Business Law - Case Study

Topics: Contract, Contract law, Invitation to treat Pages: 7 (1894 words) Published: October 15, 2008
A.Known Facts

John wanted to extend his house and built an office from there. He approached Sue after locating an advertisement from the Yellow Pages.

As Sue’s price did not seem reasonable, John then approached Drawit Pty Ltd, which charged a hundred dollar less. John paid a deposit.

Later, John went to Franks Hardware and Timber Yard. He made known to Frank, the sole proprietor, the purpose and requirement of the materials and placed an order. John signed a standard form contract and paid a deposit.

Two months later, problems arose which caused John to delay his business. John incurred financial losses.


It is obvious that there is a contract for the sales of goods between Frank and John. Therefore, terms implied by statute into the sales of goods will only be relevant here.

1.1Is it a consumer or non-consumer contract?

Here, we need to consider the definitions of consumer both under Trade Practices Act (TPA) and Goods Act Part IV (GA-IV).

As the total price of the goods is $20,500, it is under the TPA s4B(1) (a)(i) prescribed limit. Having satisfied this, we need to consider s4B(1) (a)(iii). There is no evidence showing that John had acquired the goods for the purpose of re-supply or transform them. It might be a consumer contract under TPA.

$20,500 exceeds the threshold amount under GA-IV s85(1) (a). John then needs to satisfy s85(1) (b). His materials were of a kind that is ordinarily acquired for personal consumption. Moreover, s85(1) (c) and (d) did not apply. Therefore, it might also be a consumer contract within s85 of the GA.

A consumer contract subjects either to TPA or GA-IV means that Goods Act Part I do not apply.

1.2 TPA or GA-IV?

A seller must be a corporation to be under the TPA. As Frank Hardware is a sole proprietor, it therefore is not subjected to the TPA. It then must fall under GA-IV. GA-IV applies to all consumer contracts for the sale of goods that take place in the course of business, irrespective of whether the seller is a corporation, a partnership or a sole trader.

1.3What are the Implied terms that are breached?

(i)GA-IV s(90) Fitness for particular purposes

John had a contract with Frank for the supply of materials and the sale took place in the course of a business. John made known the purpose for which the goods were required and had relied on his skill and judgement in choosing the appropriate materials. It was also reasonable for John to rely on Frank. Therefore, there is an implied condition that the materials supplied be fit for that particular purpose.

However, the materials were not of the purpose for which it was supplied. This implied term had been breached.

(ii)GA-IV s(89) Merchantable quality

As the materials were sold in the course of a business, there is an implied condition that the materials be fit for their normal purpose(s) having regarded the price.

When the materials were delivered, the pine is not limed and the oregon beams have unsightly knots. John was not aware of the defect before the sale and if John had inspected the materials before sale it would not have revealed the defect. This is because John did not know that he actually had to lime the pine himself and the knots on the beams might not be easily seen. Therefore, there is evidence that this implied term had been breached.

1.4What is the effect of exclusion clause?

As the materials bought by John is a kind normally acquired for personal consumption, Frank cannot rely on the exclusion clause to exclude his liability. This is evidenced by GA-IV s95(1).

1.5What are the remedies available?

John can terminate the contract and sue for damages. This means that he may return the materials and receive a refund. However, the goods must be returned as provided by s99 that as long as the defect becomes apparent within a reasonable time after...
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