THE LAW OF COMMERCIAL CONTRACT Revision. THE LAW OF COMMERCIAL CONTRACT Terms 2 types.

THE LAW OF COMMERCIAL CONTRACT

Revision


Terms 2 types


Express Terms Test for determining if it is a term Guidelines


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


Implied Terms 2 sources of implied terms 2 types of terms implied by courts 3 types of terms implied as a matter of fact


Exemption Clauses What are they 2 stage test The 3 rules of contruction


Terms of the Contract

Statutory Implied Terms(Sweeney & O’Reilly

Chapter 7, pp164 – 170

Chapter 8, pp 175 - 184)


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


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


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

Go

od

s &

Services

Go

od

s O

nly


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

Trade Practices Act applies

Supplier operating in a

Territory

Service

Good

Commercial Road Vehicle

Not for ResaleNot used in manufacture etc


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


Does the TPA apply?1. Jim buys a new lawn mower for $350 from Garden

Supplies Pty Ltd2. X Ltd buys a new BMW for $75,000 from Classy Motors

Pty ltd for use by its Managing Director3. Classy Motors buys a new BMW from BMW Imports Pty

Ltd for $50,000 to fulfil the order to X Ltd4. Sue, who is a farmer buys a tractor for use on her farm

from Tractors Galore for $39,0005. Betty and Tom buy a second hand bus for $52,000 to

use as a campervan in a round Australia trip6. Ford Motor Company buys $35,000 of paint to paint the

cars it builds


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


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)


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)


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)


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)


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)


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)


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)


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))


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)


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


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


Trade Practices ActExcluding Implied Terms Implied terms cannot be excluded, restricted or

modified (section 68 Trade Practices Act)


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)


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)

THE LAW OF COMMERCIAL CONTRACT Revision. THE LAW OF COMMERCIAL CONTRACT Terms 2 types.

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