Sample

LAWS3018 – Commercial Law
Table of Contents
Class 1 – Understanding the contract of sale and the multiple legal concepts of goods ................................................9
Goods: What are they ....................................................................................................................................................... 9
Sale of Goods Act 1923 (NSW) (SGA), s 5(1) ................................................................................................................. 9
Competition and Consumer Act 2010 (Cth), s 4(1) ....................................................................................................... 9
St Albans City and District Council v International Computers Ltd ............................................................................... 9
Telstra Corporation Ltd v Hurstville City Council ........................................................................................................ 10
A Contract for the Sale of Goods .................................................................................................................................... 10
SGA, ss 5 (excerpts), 6(1)–(4) ...................................................................................................................................... 10
Is a contract for the sale of goods?............................................................................................................................. 11
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd ................................................................................... 11
Toby Constructions Products Pty Ltd v Computa Bar Sales Pty Ltd ........................................................................ 11
Symes v Laurie [1985] 2 Qd R 547 .......................................................................................................................... 12
Contract for the manufacture of goods .................................................................................................................. 12
Is it a contract for the sale of goods for a money consideration called the price?..................................................... 12
SGA, ss 13, 14.......................................................................................................................................................... 12
Wenning v Robinson ............................................................................................................................................... 13
Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd .......................................................................... 14
Is the Contract for the Sale of Goods Valid? ................................................................................................................... 14
Contract of sale – how made ...................................................................................................................................... 14
SGA, s 8 ................................................................................................................................................................... 14
SGA, s 7 ................................................................................................................................................................... 14
Class 2 – Contractual and statutory terms of contracts of sale ................................................................................... 15

Overview ......................................................................................................................................................................... 15
Express Terms ................................................................................................................................................................. 15
Mere Representations or Contractual Terms ............................................................................................................. 15
Conditions and Warranties ......................................................................................................................................... 15
Wallis Son & Wells v Pratt & Haynes ...................................................................................................................... 15
Intermediate Terms ........................................................................................................................................................ 15
SGA s 4(5).................................................................................................................................................................... 15
International Sales: CISG................................................................................................................................................. 16
Terms Implied by Statute ................................................................................................................................................ 16
Crago v Multiquip ....................................................................................................................................................... 16
The Legislative Scheme ................................................................................................................................................... 16
The Sale of Goods Act 1923 (NSW) ............................................................................................................................. 16
Trade Practices Act ..................................................................................................................................................... 16
Australian Consumer Law ........................................................................................................................................... 17
Liability of Manufactures ............................................................................................................................................ 17
Definition of consumers and business to business transactions ................................................................................ 17
Overview of legislative regime for liability for goods ..................................................................................................... 17
Sale of Goods Act 1923 .............................................................................................................................................. 17
(NSW) ......................................................................................................................................................................... 17
Trade Practices Act 1974 (Cth) Pt V, Div 2 ................................................................................................................. 17
Australian Consumer Law .......................................................................................................................................... 17
Pts 3-2 and 5-4 ........................................................................................................................................................... 17
Title and Quiet Possession .............................................................................................................................................. 18
Sale of Goods Act 1923 (NSW), s 17 ........................................................................................................................... 18
Rowland v Divall ......................................................................................................................................................... 18
Butterworth v Kingsway Motors ................................................................................................................................. 19
Niblett Ltd v Confectioners’ Materials Company Ltd .................................................................................................. 19
Microbeads v Vinhurst Road Markings Ltd ................................................................................................................. 20
Class 3 – The importance of accurate and precise description of the goods; correspondence with sample ................. 21
Correspondence with Description ................................................................................................................................... 21
Sale of Goods Act 1923 (NSW), s 18 ........................................................................................................................... 21
What is a “sale of goods by description”? .................................................................................................................. 21
Australian Knitting Mills v Grant ............................................................................................................................. 21
Elder Smith Goldsbrough Mort Ltd v McBride ........................................................................................................ 21
Harlingdon & Leinster Enterprises v Christopher Hull Fine Art .............................................................................. 22
Do the Goods Correspond with the Description? ....................................................................................................... 24
Ashington Piggeries Ltd v Christopher Hill Ltd ........................................................................................................ 24
Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty Ltd ................................................................................ 24
Correspondence with Sample..................................................................................................................................... 25
Sale of Goods Act 1923 (NSW), s 20 ....................................................................................................................... 25
LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons ............................................................................................. 25
Class 4 – Fitness for purpose ...................................................................................................................................... 27

Fitness for Purpose ......................................................................................................................................................... 27
Sale of Goods Act 1923 (NSW), s 19(1) ....................................................................................................................... 27
Making known the particular purpose ....................................................................................................................... 27
Henry Kendall & Sons v William Lillico and Sons Ltd .............................................................................................. 27
Ashington Piggeries v Christopher Hill Ltd .............................................................................................................. 28
Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd .......................................................................................... 28
Golden West Refining Corporation v Daly Laboratories ......................................................................................... 29
Slater v Finning ....................................................................................................................................................... 29
Reliance ...................................................................................................................................................................... 30
Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd .......................................................................................... 31
Goods of a description in the course of the seller’s business to supply/goods supplied in the course of a business 31
Sale of a specific article Under patent or trade name ................................................................................................ 32
Baldry v Marshall .................................................................................................................................................... 32
Are the goods reasonably fit for the purpose............................................................................................................. 32
Class 5 – Merchantability ........................................................................................................................................... 34

Merchantable Quality ..................................................................................................................................................... 34
Sale of Goods Act 1923 (NSW), s 19(2) ....................................................................................................................... 34
Goods Bought by Description ..................................................................................................................................... 34
Seller deals in goods of that description..................................................................................................................... 34
Examination ................................................................................................................................................................ 34
Thornett & Fehr v Beers ......................................................................................................................................... 34
Frank v Grosvenor Motor Auctions Pty Ltd ............................................................................................................ 35
Are the goods of merchantable quality ...................................................................................................................... 35
Grant v Australian Knitting Mills ............................................................................................................................. 35
George Wills and Co Ltd v Davids Pty Ltd ............................................................................................................... 35
H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd ........................................................................................ 36
BS Brown & Son Ltd v Craiks Ltd ............................................................................................................................. 36
Cehave NV v Bremer Handelsgesellschaft mbH ..................................................................................................... 37
Niblett v Confectioners’ Materials Co..................................................................................................................... 37
Merchantable quality in consumer sales under in the Sale of Goods Act 1923 (NSW) .............................................. 37
Sale of Goods Act 1923 (NSW), ss 62, 64(3), (4) ......................................................................................................... 37
Tre Cavalli v Berry Rural Co-operative Society........................................................................................................ 38
Consumer Guarantees in the Supply of Goods................................................................................................................ 38
Consumer guarantees and the Sale of Goods Acts-implied terms ............................................................................. 38
Title, undisputed possession, undisclosed securities ................................................................................................. 38
ACL, ss 51–53 .......................................................................................................................................................... 38
Acceptable Quality...................................................................................................................................................... 39
Vautin v BY Winddown Inc ..................................................................................................................................... 40
Medtel v Courtney .................................................................................................................................................. 42
Class 6 – Fragmentation of property and commercial torts, when is possession legally recognised? .......................... 43
Concept of Possession ..................................................................................................................................................... 43
Definition .................................................................................................................................................................... 43
Legal rights may be gained by possession .................................................................................................................. 43
Armory v Delamire.................................................................................................................................................. 43
Russell v Wilson ...................................................................................................................................................... 43
Bailment of Goods ...................................................................................................................................................... 44
The Anderson Group Pty Ltd v Tyan Motors Pty Ltd .............................................................................................. 44
Trespass to Goods ........................................................................................................................................................... 47
Conversion (Trover)......................................................................................................................................................... 48
Levy v Watt ............................................................................................................................................................. 49
Detinue ........................................................................................................................................................................... 49
Action on the Case for Damage to Goods ....................................................................................................................... 50
Class 7 – Finders keepers?, Property, possession and transfer of risk ......................................................................... 51

