Transcript Terms of the Contract Statutory Implied Terms

THE LAW OF COMMERCIAL CONTRACT
Revision
THE LAW OF COMMERCIAL CONTRACT
Terms implied by Legislation
 3 Acts that imply terms in a contract
 Criteria for TPA to apply
 Definition on consumer contract in TPA
THE LAW OF COMMERCIAL CONTRACT
Application of Trade Practices Act
 Applies only where
 The vendor\supplier is subject to the Act
 The purchaser is a consumer
 The service is provided in the course of
business
THE LAW OF COMMERCIAL CONTRACT
Application of Trade Practices Act
The supplier is subject to the Act if:
 A trading, financial or foreign corporation
 It is operating in a territory (e.g. NT)
 The contract involves interstate trade
 The contract involves overseas trade
 The contract involves the Commonwealth or its
organisations
THE LAW OF COMMERCIAL CONTRACT
Application of Trade Practices Act (s4B)
ie one of the first 3 and not one of the last 4 items
Goods
Only
 Price of goods\services <= $40,000; or
 Goods\Services are of a type ordinarily acquired for
personal, domestic or household use or consumption; or
 Goods are a commercial road vehicle; and
 Goods are not acquired:
 For resale; or
 To be used in commercial production or manufacture;
or
 To be used in the repair or treatment of goods or
fixtures on land
 In the course of an auction
Goods &
Services
A person is a consumer if:
THE LAW OF COMMERCIAL CONTRACT
Terms of the Contract
Statutory Implied Terms
(Sweeney & O’Reilly
Chapter 8 pp 184 – 199)
THE LAW OF COMMERCIAL CONTRACT
Goods Act (Vic)
 Covers sale of goods only
 Distinguishes between consumer and nonconsumer contracts
 Consumer contracts
Applies terms similar to those implied by Trade
Practices Act
 Non-consumer contracts
Applies different terms that can be excluded by
agreement
 Applies to contracts made in Victoria
 Similar legislation in other Australian States
THE LAW OF COMMERCIAL CONTRACT
Goods Act (Vic)
 Defines consumer contracts as contracts for the
sale of goods:
 Under $20,000; or
 Ordinarily acquired for personal, domestic or
household use; and
are not brought for
 Resale; or
 Use as inputs in manufacture
(Section 85 Goods Act)
THE LAW OF COMMERCIAL CONTRACT
Goods Act (Vic)
 But Trade Practices Act defines a limit of
$40,000
 If a consumer contract as defined by Trade
Practices Act then TPA applies
 Otherwise Goods Act (Vic) applies
 Consumer provisions of Goods Act apply but
TPA does not apply where supplier not subject to
TPA
THE LAW OF COMMERCIAL CONTRACT
Goods Act (Vic)
 Non-consumer provisions of Goods Act apply to,
for example:
 Sale of component parts to manufacturer
 Sales of raw materials to a commercial
enterprise
 Sales of finished goods to a reseller
 Sales of industrial goods over ($40,000)
 International sales of goods
THE LAW OF COMMERCIAL CONTRACT
Is the contract for
the sale of goods?
Yes
Does s 85 of the
Goods Act apply?
No
The contract is a
non-consumer
contract
No
Does the Trade
Practices Act
apply?
THE LAW OF COMMERCIAL CONTRACT
Terms Implied by Goods Act
 A condition that the seller has the right to sell
(s17)
 A warranty that the buyer to have quiet
enjoyment (s17)
 A warranty that the goods are free from
encumbrance (s17)
 Where sale by description, a condition that the
goods match the description
 A condition that the goods are of merchantable
quality (s19(b))
THE LAW OF COMMERCIAL CONTRACT
Terms Implied by Goods Act
Where seller:
 expressly or impliedly makes known to the seller
the purpose for which the goods are being
purchased
 In such circumstances that the seller knows or
ought to know that the buyer is relying on the
seller’s skill or judgment
There is an implied condition that the goods will be
fit for the purpose (s20)
THE LAW OF COMMERCIAL CONTRACT
Terms Implied by Goods Act
 Similar to terms implied by TPA but some
differences
 Case law on Goods Act can be applied to
interpretation of TPA
THE LAW OF COMMERCIAL CONTRACT
Fitness for Purpose
 Overlaps with implied condition of merchantable
quality
 David Jones v Willis (S&O p192)
 Buyer must make known the particular purpose
to the seller
 Griffiths v Peter Conway (S&O p193)
 Purpose may be a matter of inference
 Godfrey v Perry (S&O p193)
THE LAW OF COMMERCIAL CONTRACT
Fitness for Purpose
 Buyer’s reliance on seller’s skill and judgment
