I. AN UPDATED ACT
2.1 In the context of commercial contracts, the Commission has decided that there should be a review of the Sale of Goods Act with a view to updating the Act rather than to preparing a totally new Act. Nevertheless, it is important that any areas of concern to commercial buyers and sellers be brought to the attention of the Commission if they are not referred to in this Paper.
2.2 Although the present Act can be subjected to quite a few criticisms, it has on the whole worked well in the commercial sphere and, to avoid the risk of interfering with established commercial practices and expectations, it is appropriate to adopt a fairly cautious approach. As social and economic conditions have changed since the nineteenth century the Act must change. Because this process will continue so the Act will, in time, need to be amended further. In this way a new Act will evolve naturally.
2.3 The problems of commercial sale of goods contracts can be divided into general law problems and specific problems of the Act. A useful model for amendment to the New South Wales Act in both areas is Article 2 of the Uniform Commercial Code (USA).1 Extracts from the Uniform Commercial Code (“the UCC”) have been reproduced as an Appendix to this Paper.
II. GENERAL LAW PROBLEMS
A. Introduction
2.4 The general law of contract affects sale of goods law in variety of ways, but it is worth pointing out that throughout the first half of the twentieth century the Sale of Goods Act 1893 (UK) was regarded as a fair summary of the general law of contract as it affects matters dealt with in the Act. Thus, until recently, the NSW Act of 1923 (which was virtually identical with the English Act of 1893) was frequently treated as a guide to the general law. Recently, however, the courts have struggled to keep sale of goods law in tune with general law developments. These developments have caused some of the problems encountered with the Act now. Other problems arise because some areas of the general law, such as offer and acceptance, are not dealt with at all in the Act. Finally, some areas of the general law of contract which are not regarded as entirely satisfactory, for example privity of contract, may also affect the rights and liabilities of parties to a sale of goods contract.
B. Equitable Principles
2.5 At present it is not clear whether equitable principles can be applied to sale of goods contracts. The specific problem of misrepresentation was dealt with in our recent Report.2 The wider problem can, in our view, be expressed very simply in terms of the issue of codification. The debate on whether equitable principles apply arises principally because s4(2) of the Act expressly saves the rules of the “common law". If, as suggested earlier,3 it is neither accurate nor appropriate to treat the Act as a codification, it is clear that the meaning of this expression in s4(2) must be addressed.4 We deal later5 with one specific problem of equitable intervention and would welcome views on any other aspects of equitable principles which create problems. In particular we would value reactions from the commercial and legal communities to the opinion of Lord Brandon in Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd 6 that the Act does not allow for the creation or existence of equitable interests within the confines of an ordinary contract of sale. Assuming the correctness of this interpretation, should the Act be amended so that such interests are created?
C. Offer and Acceptance
2.6 Part II of the Act purports to deal with formation of the contract but makes no reference to the principles of offer and acceptance. The Act was clearly drafted on the assumption that the general law would be applied. The question which arises is whether it would be beneficial to state the basic rules of offer and acceptance in the Act.
2.7 The UCC adopts a slightly different approach. Section 2-204(1), which is wider than s8 of the Sale of Goods Act, provides that a contract may be made in any manner sufficient to show agreement. Section 2-204(2) states that it is no obstacle to formation that the moment of the contract’s making is indefinite; and s2-204(3) states, in effect, that a contract is not void for uncertainty, if one or more terms are left out, provided the parties intended to make a contract and the court can give an appropriate remedy. Section 2-205 is in that it makes a “firm offer” not supported by consideration enforceable, something not permitted under New South Wales law but frequently advocated by academic writers. What should constitute a “firm offer” may be debated, but the Commission favours the concept of a clear and unambiguous statement, in writing.
