Law10004 week 8 study guide PDF

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LAW10004 Introduction to Business Law Week 8 Study Guide: Dealing with consumers

Overview This week we consider: 1.

Rationale for consumer protection laws and outline of existing legislative framework.

2.

Definition of Consumer.

3.

Misleading and deceptive conduct.

4.

Unconscionable conduct.

5.

Unfair contract terms.

6.

Specific Prohibitions – Unfair Practices (Section 29 ACL).

7.

Bait advertising, Wrongly accepting payment, Interia selling, Pyramid selling.

8.

Consumer guarantees with respect to goods and services.

9.

Safety and Information Standards.

10. Offences and Remedies under ACL. By the end of this week, you should be able to: 1. Appreciate the rationale for the Australian Consumer Law (ACL) 2. Identify who must comply with the ACL and who is protected as a “consumer” 3. Understand the operation of s 18 of the ACL with respect to misleading and deceptive

conduct 4. Appreciate how the ACL prohibits unconscionable conduct and how it can in some

instances declare contract terms to be “unfair” 5. Explain the specific prohibitions with respect to a range of specific marking and selling

practices for example; bait advertising and inertia selling 6. Understand how the ACL implies certain guarantees into contracts with consumers,

which are intended to protect the interests of the consumer 7. Discuss the basic obligations of business with to safety of consumer goods, the

obligation to comply with Information Standard and the basic obligations of manufacturers in the law of negligence, which is also regulated and enforced by the ACL. 8. Have a basic understanding of the most common remedies relevant to the ACL.

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1. Rationale for consumer protection laws and outline of existing legislative framework 

Consumer law comes from legislation/statute and it regulates the relationship between Business and Consumers. Special protections exist at law to protect consumers. Today we shall consider: o

The legislation framework.

o

General protections (eg Misleading conduct, unconscionability and Unfair contract terms).

o

Specific protections (eg. Bait advertising).

o

Consumer transactions (e.g. consumer guarantees).

o

Safety of consumer goods (eg. Standards and liability).

Why have special laws to protect consumers? 

Consumers are seen to be entitled to additional protection under Australian law because when dealing with a business they are usually at a disadvantage.



The traditional rules of contract law offer little assistance to a consumer who is disadvantaged because of this inequality of bargaining power: the general rule is caveat emptor.



Consumer protection legislation seeks to address the fundamental imbalance in bargaining power between business and consumers.



In 1974 the Trade Practices Act (Cth) was first introduced and there were various state and territory laws that also attempted to protect consumers and other businesses. For Constitutional reasons, it was complicated whether to sue under State or Federal law. See p. 387.

The new Australian Consumer Law (ACL) 



Since 2010, Schedule 2 to the Competition and Consumer Act 2010 (Cth) has replaced the Trade Practices Act (in many ways it is identical but there’s just different section numbers). The new law is known as the Australian Consumer Law or ACL. Now all businesses are covered by the same law consistently, regardless of the type of business structure – see p. 389. The ACL protects consumers by prohibiting: o misleading or deceptive conduct generally o unconscionable conduct o unfair terms o various specific forms of prohibited conduct.

The ACL is administered and enforced by the Australian Competition and Consumer Commission (ACCC) and by the various State and Territory consumer protection agencies.

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2. Definition of Consumer 

Section 3 of the ACL provides that:

A person is taken to have acquired particular goods as a consumer if:   

the amount paid or payable for the goods does not exceed $40,000 the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads – p. 251.

The ACL does not apply to goods for re-supply, or for use in manufacturing or production (i.e. not relevant to business transactions). If not Business to consumer (B2C), then the State and Territory Sale of Goods Acts may apply instead.

3. Misleading and deceptive conduct 

A business must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive: ACL s 18.



In establishing a breach of the section, the intention of the business is irrelevant eg. Apple case and ACCC v Telstra.



Liability cannot be avoided by use of a disclaimer.



The range of remedies provided by the ACL for breach of the section is much wider than that available at common law under contract law.



The section can be relied upon not only by consumers but also by interested members of the public and by other businesses, including competitors: Tobacco Institute case (1992) and Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (2000). Requirement 1: Business has engaged in conduct 

A business will ‘engage in conduct’ if it makes a statement or a claim or a promise, performs an action, or refuses to do any of these things.



In certain circumstances, even silence can be conduct: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1989).

Requirement 2: The conduct was in trade or commerce Conduct that takes place in a non-commercial context will not be in breach of s 18: –

Concrete Constructions (NSW) Pty Ltd v Nelson (1990)

–

Durant v Greiner (1990)

–

Pilmer v Roberts (1998)

Requirement 3: The conduct was misleading or deceptive •

‘Mislead’ is usually interpreted as simply meaning ‘to lead astray’ or ‘to lead into error’, and ‘deceive’ is interpreted as ‘to cause to believe what is false’.

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•

In deciding whether conduct is misleading or deceptive the court will use a “special” objective test: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) based on identifying a reason member of the target audience who may have been mislead or deceived.

•

Carefully review pp. 256-257 to understand how objective test in Negligence differs from breach of s 18.

•

See also ACCC v Powerballwin, Henderson v Pioneer Homes, Given v Pryor and McWilliams Wine Case.

