Case Summaries 1 193
Case Summaries 1 193
Case Summaries 1 193
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Case Summaries
Making the Contract: Offer and Acceptance
1. Harvey v Facey [1893] AC 552 (Pg 163)
Facts: Facey owned a property that Harvey wanted to buy. Telegraphic transaction was
made and Harvey sued Facey and lost. Harvey only supplied information about the lowest
price and did not make an offer.
Decision: Supplying information on request is not making an offer and the information
supplier is not bound by it.
2. Australian Woollen Mills Pty Ltd v Commonwealth [1954] 92 CLR 424 (Pg 164)
Facts: Government announced it would pay subsidies for wool purchases for Australian
manufacturing. AWL purchased wool and claimed the subsidy, but the government refused
to pay
Decision: The government only issued a statement of policy. There was no intention to
make an offer.
3. Harris v Nickerson [1873] LR 8 QB 286 (Pg 165)
Facts: An auction has been advertised to be conducted on a particular day was cancelled.
Nickerson travelled a considerable distance to attend the auction, sued for damages and
breach of contract.
Decision: Advertising an auction was not an offer, but a statement of present information.
4. Kelly v Celedonian Coal Co [1954] 92 CLR 424 (Pg 165)
Facts: Kelly planned to tender for a supply of coal to a government department. Kelly
initially held discussions with the Caledonian Coal Company. Parties agreed on a price to
supply coal at if tender was successful. Caledonian confirmed the prices by letter which also
stated These prices refer to this contract alone. Payment by [promissory note] due at a
month from shipment Kelly was a successful tenderer but when Kelly tried to place an order
with Caledonian, they refused to supply the coal. Kelly sued for breach of contract.
Decision: No contract existed. Caledonians letter was not an offer, but a statement of its
future intentions
5. Colonial Ammunition Co v Reid [1900] 21 LR NSW 338 (Pg 165)
Facts: Colonial had an agreement with the New South Wales government to supply
ammunition from time to time when required. After a time, the government switches its
purchases to other suppliers. Colonial sued for breach of contract.
Decision: No contract existed as it was a standing offer which was converted into a contract
when placed an order.
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11. Hughes Aircraft Systems International v Airservices Australia [1997] 76 FCR 151 (Pg
172)
Facts: The Civil Aviation Authority (CAA) invited Thomson Radar Australian Corporation &
Hughes Aircraft Systems to tender for the contract to supply an advanced air traffic system
for Australia. The CAA sent a Request for Tenders to both parties setting out the terms of
the tender process Thomson. When Hughes complained, CAA argued that the Request for
Tenders was merely an invitation to treat.
Decision: Request to Tenders was an offer. Once Hughes had submitted a tender in
accordance with the Request for Tenders a contract existed. This is known as the process
contract and the CA breached the contract.
12. Harvela Investments Ltd v Royal Trust Co of Canada Ltd [1985] 3 WLR 276 (Pg 173)
Facts: Shares were being sold to the highest bidder; Royal Trusts bid was an amount of
$101,000 in excess of any other offer.
Decision: If a bidder (accepting the offer) does not comply with the implied terms of the
offer, there is no sale.
13. Smythe v Thomas [2007] NSWSC 844 (Pg 174)
Facts: Thomas & Smythe were registered e-Bay users. Thomas listed an aircraft on sale on
eBay with a minimum reserve price of $150,000 and the auction was open for 10 days.
Smythe bit $150,000 and was successful. Thomas refused to proceed as he argued that the
listing on eBay was an invitation to treat. Smythe argued that it was an offer which he
accepted by being the successful bidder.
Decision: There was a contract as listing it for sale on eBay was an offer to any bidder who
bided within a specific period, made a bid of at least $150,000 and did not qualify or seek to
impose a qualification on his bids in accordance.
14. Routledge v Grant (1828) 4 Bing 653; 130 ER 920 (Pg 177)
Facts: G offers to buy Rs house. Promises to leave the offer open for 6 weeks. R buys a new
house expecting to sell his to G. Before expiration of time, G withdrew his offer. R sues G
Decision: The rule is that an offer may be revoked anytime prior to acceptance.
15. Byrne & Co v Van Tienhoven & Co (1880) LR 5 CPD 342 (Pg 177)
Facts: An offer was sent from London to New York by post. Due to postal delay there were
differences in acceptance and revocation of the offer.
Ratio: An offer cannot be revoked unit it is received by the offeree. In this case acceptance
was cabled before the offer was revoked.
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16. Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674 (Pg 179)
Facts: Quinn paid a sum of five shillings to Goldsborough Mort the rights to purchase the
whole freehold lands within a week at a price of 1.10s per acre. Before the time expired for
acceptance of the offer, Quinn purported to withdraw the offer. Despite this, Golsborough
Mort accepted the offer and when Quinn refused to transfer the land, the company sued for
specific performance.
Ratio: An offer cannot be withdrawn as a consideration of five shillings had been given for
the promise to keep offer open for one week and the offer could not be withdrawn. An
option given for value is non revocable. Since this contract was a sale of land, court ordered
specific performance of the contract.
17. Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 (Pg 180)
Decision: Wrench offered to sell his property to Hyde and Hyde made a counter offer.
Wrench did not accept it and Hyde agreed to accept the earlier offer.
Decision: Once a counter offer has been made by the offeree, the original offer is rejected
and cannot be accepted again.
18. Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 (Pg 181)
Facts: Turner Kempson (TK) offered raspberry pulp to Camm who changed the offer. TK did
not accept the changed offer so Camm sued him.
Decision: Once a counter offer has been made by the offeree, the original offer is rejected
and cannot be accepted again.
19. Masters v Cameron (1954) 91 CLR 353 (Pg 183)
Decision: Cameron owned a farm and Masters wanted to buy it. Masters paid 1750 pounds
as deposit but did no sign a contract; due to financial difficulties he withdrew the offer. The
agreement included a term that this agreement was subject to preparation of a formal
contract of sale.
Decision: In this case the court decided that an arrangement made subject to contract is
presumed not to be a contract. The deposits belonged to Masters.
There are 3 possibilities in a case like this:
I. There is a contract which is immediately binding, and one of the terms is that formal
documentation is prepared.
II. There is a contract but nothing can happen until a formal document is prepared
III. There is no contract.
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20. Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 All ER 965 (Pg 184)
Facts: On 23 My 1969, Butler sent a quotation to Ex-Cell-O for a sale of machine. The price
and delivery terms were clearly set out. The quotation contained a price variation clause
stating that the final price would be the price prevailing on the delivery date. On 27th May,
Ex-Cell-O sent back an order form with terms which were completely different from the
ones stated before but had a tear-off acknowledgement slip which states that the seller
accepted the buyers terms. On 5 June, Butler returned the acknowledgement slip along
with a letter accepting the order in accordance with our revised quotation of 23 May.
Delivery of the machine was delayed so Butler relied on the price variation clause and
increased the price. Ex-Cell-O refused to pay.
Decision: The court decided that the buyers order form was a counter offer which had been
accepted when the seller returned the acknowledgement slip.
21. Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106 (Pg 185)
Facts: Hamon-Sobelco placed an order which contained certain terms. Reese Bros Plastics
replied by fax stating that they will confirm order on their official confirmation sheets, over
the next few days and to accept this offer as confirmation in the meantime. The
confirmation which followed contained certain conditions which differed from the original
order.
Decision: Halmon-Sobelcos offer had been accepted by the fax and therefore the
subsequent confirmation containing new terms was irrelevant.
22. Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037 (Pg 186)
Facts: Not given
Decision: The contract is not made until acceptance has been communicated to the offeror.