2.8 Section 2-206 of the UCC states particular rules of offer and acceptance. Section 2-206(1) contains nothing remarkable, but it does serve to avoid uncertainty by stating, in essence, that where an offer or does not specify a mode of acceptance, acceptance may take place by any reasonable medium and that an offer to buy goods for prompt shipment invites acceptance by prompt shipment or the promise thereof. On the other hand, it is not clear to us that s2-206(2) is suitable for adoption. It provides that where acceptance may take place by beginning a requested performance, the offeree must notify the offeror of that acceptance. Section 2-207 deals with the problem of an acceptance containing additional terms. The existence of additional terms does not vitiate the acceptance, unless conditional on assent to the additional terms. Section 2-207(2) states that the additional terms are to be construed as proposals for addition to the contract, and are to become part of the contract, unless the offer expressly limits acceptance to the terms of the offer, or the additional terms materially alter the contract or the offeror gives notice of objection to the terms. A provision similar to s2-207(3) would be a useful addition to s8 of the Act. It provides that where a contract is recognised by the conduct of the parties its terms are those “on which the writings of the parties agree”.
2.9 A related problem is whether variation should be effective even though not supported by consideration. In most cases consideration will be present, but if one party has promised to do no more than he or she is already contractually bound to do, the variation would not be supported by consideration. As between commercial buyers and sellers, this technical restriction does more harm than good. This is dealt with in s2-209 of the UCC by providing that, subject to certain qualifications, consideration is not necessary. We see no reason why a variation to which both parties have agreed should not be enforceable.
2.10 The United Nations Convention on Contracts for the International Sale of Goods came into force on January 1, 1988.7 The Standing Committee of Attorneys General decided in 1984 that Australia would ratify the Convention once all States and Territories passed legislation to give effect to the Convention.8 Australia acceded to the Convention on 17 March 1988. The enabling legislation in New South Wales is the Sale of Goods (Vienna Convention) Act 1986. Section 2(2) provides that the provisions of the Act shall commence once the Convention enters into force in respect of Australia. The Convention contains more detail on formation than does the Sale of Goods Act. Although the provisions for the international sale of goods do not correspond exactly -to the general domestic law of contract in New South Wales, their existence provides further reason for the introduction of provisions on formation into the Act. Again we would draw particular attention to the status of offers not supported by consideration.9
D. Privity
2.11 A person who is not a party to a contract cannot enforce it. Thus, if A enters . into a sale of goods contract with B under terms requiring A to deliver the goods to C, a failure of A to deliver the goods, or the delivery of inferior goods, does not provide C with any claim in contract against A, unless B is an agent for C. Nor can the parties to a contract subject an outsider to a burden. For example, a seller (A) and buyer (B) cannot impose on C an obligation to guarantee B’s performance of the contract between A and B.
2.12 Although the privity rule is a basic tenet of the law of contract, nowadays it is only thought useful where it precludes the imposition of a burden on a person who is not party to the contract. Commentators,10 the courts,11 and law reform bodies have all criticised both the rule and its exceptions. This Commission made tentative suggestions for its modification in its Working Paper on Sale of Goods.12 It might be argued that amendment of the rule is better left for consideration during reform of the general law of contract rather than during a review of sale of goods law. In Western Australia and Queensland such general reform has occurred.13 On the other hand, there are examples of legislative modification in relation to some specific contracts14 and Part V, Division 2A of the Trade Practices Act 1974 (Cth) already affects the operation of the privity rule in relation to certain sale of goods transactions.15 On occasions, the courts have seen these legislative reforms as justification for the creation of further common law exceptions.16
2.13 Another example is provided by s2-318 of the UCC which modifies the privity rule in a way which allows members of a buyer’s household to take advantage of a seller’s warranty. While this is a consumer protection provision,17 it serves as a useful example of a method of overcoming limitations of the privity rule. The Commission has tentatively formed the view that there should be amendment to the impact of the rule on third party beneficiaries in the commercial context. The Commission invites views on the form and scope of any such amendment.
