Consumer Law – Cambridge

Important Legislation

  • Australian Securities and Investment Commission Act 2001 (Cth)
  • Spam Act 2003 (Cth)
  • Telecommunications Act 1997 (Cth)
  • Trade Practices Act 1974 (Cth)
  • Trade Practices Amendment (Australian Consumer Law) Act 2009 (Cth)
  • Consumer, Trader and Tenancy Tribunal Act 2001 (NSW)
  • Contracts Review Act 1980 (NSW)
  • Corporations Act 2001 (Cth)
  • Credit Act 1984 (NSW)
  • Fair Trading Act 1987 (NSW)
  • Minors (Property and Contracts) Act 1970 (NSW)
  • Motor Dealers Act 1974 (NSW)
  • Motor Vehicle Repairs Act 1980 (NSW)
  • Sale of Goods Act 1923 (NSW)
  • Travel Agents Act 1986 (NSW)

Significant Cases

  • Carlill v Carbolic Smoke Ball Co (1893) 1QB 256
  • Blomley v Ryan (1956) 99 CLR 362
  • Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
  • Handley v Snoid (1981) 4 TPR 361
  • Johnson v Buttress (1936) 56 CLR 113
  • Astley v Austrust (1999) 161 ALR 155
  • G.H. Myers v Brent Cross Service Co. (1934) 1 KB 46
  • Australian Knitting Mills Ltd v Grant (1936) 50 CLR 387
  • Beale v Taylor (1967) 1 WLR 1193
  • Qanstruct Pty Ltd v Bongiorno Ltd (1993) 113 ALR 667
  • Director of Consumer Affairs of Victoria v AAPT Ltd (Civil Claims) [2006] VCAT 1493
  • Reardon v Morley Ford Pty Ltd (1980) 49 FLR 401