Silence is not acceptance.
22. Tallerman & Co Pty Ltd v Nathans Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 (Pg 186)
Facts: Not given
Decision: Actual communication of acceptance is not necessary where the offeror has
expressly or impliedly accepted the ordinary post as the means of communication between
parties. Acceptance occurs when the letter is posted, even if the letter is lost in the post, but
it must be properly stamped and addressed (Postal Rule).
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31. Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd [1985] 2 NSWLR 309 (Pg 208)
Facts: The courts was required to determine the status of the document headed Terms of
Agreement and signed by the parties, but containing the expression proposed agreement
and the other clauses which cast doubt on the parties intention to be legally bound. There
were certain oral statements by the parties that suggested that the document was intended
to stand as an immediate binding contract.
Decision: The court unanimously held that a contract existed.
32. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 (Pg 209)
Facts: The parties had a number of discussions concerning a mining joint venture. They
signed a document called a Heads of Agreement, which contained terms and conditions
subject to the joint venture.
Decision: No contract was created between the parties.
33. Plastyne Products v Gall Engineering Co Pty Ltd (1988) NSW (Pg 209)
Facts: The buyer sent a letter to the seller in which the buyer stated that it was prepared to
pay $350,000. The letter concluded: Upon receipt of your signed acceptance, we shall
instruct our solicitors to draw up a formal contract.
Decision: There is a contract which is immediately binding, and one of the terms is that
formal documentation is prepared.
34. Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] All ER Rep 333 (Pg 213)
Facts: Dunlop manufactured tyres and entered into agreement with wholesaler (Dew and
Co) regarding selling of Dunlop tyres below list price. Dunlop sued Selfridge (retailer) but
lost.
Decision: Only the promisee could enforce the promise. In this case as Dunlop had not
provided any consideration to Selfridge he lost the case.
35. Coulls v Bagots Executer and Trustee Co Ltd (1967) 119 CLR 460 (Pg 213)
Facts: Mr. Coulls was the sole owner of some land. In an agreement to remove stone from
his property Mr. Coulls authorised ONeil to pay all royalties to himself and his wife jointly.
Sometime later Mr. Coulls died and executer asked whether Mrs. Coulls has a legal right to
one-half of the royalties.
Decision: If a promise is made by the promisor to two or more persons jointly, only one of
those persons need provide consideration. In this case the court decided that as the
promise was made only to Mr. Coulls, his wife was not a joint promisee.
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36. Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (Pg 214)
Facts: Blue Circle Southern Cement Ltd took out an insurance contract with Trident
Insurance. It covered contractors and subcontractors against injuries to members of the
public. McNiece Bros were hired to carry out the work and during a work a member of the
public was injured and McNiece Bros were forced to pay compensation. McNiece tried to
claim the contract but Trident Insurance argued that McNiece was not the party to the
contract and therefore could not sue on the contract.
Decision: Since the contract was intended to cover persons such as McNiece, it was entitled
to sue on the contract despite that fact it was not a party to that contract and had not
provided any consideration.
37. Roscorla v Thomas (1842) 114 ER 496; 3 QB 234 (Pg 215)
Facts: The plaintiff purchased a horse from the defendant for 30 pounds. After the sale,
plaintiff sought assurance that the horse was sound. Assurance was given but the horse was
vicious. Plaintiff sued for breach of contract but lost.
Decision: Any warranties must be given prior to the making of the contract.
38. Re Caseys Patents: Stewart v Casey [1892] Ch 104 (Pg 216)
Facts: Stewart and Carlton jointly owned patent rights. After Casey undertook marketing
activities for them Stewart and Casey gave Casey one-third share of the patents.
Decision:
39. Thomas v Thomas (1842) 2 QB 851 (Pg 217)
Facts: Not given.
Decision: Consideration does not have to adequate, it must be sufficient. In this case the
consideration was$1 for Rolls Royce
40. Eastwood v Kenyon (1840) 11 A&E 438 (Pg 217)
Facts: Not given.
Ratio: Consideration does not have to adequate, it must be sufficient. In this case
consideration was In love and affection
41. Dunton v Dunton (1984) 18 VLR 114 (Pg 218)
Facts: Mr Dunton agreed to pay his divorced wife a monthly sum provided that she conducts
herself with sobriety and virtuous manner. Mrs Dunton sued when her ex-husband refused
to pay.
Decision: Consideration does not have to adequate, it must be sufficient. In this case the
wife had to act in a respectable and orderly manner.
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59. DJ Hill and Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749 (Pg 250)
Facts: DJ Hill (Hill) hired a cartage contractor (Wright) to carry some valuable machinery.
The machinery was damaged in transit due to negligence of Wright. On delivery one of Hills
employee signed the exemption clause (damages due to transit). The employee did not read
this form. Prior to this event both have been involved in at least 10 dealings. Hill sued for
breach of contract and won.
Decision: In this case the court decided that the documents did not appear anything but a
delivery docket and so the exemption clause was not a term. The number of past
transactions did not matter in this case. Therefore, the exemption clause was not a term.
(Is the document contractual in nature?)
60. State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170
(Pg 250)
Facts: Heath and State Rail reached an understanding that for five years, Heath would have
right to erect hoardings, but the written contract stated that the Rail could terminate the
contract with a months notice. On asking about this term he was assured that it had five
years but would be difficult to change the contract.
Decision: In this case Heath was made aware that the contract could not be changed.
Knowing, this he signed the contract. Therefore, the term in the contract was binding. It was
not displaced by any oral agreement to the contrary.
(Is the document contractual in nature?)
61. Curtis v Chemical Cleaning and Dyeing Co [1971] VR 749 (Pg 250)
Facts: Mrs Curtis took a wedding dress to the defendant drycleaner and was asked to sign a
receipt for disclaiming damage to the beads and sequins. The dress was damaged and Curtis
claimed damages.
Decision: As the assistant had innocently made a false representation, so they could not rely
on the exemption clause except for beads and sequins.
(Is the document contractual in nature?)
62. Oceanic Sun Line Shipping v Fay (1988) 165 CLR (Pg 255)
Facts: Fay booked a cruise from NSW to Greek on a Greek vessel owned by OSLS. Brochure
showed that cruise was governed by terms on the ticket which stated that all actions against
OSLS be brought in Greece. Fay was injured and brought the case in NSW; the owner argued
that it was a condition of the contract that the case is brought in Greece.
Decision: The court decided that the contract was made in NSW and the brochure did not
amount to reasonable notice because the brochure was not a document which could
reasonably be regarded as contractual in nature. Thus the clause containing Greece was not
a term of the contract.
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63. Interfoto Picture Library v Stiletto Visual Programmes Ltd [1988] 1 All ER 348 (Pg 256)
Facts: Stiletto hired some transparencies from Interfoto. The delivery note contained that a
delivery charge of 5 pounds/day will be charged. Other libraries charge only 3.50 pounds/
week. Stiletto returned the transparencies late. Interfoto sued him but lost.
Decision: If the unsigned term is particularly unusual, extra notice will have to be given. In
this case Interfoto was entitled to 3.50 pounds/week. Also the term was wholly different to
the industrial norm, the condition was not a term of contract.
64. Couchman v Hill [1947] 1 KB 554 (Pg 256)
Facts: Couchman attended the cattle auction at which he purchased a heifer. Prior to
making his successful bid, Couchman sought assurance that the animal was unserved. Both
the owner and the auctioneer gave the necessary assurance. However, the calf died as a
result of the strain of carrying a calf while too young. The auction catalogue contained a
disclaimer stating that all lots taken subject to all faults or errors of description and no
compensation will be paid. It also stated that the seller did not guarantee the accuracy of
the information. Couchman sued for breach of contract.
