©mnoonan2011 liability for goods and services to consumers-acl module 5 winter 2011

©MNoonan2011

Liability for Goods and Services to consumers-ACL

Module 5

Winter 2011

©MNoonan2011

This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited.

©MNoonan2011

Sale of Goods Act

Students should remember that:

SOGA applies to ALL Sales of Goods whether B2B or B2C.

Conditions implied by ss. 18,19,20 of SOGA cannot be excluded in a “consumer sale”

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Australian Consumer Law

Cooperative scheme replaces Cth and State provisions, previously in TPA and Fair Trading Acts.

Single regime operates as law of Commonwealth (part XI) and as an “applied law” of States and Territories (Part XIAAA).

Many provisions same as, or similar to, those previously in Trade Practices Act. Cases therefore still relevant. Some new provisions.

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Unfair Contract provisions commenced 1/7/2010. Unfair contract provisions are Schedule 1 to Competition and Consumer Act 2010

Remainder of ACL scheduled to commence 1/1/2011. ACL is Schedule 2 to CCA.

See www.consumerlaw.gov.au for relevant information and guides to new law.

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Studied in this course in Winter Semester 2011

Module 4

Misleading, deceptive, unconscionable conduct, specific representations

Module 5

Consumer guarantees

Unfair contracts

Product liability

Remedies in relation to the above

Not studied

Other matters covered in the ACL e.g. unsolicited goods, laybys.

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Consumer Guarantees

Similar in effect to previous TPA provisions

(See ss.68,69,70,71,72,74 TPA) BUT Different legal character

-----Statutory guarantees

-----Not implied terms into contract Remedy therefore different-statute rather than

common law breach of contract.

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Consumer GuaranteesRelating to goods

1. Title 2. Undisturbed possession 3. No undisclosed securities4. Acceptable quality5. Fit for specified purpose6. Match description7. Match sample or demonstration model8. Repair facilities and spare parts9. Express warranties

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Consumer guaranteesRelating to services

Due care and skill

Fit for particular purpose

Supplied within reasonable time

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Consumer GuaranteesLiability-goods

Guarantee Supplier Manufacturer

1. Title √2. Undisturbed possession √3. No undisclosed securities √4. Acceptable quality √ √5. Fit for specified purpose √6. Match description √ √7. Match sample or demo model √8. Repair facilities/spare parts available √9. Express warranties √ √

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Consumer GuaranteesLiability-services

Guarantee Supplier

Due care and skill √

Fit for particular purpose √

Supplied within reasonable time √

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Supply, supplied, supplierACL s. 2 definitions

Supply, when used as a verb, includes:

(a) In relation to goods-supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase, and

(b) in relation to services-provide, grant or confer;

and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings

See s. 5 for when a donation can be a supply-e.g. if for promotional purposes

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Manufacturer s.7 ACL

A manufacturer includes the following:(a) A person who grows, extracts, produces, processes

or assembles goods;(b) (b) a person who holds themselves out to the public

as the manufacturer (c) A person who causes or permits the name of the

person, a brand or mark to be applied to the goods(d) A person who permits another to hold the first person

out as the manufacturer(e) An importer if the manufacturer does not have a

place of business in Australia at the time of importation.

See s. 7 for details

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Trade or commerce

Means:(a) Trade or commerce within Australia; or(b) Trade or commerce between Australia and places

outside AustraliaAnd includes any business or professional activity (whether

or not carried on for profit)Note inclusion of professional activitiesNote that while most guarantees only apply to sales in

T&C, some consumer guarantees apply regardless of whether sold in T&C-i.e. title, undisturbed possession and undisclosed securities

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Meaning of Consumer- ACL s. 5

A person is taken to have acquired particular goods as a consumer if, and only if,

(a)The amount paid or payable, as worked out under subsections (4) to (9) did not exceed $40,000 (or as prescribed) or

(b)The goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or

(c)The goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads

BUT, not if acquired for resupply or using them up or transforming them in trade or commerce in the course of production or manufacture or in the course of repairing or treating other goods or fixtures on land.

Not exact wording of section

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Meaning of Consumer- ACL s. 5

A person is taken to have acquired particular services as a consumer if, and only if:

The amount paid or payable for the services, as worked out under subsections (4) to (9) did not exceed $40,000 or as prescribed

The services were of a kind ordinarily acquired for personal, domestic or household use or consumption.

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Consumer Guarantees-Goods51. Guarantee as to title

(1) If a person (the supplier) supplies goods to a consumer, there is a guarantee that the supplier will have a right to dispose of the property in the goods when that property is to pass to the consumer

(2)Subsection (1) does not apply to a supply (a supply of limited title) if an intention that the supplier of the goods should transfer only such title as the supplier, or another person may have:(a) appears from the contract for the supply; or(b) is to be inferred from the circumstances of that contract

(3)This section does not apply if the supply is a supply by way of hire or lease.

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Consumer Guarantees-Goods52.Undisturbed possession

If a person (the supplier) supplies goods to a consumer and the supply is not a supply of limited title,, there is a guarantee that the consumer has the right to undisturbed possession of the goods. This does not apply to the extent that such possession may be lawfully disturbed by a person entitled to the benefit of any security, charge or encumbrance disclosed before the consumer agreed to the supply.

See section for further details

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Consumer Guarantees-Goods53.No undisclosed securities

If a person supplies goods to a consumer and the supply is not of limited title, there is a guarantee that the goods are free from any security, charge or encumbrance not disclosed or created with express consent of consumer and goods will remain free from same until property passes to the consumer.

