Transcript Fundamentals of Law (BL502)

THE LAW OF COMMERCIAL CONTRACT
Revision
THE LAW OF COMMERCIAL CONTRACT
Terms
 2 types
THE LAW OF COMMERCIAL CONTRACT
Express Terms
 Test for determining if it is a term
 Guidelines
THE LAW OF COMMERCIAL CONTRACT
Express Terms - Guidelines
 Was the representation included in a written
document
 When, in the negotiations, was the
representation made
 Did the representation sound promissory
 How objectively important is the representation
to the whole deal
 Did either party have special knowledge about
the subject matter of the representation
THE LAW OF COMMERCIAL CONTRACT
Implied Terms
 2 sources of implied terms
 2 types of terms implied by courts
 3 types of terms implied as a matter of fact
THE LAW OF COMMERCIAL CONTRACT
Exemption Clauses
 What are they
 2 stage test
 The 3 rules of contruction
THE LAW OF COMMERCIAL CONTRACT
Terms of the Contract
Statutory Implied Terms
(Sweeney & O’Reilly
Chapter 7, pp164 – 170
Chapter 8, pp 175 - 184)
THE LAW OF COMMERCIAL CONTRACT
History
 Courts developed standard implied terms for sale of
goods
 These terms could be excluded by express agreement
 In 1883, these terms were codified in the Sale of Goods
Act
 In 1970’s, State legislation provided for mandatory
inclusion of terms in consumer contracts
 State legislation was not uniform
 In 1975, Trade Practices Act applied standard provisions
across Australia
 States then “filled in the gaps” with Fair Trading Acts
 Sale of Goods Act still applies in non-consumer contracts
THE LAW OF COMMERCIAL CONTRACT
Terms Implied by Statute
 Trade Practices Act
 Services; and
 Goods
 Sale of Goods Act
 Goods only
 Where there is an overlap – Trade Practices Act
applies
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
Service
Is the Supplier a
corporation?
Price <= $40,000
Personal,
domestic or
household use
Supply in the
course of a
business
Commonwealth
is the supplier
Interstate or
Overseas trade
Supplier
operating in a
Territory
Commercial
Road Vehicle
Not used in
manufacture etc
Not for Resale
Good
Trade Practices
Act applies
THE LAW OF COMMERCIAL CONTRACT
Acquired for Personal Use
 Crago v Multiquip (S&O p177)
 Atkinson v Hasting Deering (Queensland) (S&O
p177)
 Note that the actual use is irrelevant
THE LAW OF COMMERCIAL CONTRACT
Does the TPA apply?
1. Jim buys a new lawn mower for $350 from Garden
Supplies Pty Ltd
2. X Ltd buys a new BMW for $75,000 from Classy Motors
Pty ltd for use by its Managing Director
3. Classy Motors buys a new BMW from BMW Imports Pty
Ltd for $50,000 to fulfil the order to X Ltd
4. Sue, who is a farmer buys a tractor for use on her farm
from Tractors Galore for $39,000
5. Betty and Tom buy a second hand bus for $52,000 to
use as a campervan in a round Australia trip
6. Ford Motor Company buys $35,000 of paint to paint the
cars it builds
THE LAW OF COMMERCIAL CONTRACT
In The Course of Business
 Private contracts are not subject to the TPA
 “Business” implies an ongoing undertaking for
profit
 Irrelevant if the buyer acquired goods\services in
the course of the buyer’s business – it is the
seller’s business which is relevant
 Does not need to take place in the ordinary
course of business – one-off transactions are
covered
THE LAW OF COMMERCIAL CONTRACT
Application of Trade Practices Act
Goods includes:
 Hire of goods
 Ships, aircraft and other vehicles
 Animals including fish
 Minerals
 Trees and crops
 Gas and electricity
(Section 4 (1) Trade Practices Act)
THE LAW OF COMMERCIAL CONTRACT
Application of Trade Practices Act
A service is:
 Performance of work with or without supply of
goods
 Provision of facilities for amusement,
entertainment, recreation or instruction
 Insurance contract
 Banking contract
 Contract in relation to lending of money
(Section 4 (1) Trade Practices Act)
THE LAW OF COMMERCIAL CONTRACT
Trade Practices Act Definitions
 Service does not include
 Supply of goods
 Work under a contract of service
(Section 4 (1) Trade Practices Act)
