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Commercial Law 70327Examination NotesSummer 2018Table of ContentsAustralian Consumer Law ..................................................................... 5Unconscionable conduct ...................................................................................... 5 Elements of unconscionabilit...

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Commercial Law 70327 Examination Notes Summer 2018

Commercial Law 70327

Exam Notes

Table of Contents! Australian Consumer Law ..................................................................... 5! Unconscionable conduct ......................................................................................5! Elements of unconscionability ..............................................................................5! S20: Within the written law ...................................................................................5! SS21 & 22: In connection with goods or services ................................................8! Tying it all together .............................................................................................11! Unfair contract terms ..........................................................................................12! Element 1: A consumer contract ........................................................................13! Element 2: A standard form contract..................................................................13! Element 3: Unfair contract terms........................................................................14! Sub-element 1 ............................................................................................................14! Sub-element 2 ............................................................................................................15!

Consumer guarantees .........................................................................................18! Acquiring goods as a consumer .........................................................................18! Prescribed amount .....................................................................................................19! Ordinarily acquired for personal, domestic or household use or consumption ..........19! Non-consumer exception ...........................................................................................20!

S2: Goods and services .....................................................................................21! In trade or commerce .........................................................................................22! Consumer guarantees relating to the supply of goods .......................................22! Title ............................................................................................................................22! Undisturbed possession .............................................................................................23! Undisclosed securities ...............................................................................................24! Acceptable quality ......................................................................................................25! Fitness for any disclosed purpose .............................................................................26! Correspondence with description ...............................................................................27! Supply by sample or model ........................................................................................28! Repairs and spare parts .............................................................................................28! Express warranties ....................................................................................................29!

Remedies relating to supply of goods ................................................................30! Rejection ....................................................................................................................31! Replacement ..............................................................................................................32! Damages ....................................................................................................................32!

Consumer guarantees relating to the supply of services ...................................35! Due care and skill.......................................................................................................35! Fitness for a particular purpose..................................................................................35! Reasonable time ........................................................................................................36! Services that do not apply ..........................................................................................36!

Remedies relating to supply of services .............................................................36! Damages ....................................................................................................................36! Actions against suppliers of services .........................................................................36!

Product liability ....................................................................................................38! Definition of ‘defective goods action’ ..................................................................39! Injury to persons caused by unsafe goods .........................................................40! Definition of ‘manufacturer’.................................................................................41! Supply ‘in trade or commerce’ ............................................................................43! Definition of ‘safety defect’: the consumer expectation test ...............................43! Defective goods actions .....................................................................................45!

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Exam Notes

S142: Defences to defective goods actions .......................................................45! 1) Timing of defect development defence ..................................................................45! 2) The regulatory compliance defence .......................................................................47! 3) State of the art defence..........................................................................................47! 4) Defect in a component of an assembled good defence .........................................49! S137A: Contributory negligence ................................................................................50!

Exclusion clauses...............................................................................................51! Limitations of actions.......................................................................................... 51! Manufacturer’s indemnification of suppliers .......................................................52! Role of the ACCC ...............................................................................................52!

Personal Property Securities Act ....................................................... 53! How the PPSA operates ......................................................................................54! 1) Does the PPSA apply? ....................................................................................55! a) What is personal property? ............................................................................55! b) Exclusions from the PPSA .............................................................................55! Collateral ....................................................................................................................56! Title ............................................................................................................................56!

2) Security interests ............................................................................................56! S12: “in substance security interests” ................................................................57! S12(3): “deemed security interests” ...................................................................57! 3) Perfection of security interest........................................................................59! Attachment .........................................................................................................59! Enforceability against 3rd parties ........................................................................60! Perfection ...........................................................................................................61! Registration ................................................................................................................61! Possession .................................................................................................................66! Control........................................................................................................................68!

4) Determining priority where competing security interests exist .................71! 5) Taking personal property free of security interests ....................................72! S43: Main extinguishment rule ...........................................................................72! S44: Defects in serial numbers ..........................................................................73! S45: Motor vehicles ............................................................................................74! Incorrect or missing serial number .............................................................................74! Taking from prescribed persons e.g. licensed motor vehicle trader...........................75! S46: Collateral sold in the ordinary course of business .....................................75! S47: Personal, domestic or household property ................................................76! Vesting in the grantor..........................................................................................76! Specific rules that apply to proceeds from collateral ......................................77! Attachment to proceeds .....................................................................................78! Enforcement .......................................................................................................79! Priority ................................................................................................................79! Purchase money security interest (PMSI) .........................................................80! “Super-priority” ...................................................................................................80!

The relevance of private international law to commercial law ........ 82! What is private international law? .....................................................................82! Main issues ..........................................................................................................82! Proper law of contract .........................................................................................83! How do we determine the proper law of contract? .............................................83!

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“Closest and real connection” test..............................................................................84! Choice overridden by statute .....................................................................................84! Bad faith .....................................................................................................................87!

Jurisdiction clauses ............................................................................................87! When will an exclusive jurisdiction not be enforced? .........................................88! Jurisdiction .................................................................................................................89! Service .......................................................................................................................89! Inconvenient/inappropriate forum...............................................................................89!