Floating charge ok unless /until it becomes fixedIf limited title, there is a guarantee that all securities etc

known to the supplier and not known to the consumer were disclosed.

Does not apply to hire or lease.

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Consumer Guarantees-Goods54.Acceptable quality

If a person supplies in Trade or Commerce, goods to a consumer (not by auction), there is a guarantee that the goods will be of acceptable quality-which means fit for all the purposes goods of that kind are commonly supplied and acceptable in appearance and finish and free from defects and safe and durable…as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects) would regard as acceptable having regard to the matters in (3).

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Consumer Guarantees-GoodsWhat are the matters in 54(3)?

The nature of the goodsThe price of the goods (if relevant);Any statements made about the goods on packaging, label Any representation made by supplier or manufacturerAny other relevant circumstances relating to the supply

In (4) if lack of acceptable quality drawn to attention of consumer, ok.

In (6) abnormal use excludedIn (7) if examination ought to have revealed lack of

acceptable quality

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Acceptable v. merchantable

Compare new expression with “merchantable” (used in SOGA s.19 and TPA s.71)

Why the change? “Archaic” terminology?

Is there any difference?

Common law meaning is focused on saleability of goods and not on objective expectation of a consumer.

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TPA s. 66(2)

Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.

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Consumer Guarantees-Goods55. Fitness for purpose

If a person supplies in T or C goods to a consumer (not by auction) there is a guarantee that the goods are reasonably fit for any disclosed purpose and for any purpose for which the supplier represents that they are reasonably fit.

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Consumer Guarantees-GoodsWhat is a disclosed purpose?

A particular purpose (whether or not a purpose for which the goods are commonly supplied) that the consumer makes known expressly or by implication to the supplier, to a person with whom any prior negotiations or arrangements in relation to acquisition were made, to the manufacturer (directly or through one of the others).

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Consumer Guarantees-GoodsFitness for purpose

Contrast new provision

with

SOGA 19

TPA 71.

No need any more to rely on skill and judgement?

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Consumer Guarantees-Goods56. Match description

If a person supplies, in trade or commerce, goods by description to a consumer and not by auction there is a guarantee that the goods correspond with the description.

A supply is not prevented from being a supply by description only because having been exposed for sale or hire, they are selected by the consumer.

If also sample, must match both.

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Consumer Guarantees-Goods57. Match sample or demo

If a person supplies in trade or commerce, goods to a consumer by reference to a sample or demonstration model and not by auction, there is a guarantee that the goods correspond with the sample or demo in quality, state or condition, that the consumer will have a reasonable opportunity to compare the goods with the sample; and the goods are free from any defect not apparent on reasonable examination of sample or demo and would cause the goods not to be of acceptable quality. If both description and sample/demo, must match both.

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Consumer Guarantees-Goods58. Repairs and spare parts

If a person supplies in trade or commerce, goods to a consumer and not by auction, there is a guarantee that the manufacturer will take reasonable action to ensure that facilities for repair and parts are reasonably available for a reasonable period after supply. Does not apply if written notice given to consumer at or before agreement that they would not be available or would not be available after a specified period.

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Consumer Guarantees-Goods59. Express warranties

There is a guarantee that manufacturer will comply with any express warranty given by manufacturer

There is a separate guarantee that supplier will comply with any express warranty given by supplier

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Consumer Guarantees-Services60. due care and skill

If a person supplies in trade or commerce services to a consumer, there is a guarantee that the services will be rendered with due care and skill

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Services

IncludesAny rights (including rights in relation to, and interests in, real or personal

property) benefits privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce and

Without limiting (a) the rights benefits, privileges or facilities that are or are to be provided granted or conferred under

A contract for or in relation to the performance of work (including of a professional nature) whether with or without the supply of goods

A contract for the provision of or use or enjoyment of facilities for amusement entertainment recreation or instruction or

A contract for which royalties tributes levies or similar A contract of insuranceA contract between banker and customerA contract for lending of moneyBut does not include a contract of service (i.e. employment)

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Consumer Guarantees-Services61. Fitness for particular purpose

If a person (the supplier) supplies in trade or commerce, services to a consumer and the consumer expressly or by implication makes known any particular purpose there is a guarantee that the services and any product resulting from the services will be reasonably fit for that purpose.

If consumer has made known to supplier or a person with whom prior negotiations or arrangements were conducted a particular result, there is a guarantee that the services and any product resulting will be of such a nature and quality, state or condition that they might reasonably be expected to achieve that result.

Does not apply if consumer did not rely or it was unreasonable for consumer to rely on skill or judgement of supplier and does not apply to services of a professional nature by architect or engineer.

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Consumer Guarantees-Services62. Reasonable time for supply

If a person supplies in trade or commerce, services to a consumer and the time within which the services are to be supplied is not fixed by the contract or is not to be determined in a manner agreed, there is a guarantee that the services will be supplied within a reasonable time.

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Consumer Guarantees-ServicesNo guarantees for some services

Section 63

Transportation or storage of goods for the purposes of a business trade profession or occupation

A contract of insurance

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Consumer GuaranteesCan they be excluded?

No

See section 64

But, they can be limited

See 64A

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Consumer GuaranteesRemedies

Distinguish

Major failure

from

minor failures

See examples in Guide available at www.consumerlaw.gov.au

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Consumer GuaranteesRemedies-major failure

Consumer can choose to

Reject the goods and choose refund or replacement

Cancel service contract and choose refund

Ask for compensation for drop in value

This is a choice for the consumer and not the supplier or manufacturer

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What is a major failure?-goods

s.260Goods would not have been acquired by reasonable

consumer fully acquainted with failureGoods depart in one or more significant respects from

description, sample or demoGoods are substantially unfit for a purpose commonly

supplied and cannot be remedied to make them fitGoods are unfit for disclosed purpose made known to

supplier or person with whom prior negotiations or arrangements made and cannot be remedied

Goods are not of acceptable quality because unsafe.