 E v Australian Red Cross Society (S&O p167)
THE LAW OF COMMERCIAL CONTRACT
Terms implied in the supply of Services
 Services will be rendered with due care and skill
 Materials supplied in connection with a service
will be reasonably fit for the purpose for which
they were supplied
(Section 74 (1) Trade Practices Act)
THE LAW OF COMMERCIAL CONTRACT
Terms implied in the supply of Services
 Where consumer, expressly or impliedly, makes known
purpose for which services are required or desired result
 Then it is implied term that services and goods supplied
in connection with the services
 will be reasonably fit for that purpose; and
 Might be reasonably expected to achieve the result
 Unless
 Consumer does not rely; or
 It is unreasonable for consumer to rely
on the supplier’s skill or judgement
(Section 74 (2) Trade Practices Act)
THE LAW OF COMMERCIAL CONTRACT
Terms implied in the supply of Services
 Exclusions
 Transport contracts
 Storage contracts
 Insurance contracts
 Architects and engineers (in relation to
achieving a result)
(Section 74 (2) Trade Practices Act)
 Read v Nerey (S&O p168)
THE LAW OF COMMERCIAL CONTRACT
Terms implied in the supply of Goods




Seller has the right to sell (s69(1)(a))
Buyer shall have quiet possession (s69(1)(b))
Goods are free from encumbrance (s69(1)(c))
Where a sale by description, goods match the
description (s70)
 Goods are of merchantable quality (s71(1))
 Where a sale by sample, goods match the
sample (s72)
THE LAW OF COMMERCIAL CONTRACT
Terms implied in the supply of Goods
 Where
 buyer has expressly or impliedly made known
to the seller the purpose for which the goods
were being purchased
 In circumstances where seller knew, or ought
to have known, that buyer was relying on the
sellers skill or judgement
 It is an implied term that the goods are fit for that
purpose (s71(2))
THE LAW OF COMMERCIAL CONTRACT
Fitness for a Particular Purpose
 The buyer expressly or impliedly made known to
the seller the purpose for which the goods were
acquired
 The buyer relied on the seller’s skill and
judgement
 It was reasonable for the buyer to rely on the
seller’s skill and judgement
 The goods must be reasonably fit for the
specified purpose
 Carpet Call v Chan (S&O p181)
THE LAW OF COMMERCIAL CONTRACT
Merchantable Quality
 The goods are as fit for their normal purpose or
purposes as is reasonable to expect having
regard to the price and other circumstances
 Defect has not been specifically drawn to buyers
attention before contract made
 If buyer examines goods before sale, defect
would not have been revealed by such
examination
THE LAW OF COMMERCIAL CONTRACT
Correspondence with Sample
 Bulk of goods must correspond with sample in
quality
 Buyer must have a reasonable opportunity to
compare bulk with sample
 Goods are free from any defect, rendering them
unmerchantable, that would not be apparent on
reasonable examination of the sample
THE LAW OF COMMERCIAL CONTRACT
Trade Practices Act
Excluding Implied Terms
 Implied terms cannot be excluded, restricted or
modified (section 68 Trade Practices Act)
THE LAW OF COMMERCIAL CONTRACT
Limiting Liability
 Liability can be limited:
 Where goods\services are not of a type ordinarily
acquired for personal, domestic or household use
 To :
 Supplying the services again
 Paying to have the services supplied again
(Section 68 (1) Trade Practices Act)
 Liability cannot be limited where it would not be fair and
reasonable to do so (Section 68A (2) Trade Practices
Act)
THE LAW OF COMMERCIAL CONTRACT
Limiting Liability
 Court will have regard to all circumstance but
particularly:
 Strength of bargaining positions
 Whether buyer received an inducement to agree to
the term
 Whether the buyer had an opportunity to obtain
goods\services from another source without the
limitation
 Whether the buyer knew of the term or could
reasonably be expected to know of the term
 Whether goods were manufactured or adapted to the
special needs of the buyer
(Section 68A (3) Trade Practices Act)