Definitions

  • Caveat emptor – a Latin term meaning ‘let the buyer beware’ – it implies that consumer should use their own powers of care and knowledge to protect themselves against exploitation
  • Laissez-faire economy – an economic system in which the state refrains from interfering with markets by regulation or other means
  • Remedies – means by which redress or reparation is provided for the breach of a legal right
  • Weights and measures laws – laws that govern weights and measures stated on the packaging of products (such as food and beverages) or as indicated on the trading premises (e.g. at a petrol station) in order to protect consumers from being cheated or deceived
  • Advertising – any action designed to draw the attention of consumers to the availability of goods or services in the marketplace
  • Contract – an agreement made between two or more persons that is recognised by the courts as being legally binding on the parties
  • Offeror – the person making an offer of a contract
  • Offeree – the person to whom the offer of a contract is made
  • Good faith – the intention to honour a commitment undertaken
  • Offer – a firm proposal to form a binding contract, made with a willingness to be bound by its terms
  • Invitation to treat – words or conduct made to invite someone to make an offer or to negotiate
  • Acceptance – the unconditional consent to all the terms of the offer
  • Consideration – something given, done or suffered in return for a promise in a contract
  • Duress – coercion or pressure used to influence someone
  • Condition – (of a contract) a term of fundamental and essential importance; if a condition is breached by a party the other party is entitled to end the contract
  • Warranty – a term of a contract whose breach entitles the aggrieved party to sue for damages, but not end the contract
  • Damages – money ordered by a court to be paid to a plaintiff as compensation for damage suffered
  • Consensus ad idem – a Latin term meaning ‘agreement as to the same things’; agreement between the parties to a contract about the terms
  • Express terms – contractual terms that have been specifically stated and agreed by both parties at the time the contract is made, either in writing or orally
  • Implied terms – contractual terms that have not been expressly stated, but which the courts are willing or required by statute to enforce
  • Merchantable quality (now acceptable quality) – a condition in contracts, implied by statute, guaranteeing that goods offered for sale are of
  • Fit for purpose – an implied term in contracts of sale, guaranteeing that the goods sold will do what they were designed to do
  • Unconscionable conduct – on party’s exploitation of the vulnerability of another party to a contract; the victim may have been impaired by some external factor (e.g. age, disability, lack of education) or he or she may have been deceived or threatened by the stronger party
  • Rescission – (of a contract) the termination of a contract with the court’s approval; rescission treats the contract as if it never existed and discharges the parties from their obligations
  • Consumer contract – a contract for the supply of goods or services, or for a sale or grant of interest in land, to an individual purchasing the goods, services or land for personal or household use
  • Product warranty – a manufacturer’s promise or assurance that will repair or replace or otherwise compensate for defective goods; breach of a warranty entitles the aggrieved party to sue for damages, but not to end the contract
  • Negligence – breach of a duty of care resulting in harm that could be foreseen
  • The Australian Consumer Law – the collection of federal consumer laws, attached as Schedule 2 of the Competition and Consumer Act 2010 (Cth) – formerly the Trade Practices Act
  • Injunction – a court order that requires a party to refrain from completing a particular action
  • Bait advertising – advertising goods or services for sale at a specified price with the knowledge that the company will not be able to offer them at that price for a reasonable period
  • Pyramid selling – an illegal form of selling whereby an individual pays to become a distributor of a good in return for a reward for recruiting new distributors
  • Cooling off period – a period of time that gives buyers an opportunity to rethink their decision to enter into a contract of sale
  • Alternative dispute resolution (ADR) – dispute resolution processes, such as mediation, arbitration and conciliation, that do not involve courts
  • Fiduciary duty – (1) legal obligations that must be fulfilled without regard to self-interest or the opportunity to make unauthorised profit from the position (2) the legal duty to manage a client’s money while it is held in a trust account
  • Licensee – licence holder
  • Trust account – a bank account for money held and dealt with on behalf of clients by a professional or business acting as a fiduciary for the clients
  • Natural justice – the body of rules that ensure that decision-makers act fairly, in good faith and without bias when resolving disputes
  • Monopoly – exclusive control of a market by one company, which generally results in increased prices because there are no alternative suppliers
  • Price-fixing – suppliers keeping prices in the market at a certain level by agreeing among themselves not to lower or raise their prices
  • Cartel – a group of companies that work together to control prices and markets; if their behaviour is found to be anti-competitive, it is illegal
  • Litigation – civil legal proceedings whereby disputing parties seek a binding remedy by a court
  • Mediation – a form of alternative dispute resolution designed to help two (or more) parties, in the presence of a neutral third party, to reach an agreement
  • Conciliation – a form of alternative dispute resolution in which the disputing parties use the services of a conciliator, who takes a more active role than in mediation, advising the parties, suggesting alternatives and encouraging the parties to reach agreement. The conciliator does not make the decision for them.

THE NATURE OF CONSUMER LAW

THE DEVELOPING NEED FOR CONSUMER PROTECTION

  • Prior to the Industrial Revolution, the vast majority of people throughout Europe lived simple lives based on subsistence agriculture
  • The typical marketplace of the time offered a small range of products
  • The consumer therefore did not need sophisticated knowledge of the quality and value of most goods in order to make a purchase
  • No packaging meant that the food could be inspected more closely
  • Today we often need to rely upon the expertise of others (shop assistants, financial advisors) when purchasing products such as superannuation plans, or electrical equipment such as computers and mobile phones
  • It is essential that legislators put safeguards in place designed to resolve conflict and protect consumers from exploitation
  • Early markets were characterised by the common law notion of caveat emptor
  • In a laissez-faire economy, the interaction between buyers and sellers of goods is considered to be a private realm, and intervention by the state is minimal

THE DEFINITION OF A CONSUMER

  • Person who buys or uses goods or services generated within the economy, under $40,000
  • Consumers expect that the products they buy will work properly for a period of time as indicated by the manufacturer, and that the services they receive will be of standard promised by the supplier
  • Laws to protect consumers and their rights are relatively new
  • Every time we purchase a commodity or service, we enter into a special legal relationship with the seller. Accordingly, both parties to a commercial transaction are governed by what lawyers refer to as a ‘bundle’ of legal rights and responsibilities – there is a legal expectation that parties will behave in a manner that ensures that both buyer and seller are treated fairly

