Week 8 -13 Sale of Goods

8/3/2019 Week 8 -13 Sale of Goods

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Susan Hedge LWB 332 Sale of Goods

Sale of Goods

Sale of Goods.........................................................................................................................................11. Application of Legislation..................................................................................................................2

1.1 Application of the Sale of Goods Act 1896 (Qld).....................................................................21.2 Application of the Trade Practices Act 1974 (Cth)...................................................................7

2. Implied terms....................................................................................................................................112.1 Implied undertaking as to title and quiet possesion.................................................................112.2 Correspondence with description............................................................................................142.3 Fitness for purpose..................................................................................................................172.4 Merchantable quality..............................................................................................................212.5 Sale by sample........................................................................................................................23

3. Remedies for the Buyer....................................................................................................................243.1 Remedies for a breach of condition implied by the SGA .......................................................243.2 Remedies for a breach of warranty implied by the SGA ........................................................263.3 Remedies for a breach of a term implied by the TPA.............................................................27

4. Actions Against Manufacturers/Importers of Goods........................................................................284.1 Application of Part V - definitions..........................................................................................294.2 Substantive sections of Part V................................................................................................294.3 Excluding the causes of action................................................................................................35

5. Persons Injured by Defective Goods.................................................................................................355.1 Application of Part VA definitions......................................................................................355.2 Substantive sections................................................................................................................365.3 Defences.................................................................................................................................365.4 Remedies................................................................................................................................37

6. Transfer of Property and Risk...........................................................................................................386.1 General rules...........................................................................................................................38

6.2 Where intention is expressed in the contract/circumstances...................................................396.3 Where no intention appears....................................................................................................406.4 Risk.........................................................................................................................................45

7. Transfer of Title by Non-Owner.......................................................................................................477.1 Exceptions to nemo dat rule....................................................................................................47

8. Performance of the Contract.............................................................................................................548.1 General Rules of Delivery .....................................................................................................548.2 Delivery of wrong quantity or mixed quantity .......................................................................558.3 Installment Deliveries ............................................................................................................558.4 Special Rules of Delivery Relating to Carriers ......................................................................56

9. Remedies for the Seller ....................................................................................................................579.1 Unpaid seller against the buyer ..............................................................................................57

9.2 Unpaid seller against the goods..............................................................................................5810. Remedies of the buyer....................................................................................................................62

10.1 Damages for non-delivery s52..............................................................................................6210.3 Repudiation of contract see discussion above s33 (does not only apply to installmentcontract may apply to lump sum contracts)..................................................................................6210.4 Damages for breach of warranty see above........................................................................6210.5 Right to specific performance s53......................................................................................62

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1. Application of Legislation Domestic Sales (ie all intra-state sales, where Qld is the proper law) = Sale of Goods Act 1896

(Qld) or SGA International Sales = Sale of Goods (Vienna Convention) Act 1896(Qld) or VSC

Note sale of goods transactions may trigger consumer protection provisions under the TradePractices Act 1974 (Cth) or TPA.

Note if both the SGA and the TPA apply the TPA will prevail because of s 109 of the CthConstitution: When a law of a State is inconsistent with a law of the Commonwealth, the latter

shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

1.1 Application of the Sale of Goods Act 1896(Qld)

SoGA essentially a codification of the common law Isnt a perfect codification because:

o The preamble to the Act provides it is an Act to codify and amend the law relating to the

sale of goods. The use of the word amend suggests the Act isnt a pure codification.o Section 61(2) provides that the rules of the common law apply to contracts for the sale of

goods except where there is an inconsistency between those rules and the Sale of GoodsAct. The fact that the Act anticipates inconsistency may suggest that the Act is not acomplete codification.

Rules of interpretation are those of a Code only resort to the common law if the words areambiguous or the statute is silent:Bank of England v Vagliano Bros [1891] AC 107; Ganers

Motor Centre v Natwest(1987) 163 CLR 236, 243

For the SoGA to apply, there must be (s4(1) SoGA):(a) a contract of sale(b) of goods

(c) by which property passes(d) for money consideration(e) where the SoGA is not excluded by agreement

(a) a contract of sale

can be wrriten or oral includes an agreement to sell: s3

o if goods are unascertained, its an agreement to sell, not a sale per se: s4(3) SoGA and Jansz v

GMB Imports Pty Ltd[1979] VR 581o becomes a sale when the property is to be transferred: s4(4) SoGA andJansz v GMB Imports

Pty Ltd[1979] VR 581

s 4 Sale and agreement to sell

(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer theproperty in goods to the buyer for a money consideration, called theprice.(1A) There may be a contract of sale between one part owner and another.(2) A contract of sale may be absolute or conditional.(3) When under a contract of sale the property in the goods is transferred from the seller to the buyerthe contract is called a sale; but when the transfer of the property in the goods is to take place at afuture time or subject to some condition thereafter to be fulfilled the contract is called an agreement tosell.(4) An agreement to sell becomes a sale when the time has elapsed or the conditions have been fulfilledsubject to which the property in the goods is to be transferred.

Must be a contract of sale as opposed to other transactions, ie not:

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o A barter, exchange or trade in where no reference to to money consideation, however if

the parties value the respective goods in money terms and then transfer equally valueditems, may be a sale: Aldridge v Johnson

o A hire purchase hirer does not have to purchase, merely has the option to purchase (but

if simply a sale conditional on payment, is a sale)o Floor plans - an agreement whereby a trader is authorised to buy goods on behalf of & as

agent for a financier, who allows him to retain the goods on his premises for the purposesof display & sale:Motor Credits (Hire Finance) v Pacific Motor Auctions

o Bailment where the ownership is not expected to be transferred

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(b) of goods

Goods

goods = all chattels personal other than things in action and money and also includesemblements and things attached to or forming part of the land which are agreed can be severed

before sale or under the contract of sale: s 3(1).o chattels = physical objects (cattle, furniture, jewels, garments, anything that could be

moved from place to place) and intangible choses such as debts, rights of action, patentsand copyrights.

o Term emblements means crops of the soil which are annually produced by agricultural

labour. Does not include things growing naturally on the land: Scully v South at 1189-90.(would include crops of grain or potatoes but not fruit growing on trees which althoughcultivated yield an annual crop largely because of nature not mankind).

o attached to or forming part of the land which are agreed can be severed means contract

for the sale of timber growing on land would be a sale of goods, provided the timber wasagreed to be felled under the contract of sale:Egmont Box Co Ltd v Registrar-General of

Lands. Such as a contract to sever a known and defined mound of rock, mineral etc is a

sale of goods BUT a contract to locate and extract sand, gravel or minerals for anagreed price per ton from the soil is not (called profit a prendre):Mills v Stokman;

Amco Enterprises Pty Ltd v Wade [1968] Qd R 445

Question is whether the mound has become so indistinguishable from the landthat it is part of the land, or whether it is still a chattel

Does not include shares, negotiable instruments and debts?

NOT a supply of services Not a sale of goods if the contract is for work and labour and the supply of materials Question is whether the contract when carried out would result in sale of a chattel & if so, the

contract is one for the sale of goods:Deta Nominees Pty v Viscount Plastic Productso Artist commissioned to paint portrait of lady:Robinson v Graves

o an agreement for supply & installation of a lift into a building & for the supply &

fitting of seats specially designed to fit a particular lecture hall:Aristoc Industries v RA Wenham

not a sale of goods if the contract is for supply and installation or work done and materialsupplied: BrooksRobinson Pty Ltd v Rothfield: 1951 (contract to build and install built in cocktailcabinet)

Exception: where property passes at the time the contract is made and the goods are later installed(Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd

o The test is intention of the parties: Symes v Laurie: contract for sale and removal of a

house held to be contract for S of G. House existed at the time of contract and partieshad contractually agreed that it would be severed from the land and put on stumps on

buyers land. Held contract for the sale of goods

Test for distinguishing goods from servicesTest 1 the substance test

To be applied first by the court If the substance of the contract is the production of something to be sold and the exercise of

skill, though high, is primarily for the purpose of producing the goods, then the contract is onefor the sale of goods.Robinson v Graves

Robinson v Graves painting of portrait was not the sale of goods Perlmutter v Beth David Hospital123 NE 2d 792 (1954) NY Crt of Appeal

o Blood transfusion Blood contained virus causing jaundice of Po Hospital not liable in negligence, as no test existed to identify the virus

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o Hospital itemized blood on bill as an expense P sued for breach of implied term thatblood be of merchantable quality

o HELD that the supply of blood was the supply of services because it was incidental tothe supply of hospital services

o Followed in Australia inE v Australian Red Cross Supply of meal in a restaurant was a sale of goods because the element of service was

incidental to the supply of the meal:Lockett v A & M Charles Ltd1938

Test 2 the alternative test if a contract results in the sale of a chattel it should be constructed as a sale of goods. Where the end result is the sale of a chattel, then no matter how great the skill involved, it is

a sale of goods but it was otherwise if work and labour resulted in nothing that became thesubject of a sale (e.g. attorney employed to prepare a deed):Lee v Griffin 1861

Lee v Griffin 1861 - sale of dentures by a dentist held to be a sale of goods

Test adopted by Fullager J in Delta Nominees Pty Ltd v Plastic Products Pty Ltdwhere K fordesign and manufacture a set of dies for plastic furniture drawers (sale of goods).

