Case Summaries 1 193

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Case Summaries 1-193.pdf
Commercial Law (Monash University)
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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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6. Partridge v Crittenden [1968] 2 All ER 421 (Pg 167)

Facts: Partridge placed an advertisement for bramble finch.
Decision: A person does not breach the law if he/her makes an invitation to treat.
7. Fisher v Bell [1960] 3 All ER 731 (Pg 168)
Facts: A parliament act made it an offence to offer sale of any weapons. A flick knife was
displayed in the window shop with a price tag clearly attached.
Decision: No offer has been made as the display of an item in a shop window with the price
attached was not an offer to sell, but merely an invitation to treat.
8. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] I
QB 401 (Pg 168)
Facts: Pharmaceutical Society of Great Britain (PSGB) thought that Boot Cash Chemists (BCC)
had breached the contract by displaying drugs. The question was when the offer was made.
Decision: A person does not breach the law if he/her makes an invitation to treat. Displaying
things is not making an offer.
9. Grainger & Sons v Gough [1896] AC (Pg 169)
Facts: G & S operated a winery and distributed price catalogue. Is it an offer?
Decision: It was an invitation to treat because if it would have been an offer then the seller
would be bound to supply any quantity demanded at the price advertised.
10. Carlill v Carbolic Smoke Ball Co [1893] I QB 256 (Pg 170)
Facts: Carbolic Smoke Ball Co. (CSB) manufactured a medical preparation and advertised
that anyone who uses it will be cured of influenza and if not then they would be paid 100
pounds, for which they deposited 1000 pounds in a bank. Carlill bought it but was not
treated.
Decision: The court decided that offer can be made to the world at large. Also if the offeror
did not intend the offer to be taken seriously, why would he advertise that he had put 100
pounds in the bank.
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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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23. Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34

(Pg 188)
Facts: A contract existed between the English company Brinkibon and an Austrian company
Stahag Stahl. In order to sue the Austrian company in England, they had to show that the
offer was made in England. On possible way was that the Austrian company made the offer
by private telex which was accepted by the English company also by private telex. Was the
contract made in England or Austria?
Decision: Communications by private telex are instantaneous and consequently the postal
rule did not apply. Therefore, the contract was made when the acceptance was received in
Austria.
24. Powell v Lee (1908) 99 LT 284 (Pg 189)
Facts: The management committee of a school met to discuss application for headmaster.
Powell was first selected and sent a telegram by Lee (committee member) but was later
rejected. Powell sued them and lost.
Decision: An acceptance can be communicated by the third party provided the third party
has been given the actual authority to communicate acceptance. In this case Lee was not
authorised to communicate decision to Powell
25. Ramsgate Victoria Hotel Co Ltd v Montefiore (1886) LR 1 Exch 109 (Pg 190)
Facts: Not given.
Decision: When no time limit is mentioned, the offer remains open for a reasonable time.
Reasonable time will depend on each case.
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Making the Contract: Intention and Consideration

26. Balfour v Balfour [1919] 2 KB 571 (Pg 203)
Facts: Mr Balfour promised to pay his wife 30 per month. The couple later separated. Mrs
Balfour claimed 30 per month.
Decision: An agreement existed but held that the parties had not intended it to be legally
binding. Generally, domestic arrangements of this type were not intended to finish up in
courts.
27. Todd v Nichol [1957] SASR 72 (Pg 204)
Facts: Mrs Nichol invited her sister in law and niece to live with her, and that she would
provide free accommodation till the rest of their lives. Due to a fight she wanted them to
leave the house.
Decision: If the agreement is of domestic nature the court begins with the presumption that
the parties did not intend to contract. Presumption can be rebutted if there is evidence to
contrary. The case had commercial flavor.
28. Rose and Frank Co v J R Crompton & Bros Ltd [1923] 2 KB 261 (Pg 204)
Facts: Crompton agreed with Rose and Frank that they will be made their exclusive
distributors. Crompton made it clear that it was not a contract or a legal agreement and
shall not be subject to jurisdiction.
Decision: As the parties made it clear that they did not intend to create a legal relation. Thus
there was no contract.
29. Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 (Pg
205)
Facts: This involves a trade promotion where Esso produced coins depicting the members of
Englands 1970 World Cup Soccer Team Each motorist who purchased four gallons of petrol
received a free coin. Customs and Excise argued that Esso should pay tax on the coins they
produced as they were produced for sale.
Decision: Contract for the supply of coins existed. Everyone who purchased four gallons of
Esso petrol has a contractual right to claim a free coin. Although the coins had little
intrinsic value and Esso used words such as free and gift, this was not sufficient to rebut
the presumption of enforceability.
30. Kleinwort Benson v Malaysia Mining Corp Berhard [1988] WLR 799 (Pg 206)
Facts: MMC wanted a loan from KB and refused to give a formal guarantee, instead wrote a
letter of comfort. They went bankrupt and MMC sued them.
Decision: A letter of comfort is not held binding. The court held that it was merely a
representation and not a promise of future conduct.
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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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42. Wigan v Edwards (1973) 47 ALJR 586 (Pg 219)