Features of a Property Right ........................................................................................................................................... 51
The Concept of “Property” as used in Statutes ............................................................................................................... 51
What may not be property ............................................................................................................................................. 51
Farah Constructions Pty Ltd v Say-Dee Pty Lt ............................................................................................................. 52
Classification of Property in the Australian legal System ............................................................................................... 52
Types of Personal property ............................................................................................................................................. 52
Chattels real and chattels personal ............................................................................................................................ 52
Types of chattels personal .......................................................................................................................................... 52
Possession Property and Title ......................................................................................................................................... 52
The Passing of Proeprty .................................................................................................................................................. 53
The Types of Goods ......................................................................................................................................................... 53
SGA, ss 5(1), 10(1), 21, 23 r 5(1), 25A ......................................................................................................................... 53
SGA, ss 21–23, 25A, 5(4), 60(2), 10(3) ........................................................................................................................ 54
Specific Goods ................................................................................................................................................................. 55
Dennant v Skinner ...................................................................................................................................................... 56
McPherson, Thom, Kettle & Co v Dench Bros ............................................................................................................. 56
Bodilingo Pty Ltd v Webb Projects Pty Ltd .................................................................................................................. 57
Kursell v Timber Operators and Contractors Ltd ......................................................................................................... 58
Specific but not Deliverable Goods ................................................................................................................................. 58
Sale or Return Goods ...................................................................................................................................................... 59
Weiner v Harris ........................................................................................................................................................... 59
Re Ferrier; Ex parte The Trustee v Donald................................................................................................................... 60
DFS Australia Pty Ltd v Comptroller-General of Customs ........................................................................................... 60
Unascertained and Future Goods ................................................................................................................................... 61
The Passing of Property by unconditional appropriation with assent ........................................................................ 61
Carlos Federspiel & Co SA v Charles Twigg & Co Ltd .............................................................................................. 61
Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd ....................................................... 62
Wardar’s (Import and Export) Co Ltd v W Norwood & Sons Ltd ............................................................................ 62
The Passing of Property by Intention and Ascertainment .......................................................................................... 63
Re Goldcorp Exchange Ltd (In Receivership) .......................................................................................................... 63
Re Stapylton Fletcher; Re Ellis, Son & Vidler Ltd..................................................................................................... 63
The Passing of property in unascertained bulk goods ................................................................................................ 64
The Passing of an Equitable interest in future goods ................................................................................................. 64
Class 8 – Property, possession and transfer of risk (Cont.) .......................................................................................... 65

Interests in Personal Property ......................................................................................................................................... 65
Possession................................................................................................................................................................... 65
Forms of Possession ................................................................................................................................................... 65
- Custody ........................................................................................................................................................... 65
- Actual or De Facto .......................................................................................................................................... 65
The Tubantia ....................................................................................................................................................... 65
- Legal ................................................................................................................................................................ 66
- Constructive .................................................................................................................................................... 66
- Acquiring and Divesting possession ................................................................................................................ 66
- Delivery ........................................................................................................................................................... 66
Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd.............................................. 66
- Abandonment of Possession and Occupation of Goods ................................................................................. 68
- Finders Rights ................................................................................................................................................. 68
Armory v Delamirie ............................................................................................................................................. 68
Parker v British Airways Board............................................................................................................................ 68
Chairman, National Crime Authority v Flack....................................................................................................... 69
Interference with Possession (Trespass, Conversion, Detinue, Action on the Case) .............................................. 70
Penfolds Wines Pty Ltd v Elliott .......................................................................................................................... 70
OBG v Allan ......................................................................................................................................................... 70
Ownership .................................................................................................................................................................. 71
What is Ownership ................................................................................................................................................. 71
Joint Ownership ...................................................................................................................................................... 71
Equitable Ownership .............................................................................................................................................. 71
Title ............................................................................................................................................................................. 71
Class 9 – Bailment of Goods ....................................................................................................................................... 73

Fundamental Concepts of Bailment ................................................................................................................................ 73
Definitions and descriptions ....................................................................................................................................... 73
A Schematic Overview of Bailment............................................................................................................................. 73
Sub-bailment .............................................................................................................................................................. 73
The Pioneer Container (condensed) ....................................................................................................................... 74
The Pioneer Container ............................................................................................................................................ 74
TNT v May & Baker ................................................................................................................................................. 74
Categories of Bailment ................................................................................................................................................... 74
Substitutional Bailment .............................................................................................................................................. 75
China Pacific SA v Food Corporation of India (The Winson) ................................................................................... 75
Quasi-bailment ........................................................................................................................................................... 75
Mutuum ...................................................................................................................................................................... 75
Bailment by Attornment ............................................................................................................................................. 75
Bailments for security ................................................................................................................................................. 75
Bailment and Other Legal Categories ............................................................................................................................. 76
Bailment and Agency .................................................................................................................................................. 76
Petrifond Midwest Ltd v Esso Resources Canada Ltd ............................................................................................. 76
Bailment and Contract ................................................................................................................................................ 76
Parastatidis v Kotaridis ........................................................................................................................................... 76
Brambles Security Services Ltd v Bi-Lo Pty Ltd ....................................................................................................... 76
Bailment and Licence .................................................................................................................................................. 77
Robertson v Stang................................................................................................................................................... 77
Rolfe v Investec Bank (Australia) Ltd ...................................................................................................................... 77
Bailment and Sale ....................................................................................................................................................... 77
Chapman Bros v Verco Bros & Co Ltd ..................................................................................................................... 77
Pangallo Estate Pty Ltd v Killara 10 Pty Ltd ............................................................................................................. 78
Bailment and Debt ...................................................................................................................................................... 78
Class 10 and 11 – Challenges to Ownership: nemo dat quod habet and its exceptions ............................................... 80
The Transfer of Title by Non-Owner................................................................................................................................ 80
SGA, ss 26, 27, 28, 5 .................................................................................................................................................... 80
Conduct by Owner .......................................................................................................................................................... 80
Representation of Apparent Ownership..................................................................................................................... 81
Eastern Distributors Ltd v Goldring (Murphy, Third Party) ..................................................................................... 81
Sale with a Voidable Title ............................................................................................................................................... 82
Car and Universal Finance Co Ltd v Caldwell .............................................................................................................. 83
Seller in Possession ......................................................................................................................................................... 83
Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd ............................................................................. 84
City Fur Manufacturing Company Ltd v Fureenbond (Brokers) London Ltd ................................................................ 84
Delivery or Transfer .................................................................................................................................................... 85
Michael Gerson v Wilkinson ................................................................................................................................... 85
Buyer in Possession ......................................................................................................................................................... 85
Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) ....................................... 85
Langmead v Thyer Rubber Co Ltd [1947] SASR 29 ..................................................................................................... 86
Possession of the goods/documents of title with the consent of the seller .............................................................. 87
Newtons of Wembley Ltd v Williams ..................................................................................................................... 87
Class 12 – Performance and Breach in the Sale of Goods............................................................................................ 88

