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Contract Law: Terms For Services

>Types: Express Terms: Written & Oral express terms >Section 3(3) you are a consumer if (i) value of services
>Structure $40,000 or less (ii) where more than $40,000, but for PDH
1. What are terms? (common law)-> written or oral? “Ordinary Acquired” – is the goods/ services normally
1.1 Is the oral statement capable of being an oral term (as per purchased for personal, domestic or household purposes?
Oscar Chess v Williams)-> Reasonable Bystander Test 1.4 Which statutory guarantees apply? p.360 Goods (s54-57),
1.1.1 What is the statement to be examined? p.373 Services (s60-62)
1.1.2 Was the representation included in a written For Goods
document? I. s54: Guarantee of acceptable quality - s54 (1) there is
1.1.3 Timing? 1.1.4 Promissory? 1.1.5 Important to the deal? guarantee that the goods are of acceptable quality. S54 (2)
1.1.6 Special knowledge? Sub conclusion Acceptable quality means that good must be: fit for purposes,
1.2 Is there a signed written contract? (as per L’Estrange v F acceptable of appearance, free from defects, safe and durable
Graucob and Toll v Alphapharm) II. s55: Guarantee of Fitness for any Disclosed Purpose – s55
1.2.1 Parol Evidence Presumption (PER) can the oral term be (2) Consumer must make known purpose of which the goods
enforced if it is not a signed written document? will be used (as per Dawson v Pacific Chase Investments). a) Argue 1 -> partly written and oral terms (PER X) (as Disclosure can be made: directly, through implication, pre-
per Van Den Esschert v Chappel) b) how to avoid PER? Argue contractual negotiations
2 -> one written and one collateral oral (PER V) (as per JJ III. s56: Guarantee that goods correspond with description –
Savage and Sons v Blakney) 3 Elements to consider for s56 (1) the goods sold will correspond to that description (as
arguing there is collateral contract 1) consideration 2) per Beale v Taylor)
promissory 3) cannot be inconsistent with the main contract IV. s57: Guarantee that goods correspond with sample – s57
2. Has one party breached the terms? (look at the term/facts) (1) the goods sold will correspond to with the sample in
3. Is there an exemption clause? (express or incorporated) quality, state and condition
3.1 Is the exemption clause a term of the contract? For Services
3.1.1 Signed documents – signature rule (as per L’Estrange v I. s60: Guarantee of Due Care and Skill – services will be
F Graucob Ltd). Exceptions: mispresented & mistaken provided with due care and skill (as per Read v Neerey)
contract II. s61: Guarantee as to fitness for purposes – where the buyer
3.1.2 Unsigned documents (as per Causer v Browne) is there makes known to the service provider for purposes service is
any unsigned writing which has been incorporated into the required, the service must be reasonably fit for purpose (as
contract (Reasonable Test) per Zhang v United Auctions) Is the document contractual in nature? III. s62: Where no time for the supply of service is fixed, a Has the person who is trying to rely on the exemption guarantee that they will be supplied within a reasonable time
clause given reasonable notice? 1.5 Is the breach a major failure? s260 and s268
3.1.3 Timing issue? (as per Olley v Malborough Court) must For Goods
be brought to attention to party at the time contract is made If there is a breach, the remedies to consumers are set out in
4. What are the remedies if the terms have been breached? the ACL s260. Remedies depend on whether it is a major
Type of damages available: loss of profit, personal injuries failure or not, factors: a) goods would not have been acquired
>Types: Implied Terms: under Common law by a reasonable consumer fully acquired with the nature &
>Structure extent. b) goods are substantially unfit for either normal,
1.1 RL: Matter of Law – it is an implied term that parties must disclosed purpose. c) cannot be easily and within a reasonable
have co-operation and act in good faith (as per Burger King time be remedied to make them fit. d) goods are not of
Corp v Hungry Jack’s Pty Ltd) acceptable quality because they are unsafe.
1.2 RL: Contract of a certain class For Services
1.2.1 RL: Professionals must carry out service with reasonable If there is a breach, the remedies to consumers are set out in
care and skill (as per Costa Vraca v Berrigan Weed & Pest the ACL s268. Remedies depend on whether it is a major
Control) failure or not, factors: a) services would not have been
1.2.2 RL: Work and materials must be fit for the purpose (as acquired by a reasonable consumer fully acquired with the
per Reg Glass v Rivere Locking System) nature & extent. b) services are substantially unfit for either
>Types: Implied Terms: under ACL normal, disclosed purpose. c) cannot be easily and within a
Have not been agreed by between parties, but which are reasonable time be remedied to make them fit. d) services and
implied or added into the contract any product resulting are not such a nature, condition or
1. Issue (put theory) a consumer is a person who is taken to quality. They might reasonably be expected to achieve the
have acquired particular goods/services as a consumer if, and purpose so cannot easily be remedied to make them fit for
only if (a) the amount paid or payable for the goods/services purpose. e) supply of services create in unsafe situation
as worked out under subsection; did not exceed (i) $40,000 (ii) 1.6 Is the exemption clause operative? S64 & s64A
if it is greater amount is prescribed for the purposes >Exclusion clauses – contracts term that excludes, restricts
>Structure the statutory guarantees for supply of goods or services is
1.1 Is the contract for goods or services? Under section 2 void (not effective) s64
