Law of Obligations 132
Topic 1 – Introduction o Be necessary to give ‘business efficacy’ – if - Had caught the ferry multiple times – deemed
contract is effective without it, it is not previous course of dealings.
implied. Hollier v Rambler Motors 
Consumer Rights: o Be so obvious ‘it goes without saying’. - H left car with RM – was damaged by fire.
UN 8 basic consumer rights: o Be capable of clear expression. - Clause on the bottom of form ‘not liable for damage by
1. Right to safety – protection against products which are
hazardous to health of life. o Not contradict any express term. fire’.
2. Right to be informed – be given the facts to make an Attorney General of Belize v Belize Telecom  - H had signed this 2 times before over 5 years. Hadn’t
informed decision, protection against dishonest or - The implied term must ‘go without saying’. signed it the 3 time.
- Must be obvious that it is implied. - Held – wasn’t enough evidence that there was
misleading advertising. Codelfa Constructions v State Rail Authority (1982) sufficient previous course of dealings for the term to
3. Right to choose – to be able to select from a range of - Injunction to stop work between 10pm and 6am. be implied’.
products offered at competitive prices.
4. Right to be heard – have consumer interested - Thought there was an implied term to pass on Types of Contracts:
represented in government policy. additional costs to State. Tenants and Landlords – Liverpool City Council 
5. Right to satisfaction of basic needs – to have access to - Held – no implied term – was not obvious enough that - Tenants have an obligation to pay rent.
essential goods and services. ‘it goes without saying’. - Landlords have an obligation (implied) to make
Bryne v Australian Airlines (1995) INFORMAL CONTRACTS dwellings liveable.
6. Right to redress – receive a fair settlement for claims. - Termination should not be ‘harsh, unjust or Contract for Work and Materials:
7. Right to consumer education – to acquire skills and unreasonable’.
knowledge needed to make informed choices. - Reasonable care and skill will be exercised.
8. Right to a healthy environment – to live and work in a - Was not an implied term. - Materials supplied will be of good quality and
non-threatening environment. - ‘A court should only imply a term where it is seen that reasonably fit for the purpose intended.
the implication of the term is necessary for the Authority for implication of terms in building contracts: Young
reasonable or effective operation of a contract.’ & Marten Ltd v McManus Childs Ltd 
ACL – one national law for fair trading and consumer Previous Course of Dealings: - Roof tiles
Must be established that: - Where poor quality materials are chosen (or where a
Topic 2 – Implied Contractual Terms - Term is clearly identifiable in past dealings. specific supplier is chosen) by the customer, builder
- Previous dealings were sufficiently numerous and may be able to avoid liability for the implied term of
consistent – regular course of dealings. fitness for purpose but may not be able to avoid
Implied Terms: - Present dealing fits into that course of dealing to the liability for the implied term regarding quality of
- Terms of the contract that were not expressly agreed extent that it can reasonably be said that the same materials.
upon between the parties, but which the law terms should be included.
nevertheless considers to be part of the agreement. Custom or Trade Usage:
Business Efficacy: - No conflict between the implied term and the express - Terms may be implied to give effect to the customs or
terms. usages of a particular trade/industry/market/context.
- Would the contract make business sense without the Henry Kendall  Con-Stan Industries (1986)
term? - W sold Brazil nuts to H 3-4 times a month for 3 years. - Outlined principles for implying a term on the basis of
The Moorcock (1889) Sent a ‘sold note’ with each delivery. Stated buyer custom:
- Boat damage when moored on the Thames. bore the risks of any defects. o The existence of a custom or trade usage that
- If the contract makes business sense without the term, - ‘Sold note’ was an implied term – due to previous
it is not implied. will justify the implication of a term into a
- Held that there was an implied term that the river bed course of dealings, H had to be aware of the term. contract is a question of fact.
W Noall & Son v Wan  o The custom or trade usage need not be
would be suitable for mooring. - Same a Henry Kendall. universally accepted. However it must be so
BP v Hastings (1977) FORMAL CONTRACTS - ‘bought notes’ and ‘sold notes’ were implied terms. well known and acquiesced in that everyone
- Test for whether a term can be implied to give Balmain New Ferry (1906) making a contract in the industry can
business efficacy: - Penny going in, penny going out.
o Be reasonable and equitable. reasonably be presumed to have imported it
- Had reasonable notice (signage). into the contract. o The custom or trade usage cannot contrary Fitness for Purpose Are the goods free from defects
an express term of the contract. - s17(a) Implied condition as to quality or fitness that would render them
o A person may be bound by a custom o 1. Buyer makes known expressly or unmerhcantable?