The Performance of the Contract ................................................................................................................................... 88
The Obligations of the Seller ........................................................................................................................................... 88
Delivery ....................................................................................................................................................................... 88
What is Delivery ...................................................................................................................................................... 88
Sale of Goods Act 1923 (NSW), ss 5(1), 32, 35................................................................................................... 88
Usual Place of Delivery ........................................................................................................................................... 88
What happens if, when asked, the buyer does not take delivery of the goods? ................................................... 88
Sale of Goods Act 1923 (NSW), s 40 .................................................................................................................. 88
Time of Delivery ...................................................................................................................................................... 89
Sale of Goods Act 1923 (NSW), s 15 ................................................................................................................... 89
The Quantity Delivered............................................................................................................................................... 89
Delivery by Instalment ................................................................................................................................................ 89
Hammer and Barrow v Coca-Cola [1962] NZLR 723 ............................................................................................... 89
The Obligations of the Buyer .......................................................................................................................................... 90
Acceptance of the Goods............................................................................................................................................ 90
Sale of Goods Act 1923 (NSW), ss 37, 38 ................................................................................................................ 90
When may the buyer be said to have accepted the goods .................................................................................... 90
Remedies of the Buyer and Seller ................................................................................................................................... 91
The Rights of the Seller against the Buyer .................................................................................................................. 91
Sale of Goods Act 1923 (NSW), ss 51, 52, 55 .......................................................................................................... 91
Buyers refusal to take delivery ............................................................................................................................... 91
Buyers non-payment, non-acceptance: the price .................................................................................................. 92
Damages ................................................................................................................................................................. 92
Issues regarding damages for non-acceptance ...................................................................................................... 92
Hadley v Baxendale (1854) 9 Ex 341 ................................................................................................................... 92
The Available Market Rule ...................................................................................................................................... 92
Shearson Lehman Hutton Inc v Maclaine Watson & Co Ltd (No 2) [1990] 3 All ER 723 ..................................... 93
The rights of unpaid seller against the goods ............................................................................................................. 93
Sale of Goods Act 1923 (NSW), ss 41–45 ................................................................................................................ 93
The Unpaid Seller’s Lien.............................................................................................................................................. 94
When is the seller in possession? ........................................................................................................................... 94
Stoppage in Transit ..................................................................................................................................................... 95
Sale of Goods Act 1923 (NSW), ss 46–48 ................................................................................................................ 95
When are the goods in transit? When does the transit come to an end?.............................................................. 95
Right of Resale ............................................................................................................................................................ 96
Sale of Goods Act 1923 (NSW), s 50 ....................................................................................................................... 96
RV Ward Ltd v Bignall [1967] 1 QB 534................................................................................................................... 96
Wherry v Watson [1990] ASC 56-004 ..................................................................................................................... 97
Class 13 – Performance and Breach in the Sale of Goods (Continued) ........................................................................ 98

Remedies of the Buyer .................................................................................................................................................... 98
Rejection of goods ...................................................................................................................................................... 98
Recovering the Contract Price .................................................................................................................................... 98
Damages ..................................................................................................................................................................... 98
Non-Delivery ........................................................................................................................................................... 98
No Available Market ............................................................................................................................................... 99
Joseph & Co Pty Ltd v Harvest Grain Co Pty Ltd (1996) 39 NSWLR 722 (District Court) ..................................... 99
What is the time for the assessment of damages for non-delivery? ........................................................................ 101
Specific Performance ................................................................................................................................................ 101
Sale of Goods Act 1923 (NSW), s 56 ..................................................................................................................... 101
Breach of Warranty ...................................................................................................................................................... 102
Sale of Goods Act 1923 (NSW), s 54 ......................................................................................................................... 102
Bostock v Nicholson [1904] 1 KB 725 ................................................................................................................... 102
McWilliam’s Wines Pty Ltd v Liaweena (NSW) Pty Ltd ......................................................................................... 103
Kasler and Cohen v Slavouski [ 1928] 1 KB 78 ...................................................................................................... 103
Transfield Shipping v Mercator Shipping .............................................................................................................. 104
Class 14 + 15 – Contractual bases of agency law; communications of agents; ratification of agency ......................... 104
Introduction to and Fundamental Concepts of Agency ................................................................................................ 104
Definition of agency.................................................................................................................................................. 104
Petersen v Moloney (1951) 84 CLR 91 .................................................................................................................. 105
Types of Agents ........................................................................................................................................................ 105
Authority and power in the law of agency ............................................................................................................... 105
Creation of Agency ....................................................................................................................................................... 106
Overview................................................................................................................................................................... 106
Actual and Implied Consent .................................................................................................................................. 106
Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130; ............................................................... 106
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 .................................................... 106
Cumming v Sands [2001] NSWSC 2................................................................................................................... 106
Prospect Industries v Anscor Pty Ltd [2003] QSC 296....................................................................................... 107
Usual Authority ......................................................................................................................................................... 107
Watteau v Fenwick [1893] 1 QB 346 .................................................................................................................... 107
Ratification................................................................................................................................................................ 108
General rules concerning ratification ................................................................................................................... 108
Keighley, Maxsted & Co v Durant [1901] AC 240.............................................................................................. 108
Exceptions and limitations upon ratification ........................................................................................................ 109
Davison v Vickery’s Motors Ltd (in liq) (1925) 37 CLR 1.................................................................................... 109
Ratification and Contract .......................................................................................................................................... 109
Davison v Vickery’s Motors Ltd (in liq) (1925) 37 CLR 1........................................................................................ 109
Agency by Estoppel................................................................................................................................................... 109
Element 1: the principal’s representation ............................................................................................................ 110
International Paper Company v Spicer ............................................................................................................. 110
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 ............................................. 110
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 .... 110
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 ............................................................ 110
The scope of Ostensible Authority ....................................................................................................................... 110
Armagas Ltd v Mundogas SA [1986] 1 AC 773 (House of Lords)....................................................................... 111
Element 2: Reliance .............................................................................................................................................. 111
Element 3: Detriment ........................................................................................................................................... 111
Class 16 – Agents and Third Parties; The Doctrine of the Undisclosed Principle ........................................................ 112
Effects of an Agency ..................................................................................................................................................... 112
Proving Agency ............................................................................................................................................................. 112
The Doctrine of the Undisclosed Principal .................................................................................................................... 112
The Doctrine of the Undisclosed Principal Stated .................................................................................................... 112
Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 .................................................................................... 112
Exceptions to the doctrine of the undisclosed principal .......................................................................................... 113
Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 ................................................................................ 113
The personality of the agent and third party........................................................................................................ 114
The effects of acting for an undisclosed principal ................................................................................................ 114
Agents and Third Parties............................................................................................................................................... 114
Personal Liability of Agents to Third Parties ............................................................................................................. 114
Contracting for an unknown principal .................................................................................................................. 114
McNally v Jackson (1938) 42 WALR 27 ............................................................................................................. 114
“Sun Happiness” [1994] 1 Lloyd’s Rep 381 ....................................................................................................... 114
Contracting for a known and disclosed principal.................................................................................................. 115
Railway Commissioners (NSW) v Orton (1922) 30 CLR 422 .............................................................................. 115
Liability in the law of civil wrongs of the agent to the third party ........................................................................ 115
Liability of agents under the ACL .............................................................................................................................. 115
Breach of warranty of authority ............................................................................................................................... 115
Rummery v Dorsman à this case seems really important from class discussion ............................................... 115
Principals and Third Parties .......................................................................................................................................... 116
General aspects of the relationship between principals and third parties............................................................... 116
Agency and Partnership ............................................................................................................................................ 116
Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 ...................................................... 116
Liability of the principal for the wrongs of the agent ............................................................................................... 116
Class 17+18 – Mercantile Agents and problems of apparent authority .................................................................... 117
Negligent Omission ....................................................................................................................................................... 117
Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452 ....... 117
Sale by Mercantile Agent .............................................................................................................................................. 117
Factors (Mercantile Agents) Act 1923 (NSW), ss 5, 3 ............................................................................................... 117
Lloyds & Scottish Finance Ltd v Williamson [1965] 1 WLR 404 ................................................................................ 118
Johnson Matthey (Aust) Ltd v Dascorp Pty Ltd (2003) ............................................................................................. 119
Who is a mercantile agent ........................................................................................................................................ 121
Heap v Motorists Advisory Agency [1923] 1 KB 577 ............................................................................................. 121
Mortgage, Loan & Finance Co of Australia Ltd v Richards (1932) 32 SR (NSW) 50 ............................................... 122
When has the mercantile agent been entrusted as such? ....................................................................................... 123
Astley Industrial Trust Ltd v Miller (Oakes, Third Party) [1968] 2 All ER 36 .......................................................... 123
Cook v Rodgers (1946) SR (NSW) 229 ................................................................................................................... 124
Is the disposition by the mercantile agent in the ordinary course of business of the mercantile agent ................. 124
Magnussen v Flanagan [1981] 2 NSWLR 926 ........................................................................................................ 124
Does the buyer take in good faither and with no notice? ........................................................................................ 125
Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395 ........................................... 125
Class 1 – Understanding the contract of sale and the multiple legal concepts of goods
Goods: What are they