Facts: Mr and Mrs Edwards signed a contract to purchase a house from Wigan. After some
days they gave a list of faults which had to be fixed before they would proceed with the
contract. Edwards sued Wigan when she failed to carry out her promise.
Decision: The high court held that even though the Edwards did not have a good chance of
winning the legal claim. Giving up the claim was a good consideration and so Wigan was
bound by her promise.
43. Mitchell v Pacific Dawn Pty Ltd [2003] QSC 86 (Pg 220)
Facts: A property owner entered into a building contract with Mitchell. Pacific were
supposed to pay a certain sum for Mitchell upon completion of the building, subject to a
retention of 8%. However, on completion, Pacific failed to pay the amount owing and
Mitchell then agreed a new deal where he was paid $300,000 less than the original contract.
They even changed the retention percentage to 2.5%. Having accepting the lesser amount,
Mitchell sued for the balance. Pacific argued that the new contract replaced the original
contract. Mitchell argued that there was no consideration for the new deal and even if the
new deal was a contract, it had been extracted under duress and therefore it wasnt
binding.
Decision: The new deal was a contract. The reduction in the retention percentage meant
that Pacific had provided consideration for Mitchells promise to accept a lesser sum.
44. Stilk v Myrick (1809) 170 ER 1168 (Pg 220)
Facts: Stilk signed on as a seaman for a voyage from London. During the voyage 2 crew
members deserted and the remaining crew were promised the wages of the deserters. After
voyage the captain refused to pay.
Decision: A promise to perform a duty, already under contract will not be a good
consideration unless the promisee provides something in addition to the duty.
45. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] I QB 1 (Pg 222)
Facts: Roffey entered into a contract with Williams. Under contract Williams agreed to
provide carpentry, but after getting into trouble he realised he was under payed. Roffey
agreed to pay extra money but did not pay after completion of work. William sued Roffey
and won.
Decision: A promise to perform an existing contractual duty could amount to consideration
if it conveyed a practical benefit to the promisor and there was no element of duress
(threat).
46. Pinnels case (1602) 77 ER 237 (Pg 223)
Facts: Pinnel was owed some money and upon agreement was payed less but before due
date, Pinnel later sued for the remaining amount but lost.
Decision: As the debt was repaid before due date this amounted to something extra.
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47. Foakes v Beer [1881-5] All ER 106 (Pg 224)

Facts: Not given
Decision: If a party provides something of value (consideration), then the party can protect
itself from the contractual obligation.
49. Hirachand Punumchand v Temple [1911] All ER 1597 (Pg 225)
Facts: Not given
Decision: If a part payment is made by a third party then the debtor cannot recover the
balance.
48. Collins v Godefroy (1831) 109 ER 1040 (Pg 226)
Facts: Collins was asked to attend court and was promised to be paid by Godefry for
appearing. But Godefroy refused to pay. Collins sued him but failed.
Decision: A promise to perform a public duty, already owing will not be a good
consideration unless the promisee provides something in addition to the duty.
50. Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (Pg 227)
Facts: The plaintiff leased a block to the defendant (HTHL) for 2500 pounds, which he
reduced due to World War 2 but again increased after things turned back to normal.
Plaintiff did not claim the back rent.
Decision: Promissory estoppel stopped the defendant from claiming back rent while he was
entitled to return to the original agreement.
51. Legione v Hateley (1983) 152 CLR 406 (Pg 229)
Facts: This case involved a land. The contract provided that the vendor could terminate the
sale if the purchaser had not completed the purchase by the due date. However, the
purchaser was unable to raise finance by the due date and called the legal secretary in the
office and advised that the finance would be available in seven days. The secretary said that
it should be fine but would have to get instructions. Three days later, the vendor terminated
the sale. The purchaser argued that the words of the secretary were sufficient to give rise to
promissory estoppel and the vendor should be estopped from exercising his rights to
terminate because of the representation made by the legal secretary.
Decision: Promissory estoppel could be applied in situations like these. However, the
promisors representation must be clear and unequivocal and it this situation it wasnt.
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52. Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR (Pg 231)

Facts: Quaglia leased a shop for 3 years at $278/month. Due to difficulties the lessor agreed
to accept a lower amount. When Quaglia called quits the lessor sued for arrears.
Decision: The court decided that detriment existed as Quaglia had to pay back the money in
lump sum amount whereas the situation would have been different if he had to pay it back
in instalments. Quaglia won the case.
53. Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR (Pg 232)
Facts: Maher owned a property with building on it. He entered into negotiations with
Walton stores to lease the land, tear down the old building, and erect a new one. Maher
signed the contract and forwarded it to Walton stores who did not sign its part of amended
agreement and later refused to deal. Maher sued Walton stores and were awarded
damages.
Decision: The case used promissory estoppel. The court decided that a legal relationship
existed between them, also the defendant induced the plaintiff to adopt the presumption.
The defendant also knew that his actions would detriment plaintiff.
54. Nash v Inman (1908) 2 KB 1 (Pg 234)
Facts: A minor purchased a number of fancy waistcoats from a tailor, then refused to pay.
The tailor sued to recover the contract price.
Decision: The minor was not legally bound by the agreement. Even though waistcoats are a
necessary, he has already purchased an adequate number of waistcoats and therefore, the
contract was not a contract for necessaries.
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Express terms of the contract