E. Representation vs Term
2.14 A statement of fact (whether made by a buyer or seller) which induces the contract is not a term of the contract unless the parties expressly or impliedly agree to it. Express agreement is signified by inclusion of the term in a contractual document. It must be shown that the maker of the statement intended to guarantee its truth before a statement of fact will be implied by the court. The difficulty of providing satisfactory proof of that intention is well illustrated by cases such as Ross v Allis-Chalmers Australia Pty Ltd.18
2.I5 The distinction between representations and terms has become less important since the passage of s52 of the Trade Practices Act 1974 (Cth) and s42 of the Fair Trading Act 1987 (NSW), which is in the same terms as s52. The effect of these provisions is to provide a right to damages for a false representation which is misleading or deceptive or likely to mislead or deceive, although not necessarily fraudulent. The damages are assessed, it would seem, on a tortious (rather than contractual) basis.19
2.16 Three questions arise. First, should the distinction between representations and terms be abolished in the sale of goods context by a provision which allows for damages, calculated on a contractual basis, for all statements which induce entry into the contract? Secondly, should the Sale of Goods Act 1923 contain a provision in the same terms as s52 of the Trade Practices Act, or is this an unnecessary reform in view of s42 of the Fair Trading Act? Thirdly, should the law relating to collateral contracts be reformed by abolishing the requirement that the collateral contract and the main contract be consistent?20
III. SPECIFIC PROBLEMS
A. Introduction
2.17 Specific problems in the sale of goods context have arisen, mainly, in two ways. First, there is the problem that because the nature, aims and terms of the typical sale of goods contracts have changed since the nineteenth century, the Sale of Goods Act does not accurately reflect the operation of some common modern contracts. Secondly, there is the problem that certain sections of the Act have been found inadequate or uncertain in scope or meaning.
2.18 It goes almost without saying that in suggesting reform the opportunity would be taken to make any amendments required to modernise the Act linguistically or to delete obsolete provisions. For example, in view of the Bankruptcy Act 1966 (Cth) the Commission sees no need for the bankruptcy rules to be preserved under s4(1).
B. Romalpa Clauses
2.19 Where a seller sells raw materials to a buyer who is a manufacturer it is now fairly common for the seller to seek protection from the insolvency of the buyer by reserving title in the goods until they have been paid for by the buyer. Although s24 of the Sale of Goods Act recognises the right of a seller to reserve the right of disposal until the fulfilment of conditions (such as payment of the price), the section has been found inadequate to the seller’s full purpose.
2.20 The use of what has become known as the Romalpa clause has caused further confusion in practice. Under a Romalpa clause (the description is derived from the decision in Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd)21 The seller obtains a right to trace the proceeds of any sale by the buyer. In this respect the clause confers a proprietary right not recognised or provided for by the Act. The elements of the Romalpa case were as follows:
(a) The contract, apart from the retention of title clause, was an ordinary commercial contract.
(b) The clear purpose of the clause was to give the sellers protection ip the event of the buyers becoming insolvent prior to payment being made.
(c) The contract ‘allowed the buyers a period of credit.
(d) It could be implied that the buyers were entitled to sell the goods, but they were bound to account for all the proceeds.
(e) The goods were resold without mixture or incorporation with other goods.
(f) The retention of title clause contained an acknowledgement that a fiduciary relationship existed.
(g) It was conceded that the buyers were bailees.
(h) The buyers were required by the clause to store the goods in such a way that they could be identified.
(i) The proceeds of sales of the goods by the buyers could be identified.
The uncertainty of the law stems mainly from the fact that it is not clear which of the elements will be regarded as crucial. It can no doubt be said that the existence of a fiduciary relationship is essential, but the situations in which that relationship will be present cannot be predicted with any degree of certainty. The Commission is of the, view that there should be some provision in the Act recognising and regulating this proprietary right and we would welcome views on how far such a provision should go.
2.21 We are conscious of the fact that a Romalpa clause creating a charge on goods may require registration under the Companies (NSW) Code and that there is a need to ensure that the Sale of Goods Act does not derogate from the effect of the Companies Code. We will therefore look to the bodies which administer the Code for guidance on the interaction between Romalpa clauses and the regulation of charges on company assets.
C. Cif and fob Contracts
2.22 Sections 2-319 to 2-325 of the UCC expressly deal with cif, fob and related contracts. By way of contrast the Sale of Goods Act does not deal specifically with such contracts. There is a considerable body of common law applicable to international commodity contracts and it seems unsatisfactory, in a commercial Act, to leave such an important area to the common law.
