Commercial Transactions

Module 2: Sale/Supply of goods and services

Winter 2006 Session

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This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited.
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Sale/Supply of Goods and Services

In modules 2,3,4,and 5, we discuss The Contract for Sale/Supply of Goods and Services Product and service liability The law relating to the transfer of title The law relating to performance of the contract At the end of these 4 modules, we will be able to advise a client on the appropriate legal action to resolve their problem: --in breach of contract where there is dissatisfaction by either party, --actions for breach of specific statutory rights with access to statutory remedies and --whether other legal solutions may be available e.g. negligence. --bearing in mind that there may also be preventative strategies, practical solutions and ADR that are relevant to an overall solutions

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Legislation relating to the sale/supply of goods and services

What is required knowledge of legislation?: A good understanding of and ability to work with: Most provisions of the Sale of Goods Act (NSW) Various provisions of the Trade Practices Act (Cth)-see outline
Note also mirror provisions of the TPA in Fair Trading Act

Sale of Goods (Vienna Convention) Act (NSW)

for international sales

Limited other references

e.g. Unfair Contracts Act (NSW), Consumer Credit Code (linked credit provider)
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SALE/SUPPLY OF GOODS and SERVICES

Historically, our law is based on FREEDOM OF CONTRACT + FREEDOM TO CONTRACT IN or OUT However, SUPERIOR BARGAINING POWER lead to ABUSE WHICH LED TO: CONSUMERISM (Note that this may extend to small business) WHICH RESULTED IN CONSUMER PROTECTION LEGISLATION COVERING SUCH THINGS AS  IMPLIED TERMS  RIGHTS TO COMPENSTION  PROHIBITION OF MARKETING ABUSES  UNFAIR CONTRACTS LEGISLATION

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IDENTIFICATION OF NATURE OF TRANSACTION In order to apply the correct law, we must first know what we have. Is it a SALE?-of goods,services,intangibles Is it an agreement to sell in the future? A SUPPLY?-but, not a sale?e.g.lease, Hire Purchase Is it a LICENCE? Is it something else? GIFT, BARTER, BAILMENT,FRANCHISE,SECURITY?
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SALE OF GOODS JANSZ V. G M B IMPORTS (1979) VR 581

1. 2. 3. 4. 5. 6. GMB Imports was licensed tobacco wholesaler. Licence expired 31.5.76. On 31.5.76 contracted to buy $5,000,000 tobacco. And to sell $2,000,000 worth of that tobacco to Permewan. Mid April 77, fulfilled obligation to Permewan. Prosecuted for selling tobacco without licence. When had sale taken place? 31.5.76 or April 77? COURT FOUND: Unascertained goods and so s.21 Goods Act (Vic) applied: Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. Promise to sell on 31.5.76.agreement to sell only Sale not until later in 1977
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SALE OF GOODS SYMES V. LAURIE (1985) 2 QD R 547

Laurie bought house from owner and sold it to Symes. Under Contract to take house to land and set it up. Damaged in transit. Whose risk? Who bears loss? Property of Symes or Laurie at relevant time?  Sale of Goods within Sale of Goods Act?  If so, risk & passing of title provisions in S of G Act apply. COURT FOUND Previous cases depended on relevant facts. No principle which could be applied. House already in existence. House attached and agreement to sever. QSOGA s.20 transferred at time intention to transfer. QSOGA s.21 rules for ascertaining intention. resulted in property passing at time of contract. RISK WITH SYMES.
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SALE OF GOODS HEWETT V. COURT (1983) 149 CLR 639

1. Hewett family contracted with Ogilby for construction of transportable house. 2. Cost $34,116 paid to $20,469. 3. Ogilby part finished, money troubles, handed over unfinished house. 4. Ogilby went into liquidation. 5. Preference? 6. Equitable lien? The distinction between a contract for the sale of goods and a contract for the provision of work and materials is frequently a fine one and the tests for distinguishing the one from the other are unsatisfactory and imprecise Contract for work and materials? Contract for sale of goods? COURT FOUND: Contract for work. MNoonan2005 Equitable lien available nevertheless.

SALE OF GOODS ESSO PETROLEUM CO. V. CUSTOMS & EXCISE COMMISSIONERS (1976) 1 SLR 1
1. 2. 3. 4. Esso promoted petrol With loyalty gift Coins with Soccer heroes Collect the full set of thirty coins. One coin given when you bury four gallons of fuel 5. Coins sold to public and tax on sales appropriate? Legal relationship. Sale of goods? COURT FOUND  Coins not transferred for money consideration  Consideration was the making of another contract  To buy petrol  No tax applicable
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DEFINITIONS
We must acquaint ourselves with statutory definitions so that we can identify transactions within their scope. We must not assume that the ordinary meaning of a word is the same as the statutory definition. To illustrate, we will look at the following:

SALE SUPPLY

GOODS
CONSUMER SALE

SERVICES
CONSUMER

PRICE

LINKED CREDIT PROVIDER

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SALE OF GOODS THE CONTRACT DEFINITIONS cont.  SALE OF GOODS

s. 6 SGA: A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. Where transfer at future time, or condition, contract is agreement to sell. Agreement to sell becomes a sale when time elapses or conditions fulfilled subject to which property is to be transferred.