55. Thornton v Shoe Lane Parking Ltd [1971] 1 All 686 (Pg 246)
Facts: Thornton took his car to the car park operated by the defendant and outside sign
read Parking at owners risk. The ticket read subject to conditions of the premises. Inside
was an exemption clause for personal injuries. Thornton was injured and claimed the car
park 50% responsible.
Decision: The court held that the contract was made before the ticket was purchased (i.e.
vending machine); also the clause was very wide. Lord Denning MR said that as the clause
was very destructive it had to be painted in red.
56. Olley v Marlborough Court Ltd [1949] 1 All 127 (Pg 246)
Facts: The Olleys booked into the Marlborough Court Hotel and paid for the week board.
When they got to the room, they noticed a sign which had a notice which stated that the
hotel was not liable for lost personal property. Mrs. Olleys furs were stolen as result of the
carelessness of the hotel staff. The hotel argued that because of the sign, they could not be
held responsible.
Decision: The contract was made at the reception desk before the Olleys went up to their
room. Therefore, the exclusion clause could not be a term.
57. LEstrange v Graucob [1934] 2 KB 394 (Pg 247)
Facts: LEstrange bought an automatic cigarette machine from Graucob (defendant) and
signed the sales agreement (without reading) which contained the exemption clause.
Machine was defective so she sued Graucob.
Decision: As the documents were signed, so they were binding. As the documents did not
contain any implied term, therefore she could not rely on it.
58. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 (Pg 248)
Facts: Toll operated a storage and cartage business called Finemores (F) Alphapharm
imported and distributed pharmaceutical products including Fluvirin. Richard Thomson (RT),
which was acting as agent for Alphapharm, sought a quotation from F for the storage and
transport of Fluvirin. F sent their quotation under cover of a letter which required RT to sign
an application for Credit and Freight Rate Schedule. RT attended the office and signed this
application. Above the place for signing were words Please read Conditions of Contract
(Overleaf) prior to signing RT signed without reading this? The contract included an
exemption clause where F would not be liable for any loss, injury or damage. The Fluvirin
was ruined when F negligently allowed the temperature at which it was stored to drop
below the minimum allowed. Alphapharm sued for negligence.
Decision: Alphapharm were bound by the exemption clause. There was no need for F to
establish that it had taken reasonable steps to bring the clause to RTs attention.
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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.
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.
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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Implied terms in Contract

80. Burger King Corp v Hungry Jacks Pty Ltd [2001] NSWCA 187 (Pg 291)
Facts: Burger King (BK) is a US firm and gave Hungry Jacks (HJ) exclusive right to develop BJ
in Australia, in return HJ promised to open 4 outlets every year. Later BK wanted Australian
market for itself so secretly started discussions with Shell. BK terminated HJs contract and
HJ sued for breach of good faith.
Decision: The court decided that BK breached its implied obligation of good faith.
81. Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 (Pg 292)
Facts: Reg Glass hired Rivers to supply and fit a particular steel-sheeted door and locking
system in his shop. The door was described as burglar-proof. Rivers fitted the door on the
existing wooden door frame. Burglars broke in by forcing the door from the frame.
Decision: This was a contract for work and materials. There was an implied term that the
door would be reasonable fit to keep would-be breakers out of the shop. The door as
fitted was not of that character. Therefore, Rivers had breached its contract.
82. Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 (Pg 293)
Facts: Plaintiff owned a Bell helicopter who had a service contract with the defendant to
service and repair the helicopter, which required the defendant to conform to the
requirements of the manufacturers manual. The manual required to all spare parts to be
acquired from the manufactures authorized distributor and to comply with the
manufacturers design specifications, although the defendant did not have expertise nor the
equipment and the plaintiff was aware of this. A spare part was replaced during service
which was acquired from the manufactures authorized dealers. The bolt contained a latent
defect and during a flight, the bolt snapped, the helicopter crashed and all the occupants
were killed.
Decision: Even though this was a contract for work and material, it would not be reasonable
to imply terms where the materials supplied are of good quality and would fit to their
intended purposed as both parties knew that the defendant had no opportunity to ensure
that the parts obtained from Bells authorised dealer were free of latent defects.
83. Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd [1988] FCA 693 (Pg 294)
Facts: Costa Vraca (plaintiff) operated a tomato farm and asked the defendant to spray
insecticides. Following spraying, the crop died and CV sued the defendant.
Decision: The court decided that there was an implied term that the services would be
carried out with reasonable care and skill. As the defendant did not take reasonable care he
was in breach of contract and liable for damages.
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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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89. Beale v Taylor [1967] 1 WLR 1193 (Pg 304)

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.
90. Re Moore & Co Ltd and Landauer & Co (Pg 305)
Facts: The contract called for the sale and delivery of canned fruit packed 30 tins to the
case. About half of the consignment was packed 24 tins to the case. In all other respects the
goods conformed with the contract. The buyer refused to accept delivery of any of the
consignment.
Decision: Since there was a breach of contract, the buyer was entitled to reject the
complete consignment even though there was no evidence that the packing affected the
value of the goods.
90. Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1990] 1 All ER
737 (Pg 305)
Facts: The defendants were Lone art dealers who sold to the plaintiff also art dealers, a
painting said to be by the German artist Munter. The sellers made it known that they were
not experts in German art. The buyer had a special interest in German art, although it
appears to be little expert knowledge. The buyer viewed and purchased the painting for
6000. It turned out to be a forgery.
Decision: The majority of the court held that this was not a sale by description. Here, the
sellers make it known that they were not experts in German paintings. The buyer inspect the
painting and rejected the argument that the goods were not of merchantable.
91. Ashington Piggeries v Cristopher Hill Ltd [1971] I All ER 737 (Pg 306)
Facts: Ashington had a mink farm and ordered mink food from Hill who had never
previously prepared food for minks. Hill got used some meal provided by Norsildmel to
prepare mink food. Some reaction made the food poisonous and minks died. Ashington
sued Hill who in turn sued Norsildmel for breach of contract.
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.
92. David Jones Ltd v Willis (1934) 52 CLR 110 (Pg 308)
Facts: Willis wanted a pair of walking shoes for her bulged foot in David Jones. After second
use the heels collapsed causing injury to Willis.
Decision: The court decided that the goods were not of merchantable quality and not fit for
the purpose specified.
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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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Remedies in Contract Cases

