week 2 commercial law

7/18/2019 Week 2 Commercial Law

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Week 2 commercial law

Introduction to sales of goods

• Governed by the sales of goods act

o The goods act applies to contract of sale exixsts

o Property passes from seller to buyero For monetary consideration

• egulates a number of aspects of conduct associated with the supply of

goods and services including misleading or deceptive conduct!

unconscionable conduct and unfair contract terms"

#pplication of state and territory sale of good legislation

• $"2 in order for a sale of goods act to apply there must be

o # contract of sale

o %f goods

o #s a result of which property in the goods pass

o For a money consideration

• &ontract of sale

o $"' a contract for the sale of goods is de(ned as a contract whereby

the seller transfers or agrees to transfer the property in goods to

the buyer for a money consideration called the pricedo )oes not need to be in writing oral contracts

o *onetary consideration section +'

Fixed! if not (xed a reasoble price is needed

o Time of transaction is when the goods are transferred

o In agreement ofr sales the property of the goods is to be transferred

in the futureo %nce transferred the agreement to sell becomes a sale s,-,.

o )e(ning / agreement to sell 0 sale

• 1ale

o Property of good is transferred form the seller to the buyer at the

time of the transactiono Goods are all chattels personal that are in choses

• #greement for sale

o The property of the goods is to be transferred in the future or is

conditional s,-'.o %nce transferred the agreement to sell becomes a sale section $ -,.

under tehe goods act• Whether a contract is a sale or an agreement to sell aects the remedies

available where a breach occurso Where a contract is a contract of sale and property is passed to the

buyer if the buyer refuse to pay for tem they may be sued for the

price agreed to pay for the goods s34-+.o If the contact is an agreement to sell and the buyer defaults the

sellers remedy is damages! may or may not be the contracted price

s3+-+.

)ierent types of goods

• 1peci(co 5g mobile phone



• #scertained goods goods sold x bulk form a (xed source seller chooses

good transferred to buyer - unless contract states otherwise.o #scertained goods

• 6nascertained goods no speci(c de(ning in the goods act

o 5g grain or rice in a cycle

• Future goods goods manufactured or ac7uired by the seller after thecontract f sale is made! include god that are not yet made

o Goods to be manufactures after making the contract of sale s '

o # present sale of future goods constitutes an agreement to sell the

goods s 8

emedies sale

• 1eller can sue or recover the price s33

emedies for an agreement to sell

•

1eller can sue for damages only s3$

1peci(c goods

• #t the time of contract

• Identify of the goods

• 1ale needs to be distinguished for other transactions that may not be

covered by the sales of goods act

• # gifted goods will not constitute a sale because there is no moneyconsideration for the transfer of property in the goods

• Whether a barter or pure exchange of goods can be constituted a sale

depends upon whether the element of a 9price: can be made outo )id the parties agree on a money price

o ;alue the respective goods and transfer te goods

o If necessary making a cash ad<ustment one way=

• # contarct for work and incidental aterials is not a contarct of sale of goods

o It can be di>cult to distigush from the two

o Whether or not a sales of goods act applies depends on the

characterisations of the contarct a one of sales of goods

• #lthough the characterisation of a transaction will eect the realaionship

between the parties! it chould not aect the outcome where the goods are

defective

• ealation to contarcts for supply of services by a person to a consumero 1 $4 of the #&? provides that there is a garentee that the services

will be rendered with due care and skillso These contarcts may include contracts for work and materials

• Testso There are some dierences of views as to the tests to be applied in

determining whther the contract is for the sale of goods of for worko When unclear the court should decide the isure by having regard to

the 9substance of the contract



o The test re7uires the court to assess the relative importance of the

work done or the goods suppliedo )i>culties arise however! where all the work goes into producing

goods to be sold so that two comonents! the work don and the

goods suppled! are inseparable

o # dierent approach has been adopted in lee v gri>n

the courtheld that if a contarct results into a sale of a chattel! it shpuld be a

sale of gooso In robinson v graves at 3@ this test was 7ualifred by the reerene to

the substance of the contract oral cntarct to be one of work and

labour there for not need to ocomply with the writing re7uiremtns

• %ther examples includeo # contract to supply and install plant and e7uiptment to improve a

carrot processing plant was held to be a contarcts for work and

matrialso # contract to bild and install cocktail cabinents

o Th making of a set of dentures• Plianly enough the outcomes are hoghly dependent on the circumstance

Property

• )e(nsion to mean the general property in goods as opposed to

some special or limited interest for example such as the interest of

a bailee or a security interest s '-+.

