THE LAW OF COMMERCIAL CONTRACT Revision. THE LAW OF COMMERCIAL CONTRACT Terms implied by Legislation...

THE LAW OF COMMERCIAL CONTRACT

Revision


Terms implied by Legislation 3 Acts that imply terms in a contract Criteria for TPA to apply Definition on consumer contract in TPA


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


Application of Trade Practices ActThe 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


Application of Trade Practices Act (s4B)A person is a consumer if: 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

ie one of the first 3 and not one of the last 4 items

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od

s &

Services

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Terms of the ContractStatutory Implied Terms

(Sweeney & O’Reilly

Chapter 8 pp 184 – 199)


Goods Act (Vic) Covers sale of goods only Distinguishes between consumer and non-

consumer contracts Consumer contracts

Applies terms similar to those implied by Trade Practices Act

Non-consumer contractsApplies different terms that can be excluded by agreement

Applies to contracts made in Victoria Similar legislation in other Australian States


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; andare not brought for Resale; or Use as inputs in manufacture(Section 85 Goods Act)


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


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


Is the contract for the sale of goods?

Does s 85 of the Goods Act apply?

Does the Trade Practices Act

apply?

The contract is a non-consumer

contract

Yes

No

No


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))


Terms Implied by Goods ActWhere 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)


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


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)


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)


Merchantable QualityClaim 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


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)


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)


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)


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)


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))


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


Other Implied TermsGoods 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


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)


Excluding or Limiting Implied Terms The terms implied by the Goods Act (Vic) in non-

consumer 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


eCommerce


eCommerce Issues Jurisdiction Form of contract Time and place of offer and acceptance Incorporation of terms Capacity of software agents


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


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?


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


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


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


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


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


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


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



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



If no place of business Place of residence


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


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


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


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


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.


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


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”


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

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