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Lecture

Implied Terms - Sale of Goods

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Law
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JSB171
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Nick Dowse Sale of Goods – Implied Terms
Implied Terms (Sale of Goods) – Structure of Answer
1. “[Buyer] may get a remedy against [seller] on the basis that it breached a term implied by statute.
This will depend on which statute applies, if any, and what terms can be implied.”
2. Does the Sale of Goods Act (Qld) (SGA), or the Trade Practices Act (Cth) (TPA) apply, or
both?
a. NOTE: Both the TPA and the SGA can apply simultaneously to the same transaction
because of s 75(1) TPA.
b. SGA
i. SGA prima facie applies to all sales within Queensland or where the buyer is not a
“consumer” under the TPA.
ii. Applies where there is:
1. A contract of sale
2. Of goods
3. By which property passes
4. For money consideration
5. SGA not excluded by agreement
iii. Contract of Sale
1. Written or oral contract to sell something, or an agreement to sell something
in the future (s 3 SGA)
2. If goods are not ascertained, there must be an agreement to sell as opposed
to a sale (s 4(3)); Jansz)
a. An agreement to sell becomes a sale when the time has elapsed or
the conditions have been fulfilled subject to which the property in the
goods is to be transferred (s 4(4)).
3. If there is no reference to money consideration, or it is by reference to barter,
exchange or trade-in, it is not a sale of goods (s (4)(1)).
a. However, if the parties value the respective goods in money terms,
and then transfer equally valued items, this may constitute a sale
(Aldridge v Johnson).
4. If it is a hire-purchase agreement under which the hirer merely as an option to
purchase, then it is not a sale of goods.
a. But if it can be construed as a sale condition on payment, then that is a
sale of goods.
5. If it is under a floor plan, where an agent in possession is authorised to buy
and sell goods on behalf of a financier, then it is not a sale of goods (Motor
Credits v Pacific Motor)
6. If it is under a bailment, this is not a sale of goods, because property in the
SGA is defined to mean the general property in goods (s 3), not some special
interest as a mere bailee.
iv. Of Goods
1. The term ‘goods’ is defined in s 3(1) SGA to mean all chattels personal, other
than things in action and money, but includes emblements and things
attached to or forming part of the land, which are agreed to be severed before
sale, or under a contract of sale (s 3(1) SGA)
a. Emblements = crops and fruit, but not crops/fruit growing naturally on
the land – must be sown by human hand (Scully v South).
2. Includes clothes, jewellery, cattle, and furniture etc – any physically moveable
object.
3. Can extend so far as to include fixtures, if parties agree to sever from the
land a chattel which would otherwise be a fixture (Symes v Laurie)
4. Can include things like timber, minerals, sand and gravel
a. Agreement to fell timber on land is contract of sale: Egmont Box v RG
of Lands
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Nick Dowse Sale of Goods – Implied Terms
b. Agreement to sever a known and defined mound of rock/mineral is a
sale of goods: Mills v Stokman
c. Agreement to locate and extract sand, gravel, or minerals for an
agreed price per ton from soil is NOT a sale of goods: Amco
Enterprises v Wade.
i. It is a profit a prendre.
d. HC in Mills v Stokman set out three scenarios, here it is the
[first/second/third] that applies:
i. If the residue is still separate from the realty, it can be
transferred under the SGA.
ii. If the residue has become reintegrated (the mound has sat
there for a long time and it looks as though it is part of the earth
again) then it can only be a contract for a sale of goods if under
the contract the buyer is obliged to sever the mound and that is
stated in the contract.
iii. Where a mound over time has become indistinguishable from
land, then no contract for its sale can be a sale of goods
contract whether or not there is an obligation to sever – it is a
profit a prendre rather than a sale of goods.
5. Does not apply to choses in action, such as shares, debts, negotiable
instruments, copyrights, patents, trade marks etc (s 3(1) SGA).
6. Does not apply to a contract for services
a. SGA does not apply to contracts for the supply of services, only goods.
b. There are two tests for distinguishing goods from services:
i. Substance test: is the substance of the K the production of
something to be sold, and the exercise of skill, though high, is
primarily for the purpose of merely producing the goods?
