Term 3, Year 12 Legal Studies Updated 25/7/2017

1. INTRODUCTION TO CIVIL
OBLIGATIONS:
AGREEMENTS
The law regulates private
interactions between citizens in
society, both planned
(contracts) and unplanned
(negligence). The law imposes
elements for a contract to be
valid and for a negligence claim
to be successful. Both the
common law and statutory
protection provide stakeholders
with remedies.
QSA Legal Studies Syllabus

2. AGREEMENTS
Content
In your textbook: pp36-55
Covering topics:
 Elements of a contract
 Capacity
 Promissory estoppel
 The terms of a contract
 The form of the agreement
 Misrepresentations
 Mistakes
 Other contractual issues
Week 1 Exercises – all
questions
 2.1.1 p38
 2.1.2 p44
 2.1.3 p44
 2.1.4 p47
 2.1.5 p48
 2.1.6 p49
 2.1.7 p50
 2.1.8 p51
 2.1.9 p53
 2.1.10 p54
Extension
 Chapter Review, Q1-7, p56

3. Agreement: an exchange of promises between two or more parties
whereby one promises something in return for something else
(goods/services)
Domestic agreement: between family and/or friends, not often legally
binding
Commercial agreement: between unknown parties, often legally
binding
 Main differences is in the intention to create a legally binding agreement

4. ELEMENTS OF A CONTRACT
Offer/Invitation to treat
Acceptance
Consideration
Capacity
Intention

5. OFFER
Written, oral or through conduct
 Written: signing a physical document in agreeance with the terms and conditions
(such as for a car or house)
 Oral: verbally agreeing to something (such as the sale of a TV on Gumtree)
 Conduct: demonstrating agreeance with a contract via what you do or through your
actions (such as purchasing something from a shop)
Offerer – the person making the offer
Offeree – person accepting the offer
Offers can be withdrawn prior to acceptance, as long as it is
communicated
Offers can be for a certain amount of time
Can be made to individuals, groups, or even the whole world

6. INVITATION TO TREAT
Like an advertisement – trying to get someone to make an offer or
accept the invitation through their conduct (such as a price tag on an
item on a shop shelf)
An invitation to submit an offer to buy
Your cat has 5 kittens and you put ads up around town saying they
are $50 each.
 These signs are an invitation to treat, not an offer
Includes shopkeepers displaying their goods
If you take a pile of items to the cashier and they say ‘That’s $25.60’
– they have then made the offer, before that the items are an
invitation to treat – you can then change your mind about the items –
acceptance occurs when you pay
If you see a can of Coke costs $2, and you walk up and just give them

7. ACCEPTANCE
General principles of acceptance:
 Acceptance must actually be communicated, unless accepting through conduct
 Acceptance must be in full, otherwise it is a counter-offer
 All conditions stated must be adhered to for acceptance to be legitimate
 Only those the offer is made to can accept
 Acceptance cannot be withdrawn without the consent of the offerer
 Acceptance must be made within a prescribed time, or else a reasonable time
 You can only accept an offer you know exists

8. Acceptance can occur without actual communication
You can accept the terms of a sale (ie. Buy one get one free) without
actually communicating as such – it is implied by paying for two of
the correct items.

9. A qualified acceptance cannot be made. This would amount to a
counter-offer.
You must accept the offer as it is, if you reply with a different version
of the offer, it is considered a counter-offer and must then be
accepted by the original offeree.
Offer A: Buy my car for $10,000
Counter-Offer B: No,
how about $9,500
Acceptance: Ok.
This is the original offer. Because it
is not accepted, but is met with a
counter offer.
This is technically a new offer/new
start of an agreement.

10. Any conditions stated in the offer must be followed before an
acceptance can be said to have taken place
You must agree to the whole offer
If your mum says “I will give you $20 to do the mowing, but only if
you have finished your homework” and then you mow the lawn. She is
within her rights to not pay you when she finds out you haven’t done
all your homework.

11. Gilbert J McCaul (Australia) Pty Ltd v Pitt Club Limited (1957) 59
SR(NSW) 122
Facts: There was the option to renew a lease. But the tenant had to:
 Give 3 months notice in writing prior to the end of the lease;
 Pay the rent punctually; and
 Otherwise perform all of the terms of the lease.
If the tenant did not do these things then they could not expect to
have their lease renewed unless the landlord agreed.
The tenant was rarely on time to pay the rent. The tenant chose to try
to renew the lease, but the landlord refused.
Legal Issue: Was the punctual payment of rent a condition which had
to be fulfilled?

