Commerical Law

MarcusC1995

Topic12Revisionlecture2019.pptx

Commercial Law Revision These revision notes are not intended to be a complete account of the course content. For more detailed information, please refer to the course texts, lectures and tutorials and other law resources.

What is law?

Generally:

Legislation from Parliament

From bodies to whom the power has been delegated

Decisions from senior courts

The “law” can be classified in many different ways:

Common law and statutory law

Examine what specific areas law covers

Historical division of law into principles of common law and equity

Geographical limits: Common law system vs civil law system

RMIT University

Government has 3 distinct areas of power:

Separation of powers doctrine: A concept inherited from England

Based on the idea that Government is divided into 3 separate and theoretically independent organs:

The legislature (Parliament), which makes the laws;

The executive (The Crown, the Ministry & the public service), which administers the laws; and

The judicature (The judges and the courts), which interprets, applies and enforces the laws

RMIT University

Legislation

Australian States have their own Constitutions and generally the States are authorised to make laws “for the peace, order and good government” of the State

However these wide legislative powers must be understood in the light of the Commonwealth Constitution

RMIT University

Australia’s Commonwealth Constitution

Gives the Commonwealth government both concurrent and exclusive legislative powers-

Concurrent: Those legislative powers shared with the states

Exclusive: Legislative powers that are only to be utilised by the Commonwealth Parliament

If there are powers not listed in the Commonwealth Constitution these may be regarded as residual and are therefore the domain of the State legislatures

RMIT University

Sources of Law – Common Law

Law made by judges in adjudicating disputes is often referred to as Case Law or Common Law and it includes:

Decisions made by judges where no legislation applies; and

Judges interpretations of particular statutes and regulations

RMIT University

Causing Harm: Torts and Negligence

Law of Tort

A tort is a civil wrong. It provides a mechanism whereby an individual can protect their personal and property rights.

If these rights are infringed, the victim may seek compensation from the wrongdoer.

RMIT University

Law of Tort

There is some overlap between tort law and criminal law: a person’s act may involve both a crime and a tort,

eg assault, battery, theft/conversion.

However, criminal proceedings are taken in the name of the state, while proceedings in tort are taken by the injured person as private citizen.

The standards of proof differ:

in criminal action, it is “beyond reasonable doubt”

in civil action, it is “on the balance of probabilities”

RMIT University

Tort versus Crime

Tort	Crime
Aims to compensate	Aims to punish
Initiated by individuals	Initiated by state
Outcome is remedy for plaintiff	Outcome is conviction or release of wrongdoer

RMIT University

Types of Tort

There are a variety of torts, including negligence, trespass, battery, nuisance, defamation. They protect different rights:

right to physical integrity

right to protection of one’s reputation

right to peaceful enjoyment of one’s property

RMIT University

Trespass

Forms of trespass:

to land (interference with plaintiff’s land without plaintiff’s consent)

to goods (interference with goods in possession of plaintiff without plaintiff’s consent)

to person:

battery: direct contract with plaintiff’s body without plaintiff’s consent (Rixon v Star City)

assault: threat causing plaintiff to anticipate contact with their person

false imprisonment

Defences

RMIT University

Nuisance

Involves act that indirectly interferes with plaintiff’s use and enjoyment of private or public land

Two forms of nuisance:

private nuisance: interferences with use/enjoyment of private land

public nuisance: interference with use/enjoyment of public land

Remedies: damages and/or injunction

RMIT University

Defamation

Publication of statement about plaintiff by defendant to a third party that would damage plaintiff’s reputation

Three elements:

statement was defamatory

statement identified the plaintiff

statement was published to a third party

Defences:

- Justification, absolute privilege, honest opinion

RMIT University

Negligence

Negligence is a particular type of tort.

The law of negligence imposes a duty on a person to act with care towards others.

If this duty exists and there is a failure to act carefully and another suffers a loss, the tort of negligence has been committed.

RMIT University

Negligence

To prove negligence, three steps must be fulfilled:

There is a duty of care owed by one party to the other

There must be a breach of that duty of care

The breach of the duty of care causes harm or damage.