1. If so, then the K is one for the sale of goods (Robinson v
Graves; applied in Re Amlink)
2. This is the better view (according to Traves).
3. Painting of portrait = not SOG (Robinson)
4. Blood transfusion, billed itemised = not SOG (Perlmutter)
5. Meal in restaurant = SOG, service incidental to supply of
meal (Lockett)
6. If mass produced hardware + software = SOG (Toby
Products)
a. But would be different for customised, specially
written (bespoke) software.
ii. Alternative test: Where the end result is the sale of a chattel,
then no matter how great the skill involved, it is a SOG” (Lee v
Griffin)
1. Sale of dentures by test = SOG (Lee v Griffin)
7. Contracts for the installation/work and supply of materials:
a. Prima facie not a SOG (Robinson v Rothfield)
b. However, if property passes at the time the K is made and then the
goods are simply installed later, there will be a SOG (Aristoc).
c. i.e. where build and install cocktail cabinet = not SOG because cabinet
became a fixture (Robinson v Rothfield)
d. i.e. where supply and install lifts into building, or where supply and fit
special seats for theatre = SOG, if built first, property passes, then
installed (Aristoc).
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Nick Dowse Sale of Goods – Implied Terms
8. Classify the type of goods
a. Specific
i. Goods that are identified and agreed upon at the time a K of
sale is made (s 3 SGA)
1. Eg a particular item from the seller
2. But need not exist, can be future
3. But need not be in seller’s title or possession (seller can
acquire title and possession later)
b. Ascertained
i. Not defined in SGA
ii. Is goods which are not specific at the time of K, but have
become identified and/or apparent and/or appropriated to the K
after the K of sale was made (Staplyton v Fletcher).
1. i.e. where K of sale for 100 tonnes of wheat, 200 tonnes
in silo, becomes ascertained after 100 tonnes loaded into
the buyer’s vehicle
iii. If there is to be no delivery, and merely a segregation in the
seller’s hands, upon such segregation, the goods will become
ascertained (Staplyton v Fletcher)
c. Unascertained
i. Not defined in SGA
ii. At CL: not identified or agreed upon at the time a K of sale is
made (Re Goldcorp Exchange)
iii. Applies to generic goods which are sold as generic goods, i.e.
where sold on terms allowing seller to obtain them from any
source/stock, as opposed to particular stock (Re Goldthorpe)
iv. Applies to quasi-specific, ex-bulk sales, i.e. where sold a portion
of a fixed and predetermines source but from which the seller
may make their own choice (eg “I sell you 60 of the sheep now
on my farm which has 500”)
v. Cannot transfer property in these unascertained goods,
because the buyer cannot acquire title to things which are
unascertained (s 19 SGA).
d. Future
i. Are goods to be manufactured or acquired by the seller after the
making of the K of sale (s 3, s 4(3); s 8(1) and (2) SGA)
ii. i.e. goods not yet in existence, or which the seller does not yet
own.
iii. Under s 8(3) SGA, where the seller purports to effect a K of sale
of future goods, the K operates as an agreement to sell, not a K
of sale.
v. By Which Property Passes (don’t mention unless necessary)
1. Property must pass from the seller to the buyer
2. Means both the legal and equitable title, not some specific or limited interest
such as that of a bailee or a security interest (s 3(1) SGA).
vi. For Money Consideration (Price)
1. Transfer of goods must be for money consideration
2. Consideration can be
a. Fixed in the contract (s 11(1) SGA)
b. Fixed by a formula in the contract (s 11(1) SGA)
c. Determined by a course of dealing between the parties (s 11(1) SGA)
d. If not in contract, must pay a reasonable price (s 11(2) SGA)
i. Question of fact, depends on circumstances, but is usually just
market price (s 11(3) SGA)
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Description