12. Decision: The court said that it was clearly a term of the acceptance
by the landlord of an option to renew that the rent must have been
paid on time. The tenant was not entitled to renew the lease and
exercise the option.

13. Acceptance can be made only by the parties to whom the offer was
made.
If I tell my brother David that he can buy my car for $5000, my
brother-in-law Anthony cannot accept this offer as it was not made
to him
He can however, make an offer to me to buy it for $5000 and I could
accept or reject this

14. Once acceptance is communicated, it cannot be
withdrawn except with the consent of the person
making the offer
Alison offers to buy Bob’s boat for $200,000.
She signs a contract. Bob signs the contract.
Alison then emails and says she doesn’t want to
proceed and to not give Bob the contract to
sign.
She is too late, the offer has been accepted.
Unless Bob chooses not to, he has to sell his
boat.

15. No one can accept an offer that they do not
know exists.
In 1927 man X was murdered. A reward was set
at $1000 for information leading to the arrest
and conviction of the murdered. Man Y is
charged with the murder. He gives the police
information leading to the actual murderers
arrest. He had forgotten about the reward and
was only giving the information to get himself
free.
When he tried to claim the reward the court
found that he was not entitled to it as he gave
information to set himself free, not in
acceptance of the offer.

16. Acceptance must be made within the time prescribed, or if not time given,
within a reasonable time.
‘Half price – Monday only’ – you cannot sue them for not giving it to you for
half price on Tuesday.
‘If you wish to buy my car for $5000, email me by Monday 1 December
2014.’ The person emails on December 5.
Peter sells mangoes. He phones Fred and tells him he will sell them for $5
for 20 mangoes. Fred says he will call back as soon as he can. Peter says to
let him know ASAP as the mangoes are getting ripe. He doesn’t hear from
Fred and so sells them to other people in 24 hours. Fred phones and says he
wants 400 cases and then tries to sue Peter when he doesn’t supply them.
It was found that it was unreasonable to expect Peter to hold fresh fruit for
more than 24 hours and that 24 hours was a reasonable amount of time in
the circumstances.

17. CARLILL V CARBOLIC SMOKE BALL COMPANY (1893)
CA 1 QB 256

18. Facts: as in the advertisement. Mrs Carlill met these conditions and
sued for £100 when the company refused to pay her.
Legal Issue: Was the advertisement an offer or an invitation to treat? If
it was an offer, did Mrs Carlill accept the offer by performing the
conditions set out in the offer or should she have communicated her
acceptance of the offer to the company before doing so?
The Carbolic Smoke Ball Company argued that the advertisement was
not an offer capable of acceptance and that it was ‘mere puff’ (sales
talk) and was not intended to be a promise at all.
Alternatively, they said it was a contract, but one made with the
world, which they believed could not be validly made.

19. WHAT WOULD YOU DECIDE?
Decision: The advertisement was not merely an invitation to treat, but
was an offer to become liable to anyone who fulfilled the conditions.
The offer impliedly dispensed with the need for notification of
acceptance, and anyone who performed the conditions accepted the
offer.
It was held that the £1000 bank deposit showed that their sincerity in
the matter meant that the advertisement was not just ‘puff’ but was
actually a serious offer.
They also found that an offer can be made to the world at large.

20. LEONARD V PEPSICO INC. (1999, US DISTRICT
COURT, NEW YORK)
Pepsi had a loyalty program whereby customers
collected points and used them to claim prizes.
The ad showed a Harrier jet, flown by a teenager,
that could be claimed for 7 million points.
A viewer saw this and managed to collect the 7
million points.
When he tried to redeem the jet, Pepsi said there
was no offer.
What do you think?

21. HYDE V WRENCH [1840] 49
ER 132
Facts: Wrench offered to sell Hyde property for $1000. Hyde said he
would pay $950 but Wrench refused. Hyde then said he would pay
$1000, but Wrench still refused. Hyde sued, saying there was a legal
agreement between the parties.
Issue: Was there a contract between the parties?

