Legal problem solving

PART TWO

Source of legal rights

Torts

Contract:Express Terms

Statute:Consumer Guarantees

Contents of the Contract

TERMS

Statement prior to contract

RepresentationMisrepresentation:

Not contractPossible action in equity or statute

(s18)

PuffNot contractNo action in

equityPossible action under statute

(s18)

TermPart of contract

Term or representation?

Objective test of intention “reasonable man”

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41

Indicative factors include1. Importance of statement2. Time between statement and contract3. Special knowledge or skill or access to truth of

one party4. Inclusion of statement in any subsequent

documentEllul &Ellul v Oakes (1972) 3 SASR 377

What kind of term?A term may be either: a Condition

◦ Essential term◦ Breach – entitlement to terminate/or damages

a Warranty◦ Ancillary term◦ Breach – damages, but no termination

an Innominate term ◦ Intermediate term◦ Breach – termination if sufficiently serious

Test: how essential was the promise?“The question whether a term in a contract is a condition or a warranty, i.e. an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict, or a substantial, performance of the promise, as the case may be, and that this ought to have been apparent to the promisor…. Jordan CJ in Tramways Advertising v Luna Park

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) CLR 633

Associated Newspapers Limited v Bancks (1951) 83 CLR 322

‘

Innominate terms: Hong Kong Fir

“There are, however, many contractual undertakings of a more complex character which cannot be categorised as being “conditions” or “warranties”….Of such undertakings, all that can be predicated is that some breaches will, and others will not, give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend on the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertakings as a “condition” or a “warranty”.” Diplock LJ 69/70

Innominate terms Approved by High Court in

◦ Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61

FridgeShe also advised that her mother was having problems with Whitegoods World from which she had bought her fridge. Kylie advised that her mother required a “French door” fridge with freezer drawers underneath to accommodate the large baking trays she used for her cakes. She had ordered the fridge she needed from Whitegoods World but had experienced delivery problems.

Her oven purchase was much more successful than her fridge which, on the very day it was due to be delivered – not only did not arrive, but the shop called her to advise that delivery was delayed for one month. Mavis said to the shop keeper: “Well that’s no good to me. I ordered that fridge for today. I need that fridge today. I told you when I needed the fridge. The only reason I ordered from you was that you told me I could have it today. If you can’t give it to me today, you can just keep your fridge!! I don’t want it anymore.” Mavis then rang Quick Fridge and ordered and received another fridge that afternoon– suitable for her requirements.

However, one month later, Whitegoods World delivered the fridge originally ordered and demanded payment. Mavis refused to accept the fridge or to pay, and advised them that the order had been cancelled. They are threatening to sue Mavis for the price of the fridge - $5,500.

Consumer Guarantees

AUSTRALIAN CONSUMER LAW

Revise: How to read a statute

E.g. Australian Consumer Law s18

Misleading or deceptive conduct

(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

Elements of a section: Person In trade or commerce Engage in conduct Misleading or deceptive

Defined by legislation (definitions section) or by courts (case law.)

Legislation Competition and Consumer Act 2010 (Cth)

◦Schedule 2 - Australian Consumer Law◦Application scheme◦Commonwealth Act – only applies to corporations◦Why?

Application Scheme How does Australian Consumer Law (ACL) apply to all jurisdictions in Australia? Why do we find it at Schedule 2 of the Competition and Consumer Act 201o (Cth)?

Part 3-2: Consumer Guarantees

Division 1—Consumer guarantees

Subdivision A—Guarantees relating to the supply of goods

51 Guarantee as to title

52 Guarantee as to undisturbed possession

53 Guarantee as to undisclosed securities etc.

54 Guarantee as to acceptable quality

55 Guarantee as to fitness for any disclosed purpose

56 Guarantee relating to the supply of goods by description

57 Guarantees relating to the supply of goods by sample or demonstration model

58 Guarantee as to repairs and spare parts

59 Guarantee as to express warranties

56  Guarantee relating to the supply of goods by description

(1) If:

(a) a person supplies, in trade or commerce, goods by description to a consumer; and

(b) the supply does not occur by way of sale by auction;

there is a guarantee that the goods correspond with the description.