4. Unconscionable conduct 

A business will engage in unconscionable conduct if it unfairly takes advantage of another person’s special weakness or disability. This is an extension of the law from case/precedents e.g. CBA v Amadio.



There are two types of unconscionable conduct prohibited by the ACL:



o

unconscionable conduct generally: ACL s 20

o

unconscionable conduct when supplying goods or services to, or acquiring goods or services from, a person other than a listed public company: ACL s 21.

See ACCC v Lux (Vaccum cleaner sales) p. 260 and ACCC (landlord case) and Tips to avoid unconscionability.

5. Unfair contract terms 

Section 23 of the ACL gives Courts power to declare an unfair term of a consumer contract VOID if the term is unfair, as long as it is a standard form contract and the contract is still capable of continuing despite the unfair term.



According to ACL s 24(1), a term of a consumer contract is ‘unfair’ if :



o

it causes a significant imbalance in the parties’ rights and obligations arising under the contract

o

it is not reasonably necessary to protect the legitimate interests of the business

o

it would cause detriment to the consumer.

See Director of Consumer Affairs Victoria v AAPT Limited (2006), DCAV v Trainstation Health Clubs (2008) and DCAV v AAPT (2006).

6. Specific Prohibitions – Unfair Practices (Section 29 ACL) 

Section 29 ACL provides that a business must not make a false representation: o

that its goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use

o

that its goods are new

o

that it has a sponsorship, approval or affiliation it does not have 4



o

with respect to the price of its goods or services

o

concerning the availability of facilities for the repair of its goods or of spare parts for its goods

o

concerning the place of origin of its goods

o

concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.

See case examples pp. 406-408.

7. Bait advertising, Wrongly accepting payment, Interia selling, Pyramid selling 

Bait advertising: A business must not engage in bait advertising: ACL s 35. A business engages in bait advertising when it advertises a product at a price that is likely to attract buyers to its premises when it knows or should know that it is likely to run out of stock very quickly.



Wrongly accepting payment: A business must not accept payment from a buyer when it either does not intend to supply the product or it knows or should know that it will be unable to provide the product within the specific time or a reasonable time: s 36.



Inertia selling is sending an unsolicited product to a person and then pressuring the person to pay for that product. A business must not claim a right to payment unless it reasonably believes that it in fact has a right to payment: s 40 If a business has sent an unsolicited product to a person, the person: a. does not have to pay for it b. is not liable for the loss of or damage to the product unless the loss or damage results from a wilful and unlawful act.

After the expiry of a certain period, the product becomes the property of the person, free of charge. 

Pyramid Selling: A business is prohibited from participating in, or inducing others to participate in, a pyramid selling scheme: ACL s 44 – p. 271.

8. Consumer guarantees with respect to goods and services 

The ACL implies into contracts for the sale of goods to consumers guarantees that: o

the seller has title: ACL s 51

o

the consumer will have undisturbed possession: ACL s 52

o

there are no undisclosed securities: ACL s 53

o

the goods are of acceptable quality: s 54

o

the goods are fit for any disclosed purpose: s 55

o

the goods correspond with their description: s 56

o

the goods correspond with any sample or demonstration model in quality, state or condition: s 57

o

the manufacturer will ensure that repair facilities and spare parts are reasonably available: s 58 5

the manufacturer will comply with any express warranties given in relation to the goods: s 59.

o





The ACL implies into contracts for the supply of services to consumers guarantees that: o

the services will be rendered with due care and skill: s 60

o

the services, and any product resulting from the services, will be fit for any disclosed purpose: s 61

o

the services will be supplied to the consumer within a reasonable time: s 62.

The statutory guarantees (goods and services) cannot be excluded from ACL in Business to Consumer transactions – ever (s 64). Any attempt to assert that there’s no refund or exchange in breach of the statutory guarantees will be a breach of the ACL.

9. Safety and Information Standards o

Part 3-3 ACL provides businesses must comply with Product Safety Standards – s 106-7.

o

Dangerous, hazardous or non-complying goods may be subject to recall: s 122 and s 128.

INFORMATION STANDARDS •

ACL Part 3-4 regulates the use of information standards for goods or services.

•

An information standard sets out the form and content of the information that must accompany the supply of goods or services (for example, on the product packaging): ACL s 134.

•

A business must not, in trade or commerce, supply goods or services if the relevant information standard has not been complied with: ACL ss 136-7.

10. Offences and Remedies under ACL 

If a business breaches a general prohibition it may be the subject of a civil action (e.g. it can be sued for compensation) but there are no criminal penalties.



If a business breaches one of the specific prohibitions it may be the subject of both a civil action and a criminal penalty such as a fine (up to $1.1 million for companies and $220,000 for individuals).



Penalties are also imposed for breach of any of the consumer guarantees.



Remedies that can be granted by a court for contravention of the ACL include for example: o

pecuniary penalties

o

injunctions

o

an order that the defendant pay damages to any person who has suffered loss because of the contravention

o

a compensation order for injured persons

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o

an order declaring a contract void, varying a contract, refusing to enforce a contract, ordering a refund, ordering compensation, ordering repair of the goods, or ordering the provision of services.

See pp. 417-419 for a complete list of remedies.

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