First Principles of Business Law Chapter 10 Notes PDF

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Notes Week 9- Consumer Protection in Australia Introduction- Aus Consumer Law, replacing trade practices act  How is a consumer defined? o The price and kind of goods  If less than or equal to 40k, purchaser only taken to be a consumer if goods acquired are for personal use  Vehicles are special case-regardless of price, still a consumer if one buys it to use in the transport of goods o Purpose:  Not a consumer if goods are intended for resale, consumed or transformed in commercial production or as part of a business Protection against misleading conduct  Misleading conduct in trade or commerce prohibited o Sec 18(1) of ACL:  Person shouldn’t engage in misleading conduct in trade- not limited to consumers o The concept of misleading conduct  Conduct is misleading when it leads person at whom its directed into error  Must be able to be inferred that those persons were misled because of the conduct in question  McWilliams wines pty ltd v McDonalds systems of Australia o Facts  McWilliams advertised wine under the name Big Mac  McDonalds claimed McWilliams use of name big mac was misleading conduct in breach of s 52 of the trade practices act - Consumers might think its related to McDonalds product o Issue: Was McWilliams conduct likely to mislead consumers? o Decision: Unlikely to be the cause of confusion o Reason:  Consumers might wonder if there’s a business connection, but ad didn’t suggest any  If anyone did assume relationship, it wouldn’t be because of McWilliams conduct o Summary: McWilliams Wines/McDonalds- McWilliams ad for wine called big mac, McDonalds said misleading conduct, consumers might think its related to maccas= unlikely to mislead, ad didn’t suggest relationship  Campomar Sociedad Ltd v Nike International o Facts  Spanish company manufactured perfumes and related products called Nike  Spanish company launched perfume- Nike sport in Aus  Another perfume displayed was adidas  Nike brand didn’t manufacture perfumes  Adidas argued Campomar marketing was likely to mislead purchasers o Issue: was campomar’s conduct likely to mislead public- thinking it was Nike’s perfume? o Decision: Likely to mislead o Reason:  Nike itself didn’t make perfumes, but other sports brands did, which the public knew  Placing “Nike sport fragrance” in area with other sport fragrances would mislead ordinary members of public into thinking it was related to Nike international o Summary: Campomar/Nike – Misleading conduct. C had perfume- Nike sport- displayed next to adidas- likely to mislead consumers = thinking its Nike international.  No intention required for misleading conduct to occur o ACL: no reference of intention- conduct can be carless and still misleading  Yorke & Amor v Lucas Pty Ltd o Facts  Yorke to buy record shop from treasure way stores  Treasure way appointed Ross Lucas as agent  Lucas passed on some info wrong- statement that weekly turnover was $3500  Yorke relied on this info, suffered loss and sued treasure way and agent for breach of s 52 o Issue: Were both treasure way and Lucas liable for misleading conduct? o Decision: both in breach

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Reason:  Lucas can’t claim misleading info was given without negligence & was thought to be true  Even if company acted honestly, can still be in breach for misleading conduct  Lucas could have disclaimed responsibility for accuracy of info when gave to Yorke Summary: Yorke/Lucas- Yorke buys record store, Lucas acts as agent for Store, told Y wrong financial info- Y relied on info and lost $= misleading conduct even though careless, both agent/ store in breach

