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Implied Warranty – Law Essay

The area of law with which this problem is associated with is the laws of consumer protection in unfair practices, specifically in the context of express and implied warranty in relation to the supply of services.

The Principles of the Law
According to Cordato, A (2006, p2.1) a valid contract is enforceable promises between two or more parties, binding them to carry out certain actions in writing or orally. Once the parties have fulfilled the components required of a contract then the terms in the agreement are binding regardless of the parties have read or understood the terms and clauses (Khoury D, Yamouni Y, 2003 pp 5.35). As illustrated in the case of L’Estrange v F Graucob Ltd [1934] 2 KB 394 where it was decided that a party not taking the trouble to read the document is bound by the terms of the contract, in this case, the exclusion clauses relieved the defendant from liability.

Terms and conditions can be in forms of express terms or implied terms that the parties involved are obliged to perform or act (Khoury D, Yamouni Y, 2003 pp 5.2). Express terms are considered in context first before implied terms because it is the actual terms stated by the parties involved. It must be incorporated in contracts by signature, by notice or by the course of dealing otherwise it will not form part of the agreement (Khoury D, Yamouni Y, 2003 pp 5.3). If the express terms are unseen prior to the agreement, as in the case of Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, the courts decision held that the exclusionary terms in the agreement could only be seen after the plaintiff parked his car in the parking station, were not to be part of the contract.

Likewise, exclusionary clauses are commonly expressed in contracts to exclude or limit one party’s liability for breach of a contract or negligence (Khoury D, Yamouni Y, 2003 pp 5.35). This is shown in Darlington Futures Ltd v Delco Aust Pty Ltd (HPH 708) when the High Court supported an exclusion clause which protected the defendant from liability from unauthorized transactions.

Implied Warranty for Services to Consumers
According to S74 of the Trade Practices Act 1974 (Cth) (TPA) it provides that ‘in every contract for the supply by a corporation, in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill’ and any term of a contract excluding or modifying that warranty is void. An example of S74 can be seen in the case of PNSL Berhad v The Owners of the Ship ‘Koumala’ [2007] QCA 429 when the Court decided that the implied warranty under S74 should be applied, in which overrode the pre-existing exclusion clause due to its lack of consistency.

1. A consumer in S4B of the TPA is defined as someone who ‘acquires goods or services for less than $40,000 (S 4B (2) a) or at any price if the goods or services are for the consumer’s personal, domestic or household use’. This was the case in Carpet Call Pty Ltd v Chan (1987) ATPR where the courts decided that ‘carpet’ would be classified under domestic consumption, even though it was purchased for commercial use (Latimer P, 2007, pp7-090).

2. An implied warranty is a statutory standard of quality terms normally not stated in contracts, but may be integrated into contracts by force of law involuntarily (Khoury D, Yamouni Y, 2003 pp 5.35).

3. Services under S74 (3) of the TPA does not include contracts for or in relation to transportation or storage of goods.

4. For breach of S74, innocent parties may sue for damages under S82 as in Commonwealth v Amann Aviation Pty Ltd at 82 where damages award can include a combination of losses that reflect different interests (Topic notes 9 pg 2)

Applying the Facts to the Law
Bill cannot argue that the exclusion clause is not incorporated as a term because he has signed the contract. Bill is the burden to the contract terms ‘by the fact that before the driver picked up the goods Bill signed ‘U-Will-B-Right’s’ Standard Transport Contract’ regardless whether he read the terms as in L’Estrange v F Graucob Ltd [1934] 2 KB 394. Nonetheless, if the terms were not in the contract, as in the case of Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 where it was decided that the terms were seen after the contract, then those terms would not form part of the contract.

Bill may argue that ‘U-Will-B-Right’s negligence resulted in the conduct on the fact that the truck driver was at fault because he was unfit to drive due to excessive consumption of caffeine and alcohol. This may put Clause 10 in effect and may waive “U-Will-B-Right Pty Ltd” free from liability for any damages to Bill’s belongings, “whomsoever the same may have been caused, nor for any consequential loss to the consignor or consignee” that is regardless of cause “U-Will-B-Right” will not be legally responsible.

On the contrary, in respect to the negligence by “U-Will-B-Right’s conduct, Bill can apply implied statutory warranty into the contract under S74 of the TPA where services to consumers are performed with appropriate care and skill. Then S74 will override clause 10 “U-Will-B-Right” may be liable for the damages as seen in the case of PNSL Berhad v The Owners of the Ship ‘Koumala’ [2007] QCA 429

In order for this implied warranty to be incorporated in the contract, despite an agreement between the parties. Bill must qualify as a consumer under S4 of the TPA since the goods in question belong to him for domestic use, similar to the Carpet Call Pty Ltd v Chan (1987) ATPR case as ‘carpets’ is used for consumer consumption.

On the other hand, Bill does not qualify for the implied warranty under S 74 (3) of the TPA because the ‘delivery of goods’ is part of transportation services that is not included in S74 of the TPA.

It is likely that Bill would fail an action against ‘U-Will-B-Right’ for the damages of the goods because he signed the contract agreeing to the expressed contractual terms such as clause 10 relieving ‘U-Will-B-Right’ from liability in the absence of the implied warranty in S74 of the TPA as in the Darlington Futures Ltd v Delco Aust Pty Ltd (HPH 708) case.