OBJECTIVES OF CONSUMER LAWS

  • Consumer law relates to the interaction between three categories of ‘actor’:

- Manufacturers or suppliers of goods and services that are intended for consumption in domestic households

- The state (parliament and judiciary)

- Consumers

  • All three groups pursue particular interests under the law, and can be considered to be interdependent in the marketplace
  • Primary objective of consumer law is to protect the welfare of consumers and this is achieved by:

- Educating the public to make them aware of their rights – educated consumers can protect themselves from exploitation

- Articulating and mandating standards for the quality of goods and services – this promotes transparency and accountability in the manufacturing and service sectors

- Providing statutory and common law remedies for consumers

- Implementing weights and measures laws providing consumers with reliable benchmarks of quality

- Ensuring that various occupations are licensed

- Protecting consumers in a time of global advertising, mass marketing and e-commerce where there has been a marked reduction in personal interaction between buyers and sellers

- Regulating contractual relationships between buyers and sellers – especially ‘unfair’ contract terms

- Guarding against unsafe and defective products

- Helping vulnerable and disadvantaged consumers

CONTRACTS

  • Types of contracts

- Basis of contract is agreement, which consists of an offer made by one party to another person, and an acceptance of the offer by that person

- Can be written in a formal manner, oral, or a mixture of the two

- Written Contracts

 Clear identification of the parties to the contract

 Contractual terms that are in writing for all to see

 Precise language which describes the terms of the contract in such a manner as to avoid the need to rely upon memories of the original agreement

 The parties’ signatures and the assumption that all terms have been read and agreed to

Normally parties to contracts opt for written contracts in order to avoid having to prove that:

 The contract existed

 The contract is in some way an incomplete document

 Oral undertakings were given in the negotiation phase

 A party’s words or conduct were misinterpreted

- Oral Contracts

Oral agreements rely on the good faith of all the parties. Such agreements may be difficult to prove and/or remember precisely. Hence they’re open to misunderstanding. In resolving a contractual dispute, the court will closely examine conduct and statements made by each party leading up to the negotiation of the contract

Oral agreements can be supported in court by:

 The conduct of the other party both before and after the agreement

 Specific actions of the other party

 Past dealings with the other party

ELEMENTS OF A CONTRACT

  • Law of contract is one of the areas of civil law and is essential to the successful operation of modern capitalist economies
  • Attempts to define the circumstances under which parties who make promises to each other are legally bound by them
  • For a contract to exist, the following elements must be present:

- The parties’ intention to create a binding contract

- An offer by one party

- Acceptance of that offer by the other party

- Consideration from the promise

  • Intention To Create Legal Relations

- If an agreement is to be treated as a contract, it is essential that the parties to it intended to enter into a legally binding relationship. A court will look at the behaviour and statements of the parties to determine whether they had such an intention

- Consequently, a legally binding contract does not necessarily arise out of a purely social arrangement or an agreement between family members

  • Offer

- If there has been no offer then there can be no acceptance, and hence no agreement between the parties

- An offer is a firm proposal, made with a willingness to be bound by the terms

- A preliminary proposal, enquiry or price quotation during the process of negotiation does not constitute an offer

- Sometimes what might appear to be an offer may only be an invitation to others to make offers – invitation to treat

- An offer that is accepted forms an agreement that is the basis of a contract, and if all other essential elements of a contract are present, the agreement will be enforceable

- At an auction sale, the call for bids by an auctioneer is an invitation to treat and the bid by the intending buyer is the offer. The acceptance is indicated and completed by the fall of the auctioneer’s hammer. Thus a bid may be withdrawn by a buyer at any time before it is accepted by the auctioneer. Similarly, an auctioneer may refuse to accept an offer if the bid does not reach the minimum (or reserve) price set by the seller