Toby Products v Computer Bar Sales [1983] sale of hardware + software was sale of goodsbecause software was mass produced off-the-shelf type of computer programs, price wasreflection of hardware supplied and therefore a chattel.o May have been different if designing software for particular use and then selling to customer

Categories of goodsSpecific goods

Goods identified and agreed upon at the time a contract of sale is made: s 3. Example sale of a particular car. Goods appropriated to contract after agreement entered into are ascertained not specific.

Unless parties agree otherwise, property is to pass when the contract for sale in respect of

those goods is made: s 21 rule 1 SGA. If the goods arent delivered the buyer may obtain an order for specific performance of the

contract, provided damages are an inadequate remedy in the circumstances: s 52 SGA.

Unascertained goods No definition in the Act. Are goods that arent identified or agreed upon at the time of making the contract. Example generic goods which are sold on terms so seller can obtain them from any

source/stock opposed to particular stock:Re Goldcorp Exchange Ltd (in rec) [1994] 2 All ER806, 814.

Example sold ex-bulk, (quasi-specific) ie. sold a portion of a fixed and predetermined sourcebut from which seller may make their own choice (unless contract requires it to be made in

some other way) such as I sell you 60 of the sheep now on my farm. Cannot transfer property in unascertained goods: s19 SoGA. Buyer cannot acquire title until it

is known to which goods the title relates:Re Goldcorp Exchange Ltd (in rec) at 814.

Ascertained goods

No definition in the Act. Probably means identified in accordance with the agreement after the contract is made: Atkin

LJ inRe Waitat 630. Such as 100 tonnes of 200 tonnes of wheat in sellers silo loaded to buyers vehicle after time

contract was made, so that they are ascertained after formation of contract. If there is to be no delivery, merely segregation at sellers hands, segregation from the

companys trading assets (physically or by giving instructions to a bonded warehouse keeped)causes the goods to be ascertained:

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o Stapylton Fletcher Ltd (in admin rec)- ascertainment by the sellers of wine separating

wine purchased by customers in a separate part of the warehouse and the carefulmaintenance of records within the company.

o If the goods arent delivered the buyer may obtain an order for specific performance

of the contract, provided damages are an inadequate remedy in the circumstances: s 52SGA.

Future goods Goods to be manufactured or acquired by seller after making the contract of sale: s 3; s 4(3); s

8(1); s 8(2)

Where by contract of sale, the seller purports to effect a present sale of future goods, thecontract operates as an agreement to sell the goods: s 8(3).

Because under s 4(3) if the seller does not have property in goods the seller in unable to passproperty to the buyer and hence conclude a sale.

Property is transferred in accordance with the intention of the parties after the goods havebecome ascertained:Akron Tyre Co v Kittson at 484-5.

Re Wait[1927] Ch 606 Bought 1000 tonnes of wheat to be loaded from Oregon and shipped to Arrowmouth. During transit sold 500 tonnes of the wheat to a sub-purchaser.

Sub-purchaser paid Wait even though wheat had not yet been appropriated (delivered). The corn dealer then went bankrupt (Wait).

The sub-purchaser then sought an order for specific performance against the trustee inbankruptcy to force them to deliver the 500 tonnes of wheat. There were other orders sought(our purposes thats the main one). Under equivalent of SGA s 53.

Whether they could maintain an action for specific performance depended on whether goodswere specific or ascertained.

HELD that they were unascertained goods because there had been no ascertainment oridentification of the 500 tonnes out of the cargo in bulk on board the ship.

Had to be identifiable out of the greater cargo to be specific or ascertained,o must be a contract to deliver a particular chattel to be entitled to specific performance

of the contracto may have had a right to damages but didnt have the right to the property.

(c) by which property passes

property means both legal and equitable title, not some specific or limited interest such as thatof a bailee or a security interest: s3(1) SoGA

see ss 19, 20, 21, 22 SoGA for the rules regarding when property passes important that property is intended to pass at some time, ie not a bailment or other relationship

where property is not expected to pass at the time of the transaction

(d) for money consideration

Goods must be transferred for a money consideration (price). Price can be determined inaccordance with methods in s 11

11 Ascertainment of price(1) The price in a contract of sale may be fixed by the contract, or may beleft to be fixed in manner thereby agreed, or may be determined by thecourse of dealing between the parties.(2) When the price is not determined in accordance with subsection (1) thebuyer must pay a reasonable price.(3) What is a reasonable price is a question of fact dependent on thecircumstances of each particular case.

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In sale of goodwill and stock/assets of a business, description of price as at valuation washeld to be sufficient fixed by the contract under s11(1): Wenning v Robinson (1964) NSW

Circumstances in s11(3) - by reference to the current market price of the goods at the time andplace of delivery, even though another amount based on, eg. cost of production may also be ina sense reasonable.

The application of a reasonable price where the parties have not otherwise agreed inaccordance with s 11(1) is an exception to the principle which requires there to be certainty ofterms between the contracting parties:Foley v Classique Coaches Ltd

o Davey v Paine Bros (Motors) Ltd(1954) NSWLR 1122 - 2 cars valued & found to be

equal in price. Agreed to exchange cars. Held to be a sale of goods whether a barter or pure exchange of goods can be made out depends if the parties agreed on a

money price, valued respective goods, and if necessary made a cash adjustment one way:Aldridge v Johnson

If a sale of the principal goods (the new car) together with a subsidiary agreement that thebuyer delivers to the seller the vehicle to be traded in, an adjustment will be made to the price,SGA doesnt apply to transaction involving traded car because the consideration paid by sellerisnt money but a partial release of debt: Warmings Used Cars Ltd v Tucker

(e) where the SoGA is not excluded

SoGA able to be excluded by express agreement of the parties

56 Exclusion of implied terms and conditionsWhen any right, duty, or liability would arise under a contract of sale byimplication of law, it may be negatived or varied by express agreement orby the course of dealing between the parties, or by usage, if the usage issuch as to bind both parties to the contract.

1.2 Application of the Trade Practices Act 1974(Cth)

TPA applies generally to corporations engaged in the supply of goods or services to aconsumer

(a) Supply

The supply of goods is a wider term than sale of goods, as used in the SGA. Supply is defined to include not only contracts of sale but also the lease or hire of goods: s

4(1) TPA.

s 4(1): supply, when used as a verb, includes:

(a) in relation to goodssupply (including re-supply) by way of sale, exchange, lease,hire or hire-purchase; and

(b) in relation to servicesprovide, grant or confer;

and, when used as a noun, has a corresponding meaning, and suppliedand supplierhave corresponding meanings.

(b) Goods or Services

Goods Defined to include ships, aircraft & other vehicles; animals including fish; minerals, trees &

crops, whether on, under or attached to the land or not; and gas and electricity: s 4 TPA.

s 4(1):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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Confusion over whether computer software is goods: ASX Operations Pty Ltd v Pont DataLtd(1990) 27 FCR 460

Also includes services

s 4(1): services includes any rights (including rights in relation to, and interests in, realor 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 theforegoing, includes the rights, benefits, privileges or facilities that are, or are to be,

provided, granted or conferred under:

(a) a contract for or in relation to:

(i) the performance of work (including work of a professional nature),whether with or without the supply of goods;

(ii) the provision of, or the use or enjoyment of facilities for, amusement,entertainment, recreation or instruction; or

(iii)the conferring of rights, benefits or privileges for which remunerationis payable in the form of a royalty, tribute, levy or similar exaction;

(b) a contract of insurance;

(c) a contract between a banker and a customer of the banker entered into in thecourse of the carrying on by the banker of the business of banking; or

(d) 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 performanceof work under a contract of service.

