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  1. Revision

  2. Terms • 2 types

  3. Express Terms • Test for determining if it is a term • Guidelines

  4. 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

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

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

  7. Terms of the Contract Statutory Implied Terms (Sweeney & O’Reilly Chapter 7, pp164 – 170 Chapter 8, pp 175 - 184)

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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 Goods & Services Goods Only

  13. Service Is the Supplier a corporation? Price <= $40,000 Commonwealth is the supplier Supply in the course of a business Personal, domestic or household use 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

  14. 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

  15. Does the TPA apply? • Jim buys a new lawn mower for $350 from Garden Supplies Pty Ltd • X Ltd buys a new BMW for $75,000 from Classy Motors Pty ltd for use by its Managing Director • Classy Motors buys a new BMW from BMW Imports Pty Ltd for $50,000 to fulfil the order to X Ltd • Sue, who is a farmer buys a tractor for use on her farm from Tractors Galore for $39,000 • Betty and Tom buy a second hand bus for $52,000 to use as a campervan in a round Australia trip • Ford Motor Company buys $35,000 of paint to paint the cars it builds

  16. 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

  17. 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)

  18. 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)

  19. 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)

  20. 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)

  21. 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)

  22. 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)

  23. 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)

  24. 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))

  25. 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)

  26. 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

  27. 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

  28. Trade Practices Act Excluding Implied Terms • Implied terms cannot be excluded, restricted or modified (section 68 Trade Practices Act)

  29. 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)

  30. 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)