Case Summary - contract b case PDF

Preview

Summary

contract b case ...

Description

Contract B Case Summary Misleading ( in trade or commerce, ACL s2 : definition) O’brien v Smolonogov :Private sales of property between individuals is not considered a business activity.Note, if the property is to be used for business activity, it will be covered by the act. Houghton v Arms: all employees that they could be personally liable for any false and misleading representations they make in the course of their employers trade or commerce. While plaintiffs will generally only sue corporations, where the corporation is unable to pay its debts, employees could be liable for their false and misleading representations.( statements made ‘ in trade or commerce’ by employees) Bond Corporation v Thiess Contractors: the giving of advice by a solicitor in respect of a purchase or sale of a business constitutes in trade or commerce. ( professional activities) Madden v Seafolly Pty Ltd: Conduct of business and statements were held to be “in trade or commerce” Misleading or deceptive conduct – likely effect on the audience ( conduct directed at the public at large) Campomar v Nike International: Product placement in shop shelves next to comparable products was likely to mislead or deceive reasonable and ordinary members of the public (Conduct directed a the public at large) Parkdale Custom Furniture v Puxu: “Consideration must be given to the class of consumers likely to be affected by the conduct…may include inexperienced as well as the experienced…” ACCC v TPG Internet: the ‘dominant message test’ of an advertisement is of crucial importance in determing whether it is misleading or deceptive. Any qualifying statements must be sufficiently clear and prominent so as not to mislead consumers, particularly about the price. Misleading or deceptive conduct – likely effect on the audience ( conduct directed at identified groups) Butcher v Lachlan Elder Realty: An inaccurate house survey was in brochures. HCA held is not misleading since P was experienced with specialized advisors, while D was not capable of verify everything in brochures. It depends on the nature of the parties and the character of the transaction, what each party knew about each other. Interpreting ‘ misleading’ Henjo Investments v Collins Marrickvill: Conduct is regarded as “misleading” if its has the capacity to lead into or cause ERROR Parkdale Custom Build Furniture v Puxu Pyt Ltd: ERROR occurs when a person is led to believe things that are not true or correct. ( Is culpability a requirement? Not necessarily. In Puxu, Gibbs CJ stated that ‘ a corporation which has acted honestly and reasonably… may nevertheless be rendered liable’; innocent misrepresentation can be a contravention of ACL, Section 18.) ‘Misleading’- puffs Byers v Dorotea : ‘ bigger and better’, if the statement was made without comparing then it would have been a general statement ( mere puffery). General statements are less likely to be taken seriously, less likely to lead the representee into error than a statement with some degree of specificity. ‘Misleading’- silence Reasonable expectation of disclosure Lam v Austotel Investments Australia Pty Ltd: No imposed obligation on a party to bring information to the other, and a failure would not be dishonest. Miller & Associates Insurance Broking Pty Ltd V BMW Australia Finance Ltd (IMPORTANT): Miller provided BMW with documents. BMW alleged failure to disclose assign or cancel issues misleading. HCA held it not required to volunteer information. It did not mislead since BMW was an experienced premium lender and Miller provided a copy of the policy. Failure to disclose EK Nominees Pty Ltd v Woolworths Ltd: development changes in plans. Claimant expends substantial resources. Respondent held liable. Deliberate silence Johnson Tiles V Esso Australia: Two instances where silence can be misleading or deceptive conduct

(1) If silence is part of broader range of conduct which becomes misleading due to non-disclosure (2) If silence alone is relied on as constituting misleading or deceptive conduct. It must be deliberate (Remains an unresolved issue by the High Court). ‘Misleading’- representations about future ( ACL, S4(1)(a) and (b) ) Miba Pty Ltd v Nescor Industries Group: Representor made statement genuinely believing to be true e.g. expected rent or franchise profits CONTRAST WITH: Digi-Tech v Brand: Whether representation as to future matter became misleading “depends on the words used and the general context” Misleading – promises Two aspects: (1) Promisor intends to and is able to perform the promise; and (2) Promise will be honoured in the future Promise of present state of affairs= warranty. If false leads to liability Accounting Systems 2000 v CCH Austrlian: Accounting Systems > Castle Douglas (License)> CCH Australia. Accounting System was not the owner. False warranty. CCH claimed compensation because of warranties in the contract.  Parol Evidence Rule cannot be used to circumvent liability for misleading promise. Claimant must show that pre-contractual promise was misleading. Italform Pty Ltd v Sangain Pty Ltd: Supply period of cranes of 8 weeks (assurance by managing director) VS 90-150 days (contractual statement), Longstanding commercial relationship between the parties,Verbal assurance was a pre-contractual promise (misleading). Could not be countered by using the Parol Evidence Rule. 