(c) consumer

There needs to be a supply of goods to a consumer. Consumer is defined in s 4B.

Essentially a consumer is a person/corporation where either the price of goods does not exceed

$40,000 OR the goods are of a kind ordinarily acquired for personal, domestic or householduse or consumption, regardless of price.

Not a consumer if the goods purchased for resale, or to be used in the process of productionand manufacture.

4B Consumers

(1) For the purposes of this Act, unless the contrary intention appears:

(a) a person shall be taken to have acquired particular goods as a consumer if, and only if:

(i) the price of the goods did not exceed the prescribed amount; or

(ii) where that price exceeded the prescribed amountthe goods were of a kind ordinarilyacquired for personal, domestic or household use or consumption or the goodsconsisted of a commercial road vehicle;

and the person did not acquire the goods, or hold himself or herself out as acquiring thegoods, for the purpose ofre-supply or for the purpose of using them up or transforming them, in trade or commerce,in the course of a process of production or manufacture or of repairing or treating othergoods or fixtures on land; and

(b) a person shall be taken to have acquired particular services as a consumer if, and only if:

(i) the price of the services did not exceed the prescribed amount; or

(ii) where that price exceeded the prescribed amountthe services were of a kindordinarily acquired for personal, domestic or household use or consumption.

(2) For the purposes of subsection (1):

(a) the prescribed amount is $40,000 or, if a greater amount is prescribed for the purposes of

this paragraph, that greater amount;(b) subject to paragraph (c), the price of goods or services purchased by a person shall be taken

to have been the amount paid or payable by the person for the goods or services;

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(c) where a person purchased goods or services together with other property or services, or withboth other property and services, and a specified price was not allocated to the goods orservices in the contract under which they were purchased, the price of the goods or servicesshall be taken to have been:

(i) the price at which, at the time of the acquisition, the person could have purchased fromthe supplier the goods or services without the other property or services;

(ii) if, at the time of the acquisition, the goods or services were not available for purchasefrom the supplier except together with the other property or services but, at that time,goods or services of the kind acquired were available for purchase from anothersupplier without other property or servicesthe lowest price at which the personcould, at that time, reasonably have purchased goods or services of that kind fromanother supplier; or

(iii) if, at the time of the acquisition, goods or services of the kind acquired were notavailable for purchase from any supplier except together with other property orservicesthe value of the goods or services at that time;

(d) where a person acquired goods or services otherwise than by way of purchase, the price ofthe goods or services shall be taken to have been:

(i) the price at which, at the time of the acquisition, the person could have purchased the

goods or services from the supplier;(ii) if, at the time of the acquisition, the goods or services were not available for purchase

from the supplier or were so available only together with other property or servicesbut, at that time, goods or services of the kind acquired were available for purchasefrom another supplierthe lowest price at which the person could, at that time,reasonably have purchased goods or services of that kind from another supplier; or

(iii) if goods or services of the kind acquired were not available, at the time of theacquisition, for purchase from any supplier or were not so available except togetherwith other property or servicesthe value of the goods or services at that time; and

(e) without limiting by implication the meaning of the expression services in subsection 4(1),the obtaining of credit by a person in connection with the acquisition of goods or services byhim or her shall be deemed to be the acquisition by him or her of a service and any amount

by which the amount paid or payable by him or her for the goods or services is increased byreason of his or her so obtaining credit shall be deemed to be paid or payable by him or herfor that service.

(3) Where it is alleged in any proceeding under this Act or in any other proceeding in respect of amatter arising under this Act that a person was a consumer in relation to particular goods orservices, it shall be presumed, unless the contrary is established, that the person was a consumer inrelation to those goods or services.

(4) In this section, commercial road vehicle means a vehicle or trailer acquired for use principally inthe transport of goods on public roads.

A person for the purposes of s 4B(1) can also be a corporation: Acts Interpretation Act 1901(Cth) para 22(1)(a); Seely International Pty Ltd v Cintro Pty Ltd.

A buyer may be a consumer even where the goods purchased were second hand:Atkinson vHastings Deering (Qld) Ptd Ltd(1985) ATPR 40-625

Similar definition of consumer applies in Part v, Div 2A which permit a consumer a directright of action against a manufacturer of goods: s 74A(2)(a). BUT there must be evidenceadmissible to prove either that a particular kind of goods is, or is not, ordinarily acquired for

personal, domestic or household use or consumption and, if the matter depends upon onus ofproof, the onus is on the party who claims an entitlement to compensation: Crago v MultiquipPty Ltd.

ordinarily acquired for personal, domestic or household use or consumption

Personal, domestic or household use is a Q of fact: Carpet Call Pty Ltd v Chan Focus is on the ordinary use, not the actual intended use

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In Crago v Multiquip Pty LtdLehane J listed the following things as NOT ordinarily acquiredfor personal, domestic or household use:

Airseeder:Jillawarra Grazing Co v John Shearer Ltd.

Large tractor:Atkinson v Hasting Deering (Qld) Pty Ltd.

Reduction photocopier:Four Square Stores (Qld) Ltd v ABE Copiers Pty Ltd.

Prime mover:Minchillo v Ford Motor Company of Australia. Goods may be of a kind ordinarily acquired for personal, domestic or household use or

consumtption even if in many or majority of cases theyre acquired for a business use: Cragov Multiquip Pty Ltdper Lehane J at 40,798.

The fact that goods are ordinarily acquired for use on a farm does not necessarily mean thatthey cannot ordinarily be acquired for domestic purposes.

Crago v Multiquip Pty Ltd(1998) ATPR 41-620 Purchase of ostrich egg incubator Held that not ordinarily acquired for personal, domestic or household use or consumption Not ordinary goods such as a TV, washing machine etc

Only used by ostrich farmers etc in the course of their business

Hence, not consumer

Carpet Call v Chan (1987) ATPR 46-025

Purchased carpet for a night club Carpet was rated heavy duty domestic and worth more than $40,000 Simply because purchased for use in night club did not make the goods lose their character as

something ordinarily acquired for personal, domestic or household use

Two issues re carpet colour to fit with dcor and staining

Extended operation under ss5, 6, 75B

Extensions under s5:o To actions of body corporates incorporated in Australia outside Australia: s5(1)

o Extension of ss47, 48 to the conduct of bodies corporate outside Australia in relation

to the supply of goods or services to persons within Australia Part V, Div 2 can broadly apply to:

o Corporations engaged in trade or commerce in the supply of goods or services;

o Any entity, including an individual engaged in interstate trade and commerce: s6

o Any entity, including an individual, engaged in conduct, to the extent that conduct

involves the use of postal, telegraphic or telephonic services or takes place in a radioor television broadcast: s6

o Conduct engaged in outside Australia by persons ordinarily resident in Australia, by

Australian citizens or by companies incorporated in Australia or carrying on businessin Australia:s6

s75B extends operation of the act to person who aid, induce or conspire in a contravention ofPart V

o Meant to catch employees, salespersons, ISPs etc

The conditions implied by ss 69-72 of Part V, Div 2 are expressed to apply to contracts forthe supply of goods or services by a corporation to a consumer.

Excluding the TPA

Effect cannot be excluded for goods of a kind ordinarily acquired for personal, domestic orhousehold use or consumption: s 68.

If goods are outside above category then there is some scope for the liability of sellers to belimited for a breach of the implied conditions: s 68A.

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2. Implied terms

SGA TPA, Part V Div 2 TPA, Part V Div 2A

Title and quietpossession

s 15 s 69(1)

Correspondence withdescription

s 16 s 70 s 74C

Fitness for purpose s 17(a) and (b) s 71(2) s 74B

Merchantable quality. s 17(c) and (d) s 71(1)(s 66(2))

s 74D(s 74D(3))

Correspondence withsample

s 18 s 72 s 74E

Cannot exclude: s 68 Cannot exclude: s 74K

2.1 Implied undertaking as to title and quiet possesion

s 15 Implied undertaking as to title etc.In a contract of sale, unless the circumstances of the contract are such as to show adifferent intention, there is

(a) an implied condition on the part of the seller that in the case of a sale the sellerhas a right to sell the goods, and that in the case of an agreement to sell the sellerwill have a right to sell the goods at the time when the property is to pass;

(b) an implied warranty that the buyer shall have and enjoy quiet possession of thegoods;

(c) an implied warranty that the goods shall be free from any charge or encumbrancein favour of any third party, not declared or known to the buyer before or at thetime when the contract is made.