Nick Dowse Sale of Goods – Implied Terms Implied Terms (Sale of Goods) – Structure of Answer 1. “[Buyer] may get a remedy against [seller] on the basis that it breached a term implied by statute. This will depend on which statute applies, if any, and what terms can be implied.” 2. Does the Sale of Goods Act (Qld) (SGA), or the Trade Practices Act (Cth) (TPA) apply, or both? a. NOTE: Both the TPA and the SGA can apply simultaneously to the same transaction because of s 75(1) TPA. b. SGA i. SGA prima facie applies to all sales within Queensland or where the buyer is not a SGA “consumer” under the TPA. ii. Applies where there is: SGA SGA 1. A contract of sale SGA 2. Of goods SGA 3. By which property passes SGA 4. For money consideration SGA 5. SGA not excluded by agreement SGA iii. Contract of Sale SGA 1. Written or oral contract to sell something, or an agreement to sell something SGA in the future (s 3 SGA) SGA 2. If goods are not ascertained, there must be an agreement to sell as opposed SGA to a sale (s 4(3)); Jansz) SGA a. An agreement to sell becomes a sale when the time has elapsed or SGA the conditions have been fulfilled subject to which the property in the goods is to be transferred (s 4(4)). SGA SGA 3. If there is no reference to money consideration, or it is by reference to barter, SGA exchange or trade-in, it is not a sale of goods (s (4)(1)). SGA a. However, if the parties value the respective goods in money terms, SGA and then transfer equally valued items, this may constitute a sale SGA (Aldridge v Johnson). SGA 4. If it is a hire-purchase agreement under which the hirer merely as an option to purchase, then it is not a sale of goods. SGA SGA a. But if it can be construed as a sale condition on payment, then that is a SGA sale of goods. SGA 5. If it is under a floor plan, where an agent in possession is authorised to buy SGA and sell goods on behalf of a financier, then it is not a sale of goods (Motor SGA Credits v Pacific Motor) SGA 6. If it is under a bailment, this is not a sale of goods, because property in the SGA is defined to mean the general property in goods (s 3), not some special SGA SGA interest as a mere bailee. SGA iv. Of Goods SGA 1. The term ‘goods’ is defined in s 3(1) SGA to mean all chattels personal, other SGA than things in action and money, but includes emblements and things SGA attached to or forming part of the land, which are agreed to be severed before SGA sale, or under a contract of sale (s 3(1) SGA) a. Emblements = crops and fruit, but not crops/fruit growing naturally on SGA SGA the land – must be sown by human hand (Scully v South). SGA 2. Includes clothes, jewellery, cattle, and furniture etc – any physically moveable SGA object. SGA 3. Can extend so far as to include fixtures, if parties agree to sever from the SGA land a chattel which would otherwise be a fixture (Symes v Laurie) SGA 4. Can include things like timber, minerals, sand and gravel SGA a. Agreement to fell timber on land is contract of sale: Egmont Box v RG SGA of Lands Page 1 of 20 Nick Dowse Sale of Goods – Implied Terms SGA b. Agreement to sever a known and defined mound of rock/mineral is a SGA sale of goods: Mills v Stokman SGA c. Agreement to locate and extract sand, gravel, or minerals for an SGA agreed price per ton from soil is NOT a sale of goods: Amco SGA Enterprises v Wade. SGA i. It is a profit a prendre. SGA d. HC in Mills v Stokman set out three scenarios, here it is the SGA [first/second/third] that applies: SGA i. If the residue is still separate from the realty, it can be SGA transferred under the SGA. SGA ii. If the residue has become reintegrated (the mound has sat SGA there for a long time and it looks as though it is part of the earth SGA again) then it can only be a contract for a sale of goods if under SGA the contract the buyer is obliged to sever the mound and that is SGA stated in the contract. SGA iii. Where a mound over time has become indistinguishable from SGA land, then no contract for its sale can be a sale of goods SGA contract whether or not there is an obligation to sever – it is a SGA profit a prendre rather than a sale of goods. SGA 5. Does not apply to choses in action, such as shares, debts, negotiable SGA instruments, copyrights, patents, trade marks etc (s 3(1) SGA). SGA 6. Does not apply to a contract for services SGA a. SGA does not apply to contracts for the supply of services, only goods. SGA b. There are two tests for distinguishing goods from services: SGA i. Substance test: is the substance of the K the production of SGA something to be sold, and the exercise of skill, though high, is SGA primarily for the purpose of merely producing the goods? SGA 1. If so, then the K is one for the sale of goods (Robinson v SGA Graves; applied in Re Amlink) SGA 2. This is the better view (according to Traves). SGA 3. Painting of portrait = not SOG (Robinson) SGA 4. Blood transfusion, billed itemised = not SOG (Perlmutter) SGA 5. Meal in restaurant = SOG, service incidental to supply of SGA meal (Lockett) 6. If mass produced hardware + software = SOG (Toby SGA SGA Products) SGA a. But would be different for customised, specially SGA written (bespoke) software. SGA ii. Alternative test: Where the end result is the sale of a chattel, SGA then no matter how great the skill involved, it is a SOG” (Lee v SGA Griffin) SGA 1. Sale of dentures by test = SOG (Lee v Griffin) SGA 7. Contracts for the installation/work and supply of materials: SGA a. Prima facie not a SOG (Robinson v Rothfield) SGA b. However, if property passes at the time the K is made and then the SGA goods are simply installed later, there will be a SOG (Aristoc). SGA c. i.e. where build and install cocktail cabinet = not SOG because cabinet SGA became a fixture (Robinson v Rothfield) SGA d. i.e. where supply and install lifts into building, or where supply and fit SGA special seats for theatre = SOG, if built first, property passes, then SGA installed (Aristoc). SGA SGA SGA SGA Page 2 of 20 Nick Dowse Sale of Goods – Implied Terms SGA 8. Classify the type of goods SGA a. Specific SGA i. Goods that are identified and agreed upon at the time a K of SGA sale is made (s 3 SGA) SGA 1. Eg a particular item from the seller SGA 2. But need not exist, can be future SGA 3. But need not be in seller’s title or possession (seller can SGA acquire title and possession later) SGA b. Ascertained SGA i. Not defined in SGA SGA ii. Is goods which are not specific at the time of K, but have SGA become identified and/or apparent and/or appropriated to the K SGA after the K of sale was made (Staplyton v Fletcher). SGA 1. i.e. where K of sale for 100 tonnes of wheat, 200 tonnes SGA in silo, becomes ascertained after 100 tonnes loaded into SGA the buyer’s vehicle SGA iii. If there is to be no delivery, and merely a segregation in the SGA seller’s hands, upon such segregation, the goods will become SGA ascertained (Staplyton v Fletcher) SGA c. Unascertained SGA i. Not defined in SGA SGA ii. At CL: not identified or agreed upon at the time a K of sale is SGA made (Re Goldcorp Exchange) SGA iii. Applies to generic goods which are sold as generic goods, i.e. SGA where sold on terms allowing seller to obtain them from any SGA source/stock, as opposed to particular stock (Re Goldthorpe) SGA iv. Applies to quasi-specific, ex-bulk sales, i.e. where sold a portion SGA of a fixed and predetermines source but from which the seller SGA may make their own choice (eg “I sell you 60 of the sheep now SGA on my farm which has 500”) SGA v. Cannot transfer property in these unascertained goods, SGA because the buyer cannot acquire title to things which are SGA unascertained (s 19 SGA). SGA d. Future SGA i. Are goods to be manufactured or acquired by the seller after the SGA making of the K of sale (s 3, s 4(3); s 8(1) and (2) SGA) SGA ii. i.e. goods not yet in existence, or which the seller does not yet SGA own. SGA iii. Under s 8(3) SGA, where the seller purports to effect a K of sale SGA of future goods, the K operates as an agreement to sell, not a K SGA of sale. SGA v. By Which Property Passes (don’t mention unless necessary) SGA 1. Property must pass from the seller to the buyer SGA 2. Means both the legal and equitable title, not some specific or limited interest SGA such as that of a bailee or a security interest (s 3(1) SGA). SGA vi. For Money Consideration (Price) SGA 1. Transfer of goods must be for money consideration SGA 2. Consideration can be SGA a. Fixed in the contract (s 11(1) SGA) SGA b. Fixed by a formula in the contract (s 11(1) SGA) SGA c. Determined by a course of dealing between the parties (s 11(1) SGA) SGA d. If not in contract, must pay a reasonable price (s 11(2) SGA) SGA i. Question of fact, depends on circumstances, but is usually just SGA market price (s 11(3) SGA) SGA Page 3 of 20 Nick Dowse Sale of Goods – Implied Terms 3. No money consideration where there is a trade in, because the consideration is the seller’s partial release of a debt (Warmings Used Cars v Tucker) SGA 4. In the sale of goodwill and assets of business, description of price as “at SGA valuation” is sufficient under s 11(1) SGA (Wenning v Robinson). SGA vii. SGA Not Excluded By Agreement SGA 1. The implied terms and conditions in the SGA are all capable of being SGA excluded by express or implied agreement between the parties: s 56 SGA (by SGA either express agreement or by course of dealing between parties) SGA viii. Overall conclusion: does the SGA apply? SGA Page 4 of 20 Nick Dowse Sale of Goods – Implied Terms c. TPA TPA i. TPA is the proper statute for interstate sales, or sales by a corporation engaged in TPA trade and commerce, or sales via the post, telegraph or the internet (s 51(1), (5) and