Misleading- statement of opinions, belief & law Forrest v ASIC: P announced a binding contract which lacked certainty. The court said the identified class was not naïve. They knew difficulties of mining projects. It was not misleading. Misleading – Passing on information Google v ACCC: The High Court held that a reasonable search engine user would know the difference between a sponsored link and an organic search result. Google did not make any misleading or deceptive representations, even when the text of the sponsored links was misleading (written by the advertisers). REMEDIES (UNDER ACL) S236 Compensation / damages S237 Court orders to prevent loss S243 Specifies orders that can be made under s237 S232 Court can order injunctions to restrain breaches of S18 In order to seek remedy under s 236 or s237 Three elements need to be satisfied 1) Breach of s18 2) Loss or damage suffered or likely to be suffered 3) Causal connection between loss or damage and the breach of section 18. S243 Accompanies s237 Loss or Damage under section 236 Loss or damage must be suffered by claimant due to respondent’s conduct e.g. loss of opportunity reliance loss, expectation loss. Marks v GIO Australia Holdings Murphy v Overton Investments Pty Ltd ( purchased a leasehold interest in a unit, the ‘ outgoings’ of the village, expectation loss) Loss or damage under section 237 ( s237 orders are granted under court’s discretion unlike section 236, which is entitlement to compensation) Exercising discretion- court guided by analogies

Henjo Investments v Collins Marrickville: exercise of discretion, court considered delay of two years in bringing the claim and changes in business unrelated to misleading conduct Apportionment of damages Section 243 (e) courts can direct the wrongdoer to pay Claimant Section 237 (2) compensation can be “whole or in part”. Causation (1)Causation is established by demonstrating ‘actual reliance’ Como Investments v Yenald Nominees: Claimant making own enquiries does not mean that causative effect disappears (2)Gould v Vaggelas: Inference of inducement can lighten the burden of proof for the Claimant Contrast with Campbell v Backoffice Investments (3) Material misrepresentation that is intended to induce and in fact induces the other party (representee) • Currently the applicable standard is Gould v Vaggelas as applied in ACCC v TPG Internet • where a representation has been made to create a particular impression in the mind of the representee and is intended to do so, it can be inferred that it has had that effect. • Effect of subsequent discovery of misleading conduct (enticement of representee) (4) The ‘ but for’ test is no longer the exclusive test for causation. Abigroup Contractors v Sydney Catchment Authority (No 3). But for test was not satisfied, yet the causal link was established. ( the loss was not caused by its misleading conduct. It argued that, but for the statement that there were no plans of the statement that there were no plans of the outlet pipe, the applicant would nevertheless have entered into the contract because it still would not have known about the further excavation work that would be required.) Exclusion clauses & disclaimers (1)Entire agreement clause/Merger clause/acknowledgment clauses. Can be a vehicle for exploitation. General Rule ( Campbell v Backoffice Investments). Entire agreement clause cannot exclude liability for misleading or deceptive conduct. (2) Disclaimer can only effect statutory liability if: • It has the effect that the conduct in question cannot be classified as misleading or deceptive • Claimant cannot successfully establish that it reasonably relied on misleading or deceptive conduct and hence, cannot prove loss caused by misleading or deceptive conduct • Poulet Frais Pty Ltd v The Silver Fox Company. Inclusion of acknowledgment clause and entire agreement clause. Representee should make own enquiries and seek legal advice. No guarantee as to accuracy. Representor held not liable for misleading or deceptive conduct Disclaimers Actual reliance becomes difficult if an expressly worded disclaimer is used For a disclaimer to negate potentially misleading conduct it must be worded unambiguously and feature prominently, and it must be communicated to the reader that the disclaimer is relevant to the information it is seeking to qualify. Butcher v Lachlan Elder Realty: Disclaimer was effective - “we cannot guarantee its accuracy and parties should rely on their own enquiries”; Disclaimer changed the nature of representations CONTRAST WITH Havyn Pty Ltd v Webster (the area of a flat could easily be determined by a real estate agent. The disclaimer was misleading) Exclusion Clauses General rule: Exclusion clauses cannot over ride statutory prohibition against misleading or deceptive conduct. NEA Pty Ltd v Magenta Mining: Exclusion clause: No warranty or condition expressed or implied as to suitability of equipment It did not negate the misleading or deceptive nature of the representation. Acknowledgement clauses What is acknowledgment clause? Representee declares that in entering the contract no reliance was placed on the representations (also called “no reliance” clause)

