LAWS 1204
CONTRACTS
Second Semester 1999
Question ?
Issues (Summary)
- Statement- “Stick like glue- I guarantee” = misleading? Remedy?
- Standard of paint- not up to standard = Breach? I.e can P terminate?
- Is VV entitled to terminate b/c of P’s conduct?
- If VV entitled to terminate, are P’s parents liable under the guarantee?
[ ‘please write in full sentences’]
- Is Victor’s (V) statement that the velour 911 paint will ‘stick like glue’ for 10 years a misleading statement in that it misled P as to the paint’s quality and to therefore enter the contract?
First, P will have a hard time arguing that v’s statement- although promisory in nature (Couchman- tested objectively) taking into account V’s language and the context of the statement (during negotiations for a contract)- amounted to a term of a contract that was partly oral and partly written.
The problem for P, if she tried to argue this is the existence of cl 24, an entire agreement clause [] that is strong support for the parol evidence rule to apply (i.e. that the parties intended the contract to be wholly in writing, with extrinsic evidence- oral or written- being inadmissible to add to, vary or contradict the written contract: Robertson v Kern).
Similarly, P would have difficulty arguing that the statement re ‘sticking like glue for 10 years’ was part of a collateral contract. Although P could argue that the statement by V was promisory, and that it was supported by her consideration of entering the main contract: Shepperd, it’s unlikely P will be able to bear the heavy onus required to establish a collateral contract: Shepperd, especially where the subject matter (i.e. permit and its suitability are closely related tot he subject matter of the main contract. The entire agreement cl, cl 24 will also act against P trying to argue for a collateral contract. Therefore, P’s best course of action is to argue that V’s statement was misleading under s52, TPA. [Excellent].
Elements of s52:
- ‘Corporation’- VV is a limited liability company, therefore is covered as a corporation under s52.
- ‘Shall not’- implies strict liability- all P needs to prove is that v’s comment was misleading. Fault is irrelevant for V- even if he made the statement honestly and reasonably, he may nevertheless be rendered liable: Parkdale.
- ‘In trade and commerce’- VV was acting in accordance with its normal business activities w supplying permit.
- Misleading conduct
(i)Conduct- the statement by V = conduct under s52. Additionally, there is no duty on P to check the accuracy of v’s statement: Redgrave.
(ii)Test: Annand
(a)Obj element- would the conduct of v mislead a reasonable person? Yes, a reasonable person, hearing V’s statement re “stick like glue- guaranteed for 10 years’ would have been misled. [Why?]
(b)Subjective element- the courts will look at the class of person the statement was aimed at: Annand. In coming to a conclusion, the court will take into account the relative expertise of the parties: CBA v Metha. V may argue that P was an experienced business person and should have known of the need for a primer in painting/ manufacturing situations. However, P will argue that V has the relative expertise with paints + painting processes. Overall, the courts are likely to hold that V had relative expertise and that P was misled.
* Although v’s statement has misled P, is v excluded from liability b/c cl 24, an exemption cls?
Generally, the terms of a contract (in this case cl 24) will not negate the effect of s52: Henjo; Covcat .
Therefore, cl 24 doesn’t operate to exclude VV from liability for V’s misleading statement under s52.
* Damages under s82 for v’s misleading statement will be discussed at the end [Thankyou]
B. Does VV’s supply of sub-standard paint entitle P to terminate the contract with VV, in that supplying sub-standard paint was a serious breach of contract?
(i)P will have a difficult time proving serious breach by VV for supplying sub-standard paint on 1 occasion.
(a)Condition/ warranty?- Although cl 17 stated that supply of paint to standard 3795 was ‘a condition’, the actual words of the contract are not definitive: Oscarches.
The test for a condition is one essentiality:Luna Park, i.e ‘was the terms re standards so important that P would have entered the contract without it?’ . P will not be able to argue that it was essential as she did not ask for the standard- i.e. she only asked if the paint would do a certain job. (but cf if standard 3795 actually meant the paint could be used on aluminum w/o primer- more information would be required before this could be argued ). Therefore, as the contract stated the paint would be to a particular standard, but whether or not it was was irrelevant to P (as long as it stuck to aluminum), the standard of the paint was not essential and was not a condition, i.e. it was a warranty that does not allow P to terminate as breach of it isn’t serious.
(b)Intermediate term? The standard isn’t an intermediate term as its incapable of various breached- ie its either breached or it’s not. [good].