 MONEY CONSIDERATION
Must be money involved Even if that is only part of consideration Note purchase of car-part trade-in, part money See Loyalty giftEsso
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SALE OF GOODS THE CONTRACT DEFINITIONS cont. Articles 1 and 2 of Vienna Convention
1. Convention applies to contracts of sale of goods between parties whose place of business are in different States. 2. Does not apply to sales:  Of goods bought for personal, family or household use  By auction  On execution or otherwise by authority of law  Of stocks, shares, investment securities, negotiable instruments or money  Of ships, vessels, hovercraft or aircraft  Of electricity

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TPA s. 4 Definition Supply

Supply when used as a verb, includes: a) in relation to goods-supply (including resupply) by way of sale, exchange, lease, hire or hire-purchase; and b) in relation to services-provide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.

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DEFINITIONS TRADE PRACTICES ACT S. 4 Goods Goods includes: a) ships, aircraft and other vehicles; b) animals, including fish; c) minerals, trees and crops, whether on, under or attached to land or not; and d) gas and electricity;

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SALE OF GOODS THE CONTRACT DEFINITIONS  GOODS

s.5(1) SGA : Include all chattels personal other than things in action and money.The term INCLUDES Emblements (crops resulting from human labour)and things attached to or forming part of the land which are agreed to be severed prior to sale (House to be removed Symes). DOES NOT INCLUDE: Money (unless collection rather than currency) Intangibles Choses in action Intellectual property CAN INCLUDE FUTURE GOODS: S. 10: The goods which form the subject of a contract of sale may be either existing goods owned or possessed by the seller or future goods. Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.
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IS A COMPUTER SYSTEM "GOODS? TOBY CONSTRUCTIONS PRODUCTS PL V. COMPUTA BAR SALES PL Package consisting of 3 items hardware ($14,390)and 2 items of software (business management and Wordstar ($2,160)) Vendor agreed to install, train staff and provide post sale service. Plaintiff alleged breaches of conditions or warranties implied by SGA and TPA. Only applied if "goods". Work to be done and materials provided and perhaps transfer intellectual property? Rogers J: Sale of this computer system comprising both hardware and software constitutes a sale of goods with both SGA and TPA. Important to him that the total system was off the shelf; not individually crafted.

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SALE OF GOODS IS A COMPUTER SYSTEM "GOODS"

ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL COMPUTERS LIMITED Court of appeal London 26/7/96 Council invited tenders for provision of computerized rate system. Faulty software led the council to believe that they had more ratepayers than in fact they did. Was the contract subject to any implied term as to quality or fitness for purpose, and if so, what was the nature of that term? Equivalent of Sale of Goods Act? Otherwise? Is software goods? (Software can involved a tangible disc onto which a program is encoded and the intangible program itself.) For purposes of English Sale of Goods Act and Supply of Goods and Services Act the definition of "goods" would include the disc but not the program.
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SALE OF GOODS IS A COMPUTER SYSTEM "GOODS"

ST. ALBANS CITY AND DISTRICT COUNCIL V. INTERNATIONAL COMPUTERS LIMITED Court of Appeal London 26/7/96 Cont. Considered Toby Constructionsale of whole computer systemsale of Goods within NSW legislation. In this case however, defective program not sold and probably not hired. Employee went to council premises taking with him a disc and he transferred the program into the computer. Such a transfer was not a transfer of goods. Turned to the common law for situation when a term would be implied..An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contractit must have been a term that went without saying.Found to be the case in this situation.
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ASX operations P/L (ASXO) and Australian Stock Exchange Limited (ASX and Pont Data Australia P/L (1991)ATPR
Pont supplies electronically disseminated financial information to stockbrokers market analysts etc. ASXO supplies electronic. Proceedings concerned a contract between these two for the supply of information by ASXO to Pont by electronically coded signals and allegations of behaviour contrary to ss. 45, 46 and 49 of TPA requiring Pont to take certain data if it was to take other data. On issue that affected and was discussed in the case was whether the provision of information concerned was services or goods. If services, no contravention of s. 49 and appeal would succeed. If goods, it would be otherwise. Given the TPA definition of goods includes electricity, does electricity include these encoded electrical impulses? While the trial Judge thought so; on appeal, the court thought not.
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DEFINITIONS S.13 SOGA ASCERTAINMENT OF PRICE

(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

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DEFINITIONS S.14 SOGA AGREEMENT TO SELL AT VALUATION

(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided; provided that if the goods or any part thereof have been delivered to and appropriated by the buyer, the buyer must pay a reasonable price therefor. (2) Where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain an action for damages against the party in fault.
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PRICE
Consider the Following: At a price to be agreed by the parties in writing from time to time Price to abc=cost to xyz + percentage profit margin At valuation At a value to be fixed by a member of the Stock and Station Agents Association to be chosen by S, the seller I will take x million litres for y million dollars

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PRICE Trawl Industries of Australia P/L v. Effem Foods P/L (T/A Uncle Bens of Australia)
UBA had pet food factory and wanted to launch a new product using Jack Mackeral. UBA entered into an agreement with TIA to buy Jack Mackeral under which TIA would incur the expense of acquiring and installing a processing line conditional on UBA purchasing Jack Mackeral for the period 1988-93 at a price which would provide a reasonable commercial profit to TIA. These base Prices shall apply for calendar year 1988. In the course of Nov 1988 and each subsequent Nov up to and including Nov 1992, TIA and UBA shall confer and establish applicable prices for the immediately following calendar year using the following formula: Price to UBA = Cost to TIA + percentage profit margin Void for uncertainty? No, capable of being worked out by court. The fact that evidence would be required and might be difficult not a bar. Incomplete? No, formula is sufficient.
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Vienna Convention Price