22. WHAT WOULD YOU DECIDE?
Decision: the court found that there was no contract, because
acceptance had not occurred.

23. CONSIDERATION
The ‘price of the promise’
Something of value passing from one party to the other in return for
the promise made
I agree to pay $5,000 for someone’s boat
Boat
$5,000

24. Consideration can be:
 Promising to supply something – a service or a good
 Exchanging money for a car wash
 Money
 Essentially anything of value to someone
If there is a breach of contract, the person who decides to sue (the
complainant or plaintiff) must prove they have given consideration for
the other’s promise

25. GENERAL PRINCIPLES OF
CONSIDERATION
C must exist in every simple contract
Heaton v Richards (1881) 2 LR (NSW) 73
Facts: Plaintiff wants to print and publish a book. The govt agrees to
do this if the paintiff pays for all the costs. The govt is not receiving
any benefit from this. The govt was unable to uphold their end of the
bargain. The plaintiff sued the govt for not carrying out the contract.
Legal Issue: Was there a binding agreement? Was there consideration
passing from the Plaintiff to the govt?

26. Decision: there was no consideration passing from the plaintiff to the
govt, therefore the contract was not binding.

27. As long as there is C, the court is not concerned as to its adequacy,
provided it is of some value.
It is irrelevant whether the consideration on offer is of value to you as
long as it is of value to those involved in the case
Consider trading cards in primary school – seems ridiculous to some,
but to others they held great value

28. Chappell and Co. Limited v Nestle Co. Limited (1960) AC 87
Facts: The respondents offered to sell a record for 1shilling 6pence
plus 3 chocolate bar wrappers. The applicant sued them for not
delivering the record when they paid 1shilling 6pence. The applicants
did not supply the chocolate bars as requested.
The applicants argued that the chocolate wrappers were of no value
to the respondents.
Legal Issue: Were the chocolate wrappers part of the consideration?

29. Decision: A contracting party can stipulate what consideration he or
she chooses.
The respondents asked for chocolate wrappers, and as such it was
within their rights to refuse the offer of the applicants and therefore
there was no binding contract.

30. C must not be illegal or unlawful.
You cannot agree to kill someone for money, or give them drugs as
these things are illegal.
You cannot sue the driver of your getaway car after a bank robbery
for not driving as fast as agreed.

31. C must be definite.
Shiels v Drysdale (1880) 6 VLR 126
Facts: a daughter promised to look after her aged father and mother
as long as they lived. In return, the father agreed, when requested by
her, to transfer to her is interest in some of his land. The father did
not transfer any land to the daughter when she made the request. She
sued on the agreement claiming that the land sould be transferred to
her.
Legal Issue: Could the subject matter of the contract be identified?
That is, could the land which was to be consideration for the promise
to look after her father and mother be identified so it could be
transferred?

32. Decision: Because the land was not identified clearly, it was not
possible to transfer any land to the daughter. The court held that the
contract was void because of uncertainty.

33. C offered now in return for past performance is not good C.
Roscorla v Thomas (1842) 3 QB 234
Facts: Roscorla bought a horse from Thomas. After Thomas delivered
the horse to Roscorla, Thomas said that the horse was “free from
vice”. In fact the horse was a vicious animal. Prior to the sale there
had been no representation by Thomas about the horse and Roscorla
had satisfied himself that the animal was sound. Roscorla sued
Thomas saying that he promised that the horse was “free from vice”
and should receive his money back.
Legal Issue: Was the promise made by Thomas that the horse was
“free from vice” part of the consideration?

34. Decision: The court held that the prior sale was not consideration for
the promise that the horse was “free from vice”. The promise made by
Thomas was therefore not enforceable, as it was made after the sale
had been completed.

35. C must be possible to carry out.
The promise cannot be something impossible:
 Hold your breath under water for an hour without a breathing apparatus
 Fly to the moon on a carrot
 …you get the idea

36. The C must be provided by the person who has made the promise.
Jack, Phoebe and Michael all live in the same street and are friends.
One afternoon, One day while the three of them are hanging out
Phoebe asks Jack to mow her lawn. He says he will for $30. Phoebe
agrees.
Two days later Jack goes on holidays to Sydney. While he is away
Michael mows Phoebe’s lawn. Just as he is packing away the lawn
mower, Phoebe arrives home from the shops. Michael says hello, and
asks if he can have the $30 in cash before he leaves. Phoebe refuses
his request. A bit angry, Michael threatens to sue Phoebe unless she
pays.