General rule: this does not break the causal link between the loss and misleading or deceptive conduct Venerdi Pty Ltd v Anthony Moreton Group Funds Management ( the respondent argued that A had agreed to the ‘ no- reliance’ clause- this argument was precluded for reasons of public policy because this kind of clause would reduce the level of protection offered by the statutory prohibition against misleading conduct Allowing a no reliance clause defeats public policy • Similar arguments were upheld in: Waltip v Capalaba Park Shopping Centre (misrepresentation regarding floor space) IOOF Australia Trusteees v Tantipech (misrepresentation on lease premises): the applicant did not understand the deed and was in fact induced by the misleading conduct. Unfair Contract Terms Unfair Contract Terms in contracts are void; Covered by ACL, Part 2-3 (UCTL) UCTL = standard form consumer contracts (ACL, Section 27 (2) Factors in determining standard form contract) • “take it or leave it” basis • UCTL Exclusions (shipping contracts, insurance) Test Three elements under UCTL (section24(1)) ELEMENT 1: Significant Imbalance (a) If the term will cause imbalance in rights and obligations • Office of Fair Trading v MB Designs • Entire agreement clauses – are they equally fair for representors and representees (Consumers)? • Consumers are more likely to rely on oral promises and statements (b) Whether the imbalance is significant • Director of Consumer Affairs Victoria v Trainstation Health Clubs: Gym membership and a clause requiring payment even when the gym shifts its location. Depriving right of the consumer to withdraw membership – considered unfair ELEMENT 2: Not reasonably necessary in order to protect the legitimate interests of the trader ACL, Section 24 (4) Term must protect a legitimate interest of the trader Term must be reasonably necessary (proportionate response to a business risk) Director of Consumer Affairs Victoria v Trainstation Health Clubs ( the term allowed the club to terminate the contract with its members for any failure by the members to comply with the club’s rules and regulations) ELEMENT 3: Detriment ACL, Section 24 (1) (c) • Any term can be construed as unfair if it cause any form of detriment against the other party • Usually consumer Determining whether a term is unfair Transparency of term: ACL, Section 24 (3) ACCC v Advanced Medical Institute Pty Ltd: Termination clause was considered non-transparent; Termination fee calculation formula/penalty fee etc was not disclosed; Forced patients to continue treatment even in cases of disadvantageous circumstances ACL, Section 24 (2) The extent to which the term is transparent The contract as a whole • Balance of one-sided term in the overall scheme of the contract • Offsetting factors Jetstar Airways V Free: Low price balanced with non-refundable ticket; In such cases the link between price and term must be transparent

Examples of unfair terms ACL, Section 25 (1) General examples Terms must still be reviewed for fairness under the UCTL tests Remedies for unfair terms Injunctions (ACL, Section 232);Compensation orders (ACL, Section 237);Compensation orders for non-parties (ACL, Section 239) • ACCC can take regulatory action – ACCC encourages review of contract terms with businesses • Provisions also extended to small businesses as of 2016 because small businesses are no different than consumers when it comes to standard form contracts Duress Party induced or pressured into entering a contract can pursue rescission as remedy • Justified on the basis of unconscionability on part of Respondent to retain benefits, given Respondents conduct. • Three categories: Duress to the Person Duress to Goods Economic Duress Elements of Duress • Pressure tactics in contracts is common • ‘Take it or leave it’ or other impliedly threatening statements • Some instances may be actionable • Formulation of Duress under English law (Universe Tankships of Monrovia v International Transport Workers Federation per Lord Scarman) Pressure amounting to compulsion of the will Illegitimacy of the pressure exerted ELEMENT 1) ILLEGITIMATE PRESSURE • Factors: Lawful VS Unlawful • Difficulty: When will the pressure become illegitimate? • Threat to do something unlawful may amount to illegitimate pressure even when the threatening party believes there is a lawful entitlement to do so (Beerens V Bluescope Distribution Pty Ltd) For example: This can potentially cover threat to report a crime or file a report. Creditor can threaten bankruptcy or recovery proceedings but only legitimately. Groundless threat vitiates a transaction • When pressure amounts to duress • Crescendo Management Pty Ltd v Westpac Banking Corp, per McHugh J “…whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate?” • ANZ Banking Group v Karam, per Beazley, Ipp and Basten JJA “The threat…need not be directed to the person or property of the victim…but can be to the legitimate commercial and financial interests of the party. Secondly, if the conduct…is not lawful, the resulting agreement may nevertheless be set aside where the weaker party establishes undue influence or unconscionable conduct…” ELEMENT 2) IMPAIRED CONSENT • Plaintiff’s will was so overwhelmed that the Plaintiff is incapable to act independently • Theoretically such contract can be void but acceptable standard is that it is actually voidable at the discretion of the Plaintiff • Causation: Pressure causing impaired consent must be at least one factor amongst a host of factor influencing Plaintiffs decision. Other factors: protest, seeking advice independently, steps to set aside the contract Duress of the person

