The position where a supplier has delivered the wrong variety of olive trees resulting in a yield that was less that than the advertised expectation;

There are two possible remedies available in this circumstance, one in contract and another under the Trade Practices Act 1974 (Cth) ("TPA").

1. Contractual remedies

Where a supplier has represented to the buyer of olive trees that the trees will yield a certain amount of produce but the variety of olive tree is incorrect, the buyer may be able to rescind the contract on the grounds of misrepresentation. This remedy is not particularly useful as the common law does not allow recision nor damages for an innocent mistake. It would require the purchaser of the olive trees to prove that the supplier had fraudulently or negligently made the representation to the purchaser or that the supplier had acted unconscionably in making the representation. Such an action is better dealt with under the TPA.

A more practical solution is to bring an action for a breach of warranty. The representation by the supplier that the olive trees will yield a certain amount of produce is a warranty and not an actual term of the contract because the main purpose of the contract is for the supply of trees. Any statement concerning performance or eventual outcome of planting is a warranty, not a contractual promise (J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435). The Goods Act 1958 (Vic) has codified the common law definition in section 3(1) as

an agreement with reference to goods which are the subject of a contract of sale but collateral to the main purpose of such contract.

Although a breach of warranty does not give rise to a right to reject the goods and repudiate the contract, section 59 of the Goods Act codifies the remedies that are available to a buyer for a breach of remedy. These are:

1. To bring an action in breach of warranty to claim the diminution in value. The measure of damages is the difference between the value of the goods when delivered and the value had they measured up to the warranty; or
2. To maintain an action for damages. The measure of the damages is the estimated loss directly and naturally resulting from the breach of warranty.

The particular value of this remedy is that merely by the supplier stating that the olive trees will create a certain yield of produce will give rise to a right to sue in contract. To successfully pursue a remedy at common law, the purchaser must first circumvent the restriction on recovery for innocent misrepresentations.

2. Trade Practices Remedies

A false statement whether innocent or intentional concerning the yield of olive trees may be misleading and deceptive conduct breaching section 52 of the TPA. If the supplier is a trading corporation making the misrepresentation in trade or commerce, it will fall under the jurisdiction of the TPA.

The intention to mislead and deceive is not actually a requirement of misleading and deceptive conduct (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216). When the supplier innocently, negligently or fraudulently represented to the purchaser that the olives trees would produce a certain yield to the supplier, the purchaser may bring an action under this section.

Where such a misrepresentation has resulted in loss and damage to the purchaser, the Court has general powers under section 87 in common law and equity to make such orders for compensation as are suitable.

Similar remedies at a State level are available against companies and private individuals under the Victorian Trading Act. Most States have equivalent legislation.

This Update has been prepared for clients and professional associates of Baker & McKenzie. Whilst every effort has been made to ensure accuracy, this Update is not an exhaustive treatment of the areas of law discussed and no responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this Update is accepted by Baker & McKenzie.