QUESTION
LAWS20028
Business Law
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Term 1 – 2012
Assessment Information
Objectives
Answer the following questions with reference to the relevant common law and equity principles operating in Australia concerning
contracts and related transactions. Do not consider the effects of legislation potentially applicable other than that any specifically
identified. Students may make whatever additional factual assumptions are necessary or convenient. Students should write about
3500-4000 words, about 400 words per 10 mark allocation.
Please also note that:
Additional readings relevant to this assignment may be made available to students via the library. If so, students will be
advised of this on the course website which all students should access on a regular weekly basis.
Whilst this assignment counts for 40% of the total assessment for the course, for convenience of grading, the assignment
questions are allocated a total of 100 marks. Your aggregate notional score out of 100 marks will then be scaled back to a
mark/score out of 40 for the assignment.
Assessment task
Question One 50 Marks
In early January 2011, Kuja Cattle Pty Ltd (“Kuja”) entered into a verbal ‘hand-shake’ agreement to sell Livestock Exports Pty Ltd
(“Livestock”) 3,000 head of breeding stock a month for six months (April to September 2011) at AUD $1,000 perDroughtmaster
head, or $3 million per monthly contract, payable by bank transfer a month in advance, with delivery to the Port of Townsville for
live export. In negotiations, Livestock specifically advised Kuja it was buying these cattle for the export market, to fulfill a parallel six
month contract it had obtained with Cavite Stock Imports (“Cavite”) a Manila, Philippines’ firm. Also, that it would be specially
chartering a livestock ship each month to deliver the cattle to Subic Bay Port, near Manila. The Cavite contract was expressly
made subject to Queensland law. Clause 25 of the contract required Livestock to pay Cavite agreed damages as follows:
$500,000 for failing entirely to deliver any of the promised six shipments.
$250 per head in the event of delivering less than 3,000 head of cattle in a shipment.
$65,000 per day penalty for late delivery to the Port of Townsville up to a maximum of 7 days, with Cavite having the right
thereafter to cancel that month’s shipment, with such option triggering application of 25(1) above.
Then after a sharp 25% rise in cattle prices across Australia, Kuja advised Livestock by email just 21 days before it was due to
supply cattle in September 2011 that, unless Livestock agreed to a $250 per head price increase, then Kuja would not be supplying
any cattle under the final, September installment. Following Kuja’s advice, Livestock had little option but to purchase
Droughtmaster cattle in the open market. With demand far exceeding supply, it was able only to purchase 2,500 at an average
price of $1,350 ($3.375 million in total). As a result of these changed arrangements:
It cost Livestock an extra $250,000 to recharter the livestock ship which it had initially cancelled on Kuja’sPrima Donna
advice of refusal to supply.
Delivery of the 2,500 cattle to the Port of Townsville for live shipment, was six days late.
Required:
Advise Livestock as to its legal rights and remedies under Australian common law (including equity) in relation to the following
possible claims against Kuja.
(a) $250,000 being the extra costs associated with cancelling and then rechartering the . Prima Donna (10 marks)
(b) $875,000 being the additional cost of purchasing 2,500 Droughtmaster cattle in the market ($1,350 versus $1,000). (10 marks)
(c) Reimbursement of $125,000 and $390,000 respectively under agreed damages Clause 25 as payable to Cavite. (10 marks)
(d) $125,000 being for loss of profits on 500 cattle based on Livestock’s average profit of $750,000 per shipment of 3,000 cattle.
(10 marks)
(e) Recovery of the $3 million advance payment to Kuja for the final September installment of Droughtmaster cattle. ( 10 marks)
Question Two 25 Marks
Dr Anka Bakana owned a prime real estate site – inherited from her late parent’s estate – in central Bundaberg, a thriving coastal
Queensland town. Following protracted negotiations, she granted the Queensland supermarket chain Barina-Carina Pty Ltd
(“BCP”) an irrevocable, non-assignable option to purchase the property for $1.25 million on payment of a non-refundable $125,000
deposit, the balance payable within one year. The contract expressly provided that to exercise the purchase option, BCP had to
obtain timely approval from the Bundaberg Regional Council (“BRC”) for supermarket construction. But approval was delayed due
to planning objections from local residents. One month before its option was due to expire, BCP asked Dr Bakana for a one year
extension in order to submit a new much improved application it had already prepared, to the BRC accommodating those
residents’ quite reasonable objections. After a series of lengthy telephone conversations with BCP’s lawyers, Dr Bakana reluctantly
agreed to this extension, and for no additional payment. But six weeks later – by which time BCP had spent a further $25,000 on
consultant’s fees in connection with its revised application – she received an unconditional written $2 million cash offer from a rival
national supermarket chain, Jingella Foods for acceptance within 28 days.