  • Acceptance of the Offer

- An acceptance of the offer is the unconditional agreement to all the terms of the offer

- Quite often, the offerer makes it clear that the offer must be accepted in writing my mail

- The acceptance is taken to be when the contract was posted, not when it is received

- The offeree must accept, without qualification, all the terms of the offer

- Any attempts to impose a conditional acceptance will amount to a counter-offer and constitute a rejection of the offer

- Once an offer has been accepted, it may only be revoked with the consent of the offerer

- Any acceptance of an offer outside the time period stipulated in the offer will be ineffective

  • Consideration

- It is the element that turns a mere promise into a contract that the law will enforce

- Every contract contains at least one promise, and the enforceability of a promise depends on the promisee’s response

- The promise must have given, done or suffered something in exchange for the promise, and that ‘price paid for the promise’ is called consideration

- Shows that the parties intended to form a binding contract

- In most cases, this is in the form of giving money in return for goods or services, or may take the form of someone’s reliance on a promise, to his or her advantage or detriment

  • Other Requirements

- Parties have the capacity to contract – capacity to voluntarily agree. Children, people with mental disorders, people under the influence of drug and alcohol cannot be enforced by the other party

- Certain types of contracts have requirements set out in legislation. E.g. in NSW, contracts for the sale of land must be in writing or there but be a written note or memorandum of the contract (Conveyancing Act 1919 (NSW) s54A)

- The obligations in a contract will be negated if both parties have not given their free and voluntary consent, due to mistake (one or both parties misunderstand each other or agree on the basis of an incorrect understanding of the facts), misrepresentation (one party induces the other to enter the contract by making a false statement), duress (a party’s consent was obtained by violence or threats), or undue influence (one party’s use of power or status to obtain the consent of the other)

- Contracts for illegal acts or to that otherwise contravene public policy are invalid and unenforceable

TERMS OF CONTRACTS

  • Conditions and Warranties

- A term within a contract can either be a condition of a warranty

- If one party breaches a condition, the aggrieved party can terminate the contract and sue for damages

- Warranties are terms that are less important or peripheral aspects of a contract. If one party fails to honour its warranty, the aggrieved party can sue for damages but is not entitled to end the contract

- For a contract to be valid and therefore legally enforceable, the parties to the agreement must demonstrate consensus ad idem

  • Implied and Expressed Terms

- Express terms are contractual terms that are either spoken or written into a contract and are agreed to by both parties – they clearly set out the legal rights of both parties

- Implied terms are built into contracts e.g. the notion of acceptable quality and an expectation that the goods will be fit for purpose

- Implied terms add another layer of consumer protection because they ensure that individuals who enter contracts hurriedly, without due consideration, are spared the expense of costly litigation in order to attain an equitable remedy

- Implied terms need to allow the parties to perform their tasks both efficiently and fairly

  • Exclusion Clauses

- Incorporated into contracts to limit a party’s liability for conduct that would otherwise breach the contract or cause harm

- These terms limit or take away the other party’s right to claim damages

- Such clauses are almost always contained in a written document that may or may not be signed

UNJUST CONTRACTS

  • Where a contract is unjust or unfair as a result of a party’s unconscionable conduct, the innocent party can bring a civil action seeking rescission of the contract
  • Victim may also be entitled to any of the various remedies
  • Legal notion of unconscionability is best understood when one considers whether both parties to a contract have bargained on equal terms, or whether one party has used his or her superior position to take advantage of another
  • Common Law Protection: Implied Terms

- A party who is victim of duress, undue influence, or unconscionable dealing is entitled to obtain relief and can have the contracted rescinded

- The law will imply contractual terms into a contract requiring parties to do what is necessary to enable the performance of the contract

- Courts will ask whether the parties would have expressly agreed to the term if they had considered the issue when entering their contract