Supply of Goods and Services
B2B transactions
Module 6
Winter13
©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
Modules 4, 5and 6
•
•
•
•
The Contract for Sale/Supply of Goods and/or Services, both B2B and B2C
Conduct surrounding the supply.
Relevant Statutory provisions which impose terms into contracts for sale of
goods (SOGA), provide statutory remedies for breach of particular provisions
(ACL) or affect interpretation of those contracts
At the end of these 3 modules, we will be able to advise a client on the
appropriate legal action to resolve their problem with supplies of goods and/ or
services (if any):
--in breach of contract where there is dissatisfaction by either party,
--actions for breach of specific statutory rights with access to statutory remedies and
--whether other legal solutions may be available e.g. negligence.
--bearing in mind that there may also be risk management strategies, practical solutions
and ADR that are relevant.
©MNoonan2009
Relevant legislation
What is required knowledge of legislation?:
• A good understanding of and ability to work with:
• Most provisions of the Sale of Goods Act (NSW)
• Various provisions of: Australian Consumer Law (most being the
same as, or similar to, those previously contained in Trade Practices
Act and State Fair Trading Acts, but note different legal structure and
new provisions regarding unfair standard form consumer contracts)
• Sale of Goods (Vienna Convention) Act (NSW) for international B2B
sales
• Limited other references
• In Winter 2013 Semester, Consumer Credit will not be covered.
©MNoonan2009
Product/service liability analysis
BREACH OF CONTRACT AGAINST SUPPLIER
including EXPRESS conditions and warranties
and/or those IMPLIED by common law, Statute
(SOGA, Vienna Convention), custom.
BREACH OF STATUTE (ACL)
UNFAIR PRACTICES Misleading, deceptive,
unconscionable conduct (ACL)
TORT- MISREPRESENTATION, NEGLIGENCE,
BAILMENT
©MNoonan2009
Change in the law
As of 1/1/2011, many statutory provisions formerly contained
in the Trade Practices Act or State Fair Trading Acts are
now contained in the Australian Consumer Law (ACL) or
ASIC Act for financial transactions, in the same or similar
terms. There are also some new provisions.
Students will be expected to answer examination questions
using the ACL but may find judgements or text analysis
referring to the TPA useful in reasoning or argument if
provisions are the same or similar.
Note the important conceptual change from use of implied
terms in TPA to Statutory Guarantees in ACL.
©MNoonan2009
B2B transactions
In this module we are considering transactions
in which all parties are businesses and do
not fall within the definition of either
“consumer” in the ACL or “consumer sale”
within SOGA. Such businesses often do not
have the benefit of most protections in the
ACL and must look after themselves in
contract and the general law.
©MNoonan2009
Product and Service Liability B2B
FACTS
LAW
REMEDIES
Goods/services
Existence Contract?
Breach contract
Unsatisfactory
Express terms
Implied terms-SOGA,custom
Intnl sale? Vienna Convention
Financial Services?
Small business=Consumer?
Action in contract
Statutory
Rescission
Damages
Equitable
ACCC fines or action?
ASIC Act
ACL guarantees?
Defendant taken
advantage of?
serious inequality?
Misleading,
deceptive conduct
Unconscionable?
Small business?
Damages
Injunction
Orders
Other
Untruthful
representation
Change in possession
without transfer of title
Tort
Bailment?
Damages
Damages
©MNoonan2009
SOGA IMPLIED TERMS
• SOGA applies to ALL sales of goods (as
defined)
• Term implied by s. 17 can be excluded in all
sales
• Implied terms in sections 18, 19, 20 can be
excluded in non-consumer sales…B2B
transactions…but not in consumer sale.
©MNoonan2009
IMPLIED TERMS - TITLE
S.17 SALE OF GOODS ACT 1923
•IN A CONTRACT OF SALE
•UNLESS THE CIRCUMSTANCES OF THE CONTRACT
•SHOW A DIFFERENT INTENTION
THERE IS:
AN IMPLIED CONDITION…
– In CONTRACT FOR SALE That SELLER HAS A RIGHT TO SELL
– AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME
PROPERTY IS TO PASS
AN IMPLIED WARRANTY
– BUYER SHALL HAVE AND ENJOY QUIET POSSESSION
AN IMPLIED WARRANTY
– GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE
NOT DECLARED AT TIME CONTRACT
©MNoonan2009
ROWLAND V. DIVALL
(1923) 2 KB 5000
•
•
•
•
•
MR. DIVALL BOUGHT CAR
SOLD IT TO ROWLAND
WHO SOLD IT TO RAILSDON
POLICE TOOK IT FROM RAILSDON
STOLEN CAR
Atkin LJ
1. TOTAL FAILURE OF CONSIDERATION
2. IMPLIED CONDITION SELLER HAD RIGHT TO SELL
3. SELLER NO SUCH RIGHT
4. NO SALE AT ALL
5. NO OBLIGATION TO RETURN CAR TO SELLER
SELLER NOT ENTITLED TO COMPLAIN ABOUT BENEFIT TO
BUYER OF USE
6. MONEY HAD AND RECEIVED ON FAILURE OF CONSIDERATION
©MNoonan2009
Niblett Limited v Confectioners’ Materials Co Ltd
(1921) 3KB 387
Confectioners’ sold 3,000 tins of condensed milk to Niblett’s
on CIF Contract. Although the documents did not show
which brand of condensed milk was the subject of the sale,
Confectioners’ argued that under an oral contract, it would
be one of three brands - “Freedom”, “Tucson”, “Nissley”.
Confectioners’ delivered 2,000 cases of “Freedom” and then
1,000 tins of “Nissley”.
