This chapter addresses the fundamental rules of contract law and introduces nine of the significant regulators operating within the Australian commercial landscape. Contracts are of enormous importance in most established economies as they provide a means by which promises made as part of a commercial bargain can be legally enforced. Contracts also underlie a large number of transactions entered into by the principal commercial regulators in this country, and so the chapter provides a useful backdrop against which we can explore more specific concepts in Australian commercial law.

This chapter engages with the substantive law pertaining to misleading or deceptive conduct. The statutory prohibition on misleading or deceptive conduct first appeared in the now defunct Trade Practices Act 1974 (Cth) (TPA). Section 52 of the TPA provided that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The TPA has now been repealed. In place of the TPA has emerged the Australian Consumer Law (ACL). The ACL now contains the same prohibition on misleading or deceptive conduct. The ACL is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The s 52 TPA equivalent is s 18 of the ACL. Section 18 provides that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. This chapter looks solely at misleading or deceptive conduct under s 18 of the ACL.

This chapter deals with the legal issues associated with the transfer of property and title in sale of goods contracts. The various state and territory Sale of Goods Acts regulate the way in which property is transferred from a seller to a buyer. However, there are circumstances where the parties to a contract of sale will be unclear as to when property will pass between them. Under these circumstances, the transfer of property will need to be regulated by one of the five general rules set out in the Sale of Goods Act. Similarly, there may be circumstances under which a non-owner will purport to transfer ownership in goods. Should this occur, the law will have to seek to do justice between one of two innocent parties: the true owner and the third party buyer without notice. The various Sale of Goods Acts contain rules determining when one party or the other prevails. For the purposes of this chapter, the sale of goods legislation referred to is the Goods Act 1958 (Vic) (‘Goods Act’).

Insolvencies are a consequence of capitalist economies and the market factors that underpin and drive them, including competitive behaviours, and the appetite for and bias towards risk, limited social and material resources (among them, credit), and the asymmetrical relationship of expectation to capacity. Insolvency always has some – and may have vast – private, public, institutional and systemic consequences. The distinction between insolvency as it relates to corporations, and bankruptcy in relation to persons, is made in the Australian Constitution. Insolvency and bankruptcy occur when corporations, businesses or persons are unable to pay their debts when and as they fall due. The term 'bankruptcy' is applicable to personal insolvency, while insolvent corporations or businesses go into liquidation. Bankruptcy laws provide the framework within and procedures by which the failure of debtors to pay their debts can be handled in an organised and efficient manner, making similar provisions for corporations, businesses and persons, while at the same time recognising the differences between the subjects of the processes.

This chapter explores the topic of contracts of guarantee. Contracts of guarantee are utilised in a range of consumer and business contexts to minimise a lender’s risk in situations where the borrower lacks sufficient assets to utilise as security, or where money is lent to inherently risky ventures. Guarantees enable access to credit in situations where the borrower lacks a credit history or cannot secure a loan because they lack assets. A lender to a corporation will require a guarantee because of the risks posed by the nature of business itself, and by use of the corporate structure, which prevents financiers accessing assets vested in shareholders and beneficiaries. Guarantees reduce the cost of borrowing by reducing the lender’s risk in providing loaned money, and by relieving the lender of the need to undertake costly risk assessments. Such costs would otherwise be passed on to the borrower through increased interest rates on borrowings.

This chapter explores the topic of product liability. The Explanatory Memorandum to the Trade Practice Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) states that:

This chapter identifies and discusses the wide variety of business structures commonly found in the commercial landscape. All organisations that supply or acquire goods or services, whether for profit or not, must choose an appropriate business structure to ensure their longevity and successful operation. That choice will be influenced by a number of factors, such as the scope and nature of the organisation’s operations, its size, the risks and costs associated with its enterprises, and tax implications. The choice may even change in time as the organisation grows and its needs and challenges change. The principal forms of business structure are discussed in turn to provide a basis for understanding how each operates in practice.

This chapter deals with the common law of agency in Australia. Agency is a legal relationship of great utility in commercial life. In essence, an agent acts on behalf of another person, known as the principal, in order to achieve things that the principal finds difficult or inconvenient to do themselves. The chapter deals with the definition of an agent, the law pertaining to the formation of an agency relationship, the duties of agents and principals, and the liability of agents and principals to third parties.

This chapter addresses the topic of consumer guarantees. The consumer guarantees apply to any contract for the supply of goods or services to a consumer made after 1 January 2011. They replace the implied warranties and conditions in the former Trade Practices Act 1974 (Cth) (TPA). Goods are covered by the consumer guarantees not only if they are sold in trade or commerce and bought by a consumer, but also if they are second-hand, leased or hired. However, some consumer guarantees apply regardless of whether the goods are sold in trade or commerce, such as the guarantees as to title, undisturbed possession and undisclosed securities. The terms 'trade' or 'commerce' relate to a supplier’s or manufacturer’s business or professional activities, including a non-profit business or activity. There is a degree of complexity to the consumer guarantees scheme. In Scenic Tours Pty Ltd v Moore, Sackville AJA noted that this might undercut the purpose of the scheme. 'Given that the consumer guarantees are intended to provide protection to consumers in their dealings with service providers, the statutory regime is anything but straightforward. A consumer would need to be particularly well informed (or advised) to understand his or her rights under the regime.'

Part II - This brief introduction to Part 2 is designed to set the stage for the detailed chapters that follow, each of which examines various parts of the Australian Consumer Law of relevance to commercial law. Commercial law, unlike many other areas of law, is not driven by a single defining doctrinal idea; rather, it is driven by the relevance of selected legal topics to commercial life. There are certain ideas that are recurrent within commercial law, such as reasonableness, good faith and bad faith, the need to protect innocent parties, reliance and legitimate expectations. However, none of these ideas defines an entire area of law or forms the basis for the existence of those laws in the first place. Most areas of commercial law exist because the demands of commerce require a set of rules to regulate the interactions of the players within that field. Consumer law is no different, and its centrality to commercial life makes it a proper sub-field for study within commercial law.

This chapter considers the centrality of price to the contract for the sale of good. In particular, it examines the role of the price in the contract’s certainty of terms, the exceptions to this requirement, and the operation of those exceptions. The statutory provisions for determining a price in a contract that is silent on the term are examined, as are the leading cases. Contracts for the sale of goods are defined and distinguished from contracts in which goods are exchanged partly for a money consideration, and partly in exchange for other goods. The chapter also examines when such agreement may constitute a contract for the sale of goods, and when it constitutes a barter contract. The performance of the contract of sale is then examined in terms of the reciprocal obligations of payment and delivery. The wrongful performance of both payment and delivery is considered. The chapter then examines the remedies available to the buyer and the seller for breaches of payment or delivery, depending on whether the breach is of a condition or a warranty, and the defences to claims by either party against the other.

This chapter deals with unconscionable conduct in the context of commercial law. There are a number of statutory schemes that regulate unconscionable conduct in the commercial sphere. The Australian Consumer Law (ACL), contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (CCA), provides a broad-ranging scheme that covers most commercial dealings within which unconscionable conduct may occur. Financial services and financial products are regulated under the Australian Securities and Investments Commission [ASIC] Act 2001 (Cth). The ASIC Act provided a statutory scheme regulating unconscionable conduct concerning financial services in trade or commerce. This chapter primarily deals with the unconscionable conduct regime set out by the ACL. The scheme has arguably the most direct application to commercial law as it governs the interactions between corporations and consumers and small businesses. The chapter first examines the equitable doctrine of unconscionable conduct, from which all the statutory regimes are derived, before considering ss 20–22 of the ACL.