TPA (20) Commonwealth Constitution) TPA ii. Applies to: 1. A contract TPA 2. For the supply TPA TPA 3. Of goods or services TPA 4. To consumers TPA iii. A contract TPA 1. Offer, acceptance, consideration, i.e. based on general principles of K law TPA iv. By a Corporation (or natural person otherwise caught) 1. Defined in s 4(1) TPA to include: TPA a. (a) is a foreign corporation; TPA TPA i. A corporation incorporated outside Australia. TPA b. (b) is a trading corporation formed within the limits of Australia or is a TPA financial corporation so formed; TPA i. To determine whether a corporation is a “trading corporation” TPA need to use the current activities test (Hughes v WACA). 1. Trading denotes providing goods or services for reward” TPA 2. Must be “substantial” trading in relation to corporation’s TPA TPA overall activities, but not necessarily its sole or main TPA activity. TPA a. Can still be a “trading corporation” if your core TPA business does not result in “reward” but you still receive a large proportion of revenue from other TPA trading activities (E v Australian Red Cross). TPA ii. A “financial corporation” is also defined in s 4(1) to mean: TPA TPA 1. Banking (other than state banking) TPA a. Must be interstate banking TPA 2. Insurance (other than state insurance) TPA a. Must be interstate insurance 3. Lending or borrowing money, as distinct from TPA transactions that merely involve the use of money (Ku- TPA ring-gai Co-op Building Society (No 12)) TPA TPA 4. Needs to be significant activities but not necessarily sole TPA or main activities TPA 5. The term “financial corporation” is not a term of act, no TPA special or settled legal meaning; merely describes a corporation which engages in financial activities or is TPA intended to do so (State Superannuation Board v TPC). TPA TPA c. (c) is incorporated in a Territory; or TPA i. A company incorporated in Australian Capital Territory or TPA Northern Territory. TPA d. (d) is the holding company of a body corporate of a kind above. TPA 2. Can also apply to natural persons a. Part V TPA extends to the engaging in conduct outside Australia by TPA bodies corporate incorporated or carrying on business within Australia TPA TPA or by Australian citizens or persons ordinarily resident within Australia TPA (s 5(1)). TPA b. The effect of s 6(2) is to extend the operation of Part V Div 2 TPA to: TPA i. Trade or commerce where: TPA 1. Conduct overseas where the person involved is an Australian citizen (s 6(2)(a)(i)); or TPA TPA Page 5 of 20 Nick Dowse Sale of Goods – Implied Terms TPA 2. Conduct occurring in interstate trade or commerce (s TPA 6(2)(a)(ii)); or TPA 3. Conduct occurring in trade or commerce in a territory, TPA between a state and territory, or between two territories TPA (s 6(2)(a)(iii)); or TPA 4. Conduct supplying goods or services to the TPA Commonwealth (s 6(2)(a)(iv)); and TPA ii. Contracts made, or goods supplied: TPA 1. in the course of, or in relation to, trade or commerce TPA between Australia and places outside Australia (s 6(2)(c) TPA (i)); or TPA 2. (ii) in the course of, or in relation to, trade or commerce TPA among the States (s 6(2)(c)(ii)); or TPA 3. (iii) in the course of, or in relation to, trade or commerce TPA within a Territory, between a State and a Territory or TPA between two Territories (s 6(2)(c)(iii)). TPA c. Section 6(3) (telephonic services extension) does not apply to Part V TPA Div 2. TPA v. For the Supply TPA 1. The term “supply of goods” is wider than “sale of goods” under the SGA. TPA 2. Includes contracts of sale, exchange, lease, hire or hire-purchase (s 4(1) TPA TPA) TPA vi. Of Goods and Services TPA 1. Goods: same as SGA + ships, aircraft and other vehicles, animals, fish, TPA minerals, trees and crops, whether on, under or attached to the land or not, TPA and gas and electricity (s 4 TPA) TPA 2. Services: rights, benefits, privileges or facilities provided, granted or TPA conferred in trade or commerce TPA a. Includes supplying blood (E v Aust Red Cross) TPA vii. To consumers TPA 1. Goods or services must be supplied to a consumer. TPA 2. Consumer is defined in s 4B TPA (exhaustive). TPA 3. Essentially, a consumer is a person/corporation where either: TPA a. The price of the goods does not exceed $40K (s 4B(1)(a)(i)); OR TPA b. If they do exceed $40K, then they are of a kind ordinarily acquired for TPA personal, domestic or household use or consumption (regardless of TPA price) (s 4B(1)(a)(ii)) TPA i. OA4PDOHUOC is a Q of fact (Carpet Call) TPA ii. Focus is