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What is a major failure?-services

s.268If a reasonable consumer would not have acquired the services if they

knew the nature and extent of failureThe services are substantially unfit for normal purpose and cannot be

remedied to make them fit within a reasonable timeThe services unfit for particular disclosed purpose and cannot be made

fit within a reasonable timeThe services are not of such a nature quality state or condition that

they might reasonably be expected to achieve a result desired by consumer and made known to supplier and cannot be remedied

The supply creates an unsafe situation.

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Consumer GuaranteesRemedies-minor failure

s.267-

consumer may require supplier to remedy failure within a reasonable time.

Consumer must give supplier opportunity to fix the problem at no cost

If supplier refuses or fails to remedy the failure within a reasonable time, consumer can have the failure remedied and recover costs from supplier or terminate contract and refuse to pay.

See s. 269.

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Consumer GuaranteesRemedies-other

Gift recipients entitled to same remedies as consumer who bought goods

Consequential loss also claimable if foreseeable and reasonable.

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Trade Practices (Australian Consumer Law)

Amendment Regulations 2010 (no 1) 25/11/2010

s. 102(1) ACL provides for regulations prescribing form and content of warranties against defects. Comes into force 1/1/2010. See Schedule 3 of Regulations.

Regulation 90. A warranty against defects: Must be in document that is transparent-i.e. expressed in reasonably plain

language legible and clear Concisely states what person giving warranty is obliged to do Concisely states what consumer must do to title them to claim Includes prescribed statement in sub regulation 90(2) Prominently states name, address, telephone number and email of person

giving warranty States period of warranty Sets out procedure for claiming warranty including address States who bears cost of claiming warranty Must state that benefits are in addition to other rights and remedies available to

the consumer

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Trade Practices (Australian Consumer Law)

Amendment Regulations 2010 (no 1) 25/11/2010

Statement prescribed in Reg 90(2) re guarantees:

“Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.”

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Product Safety-consumer goods and services

The overall regime

General information standards Safety warning notices Banning products Mandatory safety standards Compulsory recall Voluntary recalls and notification Compensation

See also www.productsafety.gov.au and www.recalls.gov.au and Part 3-5 ACL

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Product Safety-goods

What goods do Product Safety provisions relate to?

Goods intended or likely to be used for personal domestic or household use or consumption

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PRODUCT SAFETY ACL Part 3-5-compensation

138 (1) A manufacturer of goods is liable to compensate an individual if

(a) The manufacturer supplies the goods in trade or commerce and

(b) The goods have a safety defect and

(c) The individual suffers injuries because of the safety defect

(2) The individual may recover, by action against the manufacturer, the amount of the loss or damage suffered by the individual.

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Product Safety-compensation

139 Liability for loss or damage suffered by a person other than an injured individual.

140 Liability for damaging other goods that are of a kind ordinarily acquired for personal domestic or household use.

141 Liability if land buildings or fixtures destroyed or damaged

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Product Safety-defences

142.In a defective goods action, it is a defence

The safety defect did not exist at the time electricity was generated or at the time of supply by the actual manufacturer.

The goods had the safety defect only because of compliance with a mandatory standard

The state of scientific or technical knowledge

If part of other goods, the defect is attributable only to design of other goods, markings or instructions.

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See Defences-TPA Part VAReference as similar

DEFENCES available 75 AK-

• defect did not exist at time supply,

• in accordance with mandatory standard,

• state of scientific knowledge,

• only a component in finished goods and defect due to aspect of finished goods rather than component.

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Graham Barclay Oysters Pty Ltd v. Ryan See text

Barclay grows and distributes oysters grown on Wallis Lake. It tested its oysters satisfactorily in December and January 1997. In Jan, Ryan bought oysters and contracted hepatitis A. Problem with discharge of effluent into lake.

Found

There was no contravention of s. 52 TPA by silence

No privity of contract, so no implied terms possible

Contravention of Div 2A 74B(fitness) and 74D (merchantability)

Although Part VA 75 AD satisfied, defence of state of scientific knowledge successful. Confirmed on appeal, extracted in text.

Negligence successful, but was lost on appeal.

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Unfair Contract Terms

Long history and difficulties in defining area warranting attention.

Now in ACL.

See also Victorian Fair Trading Act.

Other countries? UK Unfair Terms in Consumer Contracts Regulation 1999 made pursuant to European directive on Unfair Terms in Consumer Contracts 1993.

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Unfair contract terms

S. 23 ACL

A term of a consumer contract is void if the term is unfair and the contract is a standard form contract

NOTE similarity to s. 32Y of Victorian Fair Trading Act

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Unfair contract termsWhat is a consumer contract?s. 23(3)A consumer contract is a contract for A supply of goods or services or A sale or grant of an interest in land To an individual whose acquisition of the goods,

services or interests is wholly or predominantly for personal domestic or household use or consumption

Note this is different to definition of consumer s.2The subjective purpose of person is what is relevant.Note that businesses excluded other than “sole traders”.See ASIC Act s. 12BF for financial products and services.

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Unfair contract termsWhat is a standard form contract?

Not defined, and if alleged, it is presumed to be one unless proven otherwise.