(c)Repud conduct?V supply of sub-standard paint isn’t actual repud, conduct as it’s only happened once. Although P may argue that she could terminate for anticipatory repudiatory conduct i.e. test f inevitability – unwilling to perform: Universe in that she anticipated future breaches, this is a weak argument. If VV had been informed of the standard problem they probably would have remedied it- t.f. they were probably still willing to perform the contract according to its tenor: DTR.
Overall, P is not entitled to terminate because of the sub-standard supply of paint as there has been no serious breach by VV (and there’s no express clause allowing termination in such a case).
- has P breached the contract, in that her conduct has been repudiatory, that will allow VV to terminate?
By purporting to terminate in her letter to V, P has undertaken repudiatory conduct- ie her words and conduct (letter evincing an intention to no longer accept the paint from VV) was repudiatory conduct: Luna park; DTR.
Additionally, her letter is a form of renunciation (ie P will not perform) for P’s future conduct and satisfies the inevitability test: Universal Cargo Carriers. Therefore P’s purported (but unjustified) termination is repudiatory conduct and allows VV to terminate for serious breach by P.
However, can P argue that even though she may have breached seriously. That VV is estopped from holding her to the contract, in that VV supplied paint that was in breach of contract?: Foran. Arguably VV may have repudiated its obligations under the contract in that the paint wasn’t to standard, and therefore P should not be held to the contract, however, VV will be able to successfully argue that the ratio of substandard pain was insignificant (1 in 4) and they would have fixed the problems if informed: Maple Flock; DTR. Therefore VV can not be estopped from holding P to the contract.
Election to terminate?- VV elected.
Barriers to termination? P may try to argue that VV was not ‘ready willing and able’ to perform in that they supplied substandard paint: Foran. However, VV should be able to effectively rebut this suggestion as they would have an easy onus of proof to bear in that there was unlikely to be an insubstantial [why not?] incapacity: Foran to perform (ie supply to standard) or no definitive resolve/decision not to perform: DTR.
Therefore, there are no barriers against VV terminating . Damages will be discussed at the end .
- Are P’s parents liable in that they signed a guarantee for P’s purchases/contract?
P or P’s parents, will not be able to use unconscionable bargaining to exclude team from liability under the contact as to do so would require V to have knowledge of the fact P’s parents were at a serious disadvantage: Annadio.
On the facts, P can’t prove this as V sent the documents direct to P to have them signed (ie there wasn’t direct dealing with P’s parents) and P said nothing to V to indicate they might be at a serious disadvantage. Therefore, P’s parents best course of action is to argue for undue influence [?] in a relationship based on trust: Yerky v Jones as approved and extended (obiter) in Garcia. .
Using the Yerky test, it must be a (wife) in the position of going guarantor and the husband asking for the guarantee. However, obiter in Garcia the rule in Yerky may be extended beyond husband/wife on the basis of relationships based on trust. Although the law in this area is unsettled, P could argue that P’s parents were in a relationship based on trust in that they relied on P whenever they needed help with English, they were not fluent themselves. Additionally, they were involved in a social setting when asked to sign and no precise explanation was given to P as to the implications of the documents they signed when it should have been obvious to P that explanation was required: Annadio.
Further, V accepted the signed guarantee from P’s parents without dealing direct with p’s parents: Garcia. Ps parents will be able to argue (successfully) that they did not understand the effect of the contract. Therefore, if P’s/ P’s parents argument is accepted (i.e. obiter from Garcia is accepted) there is a prima facie case to set the guarantee contract aside. However, if the argument from Garcia’s case is not accepted (as it was only an obiter suggestion) then P’s parents will be liable, as their signature is proof of intention to be bound: L’Strange.
Damages
(i)Damages to P for V;s misleading statement
Under s 52, P is entitled to damages under s82 and/or 87. First, however, there’s causation. P will be able to show the conduct was actually misleading: Aust Protective electronics as V’s statement misled her into thinking the point was suitable for her purposes.
Second, the error must be causative of loss. P will be able to argue that V’s misleading statement caused her to have to pay out extra money for primer when she thought she wouldn’t have to. The actual damages P is entitled to are reliance damages only: Gates. Therefore P will be able to claim back from V the cost of primer and the cost of applying it as a result of V’s misleading statement .
(b)Damages for VV: VV will be able to claim back loss of bargain damages (i.e the $20K) and any obligations that may have been outstanding at termination: McDonald.
As noted above, if Ps parents are liable under guarantee, VV will have to sue P for the damages herself.
Therefore overall:
-P can get reliance damages for Vs misleading statement
-V can get loss of bargain damages for Ps serious breach [yes but what would they be?]
-Ps parents may not be liable for guarantee.