notwithstanding the fact that he had the impliedly the purpose for the goods. Frost o LG Thorne & Co v Thomas Borthwick &
knowledge of it. Aylesbury Dairy, Grant v Australian Sons
Implied Duty of Good Faith Knitting Mills. If use is significantly
- Mainly used in commercial contracts. different to that of a normal user, no implied THESE IMPLIED TERMS CAN BE EXCLUDED IF AGGRED TO IN
- Parties to the contract are to act in good faith. condition. Griffiths v Peter Conway THE CONTRACT. S56
Burger King v Hungry Jacks  o 2. They buyer relied on the seller’s skill and Deemed Acceptance
judgement. Grant v Australian Knitting - s37
- Hungry Jacks needed to open a certain amount of
franchises each year subject to franchisor’s approval. Mills, Expo Aluminium Remedies
- Franchisor did not give approval. o 3. The goods are of a description which it is - s14(2)(3)
- Was not acting in good faith of the contract. in the course of the seller’s business to o Condition – repudiate
Exclusion of Implied Terms supply. Ashington Piggeries o Warranty – damages
o 4. Has the buyer ordered goodsunder their Consumer Guarantees under ACL
- Terms will not be implied by law, fact or custom patent or trade name do that it is clear there
where expressly excluded or where inconsistent with Does the act apply?
express terms. is no reliance on the skill or judgement of the 1. Person
Contract of Sale of Goods (SGA) seller? Baldry v Marshall – doesn’t a. S131 CCA – “Schedule 2 applies as a law of
- A contract whereby the seller transfers (or agrees to necessarily mean there is no implied the Commonwealth to the conduct of
condition – go to merchantable quality. corporations…”. Therefore ACL applies.
transfer) the property in goodsto the buyer for a price Merchantable Quality b. S139B(2)(a) CCA – any conduct engaged in
- s4(1) Sale of Goods Act. - s17(c)
- Distinction between sale of goods and contract for on behalf of the body corporate… by a
work and materials – what is the substance of the o Merchantable quality – goods must be director, employee or agent of the body
agreement? Robinson v Graves commercially saleable under the description corporate… is taken… to have been engaged
Contract they were sold. Must be fit for all purposes in also by the body corporate.
for which goods of that description are 2. Supply
- Refer to basic principled of contract law: commonly sold. Grant v Australian Knitting a. S2(1) ACL
o Offer and acceptance
o IELR Mills, Rasell v Cavalier Marketing i. Goods – supply (including re-
o Capacity etc. o 1. Sale by description. supply) by way of sale, exchange,
Goods o 2. Does the seller deal in goods of that lease, hire or hire-purchase.
- s3 SGA description? ii. Services – provide, grant or confer
o Has the buyer examined the goods? Would 3. Trade or Commerce
Money Consideration (Price) the examination have revealed the defects? a. S2(1) ACL – trade or commerce within
- s11 SGA
Transfer of Property s17(d) – implied condition does not apply if Australia.
- s4(3) SGA there was an inspection. Thornett & Fehr v 4. Goods
Terms Implied by the SGA Beers & Son. Medtel – if they would have a. S2(1) ACL – list what corresponds from the
known of the defect, they would not have legislation.
Correspondence with Description bought it. 5. Consumer
- s16 Sale by Sample
o Statements about quality usually do not form a. S3(1) ACL – a person is taken to have
part of the description for determining - s18 acquired goods as a consumer if:
whether there is correspondence with o 1. Was there a sale by sample? s18(1) i. Did not pay more than $40,000
description. Ashington Piggeries o 2. Either: ii. The goods were of a kind ordinarily
Does the bulk correspond with the acquired for domestic or household
o Must be relying on the description alone (has sample? consumption. Carpet Call,
not seen the goods). Varley v Whipp Has the buyer had a reasonable
o Or, can still have seen the goods but is Bunnings
relying on the description. Australian opportunity of comparing the bulk 6. No Auction
Knitting Mills with the sample?
The Act applies. o There is a guarantee that the goods are of Topic 3 – Misrepresentation, Misleading or
Supply of Goods by Description acceptable quality.
- S56(1): - S54(2) acceptable quality: Deceptive Conduct, Passing Off
o 1. Person, supply, trade or commerce o (a) fit for all purposes for which goods of
o 2. Goods supplied by description that kind are commonly supplied A representation which is untrue.
o 3. Consumer o (b) acceptable in appearance and finish - Representation – “a statement made by one party to
o 4. No Auction o (c) Free from defects.
o There is a guarantee that the goods will o (d) Safe the other, before or at the time of contracting, about
correspond with the description. o (e) Durable some existing state of affairs or some past event which
is one of the factors which induced the representee to
- S56(2) - S54(4) not acceptable quality: enter the contract. Cheshire & Fifoot’s Law of
o A supply of goods is not prevented from o If the reasons why the product is not of Contract
being a supply by description only because, acceptable quality are shown to the buyer. Actionable misrepresentation:
having been exposed for sale or hire, they Remedies
are selected by the consumer. - MAJOR FAILURE - 1. A statement of fact
Supply of Goods by Sample o 1. Consumer has a right to take action if a o Cannot be statement of opinion/mere puff.