Art 53. The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention Art 54. The buyers obigation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. Art 55. Where a contract has been validly concluded but does not expressly or implicitly fix or make provision for determining the price, the parties are considered, in the absence of any indication to the contrary, to have impliedly made reference to the price generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances in the trade concerned. Art 56. If the price is fixed according to the weight of the goods, in case of doubt it is to be determined by the net weight. See also 9, 19, 57, 58 59
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Trade Practices Act s. 4 Services

services includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights benefits, privileges or facilities that are, or are to be, provided, granted or conferred under; a contract for or in relation to: the performance of work(including work of a professional nature), whether with or without the supply of goods; the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; a contract of insurance; a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or any contract for or in relation to the lending of moneys; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service;
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TRADE PRACTICES ACT 1974- SECT 73 Linked Credit Provider

(1) Where: (a) a corporation (in this section referred to as the supplier ) supplies goods, or causes goods to be supplied, to a linked credit provider of the supplier and a consumer enters into a contract with the linked credit provider for the provision of credit in respect of the supply by way of sale, lease, hire or hire-purchase of the goods to the consumer; or (b) a consumer enters into a contract with a linked credit provider of a corporation (in this section also referred to as the supplier ) for the provision of credit in respect of the supply by the supplier of goods or services, or goods and services, to the consumer; and the consumer suffers loss or damage as a result of misrepresentation, breach of contract, or failure of consideration in relation to the contract, or as a result of a breach of a condition that is implied in the contract by virtue of section 70, 71 or 72 or of a warranty that is implied in the contract by virtue of section 74 of this Act or section 12ED of the Australian Securities and Investments Commission Act 2001, the supplier and the linked credit provider are, subject to this section, jointly and severally liable to the consumer for the amount of the loss or damage, and the consumer may recover that amount by action in accordance with this section in a court of competent jurisdiction.
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CONSUMER CREDIT CODE - SECT 117

(1) For the purposes of this Code, a "linked credit provider" of a supplier means a credit provider-(a) with whom the supplier has a contract, arrangement or understanding relating to the supply to the supplier of goods in which the supplier deals, relating to the business carried on by the supplier of supplying goods or services or relating to the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services; or (b) to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit; or (c) whose forms of contract or forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or (d) with whom the supplier has a contract, arrangement or understanding under which contracts or applications or offers for credit from the credit provider may be signed by persons at the premises of the supplier.
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S. 62 SOGA DEFINITION OF CONSUMER SALE

In this Part, consumer sale means a sale of goods (other than a sale by auction) by a seller in the course of a business where the goods: are of a kind commonly bought for private use or consumption; and are sold to a person who does not buy or hold himself or herself out as buying them in the course of a business.
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S. 63 SOGA ONUS OF PROOF

In any proceedings arising out of a contract for a consumer sale, the onus of proving that the sale is not a consumer sale lies upon the party so contending.

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consumer - goods-TPA 4B
Unless contrary intention appears: a person taken to have acquired goods as a consumer if: Test 1 price does not exceed prescribed amount ($40,000)

or
where price exceeded prescribed amount, goods were of a kind ordinarily acquire for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle AND Test 2 Goods not for re-supply, using them up or transforming them in trade or commerce in the course of a process of production, manufacture repairing or treating other goods or fixtures
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consumer - services-TPA 4B
A person taken to have acquired services as consumer if: the price did not exceed prescribed amount OR where price exceeded prescribed amountthe services were of a kind ordinarily acquired for personal, domestic or household use or consumption
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Aspects of Contract
We will go over some general matters before examining specific terms of contracts and product/service liability. They are: Express terms of contract Conditions and warranties Implied terms Interaction of statute with the common law
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Problems involving Contract

When analysing problems involving Contract Understand whether there is a Contract If so, what are the express terms? Written/oral Does the law limit these in any way? Are there any implied terms? What are they? common law/custom/statute Is there any inconsistency between express and implied? Which ones prevail? Decide on the terms of the contract. Consider the problem in light of this contract. Is there any action in contract available?
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SALE OF GOODS CONDITIONS AND WARRANTIES

DISTINGUISH FROM: 1. Puffery 2. Mere representation 3. Leading to but not forming part of contract CONDITION  Essential  Breach gives right to end contract  And/or sue for damages WARRANTY Less important than condition  Ancillary to main object of contract  Breach gives right to damages
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OSCAR CHESS V. WILLIAMS (1957) 1 WLR 370

Williams bought Morris secondhand. Traded it in on new Hillman from Oscar Chess. Williams told salesman Morris was 1948 model. Registration book showed Morris first registered 1948. 290 pounds allowed for trade in.18 months later OC discovered Morris was 1939 model. No difference in model 39-48. OC sued for difference in trade-in price. DENNING J FOUND:  Both parties mistakenly assumed Morris was 1948  Fundamental to contract, but a term of contract?  If prompt, equity might have set it aside.  Now, only remedy damages and must prove warranty.  Warranty = binding promise.  Binding promise or only innocent misrepresentation?  Proper inference from known facts? Only latter. Loss must lie where it falls
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SALE OF GOODS DICK BENTLEY PRODUCTIONS V. HAROLD SMITH (MOTORS) (1965) 1 WLR 623
Dealer, Smith sold second hand Bentley to B. Smith told B car had travelled only 20,000 miles since replacement engine and gearbox. Speedometer showed 20,000 miles. Mileage more like 100,000. INNOCENT MISREPRESENTATION? (NO DAMAGES) OR WARRANTY? (DAMAGES) Question depends on conduct of parties, their words and behaviour rather than thoughts.  Statement an inducement to act?  Smith in a position to know, or at least to find out, history of car.  Different to Mr. Williams in Oscar Chess in that respect.  Not dishonest, no fraud.  Statement as to 20,000 without foundation. Lord Denning found warranty in this case.
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INTERMEDIATE OR INNOMINATE TERMS