RMIT University

1. Duty of Care

Donoghue v Stevenson established the ‘neighbour principle’ which indicates to whom the duty of care is owed.

It is owed to anyone that you can reasonably foresee is likely to be harmed by your action or failure to act.

It is an objective test: would a reasonable person foresee that damage may result from the defendant’s action or failure to act.

The features of the case must indicate a duty of care.

RMIT University©2

Situations where a duty of care arises:

Car drivers owe duty of care to other road user

Occupiers of premises owe duty of care to entrants

Suppliers of goods owe a duty of care to recipients

Solicitors owe a duty of care to their clients

Doctors owe a duty of care to their patients

manufacturers owe a duty of care to people who use their products

employers owe a duty of care to their employees

RMIT University

2. Breach of Duty of Care

On establishing a duty of care, it is next necessary to show the defendant has in fact been careless: have they breached the standard of care?

Use the reasonable person test: how would he/she act in the shoes of the defendant?

If the defendant’s conduct falls below the standard of the reasonable person they have breached their duty of care.

RMIT University

Breach of Duty of Care: Factors to consider

The probability that the harm would occur if care was not taken (Romeo v Conservation Comm’n of NorthernTerritory; Bolton v Stone)

The likely seriousness of the harm (Paris v Stepney Borough Council)

The burden of taking precautions to avoid the risk of harm (Latimer v AEC Ltd)

The social utility of the activity that creates the risk of harm (Watt v Hertfordshire County Council)

RMIT University

3. Damage caused by Breach of Duty of Care

Two aspects to damage:

1. The damage suffered by plaintiff must be caused by the defendant.

Use the ‘but for’ test : Yates v Jones

2. The damage must not be too remote. Hence, only damage that is reasonably foreseeable is recoverable: the Wagon Mound case

RMIT University

Defences to Negligence Action:

Contributory negligence:

- Court reduces damages to the extent plaintiff contributed to their own injury: Ingram v Britten and s 26 of the Wrongs Act 1958 (Vic)

Voluntary assumption of risk:

- a total defence

- plaintiff knows of and willingly accepts the risk of injury: Agar v Hyde

RMIT University

Contract Law

Introduction

A contract is a legally enforceable agreement

The law of contract encompasses many areas of commercial law, eg agency, partnership, banking

The law of contract is traditionally based on common law and precedent, however legislation has had a significant impact, eg Australian Consumer Law

RMIT University

Elements of a contract

Three elements to form a contract:

Agreement (offer and acceptance), and

Intention to create a legal relationship, and

Consideration

Four elements to undo a contract:

Lack of consent, or

Lack of capacity, or

Lack of legality, or

Lack of formality

RMIT University

Agreement

Before agreement there may be negotiations

Agreement is when there is a “meeting of the minds”

Agreement is determined objectively

Agreement consists of a clear offer and an unconditional acceptance of the terms of the offer

RMIT University

Offer

Offers are a promise to be bound providing the terms of the offer are met

The “offeror” is the person making the offer, the “offeree” is the person to whom the offer is made

Offers can be:

- verbal

- in writing

- by conduct

RMIT University

Offers must be distinguished from an invitation to treat

Advertisements are usually regarded as invitations to treat: Partridge v Crittenden

A mere display of goods for sale at marked prices is generally regarded as an invitation to treat: Pharmaceutical Society v Boots Cash Chemists

RMIT University

An offeree can respond to an offer in 1 of 5 ways.

Offeree can:

Accept the offer in its full terms;

Reject it;

Make a counter-offer;

Ask for further information or clarification before making a final decision; or

Do nothing at all

RMIT University

Termination of offers

Offers can be rejected by the offeree outright or in the form of a counter offer, but inquiries from the offeree to clarify the offer are not rejection: Stevenson, Jacques & Co. v McLean

Offers can be revoked or withdrawn by the offerror prior to acceptance

However the revocation must be communicated to the offeree before acceptance: Byrne v van Tienhoven

If the offeror uses the post to revoke the offer it is not effective until it is received by the offeree