Decision: The intention of the parties was to contract on the basis of the oral representation
and not on the basis of the conditions set out in the catalogue. Therefore, the oral
representation was intended to be a warranty and prevailed over the written terms.
65. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (Pg 260)
Facts: United States Surgical Corp (USSC) was an American corporation which made surgical
stapling instruments used by hospital. It appointed Blackman as its Australian distributor. He
had previously been a distributor for USSC in New York. He pitched that he is more capable
than the existing distributor in Australia and even though he may further distribute other
non-competing products, he would ensure that it did not interfere with the promotion of
USSCs product. Later Blackman cancelled his contract and arranged for his own stapling
instruments and grabbed USSCs customers.
Decision: Blackman had promised that he would devote his best efforts to build up sales of
the USSC product and that he would not deal in a competing product. He had breached
those promises based on the promissory.
66. Ven Den Esschert v Chappell [1960] WAR 114 (Pg 261)
Facts: Ven agreed to sell the house to Chappell. Immediately before signing the contract
Ven asked about white ants and the reply was negative. But after taking possession, she
found white ants.
Decision: An oral representation can be added to the written terms if the evidence suggests
that this is what the parties intended. In this case the plaintiff would not have signed the
contract without the assurance.
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67. Oscar Chess Ltd v Williams [1957] All ER 325 (Pg 263)
Facts: Williams sold a Morris car to Oscar. There were some registration issues which
Williams was unaware of. Williams sold the car to Oscar who later realised the difference,
they sued Williams. Cars model year was not stated correctly.
Decision: The court decided that Williams was unaware of the year of manufacture. He
relied on the registration book which was tampered. Denning LJ held that the statement
was mere representation and not a term of the contract.
68. Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8 (Pg 263)
Facts: Ross purchased a new harvester from the agent of Allis-Chalmers Australia Pty Ltd.
Ross pointed out that he wanted to harvest 120-130 acres. The agent was under pressure
and stated that he thought that the machine could harvest 90 acres, stating that this was
based on his own experience with his own machine on his own farm. However, it could not
harvest 90 acres on Rosss property.
Decision: The court decided that the agents statement was not a warranty but merely a
statement of opinion which in the circumstances was not intended to be promissory.
69. JJ Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435 (Pg 265)
Facts: Blakney entered into a contract with Savage and was told the estimated speed of
the cruiser would be 15mph. The top speed was less and so Blakney sued Savage for
collateral warranty but lost.
Decision: The high court decided that a representation is not a collateral warranty merely
because it is one of the factors the induced the contract. A collateral warranty must be
promissory.
70. AWB (International) Ltd v Tradesmen International (PVT) Ltd [2006] VSCA 210 (Pg 267)
Facts: Tradesmen International entered into a contract to buy Australian wheat from AWB.
The contract was to deliver wheat to one of the two ports in Pakistan. The shipment was
delivered by AWB but was rejected by the Pakistani Authority and was sent to Indonesia as a
result. The contract contained a arbitration clause where dispute at the final port of
discharge should be given notice within six months. However, when the tradesmen gave
notice of dispute under the arbitration clause. The notice was given more than six months
after the ships arrival in the port of Pakistan but within six months of its arrival in Indonesia.
Decision: This was a commercial contract. The purpose of the clause was to ensure that
AWB had fairly prompt notice of any claims against it. Therefore, a reasonable person would
believe that the final port of discharge referred to one of the ports in Pakistan, not the
actual port in discharge.
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71. Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 (Pg 268)
Facts: RCA hired certain sound system to Hope but Hope refused to pay as the system
wasnt new. Agreement did not include this condition. Hope claimed under payroll evidence
but lost.
Decision: As there was no ambiguity in the agreement, parol evidence was not allowed. The
court also refused to accept an implied term, as it would conflict with the express term
contained in the documents.
72. Bacchus Marsh Concentrated Milk Co Ltd (in liq) v Joseph Nathan & Co Ltd (1919) 26
CLR 410 (Pg 269)
Facts: Nathan was a holder of number of patents including a patent to manufacture a
product called Glaxo. Nathan entered into a written agreement with Bacchus Marsh stating
that he shall sell said patent letters, where the patents were not specific. Bacchus Marsh
argued that Glaxo was included whereas Nathan denied that.
Decision: The court permitted Nathan to introduce evidence of the negotiations between
the parties, including some correspondence, which showed that the Glaxo patent was not
included.
73. Insight Vacations Pty Ltd v Young [2011] HCA 16 (Pg 270)
Facts: Mrs. Young bought a European holiday tour package from Insight Vacations Pty Ltd.
The contract had the exemption clause where the passenger occupies a motor coach seat
fitted with seat belt, the operator not the agents or the co-operations will be liable for any
damages if the seat belt wasnt worn properly. While travelling, Mrs. Young got out of her
seat to get something and when the coach suddenly braked, she fell backwards and suffered
injury. The seat was designed with a lavatory at the back.
Decision: The court commented that the clause should be given ordinary meaning. The
words occupies a motor coach seat should be understood as meaning sitting in the seat
and able to wear the safety belt. Mrs. Young was not sitting in her seat when the accident
happened. The exemption clause did not apply.
74. White v John Warwick & Co Ltd [1983] 2 All ER 1021 (Pg 272)
Facts: White hired a tricycle from Warwick and was injured due to some bicycle flaw. He
sued Warwick for breach of contract and tort of negligence. Warwick had an exemption
clause. Warwick lost tort of negligence but was safe for breach of contract as it was included
in the exemption clause.
Decision: The court held that the exemption clause did not relieve Warwick from its liability
under the tort of negligence.
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75. Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556 (Pg 274)
Facts: Photo production studio engaged Securicor to provide a night patrol its factory. The
contract has an exemption clause where Securicor will not be responsible for any injurious
act or default by any employees of the company unless it could been foreseen and avoided.
One night, Securicors employee on duty, deliberately started a fire. The factory was
substantially damaged as a result.
Decision: Due to the existence of the exemption clause, Securicor could only be liable if the
act of the employee could have been foreseen and avoided. Securicor could not have
anticipated Musgroves arson and therefore, was protected by the clause.
76. Sydney Corporation v West (1965) 114 CLR 481 (Pg 275)
Facts: West parked his car in a car park operated by SC. He was issued a ticket with the
exemption clause in it. A thief used a duplicate ticket and stole Wests car.
Decision: The exclusion clause in the ticket was a term of contract. The court decided that
the exclusion clause was very wide, in the light of the contract it meant excluding damage
by attendant or something like that and not giving a car away.
77. Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd
(1966) 115 CLR 353 (Pg 277)
Facts: May & Baker engaged TNT to transport certain items. The contract stated that May &
Baker must accept responsibility for any damages during storage or transit of goods under
any circumstances. TNT engaged a self-employed driver to collect and deliver the goods to
TNTs depot for sorting and onward transport. However, the driver collected the goods but
failed to return to the depot before it closed and as a result, he stored the goods at his place
where unfortunately they caught fire and were destroyed.
Decision: The court held that goods should be stored at the TNT depot and not in the
drivers backyard. As the negligent act occurred during an event that was beyond the
contemplation of the contract (4 corners rule) TNT was not protected by the exemption
clause.