Expressly excluded in s. 28 are:

Contract of marine salvage or towage

Charter party of a ship

Contract for carriage of goods by ship

Constitutions of a company managed investment scheme or other kind of body

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Unfair contract termsStandard form contract

Not defined, but in deciding whether a contract is a standard form one or not, court must consider (s.27):

Whether 1 party has all or most of the bargaining power Whether the contract was prepared by 1 party before any

discussion Whether another party was required to accept or reject

the terms Whether another party was given an effective opportunity

to negotiate terms Whether terms take into account specific characteristics

of another party or particular transaction Any other matter prescribed by regulationsNOTE similarity with 32ZDA of Victorian Fair Trading Act

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Unfair contract termsWhat does “unfair” mean? S.24

1. If, it would cause significant imbalance in rights and obligations

2. Not reasonably necessary to protect legitimate interests of party advantaged

3. It would cause detriment (financial or otherwise) if applied or relied upon

NOTE similarity to s. 32W of Victorian Fair Trading Act.

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Unfair contract termsWhat does “unfair” mean? S.24

In determining whether unfair, a court may consider any relevant matter, but must consider

The extent to which the term is transparentA term is transparent if expressed in reasonably plain language; and legible and presented clearly and readily available to any party affected by the term

The contract as a whole.

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Examples of unfair terms s.25

Permits one party to avoid or limit performancePermits unilateral terminationPenalises one party but not another for breach or terminationPermits one party but not another to vary termsPermits one party but not another to renew or notPermits one party to vary the upfront price without giving the other party the right to

terminatePermits one party to unilaterally vary characteristicsPermits one party to unilaterally determine breachLimits the liability of a party for its agentsPermits one party to assign to detriment of other party without consentLimits one party’s right to sue another partyLimits the evidence one party can adduce in proceedings on the contractImposes the evidential burden on one party in proceedingsHas an effect prescribed in regulationsNOTE similarity to s. 32X of Victorian Fair Trading Act

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Terms excluded s. 26

The following terms are excluded from the unfair regime

To the extent that the term----- Defines the main subject matter of the contract;

or Sets the upfront price payable Is a term required or expressly permitted by law

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Effect of term being held unfair

There may be prohibited terms in regulations. Use of such a term will be a contravention of Act

Only court can determine whether a term in a standard contract is unfair.

Proceedings can be commenced in Federal Court by a party to the contract (s.250ACL) or regulator (s.250ACL)

Court can order an injunction (s.80 CCA), prohibiting payment or transfer of money or other property (s.87A CCA), to provide redress to non party consumers (87AAA CCA) and such other orders as it considers appropriate (s.87CCA).

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Unfair terms – FTA Victoria

While ACL Unfair terms legislation is new, similar provisions have existed in Part 2B of the Victorian Fair Trading Act since 2003.

Some Victorian decisions may therefore be of assistance in understanding the application of the new ACL provisions, developing reasoning and argument and identifying unfair terms.

See also Unfair Terms in Consumer Contracts Regulations 1999 (UK) pursuant to EU Directive, mentioned in AAPT with reference to some cases.

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Director of Consumer Affairs Victoria v. AAPT Limited [2006] VCAT 1493

Director requested declaration and injunction re AAPT terms, since replaced and giving older contracts benefits of new terms retrospectively. Not granted because no consequence in these circumstances.

However, substantial discussion of the meaning of unfair, relevance of “good faith” and history of provisions.

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DCA v. Backloads.com Pty Ltd VCAT C5253/2007

Removalist Contract for household items

a consumer contract

because

Contract was for services of a kind ordinarily acquired for personal, domestic or household use or consumption for the purposes of their ordinary personal, domestic or household use or consumption.

Many unfair terms found in contract

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“2(e) This agreement shall be governed by and interpreted and enforced in accordance with the laws applicable in the Australian Capital Territory. This agreement shall be deemed to have been entered into in the ACT”

UNFAIR because:

Contrary to fact and reality because Contract in Victoria

Term has object or effect of limiting consumer’s right to sue or deterring non ACT consumers from enforcing contract- thereby creating a significant imbalance in the parties’ rights and obligations to the detriment of the consumer.

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“8(b) If the information supplied is incorrect, inadequate, inaccurate or varied after a quotation has been given, the Company may at its discretion perform the work strictly as per its quotation or vary its charges in accordance with a pro-rata adjustment based on the variation in the specified quantity, volume or weight of the goods plus any variation of estimated loading and unloading times charged at the time rate.”

UNFAIR (s.32W) because: Object or effect of penalising consumer by permitting company in its discretion

to perform contract as originally agreed without regard to consumer desire or need to vary contract.

Permits company to determine or vary or determine and vary price without right of consumer to terminate (s. 32X(f)), permits unilateral variation of characteristics of services (s. 32X(g), permits company to unilaterally determine whether contract has been breached or to interpret its meaning

Term creates uncertainty for the consumer, and only the consumer-no mutuality-thereby creating a significant imbalance in parties rights and obligations.

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“9(b) The Company hereby assigns its rights and the rights of any persons on behalf of whom it is acting, to collect all charges and payments from Clients to the Contractor. The Contractor agrees to issue invoices and to collect all such charges and payments directly from Clients.”

UNFAIR (s.32W) because: Term has object or effect of assigning rights to an unidentified non

party…and to permit that unidentified party to issue invoices and collect all charges payable by the consumer

It creates uncertainty for the consumer because the “Contractor” is not a party to the removalist services contract

It has the object or effect of permitting supplier to assign the contract to consumer’s detriment without consent of consumer (s. 32X(j)).

Thereby creates a significant imbalance in parties’ rights and obligations to the detriment of the consumer.