Offers can lapse: Ramsgate Victoria Hotel v Montefiore

RMIT University

Acceptance

Is the unconditional positive response to the offer

Must be in reliance on the offer

Must be unconditional and clear

Can be express or implied. Sometimes the conduct of the parties will lead to the implication that an agreement exists: Carlill v Carbolic Smoke Ball

RMIT University

Intention to create legal relationship

If the agreement is of a social or domestic nature, the presumption is that there is no intention that the parties intended to be legally bound:

Balfour v Balfour

Serious economic consequences and evidence of writing can rebut the presumption:

Wakeling v Ripley

If the agreement is made in a commercial context, the court will presume an intention to be legally bound. But, this presumption may be rebutted:

Rose and Frank Co. v Crompton & Bros Ltd

RMIT University

Consideration

Consideration is the value given by the offeree (promisee) for the offer/promise received from the offeror (promisor)

Defined in Curie v Misa

some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss of responsibility given, suffered or undertaken by the other

Consideration may be money but can be a promise to act, or do something or to refrain from certain actions

It can be a benefit flowing to the promisor, or to a third person at the promisor’s direction, or a detriment to the promisee

RMIT University

Consideration continued

If consideration is the price paid for the promisor’s promise, then it must occur in response to the promise

It can’t be past consideration:

Roscorla v Thomas

Anderson v Glass

RMIT University

Consideration need not be “adequate” but should be “sufficient”

The statement that consideration need not be adequate refers to the relative value of the promise and the consideration, ie if goods are sold well below their value it is irrelevant for the purposes of consideration:

Thomas v Thomas

RMIT University

The statement that consideration should be sufficient refers to the actual existence of consideration

Consideration will not be sufficient if the consideration is:

a public or legal duty:

Glasbrook Bros v Glamorgan County Council

an existing contractual duty that has to be performed by one of the parties to the contract:

Stilk v Myrick

Hartley v Ponsonby

RMIT University

Consideration

Payment of a sum lesser than agreed is not sufficient consideration (Foakes v Beer):

If the creditor accepts the lesser sum of money in full repayment of a greater amount, there isn’t any “new” consideration for the new agreement. The repayment is only a part of the original debt.

Exceptions:

Where debtor pays a smaller amount and adds something of value or pays the debt earlier than the due date

If a third party has entered into an agreement to pay a lesser amount in full settlement of the debt: Hirachand Punamchand v Temple

If the ‘practical benefits test’ is fulfilled: Musumeci v Winadell

RMIT University

Promissory estoppel

This rule was traditionally used as a defence to prevent someone going back on their promise after the other party has acted in reliance on that promise and suffered detriment: Central London Property Trust Ltd v High Trees House Ltd

In Australia promissory estoppel can also be used as a cause of an action (a sword), not merely as a defence- Waltons Stores v Maher

RMIT University

Elements of promissory estoppel

A pre-existing legal relationship between the parties under which rights either existed or were expected to be created;

A promise by one party that he or she will not insist on his or her strict legal rights

The promise gives rise to an expectation in the promisee that the promise will be honoured, even though it is not supported by consideration

Actual reliance by the promisee on the promise

An element of detriment in that the promisee is placed in a worse position when the promise turns out to be false

An element of unconscionability

RMIT University

Consent

Contracts which are affected by the lack of real or genuine consent may be rendered void or voidable

Categories:

- mistake

- misrepresentation

- unconscionable conduct

- undue influence

- duress

RMIT University

Mistake

Mistake may be about the existence of the subject matter, its qualities, the terms of contract, the identity of the other party

Under common law, mistake renders the contract void ab initio, hence its application is very limited

Equity allows for broader remedies:

- rescission

- rectification

- refusal of specific performance

RMIT University

Mistake

Types of mistake: common, mutual, unilateral

Common: both parties make the same mistake. Renders contract void ab initio. But, must be fundamental matter.

McRae v Cth Disposals Commission: tanker never existed, so contract not void for common mistake

Leaf v International Galleries: mistake about quality not fundamental

Mutual: parties at cross purposes.

Raffles v Wichelhaus: contract void because no common agreement.

RMIT University

Mistake

Unilateral: occurs when one party makes a fundamental mistake when entering the contract and the other is award of the mistake. Renders contract void or voidable.

