72,damages if supplier,
74B and 74D and statutory remedy if manufacturer only
Defences
Damages
Outcome and Cases in support of argument
9
(b) Pools re others-TPA, SOGA, Vienna Convention
Potential outcomes and cases in support of argument
9
Reasoning
2
Other- Services or goods? Were rovings the cause of the problem? Negligence.
1
TOTAL
25
©MNoonan2009
Exam QA3 Sept 2007
ISSUES ARISING FROM ANSWERS:
 Confusion between unsatisfactory goods (Part V Division 2A) and “defective”






goods provisions. Part VA). Some students mistakenly believed that defective
related to quality rather than as defined…goods not as safe as could be
expected
When looking at part (b) many students overlooked the fact that Pools was not a
consumer, and applied consumer only provisions anyway.
In some cases, there was a perception that the Vienna Convention had not been
incorporated into NSW law. It prevails over SOGA or TPA if there is a conflict.
One student even said that international conventions did not apply in NSW.
Some misconceptions e.g. a belief that a claimant would utilize s. 71 if a
consumer and Division 2A if not.
Confusion between action in contract based on implied terms, and a breach of
s.52 …particularly as to remedies such as access to TPA ss 80,82 and 87
Only one student queried whether the rovings were the cause of the problem
Some students believed that ss 74 B and 74D implied terms into a contract;
when clearly there is no contract between a consumer and a manufacturer
unless the manufacturer is also the supplier. Specific statutory remedies.
©MNoonan2009
Exam QA2 March 09
Samar Valley Orchards Pty Ltd Ltd (Samar”) is a large apricot grower in
the Riverina. It regularly sells apricots into both the domestic Australian and overseas
markets. Farmsales Pty Ltd (“,Farmsales), is an experienced exporter of Australian
produce. It offers to find markets, arrange sales, export, and and delivery,y and to
discharge all associated accounting and administrative functions.
In January 2008, there was a vague and casual oral agreement between Samar and
Farmsales that Farmsales would sell $200,000 worth of Samar apricots "as per
sample", at the agreed price, to Freshfood Supermarket in Singapore. No other
conditions were specified or discussed.
The apricots were picked, stored appropriately, packaged suitably by Samar, and
delivered to Farmsales; who shipped them to Freshfood a week later without opening
them.
Instead of receiving $200,000 as expected, Samar received $120,000. Farmsales
explained that Freshfood had deducted $80,000 as a "purchase discount" for a quality
deficiency.
Samar is unhappy with this situation and has consulted you to see whether they can
recover the $80,000.
Advise Samar on whether and on what legal bases it may be able to do so in
each of the following situations:
Farmsales is an agent for sale for Samar
Farmsales is a buyer who resells to Freshfood
©MNoonan2009
Exam QA2 March 09
Marking Scheme
Understood Q Sale of perishable goods
Answered the Q
If International Contract-agency, bailment, Vienna Convention(35,45,50)
Local C-unpaid seller, title, risk, product liability, ability to offset, SOGA
Reasoning
Other: e.g. s. 52 TPA, Bailment, ADR possibilities
ways problem could have been avoided
TOTAL
2
2
9
9
2
1
25
©MNoonan2009
Exam QA2 March 09
Tips for answering this question:
Students are expected to undertake some research when this Q was an assignment-in this
case, the Vienna convention remedies of a buyer/seller.
When an exam question, application and basics of the Convention terms required to answer
question. See Examiners comments
Students should be aware that their examiner sometimes uses cases (both NSW and
elsewhere) for inspiration for facts for examination questions. As the complexity of real
situations is sometimes inappropriate for exams and assignments, facts are usually not
identical to such cases. Sometimes they are taken from other jurisdictions, so the result in
NSW may be different. In other words, students should be cautious when applying any of
them.
For this question, students may find Hannaford (trading as Torrens Valley Orchards) v.
Australian Farmlink Pty Ltd (2008) FCA 1591 useful.
©MNoonan2009
Examiners Comments QA2 March09
 Students found this sale of goods question difficult.
 Many students ignored the fact that Freshfoods
was outside Australia and asserted that Samar or
Farmsales could just bring a domestic action
rather than refer to the Vienna convention.
 A considerable number of students forgot who they
were advising and just generally described some
law they thought relevant rather than answer the
question
©MNoonan2009