 may be only partial but it must be a
“substantial and effective inducement” to
purchase
 Must be reasonable
 Teheran-Europe Co v S T Belton (Tractors)
(S&O p194)
THE LAW OF COMMERCIAL CONTRACT
Merchantable Quality
Claim for breach of implied term exists if:
 Sale by description by seller who normally deals
in such goods (note: not required by TPA)
 The goods are not as fit for their normal purpose
or purposes as is reasonable to expect having
regard to the price and other circumstances
 Buyer was not aware of defect
 Inspection before sale would not have revealed
the defect
THE LAW OF COMMERCIAL CONTRACT
Merchantable Quality


Sale by Description
Frank v Grosvenor Motor Auctions (S&O p187)
 There has there been sale by description if
the buyer primarily relies upon their
classification or possession of attributes as
described in the description
 Having regard to Price
 Brown & Son v Craiks (S&O p190)
 H Beecham v Francis Howard (*S&O p190)
THE LAW OF COMMERCIAL CONTRACT
Merchantable Quality

Having regard to other circumstances
 New v’s Used
 ACCC circular (S&O p191)
 Bartlett v Sidney Marcus (S&O p191)
 Any defect, even if easily remedied
 Grant v Australian Knitting Mills (S&O p191)
THE LAW OF COMMERCIAL CONTRACT
Correspondence with Description
 Those matters that identify the goods (cf
merchantable quality)
 Usually applies where
 Goods not yet ascertained
 Goods not yet in existence
 Buyer has not seen goods
 Varley v Whipp (S&O p194)
 Goods are part of a display
 Beale v Taylor (S&O p195)
THE LAW OF COMMERCIAL CONTRACT
Correspondence with Description
 Extends to packaging
 Moore v Landauer & Co (S&O p195)
 Buyer must rely on description
 Harlington & Leinster Enterprise v Christopher
Hull Fine Art (S&O p196)
 Ashington Piggeries v Christopher Hill (S&O
p196)
THE LAW OF COMMERCIAL CONTRACT
Correspondence with Sample
 Bulk of goods must correspond with sample
(s20) Goods shall be free from any defect
rendering them unmerchantable which would not
be apparent from examination of the sample
(s20(2)(c))
 Buyer shall be given a reasonable opportunity of
comparing the bulk with the sample (s20(2)(b)
 If sale of goods by description and sample, all
goods (not just bulk) must correspond with
description (s19(a))
THE LAW OF COMMERCIAL CONTRACT
Other Implied Terms
 Price
 If no price, then a reasonable price is to be
paid (S13)
 Delivery (s36)
 If no time is fixed, then delivery is to be within
a reasonable time
THE LAW OF COMMERCIAL CONTRACT
Other Implied Terms
Goods Act (VIC) implies terms relating to
 Acceptance (ss 41 & 42)
 Once accepted, goods cannot be returned
(non-consumer contracts only)
 Occurs when
 Buyer says he accepts goods
 Buyer does anything inconsistent with
seller’s ownership
 A reasonable time has elapsed
THE LAW OF COMMERCIAL CONTRACT
Other Implied Terms
 Goods Act (VIC) implies terms relating to
 Passing of Property (i.e. title) (ss22 & 23)
 Payment
 Risk (s 25)
 Goods Act (VIC) will not create a contract where
none existed
 ANZ Banking v Frost Holdings (S&O p198)
THE LAW OF COMMERCIAL CONTRACT
Excluding or Limiting Implied Terms
 The terms implied by the Goods Act (Vic) in nonconsumer contracts can be excluded or limited
 Normal rules relating to exclusion clauses apply
i.e
 Is the exclusion clause a term of the contract?
 Does the exclusion clause cover the breach?
 Subject to equitable remedies e.g.
 Unconscionable conduct
 Economic duress
THE LAW OF COMMERCIAL CONTRACT
eCommerce
THE LAW OF COMMERCIAL CONTRACT
eCommerce Issues





Jurisdiction
Form of contract
Time and place of offer and acceptance
Incorporation of terms
Capacity of software agents
THE LAW OF COMMERCIAL CONTRACT
Jurisdiction
 Different laws
 Conflict of Laws
 International conventions
 Vienna Sales Convention
 UNCITRAL Model Law on Electronic Commerce
 International Chamber of Commerce E-Terms
repository
 This lecture deals only with Australian law
THE LAW OF COMMERCIAL CONTRACT
Jurisdiction
 Which country’s laws are to be applied to
address the respective rights and obligations of
the parties?
 What is the consequence of a country’s lack of
jurisdiction?
THE LAW OF COMMERCIAL CONTRACT
Jurisdiction
 The Internet transcends geographic borders ,
there are no laws or borders on the Internet.
There is no ‘Lex Internet’.