78. Director of Consumer Affairs (Vic) v AAPT Ltd [2006] VCAT 1493 (Pg 279)
Facts: AAPT sells mobile telephone service. Its consumer contract contained a number of
terms that the Director of Consumer Affairs regarded as unfair under the Fair Trading Act
1999 (Vic)
Decision: The terms were unfair, and were therefore void under the Fair Trading Act.
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79. Peters (WA) Ltd v Petersville Ltd [2001] HCA 45 (Pg 280)
Facts: Petersville sold its Western Australian process to Peters (WA). As part of the deal,
Peters were granted exclusive license to make and distribute ice cream under the Pauls
trade name in Western Australia for 15 years and the option to extend for another 15 years
along with the fact that Petersville will not sell any ice cream or frozen confection in
Western Australia or to any person if they are ultimately for sale, supply or distribution in
Western Australia. It also promised not to carry on directly or indirectly the business of
manufacturing or distribution of ice cream or frozen confections in Western Australia.
Decision: The courts held that the strain was unlawful. This went beyond being reasonably
necessary to protect the legitimate interest of Peters (WA).
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84. Henry Kendall & Sons v Williams Lillico & Sons Ltd [1962] 2 All ER (Pg 296)
Facts: The vendor regularly sold nuts to SAPPA and there were many transactions in the
past. Each time the vendor sent a note confirming the oral contract (the order) and a
dispute arose whether the terms were included in each contract.
Decision: The Court decided that the terms of the sold note were part of the contract on the
basis on consistent past dealings between them. There were on express terms to the
contrary.
85. British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1974] 2 WLR 856 (Pg 297)
Facts: Plaintiff (P) hired a crane with a driver from defendant (D). Later D sent a form which
stated that P was liable for all the costs for damages during hire. Crane was damaged
because of the driver. P sued D.
Decision: The term was not an express term as it was sent after the contract, also there
were insufficient past dealings. However, the term in hire-form ought to be implied on the
basis of a trade custom.
86. The Moorcock (1889) 14 PD 64 (Pg 298)
Facts: Plaintiff (P) owned a ship and wanted to berth it on a dock owned by the defendant
(D). D gave permission for a fee and during berthing ship got damaged due to the hard
ground beneath.
Decision: The court decided that it was an implied term that the river is suitable (fit) for the
purpose of use.
87. Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (Pg 300)
Facts: State Rail Authority was building a new railway and Codelfa won the tender. Codelfa
worked 24*7 which resulted in noise causing disquiet among locals. Locals took the matter
to court and claimed a ban. All those resulted in reduction of work shifts and increase in
expenses, SRA then appealed to the High Court.
Decision: The court refused to imply a term as the contract did not have a gap which had to
be filled in order to make the contract work. It was simply the case that Codelfa made a
mistake as to the complete date.
88. Varley v Whipp [1900] 1 QB 513 (Pg 304)
Facts: The buyer contracted to buy, without inspection, a reaper described by the vendor as
almost new and only used to cut 50 or 60 acres. When the reaper was delivered, it was
apparent that it was old and had been repaired. The buyer refused to accept the goods
Decision: The buyer was within his rights to refuse to accept the goods as there had been a
breach of the implied condition of correspondence with description.
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93. Atkinson v Hastings Deering (Qld) Pty Ltd (1985) ATPR 40-625 (Pg 308)
Facts: Atkinson purchased a second hand motor from Hastings Deering Pty Ltd. The tractor
proved to be defective in that it was prone to overheating. Atkinson claimed that the tractor
was not fit for the purpose of scrub-pulling which had been made known to Hastings
Deering at the time of sale.
Decision: The court decided that the tractor was reasonable fit having regard to the fact
that it was second-hand and, therefore, more likely to be subject to breakdowns due to
wear and tear. Therefore, Atkinson failed in his claim.
94. Griffiths v Peter Conway Ltd [1939] 1 All ER 685 (Pg 308)
Facts: Griffiths purchased a Harris Tweed coat from Conway, a tailor, which was specially
made for her. Shortly after she began to wear the coat she developed dermatitis, although
evidence showed that nothing in the cloth that would affected a normal person. Griffiths,
however, had abnormally sensitive skin.
Decision: The court held that the purpose was not made known to the seller. The particular
purpose was that the coat be suitable for a normal person with abnormally sensitive skin.
Griffiths had not made her abnormal condition known to the seller. The buyer therefore
failed.
95. Godley v Perry [1960] I All ER 36 (Pg 310)
Facts: A boy purchased a toy and broke when used and caused injury.
Decision: If goods are bought for normal purpose, then the buyer is not entitled to rely on
sellers judgement. In this case the good was not of merchantable quality. (The same
principle applied to Preist v Last [1903] 2 KB 148(a hot water bottle) and Frost v The
Aylesbury Dairy Company Ltd [1905] 1 KB 608(milk)).
96. Teheran-Europe Co Pty Ltd v ST Belton (Tractors) Ltd [1968] 2 All ER (Pg 311)
Facts: The seller (Belton) supplied air compressors to the buyer for export to Iran. The
tractors did not satisfy the Iranian import requirements. Buyer lost the case.
Decision: The implied condition of fitness for purpose only applies where it can be said that
the buyer has made the particular purpose known to the seller in such a way that the seller
knows that he or she is being relied upon.
97. Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607 (Pg 312)
Facts: Frank purchased a Renault from GMA and was told that there was nothing wrong
with the car except for the clutch. Later he found that there were many defects with the car.
Decision: Pape J outlined that the car was not of merchantable quality and if the buyer
indicated the purpose of purchase were the goods fit for that purpose.
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98. B S Brown & Sons Ltd v Craiks Ltd [1970] 1 VLR 752 (Pg 313)
Facts: The sellers manufactured woven cloth. The buyers ordered a quantity of cloth. The
cloth could be used for dress making or industrial purposes, depending on the quantity. The
contract price was cheap for dress making but expensive for industrial cloth. The buyer
wanted it for dress making but did not tell the seller. When the cloth was delivered, it was
complied with the contract but was unsuitable for dress-making purposes.
Decision: The buyer failed. The cloth was suitable for industrial purposes and given the
contract, the seller could not be known that the buyer wanted it to be suitable for dress
making.
99. H Beecham & Co Ltd v Francis Howard & Co Pty Ltd [1921] VLR 428 (Pg 314)
Facts: The buyer wanted to buy timber used in making pianos. The buyer selected timber
from sellers yard but the wood was infected with dry rot which is unsuitable for making
pianos but suitable for making boxes.
Decision: The court decided that even though the wood could be put to some use, it was
not of merchantable quality. Also price is an important factor of the quality expected.
100. Bartlett v Sidney Marcus Ltd [1965] 2 All ER 753 (Pg 3145)
Facts: Bartlett purchased a second hand Jaguar motor car from Sidney Marcus. During a test
drive prior to sale, one of Sidney Marcus pointed out to Bartlett that there was something
wrong with the clutch and the oil pressure. Sidney Marcus offered to sell the car for 575 if
Sidney Marcus did the repairs and for 550 if Bartlett took responsibility for the repairs.
Bartlett choose the latter option and drove the vehicle for 4 weeks (about 300 miles) and
then took it to repair. The problem proved to be far more serious than either Bartlett or
Sidney Marcus expected and the repairs cost Bartlett cost 45
Decision: The court of appeal rejected the buyers claim. A car was fit for its purpose as its in
road worthy condition and fit to driven along safely and of merchantable quality if it was in
a usable condition. Bartlett had driven the car for four weeks without any issues.
101. Grant v Australians Knitting Mills [1935] AC 85 (Pg 315)
Facts: Grant suffered from dermatitis after wearing underwear manufactured by AKM as he
did not wash them before use while there were no complaints from other clients. Grant won
the case.