>Goods are defined under s2 to include items normally >Limitation clauses – Remedies may be limited under s64A:
regarded as goods a) good or service is NOT normally PDH. b) limitation must be
>Services are defined under s2 include any rights, benefits, fair and reasonable. For goods: limited to repair or
privilege or facilities that are, or are to be provided in trade or replacement. For services: limited to supplying the service or
commerce paying services to be supplied again
1.2 Is the contract in trade or commerce? p.360 1.7 What remedies are available? p.368 and p.376
ACL does not apply if goods or services are provided through Remedies depends whether it is a major failure
private sale or sale by auction For Goods, remedies are listed in s260
1.3 Is the contract a consumer contract? Under section 3 (as >Consumers may choose to reject the goods if the breach is
per Crago v Multicorp Pty Ltd) a major failure. If the goods are rejected: 1. Consumer must
For Goods return the goods and may require supplier to provide refund
>Section 3(1) you are consumer if (i) goods cost $40,000 or or replacement with the same goods. 2. Any replacement are
less (ii) they are type or ordinary acquired for PDH (iii) goods subject to the statutory guarantees. 3. There are time limits
are commercial road vehicle on the right to reject goods. 4. The rejection should on the
>Section 3(1) you are not consumer if (i) to be used trade or same day of the goods supplied and received.
commerce (ii) repair Consumer can also sue for damages.
Rejection of goods – If the breach is NOT a major failure the
supplier may remedy by a) repairing b) replacing c) providing
a refund (a person remedies may be limited if s64A applies)
For Services, remedies are listed in s268 a) Injunction – it is another equitable remedy. It is a court an
>Consumer can choose to terminate or end the contract if order by the court to do something restraining them from
the breach is a major failure. 1. Termination is made known doing something. It is discretionary remedy
to supplier. 2. Following termination, consumer may demand b) Specific Performance – It is an order by the court requiring
a refund or any other consideration provided. 3. Where one party to carry out their contractual obligations
goods are supplied with the service, if it is terminated, the c) Damages – the purpose is to compensate innocent party.
goods will be rejected. The plaintiff can only receive if: 1. The defendant caused the
Consumer can also sue for damages or loss or damage caused breach of the contract (Reg Glass v Rivers Locking Systems),
by the breach. If s64 applies, remedies will be limited even if 2) The losses are reasonable foreseeable (first limb) - would a
it is a major failure. reasonable person in the position who breached the contract
>Types: Vitiating Factors – Misleading and Deceptive expect the losses (Koufos v C Czarnikow Ltd); (second limb) –
When the statement is untrue called misleading if the losses are not expected, did both parties discuss the
>Structure (Statue Law) matter or loss at that time the contract was made (Victoria
1.1 Test Section 18 – A person must not, in trade or Laundry v Newman Industries), 3) Damages may be reduced
commerce, engage in conduct that is misleading or if the injured party does not minimise the loss .
deceptive, or likely to mislead or deceive d) Termination - a contract may be terminated (discharged):
1.1.1 RL: Person – corporation and natural persons 1. For a breach of condition (Associated Newspapers Ltd v
1.1.2 RL: Was the representation made in trade or commerce Bancks), 2. For a repudation of a contract (Penola Trading Co
1.1.3 RL: The conduct must be misleading or deceptive. Pty Ltd v Sunny Springs Pty Ltd), 3. For an anticipatory breach
Under section 18, conducts that can be considered (National Engineering v Chilco Enterprises)
misleading or deceptive include: a) False statement of fact is
misleading, b) passing on information that has been prepared Corporation Law: Partnership
by others (as per Yorke v Ross Lucas Pty Ltd), c) Silence? (as >Structure: Creation of Partnership
per Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd), 1.1 RL: What is a partnership? Two or more people carrying on
d) Opinion? (as per RAIA Insurance Brokers Ltd v FAI General a business under section 5
Insurance Co), e) Promises and predictions? (as per Wheeler 1.2 RL: Carrying on business (as per Ferguson v Federal
Grace & Pieruci Pty Ltd v Wright), f) Mere puff? Commissioner of Taxation) – this entails regular acts done in
1.2 RL: Has the person breach section 18 – what did they do trade, occupation or profession (not hobby), systematic and
that was misleading or deceptive? organised activities, profit motive, commercial flavour,
1.3 RL: Loss caused by misleading conduct (as per Dalton v business already started
Lawson Hill) 1.3 RL: In common (as per Re Ruddock), people have mutual
1.4 RL: What remedy is available for misleading and deceptive rights and responsibilities – the business must be carried out
conduct under ACL on behalf of all the partners. There must be mutuality
>Types: Vitiating Factors – Unconscionable Conduct (sharing) rights and obligations
A contract may also be vitiated if it would be unfair to enforce 1.4 RL: With a view to profit – must aim to make a profit as
it. Unconscionable means the conduct or statement is unfair. the main purposes of the business
>Structure (Statue Law) 1.5 RL: Sharing of profits under section 6 is prima facie
Section 20, 21 and 22 prohibit unconscionable conduct: evidence that the person is partner (s6(3):(a-e)) include a)
1.1 Section 20 (within the meaning of the unwritten law) payment of debt from profits (as per Cox v Hickman), b)