CEHAVE V. BREMER HANDELSGESELLSCHAFT (1976) 1 QB 44 Bremer sold 3,400 tons of citrus pellets to Cehave for 100,000. They were to be used for manufacture of cattle food. A clause in contract read: Shipment to be made in good condition. A small amount was damaged. Cehave rejected the lot and claimed a refund. The people holding the pellets sold them for 30,000 and that buyer sold them to Cehave for same amount.
Lord Denning MR

Was the clause in the contract a condition so that ANY breach entitled the buyer to reject the goods? No, this was what he called an Intermediate stipulation. No right to reject unless serious One is not entitled to reject something because it is not perfect. Citrus pellets were commonly bought for making cattle food. They were as fit for that as was reasonable; shown by eventual use. Some damaged, but not to such an extent to entitle rejection. Damage such as to entitle buyer to an allowance off price. Apply good commercial sense.
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LEASON V. PRINCES FARM (1983) 2 NSWLR 382

Leason ran a stud. He wanted a filly sired by Grand Chaudiere. Princes advertised a filly for sale. Said it was sired by Grand Chaudiere. Leason bought the filly. 9 months later, he found out it was not true.Leason sought to return and get refund. Princes refused. Leason sued. COURT FOUND 1. No doubt an innocent misrepresentation. 2. Right in equity for rescission?-Discussion of cases, in theory not available in innocent misrepresentation after contract executed This filly not what it wanted Not what it was led to believe it was getting Not what it paid for
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The relevance of Leason- interaction between law of contract (both express terms and as implied by the SOGA, TPA and FTA) and common law (the law of Equityremedies for innocent misrepresentation).The SOGA expressly preserves common law rules,but, should this be construed in a narrow sense to exclude equitable remedies?. In NSW, Leason was authority for wider interpretation. In equity, innocent representation does not give rise to damages; only rescission. Even then, if contract affirmed, may not be available. Contradictory authorities discussed in Leason, where it was decided rescission was available, despite delivery of horse. However,no affirmation after lack of correct breeding discovered. Debate continued. In 1988, NSW SOGA amended-s. 4(2A)- to make very clear that rules of equity relating to effect of misrepresentation apply to contracts for the sale of goods and permit rescission even where the misrepresentation has become term of contract and/or contract performed. The TPA (&FTA) have taken over now for many types of misleading / deceptive conduct. Also, TPA may provide damages for innocent misrepresentation; whereas equity does not. (damages available in Equity for fraudulent misrepresentation though).If next we turn to law of contract, we must look at express terms.including exclusion clauses to assess situation. If exclusion clause effective, then it may prevent remedy. Some of the implied terms and provisions of the SOGA can be modified in certain contracts and some cannot.See s. 16 (2) and (3) when condition may have to be treated as a warranty where buyer has accepted goods. In Leason, if this applied, returning the horse (breach of condition) may not have been an option and only damages would have been available (breach of warranty).The legislation and case law is not identical in the various Australian jurisdictions. For the purpose of our course, concentrate on NSW. For purposes of professional life; bear that in mind. MNoonan2005

PRODUCT AND SERVICE PRODUCT LIABILITY

FACTS
Goods/services unsatisfactory

LAW
Consumer sale? Formation of contract -breach Express terms SOGA, TPA implied -Div 2,2A TPA s. 52 misleading,deceptive Intnl sale? Vienna Convention Tort Financial Services? ASIC Act TPA VA manufacturer liability defective goods Unconscionable provisions 51AA, 51AB, 51AC TPA Contracts Review Act Consumer Credit Act Tort/s. 52 TPA Bailment?

REMEDIES
Action in contract Rescission/Damages Equitable TPA Orders IT general law Fines ACCC

Goods defective causing loss, injury Defendant taken advantage of serious inequality harsh agreement Untruthful representation Change in possession without transfer of title

TPA remedies TPA remedies

Damages/TPA Damages
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IMPLIED TERMS - TITLE S.17 SALE OF GOODS ACT 1923

IN A CONTRACT OF SALE UNLESS THE CIRCUMSTANCES OF THE CONTRACT SHOW A DIFFERENT INTENTION THERE IS: AN IMPLIED CONDITION In CONTRACT FOR SALE That SELLER HAS A RIGHT TO SELL AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME PROPERTY IS TO PASS AN IMPLIED WARRANTY BUYER SHALL HAVE AND ENJOY QUIET POSSESSION AN IMPLIED WARRANTY GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE NOT DECLARED AT TIME CONTRACT
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ROWLAND V. DIVALL (1923) 2 KB 5000