2.23 Three problems arise with respect to cif and fob contracts. The first is to ascertain the obligations of the parties. These may be expressly stated in the contract, or implied by law. The UCC provisions referred to in para 2.22 provide certainty in that they give statutory force to the incidents implied by the common law. For example, in relation to fob contracts, s2-319(1) expresses the obligations of the seller according to whether it is the place of shipment or destination which is named in the contract,. and s2-320 has similar provisions in relation to cif sales. In addition, the UCC also makes specific provision for the obligations of the seller in relation to the documents (s2-323), and for letters of credit (s2-325).
2.24 The second and third problems arise because of the distinction made between the passing of property and the delivery of goods. Property does not usually pass either on entry into the contract or on delivery of the goods. Rather, it passes at an intermediate stage, typically on the acceptance of and payment for documents. The second problem, then, is that there is no provision in the Act explaining when property is to pass and no statement of the fact that the passing is generally conditional so that, if the goods are lawfully rejected, ownership passes back to the seller. The application of s23 Rule 5 - normally the appropriate provision of the Act in these circumstances - is notoriously difficult. Thirdly, in cases where the seller ships goods which do not comply with the contract, but the buyer wrongfully repudiates the contract before the documents have been accepted, the Act gives no guidance at all on what rights the buyer has. Good illustrations of these problems are provided by Kwei Tek Chao v British Traders and Shippers Ltd 22 and Berger and Co Inc v Gill and Duffus SA.23 It is to be noted that in Berger, a statement was made that a decision of the High Court in 1927 on cif contracts24 is inconsistent with current commercial practice and English law.
2.25 When considering international sale of goods contracts, regard should also be had to the United Nations Convention.25 The Commission invites submissions on how cif and fob contracts should be dealt with in the Sale of Goods Act 1923 (NSW) and whether there is anything in the Convention which ought to be incorporated into the Act for use by parties to interstate and intrastate contracts.
D. Rejection and Termination
2.26 Although not spelt out in clear terms, the Sale of Goods Act draws a distinction between rejection of the goods and termination of the performance of a contract of sale. The right of rejection may arise in a variety of situations including breach of condition, or tender of the wrong goods or quantity. The right of termination is conferred in only two cases: breach of condition (see s16(3)) and repudiation of an instalment goods contract (s34(2)). To these may be added express provisions for rejection or termination, termination under the common law for repudiation (including anticipatory breach) and termination for a sufficiently serious breach of an intermediate term. The difference between rejection and termination is that the former need not be final (the seller may be in a position to make a fresh tender), whereas the latter discharges the contract. The Commission seeks comment as to whether this distinction should be made clearer in the Act.
2.27 Termination under the Act usually arises for breach of one of the conditions implied by ss17-20. These include the concepts of fitness for purpose and merchantable quality. The Commission invites comment on whether these concepts are satisfactory, or whether they need redefinition. Greater clarity might be achieved, for example, by redefinition or replacement of the concept of merchantable quality. The relationship between s19(1) (fitness for purpose) and s19(2) (merchantable quality) has also been the subject of much debate and requires consideration.
2.28 The Commission is concerned that the concept of repudiation is left undefined by s34(2), and is regulated by the common law. Sections 2-609 to 2-612 of the UCC contain more detailed statements of the effect of repudiation. Section s2-609, in particular, seems worthy of consideration. It confers a right to obtain an assurance of performance when reasonable grounds for insecurity arise with respect to performance by the other party. The failure to give adequate assurance may be treated as a repudiation. This would, for example, give a right of termination to a seller who reasonably doubts the ability of a buyer to pay, if the buyer is unable, or unwilling, to give the required assurance.
2.29 Regulation of the circumstances under which there is a right to reject is something else on which the Act is silent. This creates considerable difficulty. On the ore hand, the courts are concerned to see that a buyer is not forced to take goods which do not conform with the contract. On the other hand, it might be unjust to allow rejection on a technical ground when the buyer is seeking to be relieved of an unprofitable contract. The concept of “waiver” under the general law, so notoriously vague, is frequently used by the courts to control buyers who reject for technical reasons on falling markets. This creates uncertainty and difficulty in the ascertainment of rights and the giving of reliable legal advice.
