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Business Law News September 2007

CONTRACTS

Retention of Title Clauses

Retention of Title Clauses [also referred to as Romalpa Clauses] are clauses in contracts for the sale of goods where the title in those goods does not pass to the purchaser until those goods are paid for in full.

In the 2000 case Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited[The Associated Alloys Case][2000] HCA 25 the High Court confirmed the principle that if a vendor wished to enforce its rights under a Retention of Title Clause [as against a liquidator of the purchaser in this case] then the vendor must ensure that the goods are preserved in such a way to make them identifiable as the vendor’s goods.

In the recent case of GMAC –v- Southbank Traders Pty. Ltd [2007]HCA 19 High Court has ruled again on Retention of Title clauses. In this case Southbank Traders sold Suzuki cars to a dealer with a Retention of Title Clause. The dealer then sold the cars to GMAC. GMAC registered its interest in the cars under the Chattels Securities Act (Vic)1987. NSW has a similar Act the Security of Interests in Goods Act (NSW) 2006.

Southbank sued GMAC for conversion of the cars which Southbank claimed were still Southbank’s cars under the Retention of Title clause. The Victorian County Court held that the registered interests of GMAC overrode the unregistered interest of Southbank. The Victorian Court of Appeal overturned this decision in favour of Southbank. The High Court of Australia upheld the decision of the County Court.

The upshot of the High Court’s decision means that the vendors of goods subject to a Retention of Title Clause should further secure their interests with a registered Security to more completely ensure their interest in goods is preserved against later registered interests of third parties.

Unilateral Contracts

We often get asked “If write to another party and tell them that if we don’t hear from them to the contrary by a certain date, then we can presume they agree with our position” Is this reasonable to do?

The NSW Court of Appeal recently decided that this is not reasonable in Ryledar Pty. Ltd. & anor –v- Euphoric Pty. Ltd. [2007] NSWCA 65.

In this case a photocopier supplier company performed a little “skit” at a dealership conference, which included a statement that a purchaser could purchase a ex rental copier for $1. When a prospective purchaser tried to take advantage of the offer, the photocopier supplied refused saying it as not intended to be a serious offer. The Court of Appeal decided in favour of the photocopier company on the grounds that the offer itself did not contain sufficient detail or precision to determine what the contract, if any, had been.

In another case of Boreland –v- Docker & Ors [2007] NSWCA 94 the landlord made an offer of a lease on a week to week basis to the tenant, and the tenant replied saying they accepted the lease for a fixed term. The Court of Appeal held that for a contract [lease] to exist the offer must MATCH the acceptance, otherwise there is no contract.

So in order to rely on a contract occurring you must be sure the OFFER has sufficient detail, and the ACCEPTANCE is just as concrete. The ingredients of a contract are OFFER, ACCEPTANCE and CONSIDERATION. So all 3 ingredients are required with sufficient certainty for the contract to exist.

We can help you to formulate a reliable contract that you can rely upon to ensure you achieve your objectives.

Forum Law Solicitors