- The statutory definition of goods in the SGAs has been modified in other legislation, notably the Competition
and Consumer Act 2010 (Cth) and the State Fair Trading Acts
Sale of Goods Act 1923 (NSW) (SGA), s 5(1)
In this Act, unless the context or subject matter otherwise requires:

Goods include all chattels personal other than things in action and money. The term includes emblements and things attached
to or forming part of the land which are agreed to be severed before sale or under the contract of sale.
Competition and Consumer Act 2010 (Cth), s 4(1)
In this Act, unless the contrary intention appears – goods includes –

(a) ships, aircraft and other vehicles.
(b) animals, including fish.
(c) minerals, trees and crops, whether on, under or attached to land or not; and
(d) gas and electricity.
The definition of “goods” in the Fair Trading Act 1987 (NSW), is contained in s 4(1): in this Act, except the ACL, ... “goods” has the same
meaning as in s 2(1) of the ACL. According to that provision [s 2(1) of the ACL], “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.
- The following two case extracts usefully illustrate the challenge of classifying intangible things as “goods” in
the context of English legislation and the Australian Constitution, respectively.
St Albans City and District Council v International Computers Ltd

Facts
- Concerns a faulty computer system purchased by the Council that was used to collect its community charge
Issue
- “Is software goods?” - Question as to whether there is an implied term in the contract as to fitness for purpose (as there is in a
contract for the sale of goods)
Judgement
- Necessary to distinguish between the program and the disk carrying the program.
- In both the Sale of Goods Act 1979, s 61, and the Supply of Goods and Services Act 1982, s 18, the definition of goods includes
“all personal chattels other than things in action and money”. disk is within this definition. A program, of itself, is not.
- If the disk is sold or hired by the computer manufacturer, but the program is defective, in my opinion there would prima facie
be a breach of the terms as to quality and fitness for purpose implied by the 1979 Act or the 1982 Act.
- However, in the present case, it is clear that the defective program 2020 was not sold, and it seems probable that it was not
hired. The evidence is that, in relation to many of the program releases, an employee of ICL went to St Albans’ premises where
the computer was installed taking with him a disk on which the new program was encoded, and himself performed the exercise
of transferring the program into the computer.
- Thus a transfer of the program in the way I have described does not, in my view, constitute a transfer of goods.
- Implied term? - Should such a term be implied in a contract of the kind I am now considering, for the transfer of a computer
program into the computer without any transfer of a disk or any other tangible thing on which the program is encoded?
o Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board – An unexpressed term can be implied if and
only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for
the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested
to them: it must have been a term that went without saying, a term which, although tacit, formed part of the contract
which the parties made for themselves.
o In my judgment, a contract for the transfer into a computer of a program intended by both parties to instruct or
enable the computer to achieve specified functions is one to which Lord Pearson’s words apply. In the absence of
any express term as to quality or fitness for purpose, or of any term to the contrary, such a contract is subject to an
implied term that the program will be reasonably fit for, ie reasonably capable of achieving the intended purpose.
- Software remains excluded from the definition of “goods” under the SGAs
- Note, however, that under the ACL, the definition of “goods” includes software
- *** The sale of a manual (say, on a DVD) containing instructions IS A sale of goods
o If the instructions are defective, does that make the manual defective? – Yes.
- *** The sale of a software license IS NOT A SALE OF GOODS
Telstra Corporation Ltd v Hurstville City Council

Facts
- Local governments imposed charges on broadband cables owned by telecommunications carriers
Issue
- Whether electromagnetic signals passing along the coaxial cables and content carried by those signals were “goods” within the
meaning of s 90 of the Constitution and capable of being subject to excise duty.
Judgement
- Cable TV is not goods because even though you receive electrical impulses, you aren't using those so much as you are
effectively licensing the right to access content. This is different to gas and electricity.
- Electricity wouldn't even be covered by 'goods' if it weren't for the special statutory wording.
- Telecommunications is not goods.
- Digital data traveling over the NBN IS NOT A GOOD
Further Examples
- Blood?
o Obiter, no: E v Australian Red Cross Society(AIDS case) (1991) 31 FCR 299; (1991) 105 ALR 53 at 58,
but see PQ v Australian Red Cross Society [1992] VR 19, sometimes relied upon to argue that blood
can be goods, but the case is not authority for that proposition:
- Valuable old coins?
o Yes. Moss v Hancock
- Trees?
o Yes, if they are “things attached to or forming part of the land which are agreed to be severed before
sale or under the contract of sale”: Warren v Nut Farms of Australia Pty Ltd (1981) WAR 134 at 142–
143 (Brinsden J) [PFA 353]
- Blocks of stone placed one top of the other?
o If part of a house, then they are part of the house and run with the land, so “no”: Ellistone Ltd v
Morris [1997] 1 WLR 687
o However, if they are stones awaiting sale from a stonemason’s sales yard, then ”yes”: Holland v
Hodgson (1872) LR 7 CP 328: [PFA 352]
A Contract for the Sale of Goods

- NSW – Sale of Goods Act 1923 (NSW) (SGA)
- The Competition and Consumer Act 2010 (Cth) does not deal with the transfer of property.
- For the SGA to apply, there must a “contract for the sale of goods”. The concept of a contract for the sale of
goods itself involves the notion of the transfer of property in goods. A “contract for the sale of goods” is also
necessary for the application of other parts of the SGA, notably the implication of terms, rights against the
goods and actions for breach of contract.
SGA, ss 5 (excerpts), 6(1)–(4)
Section 5 Definitions
(1) In this Act, unless the context or subject-matter otherwise requires:
Buyer means a person who buys or agrees to buy goods.
Contract of sale includes an agreement to sell as well as a sale.
Goods include all chattels personal other than things in action and money. The term includes emblements and things attached
to or forming part of the land which are agreed to be severed before sale or under the contract of sale.
Seller means a person who sells or agrees to sell goods.
Section 6 Sale and agreement to sell

(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer for a money consideration called the price. There may be a contract of sale between one part owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a
sale; but where the transfer of the property in the goods is to take place at a future time, or subject to some condition
thereafter to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled, subject to which the property in
the goods is to be transferred.
Sale of Goods or Services

- Lee v Griffin – If the contract, when performed, results in the sale of a chattel, then it will be a contract for the
sale of goods even if performance involves the exercise of skill and labour.
- Robinson v Graves – is it materials or skill for which payment is substantially being made?
Is a contract for the sale of goods?

