In the recent decision of Olivaylle Pty Ltd v Flottweg GMBH
& Co KGAA (No 4) (2009) 255 ALR 632, a single judge of the
Federal Court held that a purported termination of a contract for
the sale of goods by the purchaser for an alleged breach of that
contract was invalid. The judge also made an important observation
about the acceptance of agreements in the age of email
Briefly, the facts of the case are as follows. The director and
controlling mind of Olivaylle sought to establish a large olive
grove and olive oil manufacturing plant in central western
Victoria. While waiting for the first stage of the grove to reach
maturity, the director of Olivaylle tendered for a number of
international producers of equipment for the processing of olives
and, on 8 February 2005, entered into a written contract with
Flottweg, a large international manufacturer of such equipment.
Prior to entering into the contract, Olivaylle paid a deposit of
approximately €140. It was a term of the contract that
Flottweg would guarantee that the equipment supplied would be in
accordance with certain design and quality specifications, and that
Olivaylle would be entitled to exercise a right to a reduction in
the purchase price or a "withdrawal" from the contract on
the expiry of a "reasonable period of grace" after notice
in writing of a failure to meet such specifications. Such a notice
was delivered on 21 February 2006 alleging purported defects in the
production line process and requiring those defects to be remedied
by 30 June 2006, failing which Olivaylle asserted that it would
withdraw from the contract and demand the return of its deposit. On
the passing of 30 June 2006, Olivaylle did just that – to
which Flottweg took issue and proceedings were commenced.
Essentially, Olivaylle's case was that the requisite
"reasonable period of grace" had expired, entitling it to
terminate or "withdraw" from the contract. Further, in
order to give business efficacy to the contract, it was an implied
term of the contract that Olivaylle was, upon its withdrawal from
the contract, entitled to its deposit back and was not required to
make any further payments under the contract.
Logan J held, after much analysis of Australian and civil law
concepts, that Olivaylle had no right to nominate 30 June 2006 as
the conclusion of the "reasonable period of grace" and
that, on the facts, that period could not end sooner than April
2007 due to certain harvesting considerations. Therefore, Olivaylle
had no right to terminate on 30 June 2006. Indeed, Olivaylle's
request that certain defects be remedied was seen as an affirmation
of the contract.
Logan J also expressed the view (which in the end wasn't
necessary for his decision) that the instantaneous communication
rule applies when considering when and where the acceptance of an
offer by email occurs. His Honour suggested that he would employ an
analogy to telexes – the place where the message is
received is where the contract is accepted, rather than the postal
acceptance rule which states that acceptance occurs at the time and
place where the letter was posted. In this case, Flottweg's
acceptance was communicated by email (sent in Germany) to Olivaylle
at its olive grove in Victoria. Thus, if the Federal Court position
in this regard is to be followed, it appears that a contract will
be deemed to be made, and therefore the law that applies will be,
where the email acceptance was received.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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