2.30 Whilst the Commission does not consider that the situations in which a buyer’s rights of rejection apply should be reduced in number, we feel that consideration should be given to two reforms which might reduce some of the uncertainty and promote fair dealing.
2.31 The first reform would be the introduction of a requirement that a buyer who rejects goods (or documents) should specify the basis on which rejection is made. That would then be the sole legal basis for any subsequent justification of rejection and would preclude the buyer’s reliance on other previously unspecified grounds. Some qualification could perhaps be made in respect of defects in the goods not apparent on examination.26
2.32 The second reform would be the introduction of a concept of “cure”.27 Under the common law a seller is only entitled to make a fresh tender of goods if rejection precedes the time allowed for delivery. This concept should be embodied in the Act. In addition there may be scope to allow cure, subject to compensation, where the seller responds to a specification of grounds for rejection by stating that the goods can be made to conform (for example, by repair) and that conforming goods will be substituted within a reasonable period of time. The problem with allowing cure after the arrival of the time for performance is that it creates an element of uncertainty and leads to delay in delivery of the conforming goods. Timely performance by the seller is generally of the essence in commercial sale of goods contracts.
2.33 A third possibility, superficially much simpler but in practice perhaps more difficult, would be to introduce a concept of unconscionability in connection with the exercise of rights of rejection. Our preliminary view is that unconscionability should be introduced as a concept28 but only in relation to matters of formation, discussed below.
E. Mistake and Frustration
2.34 The provisions of the Act relating to mistake and frustration have given rise to considerable debate. Section 11 states that a contract of sale is void if it relates to specific goods which have already perished at the time of the contract without the knowledge of the seller. Section 12 states that an agreement to sell specific goods is avoided if, subsequently to the agreement being entered into, and prior to the risk passing to the buyer, the goods perish without fault on the part of either party. Section 11 is intended to deal with mistake, while s12 deals with impossibility of performance or frustration.
2.35 A preliminary issue in relation to these sections is whether the Act should deal with mistake and frustration, having regard to the considerable body of common law developed in the twentieth century, particularly in relation to frustration. If the view is taken that the Act should deal with these matters, ss11 and 12 are obviously incomplete. Neither section addresses the rights of the parties when part only of the goods perish. Neither deals with mistake and frustration in relation to unascertained or future goods, and no express provision is made for the operation of equitable principles in relation to mistake.
2.36 One important problem which is not adequately dealt with in s11 is the effect of promises made by the seller that specific goods do exist, or will continue to exist, and promises made by the buyer to pay irrespective of whether the goods exist or will continue to exist. In McRae v Commonwealth Disposals Commission29 the High Court was clearly of the opinion that s11 was based on an erroneous view of the common law. The High Court said that the issue, in all cases, was the parties’ agreement. As the respondent in that case was found to have warranted the existence of the subject matter, the decision was only possible because s11 was construed as having no application to cases where the goods never existed. However, it can be argued quite plausibly that the decision of the High Court is inconsistent with the spirit of s11.
F. Damages
2.37 The Sale of Goods Act confers a right to damages for late acceptance (s40); non-acceptance (s52); non-delivery (s53) and breach of warranty (s54). Other sections of the Act preserve other specific rights to damages30 but there is no statutory right to damages for late delivery or late payment. The omission of a right to damages where a seller delivers goods late may have been an oversight. It is clear that at common law such a right flows from the seller’s breach. The absence of a statutory right to damages for late payment may have been intentional, a reflection of the common law rule stated in London Chatham and Dover Railway Co v South Eastern Railway Co.31 The common law rule has been criticised32 and has been overcome to a limited extent by statutory provisions permitting the recovery of interest. The question is whether there should be a statutory rignt to damages for late payment of money by a buyer. Such a measure might supplement existing provisions permitting the recovery of interest.33
2.38 Very little guidance is given by the Act on the assessment of damages. The provisions in the Act giving remedies for non-acceptance, non-delivery and breach of warranty34 are similar in that they:
- confer a right to damages;
- state that the measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events” from the breach; and
- express a prima facie rule for the measure of damages.