- How have the courts dealt with the distinction between a contract for the sale of goods and a contract for
services that is a contract for work and materials?
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd

Facts
- D contracted orally with V to make dies for a one-piece injection-moulded plastic drawer
- Under the contract, property in the die was to pass when the die was made and a satisfactory number of merchantable drawers
had been delivered to D. The die would not be physically delivered to D but would remain in the custody of V while the drawers
were still being made.
- Term of the contract that the die would be used to make drawers only at the direction of D and that V would not make a die for
an all-plastic one-piece drawer that was within two inches of the D die for anyone else.
- Viscount Plastic kept the die, refused to supply the drawers except at a higher price and indicated they would supply drawers to
others D sued for specific performance for delivery of the die.
Issue
- Was this really a contract for the sale of goods (the die?).
Judgement
- In deciding, we shouldn’t just compare the value of skill & labour to the value of raw materials (e.g. a printer and his paper,
sculptor and clay). What we should look at instead is whether, upon the completion of the contract, the work & labour would
result in the sale of a chattel.
- Present contract relating to the tool is for the sale of goods
- Confused about what this case is actually trying to show
Toby Constructions Products Pty Ltd v Computa Bar Sales Pty Ltd
Facts
- Sale of computer hardware and software together. Also included installation and training. $12k hardware, $2k software.
Issue
- whether the sale of the equipment was a sale of goods in the ordinary sense of those words (SGA and CCA)
Judgement
- Robinson v Graves [1935] 1 KB 579,
o If you find, as they did in Lee v Griffin (1861) 1 B & S 272 that the substance of the contract was the production of
something to be sold by the dentist to the dentist’s customer, then that is a sale of goods. But if the substance of the
contract, on the other hand, is that skill and labour have to be exercised for the production of the article, and that it is
only ancillary to that that there will pass from the artist to his client or customer some materials in addition to the skill
involved in the production of the portrait, that does not make any difference to the result, because the substance of
the contract is the skill and experience of the artist in producing the picture.
- This was off-the-shelf software and therefore not comparable to a work of art. For this specific contract, most of the work on
the part of the seller was attributable to the physical goods. It was also a complete package.
- A sale of a computer system, comprising both hardware and software, as in the present case, does constitute a sale of goods
within the meaning of both the Commonwealth Act and the State legislation. There is a sale of tangible chattels, a transfer of
identifiable physical property. It is true that it is necessary for the effective working of the system that there should be
comprised within it software. That does not disqualify the aggregate operative system from the appellation or description of
“goods”.
- It may be a debatable question whether or not the sale of computer software by itself is sufficient to constitute a sale of goods
within the meaning of the legislation I am considering. However, I have no doubt that the sale of a system in toto is within the
legislation. Equally I have no doubt that the contract was for the sale of a complete computer system.
Symes v Laurie [1985] 2 Qd R 547

Facts
- A contract was made in relation to a house at the time attached to the land of another regarding it's removal.The agreement
was to sell the house and move it/restump it.
- Clause 6 says that the contractor shall insure at the owner's expense for transit but they didn’t pay the premium. House got
smashed in transit.
Judgement
- The trial judge found that at the relevant time, the house was the property of the respondent (purchaser) and therefore the risk
of transport fell to them. This relies on the fact that the house was ‘goods’ within thedefinition of the SGA.
- Transport cases are not the same as work & labour + goods cases as the good is already made.
- Unless there is intention to the contrary, the act says that property in the goods passes at the time ofcontracting (regardless of
delivery/payment postponement)
o Risk therefore lies with the purchaser unless there is fault. Bad delivery is not the fault of the seller.
Contract for the manufacture of goods

- Is a contract to make and install built-in office furniture a sale of goods? – No: Brooks Robinson Pty Ltd v
Rothfield [PFA 366]
- Is a contract to make dies for and then manufacture customised furniture, a sale of goods? – Yes: Deta
Nominees v Viscount Plastic Products [PFA 365]
- Is the sale of a sculpture a sale of goods? – Yes (obiter): Deta Nominees v Viscount Plastic Products
Is it a contract for the sale of goods for a money consideration called the price?
- If the price has been fixed as a sum, as a method, or can be determined by a course of dealing, this is the price.
- If the price cannot be determined this way, then the price is a reasonable price. The exception to this is if there
is to be a third-party valuation to determine the price, and this is not made
o In this case, the price is not determined as a reasonable price as a price fixed by a third party may not
be a reasonable price.
§ The exception to the exception is if property has passed to the buyer, in which case the price
is a reasonable price.
- Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd (1989)
o Whenever one is considering whether parties have actually entered into contractual relations, the
real question is whether the parties intended to make a contractual bargain
o Merely because the parties have agreed on a price will not necessarily be conclusive as very often
business persons arrive at the price before getting down to the serious matter of putting together
their contract: cf Clifton v Palumbo [1944]
o Very rare that the court will find that if parties have come to a meeting of minds and have entered
into a contractual relationship, uncertain- ties and ambiguities destroy what has been brought about.
The court almost always will find that the ambiguities are able to be made certain by the court
construing what the parties have said
SGA, ss 13, 14
Section 13 Ascertainment of price
(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be
determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price.
What is a reasonable price is a question of fact dependent on the circumstances of each particular case.
Section 14 Agreement to sell at valuation

(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party, and the
third party cannot or does not make the valuation, the agreement is avoided:
Provided that if the goods or any part thereof have been delivered to and appropriated by the buyer, the buyer must pay a
reasonable price therefor.
(2) Where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may
maintain an action for damages against the party in fault.
Wenning v Robinson
Facts
- Sold a shop which included the ‘stock at valuation’. No value was given to the stock in the valuation.
- Claims that the contract was not enforceable because of an unagreed essential term.
Issue
- whether or not the agreement was one which had legal effect.
Judgement
- Walsh J
o I think that the present case is not a case which falls within SGA s 14(1). It is not a case in which the agreement
provided that the price was to be fixed by the valuation of a named third party who refused or was unable to make a
valuation. Such an agreement is to be distinguished from an agreement which refers to a fair value of a fair valuation
or the like, but does not point to a particular person by whom, or a particular manner in which the price is to be
ascertained.
o Goes through the history of contracts and whether undetermined prices are an agreement to agree etc. Courts are not
to be the destroyers of bargains. (page 374 for further cases)
o The intention which is to be ascertained from the agreement is that the stock would pass from the seller to the buyer
at its “value”, that is to say, at its reasonable value, or (which is the same thing), at its reasonable price. Of course, it
was possible that disputes might arise as to the proper basis of the valuation but, nevertheless, the parties are to be
taken to have agreed that what would be paid was what was reasonable in the circumstances.
o I cannot really doubt that an agreement in express terms, that the stock was to go at a reasonable price or at a
reasonable value, would have constituted a binding executory contract. In effect, I think that that is what the parties
did agree here, although, no doubt, they had in mind that, in all probability, the price would be actually ascertained
and assented to before completion.
o The present contract includes an agreement to sell the stock at a reasonable value, even if there may be disagreement
in ascertaining that value.
o Walsh does not believe that a third party valuation was an essential precondition given that they made no effort to
decide who would do the determination or how.
o Appeal should be dismissed, with costs.
- Ferguson J
o not necessary for the parties to a contract for the sale of goods to include in the contract itself a term as to the price
o even where the parties have agreed upon the matter of price it is not necessary for them to state in the agreement
the price as a sum of money if their agreement as to price is not as to a money sum but as to a method by which a
money sum is to be ascertained by a third party or parties or by some other machinery (not being the further
agreement in the future of the parties themselves) and that method or machinery is set forth in the agreement with
sufficient precision
o Where you have a third party deciding, that is not necessarily a reasonable price which is why we don't substitute it in
when the valuation fails.
o Where a contract says 'reasonable price' that can be determined between the parties an, in an event of failure, by a
jury/court as a question of fact.
o You don't have a 'valuer' scenario unless you actually discuss who you will get to do the valuation.
Australia China Business Bureau Pty Ltd v MCP Australia Pty Ltd
Judgement
- The agreement is not silent on the question of price; the manifest intention is that the price shall be fixed by agreement
between the parties, just as the price payable in respect of the initial purchase order was fixed in that way. Clause 7(c) is a
limited intrusion upon or exception to the ordinary arrangement between the parties as reflected in [PE 22A] that MCP must
agree to ACBB’s quoted price before it is bound to place an order.
- This one was uncertain because the price was 'what the parties would agree' later
- S 13 does not apply where the parties intend that the price be settled amongst themselves
- S 14 doesn't save you where you have not given a method to fix the price
- S 13 does apply to both executed and executory contracts
Is the Contract for the Sale of Goods Valid?
Contract of sale – how made
SGA, s 8
Section 8 Contract of sale how made