Mistake as to terms of contract:

Smith v Hughes – seller knew buyer under mistake as to the age of the oats, but said nothing. Not void, unless seller promised that oats were old. Caveat emptor applies.

Taylor v Johnson – negotiations based on option to buy 10 acres at $15,000 per acre, but contract for total price of $15,000. Held: voidable because buyer acted unconscientiously, deliberately setting out to prevent seller becoming aware of the mistake

RMIT University

Misrepresentation

This is where a person entered into a contract based on some existing fact or past event that is not true

Edgington v Fitzmaurice: to establish an action in misrepresentation, a party must prove that the representation:

is one of past or existing fact/s

is false

was addressed to the party misled before or when the contract was made

was intended to induce and in fact induced the other party into the contract

In sum, the party misled must have relied on the misrepresentation

RMIT University

Misrepresentation

The misrepresentation is one of past or existing fact

- therefore it cannot be a statement of opinion. However, there are exceptions, eg if the representor never held that opinion or lied about it

The representation must be untrue

Silence alone is not a misrepresentation at common law. No duty to disclose material facts (caveat emptor applies)

However, there are some exceptions requiring disclosure:

When a ‘half-truth’ is made, ie when the representor has failed to make full disclosure

Subsequent discovery the statement is false

The statement was true when made but becomes untrue later: With v O’Flanagan

RMIT University

Misrepresentation

The misrepresentation was addressed to the party misled before or when the contract was made

- Plaintiff must show they were the intended recipient of the false statement. Only those who directly or indirectly act on the false statement can obtain a remedy for the misrepresentation

The representation was intended to induce and had in fact induced the other party into the contract

Plaintiff must show the misrepresentation both intended to induce and was successful in inducing the contract

Has the innocent party suffered any loss?

If there is no damage suffered from the misrepresentation, there is no action

RMIT University

Misrepresentation

Remedies:

Misrepresentation may make a contract voidable. This may give rise to the equitable remedy of rescission (or cancellation of the contract). The innocent party may also possibly claim damages. The types of remedies available depend on whether the misrepresentation was:

Fraudulent: rescission and/or damages for deceit are available (see Derry v Peek for the criteria for fraudulent misrepresentation)

Negligent: rescission and/or damages for negligence are available (see Shaddock v Parramatta City Council for the criteria to establish a duty of care in negligent misrep’n)

Innocent: rescission only: Whittington v Seale-Hayne

RMIT University

Breach of s 18 of the Australian Consumer Law (misleading or deceptive conduct): Use this as an additional or alternative action to misrepresentation

Apart from the common law action of misrepresentation, the plaintiff may also claim breach of s18 of the Australian Consumer Law (‘ACL’) (prohibiting misleading and deceptive conduct).

Remedies for breach of ACL s 18 include damages (s 236) and court orders to vary contract, to refund money or to return goods (s 237)

RMIT University

Unconscionable Conduct

Where stronger party takes unconscionable advantage over weaker party’s special disability

Action in equity

Special disability defined as on which “seriously affects ability of innocent party to make judgment in own interests (Amadio’s case)

ACL s 20 prohibits person from engaging in conduct which is unconscionable within meaning of common law

ACL s 21 prohibits unconscionable conduct with supply or acquisition of goods or services

ACL s 22 lists specified matters court takes into account deciding whether there has been breach of s 21

RMIT University

Undue Influence

Where ascendant party takes improper advantage of position of dominance over the dependent party

Certain classes of relationship give rise to presumption of undue influence: parent and child, solicitor and client, doctor and patient (Allcard v Skinner). May be rebutted.

If no particular relationship, dependent party must prove undue influence (Johnson v Buttress)

RMIT University

Duress

Involves illegitimate pressure by stronger party on weaker party so as to procure a contract

Distinguish it from hard bargaining

May be actual or threatened violence (Barton v Armstrong)

May be economic duress: threats to a party’s economic interests, eg North Ocean Shipping v Hyundai Construction where defendant refused to continue with construction of ship unless received 10% more. Held: illegitimate pressure and plaintiff had no choice because had chartered ship to 3rd party.

