BULAW5914 Commercial

Law
Sale of Goods
Defective goods

CRICOS Provider Number 00103D

 Description
• Where goods are sold by description
(i.e. where description is used to
identify the goods to the buyer and the
buyer has relied on it), there are
implied conditions:
• that the goods shall correspond with the
description or sample and description
CASE: Varley v Whipp [1900]
CASE: Beale v Taylor [1967]
• if the sale is by sample and description,
the bulk of the goods must correspond
with both sample and description

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 Description
• The condition is concerned with identity,
not quality but it might be hard to make
a distinction
CASE: Ashington Piggeries Ltd v Christopher
Hill Ltd [1972]
• There are obligations imposed on the
seller where the sale is in the course of
business:
• s 32H Fair Trading Act 1999
• s 18 Goods Act 1958
• s 70 Trade Practices Act 1974

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 Description
• For description to apply, need to ask:

• Is the contract for a sale of goods by

description?

• Have words of description been used?

• Do the goods comply with the description?

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 Sale by sample
• Where there is a sale by sample 3 further
terms are implied:
• that the bulk shall correspond with the sample in
quality
• that the buyer shall have a reasonable opportunity of
comparing the bulk with the sample
• that the goods must be free from any defect
rendering them unmerchantable which would not be
apparent on a reasonable examination of the sample
CASE: Drummond v Van Ingen (1887)
• There are obligations imposed on the seller
for sales made in the course of business:
• s 32HA Fair Trading Act 1999
• s 20 Goods Act 1958
• s 72 Trade Practices Act 1974

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 Fitness for purpose
• There is an implied condition on the seller to
supply goods which are fit for their purpose
• The buyer must expressly or by implication
make known to the seller the particular
purpose for which the goods are required
CASE: Grant v Australian Knitting Mills [1936]
unless the goods really have only one
purpose
• If the goods are required for a special purpose,
this fact must be made known to the seller
CASE: Griffiths v Peter Conway Ltd [1939]

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 Fitness for purpose
• The buyer must show that there is at
least some reliance upon the
judgment and skill of the seller
CASE: Cammell Laird & Co Ltd v
Manganese Bronze & Brass Co Ltd
[1934]
• There are obligations imposed on the
seller for sales made in the course of
business:
• s 32IA Fair Trading Act 1999
• s 19(a) Goods Act 1958
• s 71(2) Trade Practices Act 1974

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 Fitness for purpose
• For this provision to apply, 3 conditions must be
satisfied:
• Has the buyer either expressly or by implication made
known to the seller the particular purpose for which the
goods are required?

• Has the buyer relied on the seller’s skill and judgment?

• Are the goods of a description which it is in the course

of the seller’s business to supply?

• (If the buyer ordered the goods under their patent or

trade name, this may mean the provision does not
apply)

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 Merchantable quality
• There is an implied condition on the seller
to supply goods which are of merchantable
quality
• For the provision to apply:
• the goods must be bought by description
• from a seller who deals in goods of that
description (whether they are the manufacturer
or not) in the course of a business
CASE: David Jones Ltd v Willis (1934)
• provided that the buyer has not had the
opportunity to examine the goods
CASE: Grant v Australian Knitting Mills (1933–
34)

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 Merchantable quality

• If the goods can be used for one of

several purposes, then the goods
would be of merchantable quality if
they were fit for any one of those
purposes
CASE: Henry Kendall & Sons v William
Lillico & Sons Ltd [1968]
CASE: Wren v Holt [1903]

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 Merchantable quality
• Merchantable quality means reasonable
for the purpose described. Look at the
nature and purpose of the goods in
relation to:
• price
• the description applied to the goods;
• whether the purpose for the goods had
been made known to the seller
• any other circumstances relevant to the
sale

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 Merchantable quality
• Note: There can be a breach of both fitness for
purpose and merchantable quality on the same
set of facts
CASE: Grant v Australian Knitting Mills [1936]
CASE: McWilliams Wines Ltd v Liaweena
(NSW) Pty Ltd [1988]
• There are obligations imposed on the seller for
sales made in the course of business:
• s 32I Fair Trading Act 1999
• s 19(b) Goods Act 1958
• s 71(1) Trade Practices Act 1974

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 Merchantable quality
• For this section to operate there are 4
conditions that must be satisfied:
• Has there been a sale by description?
• Have the goods been bought from a seller
who deals in goods of that description?
• Has the buyer examined the goods? Would
a reasonable examination have revealed
the defects (a question of fact)?
• Do the goods have one purpose or several?

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 Services
• Note that ‘services’ are defined in very
wide terms under s 4 of the Trade
Practices Act 1974
• The Trade Practices Act 1974 (and
equivalent legislation in Victoria) implies
a warranty on the seller only in a
contract for the supply of services: s 74
(discussed in seminar)

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 Remedies of the parties for
breach of contract

Seller’s remedies

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 Seller’s remedies
• Against the goods
• An unpaid seller is any person who has not been paid the
full price and their rights depend on whether or not
property and/ or possession have passed:
• if property and possession have passed to the buyer,
the unpaid seller only has rights against the buyer
personally;
• an unpaid seller still in possession can exercise a lien,
stop the goods in transit, or exercise a right of
resale;
• an unpaid seller with property and possession can resell
the goods without being in breach.

• Against the buyer

• For the price of the goods or damages for non-acceptance.

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 Remedies of the parties for
breach of contract

Buyer’s remedies

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 Buyer’s remedies

• The buyer’s remedies against the seller

depend on whether the goods have been
delivered or not:
• damages for non-delivery;
• specific performance if damages are not an
adequate remedy where the seller refuses to
deliver the specific goods sought;
• breach of warranty of quality; or
• rescission if there is a breach of a condition.

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 Remedies
• The terms implied by Part V Division 2 of the
Trade Practices Act 1974 and Part 2A Div 3 of
the Fair Trading Act 1999 cannot be excluded
or modified:
• s 32L Fair Trading Act 1999
• s 68 Trade Practices Act 1974
• However, suppliers are allowed to limit their
liability (in relation to contracts other than for
goods or services acquired for PDH use or
consumption) to the cost of replacement or
repair of goods or the cost of having the
services supplied again
• s 32MA Fair Trading Act 1999
• s 68A Trade Practices Act 1974

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 Remedies
• Remedies available to the consumer in
the event of breach by the supplier
include:
• damages
• rescission, but the goods must be returned
within a reasonable time
• repair of goods
• resupply of goods and services
• resupply of equivalent goods
• refund of money paid

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 Trade Practices Act 1974
• The Trade Practices Act bases its validity on a number of
constitutional powers, the main one being the corporations
power: s 51(xx).
• State Fair Trading Acts
• Because of the constitutional limitations imposed upon the
Trade Practices Act, the states and territories have passed
mirroring legislation in the form of Fair Trading Acts to catch
activity within their state.
• Coverage of Acts
• While the Trade Practices Act is principally concerned with
corporations, the Fair Trading Acts of the states and
territories are concerned with partnership and persons, thus
giving blanket coverage for a consumer against unfair
consumer practices.

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