Required:
Advise Dr Bakana, who plans to donate the proceeds of sale to a local educational charity, whether she can accept Jingella’s offer
or if she is still bound (or estopped) under contract to sell the property to Barina-Carina Pty Ltd or could otherwise avoid the
contract by offering to repay BCP its $125,000 deposit which she had placed on initial receipt in a trust account with the Bundaberg
Credit Union. (25 marks)
Question Three 25 Marks
Read the recent High Court of Australia case [2011] HCA 16 (see )Insight Vacations Pty Ltd v Young http://www.austlii.edu.au/
together with any other relevant material you care to consider, and answer the following questions.
(a) Provide a summary account of the material facts of the case and its progression through the Australian court hierarchy.
(5 marks)
(b) What do s 74(2A) (Cth) and s 5N (NSW) provide, and how do they interactTrade Practices Act 1974 Civil Liability Act 2002
vis-à-vis the appellant’s potential liability for breach of warranty and the exemption clause? (10 marks)
(c) What is the of the case? (not a case summary). ratio decidendi (10 marks)
SOLUTION
Advise Livestock as to its legal rights and remedies under Australian common law (including equity) in relation to the following possible claims against Kuja.
(a) $250,000 being the extra costs associated with cancelling and then re-chartering the Prima Donna.
In the given case Kuja was already informed of the fact that Livestock and chartered the ship Prima Donna to deliver the cattle at a port near Manila. As this fact was within the knowledge of Kuja, it can be asked to compensate Livestock for the expenses it had to incur on canceling and then re-chartering the ship. The plea of the remoteness of damages that can be taken by Kuja can be successfully counter by Livestock as the fact that it had already charted a ship to deliver cattle to Manila was known to Kuja. The law requires that the damage caused by the breach of a condition of the contract should be of a foreseeable nature. It is a well-settled principle of common law that been able to party and sustain the loss due to the breach of contract by other party, such as the should be placed in same situation, so far as money can do, as if the contract has been performed (Robinson v Harman, 1848). Therefore the requirement under the common law is that damages are viewed as a substitute for the performance of the contract they are designed in such a way so as to put in a situation where it would have been in case the contract would have been performed according to its terms and conditions (Transfield Shipping Inc v Mercator Shipping Inc (‘The Achilleas’) 2008). Therefore while punitive damages cannot be allowed and the damages claimed should not be too remote. It is also the responsibility of the non-breaching party to do whatever it can reasonably do to mitigate the damage suffered by it (Kramer, 2003). In the present case, Livestock did whatever it can to prevent the loss. It tried to purchase the cattle head from the open market and did so at a higher price but even then it could not find the sufficient number of cattle head to escape the breach of conditions mentioned in the contract it had entered the Cavite. Livestock even purchase the cattle head at a higher price as against the price agreed to in the contract. But when it was advised by Kuja to purchase the cattle head with the hike of $ 250 per head it was forced to cancel the trip of the ship, Prima Donna. As part of its efforts to mitigate the damages, livestock purchased cattle head from the open market as otherwise it would have to pay a higher penalty to Cavite apart from giving the cost of canceling the ship Prima Donna. As Livestock performed all the duties imposed on a non-breaching party to the contract, it becomes liable to receive damages from Kuja. Though there was no clause regarding the sum of money that has to be paid in case of the breach of contract as the contract between Livestock and Kuja was a handshake contract not put in writing. But it is also a common practice and parties to the contract seldom contemplate the losses that they may suffer in case of the breach of contract or any of its conditions (Citicorp Australia Ltd v Hendry (1985). It would be naïve to believe that the vendor who agreed to deliver a particular product on a particular day would be unaware of the importance of delivery to the party to whom such promise has been made (Ringrow Pty Ltd v BP Australia Pty Ltd, 2005). In the present case Kuja was specifically told about the fact that livestock has hired