 Different countries have different
 Legal systems
 Criminal law
 consumer protection legislation
 etc
THE LAW OF COMMERCIAL CONTRACT
Jurisdiction
 France
 The Yahoo case
 Germany
 The Adelaide Institute
 Trade mark cases
 Legislation (1997) – Any web site accessible
from Germany is subject to German law
THE LAW OF COMMERCIAL CONTRACT
Jurisdiction
 USA approach
 Systematically doing business with territory; or
 Minimum contact with Territory
 Targeted solicitation
 Interactive response features
 Provisions for taking orders and making contracts
 Australia
 Macquarie Bank Ltd v Berg (Unreported) Supreme
Court of NSW per Simpson J, 2 June 1999
 Gutnik’s case
THE LAW OF COMMERCIAL CONTRACT
Form of Contract
 Many statues require:
 Writing
 Signature
 Sealed and delivered (Deed)
 Witnesses etc
 Section 8 Electronic Transactions Act
 A transaction is not invalid because it took
place wholly or partly by means of one or
more electronic communications
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Are electronic communications subject to the postal
rule?
 “instantaneous”
 does not refer to speed of communication
 Refers to if other party can immediately notify the
other if he does not receive whole or part of message
 Vienna Sales Convention
 Applies to contracts involving signatory countries
 Doesn’t apply to consumer goods or auctions
 Contract is formed when acceptance is delivered to
the offeror’s mailing address
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Is email instantaneous?
 Vienna Sales Convention
 The acceptance is sent when it is put in the
offeror’s mailbox
 Is online shopping instantaneous?
 Vienna Sales Convention
 Offer is made when it is delivered to the
seller’s URL
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Section 14 Electronic Transactions Act
 Dispatch occurs when it enters the first
information system outside the control of the
sender
 Receipt occurs when it enters the information
system designated by the recipient
 If no information system designated then
receipt occurs when it comes to the recipient’s
attention
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Section 14 Electronic Transactions Act
 Dispatch occurs at the sender’s place of
business
 Receipt occurs at the recipient’s place of
business
 If more than one place of business then
 Place of business most closely related to
the transaction
 Otherwise, principal place of business
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Section 14 Electronic Transactions Act
 If no place of business
 Place of residence
THE LAW OF COMMERCIAL CONTRACT
Time & Place of Offer & Acceptance
 Clicking “I accept” button
 This is the offer
 Seller can accept or reject
 Electronic Auctions
 The bid is the offer
 Auctioneer can accept or reject
 But, there may be a collateral contract with
auctioneer that he will accept the bid
THE LAW OF COMMERCIAL CONTRACT
Shrinkwrap Agreements
 Terms and conditions are not shown to
purchaser until after he has bought the box and
opened it
 Terms cannot be imposed after contract formed
 Purchaser must be given reasonable notice of
terms before contract formed
THE LAW OF COMMERCIAL CONTRACT
Shrinkwrap Agreements (cont.)
 Are there 2 contracts?
 One to buy the box
 One to licence the software
 Cases have recognised practical importance of
allowing terms to be made known after sale
 McRobertson Miller Airlines v Commissioner for State
Taxation (1975) 133 CLR 125
 Hill v Gateway 2000 Inc.
 Try and return clauses
THE LAW OF COMMERCIAL CONTRACT
Electronic Agents
 Can a party’s intention be expressed by a
computer
 Can a computer act as an electronic agent
 Ostensible (apparent) authority of agents
 Principal is bound where he puts agent in a
position where he appears to have authority
 Principal is nopt bound where agent it is clear
to others that agent is acting outside
ostensible authority
THE LAW OF COMMERCIAL CONTRACT
Electronic Agents (cont.)
Section 15 Electronic Transactions Act
(1) For the purposes of a law of the Commonwealth, unless otherwise
agreed between the purported originator and the addressee of an
electronic communication, the purported originator of the electronic
communication is bound by that communication only if the
communication was sent by the purported originator or with the
authority of the purported originator.
(2) Subsection (1) is not intended to affect the operation of a law
(whether written or unwritten) that makes provision for:
a) conduct engaged in by a person within the scope of the person's
actual or apparent authority to be attributed to another person;
or
b) a person to be bound by conduct engaged in by another person
within the scope of the other person's actual or apparent
authority.
THE LAW OF COMMERCIAL CONTRACT
Electronic Signatures
 3 possible legal scenarios
 Minimalist
 Only recognise that electronic signatures
can be the same as written signatures
 Prescriptive
 Specify details of technology to be used
 Set broad criteria for electronic signature to
be effective
THE LAW OF COMMERCIAL CONTRACT
Electronic Signatures
 Section 10 Electronic Transactions Act
 adopts minimalist approach
 Requires identification, attribution and assent
 Does not require signature to verify message
integrity
 Technology used must be “as reliable as [is]
appropriate”
THE LAW OF COMMERCIAL CONTRACT
Electronic Signatures
 Section 10 Electronic Transactions Act
 Recognises the need for different levels of
authentication
 Caters for technological advances
 Does not favour one technology
 Is consistent with international developments (e.g.
UNCITRAL)
 Only applies to areas covered by Commonwealth law
 States are enacting parallel legislation