Commercial litigation across international borders.............................................91! Specific legislation provisions ...........................................................................91! Australian Consumer Law ..................................................................................91! Personal Property Securities Act........................................................................91! National Consumer Credit Protection Act 2009 (Cth) .........................................92! Carriage of Goods by Sea Act 1991 (Cth) ..........................................................92!

International sale of goods: the Vienna Convention ........................ 93! Applicability of the Vienna Sales Convention...................................................93! Objective of CISG...............................................................................................93! Structure .............................................................................................................93! Applying the CISG ..............................................................................................95! Formation of the contract ...................................................................................96! Conformity of the goods .....................................................................................97! Third party claims ................................................................................................98! Performance of the contract ...............................................................................99! Payment .............................................................................................................99! Delivery ..............................................................................................................99! Passing of risk ....................................................................................................99! Preservation of the goods ................................................................................100! Additional time ..................................................................................................100! Exemption from performance ...........................................................................100! Anticipatory breach...........................................................................................101! Fundamental breach ........................................................................................101! Remedies ............................................................................................................101! Buyer’s remedies for breach of contract by seller ............................................101! Seller’s remedies for breach of contract by buyer ............................................102! Avoidance of the contract.................................................................................102! Damages ..........................................................................................................102!

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Exam Notes

Australian Consumer Law Unconscionable conduct Elements of unconscionability 1. One party must be at a special disadvantage: Amadio; Louth 2. Other party must know that the special disadvantage exists: Garcia; Amadio 3. Other party must have taken an unconscientious advantage of the party with the special disability: Amadio; Louth

S20: Within the written law S20 – Unconscionable conduct within the meaning of the written law: (1) A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the written law from time to time. (2) This section does not apply to conduct that is prohibited by section 21. • •

This section does not apply to conduct prohibited by section 21 Purpose of this section is to: o Widen the range of remedies available to the victim of unconscionable dealing. o Enables the ACCC to investigate UC and, if necessary, bring legal action on behalf of the person who has been treated unconscionably. o However, the words are perfectly general and the courts have not yet settled on what constitutes unconscionable conduct under ‘the unwritten law’.

Blomley v Ryan (1956) • FACTS: o HC held sale of land procured from a drunken landowner was unconscionable o Purchaser was aware that landowner Ryan had a drinking habit o During his bouts of drinking, purchaser had Ryan sign a contract of sale o Ryan later sought to withdraw from the agreement • Fullagar J set out circumstances that give rise a special disadvantage: poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation when it is necessary o However, the existence of indicia suggesting a special disadvantage will be insufficient if no real disadvantage exists: Luong & Anor v Du [2013] – plaintiffs had difficulties with English language but this did not give rise to a special disadvantage as they understood the transaction and the need for legal advice

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Exam Notes

Concerned with the conduct of the stronger party, rather than the quality of the consent of the weaker party – the stronger party must be aware of the weakness and knowingly choose to exploit it for their own advantage If the person has no actual knowledge of that situation but A is aware of the possibility that that situation may exist or is aware of the facts that would raise that possibility in the mind of any reasonable person, the result will be the same. Aka “wilful blindness, possibility of a stronger party purposefully closing its eyes to any special disadvantage”

Commercial Bank of Australia v Amadio (1983) • FACTS: o Regarded as leading Australian decision on unconscionable conduct o Amadio was a builder, his company had serious financial difficulties o His friend, Mr Virgo, was a banker and would often help him by increasing his overdraft and getting him to selectively dishonour cheques o By March 1977, Amadio owed $193,000 o Amadio spoke to his parents to see if they could provide security for $50K for up to 6 months o “Special disadvantage”: they were not fluent in English, were elderly, lacked business experience and depended heavily on their son o A guarantee and mortgage was to be held over the Amadios’ investment property o Virgo visited the couple under the belief Amadio had properly explained the nature of the guarantee and mortgage; Amadios signed the documents without reading them o Mr Amadio believed that the guarantee would only operate for 6 months – Virgo corrected him but they did not seem to understand him o Amadio’s business went into liquidation; bank sought to enforce guarantee o HC majority found that Amadios could not be bound by the mortgage and guarantee • Three elements of unconscionable conduct existed here: o “Special disadvantage”: poor English, advanced age, lack of business experience and high level of dependence on their son o Virgo, the stronger party, knew of the Amadios’ special disadvantage o Virgo sought to take unfair advantage by being aware but still going ahead with the transaction • This knowledge may be ‘constructive’ – that is, the party should have drawn the conclusion of a special disadvantage through their knowledge of the facts or circumstances of the case. Louth v Diprose (1992) • HC held that Diprose, who was infatuated with Louth, was unconscionably taken advantage by her after she manufactured a false atmosphere of crisis • The appellant was aware of the disability and had deliberately created it. • Demonstrates how a combination of a special vulnerability that has developed over time and a deception may give rise to an unconscionable transaction 6

Commercial Law 70327

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Exam Notes

Sets the basis for finding that a special disadvantage may be situational rather than constitutional – the specific circumstance...