Common elementsa person supplies, in trade or commerce,

goods to a consumer

Common Elements:Person/corporationSupplyTrade or commerceGoodsConsumer

S2:trade or commercetrade or commerce means:

(a) trade or commerce within Australia; or

(b) trade or commerce between Australia and places outside Australia;

and includes any business or professional activity (whether or not carried on for profit).

And case law

S2: goodsgoods includes:

(a) ships, aircraft and other vehicles; and

(b) animals, including fish; and

(c) minerals, trees and crops, whether on, under or attached to land or not; and

(d) gas and electricity; and

(e) computer software; and

(f) second hand goods; and‑

(g) any component part of, or accessory to, goods.

S3: consumer (1) A person is taken to have acquired particular goods as a consumer if, and only if:

(a) the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed:

(i) $40,000; or …. (b) the goods were of a kind ordinarily acquired for personal,

domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use

principally in the transport of goods on public roads. (2) However, subsection (1) does not apply if the person acquired the

goods, or held himself or herself out as acquiring the goods: (a) for the purpose of re supply; or‑

(b) for the purpose of using them up or transforming them, in trade or commerce:

(i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or

fixtures on land.

‘ordinarily acquired for personal, domestic or household use or consumption’

Not just personal useBusiness use as welle.g. Carpet in a nightclub (Carpet Call v Chan (1987) ATPR (Digest) 46-

025)Not just goods of a kind used in households

Commercial versions of domestic products as wellE.g. Commercial grade, decoratively coated insulation in Bunnings

warehouses (Bunnings v Laminex [2006] FCA 682)Mixed use? Common sense approach

E.g even though ostrich egg incubator could be used for home hobbies, if used commercially not consumer (Crago v Multiquip (1998) ATPR 41-620 )

56 Guarantee relating to the supply of goods by description

(1) If: (a) a person supplies, in trade or commerce,

goods by description to a consumer; and (b) the supply does not occur by way of sale

by auction;there is a guarantee that the goods correspond with the description.

S56: elements Common elements Supply by description Guarantee of correspondence with description

Case law UK Sale of Goods Act Sale of Goods Act 1923 (NSW) Trade Practices Act 1974 (Cth) Presumptions in statutory interpretation

Case Law

Ashington Piggeries v Christopher Hill [1971] 1AllER847

Grant v Australian Knitting Mills (1936) 54 CLR 49

Sale/Correspondence with description

Ashington Piggeries case:Viscount Dilhorne:

“Did the presence of DMNA merely affect the quality of the herring meal or did it make a difference in kind? If the former, then there was no failure to deliver in accordance with the description. If the latter, there was.”

55 Guarantee as to fitness for any disclosed purpose etc.

(1) If:

(a) a person (the supplier) supplies, in trade or commerce, goods to a consumer; and

(b) the supply does not occur by way of sale by auction;

there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit.

(2) A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that:

(a) the consumer makes known, expressly or by implication, to:

(i) the supplier; or

(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; or

(b) the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii).

(3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be.

S55: elements Common elements Particular purpose made known by consumer Consumer relied on skill/judgement of supplier Reasonable to rely

Case Law

Purpose made known?Obvious purpose?

Underpants – Grant v Australian Knitting Mills

Reliance on seller’s judgement?Ashington Piggeries v

Christopher Hill

S54: Guarantee as to acceptable quality

(1) If:

(a) a person supplies, in trade or commerce, goods to a consumer; and

(b) the supply does not occur by way of sale by auction;

there is a guarantee that the goods are of acceptable quality.