In addition s54(1) confers a right to set off damages for breach of warranty against the price, and s55 preserves any right to special damages or interest recoverable by a buyer or seller. It is hardly surprising that damages is an area where the general law of contract prevails over the Act. Not only is there very little detail on the basic issues of causation and remoteness, there is no guidance on mitigation, liquidated damages clauses and the effect of termination of the performance of the contract.
2.39 The UCC provisions do not differ significantly from the Sale of Goods Act provisions, although there is express reference to the effects of termination (s2-720) and the ability to liquidate damages (s2-718) and implicit recognition of the duty to mitigate (ss2-712, 2-713(1)). There is also some guidance on the circumstances in which lost profits can be recovered (s2-708(2)) and on the recovery of consequential damages by a buyer (s2-715(2)).
2.40 At the very least the Sale of Goods Act should be amended to introduce the concept of mitigation and to detail the effects of termination. It might also be advisable for the existing concepts of “market price” and “available market” to be subjected to some basic definitions, but the Commission would welcome submissions on any other, more substantial, amendments which would make the Act more useful to the Courts, the profession and commercial buyers and sellers.
G. The Nemo Dat Rule
2.41 The rule nemo dat quod non habet is acknowledged in s26(1) of the Sale of Goods Act which states that a buyer from a non-owner obtains no better title than the seller had. That section also acknowledges the exceptions of authority or consent of the owner, and states that the rule does not apply if the owner of the goods is “by his conduct precluded from denying the seller’s authority to sell”. Section 26(1) preserves the effect of the Factors (Mercantile Agents) Act 1923 (NSW), the Registration of interests in Goods Act 1986 (NSW) and the validity of a contract pursuant to a power of sale. Sections 27 and 28 then state further exceptions, the two most significant being delivery or transfer by a seller in possession35 and delivery or transfer by a buyer in possession or mercantile agent acting for such a buyer.36
2.42 Two recent decisions demonstrate some dissatisfaction with and uncertainty in interpretation of the Act. Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marak Finance Australia Ltd37 raises the fundamental question of the circumstances in which an owner should be precluded from denying a non-owner’s authority to sell. Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest, Wholesale Australia Pty Ltd38 raises the specific issue of the meaning of “delivery” in s28(2). The Sale of Goods Act being essentially a nineteenth century statute, it may be urgued that s26(1) is too narrow today. The authorities on s26(1) are also very complex. And difficult to apply. What has to be determined is whether there should be a more specific statement of when an owner will be precluded from denying a non-owner’s authority to sell. The issue in relation to s28(2) is whether “delivery” may be merely constructive and involve no change in physical possession. This was the view of a majority of the High Court in Gamer’s v Natwest. However, there are two problems:
- First, is it satisfactory for an owner to lose title without any transfer of physical possession of the goods by a buyer in possession?
- Secondly, the effect of the High Court’s decision is that if A agrees to sell goods to B, and B sells them to C, C may receive A’s title even though B had no authority to pass title and even if the delivery by B is merely constructive. What, then, is the position of D (a person deceived by B’s physical possession) if B, for example, purports to sell to D? Is a delivery by B made valid by either s28(1) or s28(2) so as to pass C’s title to D?
2.43 Any amendment to the Sale of Goods Act exceptions to the nemo dat rule must take account of the impact of the Factors (Mercantile Agents) Act 1923 (NSW) and the Registration of Interests in Goods Act 1986 (NSW). It may be that the time has come when there should be a thorough review of the nemo dat exceptions.
H. Unconscionability
2.44 The UCC states, in s2-302(1), that the court may refuse to enforce a sale of goods contract, or a term, if the court finds the contract or any term of it to have been unconscionable at the time it was made. This provision reinforces the general statement in s1-203 that every contract within the UCC imposes an obligation of “good faith” in its performance or enforcement. By way of contrast the Sale of Goods Act contains no unconscionability provisions and there is no general requirement of good faith. Moreover, the Contracts Review Act 1980 (NSW) does not apply to commercial sale of goods contracts. Section 52A(1) of the Trade Practices Act 1974 (Cth) states that a corporation shell not, “in connection with the supply or possible supply of goods or services to a person”, engage in conduct which is unconscionable. However, the goods or services must be of a kind ordinarily acquired for personal, domestic or household use or consumption (s52A(5)). Section 52A(6) states that supply or possible supply of goods for the purpose of re-supply, or for the purpose of using them up or transforming them in trade or commerce, is not within the scope of s52A. Section 43 of the recently enacted Fair Trading Act 1987 (NSW) contains provisions similar to those in s52A of the Trade Practices Act 1974 (Cth).