Implied condition that seller has right to sell: s15(a) SoGA

Most common illustration is where the seller has no title to the goods, eg:Rowland v Divall.

The liability imposed by the condition is strict and does not depend on the knowledge of theseller.

In some cases the seller may sell goods before they have obtained title if this happens theymay perfect their title and avoid liability to the buyer under this provision if the sellers titleis perfected before the buyer rescinds the contract:Patten v Thomas Motors Pty Ltd

Rowland v Divall[1923] 2 KB 500o plf purchased care from defendant, took possession and sold to a third party

o def did not have titile to pass

o third party surrended the car to the true ownero plf refunded purchase price to third party and brought action against def to recover

priceo held that s15 applied, there was a total failure of consideration b/c the seller did not

have title Niblett v Confectioners Materials Co Ltd,

o seller had title to the goods but wasnt in a position to sell them.

o The goods carried the trademark of a 3rd party and were seized by authorities.

o Plainiffs were able to secure their release by removing and destroying the labels.

o HELD: seller in breach of term and plaintiffs entitled to damages.

Egekvist Bakeries v Tizel & Blinick,

o

contract of sale was for berries, which were impounded at the time of sale.o HELD: breach of the implied term under s15 b/c seller did not have good title to sell

the goods

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Butterworth v Kingsway Motors,

o a hirer under a hire-purchase agreement sold her car before she had paid all the

installments and exercised the right to purchase.o There were several other buyer sellers etc before one (Butterworth) became aware that

the hire-purchase company owned the car.o He wrote to his immediate seller rescinding the contract of sale.

o A week or so later the hirer paid all moneys owning and so title acquired feed down

the line.o Each sued its immediate seller for damages.

Remedy

A breach of s 15(a) is a breach of a condition which gives rise to a right in the buyer to treatthe contract as repudiated and to claim damages for the breach of the condition. On the basisthat there was a total failure of consideration, the transfer of property in the goods beingfundamental to the contract:Rowland v Divall.

It is no bar to rescission of that contract that the goods cannot be returned to the seller or thatthe buyer has had a temporary use or enjoyment of them:Rowland v Divall. Ie. the impliedcondition is not converted to a warranty by the buyers actions.

s 14(3) which converts a condition into a warranty where the buyer has accepted the goods,was held to have no application to a breach of this particular condition:Rowland v Divallat507;Butterworth v Kingsway Motors at 1294.

Implied warranty that buyer shall have quiet possession: s 15(b)

Quiet possession includes, but extends beyond, freedom from physical interference with thegoods by the seller.

Infringement of the implied term where:o Goods are sold and delivered on credit, but still within the credit terms, are seized by

the seller:Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd(1968) 121 CLR 584

o Where patentee of the patent affecting the goods claimed infringement by the buyeragainst the patent:Microbeads A-G v Vinhurst Road Markings Ltd[1975] 1 WLR 218

o Where the buyer needed to remove labels on goods which infringed the copyright of a

3rd party:Niblett v Confectioners Materials Co Ltd.

Have and enjoyincludes the period after possession is passed to the seller, and before thepassing of property:Keetley v Quinton Pty Ltd.

Microbeads A-G v Vinhurst Road Markings Ltd[1975] 1 WLR 218o Buyer purchased road marking machines from Swiss sellers

o An English company has applied for the patent of the machine, and received the

letters patent after the sale

o English coy brought an action against the buyer for breach of patent and buyer suedseller for breach of implied warranty of quiet possession

o HELD there was a breach of warranty of quiet possession even though the defect

(patent rights) occurred after the sale

Remedy The buyer is not entitled to treat the contract as repudiated where there is a breach of the

warranty, being limited to a claim for damages

Implied warranty that the goods are free from encumbrance: s 15 (c)

Implied warranty that the goods will be free from any charge or encumbrance in favour of any3rd party not declared or known to the buyer before or at the time when the contract is made.

Steinke v Edwards (1935) 8 ALJ 368

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o Plaintiff bought car from def and resold

o Previous owner of car had tax owing

o Car seized under state legislation to pay out tax debts

o charge or encumbrance was defined to include tax

o HELD breach of implied warranty that goods are free from encumberance

Remedy is damages suggested that it should be limited to the amount of expenditure required to

discharge the encumbrance or charge + relevant legal costs

Trade Practices Act 1974 (Cth)

implied condition as to title: s69(1)(a)

implied warranty as to quiet possession: s69(1)(b) implied warranty that the goods are free from encumbrances: s69(1)(c)

s 69 Implied undertakings as to title, encumbrances and quiet possession

(1) In every contract for the supply of goods by a corporation to a consumer, other than acontract to which subsection (3) applies, there is:

(a) an implied condition that, in the case of a supply by way of sale, the supplier has aright to sell the goods, and, in the case of an agreement to sell or a hire-purchaseagreement, the supplier will have a right to sell the goods at the time when the

property is to pass;

(b) an implied warranty that the consumer will enjoy quiet possession of the goodsexcept so far as it may lawfully be disturbed by the supplier or by another personwho is entitled to the benefit of any charge or encumbrance disclosed or known tothe consumer before the contract is made; and

(c) in the case of a contract for the supply of goods under which the property is to pass

or may pass to the consumeran implied warranty that the goods are free, and willremain free until the time when the property passes, from any charge orencumbrance not disclosed or known to the consumer before the contract is made.

(2) A corporation is not, in relation to a contract for the supply of goods, in breach of theimplied warranty referred to in paragraph (1)(c) by reason only of the existence of afloating charge over assets of the corporation unless and until the charge becomes fixedand enforceable by the person to whom the charge is given.

(3) In a contract for the supply of goods by a corporation to a consumer in the case of whichthere appears from the contract or is to be inferred from the circumstances of the contractan intention that the supplier should transfer only such title as he or she or a third personmay have, there is:

(a) an implied warranty that all charges or encumbrances known to the supplier and notknown to the consumer have been disclosed to the consumer before the contract ismade; and

(b) an implied warranty that:

(i) the supplier;

(ii) in a case where the parties to the contract intend that the supplier shouldtransfer only such title as a third person may havethat person; and

(iii) anyone claiming through or under the supplier or that third person otherwisethan under a charge or encumbrance disclosed or known to the consumer

before the contract is made;

will not disturb the consumers quiet possession of the goods.

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Unlike the SGA s 69 of the TPA cannot be excluded by agreement, not liability limited: ss 68,68A(1).

s 69(3) provides the only potential relief for a supplier. s 69 applies to the supply by way of sale, agreement to sell or hire-purchase of goods by a

corporation to a consumer. Auction sales are included.

There is no requirement, as exists in other terms implied under Div 2, that the goods must besupplied in the course of a business.

2.2 Correspondence with description

16 Sale by descriptionWhen there is a contract for the sale of goods by description there is an implied conditionthat the goods shall correspond with the description; and if the sale is by sample, as wellas by description, it is not sufficient that the bulk of the goods corresponds with thesample if the goods do not also correspond with the description.

Note no need to use this implied warranty if there is an express term of the contract that the goodscomply with a certain description To determine whether a representation inducing contract or a binding term of the contract

the question is of the intention of the parties. Did the parties intend for those words toconstitute part of the contract? Oscar Chess Ltd v Williams

Test is whether a reasonably intelligent bystander would think that a promise was intended.

1. A sale by description

Specific Goods bought by the buyer in reliance on the description. Although reliance isnt mentioned in s 16 it

is a necessary consequence of the requirement that the sale be by description.

It is possible to sell specific goods with no description article may be sold by its presenceand the buyer take the risk that the article is what they think it is.

BUT usually sold with some description such as a stone sold as a jewel not costume jewelleryand a thoroughbred sold as a thoroughbred not a work horse.

