contract law: August 2007 Archives

Earlier in August, the New South Wales Supreme Court handed down its long-awaited judgment in the eBay Wirraway case -- more formally known as Smythe v Thomas [2007] NSWSC 844.  That judgment pre-dated the establishment of this blog, but it's quite a significant case -- at least so far as eBay buyers and sellers in Australia are concerned -- so it's worth a recap.

The facts, briefly stated, are that Thomas listed a rare and valuable Wirraway aircraft on eBay, with an auction duration of 10 days and a minimum price of $150k.  Smythe, after a phone conversation with Thomas (the substance of which was disputed) placed a bid for $150k and, there being no other bidders, "won" the auction.

[I'd rather buy a T-38, or a nice Embraer bizjet, but I digress...]

Thomas was unhappy because he was hoping to obtain $250k for the aircraft.  He refused to complete the transaction, and Smythe sued.  Thomas' defence was:

1. There was a contract (the eBay User Agreement) between Thomas and eBay, and between Smythe and eBay, but there was no contract or agreement between Thomas and Smythe;
2. The eBay listing was analogous to a classified advertisement -- i.e. an invitation to treat;
3. Even if there was offer and acceptance, the time for payment was to be negotiated and the agreement was therefore incomplete;
4. Smythe waived his right to bid on the auction, based on the content of the disputed phone call.

Rein AJ referred to a number of overseas cases in which online auctions have been discussed, the relevant provisions of the Sale of Goods Act 1923 (NSW), rejected each of Thomas' defences, and concluded that there was a valid and enforceable contract for the sale of the aircraft, and that it should be specifically performed.

Despite the fact that eBay were downplaying the potential effect on their business model and online commerce via eBay in Australia generally, it would seem that if Thomas had succeeded on any of his first three defences, it would have thrown a serious spanner into eBay's collective works.  It's reassuring to see that this didn't happen.

In July this year, Jetstar lost a case in the Victorian Civil and Administrative Tribunal concerning its terms and conditions of sale.  The case, Free v Jetstar Airways Pty Ltd [2007] VCAT 1405, involved a term of Jetstar's agreement:

JETSAVER FARE RULES

2.1 Subject to availability and payment of all applicable amounts, changes can be made to your Booking as follows. Changes to the origin and destination of travel are not permitted.
2.2 Your new fare will be at least the amount of the fare you originally purchased, and may be more. At the time your Booking is changed you must pay the difference (if any) between the fare you originally purchased and the fare available on the date of the change. This will apply to all date, time and name changes.
2.3 Date, time and Passenger name changes may be made by telephoning Jetstar Telephone Reservations ... A change fee* is payable for each change, for each passenger flight segment change ...
*Current Jetstar fees and a summary of fare types can be found at jetstar.com/faretypes.html.

The Applicant had booked two tickets to Honalulu for herself and her sister, for $437.39 per person return.  Afterwards, her sister became unable to travel and the applicant wanted to change her sister's ticket into her niece's name.  Jetstar would only do so if she paid a $75 change fee, plus the difference between what she originally paid for the tickets and what the tickets were currently selling for -- which was $600.93.  The Applicant paid under protest and brought proceedings in VCAT alleging the above terms, as applied to changes of name, were unfair terms within the meaning of the Fair Trading Act 1999 (Vic).  The Tribunal agreed and ordered a refund of the $600.93.

At the time, I predicted that Jetstar was likely to appeal, and to stop allowing name changes altogether.  I was right.  Not only is this a rather petulant act, it seemingly ignores the possibility that their new term:

Only date and time changes are permitted, subject to availability. Changes to the passenger name and changes to the origin or destination of travel are not permitted.

could very well be an unfair term as well.