• Property means in eect ownership

• The passing to property in goods being held on the basis of being

framed as the e7uitable or legal title

Goods

• Is de(ned to include all chattels personal other than things in action and

money and also include 9embelments: and things attached or to forming

pat of the land which are agreed to be served before sale or under the

contarct of sale s'-+.

• The term chattels originally ncluded physical ob<ects! the term now

includes not only physical ob<ects but also intangiblae choses such as

depts! rights of action ans patents

• 5mblemnts are crops of the soil which are annulaly produced by

agriculture labour! this does not include things growing naturally on land

)ierent categories of goods

)iernent good mena dierent remidies

• 1peci(c goods

• 6nascertained goods

• #scertained goods

• Future goods

The signi(cance of the proper classi(cation of goods

Price



• The goods must be transferred for a money consideration called the price

• The price can be determined in accordance with th methods prescribed in

s ++o 1++ provides that the price in a contaract of sale may me be (xed

by the contarct or may be left to be (ed in a manner thereby agreed

or may be determined by the course of dealig between the partieso When the price is not determined in accordance with s++-+. the

buyer must pay a reasonable priceo What is a reasonable price is a 7uestion of fact dependent on the

circumstance of each particular case

Performance of the contract

• It is the duty of the seller to deliver the goods and of the buyer to accept

and pay for them in accordance with the terms odf the contarct of sale s

2A

• 6nless the parties have agreed otherwise! ths obligatios are concurrent in

so far as the seller must be ready and willing to giv possesio of the goods

to the buyer in exchange for the price and vice versa s '4

• The act sets out a number of general rules as to the delivery ss'+!'A

• There are also special rules which apply in relation to delivery to a carrier s

',

General rules of delivery

• The geral rules are as follows

o Whether it is for the buyer to tale possession of the goods or for the

seller to send them to the buyer is a 7uestion deendng in each case

on he contarct! express or implied between the partieso If no agreemt the place of deleviery is the sellers place of vusiness

o Where the contarct s made then that place is the place of delivery

o

1pecial rules of delivery relating to carriers

6nconscionable conduct

• I theory! agreements as entered into following informed negotiationsbetween parties of e7ual or similar bargaining power

• ealty parties are often not e7ual in bargaining power of information

giving one party an advantage over the other party

• Is not de(ned in the #?&

• In asic v ne conduct that attracts su>cient critism form <udges to

support the curt granting e7uitable relif in the e7uitable

• Boomley v ryan kitto <

&ourt can set aside a transaction where

%ne party to a transaction is at a special disadvantage in

dealing with the other party Illness

Ignorance



Inexperience

Impaired faculties

Financial need

%ther circumstances aecting ability to conserve your own

interests

The other party unconscientiously takes advantage of theopportunity

• ;ery broad provision

• #pplies to business to business transaction! consumer! any type of

transaction for the supplying of goods

5lements

+" %ne party !u be under a special disadvantage2" There must be an absence of any reasonable degree of e7uality between

the parties

'" The other party must exploit that special disadvantage in a manner that isregarded as unconscionable

o Louth v Diprose -+AA2. +@3 &? $2+

o )iprose C 1olicitor infatuated with a &arol ?outh whom he met in Tasmania"

?outh was indierent" De provided her with numerous gifts and at one

time proposed however she refused" In one of the trials! the <udge stated

his willingness to devote himself to her and to lavish her with gifts!