MR. DIVALL BOUGHT CAR SOLD IT TO ROWLAND WHO SOLD IT TO RAILSDON POLICE TOOK IT FROM RAILSDON STOLEN CAR

Atkin LJ 1. TOTAL FAILURE OF CONSIDERATION 2. IMPLIED CONDITION SELLER HAD RIGHT TO SELL 3. SELLER NO SUCH RIGHT 4. NO SALE AT ALL 5. NO OBLIGATION TO RETURN CAR TO SELLER SELLER NOT ENTITLED TO COMPLAIN ABOUT BENEFIT TO BUYER OF USE 6. MONEY HAD AND RECEIVED ON FAILURE OF CONSIDERATION
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Niblett Limited v Confectioners Materials Co Ltd (1921) 3KB 387

Confectioners sold 3,000 tins of condensed milk to Nibletts on CIF Contract. Although the documents did not show which brand of condensed milk was the subject of the sale, Confectioners argued that under an oral contract, it would be one of three brands - Freedom, Tucson, Nissley. Confectioners delivered 2,000 cases of Freedom and then 1,000 tins of Nissley. In November, Nibletts received a letter from Nestle, stating that Nissley imitated the Nestle trademark and asked Niblett not to sell it. It also threatened to take proceedings against Niblett. Niblett signed an undertaking not to sell, advertise or offer for sale the Nissley condensed milk. They then unsuccessfully asked Confectioners to take it back and unsuccessfully applied for an export license for it.
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Niblett Limited v Confectioners Materials Co Ltd cont.

Niblett claimed damages for breach of warranty: 1. that the milk was of merchantable quality; 2. that Confectioners had a right to sell it; 3. that Niblett should have enjoyed quiet possession; and 4. there was an implied condition or warranty that the label on the milk would not infringe any trademark. Bankes N J, of the English Court of Appeal, found that there was a clear breach of Section 12 of the English Sale of Goods Act, 1893, (S. 17 SOGA) because Confectioners had no right to sell the goods as they were, and Niblett had never enjoyed quiet possession.

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Microbeads v Vinhurst Road Markings Ltd (1975) 1 ALLER 529

Prismo held a patent for a machine for making white lines on roads. The complete specification was published in November 1970. It was entitled to institute proceedings for infringement in 1972, when the letters patent were granted. At the beginning of 1970, Vinhurst brought a machine for making white lines from Microbeads.. property in the machine passed before Nov 1970. Vinhurst knew nothing about the patent, it found the machine unsatisfactory and didnt pay Microbeads. Microbeads sued for the price. Vinhurst alleged breach of the term of fitness for purpose, and claimed that Microbeads did not have the right to sell the machine and Vinhurst did not have quiet possession. Lord Denning found that because the sale had occurred prior to the grant of the patent, there was no breach of the condition that the seller had the right to sell the goods. They were entitled to do whatever they liked with them at the time. However, he found a breach of the implied warranty for quiet possession. He found that the words to have and enjoy applied not only at the time of sale but for to future enjoyment.
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IMPLIED TERMS
- TITLE
S.69 TRADE PRACTICES ACT 1974  IN A CONTRACT OF SUPPLY OF GOODS BY A CORPORATION TO A CONSUMER OTHER THAN A S.69(3) CONTRACT THERE IS: AN IMPLIED CONDITION IN CONTRACT FOR SALE THAT SUPPLIER HAS A RIGHT TO SELL - AGREEMENT TO SELL WILL HAVE RIGHT TO SELL AT TIME PROPERTY IS TO PASS AN IMPLIED WARRANTY CONSUMER SHALL HAVE AND ENJOY QUIET POSSESSION - EXCEPT FROM PERSON ENTITLED TO BENEFIT CHARGE OR ENCUMBRANCE DISCLOSED OR KNOWN BEFORE CONTRACT MADE AN IMPLIED WARRANTY GOODS SHALL BE FREE FROM CHARGE OR ENCUMBRANCE - NOT DISCLOSED OR KNOWN BEFORE CONTRACT MADE
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IMPLIED TERMS- SOGA- TITLE-feeding the title

PATTEN V. THOMAS MOTORS (1965) NSWR 1457

Miss P obtained a car on Hire Purchase from CAGA. She sold it to Dealer, Clinton Motors. After various transfers, TM bought it and sold to P in May 61. In August 61, Miss P obtained a loan from D&I purporting to give a Bill Of Sale over the car. She used the money to pay out the Hire Purchase agreement with CAGA On 09/08/61. Miss P did not repay D&I and they repossessed the car. P sued TM for Breach Of Warranty Of Title S. 17(1) SOGA In Sept 63. Breach Warranty rather than condition (Termination No Longer Possible). HAD ORIGINAL DEFECTIVE TITLE BEEN FED BY PAYING OUT HIRE PURCHASE CO? IF SO, ANY CAUSE OF ACTION UNDER S. 17(1) EXTINGUISHED.
COLLINS J.

YES, TITLE COULD BE FED IN THIS WAY. NO CAUSE OF ACTION.

