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Unit 7: Prospectus

17. A director can avoid liability for misstatements in the prospectus if he proves that he has Notes
reasonable ground to believe that the statement alleged to be untrue is true.
18. An expert is not criminally liable in respect of misstatements in the prospectus.

19. Where a prospectus contains untrue statements, the persons who authorized its issue are
punishable with fine up to 5,000.

Case Study Contract Termination

n 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
Icontract 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 communications.
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
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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 [euro] 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.
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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,
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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
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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 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.

Contd...

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