Week 8: Statutory Guarantee Part 1
Statutory Guarantees: Overview
- Guarantees that are implied by statute into contracts for sale of goods and services o Express terms, and implied terms (generic implied)
- Two different sources: Commonwealth Legislation (Australian Consumer Law), and State/territory Legislation (Sale of Goods Act). (In Victoria just ‘Goods Act’).
- These guarantees are to protect customers Australian Consumer Law (ACL)
- Commonwealth Legislation
- Competition and Consumer Act 2010 (Cth)
- Implied guarantees cannot be contracted out of – no clauses excluding guarantees provided by legislation.
ACL: Application
- Only in limited circumstances
- Only in contracts for sale of goods or services to a consumer, and sale must take place in trade or commerce.
o Trade or commerce within Australia or between Aus. And other places o Any business or professional activity, for profit or not
o One of the parties is in trade/commerce. E.g. not someone privately selling a car to a friend.
- ACL may not apply to sales by auction or insurance contracts ACL Application: ‘Consumer’ (s3)
- According to s3 of ACL: Consumer is person who acquires goods or services if:
o Price is $40,000 or less; or
o The goods/services are the type normally acquired for personal, domestic or household use of consumption, regardless of price.
- Not a consumer if goods are bought o For purposes of resupply; or
o For the purpose of using them in trade or commerce
E.g. carpenter buys tools for trade, not a consumer.
Part 2
ACL Implied guarantees: Goods
- Clear title (s51): Supplier actually has the rights to sell the goods to the consumer - Consumer has right to Undisturbed possession (s52) upon acquiring goods
- No undisclosed securities (s53): Free of any encumbrances, securities or charges.
o E.g. a car being sold without consumer being told that previous owner had a loan against the car
- Acceptable quality of goods (s54)
o Fit for purpose, free from defects, safe and durable. (s54(2))
o Factors taken into account: Nature of goods, price, statements made on packaging or labels, representation made by supplier or manufacturer, other relevant circumstances. (s54(3))
o No implied guarantee if defect is brought to consumer’s attention before contract is made or if consumer has opportunity to examine goods in a way that would reveal defects (s54(4))
o Fitness for purpose (s55) If the consumer has communicated to the seller of the purpose of the goods and what they’ll be used for, there is implied guarantee that goods will be reasonably fit for that purpose.
Exception if consumer hasn’t relied on seller’s skill/judgement to recommend something suitable.
o Correspondence with description (s56): goods must comply with the description.
o Correspondence with sample (s57): If a sample has been provided, goods must correspond to that sample. Only when the sale has been by reference to the sample. Consumer must also have reasonably opportunity to compare goods with sample.
Also, goods must not have any defects that would not be obvious from inspecting sample
o Repair and spare parts (s58): manufacturer takes reasonable action to ensure that facilities for repair are available for reasonable time.
o Express warranties (s59): guarantee that manufacturer will comply with any express warranty (how long goods are covered by warranty)
ACL implied guarantee: Services
- Due care and skill (s60): services rendered with due care and skill
- Fitness for particular purpose (s61): consumer communicates to seller the purpose of the services they are acquiring, and the services must be reasonably fit for that purpose. Again, not if consumer does not rely on seller’s skill/judgment
- Reasonable time for supply (s62): If the contract does not specify time, implied guarantee that services will be rendered or supplied in a reasonable time.
Part 3
Sale of Goods Act (SOGA)
- All states and territories have Sale of Goods legislation - Applies to contracts for sale of goods
o Even if delivery of goods has not yet occurred
o Does not include sales for land or interests in land e.g. tenancy agreements, or shares/money being sold
- SOGA similar to ACL but applies more broadly than ACL.
o ACL only applies to consumers, SOGA applies to even non-consumers.
o Implied guarantees can be contracted out of in SOGA, because business parties are assumed to have more equal bargaining powers.
SOGA: Implied guarantees - Fitness for purpose
o When buyer communicates to seller (expressly/impliedly) purpose of goods being acquired, goods must be fit for that purpose.
o Consumer must rely on seller’s skill or judgement o Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd
Expo buying aluminium windows from Pateman. Two businesses, SOGA applies. Expo indicated to Pateman that windows would be exposed to extreme weather. Windows turned out to leak and were not suitable. Court applied s19 of NSW SOGA – implied guarantee that goods would be fit for purpose.
- Correspondence with description
o Goods must correspond with description made by seller. Only when goods are sold by descriptions identifying the goods, not statements about quality of goods.
- Merchantable quality
o Goods must be of suitable (saleable) quality.
o David Jones v Willis
Willis bought shoes from David Jones. Shoes broke after 3rd wear and she broke her leg. Willis argued shoes were not of merchantable quality. Courts found that though David Jones had not manufactured the shoes, they were the seller so there was an implied guarantee on the quality of the shoes.
- Sale by sample
o Sale made by reference to sample. Bulk of goods must correspond with sample.
o Consumer must have reasonable opportunity to compare goods with sample, and goods must be free from defects not apparent from inspecting sample.
