Principles of Business Law: Terms of a Contract

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Questions and Answers

What are generic terms in the context of business contracts?

Terms that apply to all contracts without exception.

Terms implied into particular classes or categories of contracts. (correct)

Terms that only apply to contracts involving goods.

Terms that must be expressly stated in all contracts.

Which of the following is an example of a contract that may contain implied generic terms?

A lease agreement. (correct)

An informal handshake contract.

A casual agreement between friends.

A verbal promise to return a favor.

In which case was it determined that there is no implied term requiring a doctor to act in the best interests of the patient?

Taylor v Edwards

Smith v Howard

Breen v Williams (correct)

Jones v Brown

What condition must be met for a term to be implied by common law into a contract?

The enjoyment of the rights under the contract would be undermined without it. Signup and view all the answers

What does the Goods Act 1958 (Vic) do regarding contracts of sale?

It implies specific terms into particular types of sales contracts. Signup and view all the answers

What was the primary issue in the Breen v Williams case?

Whether the doctor owed a duty to act in the best interests of the patient. Signup and view all the answers

Which of the following best describes the outcome of Breen v Williams?

The court ruled that a standard of due care and skill must be exercised. Signup and view all the answers

What role do statutory laws play in the context of implied terms in contracts?

They can introduce specific terms into certain types of contracts. Signup and view all the answers

What is an implied condition when goods are sold by description according to s 18 of the Goods Act?

The goods must match the description provided. Signup and view all the answers

In the case of Varley v Whipp, what was the breach related to?

The reaping machine did not correspond to the description given. Signup and view all the answers

What is implied when goods are bought by description and the seller deals in such goods, as per s 19(b)?

The goods will be of merchantable quality. Signup and view all the answers

What defines 'merchantable quality' according to the content?

Goods that can be sold for the same price even with known defects. Signup and view all the answers

Which buyer action can negate the implied term of merchantable quality under s 19(b)?

Examining the goods in a manner that ought to reveal defects. Signup and view all the answers

What was the primary legal issue in the Australian Knitting Mills v Grant case?

Whether the goods were of merchantable quality. Signup and view all the answers

Under s 61 of the Goods Act, what can parties do regarding implied terms?

They can exclude implied terms that would otherwise apply. Signup and view all the answers

What legal principle is established when goods are described as 'merchantable?'

They must be acceptable to a reasonable buyer under the same conditions. Signup and view all the answers

What characterizes goods as having 'merchantable quality'?

Goods are not of 'merchantable quality' if they are unusable for their normal purposes. Signup and view all the answers

In the case of David Jones v Willis, why were the shoes deemed not of 'merchantable quality'?

They broke after minimal use, failing to serve their intended purpose. Signup and view all the answers

What is implied when a sale is made by sample according to the Goods Act 1958 (Vic)?

The sample must correspond with the bulk of the goods and be free of substantial defects. Signup and view all the answers

Which condition must be fulfilled for the implied term as to suitability to apply under Section 19(a)?

The buyer should demonstrate reliance on the seller's expertise. Signup and view all the answers

If goods are labeled as having 'merchantable quality', what can be inferred about their performance?

They should meet the reasonable expectations for their category and use. Signup and view all the answers

What legal consequence arises if goods sold by sample do not match the sample in quality?

The buyer has the right to a refund or replacement. Signup and view all the answers

What aspect differentiates 'merchantable quality' from merely being in good condition?

Merchantable quality focuses on the intended use of the goods. Signup and view all the answers

What example illustrates a failure to meet the criteria for 'merchantable quality'?

Purchasing a refrigerator that does not cool. Signup and view all the answers

What does the informal expression 'there is nothing between this house and the north pole' imply about the house?

The house is vulnerable to strong winds and rain. Signup and view all the answers

What was EA's argument regarding the contract with WP?

The contract contained an implied term of suitability for purpose. Signup and view all the answers

According to the implied term in s19(a) of the Goods Act 1958 (Vic), what is essential for its application?

The buyer must indicate the purpose for the goods. Signup and view all the answers

What was revealed about the windows supplied by WP?

They leaked and were not suitable for harsh conditions. Signup and view all the answers

What does the proviso at the end of section 19(a) specify?

Implied conditions of fitness do not apply to goods under a trade name. Signup and view all the answers

In the case of Baldry v Marshall, what did M express about the car he wanted?

He wanted a car that was fast, manageable, comfortable, and suitable for touring. Signup and view all the answers

Which aspect was NOT considered in determining whether the implied term had been breached?

The cost of the windows provided. Signup and view all the answers

What is a necessary condition for a buyer to rely on an implied term under s19(a)?

The buyer must trust the seller's expertise. Signup and view all the answers

Study Notes

Implied Terms: Generic Terms

Generic terms refer to terms implied into specific classes of contracts, such as sales, leases, insurance, and doctor-patient agreements.
These terms can be implied through common law or statutory provisions, such as the Goods Act 1958 (Vic).

Generic Terms: Common Law

At common law, a term is implied if the enjoyment of the rights conferred by the contract would be rendered worthless without it.
The case Breen v Williams illustrates this principle, involving a dispute over medical record access.

Breen v Williams Overview

In this case, a doctor refused to provide medical records to a patient without indemnification.
The court ruled that while doctors must exercise due care and skill, there is no incorporated obligation to act solely in the best interest of the patient.

Generic Implied Terms: Legislation

The Goods Act 1958 (Vic) establishes implied terms in specific sales contracts.
Key sections of the Act include provisions for sales by description, sample, and fitness for purpose, along with allowances for exclusion.

Sale of Goods by Description (s 18)

Contracts selling goods by description include an implied condition that the goods must match the given description.
In Varley v Whipp, the court found that a reaping machine described as "nearly new" did not correspond with the actual item's condition, resulting in a breach of contract.

Sale of Goods: Merchantable Quality (s 19(b))

Goods sold by description imply a term of "merchantable quality," meaning they should be acceptable for sale and usable for their intended purpose, barring any defects known to the buyer.
The Australian Knitting Mills v Grant case highlighted that underwear causing dermatitis was still considered of merchantable quality due to general buyer behavior.

Examples of Merchantable Quality

In David Jones v Willis, shoes sold as "comfortable walking shoes" were deemed not of merchantable quality after they failed during normal use, leading to serious injury.
Goods not fit for their intended use fail the merchantable quality test.

Sale by Sample (s 20)

When goods are sold based on a sample, the contract implies that the goods must match the sample and be free from hidden defects which render them "unmerchantable."

Implied Term of Suitability (s 19(a))

When a buyer informs a seller of the intended use of goods and relies on the seller's expertise, there is an implied term that goods should be fit for that purpose.
The case Expo Aluminium v WR Pateman confirmed that despite informal language, sufficient indication of use and reliance on seller expertise justified the implied term.

Proviso on Fitness for Purpose

A proviso in section 19(a) states that no implied condition for fitness exists if goods are purchased by brand name and the buyer is not relying on seller judgment.
In Baldry v Marshall, a buyer's detailed specifications for a car were disregarded when the car was identified by make alone, limiting the seller's liability.

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Description

This quiz explores the implied terms and generic terms within various classes of contracts, focusing on the principles of business law. It delves into specific types of contracts such as sales, leases, insurance, and contractual relationships between professionals and their clients. Test your understanding of how these terms operate within the legal framework.