on ordinary use, not the actual intended use TPA iii. Things not OA4PDOHU: TPA 1. Airseeder (Jillawarra) TPA 2. Large tractor (Atkinson) TPA 3. Reduction photocopier (Four Square Stores) TPA 4. Prime Mover (Minchillo) TPA 5. Ostrich egg incubator (Crago) TPA 4. May be a consumer even where goods are purchased second hand TPA (Atkinson v Hastings Deering) TPA 5. Not a consumer if the goods are purchased for resale, or to be used in the TPA process of production or manufacture (s 4B(1)(a)) TPA 6. Just because something is used on a farm or purchased for a nightclub, does TPA not make it lose its character as OA4PDOHUOC (Carpet Call) TPA a. And just because used in a business does not make it lose those TPA qualities (Crago) TPA viii. Operation of the TPA can be extended: Page 6 of 20 Nick Dowse Sale of Goods – Implied Terms TPA 1. Non-corporate traders engaged in TPA a. interstate or overseas trade or commerce (s 6) TPA b. trade or commerce within or involving a Territory (s 6) TPA c. dealings with the Cwth govt or any of its instrumentalities (s 6) TPA 2. Persons who aid, induce or conspire in a contravention of the TPA may incur TPA liability (s 75B TPA) TPA a. Includes employees, salespersons, or ISPs TPA ix. The TPA cannot be excluded: TPA 1. Section 68 prevents the ousting of the TPA TPA 2. However, s 68A TPA provides a mechanism for corporations to limit their TPA liability in relation to goods or services that are not ordinarily acquired for TPA personal, domestic or household use or consumption. TPA a. This would otherwise be prohibited under s 68 TPA. TPA 3. This essentially means that corporations can limit their liability to other TPA corporations. But it also means a corporation can limit its liability to TPA “consumers” (within its s 4B definition) where the good/service is below TPA $40,000 (in s 4B(1)(a)(i) TPA) but is not ordinarily acquired for personal etc TPA use. TPA x. Overall conclusion: does the TPA apply or not? TPA d. NOTE: Both the SGA and the TPA can apply simultaneously to the one transaction because of s 75(1) TPA. Section 109 of the Constitution does not invalidate the SGA to the extent of any inconsistency in the SGA with that of the TPA. Page 7 of 20 Nick Dowse Sale of Goods – Implied Terms 3. What terms are implied by the statute? a. SGA i. Express stipulations in the contract may render the need to imply a term redundant! SGA 1. Point out express terms of the K that mean a term need not be implied under SGA the SGA. SGA ii. Implied Condition That Seller Has The Right To Sell (s 15(a) SGA) SGA 1. Breached where seller has no title to the goods (Rowland v Divall) SGA SGA 2. Liability imposed is strict and does not depend on the knowledge of the seller. SGA 3. If the seller does not have title, they may perfect their title later but before the SGA buyer rescinds the K, in which case there is no breach of s 15(a) (Patten v SGA Thomas) SGA 4. If the seller does not have title because: SGA a. Goods stolen, then breach of s 15(a) (Rowland v Divall) SGA b. Goods under hire-purchase and option to purchase not exercised, SGA SGA unless title later “feeds” down, breach of s 15(a) (Butterworth) SGA 5. If seller does have title, but cannot sell because: SGA a. Infringing a trademark, then breach of s 15(a) (Niblett) SGA b. Goods impounded at time of sale, then breach of s 15(a) (Egekvist) SGA c. Some other fact restricts their sale, then breach of s 15(a) SGA (Microbeads). SGA 6. Remedy for breach: SGA SGA a. As a condition, the implied term is fundamental to the K, and a breach will entitle the buyer to rescind the K and claim for damages (Rowland SGA v Divall) SGA b. Section 14(3), which otherwise converts a condition to a warranty in SGA these circumstances, has been held not to apply to s 15(a) (Rowland v SGA Divall; Butterworth v Kingsway) SGA iii. Implied Warranty That Buyer Shall Have Quiet Possession (s 15(b) SGA) SGA SGA 1. “Quiet possession” includes, but extends beyond, freedom from physical interference with the goods by the seller SGA 2. The goods are the buyer’s to have and enjoy at and after the sale (Keetley) SGA 3. Will be breached where: SGA a. Goods are sold and delivered on credit, but still within the terms of SGA credit, the goods are seized by the seller wrongfully (Healing v Inglis) SGA b. Patentee of a patent affecting the goods claims infringement by buyer SGA SGA against patent (Microbeads) c. Buyer must modify goods in order to avoid copyright infringement SGA against a 3 party (Niblett) SGA 4. This implied warranty is