Subject to the provisions of this Act and of any statute in that behalf, a contract of sale may be made in writing (either with or
without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of
the parties:
Provided that nothing in this section shall affect the law relating to corporations.
- Note: SGA (NSW), s 9 was repealed in 1988. It applied to contracts made before 1 April 1989. Section 9
provided that an oral contract for the sale of goods was prima facie unenforceable unless the buyer had
actually accepted the goods or there was part payment. This provision is still pertinent in Tasmania (s 9), and
Western Australia (s 4).
SGA, s 7
Section 7 Capacity to buy and sell

Capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer and acquire property:
Provided that where necessaries are sold and delivered to a person who, by reason of mental incapacity or
drunkenness, is incompetent to contract, the person must pay a reasonable price therefor.
Necessaries in this section mean goods suitable to the condition in life of such person, and to the person’s actual
requirements at the time of the sale and delivery.
Class 2 – Contractual and statutory terms of contracts of sale
Overview
- The statutory rules regarding the liability of sellers for the goods they sell are found in sale of goods legislation
in each State and Territory and, on for international sales, the CISG
- The SGA governs a range of matters relating to the content, performance and termination of contracts for the
sale of goods. In the case of consumer sales, the Australian Consumer Law (found in sch 2 of the Competition
and Consumer Act 2010 (Cth)) supplements the SGA with a set of consumer guarantees.
- The ACL extends liability for the quality of goods sold to consumers. This is basically a regime in contract with
some modifications to overcome privity problems.
Express Terms
Mere Representations or Contractual Terms

- Statements made in the course of contractual negotiations may be mere representations or if promissory and
“an intelligent bystander would reasonably infer that a warranty was intended” (Hospital Products Ltd v United
States Surgical Corporation) may be a term of the agreement itself or a separate collateral contract.
- Representations become contractual terms when an intelligent bystander would reasonably infer that a
warranty was intended - Hospital Products v USSC
Conditions and Warranties
Wallis Son & Wells v Pratt & Haynes

The dissenting judgment of Fletcher Moulton LJ, as followed on appeal
- D sells common English sainfoin seeds to P. Sale note says that it gives no warranty. P then onsells a portion of it and gets
sued when it turns out to be giant sainfoin. P seeks to recover the amount settled with sub-purchaser.
- Fletcher Moulton LJ gives a distinction between warranties and conditions, even if he doesn’t like the terms
o Condition = core obligation of the contract, breach of which allows non-performance
o Warranty = entitled only to damages
- P lost the ability to reject the goods and treating the contract as repudiated when they onsold them.
- They therefore only had access to damages as a remedy for breach of a condition
o Rejection does not downgrade the representation to a warranty (which would bring it into the scope of the
exclusion clause) but merely downgrades the remedies available.
THIS WAS OVERRULED by [1911] AC 394
[1911] AC 394
- If you want to pass the risk to the buyer in the scenario of sale by description, then you must make that clear.
Intermediate Terms
- An intermediate term is neither a condition nor a warranty, and falls somewhere in between conferring an
absolute right to terminate and not conferring any right to terminate at all.
SGA s 4(5)
(5) Nothing in this Act shall be construed as excluding a right to treat a contract of sale as repudiated for a sufficiently serious
breach of a stipulation that is neither a condition nor a warranty but is an intermediate stipulation.
- Note that other Sale of Goods Acts do not have this provision but do contain the equivalent of Sale of Goods
Act s 4(2) which saves the rules of the common law unless they are inconsistent with the express provisions of
the Act
- Initial authority – Hong Kong Fir Shipping Co Ltd à affirmed in the context of contracts for the sale of goods in
The Hansa Nord
- The Hansa Nord
o “shipped in good condition” – if a small portion of the whole cargo was not in good condition and
arrived a little unsound, it should be met by a price allowance. The buyers should not have a right
to reject the whole cargo unless it was serious and substantial.
o In my opinion, therefore, the term “shipped in good condition” was not a condition strictly so called;
nor was it a warranty strictly so called. It was one of those intermediate stipulations which gives to
right to reject unless the breach goes to the root of the contract.
o It was held that the buyer was not entitled to reject the goods but was entitled to damages as the
condition was not very bad since they were used as originally planned except in different quantities.
- The intermediate term “faq” or “fair average quality of the season” is common in commodities contracts for
raw or processed animal or vegetable products
o “The business purpose of a ‘faq’ term is to enable the buyer and the seller to ascertain what their
respective rights are under the contract at the time when the goods are delivered” (Christopher Hill
Ltd v Ashington Piggeries)
International Sales: CISG

- The seller’s obligation is as to the quantity, quality and description required by the contract: CISG Art 35(1).
Terms Implied by Statute

- The SGA implies terms into contracts for the sale or supply of goods – title and quiet possession,
correspondence with description, fitness for purpose, merchantable quality, correspondence with sample
- Two fundamental questions to consider
o 1. Can this term be implied into this contract under this Act?
o 2. Then, once the term is implied into the contract, is there a breach of contract; that is, is there a
breach of the term which has been implied?
- In examining whether a particular statutory term can be implied and if it has been breached, “determination
really depends upon the proper aspect of the facts rather than on an examination of uncertain principles of
law” (Manchester Liners Ltd v Rea Ltd)
Crago v Multiquip
- First claim is that the equipment was not fit for the purpose made known to the vendors (hatching ostrich eggs) and this gives
rise to damages under TPA. This requires that it be for personal, domestic or household use.
o The domestic issue
§ Onus on the person relying on the TPA
§ Ostrich incubators are not things that are usually used domestically/personally and they were usually used
in the booming ostrich industry of the time. Therefore fails on this point
§ This is despite the fact that Multiquip sold a lot of their non-ostrich incubators to schools and households.
Those incubators could maintain their domestic quality despite the fact that they could and were used
commercially by many.
o This cause of action was as against the vendor
- Second claim is for negligence in the bad design of the items.
o Fails for the same reason as 3
- Third claim is for a breach of the TPA in it's misrepresentation (M&DC equivalent?).
o They were certainly designed and promoted as working on ostrich eggs and that is why they were bought.
o The claims are based on the general operation of the devices and they have operated fine for others so it is probably
Crago's fault.
- Fourth claim is for false representation as to standard or quality under the TPA
- Fifth claim is under TPA for not merchantable quality.
- Additional claim against Dunogan (retailer) under SGA for breaching implied conditions that it was fit for
purpose/merchantable quality.
The Legislative Scheme
The Sale of Goods Act 1923 (NSW)

- All transactions governed by the SGA require that the seller has the right to sell the goods, that the goods
correspond with the description that was applied to them and that the goods are fit for a particular purpose
and of merchantable quality.
- Each of the above requirements is implied by statute as a term of the contract
Trade Practices Act

- TPA implied terms in cases where the buyer was a consumer which could not be excluded
- The terms implied under the SGA and the TPA were similar and so the case law on each was often applicable to
the other.
- The difference between the two regimes was that the TPA largely precluded the ability of the seller to contract
out of its liability under the statutory implied term regime in consumer sales – the implied terms were
mandatory.
Australian Consumer Law

- ACL is found in Schedule 2 of the Competition and Consumer Act 2010
- Replaced the TPA implied term regime with a regime of “consumer guarantees” (Pt 3-2), which operate as
statutory rights rather than implied terms, and associated remedies (Pt 5-4)
- Many of these rights are similar to the implied terms in the SGA
- Important differences from SGA
o E.g. implied term of merchantable quality in the Sale of Goods Act is not found in the Australian
Consumer Law, which instead requires goods to be of “acceptable quality”
Liability of Manufactures
- ACL (Pt 5-4, Div 2) – provides consumers with a right of action not just against sellers but also against
manufacturers of the goods in certain circumstances
- SGA s 64(5) – also provides for the manufacturer to be added to an action by a consumer only in limited
circumstances
Definition of consumers and business to business transactions