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“10(a) All goods of the Client, or carried on behalf of the Client, that are received by the Company shall be subject to a general lien for any monies owed by the Client or the owner of the goods to the Company or the Contractor as a result of this agreement or any previous agreement between the Company and the Client or the owner of the Goods.”

UNFAIR (s.32W) because: Imposes general lien for monies owed by a non party to the contract

and in respect of other contracts. Unreasonable. Imposes a broad general lien in circumstances where contract requires

payment on or before pick up and in a manner seeking to overcome the common law limitations on imposition of a lien. Unreasonably excessive to protect legitimate interests of respondents.

Inconsistent with 9(b) Purports to extend operation of general lien to benefit of Contractor-

unidentified non-party Imposes an unreasonable burden on consumers, given effect of 8(b),

8(c) and 11(c), which create uncertainty for consumer.

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“10(b) In order to exercise its rights under the aforementioned lien, the Company shall have the right to seize or retain or to defer or refuse delivery of any goods that are the subject of this lien should circumstances arise that make it reasonable to conclude that the Client is unwilling or unable to pay any due charges in the required form or at the required place or time.”

UNFAIR (s.32W) because:

Inconsistent with 9(b)

See also 10(c)

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“10(c)Where the charges of the Company remain unpaid for a minimum period of 28 days, the Company may give 28 days written notice by certified or registered mail to the last known address of the Client of intention to sell. If the amount owing is not paid within that further period the Company may open any packages, DISPOSE OF THE GOODS or SELL ALL OR ANY OF THE GOODS by auction or by private treaty at its absolute discretion. Out of any monies arising the Company may retain its charges and all charges and expenses of the detention and sale. It shall credit the surplus, if any, to the person entitled to it. Any such sale shall not prejudice or affect any other rights that the Company may have to recover any outstanding charges due or payable in respect of such service or the said detention or sale.”

UNFAIR (s.32W) because:Having assigned rights to collect, terms 10(b) and (c) inconsistently purport

to permit enforcement of lien.10(b) and (c) each impose unreasonable burden on consumers given

effect of 8(b), and (c), 9(b) and 11(c), which create uncertainty. No mutuality-certainty of contract only removed for consumer.

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Terms 10(a), (b) and (c) each have object or effect of:

1. Penalising consumer but not company for breach of contract (s. 32X(c))

2. Permitting Company to unilaterally determine whether contract has been breached or to interpret its meaning (s. 32X(b)

Thereby creating significant imbalance in parties’ rights and obligations arising under the contract to the detriment of the consumer.

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11(a) Movement of incorrect goods. The Client shall provide an authorised representative who will be responsible for ensuring that the correct goods are loaded. Whether or not such a representative is provided, and WHETHER OR NOT the Client provided the Company with a LIST of ITEMS to be moved, the Client shall pay all reasonable additional charges whatsoever resulting from the movement of incorrect goods or non-movement of goods that the Client intended to have moved”.

Unfair (s.32W) because11(a) penalises consumer for the movement of “incorrect

goods” or non movement of goods even if consumer provides a correct list and even if the movement of the “incorrect goods” or non movement of goods is due to the fault or negligence of Company.

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11(b) If there is no-one in attendance at the place for delivery of the Goods the Company shall be entitled at its discretion to leave the Goods at that place or to return at a later time until delivery is completed, storing the Goods at any convenient place in the meantime, and the Client agrees to pay any reasonable additional charges incurred thereby to the Company”.

Unfair (s.32W) because11(a) and (b) impose unreasonable burden on consumer given

the effect of 8(b), (c) and 11(c), which create uncertainty for consumer.

11(b) has object or effect of permitting Company to leave goods at place for delivery even if no one there. i.e. abandoning goods. Unreasonable.

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11(c) The method, route and time by which the carriage of Goods or provision of services under this contract are performed shall be at the absolute discretion of the Company.”.

Unfair (s.32W) because

Term has object or effect of permitting Company in absolute discretion to determine time of performance. Inconsistent with conditions implied into contract by law. Unreasonably excessive, broad, unqualified discretion going to issues at the heart of the contract.

Term creates uncertainty-right to unilaterally vary time without notice to consumer-no certainty to bargain. No mutuality.

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Terms 11(a), (b) and (c) each have object or effect of: Permitting company, but not consumer to limit

performance (s. 32X(a)). Permitting company, but not consumer to vary

terms of contract (s. 32X(d)) and Permitting Company to unilaterally vary

characteristics of services to be supplied under contract (s. 32X(g))

All of these things create a significant imbalance in parties’ rights and obligations to detriment of consumer.

©MNoonan2011


“14(b) The Client recognises that there are always risks involved in the movement of any Goods or the provision of services under this contract, many of which are outside the Company’s or the Client’s control. All basic quoted prices are for the provision of carriage and other services whereby the Client understands and accepts that there are such risks, accepts any financial detriment or other losses that may result from the performance or non-performance of such work and agrees that the Company shall NOT be responsible or liable for such losses. The effect of this sub-clause may be varied where the Client chooses a Transit Protection option (See Clause 15) or where it is otherwise agreed in writing.”Term is unfair (s. 32W) because: Term has the object or effect of unreasonably limiting Company liability for matters which are or were under their control. Term confers an unreasonable benefit upon Company by purporting to exempt it for failure to provide the services or failing to provide them at an appropriate standard, where such failure is attributable to routine and foreseeable factors such as its delay and other factors within it’s control. Term has object or effect of limiting consumer right to sue (s.32X(k))Thereby creating a significant imbalance to the detriment of the consumer.