In November, Niblett’s received a letter from Nestle, stating
that “Nissley” imitated the Nestle trademark and asked
Niblett not to sell it. It also threatened to take proceedings
against Niblett. Niblett signed an undertaking not to sell,
advertise or offer for sale the “Nissley” condensed milk.
They then unsuccessfully asked Confectioners’ to take it
back and unsuccessfully applied for an export license for it.
©MNoonan2009
Niblett Limited v Confectioners’ Materials Co Ltd cont.
Niblett claimed damages for breach of warranty: 1. that the milk was of merchantable quality;
2. that Confectioners’ had a right to sell it;
3. that Niblett should have enjoyed quiet possession; and
4. there was an implied condition or warranty that the label on
the milk would not infringe any trademark.
Bankes N J, of the English Court of Appeal, found that there
was a clear breach of Section 12 of the English Sale of Goods
Act, 1893, (S. 17 SOGA) because Confectioners’ had no right to
sell the goods as they were, and Niblett had never enjoyed
quiet possession.
©MNoonan2009
Microbeads v Vinhurst Road Markings Ltd
(1975) 1 ALLER 529
Prismo held a patent for a machine for making white lines on roads. The
complete specification was published in November 1970. It was entitled to
institute proceedings for infringement in 1972, when the letters patent were
granted.
At the beginning of 1970, Vinhurst brought a machine for making white lines
from Microbeads.. property in the machine passed before Nov 1970.
Vinhurst knew nothing about the patent, it found the machine unsatisfactory
and didn’t pay Microbeads. Microbeads sued for the price. Vinhurst alleged
breach of the term of fitness for purpose, and claimed that Microbeads did
not have the right to sell the machine and Vinhurst did not have quiet
possession.
Lord Denning found that because the sale had occurred prior to the grant of
the patent, there was no breach of the condition that the seller had the right
to sell the goods. They were entitled to do whatever they liked with them at
the time. However, he found a breach of the implied warranty for quiet
possession. He found that the words “to have and enjoy” applied not only at
the time of sale but for to future enjoyment.
©MNoonan2009
IMPLIED TERMS- SOGA- TITLE-feeding the title
PATTEN V. THOMAS MOTORS
(1965) NSWR 1457
Miss P obtained a car on Hire Purchase from CAGA. She sold it to
Dealer, Clinton Motors. After various transfers, TM bought it and
sold to P in May 61. In August 61, Miss P obtained a loan from D&I
purporting to give a Bill Of Sale over the car. She used the money to
pay out the Hire Purchase agreement with CAGA On 09/08/61. Miss
P did not repay D&I and they repossessed the car. P sued TM for
Breach Of Warranty Of Title S. 17(1) SOGA In Sept 63. Breach
Warranty rather than condition (Termination No Longer Possible).
HAD ORIGINAL DEFECTIVE TITLE BEEN “FED” BY PAYING OUT
HIRE PURCHASE CO? IF SO, ANY CAUSE OF ACTION UNDER S.
17(1) EXTINGUISHED.
COLLINS J.
YES, TITLE COULD BE FED IN THIS WAY. NO CAUSE OF ACTION.
©MNoonan2009
IMPLIED TERMS
- DESCRIPTION
S.18 SALE OF GOODS ACT 1923
WHERE:
 THERE IS CONTRACT FOR SALE OF GOODS BY DESCRIPTION
THERE IS:
 AN IMPLIED CONDITION
THAT GOODS WILL CORRESPOND WITH DESCRIPTION
IF SALE BY SAMPLE + DESCRIPTION
NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF
THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION
©MNoonan2009
IMPLIED TERMS- DESCRIPTION
BEALE V. TAYLOR (1967) 1 WLR 1193
Mr. Taylor believed his car was a 1961 herald. He advertised it for
sale as such. Mr. Beale bought it but found it was half of a 1961
herald and half an older one welded together. Mr. Beale sued for a
refund.
Both parties were innocent
Seller said the sale was not by description but the sale of a car as
seen, tried and approved. He denied the buyer had suffered loss or
damage.
SELLERS LJ IN COURT OF APPEAL
1.
SALE BY DESCRIPTION
2.
WITHIN SALE OF GOODS ACT
3.
BUYER ENTITLED TO REFUND LESS SCRAP VALUE
©MNoonan2009
IMPLIED TERMS- DESCRIPTION & SAMPLE
NICHOL V. GODTS (1854) 156 ER 410
Nichol showed samples of oil to Godts. He described the oil as:
‘Foreign refined rape oil, warranted only equal to samples’
Godts entered into a written contract to buy 33 tons. The oil
corresponded with the sample, but not the description. It was a
mixture of rape and hemp oil. Godts refused to accept or pay.
Nichol sued
1.
2.
3.
4.
ATTEMPT AT EXCLUSION
AGREED TO DELIVER FOREIGN REFINED RAPE OIL
DID NOT DO SO
CONTRACT NOT PERFORMED
©MNoonan2009
IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923
 SUBJECT TO PROVISIONS OF ACT NO IMPLIED WARRANTY OR
CONDITION AS TO QUALITY OR FITNESS
EXCEPT WHERE:
• BUYER EXPRESSLY OR BY IMPLICATIONMAKES KNOWN
PARTICULAR PURPOSE BUYER RELIES ON SELLER’S SKILL
AND JUDGEMENT AND GOODS ARE TYPE IT IS SELLER’S
BUSINESS TO SUPPLY
THERE IS:
• AN IMPLIED CONDITION THAT
GOODS ARE REASONABLY FIT FOR PURPOSE
©MNoonan2009
IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923
EXCEPT WHERE:
• GOODS BOUGHT BY DESCRIPTION and SELLER DEALS IN
GOODS OF THAT DESCRIPTION
THERE IS:
• AN IMPLIED CONDITION THAT
GOODS SHALL BE OF MERCHANTABLE QUALITY
EXCEPT WHERE BUYER HAS EXAMINED DEFECTS SHOULD
HAVE BEEN REVEALED ON EXAMINATION

IMPLIED WARRANTY CAN ARISE BY USAGE OF TRADE

EXPRESS WARRANTY OR CONDITION

DOES NOT NEGATIVE IMPLIED WARRANTY OR CONDITION

UNLESS INCONSISTENT
©MNoonan2009
National Engineering V. Wellington Orana Foundry
P/L (2003) NSWSC 21
•
•
•
•
•
Part decision on whether a referee’s report should be accepted.