the ship Prima Donna to transport the cattle head to a port near Manila. As this fact was well within the knowledge of Kuja, it is liable to pay damages to Livestock for the expenses it had to incur on the canceling and then the re-chartering of the ship Prima Donna. Under the contract it was the responsibility of Livestock to do whatever was possible to mitigate the damages suffered by it and the company did the same. It went to the extent of purchasing cattle head from the open market to escape a higher penalty which would have been imposed on it according to the contract it had entered into with Cavite. Therefore under the Australian Common Law, Livestock had a valid claim against Kuja for the costs it had to incur in cancelling and then re chartering the ship Prima Donna. It was the duty of Livestock but Kuja certainly failed in performing its duty of supplying the required number of cattle head at the price stipulated in the contract. By informing and advising Livestock, 21 days ahead of the date of delivery that the prices of cattle head had witnessed a step rise throughout Australia and Livestock should also defer its delivery, Kuja cannot escape its liability to perform its part of the contract. A hike in prices cannot be said to be a valid reason for not discharging the contractual obligations imposed on Kuja under the contract. The fact of chartering of the ship was within the knowledge of Kuja and it could have easily guessed the consequences that Livestock might had to face in case it failed to discharge the obligations imposed on it under a parallel contract it had entered into with Cavite. The cost of $ 250,000 which was incurred by Livestock on cancelling and then re-chartering the ship can be claimed by the company from Kuja which had failed to discharge its part of the contact by failing to deliver the stipulated number of cattle head on the due date.
(b). $875,000 being the additional cost of purchasing 2,500 Droughtmaster cattle in the market ($1,350 versus $1,000).
Ans: As Livestock was under a contractual obligation to supply the cattle head to Cavite Stock Imports, a firm from Manila, Philippines, it was forced to buy cattle from the open market at a higher rate as Kuja failed to meet its contractual obligation of supplying the cattle head to Livestock. Therefore to meet its contractual obligations arising from its contract with Cavite and to escape the liquidated damages, it had to purchase the cattle had from the open market at a time when the rates were very high throughout Australia. In such cases the major remedy available to the parties under the common law is the seeking of damages (Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited, 2007).
Damages are in form of a monetary sum that is fixed by the court for compensating the party that has suffered the loss due to the non-performance of the contract by the other party. The requirement for claiming damages under the common law is that the party should show that it had suffered an actual loss. If there is no actual loss suffered by the party, it will only be entitled to nominal damages which are in recognition of the fact that such a party had a valid cause of action. But in the present case, Livestock suffered an actual loss as it was forced to pay AUD $1350 on an average as against the AUD $ 1,000 per head.
The additional cost paid by Livestock for purchasing 2500 head of Droughtmaster Cattle from the open market can be recovered by Livestock as it comes under the category of direct loss suffered by the company due to the un-fulfillment of its contractual obligation. Livestock can claim unlawful repudiation of the contract by Kuja and seek damages from it. These damages would include the cost incurred by Livestock on purchasing the cattle head from open market at a higher price as the price of cattle head was very high at the time and the company was forced to purchase cattle, the market to meet its contractual obligations with Cavite. Kuja was aware of the contract that was made by Livestock with Cavite and it had breached an essential term of the contract which is described as a condition. Under the Australian common law if such a breach relates to an essential term of the contract and the defaulting party renounces the contract and reveals its intention to be no longer bound by the contract, the terms of contract come under the purview of common law and the innocent party can terminate the contract and seek damages.
(c) Reimbursement of $125,000 and $390,000 respectively under agreed damages Clause 25 as payable to Cavite.