Sale in a self-service store will constitute a sale by description provided goods are described insome way on the outside of the packaging or by sign, notice or label

No distinction between self selection and a sale assistant handing over an article in response toa request: Great Atlantic and Pacific Tea Co v Walker(1937) 104 SW (2d) 627

Goods characteristics which would be apparent on reasonable examination are unlikely to beintended by the parties to form part of the description by which the goods were sold, even ifthose characteristics are mentioned in references in the contract to the goods that are itssubject matter: Gill & Duffus SA v Berger & Co Inc (No 2) Lord Diplock at 394

Smith Goldsborough Mort Ltd v McBride,

o bull was seen and selected but was sold as a breeding bull.

o Wasnt fertile sale was said to be a sale by description and the relevant description

in the catalogue was breeding bull.

Grant v Australian Knitting Mills,

o Buyer contracted dermatitis from woollen underwear

o Sued retailer on basis that it had breached the implied conditions as to merchantability

which also requires that there had been a sale by description.o Grant had self-selected the underwear from the shelf

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o Court held that there had been a sale by description, at least to the extent that the

description on the box delineates the good and describes the kind of clothing to bebought.

o In the High Court per Dixon J when the ground on which the goods are selected or

identified is then correspondence to a description and when therefore the buyerprimarily relies on their classification or possession of attributes. Notwithstanding thattheyre specific goods theyre still bought by description

Harlington & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd,

o Painting sold from one dealer to another

o Question for the court was whether the name on the painting Munter formed part of

the description of the painting in which the buyer bought in relianceo Seller made it clear to the buyer he was not an expert in Munters paintings and both

parties were very experiencedo Painting turned out to be a fake

o HELD that the buyer could not have reasonably relied on the name on the painting

Must look at the whole of the contract to determine which characteristics of

the thing are intended to be its description Parties did not have a common intention that the authenticity of the name

Munter was a term of the contract

Test is objective

Unascertained goods usually by description, otherwise nothing to determine the subject matter of the contract or the

obligations of the vendor

Future goods usually by description, but may not be fore example where they are seen and requested by the

buyer in the hands of a 3rd party and then later obtained by the seller from the 3 rd party for saleto the buyer

2. What is the content of the description?

Description means a statement of kind, class or species which the article belongs. Must be a statement as to the essential or specific nature of the thing sold NOT merely a

statement as to the quality, state or other attribute: Taylor v Combined Buyers Ltdat 639-40.o If contract to buy a cask of port wine but get beer - difference of kind so a breach.

BUT if contract to buy a cask of port wine in sound condition and get poor condition- not entitled to reject goods, conform to description only a difference of quality, stateor condition remedy under not merchantable.

o If contract to buy specific chairs described as set of antique mahogany chairs andreceive modern imitations. Can reject difference of kind not quality.

o If contract to buy a stud bull but on delivery cannot perform copulation breach of

description because part of the essential nature of a stud bull so differs in kind not justquality: Cotter v Luckie. BUT if contract for a pedigree Jersey bull on deliverysterile, not a breach of description within the strict meaning of pedigree: Dell vQuilty.

o If contract to buy a 14 horse power engine, but engine is less that than it may not

constitute a breach:Parson v Sexton.o If contract to buy specific stock of coal of Cumberland and small Welsh coal mixed

but get a mixture of inferior coal may only be a difference of quality not kind:Kirkpatrick v Gowan.

o InAshington Piggeries Ltd v Christopher Hill Ltd qualitative description of thegoods may form part of the description. Description was for a reaping machine as new

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the previous year and only used for 50 acres was a sale by description on the basis thatit should have identified a nearly new machine.

o Can reject a car if contract for a new one but receive a second hand one because

technology means it will be of a different kind not just quality.o Can reject a car when contract for a particular model but receive two half models

welded together:Beale v Taylor

Even though the model seems prima facie to regard quality, it had become soimportant to the parties to the transaction that it was considered to be theidentity of the goods

Words that describe the purpose for which goods are suitable will usually not form part of thedescription of the goods for the purpose of s 16, otherwise the implied condition as to fitnessfor purpose would be redundant

o Note, may be exceptions where general purpose of goods is an element of description

of the goods eg. oysters not fit for eating might not conform with their description asoysters

Contamination

Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty Ltd,o relevant goods described as PVC resin. Buyers said level of contamination was

higher than normally expected in market.o Held that no uniform understanding or expectation of tolerable level of contaminants

let alone at what level it couldnt be described as PVC.

Marimpex Mineralol v Louis Dreyfus et Cie Mineralol,

o goods sold as normal Russian gas oil

o Held that the goods didnt conform to the description because the level of

contamination was higher than that accepted in the trade as satisfying that description.

3. Do the goods correspond with their description?

Question of fact in the circumstances of the case: Ashington Piggeries Ltd v Christopher HillLtd.

Ashington Piggeries Ltd v Christopher Hill Ltd

CH sold animal foods, entered into contract to sell mink food to AP who ran a mink farm AP supplied a formula for CH to make up the food called King Size CH had no particular expertise with respect to mink

CH entered into K with Nordsildmel for them to supply Norwegian herring meal of 'fairaverage quality of the season' for the compound

The herring meal contained dimethylnitrosamine (DMNA) unbeknown to any of the parties The DMNA was highly toxic to mink and the mink died

The chemical reaction which produced the toxic substance in the course of manufacture wasunthought of to N and CH

Christopher Hill, the seller, sued Ashington Piggeries for the price of the goods. AshingtonPiggeries counter-claimed for damages for breach of contract alleging that the 'King Size' didnot correspond with its description, was not reasonably fit for the purpose, nor ormerchantable quality

HELD that there was no breach of the implied condition that the goods correspond with theirdescription

o There was a sale by description ie that the food would be made up according to the

formulao The herring meal was in the formula

o The presence of DMNA only went to the quality or fitness for purpose of the herring

meal and not to its description.

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Beale v Taylor

T advertised his car for sale as a Herald convertible, white, 1961 and the car was bought byB after examination.

Both parties believed the car was a 1961 model but B discovered soon after the sale that it wasmade up of two parts which had been welded together, one of which had been a 1961 model.

HELDo Although B had examined the car, he had relied on the description in the

advertisement as showing the kind of car he was buying.o The model of the car had become part of the way the car was identified.

o The sale was a sale by description and since the car didnt correspond to the

description, B was entitled to damages for breach of an implied condition

Trade Practices Act 1974 (Cth) s70

70 Supply by description

(1) Where there is a contract for the supply (otherwise than by way of sale by auction) by a

corporation in the course of a business of goods to a consumer by description, there is animplied condition that the goods will correspond with the description, and, if the supply isby reference to a sample as well as by description, it is not sufficient that the bulk of thegoods corresponds with the sample if the goods do not also correspond with thedescription.

(2) A supply of goods is not prevented from being a supply by description for the purposes ofsubsection (1) by reason only that, being exposed for sale or hire, they are selected by theconsumer.

TPA section is broader in application. Supply is broader than sale includes barters, leases, hire or hire-purchase. s 70(2) refers specifically to self-serve customer BUT since Grant v Australian Knitting

Mills Limited,perhaps unnecessary as self serve customers can be covered by s 16 SoGA Condition cannot be excluded by the parties: s 68. REMEDY: sue for damages for breach of contract (ie implied condition) not damages under s

82 TPA:Arturi v Zupps Motors Pty Ltd. Breach under s70 must be brought before state courts not federal unless other aspects of the

claim permit a claim under s 70 to be brought at the same time in a federal court.

2.3 Fitness for purpose

17 Implied conditions as to quality or fitnessSubject to the provisions of this Act and of any statute in that behalf, there is no impliedwarranty or condition as to the quality or fitness for any particular purpose of goods

supplied under a contract of sale, except as follows(a) when the buyer, expressly or by implication, makes known to the seller the

particular purpose for which the goods are required, so as to show that the buyerrelies on the sellers skill or judgment, and the goods are of a description which itis in the course of the sellers business to supply (whether the seller is themanufacturer or not), there is an implied condition that the goods shall bereasonably fit for such purpose;

(b) however, in the case of a contract for the sale of a specified article under itspatent or other trade name, there is no implied condition as to its fitness for anyparticular purpose;

4 elements1. The buyer must have made known, expressly or by implication, the particular purpose for

which he wanted the goods.

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2. Particular purpose must have been disclosed in such a way that it was clear that the buyerwas relying on the sellers skill and judgment.

3. The seller was in the business of supplying goods of that description.4. Goods, if specific, not bought under their patent or other trade name.

1. The buyer must have made known, expressly or by implication, the particular purpose for

which he wanted the goods.

Seller is entitled to know the purpose so they can ensure the goods are fit for that purpose.

