I agreed to what?

It’s an emotional roller coaster you’d likely want to avoid. Imagine scratching a lottery ticket, winning $100,000, staying up all night thinking about what you’ll do with the money, being told the following morning it’s not a winning ticket, taking the NSW Lotteries Corporation (“Lotteries“) to court, winning at trial, finding out Lotteries has appealed, fighting the appeal, losing, realising you’re not getting the $100,000 and then realising that your legal costs and your potential liability for Lotteries’ legal costs may far exceed the value of the winning-then-losing-then-winning-but-ultimately-losing ticket.

You’ll find everything you need to know about the relevant background in our earlier post on the trial judgment, here. In short, the Kuzmanovskis purchased a pictionary themed instant scratchy. The ticket stated that if you matched the word to the picture, you won the money shown. The Kuzmanovskis believed the word “BATHE” matched the picture of a man swimming.

When the ticket was scanned in and didn’t pay out, the Kuzmanovskis sued Lotteries and won, obtaining judgment for payment of the $100,000 prize money on the basis that the picture and word matched even though Lotteries did not intend the ticket to be a winner. Lotteries appealed to the Full Court of the Federal Court of Australia.

Both sides agreed that by purchasing the ticket the Kuzmanovskis had entered into a contract with Lotteries. The dispute was about the terms of that contract. The Full Court held that it had to give effect to the terms of the contract, provided they were clear and unambiguous, even if those terms were “capricious or unreasonable“.

The problem for the Kuzmanovskis was that, as well as stating that if you match the word to the picture you win the money, the ticket contained, in prominent typescript, the following:


The Full Court held that this “unambiguously sought to incorporate [into the contract] the statutory requirements of the Lotteries Act and its subsidiary legislation“. The Act provides that no prize is payable in respect of a ticket “if the ticket does not satisfy the verification code or other test” (ie no

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prize is payable if, when the ticket is scanned in, it says “not a winning ticket“). This provision is expressed to override any agreement and operates even when the ticket otherwise indicates that it is a winner.

Since the Act was held to be incorporated into the contract, no money was payable to the Kuzmanovskis, even though the Full Court agreed that the word “BATHE” matched the picture of the man swimming. This raises some interesting questions about incorporation of terms by notice where those terms are not readily accessible to the party entering the contract at the time the contract is formed.

For example, if you purchase a ticket to an event which says “subject to the terms and conditions available at our website“, and you have no way of accessing those terms at the time of purchase, are they binding? Does this judgment validate “shrink wrap” agreements (eg a licence agreement for the use of software which you are said to agree to upon opening the packaging, but the terms of which are accessible only after the package has been opened)? What about browse-wrap and click-wrap agreements? Is the situation different when the terms to be incorporated are legislation? Is the situation different again if the parties are of equal bargaining power and the terms are generally negotiable, even though some terms are not known to one of the parties? What if two individuals agreed to be bound by terms which neither party had seen? What role does the unfair terms legislation play in all of this?

As an aside, at trial, the Kuzmanovskis were also awarded $20,000 as compensation for the “initial soaring of [their] hopes and dreams” which subsequently turned to “prolonged feelings of disappointment, anger and frustration arising from a sense of being cheated“. Lotteries appealed against this finding on two grounds. First, that $20,000 was “plainly excessive“. Second, that “no reasonable person inspecting the ticket, who chose to exercise a modicum of care and attention to its entirety and to its context, could come to the conclusion that the ticket, in the [match the picture to the word] play instruction, provided all the relevant information required to determine whether it is a winning or losing ticket“.

The Full Court rejected both arguments and noted that awarding damages for injury to feelings is “not a precise science“.

After a year long legal battle, assuming there is no appeal to the High Court, the Kuzmanovskis have won themselves $20,000 and, if they are paying their own legal fees, have no doubt made a substantial loss overall. It will be interesting to see if they are also ordered to pay the legal costs of Lotteries – which would make this one of the most unlucky lottery tickets ever sold.

3 Replies to “I agreed to what?”

  1. This decision will have no impact whatsoever on the interpretation by the Australian courts of shrink-wrap, browse-wrap, click-wrap etc agreements. This is because the lottery contract is a “statutory contract”, the terms of which are determined by the operation of a statute (in this case the Public Lotteries Act of NSW). One judge, considering such a statutory contract, said: “Generally, such contracts should not to be construed the way that ordinary contracts are construed. The reasons for this are several but include the inability of the parties to control the terms of their bargain and the corresponding irrelevancy of their intentions” – http://www.austlii.edu.au/au/cases/cth/FCA/2010/534.html at [152] There are very few scenarios in which Australian law operates to form a statutory contract. There is certainly no such legislation that applies generally to software or content licensing transactions with Australian customers.

  2. Very interesting. But I note the court did not say “unambiguously sought to incorporate [into the contract] the statutory requirements of the Lotteries Act and it’s subsidiary legislation”: the judges know the difference between its and it’s. Shocking.

    1. Thanks for the pick up
      I have amended.  I guess it could have been worse, I could have written “unambiguously sort to incorporate…”

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