notwithstanding that she did not return his love! is 7uite pathetic" T he

degree of his emotional dependence upon her and his susceptibility to her

wishes is obvious on the evidence and was obvious to her": ?outh later

informed )iprose she was depressed and was going to be evicted from her

home -owned by her soon to be ex brother in law. and if this happenedshall commit suicide" This was mostly incorrect" )isprose purchased a

house but her and her insistence! placed in her name" Three years later

the relationship deteriorated and )iprose re7uested ?outh transfer the

house back into his name" 1he refused" It was held ?outh manufactured

an 9atmosphere of crisis 9 which did not really exist" )iprose:s purchase of

the house was 9explicable only on the footing that he was so emotionally

dependent upon! an inEuenced by ?outh! as to disregard entirely his own

interests": ?outh:s conduct was unconscionable calculated to induce an

actually introducing an improvident transaction conferring a bene(t upon

her" ?outh was unsuccessful in overturning the original decision"

#ustralian consumer law of unconscionable conduct

• section 24 # persons must not in trade or commerce engage in conduct

that is uncon conduct with the meaning of the unwritten law from time

to time this section does not apply to the conduct that is prohibited

• 1ection 2+ has its origins in section 3+#B of TP#

• General duty to trade fairly with consumers by establishing a norm of

conduct prohibiting unconscionable conduct C supply of goods and

services

• 1ection 22 provides considerations a &ourt may have regard to! for the

purpose of determining if a corporation has engaged in unconscionableconduct



+. 1ection 22 C considerations a &ourt may have regard to for the

purpose of determining if a corporation has engaged in

unconscionable conduct2. elevant strengths of bargaining positions of the parties'. Whether consumers are re7uired to comply with conditions not

reasonably necessary to protect a supplier:s legitimate interests,. If the consumer can understand the documentation3. Whether undue inEuence or pressure exerted or unfair tactics used$. The price for alternative! identical or e7uivalent goods or services

Remedies

If found in breach of Part 22 -unconscionable conduct sections.! civil pecuniary

penalties apply and are set out in section 22, of the #&?

1ection 2, C if a court is satis(ed a body corporate or person is in breach of Part

22 it may order that party to to pay a civil pecuniary penalty of up toH

+"+m for a body corporate

224!444 for other persons

6ndertakings -s22,.

1ubstantiation notices -s2+A.

Public warning notices -s22'.

Infringement notices -s+',#! &&#.

In<unctions -s2'2.

)amages -s2'$.

&ompensatory orders -s2'@.

%rders for nonparty consumers -s2'A.

Jonpunitive orders -s2,$.

#dverse publicity orders -s2,@.

%rders dis7ualifying a person from managing corporations -s2,8.

%rders for the preservation of property -&&#! s+'@F.

Commercial Bank of Australia v Amadio (1983)

Facts

• The #madios: son and the bank asked the #madios to provide a guarantee

by executing a mortgage over their property in order to secure the son:s

company:s overdraft" The bank was aware at the time of the re7uest the

son:s company was in (nancial di>culty and had been selectively

dishonouring che7ues prior to the re7uest

• The #madios were elderly! not Euent in 5nglish! had limited formal

education and limited command of written english! inexperienced incommercial matters and highly dependent on their son



• The son informed his parents that the mortgage was limited to 34!444

and was only for a period of $ months when in reality the mortgage was

unlimited

• #t the time of signing the mortgage! the #madios believed their son:s

business was Eourishing and only temporarily in need of funds"

• The manager of the bank had knowledge of these circumstances and still

secured their signature

• The company went into li7uidation and the bank sought to enforce the

mortgage

• The bank succeeded in the (rst instance but lost on appeal to the 1outh

#ustralian Full &ourt" The bank appealed to the Digh &ourt"

%utcome

• #ll three elements of unconscionable conduct were presentH

1pecial disadvantage C The #madios were elderly! had poor 5nglish!

commercially inexperienced and highly dependent on their son

1pecial disadvantage known by other party C The bank manager

was well aware of the #madios: circumstances and their son:s

predicament C should have informed them of state of the business

to enable the #madios to make their own

<udgement call and to seek independent legal advice

The #madios were taken advantage of unconscientiously

Kakavas v Crown Melbourne imited (!"13)

Facts

• Kakavas lost 24"3 million at &rown playing baccarat from Lune 2443 to

#ugust 244$

• De sought to recover these losses from &rown on the basis that &rown had

enticed him! a well known gambler to the casino by various incentives

unconscionable conduct -s3+## of the Trade Practices #ct! now replaced

by s24 of the #&? C s24 is on substantially the same terms.