Decision: The court decided that goods may not be of merchantable quality even though the
defect, once detected can be easily remedied.
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101. ANZ Banking Group Ltd v Frost Holding Pty Ltd [1989] VR 695 (Pg 319)
Facts: Frost Holdings submitted a propose to ANZ Bank to print and supply featuring
Australian paintings. ANZ informed Frost that it accepted the proposal in principle, but
would require an upgrading of the quality of the work. Frost submitted a proposal. The ANZ,
however, changed its mind and informed Frost that it did not wish to proceed.
Decision: The court held that no contract existed because there was no agreement as to the
essential elements such as price, quantity, size and design of the calendars. The VGA s 13
applied where there was a contract.
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107. Bunge Corp of New York v Tradax Export SA Panama [1981] 1 WLR 711 (Pg 339)
Facts: Tradax agreed to sell soya bean meal to Bunge. Condition required Bunge to give 15
days notice, Bunge failed to comply and Tradax terminated the contract and claimed
damages. Tradax won the suit.
Decision: The court held that even though the consequence of the breach was not overly
serious, time stipulations in mercantile contracts are generally regarded as conditions.
Therefore, even a minor breach would give the innocent party the right to terminate. The
seller won the case so was entitled to termination and damages.
108. Bettini v Gye [1874] All ER Rep 242 (Pg 340)
Facts: Bettini performed for Gye at various locations. The contract stated that Mr Bettini
agrees to be in London six days before his engagement. Bettini falls ill and is unable to make
it. Gye terminated the contract but Bettini was right in eyes of court.
Decision: The court decided that termination can only take place if a condition was
breached. In this case the court decided that time was not a condition and so the contract
could not be terminated.
109. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (Pg 341)
Facts: Hong Kong Fir is a ship owned by HKFS. Kawasaki hired it under charterparty (hire of
ship with or without crew). Due to lack of engine room crew Kawasaki lost 57 sailing days
and so he terminated the contract. Kawasaki was entitled to rescind the contract. The
contract contained seaworthiness clause.
Decision: The court decided that as Kawasaki was deprived of the whole benefit that it had
contracted for or not. The delay was so serious as to entitle Kawasaki to rescind.
110. Cehave HV v Bremer Handelsgesellschaft mbH (The Hansa Nord) [1976] QB 44 (Pg
342)
Facts: Bremer agreed to sell a quantity of citrus pulp pellets to Cehave to be used in the
animal feed. The contract required the goods to be shipped in good condition and the court
accepted that the goods were not in good condition when shipped and their value have
dropped. However, the goods were still suitable for being used for their original purpose.
Cehave terminated the contract and sought repayment of the purchase price.
Decision: The case was fought on the express term in the contract. There was no dispute
involving the implied terms of merchantable quantity or fitness for purpose.
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111. Rooney v ABB Grain Ltd [2010] FCA 139 (Pg 342)
Facts: Rooney family (R) operated a wheat Farm. R entered into a contract with ABB for
further delivery of wheat. The price was calculated according to a complex formula which
meant the best possible price from day to day. The buyer had a right to fix the base price
any time. This depended on the buyer to have certain information which ABB supplied to R
daily by email. Before R had selected a base price, ABB stopped sending daily price
information in order to phase out the type of contract they had with R. R sent a letter to
ABB terminating the contract.
Decision: The court held that there was an implied term to supply the daily base price
information. The term was not a condition but an intermediate condition cause the breach
could either be minor or very serious and this cause the breach was sufficiently serious to R
and therefore R was entitled to terminate the contract.
112. Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd [2009] VSCA 161 (Supreme Court of
Victoria) (Pg 343)
Facts: Sunny Springs entered into a contract to sell a hotel with gambling facilities to Penola.
The contract included upon Penola obtaining the necessary licenses and permits to operate
the hotel and a gaming facility. Penola failed to apply for necessary licenses within six
months of signing the contract. As a result Sunny springs terminate the contract and kept
the deposit.
Decision: The appeal was dismissed as there was an implied term to the contract that
Penola had to take reasonable steps to satisfy the license and permit conditions in the
contract within six months which it failed to do so.
113. National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291 (Pg 346)
Facts: NE agreed to hire a crane from Chilco in June and in March Chilco had difficulty
arranging one. NE became aware of this difficulty and Chilco confirmed the fact. NE
terminated the contract on the basis that Chilco wont be able to supply the crane. NE lost
the case and Chilco was entitled to damages.
Decision: In this case the court decided that the innocent party will not be permitted to
terminate a contract just because the other party has expressed some difficulty in
expressing their contractual obligation. The terminating party must be able to prove that
the other party was wholly and finally incapable of performing. In this case NE failed to
satisfy the test and so Chilco was entitled to damages.
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118. Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 (Pg 352)
Facts: Reg asked Rivers Systems to fit a steel-shitted door and locking system for his shop.
The door was described as burglar-proof door. Thief broke into and stole goods. Reg sued
for damages.
Decision: The plaintiff can only obtain damages for the losses caused by breach of contract.
The breach must not be the only cause but it must be sufficiently important that but for the
breach, the loss would not have occurred. The court decided that goods would not have
been stolen if the correct door had been installed.
119. Koufos v C Czarnikow Ltd [1969] 1 AC 350 (Pg 354)
Facts: Kaofos charted a ship to Czarnikow Ltd carrying load of sugar from Constanza to
Basrah which would normally take 20 days. However, the ship made unauthorized
deviations that caused it to take an extra nine or ten days. Czarnikows original aim was to
sell sugar in Basrah but between the time ship should have arrived and the time it actually
arrived at Basrah the price of sugar fell.
Decision: A reasonable business man would have contemplated that Czarnikow would very
likely suffer loss, and that it would be or would likely to be a loss referable to market price
fluctuations in Basrah. Therefore, it was a foreseeable loss that flowed in the usual course of
events from the breach.
120. Hadley v Baxendale (1854) 9 EX 341 (Pg 355)
Facts: The plaintiff (Hadley) operated a mill and a broken crankshaft caused operations at
mill to shut down. Baxendale was hired to get the shaft changed.
Baxendale was slow which meant mill had to incur losses because of being inoperative.
Defendant won the case.
Decision: If the losses caused by the breach of contract are too remote, then the plaintiff
would not be liable for damages.
121. Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 1 All ER 997 (Pg 355)
Facts: Victoria Laundry operated a business as launderers and dryers. During that time there
was a shortage of dryers and VL ordered a boiler from Newman. The ordered was delivered
months late and so VL sued for loss of profits from day today work and a lucrative dying
contract from Ministry of Supply. Newman did not know of the contract.
Decision: The court held that first lot of lots profit fell within the first limb of Hadley v
Baxendale (losses occurring in the ordinary course of things), so Newman was liable to pay,
but as Newman did not know about the Ministry of supply contract he is not liable for those
losses.
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131. North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (Pg 366)
Facts: A ship-owner (North Ocean) entered into a contract with a ship builder (Hyundai) to
build a ship. The contract price was stated in US dollars. When the US dollar devaluated by
10 percent, Hyundai requested to pay an extra 10 per cent. North Ocean agreed as they had
no effective option. Hyundai provided consideration. Later, North Ocean sought an order to
have the extra money returned on the basis that the contract was induced by duress.
Decision: North Ocean paid under compulsion and therefore, the contract to pay the extra
10 per cent was voidable for economic duress. But North Ocean had an unduly delay in
rescinding the contract and could not recover the money.
