LAW OF CONTRACT

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Peter is a farmer. Early last year he purchased a used John Deere Harvester from Dave, the owner and proprietor of the agricultural equipment dealership in Dungog. When he called at the dealership, he told Dave that he wanted a good quality used machine that would not cause him trouble. He said he had a budget of $200,000 but would have to borrow most of the money from his bank. He also explained that he could not afford to buy unless he would be able to finance the purchase through contract harvesting. Dave showed Peter the John Deere and told him that this was a really good machine. Peter then told Dave that he needed something that could harvest at least 120 acres per day. Dave told Peter that the John Deere could do that easily, “in fact, it is capable of more like 140 acres.” When told this, Peter agreed to buy. Dave then produced a single page contract document entitled “Agreement for Purchase and Sale of Used Agricultural Equipment” which he explained had been prepared by his lawyer. Dave then filled in Peter’s full name and address, the model and serial number of the machine, the price and payment and delivery details. Below these details were a number of printed clauses. Only one is relevant to the dispute that has arisen between Peter and Dave. It is as follows:

 

  1. Warranties: The dealer warrants that he has the right to sell the equipment. All used equipment is warranted against mechanical defects and failures for one year from the date of purchase. No warranty is given as to the production capacity. This document contains the entire agreement between the parties, and the purchaser acknowledges that there are no other terms, warranties, or agreements (collateral or otherwise) relating to the said machine. The purchaser also acknowledges that he has not relied on any representations not contained in this document in making this purchase.

When Peter read the document he pointed out clause 1 and said “what about the 140 acres? Shouldn’t we put something like that in here?” Dave replied “Well, you can see that there really isn’t any place on the form for something like that, and my lawyer told me I shouldn’t alter the form. But I am giving you my absolute guarantee on this. This machine will do at least 140 acres per day. That’s part of the deal.”

 

With this assurance, Peter signed the document. He then arranged finance with his bank, borrowing the purchase price of $195,000, and giving the bank a chattel mortgage as security.

 

Over the course of the next year Peter obtained many harvesting contracts with other farmers in the Dungog area. The John Deere was perfectly reliable mechanically. However, it was capable only of harvesting 100 acres per day. As a result, Peter was not able to earn enough to keep up with his payments to the bank. Last week the bank called in Peter’s loan and took possession of the machine. It is likely that it will be sold at a loss, leaving Peter with debt still to pay to the bank.

 

When Peter complained to Dave about the production capacity of the John Deere, Dave said “Mate, I feel really bad about this. I really did think it would do 140 acres. But I have already talked to my lawyer, and he says I am legally bound only by the terms in the contract document.”

 

QUESTION:

Advise Peter on the possible grounds he has for claiming compensation from Dave.

 

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