©MNoonan2011


“14(c).Save as expressly provided in these conditions the Company shall not be liable to the Client for any loss or damage suffered by the Client directly or indirectly caused by: (i) any damage loss or destruction to Goods whilst in the possession of the Company whether in transit (which includes, amongst other things, any packing, handling, installation, removal, assembly or erection), or in storage or after they have been delivered or mis-delivered; (ii) a mis-delivery, delay in pickup or delivery, or non-delivery of Goods; (iii) the carriage of Goods by a route other than the shortest or usual route; (iv) any failure to collect Cash on Delivery (COD) on behalf of the Client; and this clause shall apply whether or not any such occurrence was due to any wilful, fraudulent negligent or other act or omission of the Company.”Term is unfair (s. 32W) because: Term has the object or effect of limiting liability for any loss or damage suffered Term has object or effect of limiting consumer right to sue (s.32X(k))Thereby creating a significant imbalance to the detriment of the consumer

©MNoonan2011


“14(f).The Client shall INDEMNIFY the Company against any action, claim, suit, fine or demand brought by any third party, the Client or the Contractor against the Company as a result of or in connection with any breach by the Client of any term of this contract or the occurrence of any of the events listed in this clause or clauses 10, 12,14 and this indemnity shall extend to the reasonable solicitor client costs of the Company in defending any action and in enforcing this indemnity.”Term is unfair (s. 32W) because: Term has the object or effect of requiring indemnity for loss or damage arising from the exercise of a lien over goods not owned by the consumer and charges or payments arising other than from the removalist services contract or loss or damage by wilful, fraudulent etc act or omission of Company.Term confers unreasonable benefit on Company by purporting to make consumer liable for consequences of proceedings by consumer, contractors and any third party arising out of a breach of contract by Company, even if negligence or fraud.Term imposes unreasonably excessive solicitor client costs Term has object or effect of limiting consumer right to sue (s.32X(k))Thereby creating a significant imbalance to the detriment of the consumer

©MNoonan2011


In addition to the specific unfair clauses, it was also found:1. Contract printed in a font too small and contrary to s.

163(3)(b).2. Not clearly expressed- it creates confusion, uncertainty or

doubt -contrary to s. 163(3)(c) -because of references to Contractor (confers rights, assigns) who is not a party, contains a variety of terms that are inconsistent -11(c) and 14(a)-11(c) inconsistent with 32JA(1) FTA (implied condition services reasonably fit for purpose made known).

3. It empowers the Company to abandon goods4. Some terms refer to incorrect references5. Terms likely to mislead consumers as to where they have

to initiate proceedings-ACT?6. Uses terms contrary to fact-law of ACT.

©MNoonan2011

Free v. Jetstar Airways P/L [2007] VCAT 1405

Free booked 2 tickets from Melbourne to Honolulu and return on the internet…names of herself and her sister, selected “Jet Saver” cheap fare and paid.

Shortly before travel, sister unable to go. Ms Free wanted her niece to go instead. She requested change to name. Informed that was only possible if she were to pay a “change fee” of $75/person/flt plus fare difference on the date of change.

Free claimed term was unfair and Jetstar engaged in unconscionable conduct.

©MNoonan2011


“JETSAVER FARE RULES2.1 Subject to availability and payment of all applicable amounts, changes

can be made to your Booking as follows. Changes to the origin and destination of travel are not permitted.

2.2 Your new fare will be at least the amount of the fare you originally purchased, and may be more. At the time your Booking is changed you must pay the difference (if any) between the fare you originally purchased and the fare available on the date of the change. This will apply to all date, time and name changes.

2.3 Date, time and Passenger name changes may be made by telephoning Jetstar Telephone Reservations…A change fee* is payable for each change, for each passenger flight segment change…

*Current Jetstar fees and a summary of fare types can be found at jetstar.com/faretypes.html.

©MNoonan2011


Contract was “consumer contract”.Term not individually negotiated. Free could make booking on those terms

or not.That part of the term requiring the fare difference was unfair –

indiscriminate (whether genuine personal reason or resale), and created imbalance….and therefore void…delete “and name” from 2.2 and “or Passenger Name Change” from first column on “Fare Types”. Otherwise contract remained in effect. Note that this makes void only part of a term, and not the whole term.

Jetstar explained that main reason for term was to discourage travel agents buying blocks of cheap fares and then reselling.

Change fee OK to compensate for admin.No unconscionable conduct. Complaint is about terms of contract, not any

relevant conduct.

©MNoonan2011

DCAV v. Craig Langley P/L & Matrix Pilates and Yoga P/L [2008] VCAT 1332

In response to complaints in relation to contracts used in the fitness industry, the Director sought declarations and injunctions restraining Defendants from using certain terms in contracts.

Declarations and injunctions granted.

Various terms unfairTerms of contract not clearly expressedTerms created confusion

©MNoonan2011


“2 (i)..If fees are not paid on the due date, you agree that we may continue to debit the nominated account with the total amount due without notice to you…

(ii) In the event that you do not pay the amount payable under this Agreement within 31 calendar days of the due date expressed on the Agreement, the Club and the Billing Agent may at their discretion terminate the Membership and this Agreement. Upon such termination of this Agreement, all amounts outstanding shall become immediately due and payable without further notice of demand…

(iii) I/We authorise the business to vary the amount of the payments from time to time as provided for in the business agreement. I/We authorise Ezi Debit to vary the amount of the payments upon instructions of the Business. I/We do not require Ezi Debit to notify me/s of such variations to the debit agreement.”

©MNoonan2011


Terms 2(i),(ii) and (iii) unfair terms because:In situations where relevant payment or obligation to make payment is

bona fide in dispute they enable gym to recover payment and deny opportunity to raise dispute or stop payment.