1) A person must not in trade or commerce, engage in payment of a salary from profits (as per Plummer v Thomas),
conduct that is unconscionable, within the meaning of the c) payment to a wife or husband or child , etc. or a deed
unwritten law from time to time (as per CBA v Amadio) partner from profits, d) payment for a loan from profits (as
1.2 Section 21 (transaction between a business & a per Re Megevand), e) payment for goodwill of the business
consumer) from profits
1) A person must not in trade or commerce, in connection >Structure: Liabilities of Partners
with the supply or possible supply of goods or services to 1.1 RL: Rules relating to the partners under a partnership
another person. agreement or under Partnership Act, section 28,29 (fiduciary
Factor to consider in Business to Consumer: a) relative relationship)
strength of parties. b) conditions reasonably necessary. c) Only apply if there is no partnership agreement
understanding of document. d) unfair tactics. e) amount paid Includes: s28(1) share profit equally, s28(2) firm indemnifies
to others. all partners, s28(3) extra capital with interest 7%, s28(4) no
1.3 Section 22 (transaction between a business & a business) interest on original capital invested, s28(5) right to take part
1) A person must not in trade or commerce about other in management, s28(6) no right to remuneration, s28(7) no
person or company new partner without the consent of all existing partners,
Factor to consider in Business to Business: a) understanding s28(8) decision can be made by a majority partners, s28(9) all
of documents. b) unfair tactics. c) amount have to pay to partners can inspect the books, s29 no partner can be fired
acquire goods or services from an alternative source. d) unless there is an agreement dealing with that issue
conduct consistent with other transactions. e) any industry >Structure: Liabilities of Partners (Statue)
code to guide the parties. f) willingness to negotiate. g) good Jointly liable for partnership debts and obligations to 3rd
faith. h) strength of bargaining positions. i) conditions which parties (s9 & s13)- section 9 means in matter that include
are reasonably necessary to protect interests. carrying in the usual way of business and of the kind carried
1.4 Statutory Remedies on by the partnership. This describe the partner’s apparent
Remedies to breach of s21 or 22 may include: authority. S9 will not apply if the partner had no authority to
a) Damages (s236), b) Injunctions (s232), c) Compensation do so and third party knew this or third party did not know
Orders (s237), d) Adverse Publicity Order (s247), and e) the partner was a partner. If s9 applies, then all partners
Disqualification Order (s248) jointly liable under s13
>Structure (Common Law) Even in a partner has no actual or apparent authority, the
1.1 P is under a ‘special disability’ special disability can include: partnership still can be liable if the other partners ratified the
(as per Commercial Bank v Amadio) a) poor language skills, b) act (as per Re Oppenheim)
age, c) illness, d) financial stress, e) economic pressure, f) 1.1 RL: Is the transaction relate to kind of a business done by
superior bargaining power, g) infatuation partnership (as per Young v Lamb) Under s9 and s13
1.2 Did D takes advantage of P’s special disability in term To prove that all partners are jointly liable
where the taking is unconscionable (that is morally wrong) 1.2 RL: Is the transaction done within the usual way that the
1.3 How D took advantage of the special disability for its partnership conduct as business (as per Goldberg v Jenkins)
commercial benefits as per Amadio test To prove that only the partner is liable because not do it
1.4 What are the remedies available? within the usual business
Remedies may include:
Jointly liable for wrongful acts to 3rd parties (s14 & s16)- s14 1.3 RL: Duty not to misuse position s182(1) (as per Cummings
states partners who committed wrongful acts by a partner in v Claremont Petroleum)- directors must not improperly use
the ordinary business makes the other partners liable. It their position to: a) gain an advantage for themselves or
includes torts (negligence, fraud & defamation) and breach someone else, b) cause detriment to the corporation
of statutory duty. 1.4 RL: Duty not to use information improperly s183(1) (as per
s16: if s14 applies, then all partners will be jointly liable Cranleigh v Bryant)- directors must not improperly use
1.1 RL: Do all partners carry liability for a wrongful act information to: a) gain advantage for themselves or someone
performed by another partner? (as per Polkinghorne v Holland else, b) cause detriment to the corporation. Information
& Whittington) cannot be used improperly such as: company inventions,
To prove that all partners are jointly liable customer and supplier information, marketing strategies,
Liability for holding out (s18) information about finance, information regarding to
A non-partner may be liable for partnership debts if the non- company negotiations, and information created by a director
partner has acted in such a way that people dealing with the while carrying out their duties as a director.
partnership believe them to be a partner (as per D&H Bunny 1.5 RL: Remedies and sanctions – consequences of a breach of
Pty Ltd vs Atkins) the director duties s184- For civil consequences of breach
>Structure: Partnership Property (s24 & s48) s180,181,182 or 183: a) civil penalty up to $200,000, b)
Partners have no title to specific property owned by prohibition from managing companies in future, c) orders to
partnership, but each have a beneficial interest in every asset compensate the company. For criminal consequences: a) if
(FCT v Everett), partners have right to use partnership the director any of duties carelessly or was intentionally