often relied on together with s 15(a) (above). SGA 5. Remedy for breach: SGA a. As a mere warranty, the buyer is limited to a claim for damages, and SGA SGA cannot rescind the K (s 54 SGA). SGA i. The quantum of damages is the estimated loss directly and SGA naturally resulting from the breach of warranty: s54(2). SGA iv. Implied Warranty That Goods Are Free From Encumbrances (s 15(c) SGA) SGA 1. Breached where the seller does not disclose a tax owing or a charge etc over SGA the chattel (Steinke v Edwards) SGA 2. Will not be breached where encumbrance disclosed to buyer by seller SGA SGA 3. Remedy for breach: a. As a mere warranty, the buyer is limited to a claim for damages, and SGA cannot rescind the K (s 54 SGA). SGA i. The quantum of damages is the estimated loss directly and SGA naturally resulting from the breach of warranty: s54(2). SGA 1. But is limited to amount of expenditure required to SGA SGA Page 8 of 20 SGA Nick Dowse Sale of Goods – Implied Terms discharge the encumbrance or charge plus any legal costs (Steinke) v. Implied Condition That Goods Correspond With Their Description (s 16 SGA) 1. STOP: Check if there is an express or implied stipulation as to conformity with description. If the parties intended for spoken words to that effect were to SGA form part of the contract, the court will give effect to it (Oscar Chess). SGA 2. Section 16 requires a sale by description before the condition is implied. SGA SGA 3. Were the goods sold by description? SGA a. Will be a sale by description where the basis for goods being selected or identified is their correspondence to a description (Aust Knitting). SGA b. If the goods are unascertained, usually sold by description, otherwise SGA there would be nothing to determine the subject matter of the contract SGA c. If the goods are future goods, usually sold by description, but not SGA necessarily (i.e. where seen and requested by the buyer in the hands SGA rd SGA of a 3 party and then later obtained by the seller). SGA d. If specific goods: i. Usually sold by description, but not necessarily so. SGA ii. Sale in a self-service store will constitute a sale by description, SGA provided the goods are described in some way on the outside of SGA the packaging or by sign, notice or label (Grant v Aust Knitting) SGA iii. There is no distinction between self-selection and a sales SGA SGA assistant handing over an article in response to a request (Pacific Tea v Walker) SGA e. Examples: SGA i. Bull seen and described as breeding bull = SBD (McBride) SGA ii. Buy underwear self-selected from shelf, packaging described as SGA underwear = SBD (Aust Knitting) SGA iii. Buy painting described as “Munter” but seller professes not to SGA SGA be an expert, turns out to be fake = artist does not form part of description (Chris Hull) SGA 4. Did the buyer rely on the description? SGA a. Not strictly correct in principle to say that reliance is required, but SGA relevant as far as intention of parties for description to form part of the SGA K (Chris Hull). SGA 5. What words form part of the contractual description? SGA SGA a. The words must go to the kind, class or species of the goods, and not to their quality, state or other attribute (Taylor v Combined Buyers). SGA b. Must go to their identity, not quality (Ashington Piggeries) SGA c. Examples: SGA i. If K to buy “cask of port wine” but get beer = difference of kind, SGA so breach SGA SGA ii. If K to buy “cask of port wine in sound condition” but get in poor SGA condition = difference is only in quality, therefore no breach iii. If K to buy specific chairs described as “antique mahogany SGA chairs” but receive modern imitations = difference in kind, SGA breach SGA iv. If K to buy stud bull (breeding bull) but bull sterile = breach of SGA condition because essential SGA SGA 1. But if desc “pedigree Jersey bull” and sterile = pedigree does not equal fertile, therefore no breach (Dell v Quilty) SGA v. If K to buy 14-horse-power engine, but get less horse-power = SGA difference in quality, no breach (Parson v Sexton) SGA vi. If K to buy specific “stock of coal or Cumberland and small SGA Welsh coal mixed” but get mixture of inferior coal = difference of SGA SGA Page 9 of 20 SGA Nick Dowse Sale of Goods – Implied Terms quality only, therefore no breach (Kirkpatrick v Gowan) vii. If K to buy a new machine, from the previous year, only used for SGA 50 acres but machine doesn’t work = difference as to kind, qualitative description may form part of description (Ashington SGA Piggeries) SGA