- Consumer guarantee regime in the ACL applies to the supply of goods and services to a consumer.
- However, “consumer” is broadly defined in s 3 and will in many instances include sales to another business.
o Consumers guarantees under ACL will apply to the supply of goods where the price of those goods did
not exceed $40,000; or the goods were of a kind ordinarily acquired for personal, domestic or
household use or consumption, provided the goods were not to be used for resupply or transformed
for other business purpose
Overview of legislative regime for liability for goods
Sale of Goods Act 1923 Trade Practices Act 1974 (Cth) Pt V, Div 2 Australian Consumer Law
(NSW) Pts 3-2 and 5-4
Sale of goods Supply of goods and services to consumers Supply of goods and services to consumers
s 4B s3
Definition of consumers Definition of consumers
s 17 s 69 ss 53, 54, 55
Title; quiet possession; no encumbrance Quiet possession; no encumbrance Title; undisturbed possession; no undisclosed
securities
s 18 s 70(1) s 56
Correspondence with description Correspondence with description Correspondence with description
s 19(1) s 71(2) s 55
Fitness for purpose Fitness for purpose Fitness for purpose
s 19(2) s 71(1) s 54
Merchantable quality Merchantable quality Acceptable quality
s 20 s 72 s 57
Correspondence with sample Correspondence with sample Correspondence with sample
s 74F s 58
Failures to provide facilities for repairs or spare Guarantee as to repairs and spare parts
parts
s 74G s 59
Actions in respect of non-compliance with Guarantee as to express warranties
express warranties
s 74 Services ss 60, 61, 62
Services: care and skill; fitness for purpose;
reasonable time for supply
ss 62, 64(1) s 68 ss 64 and 64A
Can exclude unless consumer sale Cannot exclude or limit liability, except in Cannot exclude or restrict liability except in
limited circumstances limited circumstances
s 64(5) ss 74A–74M ss 271–273
Manufacturers’ liability Actions against manufacturers and importers of Actions for damages against manufacturers of
goods goods
s 74H s 254
Indemnification of suppliers by manufacturers Indemnification of suppliers by manufacturers
Title and Quiet Possession

- These terms are designed to ensure that the buyer receives good title to the goods and is able to enjoy the
goods free from interference from the seller and from third parties.
Sale of Goods Act 1923 (NSW), s 17
Section 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:
(1) 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;
(2) an implied warranty that the buyer shall have and enjoy quiet possession of the goods;
(3) 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.
Rowland v Divall
Facts
- Divall buys a car from a thief. Sells it to Rowland (a dealership) who then sells it to Railsdon after repainting it. When the cops
take the car, Rowland refunds Railsdon and pursues Divall.
- Bray J held that as Rowland and Railsdon had had the use of the car from May to September there had not been a total failure
of consideration, and Rowland was limited to his remedy in damages. Rowland appealed.
Issue
- BANKES LJ
o The plaintiff now brings his action to recover back the price that he paid to the defendant upon the ground of total
failure of consideration. Should this be allowed.
o it cannot now be disputed that there was an implied condition on the part of the defendant that he had a right to sell
the car, and unless something happened to change that condition into a warranty the plaintiff is entitled to rescind
the contract and recover back the money
o in the present case it cannot possibly be said that the plaintiff received any portion of what he had agreed to buy. It
is true that a motor car was delivered to him, but the person who sold it to him had no right to sell it, and therefore
he did not get what he paid for – namely, a car to which he would have title; and under those circumstances the user
of the car by the purchaser seems to me quite immaterial for the purpose of considering whether the condition had
been converted into a warranty. In my opinion the plaintiff was entitled to recover the whole of the purchase money,
and was not limited to his remedy in damages as the judge below held.
- SCRUTTON LJ
o It certainly seems to me that, in a case of rescission for the breach of the condition that the seller had a right to sell
the goods, it cannot be that the buyer is deprived of his right to get back the purchase money because he cannot
restore the goods which, from the nature of the transaction, are not the goods of the seller at all, and which the
seller therefore has no right to under any circumstances. For these reasons I think that the plaintiffs entitled to
recover the whole of the purchase money for a total failure of consideration, and that the appeal must be allowed.
- ATKIN LJ
o In this case there has been a total failure of consideration, that is to say that the buyer has not got any part of that
for which he paid the purchase money.
o It is true that the seller delivered to him the de facto possession, but the seller had not got the right to possession
and consequently could not give it to the buyer. Therefore the buyer, during the time that he had the car in his actual
possession had no right to it, and was at all times liable to the true owner for its conversion
o in every contract of sale of goods there is an implied term to the effect that a breach of the condition that the seller
has a right to sell the goods may be treated as a ground for rejecting the goods and repudiating the contract
notwithstanding the acceptance
o The buyer accepted the car on the representation of the seller that he had a right to sell it, and inasmuch as the
seller had no such right he is not entitled to say that the buyer has enjoyed a benefit under the contract. In fact the
buyer has not received any part of that which he contracted to receive – namely, the property and right to
possession – and, that being so, there has been a total failure of consideration.
- Driving the car isn't anything that the Act would count as treating the condition as a warranty. Accepting goods only counts
if you accept goods that you bargained for (e.g. accepting goods with good title) or you knew that it wasn't what you
bargained for
Butterworth v Kingsway Motors

Facts
- Rudolph entered hire purchase agreement with bowmaker for vehicle à Rudolph paid some of the monthly payments under
the hire-purchase agreement but not all of them
- purported to sell the car to Kennedy who was a motor dealer à Kennedy sold to Haydon for personal use à Haydon the
same day sold to Kingsway Motors à Kingsway 2 weeks later sold to Butterworth
- After the Butterworth had used the car for nearly a year, he received a notification from bowmaker claiming the delivery up
to them of the vehicle. Butterworth therefore claimed from the defendant the whole purchase price for the breach of s12(1)
(SGA s 17(1)).
- Within a week however, Rudolph paid the final instalment, so the title passed to her and this fed the defective titles of all the
subsequent purchasers.
Held
- The seller’s defective title in goods can be subsequently cured (e.g., if the seller purchases title from the true owner, thereby
giving him the chain of title)
- The buyer can only rescind contract when title was defective (i.e. when the seller did not have good title at the time of sale,
and no right to sell)
- Where the seller’s defective title is cured, the buyer has no right of rescission
- On the facts
o sales by Miss Rudolph to Mr Kennedy, by Mr Kennedy to Mr Hayton, and by Mr Hayton to the defendants were, in a
sense, perfected when Rudolph made her last payment, and that, in consequence, the newly acquired title of Miss
Rudolph passed all along the line and caused the ownership of the car to vest in the defendants on or about July 25.
The plaintiff has been holding the car at the disposal of the true owner, whoever he may be, and since July 25, 1952,
the defendants have been entitled to that car.
o It was held that the Butterworth could recover the whole purchase price for the defendant’s breach if s17(1).
Nothing done after the claimant had claimed this money could affect his right to it, so the ‘feeding’ of the claimants
title could be ignored. The market had in fact dropped and the car by the time worth only ₤ 800; thus the claimant
made a profit of ₤475.
o If Rudolph had acquired title to the car and such title had passed to the plaintiff before he rejected the goods, then
its submitted that there would have been a total failure of consideration and it would not have been open to
Butterworth to recover the full purchase price. Butterworth could however sue in damages since he would have for
almost one year have been under the risk of repossession by the true owner.
Niblett Ltd v Confectioners’ Materials Company Ltd