•

Kakavas was professionally diagnosed with a pathological gamblingaddiction! later a psychologist reported he had overcome his addiction was

now a recreational gambler

• #t one point &rown withdrew his licence to enter &rown premises as he

had been charged with armed robbery C those charges were later

dismissed

• &rown formally restored his licence to enter &rown in 2443"

• De claimed &rown exploited his abnormal and pathological interest in

gambling by luring him to gamble through incentives such as rebates on

losses! free accommodation and the use of the company:s private <et%utcome



• # full bench of the Digh &ourt unanimously re<ected the claim

• #lthough Kakavas had a gambling problem! he was able to choose the

times at which he would gamble! the amounts he wagered and refrain

from gambling when he wanted to

• Therefore! he did not have a special disadvantage

• #dditionally the &ourt found that &rown:s incentives were only to

accommodate the 9risky business: its highrolling client liked to engage in

ACCC v u# $istributors %t& td (!"13)

Facts

• ?ux used a standard selling method C telephone call from one of its

representatives to a randomly selected customer from their database or a

telephone directory

• The representatives were given a script to follow during the call

• &onsumers were oered to have a Mfree maintenance checkN done on their

vacuum cleaner at their home by a ?ux representative

• The consumers were unaware that ?ux:s intention was to attempt to sell a

new ?ux vacuum cleaner

• The representatives were not 7uali(ed or e7uipped to conduct anything

more than a cursory maintenance check

• The elderly women they visited agreed to purchase a new vacuum cleaner

at a price of +!AAA or more%utcome

• ?ux had failed to meet societal norms which re7uired honest and fair

conduct free of deception by failing to disclose their primary ob<ective of

attempting to sell a vacuum cleaner by oering Mfree maintenance checkN

• The women were subtly pressured by ?ux by remaining in their homes for

a long period of time -+"3 C 2 hours." This was considered a pressure sale

tactic as the representatives did not disclose their primary ob<ective to the

women

• Bargaining strength was created through entering and remaining insomeone:s home which was obtained through deception

• The cooling o period Mdoes not ameliorate or lessen what has gone

beforeN

'nfair %ractices arassment and Coercion

1ection 34 Part '+ #&?

-+. # person must not use physical force! undue harassment or coercion! in

connection withH

a. The supply or possible supply of goods or services or



b. The payment for goods or services or

c. The sale or grant! or the possible sale or grant! of an interest

in land or

d. The payment for an interest in land"

-2. 1ubsections -+.-c. and -d. do not aect the application of any other

provision of Part 2+ or Part '+ in relation to the supply or ac7uisition! or

the possible supply or ac7uisition of interests in land"

'*+A,R -.RM/

1ection 2'

-+. # term of a consumer contract is void ifH

-a. The term is unfair and

-b. The contract is a standard form contract-2. The contract will continue to bind the parties if it is capable of operation

without the unfair term"

-'. # &onsumer &ontract! is a contract for the supply of goods or services or a

sale or grant of an interest in land! to an individual whose ac7uisition of the

goods! services or interest is wholly or predominantly for personal! domestic or

household use or consumption

1ection 2,

)e(nition

-+. # term of a consumer contract is unfair ifH

a. It would cause a signi(cant imbalance to the parties: rights

and obligations arising under the contract and

b. it is not reasonabl& necessar& in order to protect the

le0itimate interests of the party who would be advantaged

by the term and

c. it would cause detriment -whether (nancial or otherwise. to

a party if it were to be applied or relied on"

All tree limbs must be satis2ed for a term to be unfair4

&onsiderations s2,-2.