132. OSullivan v Management Agency & Music Ltd [1984] 3 WLR 448; 3 All ER 351 (Pg 367)
Facts: OSullivan was a young nave pop singer and composer who placed total confidence in
Mills and his management company. They signed a contract where the management would
manage all aspects of his career for a period of 5 years with an option for two more. This
included an assignment of the future copyright in his songs. OSullivan became extremely
successful and challenged the contract.
Decision: OSullivan was young, inexperienced and signed the contract without legal advice.
Because of this inequality in bargaining power, the court held that the agreement was an
unreasonable restraint of trade. The agreement was set aside.
133. Lloyds Bank Ltd v Bundy [1974] 3 WLR 501; 3 All ER 757 (Pg 368)
Facts: Bundy was an elderly farmer, inexperienced in business matters. For many years, he
had been a customer of Lloyds Bank. He relied on the manager of the bank for financial
advice and manager was fully aware of his financial affairs. Bundy agreed to guarantee
certain debts owing by his son to Lloyds Bank. The manager did not ask Bundy to get
individual advice before executing this. The sons business failed and the Bank started legal
proceedings against Bundy.
Decision: Banker-customer is not normally a relationship that gives rise to a presumption of
the undue influence. In this case there was a special relationship which gave rise to the
presumption of undue influence. The bank at failed to rebut that presumption and therefore
the guarantees should be set aside.
134. Taylor v Johnson (1983) 151 CLR 422 (Pg 370)
Facts: Johnson entered into a contract to sell 10 acres of land to Taylor. The contract stated
the price as 15,000. In fact the land was worth 50,000 and if rezoned 195,000. Johnson
though the contract price as 15,000 per acre. The court held that Taylor was aware of his
mistake and took steps to ensure that Johnson did not discover the mistake.
Decision: The court held that Mrs. Johnson was entitled to rescind the contract for
unilateral mistake
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135. Cundy v Lindsay (1873) 3 App as 459; [1874-80] All ER Rep 1149 (Pg 371)
Facts: A rogue ordered goods from Lindsay claiming to be Blenkiron & Co of 37 Wood
Street. In fact, the actual business operated from 123 Wood Street. The rogue sold the
goods to Cundy whom sold it to another person. Cundy was not aware that the seller was a
rogue. Lindsay sued Cundy for selling his property without authority.
Decision: The contract was void and therefore, Lindsay was still the owner of the goods.
136. Petelin v Cullen (1975) 132 CLR 355 (Pg 372)
Facts: Petelin granted an option over his land to Cullen. Cullen failed to exercise the option
wihin the option period. Petelin spoke very little English and could not read it at all. On the
urging of Cullens agent, Petelin signed a document which he believed was a receipt for $50.
The document was, in fact, a renewal option which had lapsed. Cullen then purported to
exercise the option. Petelin refused to transfer his land. Cullen sued for special
performance. Petelin argued the defense of non est factum.
Decision: The court upheld Petelins defence and refused to order special performance.
137. Academy of Health & Fitness Pty Ltd v Power [1973] VR 254 (Pg 374)
Facts: Power, a jockey entered a contract to use appellants gym facilities. Prior to entering
a contract, Power was told that the sauna was available for use of seven days a week. This
was not accurate as men could only use the facilities on alternative days. He never visited
the gym or paid the fees. The academy sued for the fees.
Decision: The court held that Power had validly rescinded the contrcat.
138. Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525 (Pg 375)
Facts: Caldwell sold his car in return for a cheque. The buyer disappeared and the cheque
bounced. Caldwell immediately notified the police and the Automobile Association. The
buyer sold the car to the finance company.
Decision: The court decided in favor of Caldwell. He has done all that was reasonable in the
circumstances, which he had, the rescission was Valid. Thus, Caldwell, was not interfering
with any third party rights by demanding the return of the car.
139. Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 (Pg 376)
Facts: Mr. and Mrs. Khoshba decided to invest in a shopping trolley collection business. The
Khoshabas raised the investment funds ($120,000) by mortgaging their house to Perpetual
Trustee. The loan application was drawn up by a mortgage broker which had false
information that Mr. Khoshaba wasnt aware of when he signed the application. The
application was sent to AMW Pty Ltd which assessed it on behalf of Perpetual in accordance
to specific guideline which it failed to follow. The Khoshabas argued that the agreement was
unjust within the meaning of the Contract Review Act. The trial judge agreed and Perpetual
appealed.
Decision: The court dismissed the appeal as Perpetual failed to follow the guidelines
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144. Carpet Call Pty Ltd v Chan (1987) ATPR 46-025 (Pg 393)
Facts: Chan bought a carpet for his night club and asked Carpet Call to provide a good carpet
that can withstand young patrons. Chan refused to pay full price after certain areas of
carpet were damaged because of stains and customer abuse.
Decision: It was a consumer contract as the good is normally acquired for personal use. As
the buyer did not rely on sellers skill while supplying good, so Chan lost the case.
145. Beale v Taylor [1967] 1 WLR 1193 (Pg 394)
Facts: A seller advertised to sale a car. The buyer inspected the car before purchase. Later
the buyer took the car to a garage and was told that the car was in fact two cars welded
together, the rear was the model the seller advertised by the front was from an earlier
model. Because of the welding, the car was unroadworthy.
Decision: Even though the buyer inspected the car, it was still a sale by description. As the
car did not match the description, there was a breach of contract.
146. Graham Barclay Oysters Pty Ltd v Ryan (Pg 401)
Facts: Ryan contracted hepatitis A in the early 1997 as a result of eating oysters grown in
Wallis Lake, New South Wales. The Oysters were grown by Graham Barclay Oysters Pty Ltd
(Barclay), and sold by an associated company (Barclays Distributors Pty Ltd) to Ryans father.
Ryan sued Barclay for damages on the basis that Barclay was the manufacturer and the
Oysters were not of acceptable quality and nor of merchantable quality.
Decision: The oysters were not fit for the purpose of being eaten nor were not of
merchantable quality. Therefore, Ryan was entitled to damages
147. Medtel Pty Ltd v Courtney [2003] FCAFC 151 (Pg 402)
Facts: Courtney had a place maker distributed by Medtel Pty Ltd implanted. In 2002 there
was an alert issued about that model of pacemaker which could be defective and be
inefficient and was recommended to test and replace these pacemakers. Courtneys
pacemaker was tested and found to be working but was replaced following the alerts
recommendation. The replacement was free of charge but Courtney sued Medtel for selling
the pacemaker which was not of merchantable quality nor fit for the purpose.
Decision: The court found that this was a consumer contract. Since the pacemakers unfit
for purpose due to a defect and was not of merchantable quality and the plaintiff suffered
loss, Medtel was liable for compensation.
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Partnerships
150. Ferguson v Federal Commissioner of Taxation (1979) 79 ATC 4261 (Pg 456)
Facts: Ferguson was employed in Australian navy. He was keen on leaving the navy and go
into primary production. Therefore, he leased 5 cattle for breeding to 200 cattle for which
he contracted a property owner to pasture his cattle. He made some losses which he
claimed were deductible from income tax. The IT commissioner did not allow this as losses
were not incurred in carrying on the business.
Decision: The court held that Ferguson was carrying on a business. The operation had
commercial flavor in it (profit intention). Also the activities were organised.
151. Goudberg v Herniman Associates Pty Ltd [2007] VSCA 12 (Pg 457)
Facts: Williams had an idea to covert hotel restaurants into a chain of franchised
restaurants. Williams discussed the idea with Goudberg. Together they selected a number
of possible US franchises to visit and held discussions with Applebees. They discussed the
appropriate structure for the venture and possible financing. Williams then engaged
Herniman Associates, architects, to advice on the possible architectural requirements. The
project eventually collapsed.