In 1996, National entered into a sub contract with Multiplex for the
fabrication and erection of structural steelwork for Stadium Australia.
National ordered and purchased the cast forked ends from Wellington. It
produced and delivered castings made in accordance with the shape
requested by National. Upon testing they were found to contain defects.
At this stage Wellington had cast about 600; some of which had been
delivered. Wellington proposed that the design be modified and a revised
price was agreed. Several castings of the roof needed to be replaced.
National claimed a breach of s. 19(1)-not reasonably fit for the purpose.
Did the buyer make known the particular purpose “so as to show that the
buyer relies on the seller’s skill or judgement”?The National
representative had provided drawings and specifications. What skill or
judgement was left to the manufacturer? Was there reliance upon the
seller as to whether castings could be cast or whether they could be cast
to the appropriate standard?
©MNoonan2009
IMPLIED TERMS
- FITNESS FOR PURPOSE
CASE
GRANT V. AUSTRALIAN
KNITTING MILLS
GRIFFITHS V. PETER
CONWAY
BARTLETT V. SIDNEY
MARCUS
PURPOSE
NOTE
WORN NEXT TO SKIN
AGAINST
RETAILER,
MANUFACTURER
NEGLIGENT
COAT TO BE WORN BY INSUFFICIENT TO
MRS. GRIFFITHS
MAKE KNOWN
PARTICULAR
PURPOSE
COAT TO BE WORN BY
A PERSON WITH AN
ABNORMALITY
MOTOR CAR TO DRIVE ALSO
ALONG THE ROAD
DESCRIPTION
REASONABLY FIT IF
SECOND HAND
ROADWORTHY
CAR
©MNoonan2009
IMPLIED TERMS
- FITNESS FOR PURPOSE
CASE
PURPOSE
CROWTHER V.
CAR TO DRIVE
SHANNON MOTOR ALONG THE ROAD
CO.
NEARING POINT OF
FAILURE
LEXMEAD
COUPLING FIT FOR
(BASINGSTOKE) V. TOWING TRAILERS
LEWIS
FITTED WITH CUP
OR RING
ATTACHMENTS
BALDRY V.
FAST CAR THAT
MARSHALL
WAS FLEXIBLE,
EASILY MANAGED,
COMFORTABLE,
SUITABLE FOR A
TOURING CAR
NOTE
ROADWORTHY+FOR A
REASONABLE TIME
ONLY FOUND OUT
AFTERWARDS
IMPLIED WARRANTY
NO LONGER
AVAILABLE BECAUSE
OF KNOWLEDGE OF
DEFECT
CONTRACT FOR
PURCHASE OF
BUGATTI
EFFECT OF TRADE
NAME V. DESCRIPTION
IN CONTRACT
©MNoonan2009
Issues
Note the need to prove:
Purpose made known-how? Particular
purpose? General purpose? Obvious?
Reliance on skill and judgement- to what
extent? What if specifications given or
superior knowledge in buyer?
©MNoonan2009
Ashington Piggeries Ltd v Christopher Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel
(1972) AC441; (1971) 1ALLER847
Ashington Piggeries (AP) had a mink farm. They used
Christopher Hill (CH) to make a compound food to feed the
mink. It was an oral contract. The formula for the compound
which specified the ingredients was provided by AP, (an expert
in the nutritional requirements of mink).
CH was in the business of compounding food stuffs for
domestic animals but knew nothing about mink and had never
compounded food stuffs for minks before. CH entered into a
commodity contract with Nirdsirdmel (N) for them to supply a
herring meat of “fair average quality of the season” for the
compound. The herring meal contained DNMA which had been
produced by a chemical reaction because of sodium nitrate
used as a preservative. The DNMA was toxic for the mink,
which died.
©MNoonan2009
Ashington Piggeries Ltd v Christoper Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel (description) cont.
CH, seller, sued AP, buyer, for price. AP, in cross action, sued CH - breach of
contract alleging “King Size” did not correspond with description; not reasonably
fit for purpose; and not of merchantable quality. In X action, CH joined N.
CH admitted that sales of King Size were sales by description. Breach of implied
condition that the goods supplied would correspond with description?
The Court of Appeal had decided the goods complied with the description. HofL
analysed: Did the presence of DNMA really affect quality or did it make a
difference in kind? If the former, then in accordance with description. The
contract said:
“Norwegian herring meal fair average quality of the season, expected to analyze
not less than 70% protein, not more than 12 % fat and not more than 4% salt”.
HofL said: What was sold was Norwegian herring meal, despite the DNMA
problem and it matched that description.
©MNoonan2009
Ashington Piggeries Ltd v Christoper Hill Ltd;
Christopher Hill Ltd v Nirdsirdmel (fit for purpose)
AP had made known to CH the particular purpose for the
King Size, but had CH made that purpose known to N?
Did the buyers rely on sellers skill & judgement?
They made known they were compounding it for foodstuffs
and it was common food for mink; but they did not explicitly
state that.
