THE LAW OF COMMERCIAL CONTRACT Revision THE LAW

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, pp 164 – 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 vendorsupplier 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 (s 4 B) ie one of the first 3 and not one of the last 4 items Goods Only § Price of goodsservices <= $40, 000; or § GoodsServices 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 p 177) § Atkinson v Hasting Deering (Queensland) (S&O p 177) § 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 goodsservices 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 p 167)

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 p 168)

THE LAW OF COMMERCIAL CONTRACT Terms implied in the supply of Goods § § Seller has the right to sell (s 69(1)(a)) Buyer shall have quiet possession (s 69(1)(b)) Goods are free from encumbrance (s 69(1)(c)) Where a sale by description, goods match the description (s 70) § Goods are of merchantable quality (s 71(1)) § Where a sale by sample, goods match the sample (s 72)

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 (s 71(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 p 181)

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 goodsservices 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 68 A (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 goodsservices 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 68 A (3) Trade Practices Act)