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IMPLIED TERMS
- DESCRIPTION
S.18 SALE OF GOODS ACT 1923 WHERE:  THERE IS CONTRACT FOR SALE OF GOODS BY DESCRIPTION THERE IS: y AN IMPLIED CONDITION THAT GOODS WILL CORRESPOND WITH DESCRIPTION IF SALE BY SAMPLE + DESCRIPTION NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION
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IMPLIED TERMS
- DESCRIPTION
S.70 TRADE PRACTICES ACT 1974 WHERE:  THERE IS CONTRACT FOR SUPPLY OF GOODS (OTHERWISE THAN BY AUCTION) BY A CORPORATION IN COURSE OF BUSINESS TO A CONSUMER BY DESCRIPTION THERE IS: AN IMPLIED CONDITION THAT GOODS WILL CORRESPOND WITH DESCRIPTION IF SALE BY SAMPLE + DESCRIPTION, NOT SUFFICIENT FOR BULK TO CORRESPOND WITH SAMPLE IF THEY DO NOT ALSO CORRESPOND WITH DESCRIPTION. CAN STILL BE SALE BY DESCRIPTION EVEN IF ONLY EXPOSED FOR SALE OR HIRE AND SELECTED BY CONSUMER. S. 74(2).
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IMPLIED TERMS- DESCRIPTION

BEALE V. TAYLOR (1967) 1 WLR 1193 Mr. Taylor believed his car was a 1961 herald. He advertised it for sale as such. Mr. Beale bought it but found it was half of a 1961 herald and half an older one welded together. Mr. Beale sued for a refund. Both parties were innocent Seller said the sale was not by description but the sale of a car as seen, tried and approved. He denied the buyer had suffered loss or damage. SELLERS LJ IN COURT OF APPEAL 1. SALE BY DESCRIPTION 2. WITHIN SALE OF GOODS ACT 3. BUYER ENTITLED TO REFUND LESS SCRAP VALUE

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IMPLIED TERMS- DESCRIPTION & SAMPLE

NICHOL V. GODTS (1854) 156 ER 410 Nichol showed samples of oil to Godts. He described the oil as: Foreign refined rape oil, warranted only equal to samples Godts entered into a written contract to buy 33 tons. The oil corresponded with the sample, but not the description. It was a mixture of rape and hemp oil. Godts refused to accept or pay. Nichol sued 1. 2. 3. 4. ATTEMPT AT EXCLUSION AGREED TO DELIVER FOREIGN REFINED RAPE OIL DID NOT DO SO CONTRACT NOT PERFORMED

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IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923  SUBJECT TO PROVISIONS OF ACT NO IMPLIED WARRANTY OR CONDITION AS TO QUALITY OR FITNESS EXCEPT WHERE: BUYER EXPRESSLY OR BY IMPLICATIONMAKES KNOWN PARTICULAR PURPOSE BUYER RELIES ON SELLERS SKILL AND JUDGEMENT AND GOODS ARE TYPE IT IS SELLERS BUSINESS TO SUPPLY THERE IS: AN IMPLIED CONDITION THAT GOODS ARE REASONABLY FIT FOR PURPOSE

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IMPLIED TERMS
- QUALITY OR FITNESS
S.19 SALE OF GOODS ACT 1923 EXCEPT WHERE: GOODS BOUGHT BY DESCRIPTION and SELLER DEALS IN GOODS OF THAT DESCRIPTION THERE IS: AN IMPLIED CONDITION THAT GOODS SHALL BE OF MERCHANTABLE QUALITY EXCEPT WHERE BUYER HAS EXAMINED DEFECTS SHOULD HAVE BEEN REVEALED ON EXAMINATION y IMPLIED WARRANTY CAN ARISE BY USAGE OF TRADE y EXPRESS WARRANTY OR CONDITION y DOES NOT NEGATIVE IMPLIED WARRANTY OR CONDITION y UNLESS INCONSISTENT

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IMPLIED TERMS
- QUALITY OR FITNESS
S.71 TRADE PRACTICES ACT 1974 Where: A corporation supplies goods to consumer (other than auction) in course of business buyer expressly or by implication makes known particular purpose There is: An implied condition that goods are reasonably fit for purpose Unless it is unreasonable for buyer to rely on sellers Skill and judgement There is: An implied condition that Goods are of merchantable quality Except defects specifically drawn to attention of Consumer or where consumer examines goods, and defects should have been revealed on that examination
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National Engineering V. Wellington orana Foundry P/L (2003) NSWSC 21

Part decision on whether a referees report should be accepted. In 1996, National entered into a sub contract with Multiplex for the fabrication and erection of structural steelwork for Stadium Australia. National ordered and purchased the cast forked ends from Wellington. It produced and delivered castings made in accordance with the shape requested by National. Upon testing they were found to contain defects. At this stage Wellington had cast about 600; some of which had been delivered.Wellington proposed that the design be modified and a revised price was agreed. Several castings of the roof needed to be replaced. National claimed a breach of s. 19(1)-not reasonably fit for the purpose. Did the buyer make known the particular purpose so as to show that the buyer relies on the sellers skill or judgement?The National representative had provided drawings and specifications.What skill or judgement was left to the manufacturer?Was there reliance upon the seller as to whether castings could be cast or whether they could be cast to the appropriate standard?
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IMPLIED TERMS
- FITNESS FOR PURPOSE
CASE
GRANT V. AUSTRALIAN KNITTING MILLS

PURPOSE
WORN NEXT TO SKIN

NOTE
AGAINST RETAILER, MANUFACTURER NEGLIGENT INSUFFICIENT TO MAKE KNOWN PARTICULAR PURPOSE

GRIFFITHS V. PETER CONWAY

COAT TO BE WORN BY MRS. GRIFFITHS

BARTLETT V. SIDNEY MARCUS

COAT TO BE WORN BY A PERSON WITH AN ABNORMALITY MOTOR CAR TO DRIVE ALONG THE ROAD REASONABLY FIT IF ROADWORTHY

ALSO DESCRIPTION SECOND HAND CAR

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IMPLIED TERMS
- FITNESS FOR PURPOSE

SE
RO T ER . S NNON MOTOR O.