Answer: The terms of the contract entered into between Livestock and Cavite expressly mentioned that Livestock would have to pay a penalty of $ 65,000 per day up to a maximum period of seven days in case the cattle head were delivered late at the Port of Townsville. In the present case Kuja advised Livestock that in view of the sharp rise in the price of cattle it can supply only in case Livestock and agreed to purchase cattle with an increase of $2 50 per head. As the object to paying damages for breach of contract is to put the injured party in the same position financially as it would have been in case of the new performance of the contract. Damages for breach of contract are a major remedy available under the common law. It is a monetary sum that is inside the court for compensating the party that has suffered a loss due to the nonperformance of the contract by the other party (Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council & Ors, 2006). The injured party needs to show that he has suffered a substantial and actual loss due to the nonperformance of the contract by their party. In case the innocent party has not suffered any actual loss, it would not have valid ground for seeking damages from the other party. A breach of contract occurs when a party to the contract fails to perform the obligation imposed upon it by the contract (Mazelow Pty Ltd v Herberton Shire Council, 2002). Such a breach could be actual or anticipatory and in the present case the breach was an actual breach when Kuja refused to supply the agreed number of cattle head to Livestock unless there was an increase in the price of cattle to be supplied by Kuja. Moreover the fact that there was a parallel contract between Livestock and Cavite was well-known to Kuja. The contract between Livestock and Cavite expressly mentioned that in case there was a default on part of Livestock by delivering less than 3000 head of cattle in any shipment, there would be a penalty of $250 per head. Similarly another clause in the contract mentioned that in case of late delivery at the Port of Townsville, there would be a penalty of $65,000 per day up to a period of seven days after which Cavite had the right to cancel the shipment for that month in which case another clause of the contract will be triggered which will impose further penalty on Livestock. These facts were well within the knowledge of Kuja when it refused to supplying the cattle head at the agreed rate. Therefore, Livestock as a valid claim against Kuja for damages which it had to suffer under the parallel contract with Cavete.
(d). $125,000 being for loss of profits on 500 cattle based on Livestock’s average profit of $750,000 per shipment of 3,000 cattle.
The law on recovery of damages following the breach of contract by a party requires that when a party seeks damages owing to the breach of contract by the other party, the breach of contract should be such which can be
(a) Reasonably and fairly considered to be either arising naturally from the breach of contract i.e. according to usual course of business. Or
(b) Such damages can suppose to reasonably have been in the knowledge of both the parties when the contract was made as a probable result of such a breach.
The rule in the common law is that the losses that can be recovered should be foreseeable. Claiming damages for loss of profit is a question of law and should be discerned from the intention of the parties. It has to be seen if one party has agreed to be responsibility for such a risk to the integration of the whole contract. The loss suffered by the other party should be of such a nature that it can reasonably be within the contemplation of both the parties at the time of entering of the contract (Transfield Shipping Inc v Mercator Shipping Inc (‘The Achilleas’), 2008). The Achilleas was also cited in the NSW Court of Appeal which means that it is also a good law in Australia. To sum up the situation it can be said that the test applied for getting the remoteness of damages remains the test includes the following steps. It includes the review of the special circumstances at the time of entering into the contract can be brought to the attention of the parties. In order to receive substantial damages from the party that had committed a breach of contract, the innocent party must show that an actual losses suffered by it. In case no actual loss has been suffered only nominal damages can be awarded. The court has to consider the remoteness of damages which can be done by considering the consequences of breach of contract for which the defendant can be held legally responsible. Similarly the measure of damages can be ascertained from the principles upon which the damage is evaluated in monetary terms but the second consideration is completely distinct from the first one and needs to be decided only after the first has been decided by the court (Codelfa Construction Pty. Ltd. v State Rail Authority of N.S.W., 1982). The principle was established in this case that where one party has committed a breach of contract, the other party can receive damages for such breach of contract if the loss or damages suffered by the other party can reasonably be considered to be arising naturally from the said breach of contract itself or when such loss or damages can reasonably be assumed to be within the contemplation of the parties to the contract as a probable result of such a breach at the time when they entered the contract. In the present case the loss of profit which would be suffered by Livestock was within the contemplation of Kuja hence Livestock can claim damages in respect thereof.
(e) Recovery of the $3 million advance payment to Kuja for the final September installment of Droughtmaster cattle.
In case there is a breach of an essential term of the contract, the innocent party can terminate the contract under the common law. In such cases the innocent party has an option to either rely upon specific contractual rights to terminate the contract and also a right under common law to terminate contract in case of the breach of an essential condition of the contract by the other party (Renard Constructions v Minister of Public Works, 1992). In the present case Kuja committed the breach of an essential condition of the contract when it failed to supply the required number of cattle head for the month of September at the rate agreed upon in the contract. Once Livestock has terminated its contract with Kuja, it can certainly ask for the recovery of advancement made by it to Kuja for the month of September. The term of the contract becomes essential when it can reasonably be inferred that the innocent party would have entered into the contract only if it was a short of the literal and strict performance of that term of the contract. In case of the breach of such a term, the innocent party can go for the termination of the contract and claim damages. A term of the contract is also essential when the interpretation of the contract as a whole provides a view that unless the innocent party was assured of the substantial performance of that particular term, it would not have entered into the contract and there was a substantial breach in performance on that term of the contract. In such cases also the innocent party can terminate the contact and seek damages PMT Partners Pty Ltd (In Liquidation) v Australian National Parks and Wildlife Service (1995). A notice sent by Kuja cannot substitute the performance of the essential term of the contract that was to supply the required number of cattle head for the month of September. Therefore Livestock can terminate the contract and seek damages including the refund of the amount paid in advanced to Kuja for supplying the cattle head for the month of September.