102. Taylor v Caldwell (1863) 3 B 826; 122 ER 309 (Pg 333)
Facts: Taylor hired a concert hall from Caldwell. Unfortunately, the hall burnt down prior to
performance. Taylor sued Caldwell for damages.
Decision: The contract was discharged for frustration and therefore, Taylor could not get
damages.
103. Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (Pg 333)
Facts: Davis Contractors won a tender to build houses in 8 months. There was a shortage of
labour and as a result they took 22 months to finish the project at an additional expense of
17,500. Davis Contractors claimed that the shortage of labour frustrated the contract, which
means he could recovered the additional expense back.
Decision: The court held that the contract had not been frustrated. The delay caused the
labour shortage to be foreseeable. A contract is not frustrated just because one party is
commercially disappointed with the outcome.
104. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (Pg 336)
Facts: Not given
Decision: The judge in this case decided that a condition is a term when the promise is of
such importance that the promisee would not have entered into the contract unless he has
been assured that the promise would be kept.
105. Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 (Pg 336)
Facts: Bancks was a leading cartoonist and worked for Associated Newspaper (AN). AN did
not live up to a condition on which the contract was based and so Bancks terminated his
contract. AN brought an action against him and failed.
Decision: The court held that the statement was at the heart of the contract and so breach
of the condition gives the plaintiff the right to terminate the contract.
106. L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (Pg 338)
Facts: Schuler, a manufacturer of press, agreed to give Wickman sole selling rights to United
Kingdom. The contract stated that Wickman shall send its representative to visit certain UK
manufactures at least once a week for inspection. Wickman committed some minor
breaches of this clause and Schuler attempted to terminate for breach of contract.
Decision: The clause in question did not give Schuler the right to terminate since the word
condition may have more than one meaning when used in the context of 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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114. Foran v Wight (1989) 168 CLR 385 (Pg 347)

Facts: Foran entered into a contract to buy property from Wight and 2 days before
settlement Forans had problem arranging finance despite which they informed Wight that
they would proceed with the contract. Wights had some problem as well, so on the same
day they told Forans that they will not be able to complete settlement which stopped
Forans from searching for capital. On settlement day neither party attempted to settle.2
days later Forans sued Wight for a return of deposit. The Wights countersued for breach of
contract.
Decision: The court decided that Wights failure was a breach of condition. This was because
the settlement date was of the essence of the contract. So Forans could terminate the
contract, provided they are able to prove that they were ready to carry out their part.
Forans are entitled to the return of their deposit.
115. Hoenig v Isaacs [1952] 2 All ER 176 (Pg 349)
Facts: Hoenig hired Isaacs to renovate his house. The contract price was 750 pounds. Isaacs
did not perform his job well and so Hoenig refused to pay. Issue is what amount he should
be paid.
Decision: Contractual obligations have to be substantially performed in order to sue for the
contract price. In this case the court held that the work was substantially performed and so
Issac was entitled to the contract price less cost of incomplete work.
116. Addis v Gramophone [1909] AC 488 (Pg 350)
Facts: Addis was employed by Gramophone with salary and commission. The contract
required Gramophone to give 6 months notice of termination. Gramophone did so but
hired replacing manager which prevented Addis from earning commission. Addis sued for
damages and won the case.
Decision: The purpose of an award of damages is to compensate the innocent party, not to
punish the defaulting party. In this case the court first awarded a lump sum amount but
later overturned it. The same principle was applied in Robinson v Harman (1848) I Exch.
117. Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 (Pg 351)
Facts: Tabcorp leased a building from Bowen. A term of the lease provided that Tabcorp was
not to make any substantial alterations or additions to the building without Bowens written
contest. Without informing Bowen, Tabcorp made substantial alterations to the lobby.
Decision: The contract entitled Bowen Investments to have control over whether any
substantial alterations were made to the building and to ensure that Bowen got the benefit
of this promise the measure of damages had to be the cost of reinstating the original lobby.
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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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122. McRae v Commonwealth Disposals Commission (1951) 84 CLR

Facts: CDC called for tenders for salvage and sale of a tanker it thought had gone aground.
McRae won the tender and spent money for searching the tanker which did not exist (CDC
made a mistake). McRae sued for price of tender as well as expense incurred to search for
the tanker.
Decision: It was not possible to estimate whether McRae would have made a profit or a loss
on the operation. However it was reasonable that McRae would incur expenses, so McRae
was awarded damages of a good sum. The case fell under Hadley v Baxendals second limb.
123. Commonwealth v Amaan Aviation Pty Ltd (1991) 174 CLR 64 (Pg 357)
Facts: Amaan won a contract to provide aerial surveillance of Australias northern coastline
and a considerable expense was incurred in setting it up which includes the purchase and
adaption of suitable aircrafts. Amaan failed to comply precisely with the contract and the
Commonwealth served notice of termination. However, it was not done correctly and
amounted to a wrongful repudiation of the contract. Amann then terminated the contract
and sued for damages. Initially they were award the profit being made under the contract
but failed to claim the startup costs and appealed.
Decision: The purpose of damages for breach of contract is to place the plaintiff in the same
position as if the contract had been performed. Since the expected cost plus expect profit
cannot be calculated, the court may award damages on the basis on the reliance cost.
124. Jarvis v Swans Tours Ltd [1973] 1 QB 233 (Pg 358)
Facts: Jarvis booked a skiing holiday with Swans Tours on the basis of a number of attractive
representations made in Swans brochure. Unfortunately for Jarvis, what appears on the
brochure is not always accurate.
Decision: The court awarded Jarvis damages which were approximately twice the cost of the
holiday on the basis of his loss of entertainment and enjoyment.
125. Baltic Shipping Company v Dillon (1993) 111 ALR 289 (Pg 359)
Facts: Mrs. Dillion went on a 14 days cruise which sank after 10 days. Mrs. Dillion suffered
injury, lost belonging, and was distressed and disappointed.
Decision: The high court approved of damages including distress, disappointment, and loss
of enjoyment. However the court decided that Mrs. Dillion will not be returned full fare as
she experienced part of her holiday.
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126. Dougan v Ley (1946) 71 CLR 142 (Pg 360)