37. If someone promises to do something or does something which he or
she is already obliged to do under a contract, then that promise is not
further C.
Folkes v Beer (1884) 9 AC 605
Facts: The plaintiff won a court judgment against the defendant. The
defendant asked for time to pay. The plaintiff was entitled to payment
of the judgment debt plus interest which accrued on any outstanding
balance. It was agreed by the plaintiff that the defendant would pay a
certain sum at once and the balance by instalments. The defendant
eventually paid the whole of the judgment debt but did not pay the
interest which had accrued on the unpaid balances. The plaintiff sued
the defendant.
Legal Issue: Was the agreement by the plaintiff to accept payment by
instalments consideration for the whole of the judgment debt plus
interest?

38. Decision: It was held that the defendant was not relieved from the
obligation to pay interest. The defendant had not promised to do
anything other than what he was obliged to do.

39. A promise to refrain from legal action may be consideration
If someone promises not to sue in exchange for compensation
Such as after an accident in a business
 Rather than face court the business may offer to pay compensation out of court –
saves legal battle and having their name dragged through the mud in the press

40. CAPACITY
Whether someone can enter into a legal agreement is called capacity
Some people are not allowed to enter into legal agreements
If they do, the agreement will not be upheld by the courts
These include:
 Bankrupt people
 Criminals
 Mentally ill people
 Some intoxicated people
They are said to lack capacity to contract

41. Some groups of people also have special rules
Such as corporations and people who are not Australian citizens
Some contracts are between people who are not ‘equals’ (in the eyes
of the law)
The law will look at the question: is this agreement fair or has the
stronger party driven too hard a bargain?

42. INFANTS & MAJORITY
Legally, you are an infant until you reach 18 years old
This is usually referred to as being a ‘minor’
Minors lack capacity to enter into legal agreements
There are 4 exceptions to this rule:
1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

43. 1. Contracts for necessaries
Necessaries are things which maintain the minor in question to the
standard of living which they enjoy
Their social position, age and occupation are all relevant factors
Eg: a minor buys a bike to ride 20km to work every day – the court
held that he had to pay for it under contract because it was a
necessary
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

44. 1. Contracts for necessaries
2. Contracts for the benefit of infants
When a minor enters a contract for an apprenticeship or some other
agreement which is for their benefit, they are usually bound by it
The concept of what is a ‘benefit’ for the minor is determined by the
facts of each case
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

45. 1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
This exception is for those contracts which involve a continuing
obligation, and where minors acquire property of a permanent nature
Unless the minor repudiates (rejects, cancels, etc) the contract within
a reasonable time after turning 18, the contract becomes legally
binding
4. Where an infant needs to ratify a contract for it to be binding

46. 1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding
After turning 18 a minor may confirm an agreement made previously
so that they become legally bound to it
This is called ratification
Generally, any contract that is not already legally binding (such as
rule #1 above) must be ratified for it to be binding on the infant

47. INTENTION
Domestic agreements generally do not contain an intention to be held
legally liable for something
This intention is when both parties wish for the agreement/contract
to be legally binding
 That is, they agree that if there is a breach of contract (from either party) then there
may be legal consequences
For example, if your mum offers to pay you $20 for mowing, this
would be a domestic agreement, and your mum probably does not
intend it to hold any legal ramifications if she doesn’t pay up

48. However, for commercial, legally binding agreements, there are a
number of things the court will look for to decide if there was intent:
 What was agreed upon
 Agreeing to mow the lawn is less serious than a company merger worth millions of dollars
 The circumstances of the agreement being formed
 If it was made during a big night out at the pub, after too many drinks, perhaps it shouldn’t be as legally
binding
 The words used by the parties
 More formal words and language = more likely to be a legally binding agreement
 The effect of the agreement on the parties
 Not being allowed to go to a party after your mum said you could if you stacked the dishwasher is not
that dire, however, a business having to close after losing million of dollars is much worse
 How the people acted
 Did they act as if the agreement was binding?

49. Agreements between husbands and wives are usually considered
domestic
 Except for when it involves marriage breakdowns and property investments
Merritt v Merritt [1971] WLR 1211
Husband and wife are divorcing
Husband says the wife can have the family home after the divorce
However, he goes back on this and refuses to transfer it
The found that this was not a social agreement and as such was
bound by it
It was more like a business arrangement

50. PROMISORY ESTOPPEL
A person who makes a promise can be stopped from going back on
that promise
Came about because at times agreements can be made that are unfair
to one of the parties involved
Most commonly used when consideration has been given by the party
trying to enforce the agreement (plaintiff), but there is no legal
contract
Generally applied if the person relying on it (defendant) has suffered
loss
Not used very often
In these cases, the court decides that it would allow a party to take
action to recover damages where there was a promise which was not
supported by consideration

51. An example of an instance where promissory estoppel might be
applied is a case where an employer makes an oral promise to an
employee to pay the employee a specified monthly or annual amount
of money during the full duration of the employee's retirement. If the
employee then subsequently retires based on a reliance on the
employer's promise, the employer could be legally estopped from not
delivering on his promise to make the specified retirement payments.