The majority decision-purpose made known. In dissent, Lord
Diplock -purpose not specific enough as it could have been
any one of a “range of purposes”.
©MNoonan2009
Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd
(1991) ATPR 41-152
Mr. and Mrs. Rasell ordered carpet for their home from a carpet
manufacturer. They specified that the carpet was to be a
particular colour to match the interior décor of the house and the
internal walls which were exposed brick. The carpet was
supplied and there was no complaint as to its quality as carpet,
but the colour of the carpet was different in patches and different
from the colour specified. This was due to "pile reversal" or
"watermarking"; a result of the manufacturing process.
Did the customer have to accept the carpet?
It was held that the carpet was not reasonably fit for the purpose
of blending in with or matching the existing décor; a particular
purpose made known at the time of purchase…. a breach of s. 71
(2) TPA. Further, since it was also not fit for one of the usual
purposes for which carpet is purchased (matching existing décor)
it was not of merchantable quality. Note also that it was new,
high quality and expensive carpet.
©MNoonan2009
IMPLIED TERMS
- MERCHANTABLE QUALITY
CASE
DAVID JONES
V. WILLIS
QUALITY
DESCRIPTION
“WALKING SHOES” &
RELIED ON SKILL AND
JUDGMENT DESPITE
NOT
MANUFACTURERS
BROWN AND SON DIFFERENT USE
V. CRAIKS
ASSUMPTIONS. CLOTH
FOR UNDISCLOSED
PURPOSE OF
DRESSES
V.INDUSTRIAL.
DANIELS V. WHITE BOTTLE OF “R
AND TARBARD
WHITE’S LEMONADE”
SALE BY DESCRIPTION
NOTE
NOT FIT FOR
PURPOSE OF
WALKING EITHER
“THROWAWAY
PRICE”
AN INDICATION
GOODS NOT
MERCHANTABLE
QUALITY
NO RELIANCE ON
SKILL AND
JUDGMENT
SO (2) ONLY
©MNoonan2009
IMPLIED TERMS
- MERCHANTABLE QUALITY
CASE
WILSON V.
RICKETT
COCKERELL
BEER V.
WALKER
THORNETT &
FEHR V. BEERS
AND SON
QUALITY
“A TON OF COALITE”
SHOULD NOT
EXPLODE. QUITE
CLEARLY
CONSIGNMENT NOT
MERCHANTABLE.
RABBIT CARCASSES
SHOULD NOT ARRIVE
PUTREFIED.
VEGETABLE GLUE
SHOULD NOT BE
DEFECTIVE. WERE
THEY EXAMINED?
NOTE
ANOTHER EXAMPLE
WHERE FITNESS FOR
PURPOSE WOULD
HAVE FAILED
A PERSON SELLING
HUMAN FOOD
WARRANTS FOOD IS
GOOD ON ARRIVAL.
SAW BARRELS, DID
NOT EXAMINE
BECAUSE OF TIME.
DEFECT WOULD HAVE
BEEN IMMEDIATELY
APPARENT.
©MNoonan2009
W.M.Johnson P/L v. Maxwelton (Oaklands) P/L
CASCNSW CA 40136/99 23/10/2000
Maxwelton farmed Tara, running cattle, sheep and fat lambs and growing
cereal. Dixon (Manager) decided to acquire a hay baler. Hay is mown and
raked into windrows. Then it is picked up by the baler, compressed into
bales, and tied with twine…last is knotting system. He bought a used
Heston 4800 baler "as is" for $35,000. Saw 3 faults. Seller reduced price by
$1,000.Seller indicated that the baler was a good and reliable baler and
had been in operational use in the previous season. Dixon picked it up,
cleaned off chaff, changed the oil in the gear boxes greased the machine,
adjusted the chains according to the operators manual, replaced a bolt and
went to a baling school.
Knotting system did not function. After attempts at repairs, abandoned use
of it.
s. 71(1) TPA "merchantability"
Consumer for purposes of Act…Baler supplied in the course of a business.
Not possible to see problem when not operating and so inspection could not
reveal. s. 66(2)… goods are of merchantable quality if they are as fit for the
purpose for which goods of that kind are commonly bought as it is
reasonable to expect having regard to any description applied to them, the
price and all the other relevant circumstances. Calculation of price did not
reflect a known inoperable essential component…""as Is" could not of
itself exclude implied condition …still less "as per inspection"…in this case
only covered the defects leading to the $1,000 reduction.
©MNoonan2009
DRUMMOND AND SONS V. V AN INGEN AND CO
(1887) 12 App Cases 284
1883 Van Ingen bought cloth described as “worsted coatings” and sold it
to tailors who made coats. 1884 Van Ingen wanted more for same purpose.
Shown samples, bought in accordance with samples. Cloth delivered
conformed to samples BUT No good for coats
Lord Herschell "When a purchaser states generally the nature of the article
he requires, and asks the manufacturer to supply specimens of the mode
in which he proposes to carry out the order, he trusts to the skill of the
manufacturer just as much as if he asked for no such specimens. And I
think he has a right to rely, on the samples supplied representing a
manufactured article which will be fit for the purposes for which such an
article is ordinarily used, just as much as he has a right to rely, on
manufactured goods supplied on an order without samples complying with
such a warranty.”
Implied warranty will be excluded if due diligence would have disclosed
defect. What amounts to due diligence depends on circumstances. Nothing
here which could reasonably lead them to anticipate problem.