Facts: Dougan agreed to sell his taxicab together with his taxi license to Ley as the number
of licenses was strictly limited by NSW Department of Transport. Therefore, it was a sale of
valuable rights attached. Dougan refused to proceed with the sale and Ley sued for special
performance
Decision: Dougan was ordered to submit the necessary documents of transfer to the
Commissioner for Road Transport and tramways for the transfer of registration and license
as damages were not sufficient.
127. Lumley v Wagner [1843-60] All ER Rep 368 (Pg 361)
Facts: Miss Wagner was hired by Lumley, the owner of a theatre to sing for a period of 3
months and agreed not to sing at any other theatre during the period. However, the singer
broke the contract and sang at Gyes theatre which was a rival theatre.
Decision: The court refused to make an order for special performance on the grounds that it
was a contract for personal services but granted an injunction to stop performing at the rival
theatre.
128. Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 (Pg 362)
Facts: Pavey carried out curtained building work for Paul under an oral contract. In NSW, a
building contract of this type was enforceable it was in writing and signed by the parties.
Because the contract did not satisfy these requirements and was unenforceable. Pavey sued
on quantum meruit basis for the work done and material supplied at the request of Paul.
Decision: The court held that the basis of quantum merit was restitution not contract.
Therefore, the court found in favour of Pavey
129. Sumpter v Hedges [1898] 1 QB 673 (Pg 365)
Facts: Sumpter, a builder, was hired by Hedges to build two houses for 565. Sumpter ran
out of money and was unable to complete the job. Hedges finished the building himself.
Sumpter claimed 333 on a quantum meruit.
Decision: Sumpter was not entitled for the money as the unfinished business was on
Hedgess land and Sumpter had repudiated the contract.
130. Blomley v Ryan (1956) 99 CLR 362 (Pg 365)
Facts: Ryan was an old farmer with a drinking problem. Alcohol has impaired his mental and
physical powers. Blomley wanted to buy Ryans property. During a drinking binge, Ryan
agreed to sell his property at a much lower price with only a deposit of 5. Ryan;s real estate
agent was present but was on Blomleys side. The contract was signed at a solicitors office
after the solicitor had read the terms. When Ryan refused to transfer the land, Blomley sued
for special performance
Decision: Ryan is considered under a special disability The contact was set aside on the
grounds of unconscionability.
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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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Consumers Rights and the Supply of Goods and Services

140. Atkinson v Hastings Deering (Qld) Pty Ltd (1985) ATPR 40-625 (Pg 387)
Facts: Atkinson purchased a second-hand tractor 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: A tractor was not a good ordinarily acquired for personal, domestic or household
use nor was a commercial road vehicle. Therefore, this was not a consumer contract. 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.
141. Paisley v Aitchison trading as Dean Cars & Anor (Civil Claims) [2012] VCAT 1483 (Pg
387)
Facts: Paisley bought a Kia Carnival from Aitchison. The vehicle was eight years old and
travelled almost 80,000 Km. The price was $12,500 inclusion of a DVD, Stamp duty and
transfer fees. Paisley complained about a number of defects which were all later remedied
at no extra cost. Paisley sought to rescind the contract for breach of s 54 ACL.
Decision: The defects did not mean that the car was not of acceptable quality as they did no
amount to a major failture.
142. Grant v Australians Knitting Mills [1935] AC 85 (Pg 391)
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.
143. Dawson v Pacific Chase Investments (General) [2012] NSWCTTT 432 (Pg 392)
Facts: Dawson bought a horse to use in harness racing. The purpose was known to the
seller. Later it was discovered the horse had a defect and wasnt suitable for racing. Neither
Dawson nor the seller was aware of this. Dawson had inspected the horse before sale but
did not have a vet to check the horse. Dawson sought to reject the horse and the seller
refused.
Decision: This was a consumer contract. Although the buyer inspected the horse, he did not
and could not reveal the defect. The horse was not of acceptable quality nor fit for buyers
disclosed purpose. The buyer was entitled to reject the horse.
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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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148. Read v Neerey [1979] VR 47 (Pg 405)

Facts: Read twice took his BMW car to Neerey to have fix transmission. Neerey told Read
that a switch was missing. In fact the switch was wired incorrectly by Neerey. On one
occasion the car was not in neutral and caused damages.
Decision: Mark J held that both TPA s 74 and common law implied a warranty of reasonable
care and skill into the contract. Though Neerey warned about the defect, it does not mean
that Neereys breach had not caused the loss.
149. Zhang v United Auctions (Home Building) [2013] NSWCTTT 6 (Pg 406)
Facts: Zhang took his motor cycle to have repair works carried out, including to address a
ticking or tapping noise that was emanating from the vehicles engine. The repairer
carried out a range of repairs but the noise persisted.
Decision: This was a service contract covered by ACL. The statutory guarantee required by s
61 had been breached as the service were not reasonably fit for the purpose of eradicating
the noise. Zhang was entitled for a refund.
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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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153. Re Ruddock (1879) 5 VLR 51 (Pg 460)