•

•

Common law grounds for setting aside: actual or threatened violence (Barton v Armstrong) Coercion/violence in execution of deed Plaintiff would have signed the contract anyway. Plaintiff can obtain relief even though Plaintiff could not prove that despite the threats, he wouldn’t have signed the contract Threat of prosecution affecting health of party’s family member (Mutual Finance Ltd v John Whetton) Legitimate threat was considered illegitimate pressure

Duress of Goods Threatened detention or seizure or damage can fall within scope of duress in contracts • Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd Repeated charges after unsatisfactory service of helicopter Service provider knew service user needed helicopter urgently for charter Service user agreed to pay enhanced sum but after taking possession refused to do so Grounds of duress were accepted when service user refused to pay Economic Duress • Respondent threatens non-performance or breach unless modification or re-negotiations of contract occur • Applicable factors Was modification supported by consideration? Was modification the result of a genuine response to changed circumstances or under duress? • North Ocean Shipping Co v Hyundai Construction Shipbuilders demanding 10% increase in contract price Buyers paid the 10%, claimed possession of the ship and then launched a recovery claim Court declared this as not economic duress due to no protest and due to affirmation by the buyer of a voidable contract Remedies • Main remedy: Rescission Not available if substantial restoration of parties to original positions is not possible Not available if the Plaintiff has ratified or affirmed the contract after the illegitimate pressure has been lifted • Proceedings under ACL, Section 20 (under certain circumstances) Prohibits corporations from engaging in unconscionable conduct, in trade or commerce. Statutory remedies Undue Influence • Transaction need not be disadvantageous for the plaintiff. It may be one of the factors considered. In Australia, it is not a requirement for relief against Undue Influence that the transaction be disadvantageous to the Plaintiff (Barburin V. Barburin) • Recent test (UK): The transaction in question was explicable only on the basis that undue influence was used to procure it (RBS V. Etridge (No.2)). Actual undue Influence (AUI) • Plaintiff must prove that Defendant exerted undue influence on the Plaintiff to enter into particular transaction which is impugned (Barclays Bank v O’Brien) • See also Farmers Co-op Executors & Trustees v Perks. Violent husband. Undue influence found in transfer of property Presumed Undue Influence (PUI) • Equitable presumption of undue influence if a relationship of influence can be established • Shifts the onus of proving that undue influence was a factor in contract from Plaintiff to Defendant • Defendant needs to show that Plaintiff freely consented to the transaction • Commercial Bank of Australia v Amadio: Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party… Unconscionable dealing looks to the conduct of the stronger party in attempting to enforece, or retain the benefit of, dealing

with a person under a special disability in circumstance where it is not consistent with equity or good conscience that he should do so. Relationships of influence • Presumed relationships of influence Hartigan v International Society for Krishna Consciousness Incorporated Giving up every asset to the association. Misunderstanding of teachings. Judge found presumption of influence. • Relationships of influence in fact If the relationship between the plaintiff and the defendant does not fall into one of the recognised classes of deemed relationship of influence, Plaintiff can try to prove that there is a RELATIONSHIP OF FACT. Fact dependent findings of relationships of influence. Case to case basis. Lee v Chai: Purchase of property for mistress...