When determining whether term is unfair under s2,-+. a court may have regard

to any matters it think are relevant! but must considerH

-a. The extent to which the term is transparent

-b. The contract as a whole

&ontract as a whole

# term may seem unfair when read on its own! however! it may be reasonablewhen read with other terms in the contract



Transparency s2,-'. #?&

o 5xpressed in reasonably plain language

o ?egible

o eadily available to ay party aected by the term

o Presented clearly

1ection 2, C ebuttal presumption

-,. For the purposes of section 2, -+. -b.! the term of a consumer contract is

presumed not to be reasonably necessary in order to protect the

legitimate interests of the party who would be advantaged by the term!

unless that party proves otherwise

1ection 23 C 5xamples of terms that may be unfair

o avoid or limit performance of the contract

o terminate the contract

o Penalise for a breach or termination of the contracto vary the terms of the contract

o renew or not renew the contract

o vary the upfront price payable under the contract without the other party

being able to terminate the contract

%rescri5tion of terms

1ection 23-2. providesH

Before the GovernorGeneral makes a regulation for the purposes of subsection

-+.-n. prescribing a kind of term! or a kind of eect that a term has! the *inister

must take into considerationH

-a. The detriment that a term of that kind would cause to consumers

and

-b. The impact the impact on business generally of prescribing that

kind of term or eect and

-c. The public interest"

1tandard from of cotarct factors

o Barginig power

o preparation of a ctarcto %pportunity to negotiate

o Terms of the contacrt

o #ny other matter prescribed by the regulators

Rebuttable 5resum5tion section !6 (1)

If a party to a proceeding alleges that a contract is a standard form

contract! it is presumed to be a standard form contract unless another

party to the proceeding proves otherwise

The following factors must be considered by the court in deciding whether a

contract is a standard form contract [email protected]



a. does one of the parties has all or most of the bargaining

power relating to the transaction

b. was the contract prepared by one party before any discussion

relating to the transaction occurred between the parties

o The following factors must be considered by the court in deciding whethera contract is a standard form contract [email protected]

o c. Was one party! in eect! re7uired to either accept or re<ect the

terms of the contract in the form in which they were presented

o d. Was one party given an eective opportunity to negotiate the terms

of the contract

o e. )id the terms of the contract take into amount the speci(c

characteristics of another party or the particular transaction

o

f. #ny other matter prescribed by the regulations

.7ect of term bein0 unfair

%nly terms in a standard form contract can be rendered void by s2'-+.-b.

# void term cannot create rights or impose obligations on either of the

contracting parties

Whether a contract is a standard form contract is a 7uestion of fact C

rebuttal presumption s2@-s.

-erms e#cluded

It is provided by s2$ that s2' does not apply to a term to the extent! but only to

the extent! that the termH

-a. )e(nes the main sub<ect of the contract or

-b. 1ets the upfront price payable under the contract or

-c. Is a term re7uired! or expressly permitted! by a law of the &ommonwealth!

a 1tate or Territory

+A/. or misleadin0 re5resentation/

Re5resentations about 0oods and services 1tandard! 7uality! value! grade or composition of goods s2A-+.-a.

False or misleading representations that goods are of a particular

standard! 7uality! value! grade composition! style or model

&redence claims s2A-+.-a.

epresentation of a premium or special characteristic about a

product e"g" Mfree range eggsN

1tandard! 7uality! value or grade C services s2A-+.-b.



False or misleading representation about a service:s standard!

7uality! value or grade

epresenting that goods are new s2A-+.-c.

False or misleading endorsements! testimonials or performance claims

.ndorsement s!9(1)(d) () C prohibition of dierent forms of

conduct which may result in a false or a misleading statement about

an endorsement

-estimonials s!9(1) C False or misleading representation that

purports to be a testimonial by any person relating to goods or

services! or making a false or misleading representation concerning

a testimonial by any person or a representation that purports to be

such a testimonial

%erformance claim s!9(1)(0) C False or misleading

representation regarding performance characteristics! accessories!uses or bene(ts of goods or services

Price s2A-+.-i.

Price C Ma charge of any descriptionN s2-+.