©MNoonan2009
EXCLUSION and LIMITATION
IMPLIED CONDITIONS / WARRANTIES
GENERAL RULES:
SALE OF GOODS ACT
MAY BE EXCLUDED EXCEPT IN CONSUMER
SALE
S. 62 DEFINITION OF CONSUMER SALE
S. 63 ONUS OF PROOF WITH PARTY
CONTENDING IT IS NOT A CONSUMER SALE
S. 64 PROVISIONS PURPORTING TO EXCLUDE
SS. 18,19,20 (EXCEPT 19(4)) IN CONSUMER
SALE IS VOID
©MNoonan2009
LIMITS ON EXCLUSION IMPLIED TERMS
- SOGA
S. 64
(1) Any provision in, or applying to, a contract for a consumer
sale and purporting to exclude or restrict the operation of all
or any of the provisions of sections 18, 19 and 20 (section
19(4) excepted) or any liability of the seller for a breach of a
condition or warranty implied by any provision of those
sections is void.
(2) express warranty or condition in consumer sale does not
negative a condition as to merchantable quality implied by
Act
(3)…expression “merchantable quality”…
(4) No implied condition of merchantable quality for defects
brought to buyer’s notice before contract
(5) Re merchantable quality….court may add manufacturer as a
party….make order that manufacturer pay…remedy
©MNoonan2009
PERFORMANCE
OF
THE CONTRACT
©MNoonan2009
Performance
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
SOGA s. 30,31
Duties of seller and buyer
30. It is the duty of the seller to deliver the
goods, and of the buyer to accept and pay for
them, in accordance with the terms of the contract
of sale.
Payment and delivery are concurrent conditions
31. Unless otherwise agreed, delivery of the goods
and payment of the price are concurrent
conditions, that is to say, the seller must be
ready and willing to give possession of the goods
to the buyer in exchange for the price, and the
buyer must be ready and willing to pay the price
in exchange for possession of the goods.
©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.
©MNoonan2009
Rules as to delivery cont.
32(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
©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
©MNoonan2009
contract is a repudiation of the whole contract
HAMMER AND BARROW V. COCA COLA
(1962) NZLR 723







Hammer, a yo yo manufacturer contracted to sell 200,000 yo yos for a marketing campaign
85,000 /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
–
–
–
–
–
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
 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 for ©MNoonan2009
an
HAMMER AND BARROW V. COCA COLA
(1962) NZLR 723 See text extract
Had CC lost the right to reject because it had “accepted” 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 delivery amounts to a
repudiation of the contract.
©MNoonan2009
REMEDIES OF UNPAID SELLER (2)
 MEANING OF “UNPAID SELLER” = S.41
LIEN






AGAINST THE GOODS
Ownership passed (no lien over your own goods)
Seller still in possession
Or lawfully recovers possession
No possession, no lien
Ascertained goods only
Right can be lost s.45(1), s.49
WITHHOLDING DELIVERY
 Buyer defaults
 Ownership has not passed
STOP GOODS IN TRANSIT





When are goods in transit? S. 47(1)
Available when buyer becomes “insolvent”
Meaning of “insolvent”
Revests possession and revives lien
Retake actual possession or notice to carrier
RIGHT OF RESALE
Goods are perishable
 Notice to buyer after exercise lien or stoppage
 Expressly reserved right
 s.50(3) Ward
©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 them
until payment or tender of the
©MNoonan2009
price.
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 given
©MNoonan2009
by the seller to the carrier or other bailee in
JOHANN PLISCHKE U. SOHNE V. ALLISON BROS
(1936) 2 ALL ER 1009









Plischke agreed to sell linen to Napier
Term of contract “Free house, London”
Shipped from Germany to England
On arrival on 14.1, placed in warehouse
By Allison on instructions Napier
Napier entered arrangement with creditors
Plischke discovered this and
On 18.1, Plischke ordered Allison not to deliver to Napier
Allison refused
1. GOODS STOPPED IN TRANSIT?
2. HAD TRANSIT ENDED?
3. MEANING OF “FREE HOUSE, LONDON”
Branson J
 Free house means goods to be delivered to them and does not exclude right to
indicate goods should be delivered some other place
 Allisons acted as agent for Purchaser not Seller
 Transit ended when goods collected by Allisons for Napier
 Even if wrong, SGA s. 45(2)=NSWSGAs.47(2) determines the matter
©MNoonan2009
RIGHTS OF UNPAID SELLER AGAINST GOODS
SOGA s. 49-Effect of sub sale 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 may have for damages.
©MNoonan2009
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 Charter
 Presumption of difference
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 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) Provision in contract enabling CRL to invoice should shipping schedule be
revised and, if it does, require payment in 28 days, does not establish a day certain.
The day is uncertain, governed by decision of CRL whether and when to invoice.
Accordingly, CRL no entitlement under s. 50(2) of the SOGA to sue for price.
Is s. 50(2) exhaustive of rights? No, SOGA expressly saves the rules 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 nonacceptance
52. (1) Where the buyer wrongfully neglects
or refuses to accept and pay for the goods,
the seller may maintain an action against
the buyer for damages for non-acceptance.
(2) The measure of damages is the
estimated loss directly and naturally
resulting in the ordinary course of events
from the buyer's breach of contract.
(3) Where there is an available market
for the goods in question, the measure of
damages is prima facie to be ascertained by
the difference between the contract price
and the market or current price at the time
©MNoonan2009
or times when the goods ought to have been
CHARTER V. SULLIVAN
(1957) 2 QB 117






Sullivan agreed to buy Hillman
from Charter
Profit 97 pound 17 shillings
Sullivan pulled out
Week later Charter sold
to Wigley for same price
TRUE MEASURE OF DAMAGES?
 Nominal damages?
(difference between contract and market)
 Loss of profit +
(directly and naturally resulting in ordinary course)
Jenkins LJ
 Consideration of facts resulting in rejection of PF measure in favour of direct and
natural loss.