viii. If K to buy new car, but receive 2 hand car where technology SGA has changed = goes to kind, not quality SGA SGA ix. If K to buy a particular model of car, but car received is two SGA bodies of same model welded together = breach (Beale v Taylor) SGA 1. Even though this prima facie goes to quality, it was so SGA important to the parties to the TX that it was considered SGA to go to the identity of the goods. SGA d. Words that describe the purpose for which goods are suitable will SGA SGA usually not form part of the description, but if something is described SGA as “oysters, fit for eating” and they are not, will not conform with their description SGA e. Go through and state which words form part of the description, which SGA words do not. SGA 6. Do the goods in fact correspond with their description? SGA a. This is a question of fact, determined my reference to the particular SGA SGA circumstances (Ashington Piggeries) SGA b. If order food to be made of “fair, average quality of the season” and receive toxic food for mink = description goes to quality, not kind, SGA therefore no breach of this implied term (Ashington Piggeries) SGA 7. Remedy for breach: SGA a. Go to Remedies for Breach of Implied Terms on page 18. SGA vi. Implied Condition That The Goods Will Be Fit For Their Purpose (s 17(a) & (b) SGA) SGA SGA 1. The buyer must have made known, expressly or by implication, the particular SGA purpose for which he wanted the goods a. Rationale: the seller is entitled to know the purpose so they can ensure SGA the goods are fit for that purpose. SGA b. “Particular purpose” = their given purpose, known or communicated. SGA c. Go through circumstances surrounding the TX and examine them. SGA d. The purpose can be a narrow or general purpose (Regal Pearl) SGA SGA i. Important which purpose the court adopts as it can affect SGA whether or not there has been a breach ii. i.e. in Regal Pearl trial judge defined it as “prawns for cooking in SGA prawn dishes for customers to eat” (narrow), but appellate court SGA defined it as “prawns for human consumption” (general) SGA iii. If too general/broad, might not be enough to enable the seller to SGA SGA exercise its skill and judgement (Hardwick) SGA e. If the goods have multiple purposes, it is enough for the goods to be fit for at least one of those purposes, not all (Hardwick Game Farm) SGA f. Even if the buyer does not make the purpose for which they are buying SGA the goods expressly known to the seller, the purpose can be inferred if SGA the goods are suitable for only one normal purpose (Priest v Last). SGA i. i.e. if buy hairbrush, obviously to brush hair SGA SGA ii. i.e. if buy ship propeller, obviously for propelling ship (Cammell) SGA iii. i.e. if buy underwear, obviously to be worn (Aust Knitting) iv. i.e. if buy carton of milk, obviously to be drunk by human (Frost) SGA g. The converse also applies: if you have a good that can be used for a SGA variety of purposes, need to particularise when disclosing (Priest v SGA Last). SGA SGA Page 10 of 20 SGA SGA SGA SGA NicSGAowse Sale of Goods – Implied Terms SGA h. But if the buyer has an abnormality which is not disclosed to the seller, SGA then there can be no implication (Griffiths v Peter Conway) SGA i. If the parties have a sufficient history of dealings together, this may be SGA enough to imply a disclosure for purpose by the buyer (Hardwick SGA Game Farm) SGA 2. The particular purpose must be disclosed in such a way that it is clear that SGA the buyer is relying on the seller’s skill and judgement, and, does in fact rely SGA on it. SGA a. Must disclose the purpose to the seller with a sufficient degree of SGA particularity. SGA b. There must be actual reliance on the seller’s skill and judgement and SGA this must be evidence to a reasonable seller at or before the time the K SGA is formed (Frank v Grosvenor) SGA i. i.e. it is an objective test. SGA ii. Where reliance is in issue as between two related corporations, SGA it will be difficult to show reliance where the buyer knows the SGA seller simply on-sells goods which they (the seller) themselves SGA have not exercised any skill/judgment (Dowdell v Knispel). SGA c. There is no presumption of reliance (Claude B Fox), but can arise by SGA implication from the surrounding circumstances (Ashington Piggeries) SGA d. Reliance can be inferred from the fact that a buyer goes to a shop in SGA the confidence that the tradesmen selected the stocked goods with SGA skill
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