Intention as evidence of misleading conduct o Intention not required for s 18, but existence of deliberate/careless intention relevant Disclaimers o Liability for misleading conduct avoided if person says: take no responsibility for what’s said- disclaimer Butcher v Lachlan Elder Realty Pty Ltd o Facts  Lachlan made brochure for waterfront property- Sydney  Had diagram- L put in fine print accuracy isn’t guaranteed, should rely on own sources  Butcher relied on info given, bought  Diagram inaccurate- affected how he could develop property  B wanted to avoid on s52 trade practices o Issue: had the realtor done misleading conduct? o Decision: No o Reason:  Disclaimer clear, even if small  Shouldn’t have been relied on by butcher o Summary: Butcher/Lachlan- disclaimers. L brochure for property, had diagram, stated it’s not accurate, B relied on it, wanted to avoid= disclaimer obvious, no breach. Conduct must take place “in trade or commerce" o Sec 18 prohibits misleading conduct in trade or commerce- doesn’t apply to non business transactions Concrete Constructions (NSW) Pty Ltd v Nelson o Facts  Nelson working on concrete building, CC said grate secure, but nelson fell- was injured  Wanted damages for breach of s52 trade practices act  Misleading conduct in trade or commerce o Issue: Did the act of misleading info to employee take place in trade or commerce? o Decision: Not part company’s commercial activities, only something incidental – not in trade/commerce o Reason:  Only includes conduct that is itself an aspect or element of activities which bear a trading character  Has to be conduct that has an element of trade/commerce  Not interpreted widely- i.e. cant be something that’s incidental, or as a result of the trade o Summary: Concrete Constructions/Nelson- N works on concrete building, CC said grate secure, Nelson fell/injuredsaid breach of misleading conduct in trade/commerce= No breach, not in trade/commerce, only incidental to trade activities. Application to natural persons, artificial persons and information providers o S 18- Misleading conduct applies to corporations/individuals- not to info providers like ABC, but applies to ads (if likely to mislead) Remedies for a breach of s 18 o Injunctions, damages, compensation orders, non punitive orders and declaring void- breach of s 18 doesn’t incur fines or civil penalties

Protection against unconscionable conduct  The scope of unconscionable conduct in ACL o S 20(1) prohibits unconscionable dealings within meaning of unwritten law- also a breach of s20 in ACL- they overlap o Purpose of overlap is to make remedies from ACL available for both  Additional circumstances giving rise to unconscionable conduct o Sec 21(1) goes furthero Person mustn’t in trade / commerce, and in connection with supply or acquisition of goods or services engage in conduct that’s unconscionable

Both consumer and commercial transactions- doesn’t define type of goods, purpose or price applies to a wide range of circumstances, including those outside of definition S 22 lists specified matters which a court may take into account when deciding whether there has been a breach of s 21  Relative bargaining positions of parties  Whether, by conduct, a party imposed conditions not reasonably necessary to protect their interests  Whether a party was unable to understand documents relating to transaction  If undue influence / tactics used by a party  Circumstances under which/amount for which, a party could have gotten identical goods/services from another person  Extent to which a party’s conduct was similar to previous transactions  Requirements of industry code  Extent to which one party failed to disclose their intention to engage in conduct that might affect the interests or foreseeable risks of other party  In the case of contracts for the supply of goods/services  Extent to which a party was willing to negotiate terms of contract  Terms and conditions contained in contract  Conduct of parties in complying with contract  Conduct after entering contract  Whether a party has contractual rights to vary unilaterally term of contract  The extent to which parties acted in good faith o Court isn’t limited to these factors, can exercise in discretion if a case has unconscionable conduct Gary Rogers Motors (Aus) Pty Ltd v Subaru (Aus) o Facts  1991, GRM to be a car dealer for Subaru - 3 years, renewed in 94  GRM unwilling to comply with new terms- S terminated GRMs dealership  GRM said it would do whatever S wanted, but S refused o Issue: Was S decision to terminate the appointment a breach of s 51AC of trade practices act? o Decision: No o Reason:  S 51AC said: failure to comply with industry code of conduct- factor that might show unconscionable conduct  Franchisor had to provide written reasons when terminating contract, S had not provided written reasons- but termination was known  S hadn’t complied with industry code- but can’t be unconscionable dealings o Summary: Gary Rogers Motors/Subaru- GRM car dealer for S, unwilling to comply with new terms- S terminated GRMs dealership= not breach of trade prac act for unconscionable conduct- even though S didn’t comply w/ industry code- not bad enough to be unconscionable dealing. Enforcement o Injunctions, damages, compensation orders etc.- no fines, but civil pecuniary penalties can be imposed o o o

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Protection against unfair terms in contracts  Regulation of terms in consumer contracts o Suppliers have greater bargaining power than consumers- so contracts can be burdening o Provisions of ch 2 part 2-3 of ACL invalidate unfair terms within consumer contracts  Identifying contracts that are regulated o Consumer contracts are defined in s 23 as contracts for “supply of goods or services” or “sale for grant of an interest in land” to an individual getting goods for their own personal use o Price paid is irrelevant o If party wants to argue that a term is void, contract must be standard form contract  Where one of the parties has more bargaining power, prepares terms on which they are willing to deal, without giving the other party opportunity to negotiate terms  Terms presented on take it or leave it basis, not individual  If a party says it was in standard form, the other party must disprove it  Defining “unfair” terms o Sec 24 says that terms are unfair if  It would cause imbalance in parties contractual rights (significant), not reasonably necessary to protect legit interests of party who would be advantaged, and would cause detriment to other party if relied on