property for that business. Section 48 sets out rules for the dishonest, the breach may amount to a criminal offence
distribution of assets following the dissolution of a under s184, fine up to $360,000 and/or five years’
partnership. imprisonment.
1.1 RL: What happens with the partnership property (as per 1.6 RL: Duty to disclose personal interest in subject the matter
Harvey v Harvey) of a decision by the directors s191- director should tell the
Partnership property is owned by the firm not the partners. others that they have a personal interest in the matter being
The partnership is to be applied to pay off the debs and if discussed.
there is any surplus to be distributed to the partners 1.7 RL: Duty to avoid insolvent trading s588G- it imposes a
>Structure: Duties of Partners (s32,33,34) duty on the director to prevent insolvent trading by the
The Fiduciary Relationships between partners. Partners have company
responsibilities to one another-duties to behave with good Insolvent is defined under s95A: A company is regarded as
faith towards each other being insolvent when it is unable to pay its debts as they
1.1 RL: What duties do partners have to each other under become due.
s32,33,34 (as per Chan v Zacharia) Following factors strongly indicate insolvency: failure to pay
s32-Duties to render accounts for use of property, s32-Duties creditors, inability to provide funds to cover small cheques,
to make disclosure of information affecting the partnership, failure to meet demands for payment on essential services
s33-Duties to account for private profits or use of assets, s34- 1.7.1 RL: Duty to avoid insolvent trading s588G (1)
Duties to avoid competition & not to compete with RL: A person is a director of a company at the time
partnership. when the company incurs a debt
>Structure: Liability for Retiring Partners (s40) RL: The company is insolvent at that time or become
Any person who deals with firm after change in its insolvent by incurring that debt
membership RL: At that time, there are reasonable grounds for
is entitled to treat all apparent partners as still being partners suspecting that the company is insolvent or would become
until they receive notice of the retirement. insolvent
1.1 RL: What happen when partners leave the partnership (as Sub conclusion
per Tower Cabinet Co) section 40 1.7.2 RL: Duty to avoid insolvent trading s588G (2) RL: The person is aware at that time that there are
Corporation Law: Corporations and Directors (Statue) such grounds for suspecting
>Structure director duties under the corporation act RL: A reasonable person in a like position in a company
1.1 RL: Duty to exercise reasonable care and skill s180(1) (as in the company’s circumstances would be so aware
per South Australia v Clark) Sub conclusion
Directors must do their jobs with the degree of care and skill 1.8 RL: Defences s588H (as per Metropolitan Fire Systems v
that a reasonable person would exercise. If a director has Miller)- four possible defences for directors who have
special skill or knowledge, it is expected to bring their special breached s588G. At that time when the debt was incurred the
skills into use when making decisions that affect the director must establish: a) 588H (2)- that there were
company. Two elements must be satisfied: wrongful or reasonable grounds to expect that the company would
inappropriate act by the company and the company was remain solvent even with the new debts, b) 588H (3)- that the
caused by a lack of skill or care by the director. Note: Not director had reasonable grounds to rely on information
apply for non-managing director provided by a competent or reliable person that the company
1.1.1 RL: Business Judgement Rule s180(2)- provide a defence was insolvent. For sizeable companies: rely on report
for breach of s180(1) if it includes: a) make the business provided by accounting staff or auditors; For small
judgement in good faith for a proper purpose, b) have no companies: the director is reliable and competent to know
personal interest in the subject matter, c) inform themselves company solvency, c) 588H (4)- that the director did not take
about the subject matter to the extent they reasonably part in management owing to illness or other good reason
believe is appropriate, d) rationally believe that the business (serious illness). To decide whether it is a good reason or not
judgement is in the best interests of the corporation. check in s180(1) such as not attend a meeting where the
Important notes: a) how often should directors attend decision is made is not a good reason, d) 588H (5)- that the
meetings, b) should the director know everything about director took all reasonable steps to prevent the company
company’s affairs, c) can director rely on information from from incurring debt such as place the company under
others? Sub conclusion: voluntary administration. This means a third-party
1.2 RL: Duty to good faith and for a proper purpose s181(1) (as administrator will take over the company in order to assess
per Walker v Winborne)- directors must exercise their powers the best options for company and creditors (auctions-buy
and discharge their duties in: a) good faith: act honestly in the back)
best interests for the company not for their personal 1.9 RL: Remedies and sanctions – consequences for breach of
interests, b) for a proper purpose: exercise powers for benefit duty- a) Civil liability: the director must pay the money owed
of the company by the company, b) Civil Penalty: $200,000 fine- civil
sanctions apply when the director is incompetent, c)
Criminal: $220,000 and/or prison for up to 5 years – criminal
sanctions apply when the director is dishonest or reckless
Why study business law?