Facts: Ruddock carried on business in his own name and owed a debt to Mrs Bear and she
agreed that she would acquire a quarter-share in the business in return for a discharge in
debt. She would obtain 25 per cent of the net profits and in control of quarter share and not
be liable for any losses. Ruddock further agreed that he would not hold back anything as a
partner and to treat her the same way a partner would be treated. There was no expire date
placed on the deal. When Ruddock became insolvent, Mrs. Bear claim her debt as a creditor
but she could not to this as a partner.
Decision: The court held that Mrs. Bear was a partner. Ruddock and Bear treated each other
as partners and the relationship was determined by the by this mutuality of rights and not
by the words used by the partner.
154. Checker Taxicab Co Ltd v Stone [1930] NZLR 169 (Pg 460)
Facts: Checker owned a taxicab and the taxi was hired to drive under the terms of an
agreement between the driver and Checker where the driver was required the cab hired to
be returned at the end of the day in good condition. The driver agreed to pay a percentage
of his takings by way of hiring fee. The driver was to pay all the running costs and had
complete control over the use of the cab during the hiring period
Decision: The court held that the driver was neither an employee, nor a partner, of Checker.
Checker and the driver were carrying on separate business.
155. Cox v Hickman (1860) II ER 431 (Pg 462)
Facts: Cox and others were creditors of a trading partnership which got into financial
difficulties. The creditors agreed with the partners that the business would be held by the
creditors until the debts were paid off at which time the business would revert to the sole
owners. Until the debts were paid all the profits would be shared by creditors. Court had to
decide whether creditors were partners.
Decision: The court held that they were not partners even though they had profit motive.
This is based on s 6 (3) (a) which states that securing a repayment of debt by agreeing to
take a proportion of profits does not result in partnership.
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156. Plummer v Thomas [2002] NSWSC 1185 (Pg 463)

Facts: Plummer and Thomas entered into an agreement with Plummer claimed amounted
to a partnership. According to the arrangement, profits were to be share 50/50. Otherwise
Thomas arranged the lease in his name and paid the bond, registered the business name in
his name, opened the bank accounts in his own name, paid all the debts, decided who
would be hired and fired, and decided who the accountant would be and what from the
financial records would take. Plummer brought a number of specialty items to the
workshop. However, when the relationship broke down she claimed back and Thomas
disagreed.
Decision: Despite the agreement to share profits, the rest of the evidence did not support
the existence of the partnership. In particular, there was no suggestion that Plummer had
agreed to share losses.
157. Re Megevand; Ex parte Delhasse (1878) 7 Ch D 511 (Pg 464)
Facts: Delhasse agreed to lend Megavand and another intended 10,000 to set up a
business where they an agreement stated that Dehasse was the creditor not the partner,
along with other partnership conditions including a fixed share of profits, rights to inspect
books of accounts, the right to dissolve partnership and conduct the wind up, All these
conditions are consistent with Delhasse being a creditor and not a partner. It also stated
that the loan was not repayable until after the partnership had been dissolved. Also
Delhasses 10,000 was the only capital in the partnership.
Decision: The court held that Delhasse was a partner since the agreement went beyond the
requirements of a standard loan. The fact that the loan was not to be repaid until the
partnership was dissolved was more consistent with a partners capital contribution rather
than a loan.
158. Steckel v Ellice [1973] I All ER 465 (Pg 465)
Facts: Both the defendant and the plaintiff were chartered accountants. Steckel was
described as a salaried employee. According to the agreement between Steckel and Ellice,
Steckel was to receive a salary and had no interest in or right to capital of the partnership.
All profits belonged to Ellice and all looses were his responsibility.
Decision: Megarry J held that with regards to third party, Steckel was a partner, if not
actually then by holding out.
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159. Chan v Zacharia (1984) 154 CLR 178 (Pg 468)

Facts: Chan and Zacharia were two doctors who decided to dissolve their partnership.
Before the partnership had been wound up Chan (without Zacharias knowledge) renewed
the lease so that he could continue to practice medicine from the same address and the
lease excluded Zacharia and he argued that Chan could not keep the lease for himself
because at the time the lease was renewed Zacharia and Chan were partners and therefore
owed fiduciary duties to each other.
Decision: The High Court held that Chan held the lease on trust for both himself and
Zacharia. This meant that Chan owed fiduciary duties to his partner in respect of the lease
and would have to account to Zacharia for the benefit Chan was received from lease
renewal.
160. United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49 (Pg 465)
Facts: Security Projects Ltd (SPL) a property owner, UDC (a finance company) and Brian (an
investor) entered into partnership agreement to develop certain land owned by SPL as a
shopping center. Before the partnership actually commenced, but after detailed
negotiations had been held, SPL gave a mortgage over land to UDC to secure moneys UDC
had lent to SPL not only for the development of the shopping center but also other
developments which Brian was not involved in. Brian knew nothing about the terms of the
mortgage. Eventually, the shopping center was build and sold for a profit. UDC, however,
kept the proceeds to pay of other debts that it was owed by SPL and to which it claimed to
be entitled under the terms of the mortgage. Brian objected that the terms of the mortgage
amounted to breach of fiduciary duty and were enforceable against Brian.
Decision: The court held that UDC owed a fiduciary duty to Brian. Although the partnership
had not yet commenced, the parties had moved well beyond the stage of preliminary
negotiations. UDC had breached that duty by taking a mortgage that advantaged itself to
the disadvantage of Brian without Brians consent.
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161. Harvey v Harvey (1970) 120 CLR 529 (Pg 471)