RMIT University

Capacity

Parties to the agreement must have the capacity to contract

The concept of capacity refers to the contracting parties being able to form an intention to be bound by the agreement

A party to an agreement who is under 18 years of age or who is mentally ill or under the influence of drugs/alcohol may not have the capacity to contract

RMIT University

Minors contracts

Refer to contracts entered into with people under 18 years

General rule: Contracts can be entered into by minors

However. while such contracts are enforceable by the minor, they are not enforceable AGAINST the minor

Contracts for NECESSARIES such as clothing and shelter are valid and enforceable against the minor

The courts take into account the minors needs and standard of living in determining what is necessary

Contracts for employment, education and training are also valid and enforceable against the minor if it is for the minor’s benefit (Hamilton v Lethbridge)

RMIT University

Legality

Contracts illegal under statute:

Need to look at wording of statute:

may only penalise the conduct, but not invalidate contract

may invalidate contract, but not penalise parties

may do both

Contracts illegal under common law:

- contracts to commit a crime or tort are void

- contracts in restraint of trade: use Nordenfelt test: a restraint of trade is prima facie illegal and void unless it is in the parties’ and the public’s interests. The restraint of trade must also be reasonable in time and space

- in employment contracts, restraint on confidential info may be valid (Forster v Suggett), but won’t extend to ordinary info and skills

RMIT University

Contents of a Contract

The study of the contents of a contract concerns:

- identifying what are the terms of the contract

- interpreting their meaning

RMIT University

Terms versus Representations

Why distinguish between contractual terms and representations?

How to distinguish them?

- fundamentally, terms are statements for which a party assumes contractual liability (unlike representations)

- use the Oscar Chess v Williams criteria:

How important was the truth of the statement?

How much time elapsed between the making of the statement and the final agreement?

Was there reliance on skills/knowledge of other party?

Was statement put in writing?

RMIT University

Written Contracts

Parol Evidence Rule:

- if agreement in writing, presumed that writing contains all the terms. Any oral statements will not be admitted as contractual: Mercantile Bank of Sydney v Taylor

- but partly written, partly oral contracts are an exception: Vann Den Esschert v Chappell

If contract signed:

- parties bound even if did not read the document: L’Estrange v Graucob

- unless the signed contract was misrepresented: Curtis v Chemical Cleaning & Dye Co

RMIT University

Collateral Contracts

They avoid harsh consequences of parol evidence rule

De Lassalle v Guildford:

- lessee would not give signed copy of lease unless lessor assured him the drains of property were in order. Later, discovered they weren’t. Held: could not sue for breach of the lease contract as the promise about drains wasn’t contained in that document, but could sue on a “collateral contract”

- collateral contracts require:

- promise

- which doesn’t contradict main contract

- consideration for collateral promise (normally, entry into main contract)

Also, consider the very powerful s 18 of the Australian Consumer Law (misleading and deceptive conduct)

RMIT University

Conditions and Warranties

Terms may be conditions or warranties

Condition: vital to contract, so important that its non-performance is considered a substantial failure to honour contract. Remedies = rescission and damages

Warranty: not of central importance. If breached, injured party must still perform contract, but may sue for damages, not rescission.

How to distinguish between them? Use “root of the contract” test – is the term essential to the contract? ie would the party not have entered into contract but for strict performance of the promise:

- Bettini v Gye: breach of warranty, hence only damages

- Associated Newspapers v Bancks: breach of condition, hence both rescission and damages available

RMIT University

Disclaimers or Exclusions Clauses

Two issues as to a disclaimer:

(a) incorporation - is it incorporated into the contract? Yes, if:

It is included in a signed written contract: L’Estrange v Graucob

It was brought to the other party’s attention by reasonable notice before the contract was formed: Thornton v Shoe Lane Parking; Causer v Browne

It is implied into the contract from prior dealings: Balmain New Ferry v Robertson

Interpretation – does it cover what it claims to cover?