Decision: Even though Williams and Goudberg were acting in common, they did not engage
in carrying on a business although their activities were exploratory and preparatory to
setting up a business. Therefore, Goudberg was not liable
152. Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd
(1974) 131 CLR 321 (Pg 458)
Facts: A company (Fourth Media Management Pty Ltd) had contracts with some performers.
To finance the tours, they entered into contract with Volume Sales (Finance) Pty Ltd. They
included certain terms like the contract was a joint venture and that Volume Sales would
be paid one-half of the profits. Fourth media granted an equitable charge over its right to
box office receipts to an advertising agency called Canny Gabriel. The question was who had
priority over box office takings. If the agreement between Fourth Media and Volume sales
created a partnership, then Volume Sales had equitable charge.
Decision: A single venture may create a partnership according to Partnership Act 1958. In
this case the court decided that the parties were partners although it was a one off tour. It is
because the parties went into agreement with a view of profit and to to make joint
decisions.
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164. Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 (Pg 478)
Facts: Seeto was a partner in accounting firm who worked with other partners although
they used a separate company structure to Seeto. His clients included a young businessman
and Seeto persuaded his client and the clients company to hand over sums totaling US 4.6
million to be deposited in a special off-shore custodian account controlled by Seeto as per
firms insurance policy and become part of an elaborate overseas profit-earning scheme.
When the promised 50% was not forth coming, the client sought return of their investment
but the money disappeared. The client sued Seetos partners in the accounting firm.
Decision: The court found that the partnership was not bound by Seetos actions. The courts
found that operating a trust account would have fallen within kind of business that
accounting firms carried on at that time but the account here was not a trust account nor
the clients funds to deposit in the account temporary. This custodian account was an
integral part of an outlandish investment scheme.
165. Re Oppenheimer (1872) 3 VR (I, E & M) 20 (Pg 479)
Facts: The partnership was described as a firm of importers. Goods were purchased in Paris
by one partner, transported to Australia and sold in Melbourne by another partner. But the
Melbourne partner bought stock in Melbourne and was unable to pay for it. The Parisian
partner came to Melbourne for the sake of winding up a partnership. He examined the
transactions and took possession of the stock by the Melbourne partner and arranged it for
its sale. He paid some of the debts incurred by the Melbourne partner and refused to pay
the others.
Decision: The court held that the buying of stock in Melbourne and not in Paris was not the
usual way of doing business and therefore, the Parisian partner would not normally be
bound. However, the Parisian partner was found liable because, on the evidence, he had
ratified his co-partners actions.
166. Construction Engineering Pty Ltd v Hexyl Pty Ltd [1985] HCA 13 (Pg 480)
Facts: Two companies (Tambel Pty Ltd and Hexyl Pty Ltd) conducted a business of land
development in partnership. Tambel acquired a land in its own name and engaged
Construction Engineering to build homes on it. The contract did not mention Hexyl. In fact,
Construction Engineering did not know of Hexyl and thought Tambel were acting as
principle. A dispute arose and parties went to arbitration. Construction Eng. tried to include
Hexyl as a party to dispute but Hexyl denied.
Decision: s 9 states that a partner will not be bound by actions of other partners where:
a) Partner had no authority.
b) 1. Third party knew that co-partner had no authority
2. Third party did not know or believe that there was a partner.
In this case the court decided that Tambel did not have the actual or ostensible authority to
make contracts, also Construction Eng did not know of Hexyl.
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167. Mercantile Credit Co Ltd v Garrod [1962] 3 All ER 1103 (Pg 481)
Facts: G and P operated a garage as a partnership. P managed the business. G was a silent
partner. The agreed business of the firm was to repair vehicles and lease out lock-up garage
space. G & P expressly agreed that P would not buy and sell vehicles as part of the business.
P fraudulently sold a vehicle to MC. MCs cheque in payment was made out to the
partnership. When the fraud was discovered MC sued G and P to get its money back. G
denied liability.
Decision: Although P had no authority to sell cars, the firm could still be liable if P acting
within the scope of the authority.. This depended on whether selling cars was a normal
function of the business and it quite was for a garage specialising in repairs also be involved
in selling cars. Therefore, G was bound.
168. Polkinghorne v Holland & Whittington (1934) 51 CLR 51 (Pg 484)
Facts: Holland, Whittington, and Harold Holland conducted a solicitors office as partners.
Harold advised a client (Polkinghorne) to sell government shares and to buy shares of a
friends firm. It was intentional and other partners did not know of it. All partners were sued
and the client won the case.
Decision: The high court decided that as they were in a partnership, each partner was an
agent and all partners will be responsible for acts done in course of his authority as partner.
The acts were under ordinary course of the business and so all partners were liable.
169. Walker v European Electronics Pty Ltd (1990) 23 NSWLR 1 (Pg 485)
Facts: 3 partners ran a chartered accountants firm. All 3 partners had different field of
expertise and one partner misappropriated a large sum of money. European Electronics
sued all 3 partners.
Decision: The court decided that the accountant was acting in the ordinary course of
business, so all partners are jointly and severally liable.
170. D&H Bunny Pty Ltd v Atkins and Naughton [1961] VR 31 (Pg 487)
Facts: Bunny operated a business supplying hardware. Atkins and Naughton were
interviewed by Bunnys creditor (Barnard). Atkins and Naughton either told him that they
already entered into partnership or were about to enter into a partnership. Barnard did not
ask about partnership terms. Atkins and Naughton never went ahead with the partnership
and never told it to Bunny. Naughton bought goods on credit. Twice Atkins collected goods
on behalf of Naughton. Twice he paid Naughtons account with his own cheque. Eventually
Naughton failed to pay his account and Bunnny sued both of them. Atkins argued that he
was not liable as he was not a partner but lost the case.
Decision: The court decided that Atkins was responsible and he had held himself out as a
partner and was liable. It is because twice he acted on behalf of Naughton and signed
receipts to joint name. The judge said that Atkins was holding out as a partner.
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171. Tower Cabinet Co Ltd v Ingram [1949] I All ER 1033 (Pg 489)
Facts: Mr Christmas and Mr Ingram carried on a partnership. The firms letter had the
names of both partners. Partnership was dissolved and Christmas was the sole owner, he
made it know to the bank but failed to put a notice in the paper in spite of Ingrams
notification. Christmas had new letter had with only his name. But on one order he used the
old letter head. The seller argued that Ingram was liable as if he were a partner.
Decision: Under s 18, the court decided that Ingram had not held himself out, only
representation was made by Christmas without Ingrams notice. Also s 40(3) states that a
partner is not liable for partnership debt after date of death, bankruptcy, or retirement.
172. Elders Pastoral Ltd v Rutherfurd (1990) 3 NZBLC 99-201 (Pg 485)
Facts: Mrs. Rutherfurd was a partner in a pastoral business for a number of years. During
this time, the partnership had dealings with Elders. However, Mrs. Rutherfurds existence
was not known to the Elders until after she had retired as a partner. When she retired, Mrs.
Rutherfurd neglected to give any notice of her retirement. Following her retirement, the
partnership incurred a number of debts to Elders. Elders sought to make Mrs. Rutherfurd
liable for these debts jointly with the actual partners.
Decision: The court held that pursuant to s 40(3), Mrs. Rutherfurd was not liable for the
debts incurred by the partnership to Elders after she had retired.