(2) Goods are of acceptable quality if they are as:

(a) fit for all the purposes for which goods of that kind are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from defects; and

(d) safe; and

(e) durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

(3) The matters for the purposes of subsection (2) are:

(a) the nature of the goods; and

(b) the price of the goods (if relevant); and

(c) any statements made about the goods on any packaging or label on the goods; and

(d) any representation made about the goods by the supplier or manufacturer of the goods; and

(e) any other relevant circumstances relating to the supply of the goods.

Case Law

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

Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd (1991) ATPR 41-152

Carpet Call Pty Ltd v Chan (1987) ATPR 41-025

Remedies Breach of contract:

◦ Remedies on the contract◦ e.g damages

Breach of term implied into the contract:◦ Sale of Goods Act◦ Remedies on the contract

Breach of statutory guarantee◦ Australian Consumer Law◦ Remedies provided by statute

SOURCE OF RIGHTS GOVERNS THE REMEDIES

Flooring:Mavis was particularly interested in flooring as she had difficulties keeping her slate tiles clean. She searched for low maintenance flooring and after extensive shopping decided on single sheet vinyl flooring. She saw just the thing at Discount Lino Barn, close to Kylie’s home. Kylie indicated that she didn’t share her mother’s preference for vinyl flooring as it was cold underfoot and had suggested kitchen carpet. Kylie and Mavis spoke to Mike at Discount Lino Barn who suggested under-floor heating could address Kylie’s temperature issues. Kylie provided details of the under floor heating options while her mother left the conference room to offer slices of her coffee cake to the other staff….

She is also angry about the flooring she has had installed. Despite Kylie’s protests she went with the single sheet vinyl, and did not have under floor heating installed. The vinyl, while easier to clean than the slate, is marking and scuffing badly however. She has only had it down 6 months, and already there are a number of wear marks. Her cupcake classes – which she runs 5 times a week and more often in school holidays – are now so popular that she has at least 20 students per class. Because of her renovations she has room for them all around her lovely new island bench, but the vinyl around the island bench almost looks like a race track.

It is as if her students have worn a path around the bench – and in only 6 months.

The vinyl was quite expensive – as she had heavy grade domestic installed – but Mavis is very unhappy. She hasn’t yet paid the bill for the vinyl as she has been arguing with the company. They are, according to Mavis, now getting nasty, and want their $45,000 immediately.

OvenMavis returned to the conference room. She advised that she had had to make a large coffee cake that morning, even though her preference would have been to make cup-cakes. In fact, one of her legal problems was her cup-cake oven. Cake Cookers is a specialist retailer which sells products designed for those who like to cook cakes. It retails a number of specialist pans and other baking utensils – many imported from America and not readily available in Australia - as well as a special range of cake ovens.

They are located in Broome – and Mavis lives in NSW, but Cake Cookers sells throughout Australia by catalogue. Mavis wanted a special cake oven in her new kitchen. She saw an oven that looked perfect for her in their catalogue – the picture showed 8 slide out patty pan trays instead of oven trays – exactly what she wanted.

She rang the store and spoke to Cathy. She told Cathy all about her cupcakes, her favourite recipes, and her interest in the patty pan oven in their catalogue. Cathy told her that the patty pan oven had eight slide out patty pan holders – instead of oven racks – and that each patty pan holder would take one dozen patty pans. Even better, they came with self cleaning silicone inserts. Mavis was delighted about the self cleaning but concerned that each tray would only take one dozen patty pans. Although after discussion with Cathy, she was convinced that the overall capacity of the oven was appropriate, and so she placed an order….

Mavis advised that even if she had known about the cake order she would have had difficulty fulfilling it because of problems with her newly installed cake oven. When the oven arrived she saw that instead of Australian sized delicate patty pan holders, the cake trays were American size muffin holders – and two trays were even jumbo sized Texas muffin size holders. This is not what Mavis wanted at all.Mavis rang Cathy and told her the oven was not what she had wanted at all, and not suitable for the cakes in which she specialised. Cathy said she was sorry that Mavis was disappointed, but there is nothing that they can do about it now. Mavis wants to know if she still has to pay the $8,000 for the special cake oven.