PURPOSE
R TO DRI E LON T E RO D

NOTE
RO D ORT FOR RE SON LE TIME ONL FOUND OUT FTER RDS IMPLIED RR NT NO LON ER IL LE E USE OF NO LED E OF DEFE T ONTR T FOR PUR SE OF U TTI EFFE T OF TR DE N ME . DES RIPTION IN ONTR T
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NE RIN POINT OF F ILURE LE ME D OUPLIN FIT FOR ( SIN STO E) . TO IN TR ILERS UP LE IS FITTED IT OR RIN TT MENTS LDR . RT T F ST M RS LL S FLE I LE, E SIL M N ED, OMFORT LE, SUIT LE FOR TOURIN R

Ashington Piggeries Ltd v Christopher Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (1972) AC441; (1971) 1ALLER847
Ashington Piggeries (AP) had a mink farm. They used Christopher Hill (CH)to make a compound food to feed the mink. It was an oral contract. The formula for the compound which specified the ingredients was provided by AP, (an expert in the nutritional requirements of mink). CH was in the business of compounding food stuffs for domestic animals but knew nothing about mink and had never compounded food stuffs for minks before. CH entered into a commodity contract with Nirdsirdmel (N) for them to supply a herring meat of fair average quality of the season for the compound. The herring meal contained DNMA which had been produced by a chemical reaction because of sodium nitrate used as a preservative. The DNMA was toxic for the mink, which died.
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Ashington Piggeries Ltd v Christoper Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (description) cont.
CH, seller, sued AP, buyer, for price. AP, in cross action, sued CH - breach of contract alleging King Size did not correspond with description; not reasonably fit for purpose; and not of merchantable quality. In X action, CH joined N. CH admitted that sales of King Size were sales by description. Breach of implied condition that the goods supplied would correspond with description? The Court of Appeal had decided the goods complied with the description. HofL analysed: Did the presence of DNMA really affect quality or did it make a difference in kind? If the former, then in accordance with description. The contract said: Norwegian herring meal fair average quality of the season, expected to analyze not less than 70% protein, not more than 12 % fat and not more than 4% salt. HofL said: What was sold was Norwegian herring meal, despite the DNMA problem and it matched that description.
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Ashington Piggeries Ltd v Christoper Hill Ltd; Christopher Hill Ltd v Nirdsirdmel (fit for purpose) AP had made known to CH the particular purpose for the King Size, but had CH made that purpose known to N? Did the buyers rely on sellers skill & judgement? They made known they were compounding it for foodstuffs and it was common food for mink; but they did not explicitly state that. The majority decision-purpose made known. In dissent, Lord Diplock -purpose not specific enough as it could have been any one of a range of purposes.
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Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd (1991) ATPR 41-152 Mr. and Mrs. Rasell ordered carpet for their home from a carpet manufacturer. They specified that the carpet was to be a particular colour to match the interior dcor of the house and the internal walls which were exposed brick. The carpet was supplied and there was no complaint as to its quality as carpet, but the colour of the carpet was different in patches and different from the colour specified. This was due to "pile reversal" or "watermarking"; a result of the manufacturing process. Did the customer have to accept the carpet? It was held that the carpet was not reasonably fit for the purpose of blending in with or matching the existing dcor; a particular purpose made known at the time of purchase. a breach of s. 71 (2) TPA. Further, since it was also not fit for one of the usual purposes for which carpet is purchased (matching existing dcor) it was not of merchantable quality. Note also that it was new, high quality and expensive carpet.
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IMPLIED TERMS
- MERCHANTABLE QUALITY CASE
DAVID JONES V. WILLIS

QUALITY

NOTE
NOT FIT FOR PURPOSE OF WALKING EITHER

DESCRIPTION WALKING SHOES & RELIED ON SKILL AND JUDGMENT DESPITE NOT MANUFACTURERS BROWN AND SON DIFFERENT USE V. CRAIKS ASSUMPTIONS. CLOTH FOR UNDISCLOSED PURPOSE OF DRESSES V.INDUSTRIAL. DANIELS V. WHITE BOTTLE OF R AND TARBARD WHITES LEMONADE SALE BY DESCRIPTION

THROWAWAY PRICE AN INDICATION GOODS NOT MERCHANTABLE QUALITY NO RELIANCE ON SKILL AND JUDGMENT SO (2) ONLY
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IMPLIED TERMS
- MERCHANTABLE QUALITY
CASE
WILSON V. RICKETT COCKERELL

QUALITY
A TON OF COALITE SHOULD NOT EXPLODE. QUITE CLEARLY CONSIGNMENT NOT MERCHANTABLE. RABBIT CARCASSES SHOULD NOT ARRIVE PUTREFIED. VEGETABLE GLUE SHOULD NOT BE DEFECTIVE. WERE THEY EXAMINED?