2.45 As indicated earlier39 the Commission sees a need for regulation of unconscionable practices in commercial sale of goods contracts, at least in the context of formation. The days are gone when commercial buyers and sellers could be assumed to be in roughly equal bargaining positions. A retailer who purchases from a large manufacturer, for example, should be entitled to some protection from unconscionable contractual terms. However, the Commission has no firm views on how far an unconscionability provision should go. We would like to receive submissions on whether there should be a general duty of good faith, or an unconscionability provision and whether either (or both) should be limited to the terms of the contract themselves or extend to their enforcement. It may be that an amendment to the scope of the Contracts Review Act 1980 (NSW) would be the most straightforward way of regulating unconscionable conduct in commercial sale of goods contracts.
FOOTNOTES
1. The current text was approved in 1978.
2. See para 1.12.
3. See para 1.2.
4. Attention might also need to be given to the statement in the Preamble that the Act is a codification of the common law.
5. See paras 2.19-2.21.
6. [1986] 1 AC 785 at 812-813.
7. Article 99(1) provides for the Convention to enter into force “on the first day of the month following the expiration of twelve months after the date of deposit of the tenth instrument of ratification”. As at December 11 1986 the following countries had ratified or acceded to the Convention: Argentina (July 19, 1983); China (December 11, 1986); Egypt (December 6, 1982); France (August 6, 1982); Hungary (June 16, 1983); Italy (December 11, 1986); Lesotho (June 18, 1981); Syria (October 19, 1982); United States (December 11, 1986), Yugoslavia (March 27, 1985); and Zambia (June 6, 1986).
8. Decision taken by the Standing Committee of Attorneys General at Perth on 25 May 1984.
9. See Article 16.
10. See, for example, Mr Justice Rogers, “Contract and Third Parties”, paper delivered at the Australian National University Seminar on Contracts (Canberra-October 1986).
11. See for example Woodar Investrent Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277.
12. New South Wales Law Reform Commission, Working, Paper on Sale of Goods (WP 13, 1975) paras 6.1 et seq.
13. See Property Law Act 1969 (WA), s11; and Property Law Act 1974 (Qld), s55.
14. See for example Insurance Contracts Act 1984 (Cth).
15. See further paras 3.29-3.34 dealing with the Trade Practices Act provisions and the exception to the privity rule contained in s64(5) of the Sale of Goods Act 1923 (NSW).
16. See, for example, Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270.
17. See paras 3.29-3.34.
18. (1980) 32 ALR 561.
19. See, for example, Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1.
20. See generally on collateral contracts and the requirement of consistency Lindgren, Carter and Harland, Contract Law in Australia (1986) paras 611-613.
21. [1976] 1 WLR 676.
22. [1954] 2 QB 459.
23. [1984] AC 382.
24. Henry Dean and Sons (Sydney) Ltd v P O’Day Pty Ltd (1927) 39 CLR 330.
25. See para 2.10.
26. Cf UCC, s2-605.
27. Cf UCC, s2-508.
28. See paras 2.44-2.45.
29. (1951) 84 CLR 377.
30. For example, s50(4).
31. [1893] AC 429.
32 . See the discussion Lindgren, Carter and Harland, Contract Law in Australia (1986), para 2151.
33. See, for example, Supreme Court Act 1970 (NSW), s94.
34. Sections 52-54.
35. Section 28(1).
36. Section 28(2). See also s50(2) regarding a buyer from a seller who exercised his right of lien or stoppage in transitu.
37. (1985) 3 NSWLR 452.
38. (1987) 72 ALR 321.
39. See para 2.33.