Facts: HH Harvey (HH) owned a farm. Because of ill health he wanted to sell the property.
However, he decided against selling when his brother approached him and suggested that
farm could be worked by HL and HLs sons. The parties agreed. It would enable HLs sons to
gain some pastoral management and preserve the land for HHs son who was then 6. The
arrangement was oral. HL and his sons would contribute skill and labour but no capital. All
expenses, losses and profits had to be shared. Over time, improvements were made to the
farm which increased its value. There was no agreement about whether the land was
partnership or not. The partnership ran for 20 years and then terminated.
The question is
I. Whether partnership existed and if it did
II. Had the land become a partnership property or
III. If the partnership existed and the land was not partnership property, should the value of
improvements be taken into account?
Decision: The court held
I. That the agreement was clearly partnership.
II. That the land did not become partnership property because parties intended to preserve
the land for HHs son.
III. That there is no general principle that says that in absence of agreement, a partner
whose property has been increased in value is bound to share the value with other partners.
This meant that HH got the land and wasnt liable to pay compensation to any partner.
162. Young v Lamb & Ors [2001] NSWCA 225 (Pg 476)
Facts: Mr. and Mrs. Young and Mr. and Mrs. Newell had a partnership firm. Mrs. Newell did
most of the lease negotiations and was the one who always paid rent to the agent. Mrs.
Newell negotiated a new lease option with the agent, without the consent of the partners.
Partners argued that they were not bound by her decision.
Decision: The court held that in general commercial partnership, partnership is bound by a
partners action like leasing land if they are done in firms name and within the course of
business.
163. Goldberg v Jenkins (1889) 15 VLR 36 (Pg 477)
Facts: Jenkins, a partner in a business, borrowed money for himself in the name of
partnership with interest rate of 60%. Jenkins partner denied that it was a partnership debt
and won the case.
Decision: Generally borrowing money is not within the normal scope of a partner. Even if it
is, the particular transaction must be the usual way of borrowing. In this case the rates were
exorbitant and did not fall within the usual way and thus other partners were not liable.
Normal rate is between 6 10%.
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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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Introduction to Company Law

173. Salomon v Salomon & Co Ltd [1987] AC 22 (Pg 508)
Facts: Salomon was a boot manufacturer who originally operated a business as a sole
trader. He converted the business into a company as several of his sons worked with him.
His sons and wife were given a share each. He was the MD and his sons were directors.
Salomon sold his business to the company and received more shares and secured loan from
the company. The company went into liquidation and Salomon was sued for companys
debt. Salomon on the other hand argued that he was not the company.
Decision: The court held that a company was a separate entity from its shareholders and it
conducts business in its own name. This case established the principle that control and
management of business is distinct from its ownership.
174. Lee v Lees Air Farming Ltd [1961] AC 12 (Pg 509)
Facts: Mr Lee ran a business and formed a company to conduct the business. The capital
comprised 3000 shares and 2999 were owned by Lee. He was the MD of the company and
an employee under companys workers compensation insurance. Mr Lee died in a plane
crash and his wife wanted compensation under workers compensation act. She won the
case.
Decision: The Privy Council established Salmons case, i.e. a company is a separate legal
entity with independent existence from its shareholders.
175. Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1987) 5 ACLC 467 (Pg 510)
Facts: A corporation (the subsidiary) executed a deed. Later the plaintiff alleged that the
terms of the deed had been breached by the actions of the subsidiarys holding company.
The court was asked to treat the holding company and the subsidiary company as one and
the same.
Decision: The court rejected the plaintiffs submission. The holding company and the
subsidiary were separate legal entities and must be treated as such.
176. Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1992) 10 ACLC 253
(Pg 519)
Facts: Brick & Pipe provided guarantee to Occidental. The deed had to be signed by a
director and secretary or person employed to do so for the deed to be valid. The deed was
signed by Goldberg (director) and Furst- who supposed to be but was not a secretary. On
inquiring he was told that Furst was a secretary by a person not authorised to do so.
Goldberg heard of it but remained silent. Is the guarantee binding?
Decision: Furst was not appointed as a secretary of the company. Even the assurance was
given by Occidental who did not have the actual authority but had ostensible authority. On
the other hand Goldberg had the actual authority and by remaining silent he assured Furst
was validly appointed. So, the company was bound.
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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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Duties of Company Directors and Other Officers