Power to debit for “total amount due” in (ii) enables gym to debit for more than the “payment due” without notice

Unilateral ability to vary amount of payments and destroy the bargainAuthorises a third party Billing Agent to terminate without notice and in its

unfettered discretionTHEREFORE theyPenalise consumer but not gym for breachPermit gym unilaterally to determine breach and to interpret meaningPermit gym to terminate but not consumerPermit unilateral variation of characteristics of services.Create significant imbalance

©MNoonan2011


“You can only cancel your membership prior to the expiry of the minimum term if you become medically incapacitated, or if you relocate to an area not within 20ikm of the studio or if we make changes to the contract, which adversely affect you…..”

©MNoonan2011


Term unfair because:It enables gym to avoid liability for breach that would otherwise entitle consumer to cancel or require refundIt false or misleadingly represents the exclusion of a condition/warranty right or remedy elsewhere in the actIt has object or effect of preventing or deterring consumer from pursuing or exercising rightsWhere consumer cancels agreement term enables gym to refuse to make any refund, which in some circumstances constitutes a penaltyIt impliedly reserves a right for the gym, but not consumer to unilaterally vary any term of the contractAll of which create significant imbalance

©MNoonan2011


Also various other unfair terms relating to fees and the term of the agreement.

Also agreement not clearly expressed. A large number of words or phrases used which were not defined or appeared to be different terminology to mean the same thing or using the same terminology to mean different things.

Variety of terms used which were ambiguous or inconsistent with other terms.

©MNoonan2011

Unfair terms-Insurance Contracts

s.15 of the Insurance Contracts Act (ICA) operates to exclude operation of ACL.

“(1)A contract of insurance is not capable of being made the subject of relief under:(a)Any other Act; or(b)a State Act; or(c)An Act or Ordinance of a Territory.

(2) Relief….means (a) the judicial review of a contract on the ground that it is harsh, oppressive, unconscionable, unjust unfair or inequitable; or (b) relief for insureds from the consequences in law of making a misrepresentation; but does not include relief in the form of compensatory damages.”

©MNoonan2011


Considerable controversy over whether insurance contracts should be covered by ACL unfair provisions.

Senate Economics and Legislation Committee concluded that consumers are not provided with adequate protection in insurance contracts under existing law.

Insurance Industry argues the reverse-s.14ICA prevents a party from relying on a provision if to do so would be to fail to act with the “utmost good faith”. Ss. 35,37 prevent reliance on unusual and “non standard” clauses if not previously drawn to attention of insured. Ss. 21, 21A, 26, 28 include safeguards. Ss. 44, 46,47 prevent insurers from relying on certain clauses.s.53 renders void provisions that permit insurers to vary terms to the prejudice of anyone but themselves. S.54 restricts the extent to which an insurer can rely on an act or omission of insured.

©MNoonan2011


Proposed amendments to ICA were introduced but appear not to be proceeding.

An options paper (as to how to best protect consumers from unfair clauses in insurance contracts) was published in early 2010 with comments to be in by April, 2010. See Treasury website for copy (www.treasury.gov.au)

Options put up for comment- maintaining status quo (s. 14 ICA), permit ACL provisions to apply to insurance contracts, extend ICA to cover unfair terms, and/or enhance existing ICA remedies.

No change to existing situation as at December 2010.

©MNoonan2011

Manufacturers, Importers

Usually no direct contract with consumer. So, specific statutory remedies provided

Unsatisfactory goods Part V Division 2A

Defective goods and services Part VA

©MNoonan2011

Liability Manufacturers, Importers-TPA

Division 2A TPA (ss. 74A-74L) provides direct statutory rights of action (not implied terms into a contract) to consumers (or someone who acquired or derived title from a consumer-gift,second hand) against manufacturers and, where the manufacturer has no place of business in Australia; against importers.

The rights are similar to those implied in Contract with suppliers in Div 2-non-correspondence to description or sample, fitness for purpose, merchantability, non compliance with express warranties. It applies to “goods” ordinarily acquired for “personal, domestic or household use”.

Action must be commenced within 3 years of date consumer became aware or ought reasonably to have become aware of the fault occurring. (ss. 74J) with absolute limit of 10 years from first supply.

Attempts to exclude, restrict or modify are void (74K). Where a supplier is also liable to consumer via a breach of term implied by Div 2, manufacturer is liable to indemnify supplier (74H).

©MNoonan2011

Part V Division 2A

74A Interpretation 74B Fitness for particular purpose 74C False description 74D Unmerchantable quality 74E Non-correspondence with samples 74F Failure to provide repair facilities, parts 74G Non compliance with express warranty 74H-L Right to recover, time, seller indemnity

©MNoonan2011

Conditions to satisfy Pt.V Div2A

Kind of goods -ordinarily acquired for personal, domestic or household use or consumption

Manufacturer - manufactured the goods or held itself out as the manufacturer or allowed its brand name to be applied or imported the goods –deemed manufacturerSupply (sale, exchange, lease, hire, HP and goods affixed to land or

premises at time of supply) occurred, but not by auction

Consumer within s. 4B

©MNoonan2011

Liability Manufacturers, Importers-SOGA

As well as the provisions in the TPA, see also SOGA ss. 62-64.

Where goods not of merchantable quality, court may add manufacturer as a party and if of opinion that defect should be remedied by manufacturer, make orders requiring manufacturer to pay buyer an amount equal to an estimate of cost of remedying defect or requiring manufacturer to remedy defect plus any other ancillary orders as seem proper.