 Plaintiff did not prove loss of profit. He 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
©MNoonan2009
his contract.
WARD V. BIGNALL
(1967) 1 QB 534






Bignall agreed to buy 2 cars from Ward
Paid 25, went off to get 825
Changed his mind.
Warning that Ward would resell
Ward sold one, not the other
Sued for price
Diplock LJ.
Measure of damages?
1. Unpaid seller’s lien=price
2. Damages for non –acceptance
=difference between contract and market s.50
Sale of one car was election to rescind contract.
Damages for non-acceptance appropriate
©MNoonan2009
LAZENBY GARAGES V. WRIGHT
(1976) 1 WLR 459






Lazenby bought second hand car for 1,325
Wright agreed to buy it for 1,670
He pulled out
Lazenby resold for 1,770
Lazenby sued Wright for damages
Lost sale of another car to the second purchaser
Lord Denning MR
 Loss of profit on sale of another car?
 No market for second hand cars
 Prima facie measure did not apply
(difference between contract and market)
 Therefore loss directly and naturally in ordinary course
 What would parties contemplate as natural consequence
 Buyer could not have contemplated that dealer would sell one car less
 He would contemplate possible loss on resale
 No loss on resale; no damage
©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
©MNoonan2009
as to appropriate damages.
LEDGER V. CLEVELAND NOMINEES PTY LTD
- the Letter
6 February 1995
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
I confirm my agreement to purchase the vehicle on the above conditions K.F.Ledger
©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
©MNoonan2009
ACTIONS FOR BREACH OF THE CONTRACT
SOGA -s. 53-Damages for nondelivery
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
©MNoonan2009
warranty.
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
©MNoonan2009
contract of sale or any breach of
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
©MNoonan2009
of sale to be subject to a reserved price, and a right
Exclusion/Limitation Clauses
An express term of the Contract. Is it part of the
contract? Was the offending conduct within the
terms of the contract, so that it applies?
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 not deemed 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 and payment 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.
©MNoonan2009
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
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 include:
- reasonable notice of clause and brought to attention;
- 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
- Unconscionable Conduct
©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 no 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
Limitation of Liability
Parties will always want to attempt to exclude
or limit their potential liability, transfer it to
someone else or insure against it.
How do they do it?
Allocation via transaction
Exclusion clauses…also called an exemption
clause, a disclaimer, a warning.
Indemnity clauses in later slides.
Insurance. See later module.
©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 (See exam question 2008 Bagger/Whabbles inspired by this case)
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 (now s. 18
ACL) provided a remedy. Machinery had been mislead and would
not have entered into the contract had it known the true position.
©MNoonan2009
Indemnity Clauses
As well as exclusion and limitation clauses,
one often finds Indemnity Clauses in
contracts. Under the typical clause, the buyer
indemnifies the seller for any loss or liability
it incurs. In other words, even if the buyer has
a cause of action and succeeds with breach of
contract or statute, if the indemnity clause is
valid, they have to pay any compensation they
receive right back!
©MNoonan2009
Qantas Airways v. Aravco Ltd (1996) HCA 12
Did 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.
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”.
Aravco pleaded s.74 TPA 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 TPA 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 in clause 7 to the cost of the services being
supplied again, the damages would be less than $5,000.
©MNoonan2009
Qantas v. Aravco cont 2
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.
©MNoonan2009
Qantas v. Aravco cont 3
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. Clause 7
stated that pursuant to s.68A of the TPA, clause 7 applied in respect of any
goods and services not of a kind ordinarily acquired for personal, domestic
or household use or consumption to limit liability in the case of services to
supplying the services again or the payment of the cost of having the
services supplied again.
Aravco would then have relied on s.68A (2), and contended 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.
Would the new unfair terms provisions have assisted Aravco?
©MNoonan2009
Scope of indemnity clauses
They can enable a contracting party to:
Avoid liability for their own negligence
Get around rules concerning remoteness or
need to mitigate their loss
Transfer liability alltogether to someone else
©MNoonan2009
Samways v. WorkCoverQueensland and Ors [2010] QSC 127
“The Hirer (De Luca)shall fully and completely
indemnify the Contractor (Lynsha) in respect
of all claims by any person or party
whatsoever for injury to any person or
persons and/or property caused by or in
connection with or arising out of the use of
the plant and in respect of all costs and
charges in connection therewith whether
arising under statute or common law.”
©MNoonan2009
Samways v. WorkCover cont 2
Mr. Samways was injured when he walked into the
raised bucket of a stationary bobcat on a building
site. The bobcat was owned by Lynsha, which had
hired it to De Luca Properties, who were in control
of the site. Mr. Samways worked for a
subcontractor and sued in negligence and for
breach of statutory duty against his employer, De
Luca and Lynsha. Court found 10% sub
contractor, De Luca 30% and Lynsha 60% to be
reduced by 20% for contributory negligence of
Samways.
Clause found wide enough to cover their own
negligence and Lynsha could recover.
©MNoonan2009
Samways v. WorkCover cont 3
See useful summary of principles of construction of
indemnity clauses.
1. To be construed strictly
2. Without statutory authority, a court has no
mandate to rewrite clause
3. Should be construed in contractual context
which allocates risks between parties
4. Give effect to ordinary meaning of language
5. If insurance required, may be taken into account,
also absence of such a provision.
©MNoonan2009
International contracts
•
•
•
•
•
•
•
Harmonisation desirable
International body of jurisprudence building
Express provisions agreed by the parties
Treaties-Vienna Convention application
Incoterms
Dispute resolution
Unidroit principles
©MNoonan2009
International Contracts
When does SOG (Vienna Convention) Act apply?