Contra proferentem rule interprets disclaimer narrowly: White v John Warwick

Disclaimer does not cover conduct not falling within the ‘four corners’ of contract: Sydney City Council v West

RMIT University

Remedies

(1) Rescission: termination of contract for breach of:

a condition:

- Associated Newspapers v Bancks

an intermediate term, breach of which has serious consequences:

- Cehave v Bremer

(2) Damages: available for breach of condition or warranty or for fraudulent or negligent misrepresentation

(3) Injunction: a court order restraining a party from doing an act

(4) Specific performance: a court order directing the breaching party to perform their contractual obligations

RMIT University

Damages

Damages: compensate plaintiff for losses flowing from the breach.

Losses that can be recovered:

Use the rule in Hadley v Baxendale:

(a) damages are recoverable for direct losses, ie for losses that flow naturally from the breach

(b) damages are only recoverable for indirect losses (ie for losses that don’t ordinarily result from the breach), if the defendant was made aware of them before the contract

RMIT University

Quantum of Damages

General damages compensate plaintiff for actual financial losses

Nominal damages may be awarded for the breach where there is no actual loss arising from the breach.

Damages may also compensate for loss of expected profits from the contract and cost of expenditure (McRae v Cth Disposals Commission)

Damages for distress and disappointment are not usually awarded in breaches of contract. However, if purpose of contract was to provide plaintiff with enjoyment (eg holiday travel), damages for distress and disappointment may be awarded: Baltic Shipping “The Mikhail Lermontov” v Dillon.

End of Contract (or Discharge of Contract)

A contract can be discharged:

by performance of the contract

by agreement

by breach of the contract

by lapse of time

by law

by the doctrine of frustration

RMIT University

Discharge by Performance

Contract discharged where both parties fulfil precisely their contractual obligations

Three exceptions:

1 if the contract is divisible

2 where partial performance is accepted: party who partially performed the contract may ask for a ‘quantum meruit’: Steele v Tardiani

3 if party has substantially performed their obligations, right to quantum meruit: Hoenig v Isaacs

RMIT University

Discharge by Agreement

A contract can be terminated by another agreement

If one of the parties has completed their part of the contractual obligations then ‘accord and satisfaction’ will be required before the other party is released from their contractual obligations.

A contract may contain a term that allows one of the parties to terminate the contract.

RMIT University

Discharge by Breach

If one of the parties to the contract commits an actual breach of a condition of the contract then the other party has the option to terminate the contract and claim damages for losses incurred as a result of the breach.

RMIT University

Discharge by Frustration

Where an event occurs making completion of the contract impossible.

The event must:

Radically alter the contractual position of at least one party

Was not within the parties’ contemplation at the time of the contract

Was not caused by either party

It would be unjust to hold a party to the original contract

see Taylor v Caldwell; Krell v Henry.

Where a contract is frustrated all amounts paid are recoverable and all amounts payable cease to be payable: Australian Consumer Law and Fair Trading Act 2012 (Vic) s 36

RMIT University

Consumer Protection: Australian Consumer Law

Australian Consumer Law (ACL)

In force since 1 January 2011

regulates misleading and deceptive conduct (s 18) and unconscionable conduct (ss 20-22)

provides guarantees:

- to “consumers” (defined in s 3)

- against suppliers (ss 51-57 re goods, ss 60-62 re services) that are non-excludable: s 64

- against manufacturers (ss 271-273 re goods)

that are non-excludable: s 276.

provides remedies to persons against manufacturers for

loss, damage, injury arising from goods with safety defects: ss 138-141

any exclusion of liability is void: s 150

RMIT University

Consumer

Guarantees are provided to “consumers”

“Consumer” defined in s 3:

- a person is a consumer when the goods/services cost

- $40,000 or less; or

- if >$40,000, the goods/services are of a kind ordinarily acquired for personal, domestic or household use or consumption

- but, must NOT be for re-supply or to be used up or transformed in trade or commerce

RMIT University

Guarantee as to acceptable quality: s 54

Under s 54, there is a guarantee that goods supplied to a consumer are of “acceptable quality”

Goods are of “acceptable quality” if they are as:

fit for all purposes for which goods of that kind are commonly supplied

acceptable in appearance and finish

free from defects

safe; and

durable

cont’d ….