Appropriate to look at all the circumstances preceding the transaction. May request goods for a specific purpose jacket to keep me warm & dry while skiing. Can be inferred if a propeller is ordered for a ship under construction, the purpose is will

have been made known: Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd.o When goods are by their description suitable for only one purpose, it will be inferred

that they buyer has made known the purpose for the goods:Priest v Last.o If no specific purpose is made known, inferred that the buyer has made known that the

goods are being bought for their normal purpose:Priest v Last.o If capable of use for more than one purpose, buyer must make known the purpose they

require them for, if they do, must be suitable for that purpose:Priest v Last.o Eg underwear to wear: Grant v Australian Knitting Mills; walking shoes to walk in:

David Jones Ltd v Willis

Particular purpose means given a purpose, particular just narrows it. The purpose must be made know with sufficient particularity to enable the seller to identify

the characteristics which the goods need to posssess to fir them for that purpose: TheHardwick Game Farm v Suffolk Agricultural Poultry Producers Asssociation.

Regal Pearl Pty Ltd v Stewart[2002] prawns contaminated with hepatitis held not fit for thepurpose of human consumption. When the court below tested them against purpose ofconsumption after cooking would have been fit for that purpose

Frost v Aylesbury Dairy CoLtd[1905] - milk supplied infected with typhoid. Buyers wifedrank milk and died. Argued the buyer had not disclosed the purpose for which the milk wasrequired. HELD: could be reasonably assumed milk was purchased for human consumption.

Southern Cross Homes (Broken Hill) Inc v Chapman [1999], argued by buyer that requiredpurpose of the purchase of a commode chair was that they would not permit any leakage orspillage. Chairs in fact permitted leakage into a designated fiberglass base. HELD: this

particular purpose was not made known to the seller, only relevant purpose was the sale of acommode chair which would accept commode pots and bed pans

Griffiths v Peter Conway Ltd

o The implied condition of fitness is not operative when the particular purpose for

which goods are required is the purpose of being worn by a person suffering anabnormality, and it is not known by the seller at the time of the sale

o A tweed coat which would not have affected a normal persons skin was purchasedand caused dermatitis because of an abnormality in the buyers skin of which theseller was not aware. No breach of implied condition of fitness for purpose.

Grant v Australian Knitting Mills Ltd, P bought underwear and then contracted dermatitis.HELD: that purpose didnt need to be disclosed, when goods are by their description suitablefor one purpose, it will be inferred that they buyer has made known the purpose for the goods

2. Particular purpose must have been disclosed in such a way that it was clear that the buyer

was relying on the sellers skill and judgment.

There must be actual reliance by the buyer on the sellers skill and judgment and this must beevident to a reasonable seller at or before the time the contract is formed:Frank v Grosvenor

Motor Auctions Pty Ltd

No presumption of reliance: Claude B Fox Pty Ltd v Rayner.

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Evidence of reliance usually occurs by implication question of fact:Ashington Piggeries Ltdv Christopher Hill Ltd.

o Grant v Australian Knitting Mills Ltd, HELD: reliance will, in general, be inferred

from the fact that a buyer goes to the relevant shop in the confidence that thetradesment has selected his stock with skill and judgment, that is, that the seller has

bought the right goods of a good make. The better the shop the easier it is to draw thisinference.

Inference from Grant v Australian Knitting Mills Ltddoesnt apply between two traders whoare equally knowledgeable:Hardwick Game Farm at 84, 106-7, 124-5.

Reliance must be affirmatively shown but reliance on the sellers skill and judgment need notbe total or exclusive:Ashington Piggeries v Christopher Hillat 423 per Lord Wright.

Reliance must, constitute a substantial and effective inducement which leads the buyer topurchase the article:Dependable Motors Pty Ltd v Ashford Shire Councilat 283 and 289.

The buyer may still have relied on his own experts, knowledge or common sense

o Ashington Piggeries v Christopher Hill,seller was a compounder of foodstuffs andtold the buyer he knew nothing about the nutritional requirements of mink, merelyagreed to comply with the formula as provided by the buyer, a mink farmer.

o The seller was held liable under equivalent of s 17(a)

o although the buyer had relied on his own skill and judgment as to the suitability of the

compound, he had still relied on the seller to select and acquire good qualityingredients of the kind in the formula and to combine them satisfactorily.

Ashford Shire Council v Dependable Motors Pty Ltd

o A shire council requiring a tractor for use in roadwork requested an engineer to

inspect a tractor in Sydney to see whether it was suitable for the worko The engineer inspected the tractor, & informed the D that the tractor was required for

roadwork & asked whether it could perform such work.o Engineer reported back to the P that the tractor had plenty of power & was big enough

to do the work, however he did not report what was passed between the D andhimself.

o Engineer received instructions from P to purchase the tractor. In purchasing the

tractor, P relied upon the report made by the engineer.

HELDthe engineer on behalf of P having disclosed the proposed purpose, had acted on theskill and judgment of the Deft. Since the tractor was unsuitable for roadwork the P wasentitled damages.

o The purpose of the section is to impute to the seller a contractual promise moving

from the seller to the buyer that the goods are fit for the purpose about which he hasbeen informed & on which his/her skill/judgment has been sought

o A reasonable person in the shoes of the seller would have realized that he/she was

being relied upon by the buyer

McWilliams Wines Pty Ltd v Liaweenao Pff wine maker bought 50,000 corks from Deft cork merchant. It was later found that

a significant proportion of the bottles of wine sealed with the cork becamecontaminated and were unsaleable.

HELD D was liable for breach of implied condition of fitness.o Due to many other transactions between the parties over the years, it had been

established that the P had made known to the D that it was relying on the skill &judgment to deliver corks which were not contaminated in some unobservable way &which would cause a deleterious effect on the wine.

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In some cases inspection by buyer may indicate that they are not relying on the sellers skilland judgment:H Beecham & Co Pty Ltd v F Howard & Co Pty Ltdat 433.

REMEDY: if reliance is established, sellers liability is strict and it does not matter whetherthe defect was latent or patent:Hardwick Game Farm.

3. The seller was in the business of supplying goods of that description.

Limits it to the course of sellers business opposed to private persons:Ashington Piggeries Ltdv Christopher Hill Ltd.

It is sufficient that the seller supply goods of that kind in the course of business:AshingtonPiggeries Ltd v Christopher Hill Ltd.

It is in the course of a sellers business to supply goods if he agrees to supply the goods whenordered. This is the case whether or not he has previously accepted orders for goods of thatdescription:Ashington Piggeries Ltd v Christopher Hill Ltd.

Irrelevant whether the sale of those goods forms an integral part of the business carried on, orwith what sort of regularity.

Stevenson v Rogers,seller had an established business as a fisher. Bought a new vessel in1983 and sold it in 1988. Held that the provision was wide enough to encompass it such sparsedealings

4. Goods, if specific, not bought under their patent or other trade name: s17(b)

Logic is where a buyer buys by reference to a trade name, he does not rely on the seller. Baldry v Marshall[1925] 1 KB 260

o Buyer asked for a car suitable for touring & ordered a car that was recommended in a

magazine. The car proved unsuitable for touringo HELD that despite the order of the car by name, the buyer had relied on the sellers

skill and judgment & it was not the sale under a trade name within the meaning ofs17(b).

Once the trade name is secondary, and the purpose of the goods is communicated, s17(b) willnot apply

Mere fact that buyer mentions the trade name will not be sufficient to exclude the implication

Has the condition been breached? Question of fact: Christopher Hill v Ashington Piggeries The goods must be reasonably fit for their specified purpose, assessed at the time of sale

The goods must be reasonably fit for their purpose for a reasonable time after sale: Lambert vLewis what is a reasonable time depends on the nature of the goods.

Where the engine of a car stopped one week after purchase, this was held to show that the carwas not fit for its purpose at the time of sale: Crowther v Shannon.

Trade Practices Act 1974 (Cth) s71(2)

s 71 Implied undertakings as to quality or fitness

(2) Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer inthe course of a business and the consumer, expressly or by implication, makes known to thecorporation or to the person by whom any antecedent negotiations are conducted any particular

purpose for which the goods are being acquired, there is an implied condition that the goodssupplied under the contract for the supply of the goods are reasonably fit for that purpose, whetheror not that is a purpose for which such goods are commonly supplied, except where thecircumstances show that the consumer does not rely, or that it is unreasonable for him or her torely, on the skill or judgment of the corporation or of that person.