False or misleading representation in regards to the price of goods

or services

Twoprice advertising

&ompany:s previous pricing C products must be sold at the speci(edprevious price for a reasonable period of time before the

commencement of the sale

9&ost: or wholesale price

&ompetitor:s price

ecommended retail price -P.

epairs and spare parts s2A-+.-<.

False or misleading representation concerning the availability of

facilities for the repair of goods! or of spare parts for goods

Place of origin claims s2A-+.-k.

False or misleading representation concerning the place of origin of

goods

# representation about the place of origins of goods may constitute

a representation as to the past history of the goods therefore s2A-+.

-a. can become relevant

Part '3 #&? provides defences for these claims

&laims about the need for goods or services s2A-+.-l.



False or misleading representation concerning the need for any

goods or services

*ust be in relation to goods or services where the <udgement of a

specialist expertise is re7uired e"g" motor services

Warranties! rights and remedies s2A-+.-m.

False or misleading representation concerning the existence!

exclusion or eect of any condition! warranty! guarantee! right or

remedy

*isrepresenting the existence of eect of a condition

Reuirement to 5a& for a contractual ri0t

False or misleading representations in trade or commerce concerning a

re7uirement to pay for a contractual right thatH

-+. Is wholly or partly e7uivalent to any condition! warranty! guarantee! right

or remedy -including a guarantee under )iv + of Pt '2. and

-2. # person has under a law of the &ommonwealth! a 1tate or a Territory

-other than an unwritten law.

will contravene s2A-+.-n. of the #&?

Misleadin0 conduct concernin0 land s3"

-+.# person must not! in trade or commerce! in connection with the sale or grant!

or the possible sale or grant! of an interest in land or in connection with the

promotion by any means of the sale or grant of an interest in landH

-a. *ake a false or misleading representation that the person making the

representation has a sponsorship! approval or a>liation or

-b. *ake a false or misleading representation concerning the nature of the

interest in the land or

-c. *ake a false or misleading representation concerning the price payable for

the land or

-d. *ake a false or misleading representation concerning the location of the

land or

-e. *ake a false or misleading representation concerning the use to which the

land is capable of being put or may lawfully be put or

-f. *ake a false or misleading representation concerning the existence or

availability of facilities associated with the land

False or misleading representation in regards to landH

-a. *ake a false or misleading representation that the person making the

representation has a sponsorship! approval or a>liation or

-b. Jature of the interest in the land or

-c. Price payable for the land or



-d. The location of the land or

-e. The use to which the land is capable of being put or may lawfully be put

or

-f. The existence or availability of facilities associated with the land

Interest

Both legal and e7uitable estates and interests! as well as rights! powers or

privileges over or in connection with the landH s2-2.

Misleadin0 conduct concernin0 em5lo&ment o55ortunities s31

# person must not! in relation to employment that is to be! or may be! oered by

the person or by another person! engage in conduct that is liable to mislead

persons seeking the employment as toH

-a. The availability! nature! terms or conditions of the employment or

-b. #ny other matter relating to the employment

Misleadin0 conduct concernin0 te nature of 0oods s33

# person must not! in trade or commerce! engage in conduct that is liable to

mislead the public as to the nature! the characteristics! the suitability for their

purpose or the 7uantity of any goods"

Misleadin0 conduct concernin0 te nature of services s3:

# person must not! in trade or commerce! engage in conduct that is liable tomislead the public as to the nature! the characteristics! the suitability for their

purpose or the 7uantity of any services"

Misleadin0 conduct concernin0 business o55ortunities s36

&ontains two prohibitionsH

False or misleading representation about a business activity that the

representee is invited to participate in by making investments

therein! or performing work

False or misleading representation about a business activity to be

conducted from home

&ommission arrangements are regulated by s'@-2.