RMIT University

Guarantee as to acceptable quality: s 54

as a reasonable consumer fully acquainted with the state and conditions of the goods would regard as acceptable having regard to the following matters:

the nature of the goods

the price of the goods

any statements about the goods

Goods are of acceptable quality regarding aspects specifically drawn to the consumer’s attention: s 54(4)

RMIT University

Fitness for any disclosed purpose: s 55

Under s 55, there is a guarantee that goods are reasonably fit for any disclosed purpose and for any purpose for which the supplier guarantees that they are reasonably fit

A disclosed purpose is a particular purpose for which the goods are being acquired by the consumer and that the consumer makes known to the supplier or manufacturer

The s 55 guarantee does not apply where the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the supplier or the manufacturer

RMIT University

Other Guarantees:

Guarantee that the goods correspond to their description: s 56

Guarantee that in a sale by sample, the goods correspond with the sample in quality, state and condition: s 57

Guarantee that supplier has the legal right to dispose of the goods: s 51

Guarantee that the goods sold are not subject to any undisclosed security: s 53

Guarantee that manufacturer will ensure repair facilities and spare parts for a reasonable period after supply of goods: s 58

Guarantee that manufacturer and supplier will comply with any express warranties they have given: s 59

RMIT University

Guarantees as to services: ss 60-61

Under s 60 there is a guarantee that services supplied to a consumer will be rendered with due care and skill

Under s 61 there is a guarantee that any services and any product resulting from the services will be fit for a purpose that the consumer made known to the supplier

Under s 62 there is a guarantee that services will be supplied within a reasonable time

RMIT University

Remedies

are available:

to consumers

to persons who acquire goods from consumer as a gift (s 266)

the nature of the remedy available depends on the nature of the supplier’s failure to comply with the guarantee

if it is not a “major failure”:

- consumer may require supplier to remedy the failure within a reasonable time; if supplier does not remedy the failure, consumer may reject the goods or recover all reasonable costs in remedying the failure: s 259(2)

if a “major failure” occurs:

- consumer may reject goods or recover compensation for any reduction in value of goods below the price paid: s 259(3))

In either case, consumer may recover damages for any reasonably foreseeable loss or damage caused by non-compliance: s 259(4)

Similar remedies apply for breach of services guarantees: s 267

Exclusions of statutory remedies are void: s 64

RMIT University

“Major failure”: s 260 for goods and s 268 for services

A “major failure” occurs where goods/services:

would not have been acquired by a reasonable consumer who was fully acquainted with the nature and extent of the failure

are substantially unfit for a purpose for which goods/services of the same kind are commonly supplied and they cannot be easily and within a reasonable time be remedied to make them fit for such a purpose

are unfit for a disclosed purpose

are not of acceptable quality because they are unsafe

RMIT University

Manufacturer’s Liability for Non-Compliance

“affected person” may recover damages from manufacturer if goods not of acceptable quality: s 271(1) ); or where goods don’t match description: s 271(4)

Damages against a manufacturer for breach of these guarantees cover:

(a) any reduction in the value of the goods

(b) any loss or damage that was reasonably foreseeable for breach of the guarantee: s 272

“Affected person” is:

a consumer

person who acquires goods from the consumer

person who derives title to the goods through the consumer: s 2(1)

Exclusions/modifications to statutory remedies are VOID: s 276

Manufacturer liable to indemnify supplier: s 274

RMIT University

Manufacturer’s Liability for Goods with Safety Defects

Manufacturer liable:

to compensate an individual if goods supplied by it have a “safety defect” and the individual suffers injuries because of the defect: s 138

to dependents of individual for loss as a result of injuries to or death of individual caused by a safety defect: s 139

for loss of other goods ordinarily acquired for personal, domestic or household use (s 140) or loss of land, buildings or fixtures acquired for private use caused by the defective goods ( s 141)

Goods have a “safety defect” if “their safety is not such as persons generally are entitled to expect” having regard to manner in which marketed, packaging, instructions, warnings, etc: s 9(1)

Any exclusion of liability is VOID: s 150

RMIT University

Starting a Business

Common types of business structure:

Sole trader

Partnership

Company

Trust

Sole traders and partners are personally liable for business debts.

A company, on the other hand, is a separate legal entity. Shareholders have limited liability.

RMIT University