1. Direct application by virtue of Article 1
2. Conflict of laws rules-if proper law of an
international sales contract is Australian, VC
applies as part of that law.
3. By agreement between the parties
4. Deemed appropriate by arbitral tribunal either as
law or as evidence of international usage.
©MNoonan2009
Vienna Convention
Considerable ignorance amongst lawyers, including
courts.
Why should Australian lawyers be more familiar
with it?
1. Part of our law
2. We are an export/import country
3. Large number of signatories, including main
trading partners and other Asia Pacific nations
4. Competitiveness/reputation of legal profession in
international disputes and arbitration
©MNoonan2009
Issues in international contracts
•
•
•
•
•
•
Mutual understanding and agreement
National interests and trade
Conceptual differences
Cultural differences
Choice of law
Dispute resolution
©MNoonan2009
Vienna Convention
Seller to deliver goods and any documents (Arts 31-34) of the
quantity, quality, description, packaging required by contract
(Art 35). Partial and excessive delivery (Art 51,52). Goods must
conform. If seller does not meet obligations, buyer may compel
performance, claim damages or reduce price. Buyer may fix
additional time (Art 47) or declare contract avoided (Art 49)
Buyer may reduce price for non conformity (Art 50). Buyer
obliged to pay price and take delivery (Arts 53,60). Arts 54-59
deal with determining price when not fixed. Seller may compel
buyer to pay price or take delivery (Art 62) or fix additional
period for performance (Art 63). Seller can avoid contract for
fundamental breach (Art 64). Anticipatory breach and instalment
contracts dealt with in Arts 71-73. Damages covered by Arts 7477.
See Ginza Pte v. Vista Corp Pty Ltd
©MNoonan2009
Other references
See article:The last Outpost: Automatic CISG
opt outs, misapplications and the costs of
ignoring the Vienna Sales Convention for
Australian Lawyers. Lisa Spagnolo,
available on http://www.austlii.edu.au
See Pace University database at
http://cisgw3.law.pace.edu
©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
Ginza
See discussion of case pp 184-188 inclusive in
Article by Lisa Spagnolo.
Although Vienna Convention seen to apply,
much confusion about interpretation, use of
common law cases instead of VC cases,
reference to concepts outside, ignored some
provisions.
©MNoonan2009
Sale of Goods (Vienna Convention) Act 1986
Article 35
The seller must deliver goods which are of the quantity, quality and
description required by the contract and which are contained or
packaged in the manner required by the contract.Except where the
parties have agreed otherwise, the goods do not conform with the
contract unless they:
(a) are fit for the purposes for which goods of the same description
would ordinarily be used; (b) are fit for any particular purpose expressly
or impliedly made known to the seller at the time of the conclusion of the
contract, except where the circumstances show that the buyer did not
rely, or that it was unreasonable for him to rely, on the seller's skill and
judgement; (c) possess the qualities of goods which the seller has held
out to the buyer as a sample or model;(d) are contained or packaged in
the manner usual for such goods or, where there is no such manner, in a
manner adequate to preserve and protect the goods.
The seller is not liable under subparagraphs (a) to (d) of the preceding
paragraph for any lack of conformity of the goods if at the time of the
conclusion of the contract the buyer knew or could not have been
unaware of such lack of conformity.
©MNoonan2009
UNIDROIT
International Institute for the Unification of
Private Law
©MNoonan2009
UNIDROIT Principles
of International Commercial Contracts
Purpose
These Principles set forth general rules for international commercial
contracts
They shall be applied when the parties have agreed that their contract be
governed by them
They may be applied when the parties have agreed that their contracts be
governed by general principles of law, the lex mercatoria or the like
They may be applied when the parties have not chosen any law to govern
their contract
They may be used to interpret or supplement international uniform law
instruments
They may be used to interparet or supplement domestic law
They may serve a s model for national and international legislators.
©MNoonan2009
UNIDROIT Principles
1. Freedom of Contract
2. No form required
3. Binding character of Contract
4. Mandatory rules
5. Exclusion or modification by the parties
6. Interpretation
7. Good faith and fair dealing
8. Inconsistent behaviour
9. Usages and practices
10. Notice
See text and www.unidroit.org for details.
©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 delivery, 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
2
2
If International Contract-agency, bailment, Vienna Convention(35,45,50) 9
Local C-unpaid seller, title, risk, product liability, ability to offset, SOGA 9
Reasoning
2
Other: e.g. s. 52 TPA, Bailment, ADR possibilities
ways problem could have been avoided
1
TOTAL
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
Student Question 1
Is it possible to contract out of SOGA
Yes, to some extent.
SOGAYes, everything for non “consumer sale”.
Yes, everything other than ss. 18, 19, 20, in the case
of a “consumer sale”.
©MNoonan2009
Student Question 3
When we are considering “goods”, we have both the
SOGA and TPA/ACA. When is it better to bring
an action under one or the other?
When there is only one available. E.g. a non
consumer may only have the implied terms of the
SOGA, if any at all.
When a choice provides a better, easier, cheaper
action or more appropriate remedy. For a
“consumer”, this is usually the ACL.
©MNoonan2009
Assignment Question
Bagger Limited (BL) is a NSW company which makes and supplies a machine called a "bagger". It makes plastic
bags for vacuum packing meat.
In January 2007, Meat Market Limited (MML), a meat processing company in Goulburn NSW informed Richard,
the Managing Director of BL, that it would like to place an order for baggers, but would only do so if BL could also
supply networkable thermal printers (which would place relevant information directly on the plastic as each piece of
meat was bagged) and organise installation during their annual close down in August.
