Legal problem solving – using case law and legislation Part II

1. Legal problem solving – using case law and legislationPart II

2. Source of legal rights Contract: Express Terms Torts Statute: Consumer Guarantees

3. Contents of the Contract Terms

5. Term or representation? • Objective test of intention • “reasonable man” • Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 • Indicative factors include • Importance of statement • Time between statement and contract • Special knowledge or skill or access to truth of one party • Inclusion of statement in any subsequent document • Ellul &Ellul v Oakes (1972) 3 SASR 377

6. 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

7. 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

8. ‘ Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) CLR 633 Associated Newspapers Limited v Bancks (1951) 83 CLR 322

9. Warranty • Bettini v Gye(1876) 1QBD 183 per Blackburn J said at 188: “[a condition is] a stipulation [which] goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract a thing different in substance from what the defendant has stipulated for.”

10. 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

11. Innominate terms • Approved by High Court in • Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61

12. Implied Terms in contracts: Sale of Goods Act 1923 (NSW )

13. Sale of Goods Act NSW (1923) • Implies terms into • Contracts • For sale (money consideration) • Of goods (not services) • Cf Australian Consumer Law

14. What is implied? • S17: title to sell • S18: correspondence with description • S19(1):fitness for purpose • S19(2): merchantable quality • S20: correspondence with sample

15. Eg s17Sale of Goods Act • s 17 Implied undertaking as to title etc • In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is: • an implied condition on the part of the seller that in the case of a sale the seller has a right to sell the goods, and that in the case of an agreement to sell the seller will have a right to sell the goods at the time when the property is to pass, • an implied warranty that the buyer shall have and enjoy quiet possession of the goods, • an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

16. Consumer? • 62Definition • In this Part, consumer sale means a sale of goods (other than a sale by auction) by a seller in the course of a business where the goods: • (a)  are of a kind commonly bought for private use or consumption, and • (b)  are sold to a person who does not buy or hold himself or herself out as buying them in the course of a business.

17. Relationship between legislation and case law • Common law system – use cases to understand/interpret legislation • e.g. What do terms such as ‘merchantable quality’,’ sale by description’ and ‘reliance on seller’ mean? • Find answers in case law such as: • Ashington Piggeries v Christopher Hill [1972] AC 441 • Grant v Australian Knitting Mills (1935) 54 CLR 49 • David Jones Ltd v Willis (1934) 52 CLR 110

18. Consumer Guarantees: Australian Consumer Law

19. Revise: How to read a statute E.g. Competition and Consumer Act 2010 (Cth) – 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.

20. 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.)

21. Legislation • Competition and Consumer Act 2010 (Cth) • Schedule 2 - Australian Consumer Law • Application scheme • Commonwealth Act – only applies to corporations • Why?

22. 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)?

23. 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. 54Guarantee as to acceptable quality 55 Guarantee as to fitness for any disclosed purpose etc. 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

24. 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.              (2)  A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer.              (3)  If goods are supplied by description as well as by reference to a sample or demonstration model, the guarantees in this section and in section 57 both apply.

25. Common elements a person supplies, in trade or commerce, goods to a consumer • Common Elements: • Person/corporation • Supply • Trade or commerce • Goods • Consumer

26. S2:trade or commerce trade 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

27. S2: goods goods 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.

28. 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                              (ii)  if a greater amount is prescribed for the purposes of this paragraph—that greater amount; 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.

29. Case law • ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’ • Carpet Call Pty Ltd v Chan (1987) ATPR 41-025

30. ‘ordinarily acquired for personal, domestic or household use or consumption’ • Not just personal use • Business use as well • e.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 well • E.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 )

31. 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.              (2)  A supply of goods is not prevented from being a supply by description only because, having been exposed for sale or hire, they are selected by the consumer.              (3)  If goods are supplied by description as well as by reference to a sample or demonstration model, the guarantees in this section and in section 57 both apply.

32. S56: elements • Common elements • Supply by description • Guarantee of correspondence with description

33. Case law • UK Sale of Goods Act • S19(2) Sale of Goods Act 1923 (NSW) • s71(1) Trade Practices Act 1974 (Cth) • Presumptions in statutory interpretation

34. Case Law Ashington Piggeries v Christopher Hill [1971] 1AllER847 Grant v Australian Knitting Mills (1936) 54 CLR 49 Sale/Correspondence with description

35. 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.”

36. 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.

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

38. Case Law Purpose made known? • Obvious purpose? • Underpants – Grant v Australian Knitting Mills Reliance on seller’s judgement? • Ashington Piggeries v Christopher Hill

39. 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).

40.   (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.              (4)  If:                      (a)  goods supplied to a consumer are not of acceptable quality; and                      (b)  the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer’s attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality.

41.   (5)  If:                      (a)  goods are displayed for sale or hire; and                      (b)  the goods would not be of acceptable quality if they were supplied to a consumer; the reason or reasons why they are not of acceptable quality are taken, for the purposes of subsection (4), to have been specifically drawn to a consumer’s attention if those reasons were disclosed on a written notice that was displayed with the goods and that was transparent.              (6)  Goods do not fail to be of acceptable quality if:                      (a)  the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and                      (b)  they are damaged by abnormal use.              (7)  Goods do not fail to be of acceptable quality if:                      (a)  the consumer acquiring the goods examines them before the consumer agrees to the supply of the goods; and                      (b)  the examination ought reasonably to have revealed that the goods were not of acceptable quality.

42. 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

43. Remedies http://shusmo.me/2010/02/13/those-darn-angry-customers /

44. 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

45. Statutory Remedies • The remedies relating to the consumer guarantees are found in Part 5-4 of the ACL. • Range from refunds and replacements to compensation and costs. • The appropriate remedy against suppliers of goods and services varies depending on whether or not the failure to comply with the guarantees is ‘major’ and whether it can be remedied.

46. Consumer Guarantees - remedies • If the failure is major or cannot be remedied, the consumer (not the supplier) may choose to reject the goods ormay choose to keep the goods but ask for compensation to make up the difference in value caused by the failure: see section 259 (3). • If the failure to comply with a guarantee is not a major failure and can be remedied, the consumer may require the supplier to remedy the failure within a reasonable time: see section 259 (2). • The supplier may then choose to remedy the failure by repairing or replacing the goods or refunding money paid for the goods: see section 261.

47. 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….

48. 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.

49. 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.