Don’t apply to price and subject matter When deciding if unfair, court considers contract as a whole, and the extent to which unfair term is made available to the disadvantaged party (to be understood) o Sec 25 gives examples:  Term permitting one party, not the other, to avoid the performance  Term permitting one party, not the other, to vary terms  Unfair terms of no legal effect o Sec 23 of ACL makes void any unfair terms, as long as contact can continue operating without term, remains binding  Enforcement o Inclusion of unfair terms doesn’t incur fines or civil pecuniary penalties-but others as above (damages, injunctions etc.) Protection against unfair business practices  Regulation of business practices o Suppliers may use marketing strategies that aren’t honest- ch 3, part 3-1 of ACL prohibit this  False of misleading statements o Sec 29 prohibits the making of misleading statements in connection with supply of goods o Person mustn’t falsely represent that goods  Offering gifts and prizes o S 32, practices offering gifts as prize are prohibited- if there is no intention of actually giving it o If offer or gift isn’t given to consumer within reasonable time- pecuniary penalty on supplier o Behaviour can be excused if seen to be beyond suppliers control (after necessary precautions)  Misleading conduct as to the nature of goods or services o S33/34– no behaviour that misleads the nature, purpose/quantity of goods/ manufacturing  Bait advertising o Sec 35- if supplier can’t supply goods for an amount of time / reasonable quantities- prohibited  Wrongly accepted payment o Sec 36 (1-3) of ACL: can’t accept payment for goods that won’t be supplied at all, or something completely materially different from said, or if can’t be supplied within reasonable times o Sec 36(4)- once paid, goods must be supplied soon unless situation beyond suppliers control  Unsolicited cards o S 39 says cards can’t be sent to those who haven’t requested it in writing  Unsolicited goods o Sec 40- prohibits demanding payment for goods from someone who didn’t ask for it o Sec 41- anyone who receives unsolicited goods isn’t liable to pay for it, and don’t have to pay for damage unless they caused it (of goods)= sec 41 o After 3 months, person who sent goods can’t get them back (or shorter, if written)  Pyramid schemes and referral selling o S 44- pyramid schemes prohbited, whereby all persons joining schemes as participant must provide benefit to another participant, and as new people join, they receive benefit from new o Referral selling- if a consumer is promised a reduction in price if the consumer assists in finding more consumersdelivery depends on arrival of new consumers  Multiple pricing o Supplier must show goods at lower price, if there are two prices- s 47 o Sec 48- single price (combo of charges and taxes) of goods must be displayed- not shipping fee  Harassment or coercion o Sec 50- prohibits undue harassment/coercion for goods/services or for sale of interests in land  Enforcement o Civil pecuniary penalty for engaging in prohibited business practices, punishable by fine o o

Statutory guarantees in consumer transactions  Guarantee of correspondence with description o When bought by description, s56 guarantees that goods supplied will be those described  Guarantee of acceptable quality o S 52 of ACL guarantees that goods are of acceptable quality- cant be unsafe, defected etc. o If supplier shows consumer has used product abnormally- then it isn’t unacceptable  Guarantee of suitability for a consumer's purpose

If the consumer specifies what they want the goods for and relied on the skill and judgment of supplier, s 55 of ACL provides guarantee that goods will be fit for intended purpose Guarantee of correspondence with samples o S 57 guarantees goods will correspond with sample – free of defects not shown in sample Guarantee of good title and quiet possession o S 51 guarantees supplier has right to dispose of goods when time comes to pass ownership o S 52 guarantees right of ownership- not disturbed by 3rd party who have completing claims o S 53 guarantees goods sold to a consumer are not subject to security, charge or encumbrance not disclosed in writing before time of sale or agreed to by consumer Guarantee of the availability of spare parts and repairs o Sec 58 of the ACL guarantees that manufacture will supply repair facilities and spare parts for a reasonable period afterwards- unless otherwise specified Guarantees of express warranties o S 59 guarantees manufacturer will comply with express warranties- as will supplier Remedies o General remedies of ACL o ch 5 pt. 5-4 also gives remedies for breach of statutory guarantee A failure that can be remedied and is not a major failure o Consumer can ask supplier to remedy the failure o Supplier should repair or replace any faulty goods, refund, or correcting defects o If supplier doesn’t remedy the failure within good time or at all, the consumer can  Get the failure remedied elsewhere, and recover costs from supplier  Notify supplier they are rejecting goods on grounds of failure o Consumer cant reject if they fail to do so within a certain area of time - rejection period o Goods must be returned to supplier, unless costly, and supplier must refund or replace them A failure that cannot be remedied is a major failure o If failure to comply cant be remedied/ is major failure, consumer can reject and get compensation- can also sue supplier for damages to compensate losses o Consumer cant reject beyond a specific time (rejection period) Liability of manufacturers o If there is a breach of s 54, 56, 58, or 59 (1) s 271 provides consumer with right of damages Statutory guarantees in contracts for services o S 60-62 provides guarantees that services will be rendered with skill, services will be fit for purposes intended, and that they'll be supplied by reasonable time- cant be excluded o