,nsurance

)e(nition

Payment of a premium to an insurer by the insured! on the basis

that should an identi(ed event occur! where the occurrence of that

event is uncertain! the insurer will make a payment back to the

insured5ssential re7uirements



o &onsideration

o 6nceratitiy is to the occurance of the speci(ed event

o Person who has the bene(t of the insurance must have an insurable

interesto # duty of utmost good faith

o ?egal obligation on the parties to the contract to reveal to the otherparties any and all information that might inEuence the other

party:s decision to enter into the insurance contract and this

obligation to reveal all relevant information aecting the policy

continues throughout the policy termo 1tatutory in nature set out in s+' of the Insurance &ontracts #ct

+A8, -&th.o 5xceptionsH

o einsurance contracts

o Dealth insurance contracts

o Insurance contracts entered into by friendly society

o *arine insurance contracts ando Workers compensation contracts

&ategories of insurance

+. Indemnity insurance2. Jonindemity insurance

egulatory bodies

General Insurance eform #ct 244+

1ubstantially amended the Insurance #ct introduced in +A@'

egulates the conduct of general insurers

?ife Insurance #ct +AA3

egulates the conduct of life insurance

#ustralian 1ecurities O Interests &ommission -#1I&.

egulates insurance brokers and intermediaries under laws set out in parts @"$ to

@"A of the &orporations #ct 244+ -&th

#ustralian Prudential egulation #uthority -#P#.

5stablished in +AA8 to ensure bodies in the (nancial sector follow the

&ommonwealth laws set out in the #cts mentioned previously

)evelop their own administrative practices and procedures to be applied

when performing the regulatory role

oles of #P#

+" egulation of the (nance industry

Includes the insurance industry

Balancing the following ob<ectivesH Financial safety and e>ciency



&ompetition

1tability and

&ompetitive neutrality

2" #dvisory role to the Federal Government *inister

If #P# becomes aware that a body it regulates is having (nancial

di>culties! #P# has a speci(c obligation to inform the minister as soon as

practicable

'" Prudential standards for insurers

Prudential standards are standards that the insurers must meet on issues

such as capital ade7uacy re7uirements! which sets the limit general

insurers must meetH

For holding ade7uate li7uid funds and appropriate types of assets to

meet their potential claim obligations

isk *anagement

Governance

einsurance re7uirements

#udit re7uirements

*atters enabling actuaries to perform their role

," Investigations into insurers

#P# has broad powers and can compel general insurers! auditors and

actuaries who act for general insurers to provide them with various types

of information on re7uest

If #P# becomes aware that a body it regulates is having (nancial

di>culties! #P# has a speci(c obligation to inform the minister as soon as

practicable

#ustralian privicy principles

1et out in Privacy #ct +A88 -&th.

&ompliance re7uired for general insurers with a turnover of more than '

million per annum

#ssignment

Assi0nor

o %wner of Property being transferred

Assi0nee

o Person to whom the property is being transferred to

%ro5ert&



All property can be assigned

eal property

Freehold land and the structures a>xed to it

Personal property #nything other than real property that can be owned

It covers any right or interest in property that can be moved

Cattels

&hattels real

#ssociated with real estate but is not real property C eg leasehold interest

&hattels personal

Things you can touch and see tangible physical items

#lso covers intangible items such as interests in debts! shares! intellectual

property rights! rights under a trust and rights under contracts

Coses

Means “Things”

&hoses in Possession

# tangible ob<ect in one:s physical possession

&an be visually inspected and evidence of transfer of physical possessionis easy to determine

&hoses in #ction

&overs everything that is no a chose in possession Intangible property

%riginally created to cover a right against a particular individual such as a

debt

5ective transfer of the legal andor e7uitable rights of a chose in action is

dependent on drafting eecting the assignment

.#am5les of Coses in Action

The bene(t of contracts

Intellectual property rights

Insurance policies

1hares in companies and the rights associated with them

ights of bene(ciaries under trusts

The right to sue under torts! breaches of contract! and under legislation

such as the &ompetition and &onsumer ?aw and &orporations #ct



-ransferabilit&

1ome choses in action are not transferable or can only be transferred

through prescribed procedures

*ay not be transferable whereH

The contract giving rise to the chose in action is silent on assignment or

5xpressly states it is not assignable

.#am5le of a 5rescribed 5rocedure

1hares in a company

1hareholders having signed a shareholders agreement

1hareholders agreement contains procedures followed to eect the

transfer of those shares

%ractical .nforceabilit&

Whether or not the assignee will have the ability to enforce the chose in

action following assignment without involving the assignor

)oes the assignee have the capacity to enforce the rights transferred without the