52. THE TERMS OF A CONTRACT
Express terms: the words that clearly define the items in the contract
that are legally binding – ie. Specifics of the car you are buying (blue
1999 Honda Civic for $2000, rather than just ‘a car’)
Main terms are called ‘conditions of the contract’
Implied terms – those that are assumed
Such as reasonable care and skill will be used when hiring a worker
to carry out repairs, and that materials fit for the purpose will be used

53. CONDITIONS AND WARRANTIES
Terms of a contract need to be established as conditions or
warranties
Important terms = conditions
Less important terms = warranties
The distinction is important for deciding remedies in a court situation
A term will be a condition if:
 It was an essential part of the contract, and if
 The term was not carried out it would make the performance of the rest of the
contract totally different from what was agreed

54. Warranties are subsidiary to the main purpose of the contract
The basic nature of the contact is not changed by a failure to perform a
warranty term – it is still a breach of contract, but the remedies are different
Examples:
 Condition: get paid $22/hr working at a supermarket  without this I would not accept
the contract (job offer)
 Warranty: get a 5% discount on all items at the supermarket  without this I still would
probably accept the contract
 Condition: I will sell you a Toyota Charade
 Warranty: the supplier will replace any faulty parts for one year after purchase
More examples in your textbook (p.49)
Remedies:
 Condition – void contract
 Warranty - damages

55. THE FORM OF THE AGREEMENT
Written agreements are easier to prove, but are not required
Written agreements:
 No oral evidence can be added to add, change or contradict the terms of the written
agreement
 Courts assume everything is in writing
 This is called ‘parol evidence rule’
 Can be unfair – a party can say things to convince someone else to sign
When a statement is made but not included in the written contract, it
is important to decide if it is actually part of the contract
 This can determine the legal remedies if the statement is true

56. MISREPRESENTATIONS
Any statement of fact by one person to another, either by word or
actions, which is not in accordance with the actual facts
To get compensation for misrepresentation, it must be:
 A false representation of an existing or past fact
 Addressed to the plaintiff by the person making the representation
 Made before the contract is entered into
 Intended to persuade the plaintiff and actually have persuaded the plaintiff
 Factual information, not opinion

57. Types of misrepresentation:
Innocent
 A statement made where the party saying it believes it to be true – they are not
aware that it is incorrect
 Can rescind contract, but may not get damages
Negligent
 When a statement is made and the party has not taken reasonable care to ensure it
is true
Fraudulent
 Making a statement the party knows to be false
 Difficult to prove

58. For fraudulent misrepresentation to exist, it must be established that:
 There is representation of fact (not opinion)
 Representation must be untrue
 The person who made the representation must know that what they said was
untrue, or they must not believe it is true, or not care whether it is true or false
 The person who makes the representation must intend the other party to act on it
 The representation must have been acted on by the other party
 The party claiming must have suffered damage

59. MISTAKES
Mistake of law
 Parties are sometimes mistaken as to the legality of the contract
 Does not always mean the contract is void
 Everyone is presumed to know the law – ignorance of the law is no excuse
 Exception is when parties agree to do something illegal as part of the obligations
under the contract
Mistake of fact
 Parties can be genuinely mistaken as to certain important facts which are the
subject of the contract
 Does not always mean the contract is void
 If the court can deem that the contract would not have been entered into based on
the reasonable person test then the contract may be void (ie. If it weren’t for this
mistake, I wouldn’t have entered the contract)

60. OTHER CONTRACTUAL ISSUES
Undue influence:
 Entering into a contract due to pressure brought on by another party
Unconscionable dealing:
 Taking unfair advantage of someone else’s disadvantages to benefit yourself
 Usually through lack of education, language difficulties or illness
Duress:
 Threats or actual violence towards a party to induce them to sign
Lack of ‘good faith’:
 Information of relevance to the contract must be disclosed
Restraint of trade:
 Unfairly restricting someone’s ability to earn a living
Frustration:
 Something happens preventing the contact from being fulfilled, fundamentally changing the nature of what
was contract for
More details on these in your textbook