Unlike SGA, the TPA implies the condition as to fitness for purpose where (in addition to the

other requirements) the purpose is expressly or impliedly made known to seller: it is not

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necessary for the buyer also to prove reliance but if the seller can prove there was no relianceor unreasonable reliance, the term will not be implied

o Effectively shifts the onus of proof onto the supplier

No equivalent trade name exception under the TPA.

A statutory agency incorporated by the provision in permitting the relevant purpose to bemade known to the person by whom any antecedent negotiations are conducted.

2.4 Merchantable quality

17 Implied conditions as to quality or fitness(c) when goods are bought by description from a seller who deals in goods of that

description (whether the seller is the manufacturer or not) there is an impliedcondition that the goods shall be of merchantable quality;

(d) however, if the buyer has examined the goods, there is no implied condition asregards defects which such examination ought to have revealed;

3 elements1. The goods were bought by description.

2. The seller deals in goods of that description.3. The buyer did not examine the goods before or at the time of sale, or, if he did, the defects

were such as would not reasonably have been discoverable on such examination.

1. The goods were bought by description.

Has been construed to have the same meaning as for fitness for purpose: Taylor v CombinedBuyers Ltd see 2.3 above

Reasonable to expect uniformity of the sections:Ashington Piggeries Ltd v Christopher HillLtd.

2. The seller deals in goods of that description.

Has been construed to have the same meaning as for fitness for purpose: Taylor v Combined

Buyers Ltd. Sufficient if the seller dealt in the course of his business with goods of that kind:Ashington

Piggeries Ltd v Christopher Hill Ltdper Lord Hodson at 469.

3. The buyer did not examine the goods before or at the time of sale, or, if he did, the defects

were such as would not reasonably have been discoverable on such examination.

Must have been made prior to the contract being entered into. Such examination refers to examination by buyer. Ought to have been revealed refers to the actual examination carried out and what ought to

have been revealed by it not to what might have been revealed in an ordinary inspection:Frank v Grosvenor Motor Auctions Pty Ltd.

Clear that the proviso doesnt apply if the buyer does not undertake any examination at all,irrespective of whether he has been offered an opportunity to examine the goods.

Thornett & Fehr v Beers

o Buyer viewed outside of barrels of glue.

o HELD: to have undertaken an examination within the meaning of the proviso, so no

implied condition of merchantability.o Section doesnt require a full examination. A proper examination would have revealed

the defect and the buyer had been offered a full inspection and declined theopportunity so was held to have assumed the risk

o Some doubt about the correctness of this decision

Has the condition been breached are the goods merchantable?

No definition of merchantable quality in SGA.

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Is a composite quality comprising elements of description, purpose, condition and price:Cehave NV v Bremer Handelsgesellschaft mbHat 80.

If description and purpose is wide to be merchantable they need only suit one of thosepurposes:Henry Kendall & Sons v William Lillico & Sons Ltdat 77, Lord Reid.

If description is narrow and one purpose goods will not be merchantable if they do not meetthat purpose:Henry Kendall & Sons v William Lillico & Sons Ltdat 77, Lord Reid.

Henry Kendall & Sons v William Lillico & Sons Ltd,

o sale of contaminated Brazilian groundnut extract to manufactures of cattle

and poultry foods.o Sale in question was to manufacturer of poultry food.

o The goods found to be poisonous for poultry but would have been

suitable for cattle.o Held that although sellers breached fitness for purpose it was of

merchantable quality because it was fit for one of its purposes (althoughnot the one for which the buyers had bought it for)

Brand v Bardon,o moisturising cream for abnormal/sensitive skin caused skin blisters on

the buyer.o Held to be a breach, outcome probably different if hadnt been label for

sensitive skin.

The price is relevant the higher the price the higher the buyers expectations as to quality ofthe goods supplied:Australian Knitting Mills Limited v Grantat 418, Dixon J.

Must be commercially saleable to a consumer under the description by which they were soldat a price not too far removed from K price:Brown & Son v Craiks [1970] 1 WLR 752

An unsubstantial price reduction may not be sufficient

H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd, wood was sold for making pianos but had dry rot. Wood would have

been suitable for making boxes, one of its purposes.

HELD that it wasnt merchantable because no businessman would

have accepted the timber, its condition being known, without asignificant price reduction on market price, at 435.

BS Brown & Son Ltd v Crakis,

rayon cloth bought, unknown to seller, to make dresses.

The cloth was of insufficient quality for that purpose but could be

used as industrial fabric.

Although the price was high for industrial fabric the difference was

not substantial enough to make the cloth unmerchantable.

Trade Practices Act 1974 (Cth) s71(1)

71 Implied undertakings as to quality or fitness

(1) Where a corporation supplies (otherwise than by way of sale by auction) goods to aconsumer in the course of a business, there is an implied condition that the goodssupplied under the contract for the supply of the goods are of merchantable quality,except that there is no such condition by virtue only of this section:

(a) as regards defects specifically drawn to the consumers attention before the contractis made; or

(b) if the consumer examines the goods before the contract is made, as regards defects

which that examination ought to reveal.

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66 Interpretation

(2) Goods of any kind are of merchantable quality within the meaning of this Division if theyare as fit for the purpose or purposes for which goods of that kind are commonly boughtas it is reasonable to expect having regard to any description applied to them, the price (ifrelevant) and all the other relevant circumstances.

Condition as to merchantability is excluded under s 71(1)(b) if the consumer examines thegoods before the contract is made as regard defects which examination ought reveal

o The examination is clearly the actual examination undertaken by the buyer, not the

examination a reasonable buyer wouldve made: Truck Wreckers (1979) Pty Ltd vWaters.

Unnecessary and undesirable to look at the common law definition for the purpose ofconstruing statutory definition in s 66(2) TPA: Courtney V Medtel Pty Ltdat [189].

Merchantable quality standard required under TPA is more onerous than CL definition. Goods to be merchantable under s 66(2) must be fit for all the purposes for which goods of

that kind are commonly bought. Also seller doesnt have to deal in goods of that description so long as the contract for sale is

made in the course of a business.

Cavalier Marketing v Rasell[1991] 2 Qd R 323 Consumer purchased carpet which had a pile reversal defect (didnt change colour with

direction of pile) Carpet bought for 2 purposes as a floor covering and also to fit with dcor of home

Carpet fit for purpose of floor covering but not aesthetically pleasing to buyer HELD that as s66(2) states that goods must be fit for all purposes they are bought for, and

here the carpet had been bought for decoration, it was not of merchantable quality Different conclusion would be reached under SoGA

2.5 Sale by sample

18 Sale by sample(1) A contract of sale is a contract for sale by sample when there is a term in the contract,express or implied, to that effect.(2) In the case of a contract for sale by sample

(a) there is an implied condition that the bulk shall correspond with the sample inquality;

(b) there is an implied condition that the buyer shall have a reasonableopportunity of comparing the bulk with the sample;

(c) there is an implied condition that the goods shall be free from any defect,rendering them unmerchantable, which would not be apparent on reasonableexamination of the sample.

A sale is not a sale by sample merely because a buyer is shown a sample during the course ofnegotiations:JS Robertson (Aust) Pty Ltd v Martin.

The seller must expressly or impliedly promise that the goods being sold will conform to thesample:LG Thorne Ltd v Thomas Borthwick & Sons (Asia) Ltd.

May involve issues as to the admissibility of parol evidence where a sample is not referred toin the contract but was relied upon by the buyer: Codelfa Construction Pty Ltd v State Rail

Authority of NSW.

There is nothing to prevent the buyer providing the relevant sample, though it usually comesfrom the seller: Simms Jones Ltd v Petrochem NZ Ltd

LG Thorne Ltd v Thomas Borthwick & Sons (Asia) Ltd

o Plt bought certain drums of neatsfoot oil.

o Had been provided a sample and after analysis, and satisfied with the analysis heentered into the contract.

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o The oil supplied was different didnt have a cloud oil under 30F.

o HELD that it wasnt a sale by sample, was a contract in writing and the sample was

verbal.o Even though the court was confident Plt would not have bought if the oil wasnt

satisfactory wasnt sufficient to overcome general rule with regard to parol

variations of written contracts. Cameron & Co v Slutzkin Pty Ltd

o HC admitted evidence by way of a sample, not to vary the written terms of the

contract of sale, but in order to interpret the expression matchless 2475 voile.o To determine the nature of the goods intended to be described. Goods didnt conform

to the sample so the buyer was held to be justified in rejecting them.