involvement of the assignor=

Assi0nment of a Cose in Action

The assignor cannot unilaterally transfer its obligations and contract out of

the right held by a third party

Therefore

#n assignee receives an assignment sub<ect to the e7uitable rights any

parties may have against the assignor

Consent of %arties

)eed of Jovation

e7uires the consent of all parties to the original contract and the new

party

#ssignment

*ay not re7uire the consent of all the parties

;en to 5re5are

)eed of Jovation

%ne party wants to assign both its obli0ations and ri0ts under the

contract to a third party

Brings the original contract to an end and creates a new contract between

the parties! where the assignee steps into the shoes of the assignor and

the assignor is released from all obligations it owes under the originalcontract



+. There must be clause in the contract between # and B that allows # to

assign its rights and obligations under the contract

2. & will re7uire # to assign its rights and obligations under the contract with

B to &

'. This will then allow & to take over the supply of goods to B

,. # will then be released from all future obligations under the existing

contract with B as it will no longer have any involvement in the business

#ssignment

Where the party assigning their ri0ts will continue performing their

obligations under the original contract but want to dispose of some or all

of their rights under the original contract to a third party

Assi0nment Clauses

&ontracts often contain an assignment clause but it may be 7uali(ed re7uiring # to obtain B:s prior written consent before it can assign

&ontracts may also speci(cally prohibit the assignment of rights and

obligations

Personal services contract

&ontracts that do not have an assignment clause

Jo clauses dealing with the right of assignment

Jo prohibitions on # from assigning its rights and obligations to & so the

rights could be assigned without seeking the consent of B

Dowever! # would still re7uire the consent of B to an assignment of rights

and obligations

Assi0nments under /tatutes

Property ?aw #ct +A38 -;ictoria.

s+', C the assignment of an existing debt or legal chose in action must be

in writing and express notice given to the person liable for the debt or

legal chose in action

%n the date of the notice! the assignment will eect the transfer ofH

The legal rights to the assignee

#ll legal and e7uitable remedies available to the assignor for the

debt or legal chose in action to the assignee and

The power to discharge the debt or legal chose in action without the

agreement of the assignor

Consideration is not reuired if transferrin0 under tis section

<uarantees



)e(nition

# contract that creates an obligation on the Guarantor to satisfy

liability owed by another party to a third person

# collateral contract where one party agrees to answer the debt!

default or miscarriage of another! who is or is contemplated tobecome liable to a third party to whom the guarantee is givenH

*ason &L! Sunbird Plaza Pty Ltd v Maloney -+A88. @@ #? 243"

# contract that creates an obligation on the guarantor to satisfy

liability owed by another person to a third person

The Guarantor:s obligations under the guarantee areH

&onsidered to be a secondary obligation ancillary and based upon

the Principal )ebtor:s present or future liability

)ependent on the continued existence and enforceability of thePrincipal )ebtor:s obligation to be the Guarantor C In *c)onalds

&ase Lustice 1tarke described this concept as the essence of the

guarantor:s obligation C without a primary obligation C there is no

guarantee

%bligation under the guarantee ends when principal obligation is

extinguished or no longer exists

?iability of the Guarantor and the Principal )ebtor must be

coextensiveH Yeoman Credit Ltd v Latter Q+A$+R + W? 828

The Guarantor will not be held liable if the principal debtor:s obligation has beenH

)ischarged

1igni(cantly changed

%

%therwise has come to an end

If you are acting for a &reditor C include in the guaranteeH

Guarantors obligations do not come to an end where the principal

debtor becomesH Bankrupt

Wound up -li7uidation.

Placed into receivership or administration

5nters into a scheme of arrangement with its &reditors

week 2 commercial law

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