Bissett v Wilkinson
- S57(1) if: supplier of goods fails to comply with a - 2. Which is untrue
o 1. Person, supply, trade or commerce guarantee. S259(1) o False statement must be made, silence does
o 2. Goods supplied by sample or demo model o 2. Is the failure major? S260 not constitute misrep.
o 3. Consumer (a) The goods would not have been
o 4. No Auction acquired had the consumer been - 3. That was intended to induce the contract
o There is a guarantee that the goods will fully aware of the extent of the o The representor must have intended the
statement to be relied on by the representee.
correspond with the sample in quality, state failure. Medtel Peek v Gurney
or condition, the goods are free from any (b) The goods depart in one or - 4. And did in fact induce the contract
defects that would not be apparent on more significant respects (either o The representee must have relied on the
reasonable examination of the sample, from their description or their
would cause the goods to not be of sample) statement.
acceptable quality. (c) The goods are substantially o If they knew it was untrue Redgrave v Hurd
o If they did not rely on it Holmes v Jones
Fitness for any Disclosed Purpose unfit for the purpose for which - The representation does not need to be the sole
- S55(1) if: goods of the same kind are reason for entering into the contract, if it is one of the
o 1. Person, supply, trade or commerce commonly supplied and can’t be
o 2. Goods supplied remedied. reasons it is sufficient. Edgington v Fitzmaurice
o 3. Consumer (d) The goods are unfit for a Three Categories:
o 4. No Auction disclosed purpose Fraudulent:
- A statement made knowing to be false or without
o There is a guarantee that the goods are (e) The goods are not of acceptable belief in the truth or recklessly, careless whether it be
reasonably fit for any disclosed purpose, and quality because they are unsafe. true or false. Derry v Peek, Gould v Vaggelas
for any purpose for which the supplier o Remedies
represents that they are reasonably fit. Reject the goods s259(3) Remedies:
- Disclosed Purpose s55(2): Damages s259(4) - Rescission of the contract
- NOT MAJOR FAILURE - Damages in the tort of deceit
o 1. Was there a disclosed purpose? Innocent:
o 2. Was it expressed or implied? o Supplier must remedy the failure s259(2) - A statement made in honest but mistaken belief that it
o 3. Did the buyer rely on the skill and Refund s261(c) is correct. Redgrave v Hurd
judgement of the seller? – if not, no Replacement s261(d)
Acceptable Quality Rescission of the contract
- S54(1) if: - A careless statement made in the circumstances
o 1. Person, supply, trade or commerce where the representor owes a duty of care to the
o 2. Goods supplied representee. Esso Petroleum
o 3. Consumer
o 4. No Auction Remedies:
- Damages in the tort of negligence Misleading or Deceptive Conduct: Depends on whether a reasonable o Talmax v Telstra – Telstra ad with logo on
- S 18(1) ACL: member of the relevant class that swimmer’s cap. Swimmer was not actually a
o A person must not, in trade or commerce, the party has adopted or endorsed sponsor.
engage in conduct that is misleading or that representation. o ACCC v Dell – D had prices for computers on
deceptive or is likely to mislead or deceive. MISLEADING: website but did not include compulsory
o 1. Person ACCC v Australian delivery fee.
S131 CCA – “Schedule 2 applies as a Medical Institute – Ian o ACCC v GIA – G removed tags saying “made
law of the Commonwealth to the Turpie appearing in in China”.
conduct of corporations…”. newspaper advert. Passing Off
Therefore ACL applies. - When one person attempts to ‘pass off’ their goods,
S139B(2)(a) CCA – any conduct ACCC v Google services or business as those of another person, or as
engaged in on behalf of the body Butcher v Lachlan Elder in some other way associated with the other.
corporate… by a director, employee Realty o 1. The existence of some reputation of
or agent of the body corporate… is S19 exemption – publications by goodwill vested in the plaintiff’s business
taken… to have been engaged in ‘information providers’ from the o 2. Defendant makes a false representation as
also by the body corporate. to a connection between the defendant’s
scope of s18.
o 2. Trade or commerce S251 defence – if the publisher business and the plaintiff’s business that was
S2(1) ACL – trade or commerce received the advertisement in the