61. STATUTORY PROTECTION
Content
In your textbook: pp57-66
Covering topics:
 The legislation
 Implied obligations
 Exclusion clauses
 Remedies
 Contemporary issues in relation to
agreements
Week 2 Exercises – questions as
indicated
 2.2.1 Q1-2, p59
 2.2.2 Q1-2, p61
 2.2.3 Q1-3, p62
 2.2.4 Q1-4, p65
Extension
 2.2.1 Q3, p59
 2.2.2 Q3, p61
 2.2.4 Q5, p65
 Chapter Review Q1-7, p66

62. Historically – common law prevailed
Government intervention  statutes were introduced
Provides regulation of common law principles
Balances bargaining power between parties = consumer protection

63. THE LEGISLATION
Competition and Consumer Act 2010 (Cth) [CCA]
 Aims to enhance the welfare of Australians through the promotion of competition
and fair trading, and provision for consumer protection
 Imposes strict liability on manufacturers of defective goods which may cause injury
or damage
 Prohibits deceptive or misleading conduct, and misrepresentation
 Mirrored in Fair Trading Act 1989 (Qld)
 Applies to people and corporations
Sale of Goods Act 1896 (Qld) [SGA]
 Applies to individuals and companies
 Can be contracted out of – by incorporating a clause saying it doesn’t apply

64. IMPLIED OBLIGATIONS
5 important conditions and warranties for contracts (from CCA and
SGA):
1. The seller has the right to sell
2. The goods will conform to the description given by the seller
3. The goods will be fit for the purpose for which they are intended
4. The goods will be of merchantable quality
5. The goods will conform to the sample, if one was given
We will look at these individually.

65. 5 important conditions and warranties for contracts (from CCA and
SGA):
1. The seller has the right to sell
What is being sold to you is permitted to be sold by the seller
Ie. If someone sells you a car, it is implied that they own it
If they do not, legal action can be taken – you will probably have to
return the car to the rightful owner, but you may be able to make a
claim against the original seller (most likely a financial claim for your
money back, plus legal fees, for example).
An legal restrictions such as ownership must be brought to the
attention of the customer before purchasing.

66. 5 important conditions and warranties for contracts (from CCA and
SGA):
2. The goods will conform to the description given by the seller
The items should be as described.
Important when ordering from catalogues, over the internet or
anytime the buyer doesn’t see the item before purchasing it
If you are told it is in ‘excellent condition’, then it should be

67. 5 important conditions and warranties for contracts (from CCA and SGA):
3. The goods will be fit for the purpose for which they are intended
Goods should be able to be used for what they are meant to be used for.
Ie. If I buy a pair of shoes, it should be safe to assume I can wear them. The
retailer can assume that the pair they sell me are suitable for whatever purpose I
want them for (presumably walking in).
If I tell the store (as long as they are in the business of the selling the item) that I
want the item for a different purpose, then they should supply me with
something for that purpose.
Ie. If I tell the retailer I want to buy a pair of shoes to go long distance running,
then the store should supply me with a suitable pair (if they can).
Goods should also be fit for their purpose for a reasonable amount of time.
Ie. You could return a new car if it broke down after a week, but you couldn’t
return a toothbrush after a year if the bristles fall out.

68. 5 important conditions and warranties for contracts (from CCA and
SGA):
4. The goods will be of merchantable quality
Goods must be of reasonable quality, considering the purpose for
which they were bought, the price and all other relevant circumstances
If goods are sold as ‘high quality’ you should expect high quality
If goods are expensive compared to similar products then the
consumer can expect a higher level of quality
Grant v Australian Knitting Mills (1936) 54 CLR 49

69. M/S Aswan Engineering Establishment Co v Lupdine [1987] 1 WLR 1
Facts: The defendant supplied buckets to the plaintiff for the
transport of liquid material to Kuwait. The material in the buckets was
shipped to Kuwait and left on the Kuwait dock, where the ground
temperature reached 70 degrees Celsius. The buckets melted, ruining
the liquid material.
Issue: Was the supplier of the buckets responsible for the damage
because the buckets were not of merchantable quality?
Verdict and Reasons: The court found that the buckets were of
reasonable quality and that it was not reasonable to expect that they
could be exposed to such extreme weather conditions over a long
period of time without damage. The buckets were suitable for most
purposes.