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Unsolicited Consumer Agreements  Regulating marketing by suppliers to consumers in their home o Consumers often are called in their homes o Standards of conduct: ch 3 pt 3-2  Can’t be at inappropriate hours, cant be overly persistent, consumer is given adequate info, they aren’t rushed into decision  Identifying unsolicited consumer agreements o Sec 69 of ACL says agreement is unsolicited when:  Involves supply of goods from dealer  Dealer: person who goes into negotiations with a view to making agreement for supply of goods, even if they’re not the supplier  Conducted by phone or at place that isn’t suppliers business place  Consumer didn’t invite the dealer to telephone them  Total price paid by consumer is more than $100 or dunno when transaction began  Restricted times for calls o S 73- can’t call on Sunday or public holiday, between 9-6 weekdays, 5 on sat  Obligation on supplier to provide specified information o Dealer must provide objective to seek agreement for supply of goods within reasonable time o Dealer must inform consumer of their rights to leave premises immediately o Dealer must state name and address, or supplier  Compliance with request to leave

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o Sec 75 of ACL empowers consumer to end negotiations with a dealer by asking them to leave o Dealer must comply- can’t contact again for at least 30 days after Written copy of agreement to be supplied o Sec 78 requires copy of agreement a consumer enters into in unsold. o If by phone, copy sent within 5 business days, or if in person, must be given as soon as signed o Sec 79 says agreement must show all terms - total amount to be paid, amount of postage, suppliers business name, ABN and contact details Enforcement o General remedies for ACL o S 82 allows consumer right to terminate unsolicited agreement with certain time  If not on telephone, within 10 business days after agreement made  If on telephone, 10 days from when consumer got copy of agreement o Longer periods allowed for special cases- i.e. if dealer approached outside permitted hours, didn’t disclose identify, didn’t cease to negotiate at consumers request- consumer can terminate within 3 months o Consumer informs dealer by writing or orally (cancelling) o Consumer must return goods to supplier, and consumer is liable for damages that they caused o If supplier doesn’t collect within 30 days- lose right to claim it No waiver or rights permitted o Sec 90 says rights can’t be waived in ACL dealing with above stuff

Safety standards  Regulation of dangerous products o ch 3 pt. 3-3 ACL establishes system for protecting consumers in dangerous situations  Setting safety standards o S 104-5 publishes safety standards consisting of requirements in relation to how goods are to be designed, made, packaged etc. safety standards for skills of supplier, materials etc. o Especially for goods on internet- s 106-7 prohibit unsafe goods  Bans on dangerous goods o Minister is empowered by s 109 and 114 of ACL to ban dangerous things o Published on internet o Interim bans are imposed by cth, state or Terri and last for 60 days from date they begin- can be extended by 30/60 days o Permanent bans are in force on the day they come into operation until revoked at ministers discretion - s 118 and 119 prohibit person supplying these goods  Recall of goods o S 122 issues recall notice if goods may cause injury, or if they don’t meet safety standards o Suppliers may need to tell consumers what they will do in relation to recalled goods- i.e. replace- s 127 prohibits it  Safety warning notices o S 129- publish written notice on internet warning that goods may pose a risk o If goods aren’t recalled or ban, minister publishes results and gives notice of any action  Notice of death, injury or illness o S 131-32 requires supplier of goods who becomes aware of death caused by product to report to cth, enabling minister to take action by recalling...