References:
A Kramer, ‘Common sense principles of contract interpretation (and how we’ve been using them all along)’, (2003) 23 Oxford Journal of Legal Studies 173
Ankar Pty Ltd v National Westminister Finance (Australia) Ltd (1987) 162 CLR 549, 562
Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1
Codelfa Construction Pty. Ltd. v State Rail Authority of N.S.W. (1982) 149 CLR 337.
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61
Mazelow Pty Ltd v Herberton Shire Council [2002] QCA 119 at para 7
PMT Partners Pty Ltd (In Liquidation) v Australian National Parks And Wildlife Service (1995) 184 CLR 301
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at
Renard Constructions v Minister of Public Works (1992) 26 NSWLR 234
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 222 ALR 306
Robinson v Harman (1848) 1 Exch 850, 855
Sanpine Pty Ltd v Koompahtoo Local Aboriginal Land Council & Ors [2006] NSWCA 291 at para 177
Sopov & Anr v Kane Constructons Pty Ltd (No 2) (2009) 257 ALR 182
Transfield Shipping Inc v Mercator Shipping Inc (‘The Achilleas’) [2008] UKHL 48
Question Two
Advise Dr Bakana, who plans to donate the proceeds of sale to a local educational charity, whether she can accept Jingella’s offer or if she is still bound (or estopped) under contract to sell the property to Barina-Carina Pty Ltd or could otherwise avoid the contract by offering to repay BCP its $125,000 deposit which she had placed on initial receipt in a trust account with the Bundaberg Credit Union.
Ans. A contract can be rescinded by a party to contract in many ways and the world rescission can be used in many different senses including in the discharge or termination of a contract due to the reach of essential condition, discharge or termination on basis of contractual condition under which such a right was conferred ; rescission of a contract due to vitiating factors in the contract which provides such a right in equity or at law ; termination following the acceptance of repudiation or termination of a contract by abandonment or mutual agreement (Gummow and Leahne, 2002). It should also be noted that each party to contract is bound to perform its obligation strictly in accordance with the terms of the contract where time is of the essence (Ogle v Comboyuro Investments Pty Ltd (1976). Any failure to perform obligations within the stipulated time could constitute a breach with may entitle the other party to go for the rescission of the contract (Simons & Anor v Zartom Investments Pty Ltd,1975). Time stipulations have been made essential by the transfer of land Act 1958 in the present case Dr. Bakana has agreed to the extension of one year to Barina Carina Pty Ltd. for obtaining and approval from Bundaberg Regional Council for constructing a super market on the property of Dr. Bakana (Everest Project 13 Developments Pty Ltd v Mendoza & Ors, 2008). The extension was granted well within time, one month prior to the expiry of the time limit stipulated in the contract primarily (Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd, 1994). There was a specific condition in the contract that Barina Carina Pty. Ltd. would obtain and approval from the Bundaberg Regional Council for the construction of a super market. As there was a delay in getting such approval, the time limit was extended by Dr. Bakana and in result of this extension Barina Carina Pty. Ltd had spent $ 25,000 on paying consultation fees related with the revised application it had filed for obtaining an approval from the Bundaberg Regional Council (Tanwar Enterprises Pty Ltd v Cauchi, 2003 ; HCA 57; 2003). At the time of entering into the contract, Dr. Bakana has received in non-refundable payment of $ 125,000 from Barina Carina Pty Ltd. under which she granted an irrevocable and non assignable option for purchasing the property to Barina Carina Pty. Ltd. (Krakowski v Eurolynx Properties Ltd (1995). Dr. Bakana is estopped from rescinding the contract as there was no misrepresentation on part of Barina Carina Pty. Ltd. (Cth v Verwayen, 1990) The company has acted on the promise of Dr. Bakana when they invested further $ 25,000 to pay the consultation fee for submitting a revised application for obtaining the approval of the BRC. Dr. Bakana cannot accept the offer given by the Jingella foods as she is bound by the contract which is in force at the time of the offer made by Jingella. No breach of any term of the contract has been committed by Barina Carina Pty. Ltd. which may entitle Dr. Bakana to rescind the contract and return the amount accepted by her under the contract.