Trade Practices Act 1974 (Cth) s72

72 Supply by sample

Where in a contract for the supply (otherwise than by way of sale by auction) by acorporation in the course of a business of goods to a consumer there is a term in thecontract, expressed or implied, to the effect that the goods are supplied by reference to asample:

(a) there is an implied condition that the bulk will correspond with the sample inquality;

(b) there is an implied condition that the consumer will have a reasonable opportunityof comparing the bulk with the sample; and

(c) there is an implied condition that the goods will be free from any defect, renderingthem unmerchantable, that would not be apparent on reasonable examination of thesample.

3. Remedies for the Buyer

3.1 Remedies for a breach of condition implied by the SGA

Breach of condition entitles innocent party to rescind the contract = right to reject goods. Right to reject the goods as been described as merely a particular form of the right to rescind,

because it involves the rejection of a tender of goods: Chao v British Traders and ShippersLtd.

When a condition will be treated as a warranty s14(3) SoGA

14 When condition to be treated as warranty(3) When a contract of sale is not severable, and the buyer has accepted the goods, orpart thereof, or when the contract is for specific goods the property in which has passedto the buyer, the breach of any condition to be fulfilled by the seller can only be treatedas a breach of warranty and not as a ground for rejecting the goods and treating thecontract as repudiated, unless there is a term of the contract, express or implied, to thateffect.

Section enlivened if:o Buyer has accepted the goods

o If K for specific goods, property has passed to the buyer

s14(3) can be excluded by a term of the K, express or implied

Approach to Ks for the sale of specific goods

words of s14(3) state that the buyer cannot reject goods once property has passed to the buyer

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This has been criticised as too harsh because s 21 r 1 ie. property in specific goods passes atthe time the contract is made.

SO courts avoid strict application of the provision and determine the issue on the basis ofwhether the goods have been accepted: Taylor v Combined Buyers Ltdat 650.

Has the buyer accepted the goods

s37 sets out three instances in which a buyer will have deemed to have accepted the goods:1. when the buyer intimates to the seller that the buyer has accepted them; or2. when the goods have been delivered to the buyer, and the buyer does any act in

relation to them which is inconsistent with the ownership of the seller

act inconsistent with the ownership of the seller means an act inconsistentwith the right of the seller, in the event of a rejection, to have the goodsreturned to the place of examination of the goods as contemplated by the K:

Kwei Tek Chao v British Traders and Shippers Ltd[1954] 2 QB 459;Hammer & Barrow v Coca-Cola [1962] NZLR 723

3. when after the lapse of a reasonable time, the buyer retains the goods withoutintimating to the seller that the buyer has rejected them.

37 AcceptanceThe buyer is deemed to have accepted the goods when the buyerintimates to the seller that the buyer has accepted them, or when thegoods have been delivered to the buyer, and the buyer does any act inrelation to them which is inconsistent with the ownership of the seller,or when after the lapse of a reasonable time, the buyer retains thegoods without intimating to the seller that the buyer has rejected them.

BUT s36 states that:

where goods are delivered that the buyer has not previously examined the buyer will not be deemed to accept them until they have had a reasonably opportunity to

inspect to determine whether the goods are in accordance with the K

36 Buyers right of examining the goods(1) When goods are delivered to the buyer, which the buyer has notpreviously examined, the buyer is not deemed to have accepted themunless and until the buyer has had a reasonable opportunity ofexamining them for the purpose of ascertaining whether they are inconformity with the contract.(2) Unless otherwise agreed, when the seller tenders delivery of goodsto the buyer, the seller is bound, on request, to afford the buyer areasonable opportunity of examining the goods for the purpose of

ascertaining whether they are in conformity with the contract.

Accepted in other jurisdictions that ss37 is NOT to be read subject to s36:Hardy v Hillerns andFowler[1923] 2 KB 490

Hence, where a buyer does an act inconsistent with the ownership of the seller, they will be

taken to have accepted the goods regardless of whether they had a reasonable opportunity toinspect the goods

Hardy v Hillerns and Fowler[1923] 2 KB 490o Buyer bought wheat to be shipped from South America.

o Shortly after delivery and while the time during which buyers had the right to

examine the goods was still running they on-sold the goods.o Buyer then tried to reject the wheat as soon as it was possible to make an adequate

inspection and recalled the wheat in transit to the sub-buyer.

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o Held that the act by the buyer in on-selling part of the goods has placed the goods in a

position which prevented the seller from resuming possession of them upon receipt ofthe notice of rejection by the buyer. The act therefore was acceptance and theycouldnt reject the goods

In the case of an on-sale of goods to a sub-buyer, this result can be avoidedo Seller and buyer agree that seller will send goods straight to sub-buyer

o Place for examination of goods under s36 is sub-buyers premises

o Buyers agent may possess goods and dispatch them to sub-buyer

o This dispatch will not be an acceptance under s37 because the sellers right, in the

event of a rejection by the buyer, to have the goods physically returned to the place ofexamination has not been interfered with (b/c the goods are at the place ofexamination the sub-buyers premises)

Hammer & Barrow v Coca-Cola [1962] NZLR 723o Yoyos purchased by Coca-cola from H&B and delivered to sub-buyers in Auckland

o Yoyos passed through forwarding agent of Coca-Cola in Christchuch

o 80% of yoyos defective and Coca-cola attempted to reject the goods already delivered(+ rescind contract which is not herein relevant)

o HELD that the yoyos could be returned as the buyer had not yet done an act

inconsistent with the ownership of the seller Although the goods were delivered in Christchuch, the place for

examination of the yoyos were at the premises of the sub-buyers in Auckland(contemplation of the parties in the K)

The right of the seller in the case of a rejection was to have the goods returnedto the place of examination (Auckland)

Hence all yoyos still in Auckland could be rejectedand sent back Only yoyos which could not be returned were those that had been sent on to

retailers from sub-buyers or attempted to be fixed by Coca-cola

Buyers act of rejection must be unequivocal, if not, or doesnt reject the goods, buyer willhave affirmed the contract: Graanhandel T Vink BV v European Grain & Shipping Ltd.

Unless the parties otherwise agree the buyer is not bound to return the rejected goods to theseller it is sufficient if buyer intimates to seller that buyer rejects the goods: s 38.

3.2 Remedies for a breach of warranty implied by the SGA

If the seller has breached a warranty or has breached a condition but the buyer has acceptedthe goods, the buyer is entitled to damages.

54 Remedy for breach of warranty

(1) When there is a breach of warranty by the seller, or when the buyer elects, oris compelled, to treat a breach of a condition on the part of the seller as a breachof warranty, the buyer is not by reason only of such breach of warranty entitledto reject the goods; but the buyer may

(a) set up against the seller the breach of warranty in diminution orextinction of the

price; or(b) maintain an action against the seller for damages for the breach of

warranty.(2) The measure of damages for breach of warranty is the estimated loss directlyand naturally resulting, in the ordinary course of events, from the breach ofwarranty.

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(3) In the case of breach of warranty of quality such loss is prima facie thedifference between the value of the goods at the time of delivery to the buyerand the value which they would have had if they had answered to the warranty.(4) The fact that the buyer has set up the breach of warranty in diminution orextinction of the price does not prevent the buyer from maintaining an action forthe same breach of warranty if the buyer has suffered further damage.

55 Interest and special damagesThis Act does not affect the right of a buyer or a seller to recover interest orspecial damages in any case in which by law interest or special damages arerecoverable, or to recover money paid when the consideration for the payment ofit has failed.

Section 54(2) incorporates the basic principles for remoteness of damages as enunciated in theleading case ofHadley v Baxendale.

o What the parties reasonably contemplated at the time of contract as to the damages

that would result from a breach of their contract is a question of fact.

In relation to damages for goods of an inferior quality, the principal in s 54(3) is regarded as a

prima facie rule from which the court may depart in appropriate circumstances. (Burden ofproof on person seeking to adopt another measure of damages).

Often a commercial buyer will have either on-sold the goods or at least have contemplated on-selling them, if the seller knows that the buyer intended to resell them and a breach would belikely to cause the buyer a loss of profit on the resale or potential resale the buyer is entitled torecover damages in respect of those

Documents

Week 8 -13 Sale of Goods