180. State of South Australia v Clark (1996) 14 ACLC 1019 (Pg 532)
Facts: Clark was the MD and CEO for South Australia Bank. He was instrumental in acquiring
shares in a company without evaluating its true value. Clark knew that the proceeds from
the sale would be used to repay a loan of a company in which Clark was a director and had
major holdings. Clark did not disclose his involvement with the company. Bank sued him for
damages and breach of contract.
Decision: s 180 sets out that the duty of company director or officer is to exercise a
reasonable degree of care and diligence. Officer has breached his duty if he fails to exercise
reasonable care. In this case Clark had to pay $81 Million as damages.
181. Circle Petroleum (Qld) Pty Ltd v Greenslade (1998) 16 ACLC 1577 (Pg 533)
Facts: Greenslade was the managing director of Circle Petroleum and had a extensive
experience in the petroleum industry and was well aware of the risks of not maintaining
tight credit control. Promco was a customer of Circle Petroluem and had suffered severe
trading difficulties and was in debt and as a result the board decided not to extended futher
credit with him. However, Greenslade let him acquire further supplies of petroleum on
credit, knowing his condition and the risks involved. When Promco was unable to pay its
debts, Circle issued proceedings against Greenslade for breach of his statutory duty to
exercise reasonable care and duty.
Decision: The court held that Greenslade had failed to exercise the degree of skill and care
which could reasonably be expected from a person of his knowledge and experience.
182. Walker v Wimborne (1976) 50 ALJR 446 (Pg 537)
Facts: The directors of Asiatic Electric Pty Ltd made certain payments before liquidator was
appointed. The liquidator challenged these payments as not being in interests of Asiatic. At
the time these payments were made, Asiatic was unable to pay its debt. Asiatic was a
member of a group of companies that had common shareholders. The payments had been
made on behalf of other companies within the group. The directors treated the assets of
each company as the assets of the group.
Decision: The court held that the directors owed their duty to the particular company in
question and not to the whole group. Therefore directors who made payment to other
companies were in breach of their duties. S 81 is used here which states that a director or
officer of a company must exercise their power and discharge their duties.
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183. Cummings v Claremont Petroleum NL (1993) 11 ACLC 125 (Pg 539)

Facts: Cummings, Fuller and one other person were directors of Claremont, a public
company. Cummings and Fuller passed certain resolutions which favored their consulting
companies and included termination allowances and free lease of luxury vehicle. These
payments were excessive by any terms. Subsequently, they were voted out of the board and
the new board ordered the termination payments be repaid.
Decision: s 182 imposes on the director of the company not to misuse his position for
personal gain, gain by third party or to cause detriment to the company. In this case the
directors misused their position and were under breach.
184. Cranleigh Precision Engineering Ltd v Bryant [1965] 1 WLR 1293 (Pg 541)
Facts: Bryant and another founded Cranleigh Precision Engineering Ltd (the plaintiff) Bryant
acted as managing director. Bryant created an above-ground swimming pool which
contained two revolutionary features and while trying to register a patent for this, he
learned of an existing patent which wasnt utilized in the UK (the Bischoff patent). Cranleigh
wasnt aware of this and after an internal company dispute, Bryant left to form his own
business. He acquired the rights for the Bischoff patent and made use of the two
revolunatary features that had been incorporated into the Cranleigh swimming pool.
Decision: The court granted an injunction to stop Bryant utilizing the confidential
information and making use of the Bischoff patent. The judge held that knowledge of its
existence was information which Bryant had acquired on behalf of Cranleight and therefore
was a breach of duty owed by Bryant to Cranleigh as its managing director not disclose the
information to Cranleigh. It was also a breach of the duty (of confidential information) to
use that information to the detriment of Cranleigh.
185. Green and Clara Pty Ltd Bestobell Industries Pty Ltd (1982) 1 ACLC 1 (Pg 542)
Facts: Green was employed by Bestobell, a Construction Company. As a result of his position
he was aware that Bestobell intended to tender for a construction job. Green owned a
private company and also submitted a tender. Green won the tender and Bestobells tender
was third. Bestobell sued for breach of contract.
Decision: Even though Bestobell would not have won (third), Green was in breach of his
duty, so the court ordered him to pay all profits to Bestobell. The court held that Green had
breached fiduciary obligation not to use inside information.
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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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193. Hardoon v Belilios [1901] AC 118 (Pg 576)

Facts: Hardoon was the registered owner of 50 partly paid shares in the Bank of China, japan
and Straits Ltd and he wasnt a beneficial owner despite being the registered owner of the
shares. The shares were initially registered in his name by him employee with a intention to
immediately transfer to the client. Hardoon signed the papers but was never registered.
When the banking company would up in 1894, the liquidator made calls on the partly paid
shares and successfully sued Hardoon for that amount, as the registered owner of the
shares. Hardoon sought to recover this amount from Belilios, who had become the sole
beneficial owner of those shares in 1892.
Decision: When Belios had accepted beneficial ownership of the shares, he became the
beneficiary of the trust over the shares. The trustee, Hardoon, was entitled to be
indemnified by Belilos for the call on the shares he held on trust.

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Commercial Law (Monash University)

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6. Partridge v Crittenden [1968] 2 All ER 421 (Pg 167)

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23. Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34

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Making the Contract: Intention and Consideration

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42. Wigan v Edwards (1973) 47 ALJR 586 (Pg 219)

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47. Foakes v Beer [1881-5] All ER 106 (Pg 224)

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52. Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR (Pg 231)

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Express terms of the contract

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Implied terms in Contract

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89. Beale v Taylor [1967] 1 WLR 1193 (Pg 304)

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Remedies in Contract Cases

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114. Foran v Wight (1989) 168 CLR 385 (Pg 347)

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122. McRae v Commonwealth Disposals Commission (1951) 84 CLR

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126. Dougan v Ley (1946) 71 CLR 142 (Pg 360)

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Consumers Rights and the Supply of Goods and Services

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148. Read v Neerey [1979] VR 47 (Pg 405)

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153. Re Ruddock (1879) 5 VLR 51 (Pg 460)

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156. Plummer v Thomas [2002] NSWSC 1185 (Pg 463)

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159. Chan v Zacharia (1984) 154 CLR 178 (Pg 468)

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161. Harvey v Harvey (1970) 120 CLR 529 (Pg 471)