Facts
- C sells N some milk that was orally said to be one of three brands. One of the brands was under IP attack by Nestle who asked
N not to sell it and they agreed. When C refused to take them back, N tried to sell them overseas and eventually had to take
the labels off and sell them unbranded for a cheap price.
- Niblett claimed damages for breach of warranties (1) that the milk was of merchantable quality; (2) that the defendants had a
right to sell it; (3) that the plaintiffs should have and enjoy quiet possession of it; and that there was an implied condition or
warranty of the contract that any label on the milk would not infringe any trade mark.]
Held
- Case stands for: The implied warranty does not require any fault on the part of the vendor.
- While the seller may have the right to sell at the time of the sale, their right to sell may be lost if there is a vitiating factor
(e.g., in this case, breach of a patent), thus revoking the seller’s earlier right to sell
- But assuming that goods of one or more of three brands might be delivered under the contract, that circumstance does not
show any intention that if two of those brands are free from objection, and the third is an infringement of trademark rights,
the vendor may tender goods of the third brand in fulfilment of his contract. The goods tendered must still be goods which
the vendor has a right to sell. Therefore, in my opinion the appellants have established a right of action under s 17(1), of the
Act.
- The failure to resolve the trademark issue meant that the buyer was denied their right to quiet possession
Microbeads v Vinhurst Road Markings Ltd

Facts
- Machine that makes white lines on roads sold before the world knew about the existence of a patent owned by Prismo.
Patent holder (Prismo) alleges infringement two years down the track.
- At the beginning of 1970 Vinhurst bought a machine for making white lines from Microbeads. The property in the machine
passed before the patent was valid. Vinhurst knew nothing about the patent because it was only when the specification was
published in November that it was open to the whole world to know about the patent. Vinhurst found the machine
unsatisfactory and did not pay the balance of the price to Microbeads. Microbeads sued for the price. Vinhurst alleged breach
of the term of fitness for purpose. In 1972 Prismo alleged that the machine infringed its patent.
Issue
- whether the sale by Microbead breaches the terms of the right to sell and quiet possession
Held
- A disturbance of the buyer’s possession by the holder of a patent granted after the sale of the goods would amount to a
breach of quiet possession, even where the patent holder did not hold the relevant patent at the time of sale (i.e. the seller
had a right to sell at the time)
- When the buyer has bought goods quite innocently and later on he is disturbed in his possession because the goods are found
to be infringing a patent, then he can recover damages for breach of warranty against the seller. It may be the seller is
innocent himself, but when one or other must suffer, the loss should fall on the seller; because, after all, he sold the goods
and if it turns out that they infringe a patent, he should bear the loss. In the present case Prismo sue for infringement now
and stop the buyer using the machines. That is a clear disturbance of possession. The buyer is not able to enjoy the quiet
possession which the seller impliedly warranted that he shall have. – Breach of s17(2)
o Generally means now and in the future. We should not read into it any limitation stating that the defect in title must
exist at the time of sale, even if the seller is innocent at the time of sale.
o Approves Niblett in saying that quiet enjoyment means as against the world, not just the vendor.
- Case stands for: Quiet enjoyment continues into the future.
Class 3 – The importance of accurate and precise description of the goods; correspondence with sample
Correspondence with Description

- Buyer should get goods of that identity for which he or she bargained
- Important issues are: what is actually comprised in the description; what is the description derived from; and
how do we decide whether the goods do or do not correspond with the description.
Sale of Goods Act 1923 (NSW), s 18
Section 18 Sale by description

Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond
with the description; and if the sale be by sample as well as by description, it is not sufficient that the bulk of the goods
corresponds with the sample if the goods do not also correspond with the description.
What is a “sale of goods by description”?
Australian Knitting Mills v Grant

Facts
- Dr Grant bought some “Golden Fleece” woollen underwear from John Martin & Co Ltd, retailers. He contracted dermatitis
from the underpants because a chemical, free sulphite, remained in the material. Dr Grant sued both the retailer and the
manufacturer of the underwear, Australian Knitting Mills.
- At first instance it was found that the retailer had breached the implied term of fitness for purpose and that the manufacturer
had been negligent – A majority of the High Court reversed both decisions.
- On appeal, the Privy Council found that the retailer had breached the contract. The question of a sale by description was
considered for the purposes of the implied term of merchantable quality. The High Court held that there was no breach of
contract. The Privy Council [1936] AC 85 held that there was a breach of the implied terms of fitness for purpose and of
merchantable quality.
Held
- HCA 50 CLR 387:
o Dixon J: A sale of goods by description occurs where the goods are selected or identified in correspondence by
reference to a description and the buyer therefore relies on their classification or possession of attributes in
choosing the goods.
o This occurs notwithstanding an opportunity for the purchaser to inspect the goods at hand since the inspection
wouldn’t have revealed the defects. If they asked for goods of a certain description and are provided goods, it is sale
by description.
- Privy Council
o Particular purpose
§ In order to get the benefit of subsection s19(1) (quality or fitness), the buyer must show (usually by
implication) that the buyer relied on the skill and judgement of the seller in making their purchase.
§ The judgement of the seller can include relying on a retailer buying products that work from manufacturers
(since they are presumably experts in what they sell).
§ Particular purpose doesn’t require you to expressly state why you want them. It is easy to imply that you are
buying underwear so you can wear it.
o By description
§ Merchantable doesn’t just mean you could sell it. It includes being free of defects that you can’t see. It also
doesn’t count if you have to do something to it (e.g., wash it three times) before it becomes merchantable.
§ Even though you’re buying an item right in front of your face, it is still by description if it is described (e.g as
woollen)
§ Distinction between description and quality (underpants were woollen, they weren’t good though)
Key takeaways:
- Goods will be sold by description as long as it is sold not merely as the specific thing, but as a thing corresponding to a
description
Elder Smith Goldsbrough Mort Ltd v McBride

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LAWS3018 – Commercial Law

Class 2 – Contractual and statutory terms of contracts of sale ................................................................................... 15

Class 4 – Fitness for purpose ...................................................................................................................................... 27

Class 5 – Merchantability ........................................................................................................................................... 34

Class 7 – Finders keepers?, Property, possession and transfer of risk ......................................................................... 51

Class 8 – Property, possession and transfer of risk (Cont.) .......................................................................................... 65

Class 9 – Bailment of Goods ....................................................................................................................................... 73

Class 12 – Performance and Breach in the Sale of Goods............................................................................................ 88

Class 13 – Performance and Breach in the Sale of Goods (Continued) ........................................................................ 98

Goods: What are they

Sale of Goods Act 1923 (NSW) (SGA), s 5(1)

In this Act, unless the context or subject matter otherwise requires:

Competition and Consumer Act 2010 (Cth), s 4(1)

In this Act, unless the contrary intention appears – goods includes –

St Albans City and District Council v International Computers Ltd

Telstra Corporation Ltd v Hurstville City Council

A Contract for the Sale of Goods

SGA, ss 5 (excerpts), 6(1)–(4)

Section 6 Sale and agreement to sell

Sale of Goods or Services

Is a contract for the sale of goods?

Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd

Symes v Laurie [1985] 2 Qd R 547

Contract for the manufacture of goods

Section 14 Agreement to sell at valuation

Is the Contract for the Sale of Goods Valid?

Contract of sale – how made

Section 8 Contract of sale how made

Section 7 Capacity to buy and sell

Mere Representations or Contractual Terms

Conditions and Warranties

Wallis Son & Wells v Pratt & Haynes

International Sales: CISG

Terms Implied by Statute

The Legislative Scheme

The Sale of Goods Act 1923 (NSW)

Trade Practices Act

Australian Consumer Law

Definition of consumers and business to business transactions

Overview of legislative regime for liability for goods

Title and Quiet Possession

Sale of Goods Act 1923 (NSW), s 17

Section 17 Implied undertaking as to title etc

Butterworth v Kingsway Motors

Niblett Ltd v Confectioners’ Materials Company Ltd

Microbeads v Vinhurst Road Markings Ltd

Correspondence with Description

Sale of Goods Act 1923 (NSW), s 18

Section 18 Sale by description

What is a “sale of goods by description”?

Australian Knitting Mills v Grant

Elder Smith Goldsbrough Mort Ltd v McBride

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