NOTE
ANOTHER EXAMPLE WHERE FITNESS FOR PURPOSE WOULD HAVE FAILED

BEER V. WALKER

THORNETT & FEHR V. BEERS AND SON

A PERSON SELLING HUMAN FOOD WARRANTS FOOD IS GOOD ON ARRIVAL. SAW BARRELS, DID NOT EXAMINE BECAUSE OF TIME. DEFECT WOULD HAVE BEEN IMMEDIATELY APPARENT.
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W.M.Johnson P/L v. Maxwelton (Oaklands) P/L CASCNSW CA 40136/99 23/10/2000 Maxwelton farmed Tara, running cattle, sheep and fat lambs and growing cereal. Dixon (Manager) decided to acquire a hay baler. Hay is mown and raked into windrows. Then it is picked up by the baler, compressed into bales, and tied with twinelast is knotting system. He bought a used Heston 4800 baler "as is" for $35,000. Saw 3 faults. Seller reduced price by $1,000.Seller indicated that the baler was a good and reliable baler and had been in operational use in the previous season. Dixon picked it up, cleaned off chaff, changed the oil in the gear boxes greased the machine, adjusted the chains according to the operators manual, replaced a bolt and went to a baling school. Knotting system did not function. After attempts at repairs, abandoned use of it. s. 71(1) TPA "merchantability" Consumer for purposes of ActBaler supplied in the course of a business. Not possible to see problem when not operating and so inspection could not reveal. s. 66(2) goods are of merchantable quality if they are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price and all the other relevant circumstances. Calculation of price did not reflect a known inoperable essential component""as Is" could not of itself exclude implied condition still less "as per inspection"in this case only covered the defects leading to the $1,000 reduction.
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DRUMMOND AND SONS V. V AN INGEN AND CO (1887) 12 App Cases 284

1883 Van Ingen bought cloth described as worsted coatings and sold it to tailors who made coats. 1884 Van Ingen wanted more for same purpose. Shown samples, bought in accordance with samples. Cloth delivered conformed to samples BUT No good for coats Lord Herschell "When a purchaser states generally the nature of the article he requires, and asks the manufacturer to supply specimens of the mode in which he proposes to carry out the order, he trusts to the skill of the manufacturer just as much as if he asked for no such specimens. And I think he has a right to rely, on the samples supplied representing a manufactured article which will be fit for the purposes for which such an article is ordinarily used, just as much as he has a right to rely, on manufactured goods supplied on an order without samples complying with such a warranty. Implied warranty will be excluded if due diligence would have disclosed defect. What amounts to due diligence depends on circumstances. Nothing here which could reasonably lead them to anticipate problem.
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TRADE PRACTICES ACT 1974 - SECT 74 Warranties in relation to the supply of services
(1) In every contract for the supply by a corporation in the course of a business of
services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connection with those services will be reasonably fit for the purpose for which they are supplied. (2) Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result that he or she desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connection with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation's skill or judgment. (3) A reference in this section to services does not include a reference to services that are, or are to be, provided, granted or conferred under: (a) a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored; or (b) a contract of insurance.
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Problems with Services - SMH 06/03/03 Big Pond Ripples with Angry Users by Sue Lowe
Telstra has spent almost $2m compensating customers of its Internet cable service after widespread collapses in January and February.Telstra yesterday acknowledged repeated breakdowns of its high-speed cable network and offered customers a regate of 25% on their typical $60 to $90 monthly bills. Telstras internet arm, Big Pond, is estimated to have between 70,000 and 80,000 cable internet customers.. After a threatened class action lawsuit by customers of its broadband internet network ADSL in 2001 Telstra introduced a service guarantee for ADSL but it was not extended to the cable network. Under the ADSL guarantee customers are given a 10% rebate for every 7 hours and 24 minutes their service is unavailable.
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Sale of Goods (Vienna Convention) Act 1986 Article 35

The seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller's skill and judgement; (c) possess the qualities of goods which the seller has held out to the buyer as a sample or model;(d) are contained or packaged in the manner usual for such goods or, where there is no such manner, in a manner adequate to preserve and protect the goods. The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for any lack of conformity of the goods if at the time of the conclusion of the contract the buyer knew or could not have been unaware of such lack of conformity.
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Incoterms 2000
A collection of essential trade terms compiled by the International Chamber of Commerce. If used in a contract, they have a uniform interpretation. There are 13 terms. In CT, knowledge of 3 only is required. EXW-ex works, FOB-free on board and CIFcost, insurance, freight.
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C terms-risk stops at sellers port

D terms-seller is responsible for delivery and so may be liable for breach of contract if goods lost or damaged on the way

Sellers factory

Sellers port

Buyers port

Buyers place of business

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EXW-Ex Works
Goods are delivered at the sellers premisesusually, factory, warehouse or place of business. Risk passes when goods are placed at buyers disposal as agreed. Seller must give adequate notice for delivery and mark and package goods appropriately at their own expense in conformity with the contract

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FOB-Free on Board
One of the most common terms used. The seller is free from responsibilities and risks once goods have passed over the rail of a named ship at a named port. Note that with container ships, sometimes containers do not pass rail, and so another term (FCA-free carrier) may be more appropriate. Lower than CIF price because price does not include insurance or freight.
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CIF-Cost,insurance,freight
Seller is responsible for costs, insurance and freight for transporting goods to agreed destination, but risks and additional costs incurred after goods have passed ships rail are borne by buyer. Seller must provide goods and documents, obtain export licence and complete formalities, make transport contract and arrangements, and insurance.
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John is a farmer and he needs to place a 1,000kg piece of equipment in his barn. The equipment must be lifted thirty feet into a hayloft. He goes to Mitre 10 hardware and tells them that he needs some heavy-duty rope to use on his farm. They recommend a 2cm thick nylon rope and John purchases 100 m of it. John ties the rope around the piece of equipment, puts it through a pulley, and with the aid of a tractor lifts the equipment off the ground. Suddenly the rope breaks. In the crash to the ground, the equipment is severely damaged. John wants to take action against Mitre 10 because the rope was not fit to do the job. Advise him.
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