Case law:
Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463
Cth v Verwayen (1990) 170 CLR 394).
Everest Project 13 Developments Pty Ltd v Mendoza & Ors [2008] VSC 366
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563
Meagher Gummow & Lehane, 2002, Equity Doctrines & Remedies, 3rd Ed, para 2401-2405)
Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444).
Simons & Anor v Zartom Investments Pty Ltd [1975] 2NSWLR30).
Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315).
Question Three
3 a. Provide a summary account of the material facts of the case and its progression through the Australian court hierarchy.
Ans: The brief facts of Insight Vacations Pty Ltd v Young are that Mrs. Young purchased package from Insight Vacations in 2005. The contract entered into between the two mentioned that it would be governed by the New South Wales law. A clause of the contract exempted Insight from any liability arising out of a claim for an incident or accident if any passenger was not wearing seatbelt at the time of the incident. Mrs. Young suffered an injury when she got out of her seat to take something from a shelf overhead. The coach applied brakes suddenly and Mrs. Young fell down and suffered injuries. She sued Insight for breach of the contractual warranty provided by s74 of the Trade Practices Act 1974 which requires that services under contract “should be provided with due care.” The case was decided in favor of Mrs. Young by the District Court of New South Wales where she was awarded $22,371 as damages along with costs. Insight preferred an appeal against the decision of the District Court in Supreme Court of New South Wales. It challenged the decision of the District Court on quantum of the damages awarded by the District Court. The damages were reduced by all the members of the Supreme Court of New South Wales but the plea of Insight against its liability was rejected. Insight went to High Court through special leave to appeal on the same grounds. The appeal of Insight was rejected by the High Court saying that the exemption clause on its true interpretation could only be applied to a passenger is occupying a seat and not when the passenger has left the seat to move around.
3b. What do s 74(2A) Trade Practices Act 1974 and s 5N Civil Liability Act 2002 (NSW) provides, and how do they interact vis-à-vis the appellant’s potential liability for breach of warranty and the exemption clause?
Answer: Insight tried to take recourse to section 74 (2A) of the Trade Practices Act provides that in case the implied warranty in a contact is breached and the contact is governed by the law of the state, the law of the state will be applicable in such a case where the liability of the party is precluded or restricted. It was argued on part of Insight that the effect of s74 (2A) of the Trade Practices Act is that s 5N of Civil Liability Act 2002 (NSW) also called the Civil Liability Act, can be applied. S 5N provides that despite any other law in force, a term of any contract for supplying recreational services may restrict, modify or exclude any liability to which division five of the act applies that results in reach of a warranty that such services would be rendered with care. It was argued by insight that the exemption clause was attracted in the present case but the argument was rejected by district Court. Insight went to high Court where its appeal was unanimously dismissed. The high Court held that section 5 and is not picked up as it does not meets the description provided in the Civil Liability Act in the present case. The Court held that section 5 (N) in itself does not apply to preclude or limit the liability of a party, it only allows the parties to modify restrict or exclude certain liabilities in certain contract.
3c: What is the ratio decidendi of the case?
Ans. The arguments of Insight were rejected by the district Court which awarded $ 22,371 as damages to Mrs. Young. The damages were reduced by the Supreme Court of New South Wales but it dismissed the appeal of Insight against its liability by majority. Insight went to High Court raising the same grounds where also, the appeal of Insight was unanimously dismissed. The High Court held that section 5 (N) of the Civil Liability Act is not attracted in the present case. It was further held by the Court that even if Section 5 (N) would have been picked up by section 74 (2A) of the trade practices Act, it will not be engaged with the facts related with the claim of Mrs. Young. The reference to “term of contract for supplying recreational services” should be read subject to the geographical limitations which can be derived from the contest of Civil Liability Act. The relevant limitation would be the place where recreational service is to be supplied. Therefore this section applies to contracts for supplying recreational services only in New South Wales. It could not be applied to the contract between Insight and Mrs. Young as it was for supplying recreational services beyond the territory of New South Wales.
Reference
Insight Vacations Pty Ltd v Young [2011] HCA 16 (11 May 2011)
JG17
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