70. 5 important conditions and warranties for contracts (from CCA and
SGA):
5. The goods will conform to the sample, if one was given
What you buy must be as good as the sample you are given (if you are
given on)
Ie. If you are given a sample of chocolates, and then buy a box
because the same was so good, you can expect the box you bought
to be good.

71. QUESTIONS
1. In the case of M/S Aswan Engineering Establishment Co, would it
have made any difference if the seller was informed of the use for
the buckets?
2. Is it appropriate that the seller should explain to potential
customers how products should be used? Even basic products like
buckets?
3. Are the following goods of merchantable quality and fit for their
purpose (assume all are used correctly):
a) You hire a DVD. It freezes at the climax and you can’t watch the rest.
b) After two months a new pair of Nikes lose their sole.
c) You buy fries from KFC. You complains that they are too salty.
d) You go to a sports store and explain you want shoes with grip for cricket. They
sell you shoes assuring it will give you the grip you need. Two weeks later,
playing on damp grass, you slip and break your ankle.

72. EXCLUSION CLAUSES
Terms of a contract are there to ensure an agreement is satisfactory
for both parties
Exclusion clauses limit or avoid liability for something that might go
wrong in the course of the contract
Courts will usually uphold an exclusion cause:
 there is an assumption by courts that agreements are negotiated
 They do however recognise that often there is little or no choice about the presence
of an exclusion clause – it must be accepted if you wish to enter the agreement
 Eg. Online agreements for Facebook, Youtube, etc
Courts will interpret exclusion clauses carefully – if it is unclear, the
court will interpret it in favour of the person forced to sign

73. YouTube users are asked to sign a term of use agreement before
uploading video content
https://www.youtube.com/t/terms
Read the statements that reduce the liability of YouTube and try to
rewrite these in your own words

74. ERNEST BECK AND CO V SZYMANOWSKI AND CO
[1924] AC 43
Plaintiff agreed to a contract with an exclusion clause stating that if
the buyer did not return ‘goods delivered’ within 14 days, the buyer
lost any right to return the goods.
After the 14 day period, the buyer discovered that the goods received
were not the goods ordered.
They tried to return the goods, but the seller tried to rely on the
exclusion clause.
What should happen?

75. Both parties sign
agreement
Court ignores clause if...
either party signed
agreement as something
else (e.g. receipt)
effect of clause not
explained
party signing didn't
understand what was
being signed

76. both parties have not
signed agreement
reasonable steps must
be taken to notify the
party of the existence of
the clause ...
before agreement
entered
steps required to notify
a "normal reasonable
person" (objective)

77. ACTIVITY – IN PAIRS
Use pp60-61 to investigate the following requirements of
exclusion clauses. Include information on relevant cases
detailed in the text.
The clause must be contained in a
contractual document
Parker v South Eastern Railway Co
The existence of the exclusion clause
must be brought to the notice of the
other party before or at the time the
contract is entered into
Thompson v London, Midland and
Scottish Railway Co
Reasonably sufficient notice of the clause
must be given
Olley v Marlborough Court
What is reasonable is a question of fact
Thornton v Shoe Lane Parking Ltd
J Spurling Ltd v Bradshaw

78. REMEDIES
Competition and Consumer Act 2010 (Cth)
 In general a wronged party must:
 return the goods
 Give notice of the breach
 Do so within a reasonable amount of time
 Eg. I return a shirt to David Jones the day after I purchase it and I tell them I am return it
because of the poorly sewn sleeves – this fulfils the above three requirements
Sale of Goods Act 1896 (Qld)
 Wrong parties should ‘walk away’ before taking delivery of goods
 May take reasonable time to inspect goods
 May reject goods after inspection
 After delivery, only remedy is to sue
Fair Trading Act 1989 (Qld)
 Similar remedies as laid out under the CCA above

79. CAUSATION & REMOTENESS OF
DAMAGE
A breach of contract must cause financial loss
The plaintiff must show that the loss was caused by the defendant
However…
The person not fulfilling the contract is only liable for loss that would
reasonably be because of their fault
If financial loss is too remote/far removed from the wrongful act, they
are not liable and the plaintiff must cover the damages themselves

80. TO COMPLETE THE TEXT…
Summarise the following headings under 2.2.5 Contemporary Issues
in Relation to Agreements:
 Cooling-off periods (p65)
 Rescission (p65)
 Government involvement in contract-related matters (p65)