First, it is important for business owners, managers, and

other professionals to have a basic understanding of business
law to help them make better decisions. Of course, we cannot
possibly cover every legal rule. Therefore, businesses need
these basic laws for the same reasons that people do such as
to define unacceptable behaviour, to provide certainty and
stability, to protect the public, and to provide a mechanism
for businesses to resolve disputes. In general, business law
helps to shape how business is conducted and how
commercial problems in business are solved.

Throughout a business sectors, it can do most things that a

person can do, and we need laws to maintain those activities.
For instance, a business can buy and sell property, sue and be
sued, enter contracts, hire and fire employees, and even
commit crimes.

The study of business involves learning about how to deal

with risk and uncertainty. For example, a restaurant who
introduce new foods does not know for certain that their new
product will be successful. There is no prototype testing or
consumer surveys that can guarantee the product will
success. This is the competitive risk, whereby drives in
modern business. It is the risk that lies in the market and
commercial industry that cannot be entirely removes from
their existence.

Study of business law encourages people to address the

competitive risk problem by constantly improve their
products, prices and service. This is the area of studying law
which learn on how to manage the risk by applying new and
appropriate techniques.

However, there are also other risk such as systematic risk. It

is related to two fundamental examples of systematic risk
which are product liability laws (which deal with harmful
products) and contract law (which deals with promises). The
law goes to preventing the systematic risks. Because business
operate within the legal framework, business people have to
recognize that they are affected by the law. They must know
that their decisions will have a legal contract and further
consequences. Their act may can lead to become a legally
liable to clients, customers, suppliers and third parties.

In conclusion, the importance of studying business law is

about managing the risk of doing business. An understanding
of business law can reduce the risk inherent in doing business