Question

Facts: Beacon Fun Stuff Pty Ltd has been manufacturing Tasmanian souvenirs for a number of years. They formed an agency relationship with Greg Gold in 2019 for him to sell their souvenirs in Queensland. Greg Gold recently asked Beacon Fun Stuff Pty Ltd if he could change the relationship between him and Beacon Fun Stuff Pty Ltd from one of agency to one of buyer and seller. His business in Cairns in Queensland has expanded and he wishes to buy large quantities of souvenirs from Beacon Fun Stuff Pty Ltd and label them as Gold Great Souvenirs and sell them to his customers directly. Beacon Fun Stuff Pty Ltd are content with this and sign a contract to make, sell and deliver 1000 Leaf Nosed Bat Magnets within a 28-day period to Greg Gold’s business in Cairns, Queensland. The magnets are made within 3 weeks and Algol asks her parents Sunny and Monny Rigel to transport them to Queensland. Sunny and Monny had been wanting to take a holiday anyway so had booked to take their motor home to Queensland, to arrive in time to deliver the magnets to Greg in accordance with the time stipulated in the contract. Algol does not tell her parents that time for delivery is an essential term in the contract. It took Monny and Sunny two weeks to deliver the magnets as they stopped and enjoyed the sights along the way. Greg accepts late delivery but confirms that he will take $500 off the contract price for this late delivery. Further, some of the magnets are faulty, they have not been glued correctly and they fall apart within a few days of use by purchasers. Approximately 50 of Greg’s customers return the magnets and demand a full refund. Greg says he is just an ‘agent’ and that the customers have a right to sue under the Australian consumer law, but they need to sue Beacon Fun Stuff Pty Ltd and not him or his business. Thirty of these customers contact Beacon Fun Pty Ltd in Tasmania and demand a refund. Required: Algol seeks your advice on the following matters: 1. Can Greg deduct the $500 for late delivery if there is no clause in the contract for purchase that provides for this? 2. Who is liable here to compensate the customers for the faulty magnets and what sections of the Australian Consumer Law might have been breached? 3. What do you believe is the relationship between Greg Gold and Beacon Fun Stuff Pty Ltd, is it one of agency or one of seller and buyer? Please refer to legal cases, legal principles and provision of the Competition and Consumer Act 2010 (Cth) as applicable.

Answer 1

1. Late Delivery -

the Sellers fail to make delivery on time as stipulated in the Contract, with exception of unforceeble circumstances that prevent the fulfiling contract causes specified in this Contract, the Buyers have the right to penalize the Sellers.

the Seller shall pay to the Buyer for every [***] of delay a penalty amounting to [***] of the total value of the goods whose shipment has been delayed. Any fractional part of a [***] is to be considered as a full [***]. The total amount of penalty shall not, however, exceed [***] of the total value of the goods involved in late shipment and is to be deducted from the amount due at the time of payment.

To avoid this clause being considered a penalty, Law requires that the liquidated damages sum should be justified as a means of protecting the legitimate interests of the party seeking to rely on it – in this instance, this could be that the damages sum represents a genuine pre-estimate of the loss that the procuring party would suffer as a result of a delay in delivery, or it might be that there is some other commercial reason as to why such sums are relevant (e.g. perhaps the goods form a crucial part of a wider business-critical process and the procuring party needs to protect against late delivery as a result). In addition, the damages sum should not be out of proportion to the actual loss of the procuring party – this will depend on the circumstances, but in a situation where the goods supplied are business critical, it may be that a higher percentage is perfectly justified as the loss from late delivery might be particularly high.

So if there is no clause in the contract regarding penalty for late delivery then buyer has to justified that there is damages or loss suffer from late delivery then only Buyer can deduct money for late delivery.

2. In this Scenario, Greg Gold get goods from Beacon Stuff Ply as a buyer & there is no agency relationship its simply retailer & manufacture relationship between them & Greg gots goods from them & stick labels of Gold Great souveiners & sold goods directly to customers.

So if goods have any problem i.e faulty or damages then Greg Gold is be the liable to repairs or replacement of that product & not the Manaufacturer (Beacon Stuff Ply).

So Greg gold is liable here to compensate the customers for the faulty magnets.

Section 18 of the Law might had breached.

3. We believe that the relationship between Greg Gold & Beacon Fun Stuff Pty Ltd is of seller & Buyer as goods are label them as Gold Great Souvenirs which is of Greg Gold name so its purely of Seller & Buyer realationship. If Goods are under name of Beacon Fun Stuff Pty.Ltd then there will be agency relationship.

A sale of goods contract can be distinguished from other transactions. For eg. Unlike other legal categories like bailment or agency, the sale of goods is primarily concerned with the transfer of property from one party to other in exchange for Money. A bailment may involve transfer of possession of property from bailor to bailee, but the ownership of the property does not change. Similarly in agency relationship may involve the agent having the power to make representations on behalf of the principal, who may be the owner of goods.

In the case laws Deta Nominees V Viscount Plastics.

Viscount plastics is the manufacturer of furniture component.

After completion of furniture component drawer were delivered to Deta.