Richard went to a trade show in Melbourne to see a demonstration of a new thermal printer known as a Whabble;
supplied by a US company via their NSW agent, PTR Limited (PTR). Richard asked T, the PTR representative at
the show, whether one control unit could control 6 printers. "No", said T "each is a dedicated unit. But, you can put
them in a separate area as they come with 30m cables". "That’s good", said Richard, "because that will suit the
configuration of the MML plant perfectly. Can they be networked?" "Definitely", said T, "I have been involved with
2 networked installations in Australia already." ""What is the price?" asked Richard. "$11,000, installed", said T.
In April, 2007 BL sent an email quotation to MML for the supply of 18 baggers and 18 Whabbles at a cost of
$12,000 per bagger and $11,000 per Whabble, installed. MML accepted the quotation by return email. BL placed
an order with PTR for 18 Whabbles the same day. The baggers and Whabbles were delivered by their respective
companies on August 2. The baggers were installed in 3 days and T attended for 8 days to install the Whabbles.
T did not have the expertise to network the printers as he had never been involved in networking printers. The
cables between printer and control unit were 2m; not 30m. MML asked him to leave after 3 days and engaged
another consultant at a cost of $124,000, who finally networked the printers after 3 months work. During these 3
months, MML had to divert 50% of meat processing to a competitor.
MML has refused to pay BL for the Whabbles; claiming it is offsetting the additional costs incurred. BL has in turn,
refused to pay PTR. PTR has brought an action in contract claiming $202,000 from BL and reminding Richard of
the following clause contained on the back of their invoice.
"The Company shall not be liable for any loss or damage or injury, direct or consequential, whether in contract,
tort, by statute or otherwise and whether at law or in equity, and whether caused or arising out of or through the
negligence, breach acts or omissions for the Company, its servants or agents or otherwise and of whatsoever nature
and to whomsoever or whatsoever caused arising out of the manufacturing and supply or supply only of any goods
to the Customer or out of or through the use of any such goods by the Customer."
Advise BL.
©MNoonan2009
Assignment /exam marking
CT EXAM March 2008 SECTION B QUESTION 1 Bagger and Whabble
Understood Q
(product liability, s.52 conduct)
Answered the Q
BL re MML refusal to pay for Whabbles
Breach of contract-express terms and implied
BL refusal to pay PTR and defence to action in contract
Misleading and deceptive conduct s. 52 TPA (s. 18 ACL now)
Exclusion clause-would exclude s. 19 SOGA
but not 52 because conduct prior to contract
Reasoning and other
TOTAL
2
2
9
9
3
25
Most students correctly identified that fitness for purpose, and false/misleading and
deceptive claims were involved.
Students were expected to cover s. 19 SOGA and s. 52 TPA as a minimum; . Some
students applied s. 71 of TPA or Div 2A despite the fact that no consumer was
involved in the transactions.
Some students dealt with BL v. PTR only and ignored the MML refusal to pay.
©MNoonan2009
Exam Sept 2006 A3
Understood the Q (contract, product liability)
Answered the Q
Contract-when formed, terms, to sell or sale, outcome
SOGA application
TPA application
Reasoning
Other e.g. negligence, contributory, instalment contract
2
2
6
6
6
2
1
TOTAL
25
©MNoonan2009
Sept 2006 Q A3 cont
The steps to successfully answering this question were:
•
•
•
•
•
Ascertaining whether there was a contract between Huntley and Glassworks and
if so, what was the nature of it and what were the terms? At the time of the
quotation, was it an agreement to search for a manufacturer as specified (service,
or agreement to sell)? When did it become a sale of goods? Who made the offer?
Did Huntley accept offer from Huntley or vice versa? Counter offer? Could all the
terms coexist? Exploration of traditional offer/acceptance in commercial context,
and whether last shot, global more appropriate?
Depending on the answer, students would have then gone on to analyse whether
Huntley would have been able to make a claim in contract using the express terms.
Or any terms implied by SOGA or TPA. Were any implied? If so, what and how
did they apply? If not, why not? Because of the consumer limitations in the TPA,
the SOGA was more relevant.
Students should also have explored other potential claims. E.g. s. 52 (which would
open up access to TPA remedies), negligence
Students should then have dealt with remedies appropriate to their conclusions,
and given a view as to likely outcome.
Many students who answered this question as an assignment the following
semester had worked out that Goodman Fielder v. Cospak (2004) NSWSC had
been my inspiration for the facts of this Q.
©MNoonan2009
Sept 2006 QA3 cont.
Weaknesses noted in answers:
• A very superficial knowledge of the implied terms of the SOGA and TPA, leading
to incorrect conclusions and applications. An example would be that a student
believed there was a general condition that goods be fit for a purpose, without
covering that this purpose had to be made known and the purchaser had to rely
on the sellers skill and judgement. The buyer had to be a consumer for s. 71 to
apply (TPA). The term might have been excluded. A student might jump straight
to the implied terms without drawing a conclusion on what the express terms
were (e.g. whether the exclusion clause applied, and if so, to what extent?).
• An incorrect view- as to the application of the SOGA and TPA. E.g. thinking that
if corporations were involved, the TPA (and not the SOGA) applied and if
individuals were involved, the SOGA (and not the TPA) applied.
• Some students discussed possible application of the TPA but not SOGA, or vice
versa, rather than both.
• A few students were creative in deciding that the contract was one for services
and not goods…..to procure someone else to make the bottles, not to supply
them.
• The correct action if there is a breach of an implied term is an action in contract
and not for breach of statute. For this reason, if one is implying a term via s. 71
TPA, the remedies of ss. 80, 82 and 87 are not available. It is a common law post
2011 that ACL is different concept-guarantees and not implied terms.
©MNoonan2009