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Statutory implied terms (historical only)

Note: On 1 January 2011 the state, territory and federal implied terms regimes for consumer contracts were repealed and replaced with a set of consumer guarantees which form part of the Australian Consumer Law. See the consumer guarantees page.

The following provides an historical overview of the implied terms regimes.

View sample approach to statutory implied terms

Commonwealth

The key consumer protection legislation in Australia is the Trade Practices Act 1974. Part V of this Act implies terms into consumer contracts.

Victoria

In Victoria, in addition to common law implied terms, three regimes operate to imply terms into contracts; an overview of the regimes is provided below (note, it is not designed to be comprehensive and focuses on goods rather than services). See also sample approach to Victorian implied terms regime.

Application

Goods Act

All contracts for the sale of goods unless Part 2A of the FTA applies (s 32FA FTA).  Implied terms may be excluded or modified by the parties: s 61 GA.

Fair Trading Act

Consumer contracts only: see 32D.  Covers sales of goods valued at under $40,000 or above that amount but of a kind ordinarily acquired for personal, household and domestic use.  However, specifically excludes (s 32DA) goods bought for purpose of resale or raw materials ordinarily acquired for repairing goods or incorporation in other goods.  Implied terms not excludable: 32L.

Trade Practices Act

Consumer contracts only (s 4B) – application virtually identical to FTA but also covers commercial road vehicles.  Also, supplier must be a corporation.  Implied terms not excludable: s 68

Title – right to supply Implied term

s 17 GA, ss 32G & 32GA FTA, s 69 TPA

Seller will have:

* right to sell/supply or will have at the time property is to pass (this is a condition): Niblett; Rowland. Title may be ‘fed’ if acquired after property passes but before breach is claimed (Patten v Thomas Motors) and parties may agree to transfer limited title only

* right to quiet possession (warranty only)

* goods will be free from charge or encumbrance (warranty only)

Conformity with description

s 18 GA, s 32H FTA, s 70 TPA) where:

* contract for the sale of goods

* by description (must be influential to sale and must relate to identity not just quality (Ashington Pig; Elder Smith)

* to consumer (FTA and TPA only)

In TPA need supply by corporation in course of business and auction sales are specifically excluded

Fitness for purpose

s 19(a) GA, s 32IA FTA, s 71(2) TPA

Implied condition goods will be fit for purpose at time property passes where:

* Particular purpose is made known (can be expressly or by implication (implied if obvious; eg kettle) and must enable S to exercise skill/judgment (Kendalll v Lillico; Ashington Piggeries)

* There is reliance (full or partial) on the seller’s skill and judgment; and

* Sold in the course of business (note differences in Acts, below); and

* (Goods Act only) not sold under trade name (this only applies where reference to trade name demonstrates no reliance on the seller’s skill and judgment)

Reliance

Goods Act makes it is a pre-requisite for the buyer to demonstrate they made the purpose known ‘so as to show that the buyer relies’ on S’s skill and judgment.

The FTA and TPA term is implied (if purpose made known) unless

(a) circumstances show that the consumer does not rely; or
(b) it is unreasonable for him to rely

on the seller’s skill and judgment

Demonstration of reliance can be express or implied. More likely to be implied where consumers are involved rather than when both customer and shopkeeper are equally knowledgeable: Kendall v Lillico; Ashington Piggeries

Course of business

Goods Act must be goods of a description which it is in the course of the seller’s business to supply  probably still covers sales of items that seller is willing to order and sell in his business o definitely covers goods of the type sold before: Ashington Piggeries FTA and TPA must be goods of a description which it is in the course of a business to supply - excludes private or irregular sales but otherwise covers most sales

Reasonably fit

Goods must be reasonably – not absolutely – fit for purpose (Cavalier Marketing and Barclay Oysters)

Merchantable Quality

Where supply of goods in the course of a business (not private sale) there is an implied condition goods are of merchantable quality (s 71(1) TPA; 32I FTA; 19(b) GA):

Does not apply in relation to defects:

(a) purchaser is aware of when supply is made; or

TPA: defects ‘specifically drawn to consumer’s attention before the contract is made’; FTA: defects purchaser is aware of at time of sale; GA: no specific reference but given excludability it is likely to be implied that it does not apply to such defects

(b) if goods have been examined, defects examination ought to have revealed

TPA: that examination (focus on actual examination undertaken); FTA: the examination (focus on actual examination undertaken); GA: such examination (focus on what a reasonable examination would have discovered – even if actual examination would not have: Thornett v Beers)

Merchantable quality

Fit for all normal purposes (having regard to price and other relevant circumstances): s 66(2) TPA; s 32I(2) FTA and Fit for any normal purpose: Kendall v Lillico

Extra Goods Act requirement: Goods must be bought by description from a seller dealing in goods of that description

Sale by sample

Where there is an express or implied term to the effect goods are supplied by reference to sample, (or under FTA supplier showed purchaser a sample and purchaser was induced by this) there is an implied condition (s 72 TPA; 32HA FTA; 20 GA):

* Bulk will correspond with sample in quality

* Consumer will have reasonable opportunity to compare bulk with sample; and

* Goods will be free from any defect rendering them unmerchantable that would not be apparent on reasonable examination (unless purchaser was aware of defects at time of purchase (FTA))

 

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