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177. Panorama Developments (Guildford) Ltd v Fidelis Furnishings Fabrics Ltd [1971] 2 QB
711 (Pg 521)
Facts: Bayne, the company secretary for Fidelis Furnishings hired some expensive cars from
Panorama in the name of the company. In fact, Bayne used the car for personal purposes.
When the company refused to pay Panorama sued.
Decision: A company secretary is regarded as having customary authority to make contracts
concerning the internal administrative matter of the company. In this case the court held
that the secretary had the apparent authority to hire cars, so the company is bound by his
actions.
178. Nicholson v Hilldove Pty Ltd [2012] VSC 598 (Pg 521)
Facts: Hilldove owned the crown hotel in Lilydale on behalf of investors in a trust. The
investors wanted to sell the hotel. Although Hilldove was a legal owner of the property the
investors expected to approve or reject any offer to buy the hotel. Negotiations occurred
between Nicholson, and Niall, who was the sole director of Hilldove and in December 2011,
they agreed to sell the hotel for 6 million and was sold without Niall obtaining approval from
Hilldoves investors. In early February, Hilldove sold the same hotel to a third party, Tomsic.
Nicholson sought damages from breach of the first contract of sale.
Decision: Section 129(3) entitled Nicholson to assume that Niall had the normal powers and
broad authority of a sole director. This would include unrestricted authority to create
contracts on behalf of the company. The court also found no evidence that Nicholson knew
or suspected that Nialls authority was restricted by any need to obtain shareholders or
investors approval.
179. Sunburst Properties Pty Ltd (in Liq) v Agwater Pty Ltd [2005] SASC 335 (Pg 522)
Facts: Sunburst properties owned a vineyard and water licenses to irrigate the property. The
water travelled through a pipeline owed by Agwater. Later Sunburst was in serious financial
difficulty and the National Australian Bank had appointed receivers and managers to protect
the banks interest in the company and a contract was created between Sunburst and
Agwater where Sunburst would sell its vineyard and water licenses together with Agwaters
pipeline and divide between them the proceeds from the sale. This joint-sale agreement
was signed by sunburst by a receiver and manager, Heard and signed for Agwater by Crosby
and Marshall, directors of Agwater. Before his appointment, Herd obtained a search of the
ASIC Company registered and found 2 more directors which include Mr. Garatte but later
found from others sources that they have recently resigned. Later Garrett claimed that he
has been recently appointed as the director and the Crosby and Marshall were dismissed
and lacked authority to enter the joint-sale agreement on behalf of Agwater.
Decision: The court found that Crosby and Marshall were directors at the time when jointsale agreement was signed. Herd and Sunburst did not know about such resignation since
both their names were listed when Sunburst company register lodged with the ASIC. Heard
did not know or actually suspect that his assumptions under ss 129(2) 129(4) and 129(5)
were incorrect, so s 128(4) did not apply here.
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186. Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 ACLC 215 (Pg 542)
Facts: Russell Kinsela was a family owned company and was in a deep financial trouble. The
directors decided in lease the business premises to two family members so that the
companys creditors could not immediately get their hands on it. In this way, they hoped to
save the family business. All shareholders agreed with this action. The liquidator brought an
action against the directors for breach of duty.
Decision: When the company is insolvent, the directors owe a duty of care to the creditors
not to prejudice the interests of the creditors. The directors of Russell Kinsela Pty Ltd had
breached this duty. It did not matter that the shareholders were unanimously favor of the
move.
187. Metropolitan Fire Systems Pty Ltd v Miller (1997) 23 ACSR 699 (Pg 549)
Facts: Miller and others were directors of Raydar Electrics Pty Ltd. Raydar had creditors
demanding outstanding payments. In the same month Raydar was contracted to carry out
some work. Miller acting on part of Raydar subcontracted Metropolitan Fire Systems to
perform the task and assured that payments would be made. Raydar became insolvent and
Metropolitan sued for breach of 588G. Miller and other directors argued that they had a
defence under s.588H(2). 2 directors argued that they had a defence under s 588H(3) as
they relied on Miller for financial information.
Decision: The court held that there were reasonable grounds to suspect that Raydar was
under solvency. This meant that s 588G has been breached. Defence under s 588H(2) failed
because they were not founded on reasonable grounds. The court also held that other
directors were also liable because they did not fulfil their obligation to make inquires about
the company situation.
188. ASIC v Plymin, Elliott and Harrison [2003] VSC 123 (Pg 550)
Facts: Plymin (MD), Elliott (non-executive director) and Harrison (chairman) were directors
of Water Wheel Mills Pty Ltd and Water Wheel Holdings Ltd. In 2000 the Water Wheel
companies were placed into voluntary administration by the board. However, the ASIC took
action for insolvent trading prior to the date. The Mill suffered losses for 3 years and was
allowed to trade in spite of solvency. ASIC argued that the directors breached s.588G and
sought damages. Elliott claimed that he was unaware of it as he was just a non-executive
director.
Decision: The directors failed their defences and were liable under s 588G. This is because
the directors did not make any efforts to stop the companies incurring debts while
insolvent.
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189. Tourprint International Pty Ltd (in liq) v Bott (1999) 32 ACSR 201 (Pg 551)
Facts: Bott was appointed as a director of Tourprint in September 1992. Between July and
early December, the company incurred debts exceeding $500,000. A liquidator was
appointed in early 1994. The liquidator claimed Bott had breached s 588 G and sued Bott for
these debts under s 588M.
Decision: The Supreme Court of New South Wales held that the elements of s 588G had
been satisfied. Tourprint was insolvent during the relevant period. A reasonable person
would have been aware that the company was insolvent.
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Introduction to Trusts
190. Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] 1 All ER 139 (Pg 570)
Facts: Barclay Bank Trust was a professional trustee company and held controlling interest
in a property company in a trust property. The property company formed a wholly-owned
subsidiary, which engaged in highly speculative purchase of land. And purchase turned out
to be disastrous and the trust property plunged. The trustee had not ensured it received an
appropriate flow of information from the property company to take an active role in the
investment decisions of the company or the subsidiary and the beneficiaries sued the
trustee for compensation, claiming the trustee had breached its duty of skill and care.
Decision: The trustee company had breached its duty of care and skill. The trustee had
inadequately and imprudently supervised the property company.
191. Fitzwood Pty Ltd v Unique Global Pty Ltd (in liq) [2002] FCAFC 285 (Pg 572)
Facts: Unique Goal was a trustee of a unit trust established to purchase, leased out and then
resell a commercial building. Fitzwood was a significant holder of the trust. After a dispute,
Fitzwood gave an undertaking not to deal with trust assets without the consent of certain
unit holders. A real estate agent received a good offer to purchase the property, trustee
accepted the offer without the consent of the unit holders and in breach of a last-minute
injunction obtained by Fitzwood. When the injunction stopped the transaction, the
purchaser terminated the contract and claimed damages while the real estate agent claimed
for commission.
Decision: The trustee company had lost its rights to e indemnified from trust assets. Given
the undertaking and the injunction against the sale of the property, the trustee had acted in
breach of the trust and in breach of its fiduciary duties to the unit holders.
192. Foskett v McKeown [2000] 3 All ER 97 (Pg 575)
Facts: McKeown held life insurance policy over his life on the trust of his children and held
moneys on trust for other people who wished to Purchase land to Portugal. McKeown
breached of his trust by using some of the trust money to pay atleast two premiums of his
insurance policy. McKeown died afterwards which resulted in a life insurance payout of 1
million.
Decision: The Portugal land purchasers moneys had been wrongly used to pay some
premiums on the life insurance policy and this was a breach of trust which McKeown held
those money.
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