©MNoonan2011

TRADE PRACTICES ACT 1974- SECT 74DActions re goods-unmerchantable quality

(1) Where:

(a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply;

(b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer;

(c) the goods are not of merchantable quality; and

(d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not of merchantable quality;

the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction.

©MNoonan2011

TPA s. 74D continued (2)

(2) Subsection (1) does not apply: (a) if the goods are not of merchantable quality by reason of:

(i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (ii) a cause independent of human control; occurring after the goods have left the control of the corporation;

(b) as regards defects specifically drawn to the consumer's attention before the making of the contract for the supply of the goods to the consumer; or (c) if the consumer examines the goods before that contract is made, as regards defects that the examination ought to reveal.

(3) Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to:

(a) any description applied to the goods by the corporation; (b) the price received by the corporation for the goods (if relevant); and (c) all the other relevant circumstances.

©MNoonan2011

Maxwelton farmed Tara-cattle, sheep, fat lambs,cereal. Dixon (Manager) decided to acquire a hay baler. Hay is mown and raked into windrows. Then it is picked up by the baler, compressed into bales, and tied with twine…last is knotting system. He bought a used Heston 4800 baler "as is" for $35,000. Saw 3 faults. Seller reduced price by $1,000. Seller indicated that the baler was a good and reliable baler and had been in operational use in the previous season. Dixon picked it up, cleaned off chaff, changed oil in the gear boxes, greased machine, adjusted chains according to manual, replaced a bolt and went to a baling school. Knotting system did not function. Attempted repair, then abandoned use of it. s. 71(1) TPA "merchantability" Consumer for purposes of Act…Baler supplied in the course of a business. Not possible to see problem when not operating and so inspection could not reveal. s. 66(2)… goods are of merchantable quality if they are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price and all the other relevant circumstances.Calculation of price did not reflect a known inoperable essential component. ""as is" could not of itself exclude implied condition …still less "as per inspection”. Only covered defects leading to $1,000 reduction.

W.M.Johnson P/L v. Maxwelton (Oaklands) P/L CASCNSW CA 40136/99 23/10/2000

©MNoonan2011

Medtel Pty Limitee v. Courtney (2003) FCAFC 151

The full Federal Court considered whether a pacemaker from a batch of pacemakers imported and distributed by Medtel that was still functioning could, nevertheless, be not of merchantable quality under TPA74D on basis there was a superadded risk of failure-even though it was subsequently proven that the pacemaker had not actually failed prematurely. Some of the batch of pacemakers found to be at greater risk of early battery depletion due to the type of solder used in manufacture. Not possible to determine whether a particular pacemaker was actually defective without taking it out of the patient and testing it. Mr. Courtney brought representative proceedings on behalf of himself and others fitted with the pacemaker. Judge at first instance found pacemakers not of merchantable quality, nor fit for the purpose because of superadded risk. Medtel appealed. The full FC dismissed the appeal.

Compare definition of “merchantable quality”-court needs to have regard to what a consumer is reasonably entitled to expect at the time of supply in terms of description and price…with common law..Australian Knitting Mills Limited v. Grant required that the goods be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of price obtainable for such goods if in reasonably sound order and condition and without special terms.

©MNoonan2011

Rasell v. Garden City Vinyl and Carpet Centre Pty Ltd (1991) ATPR 41-152

Mr. and Mrs. Rasell ordered carpet for their home from a carpet manufacturer. They specified that the carpet was to be a particular colour to match the interior décor of the house and the internal walls which were exposed brick. The carpet was supplied and there was no complaint as to its quality as carpet, but the colour of the carpet was different in patches and different from the colour specified. This was due to "pile reversal" or "watermarking"; a result of the manufacturing process.

Did the customer have to accept the carpet?

It was held that the carpet was not reasonably fit for the purpose of blending in with or matching the existing décor; a particular purpose made known at the time of purchase…. a breach of s. 71 (2) TPA. Further, since it was also not fit for one of the usual purposes for which carpet is purchased (matching existing décor) it was not of merchantable quality. Note also that it was new, high quality and expensive carpet.

©MNoonan2011

Liability Manufacturers, Importers -Defective goods causing injury loss.Div 2 Part VA TPA

Part VA (ss.75AA-75AS) creates a statutory right of action against manufacturer of defective goods where those goods cause injury or damage to any person.

Not limited to consumers.

Strict liability

Where defect causes personal injury, manufacturer liable for losses suffered by injured party (75AD) plus consequent losses of dependents (75AE)

In addition to any common law or other statutory remedies, not a substitute.

©MNoonan2011

Meaning of Defective- Pt.VA

“DEFECTIVE” 75AC-safety is not such as persons generally are entitled to expect.

Court looks at all relevant circumstances including: Marketing Packaging Use of any mark Instructions or warnings What might be reasonably expected to be done with or in

relation to goods and Time when manufacturer supplied the goods (s.75AC(2))

©MNoonan2011

Liability Manufacturers, Importers -Defective goods causing injury loss.

Div 2 Part VA TPA

NOTE THRESHOLD ISSUES-

•Corporation,

•in trade or commerce,

•supplies,

•goods manufactured by it,

•goods are defective,

•injury suffered,

AND defences available.

Does not compensate for defects themselves; but for injury arising from interaction of defects with people and property. (74AE individuals, 74AF goods, 74AG real property). May also be failure of statutory duty elsewhere in TPA (Part V Division 1A) re safety standards, recalls etc.

©MNoonan2011

Pt VA cont.

“Goods” -not limited to goods of a kind ordinarily acquired for domestic or household use or consumption. Contrast Pt V Div 2A.

Liability not restricted to buyer or hirer of goods but applies to anyone injured by them.

If more than one party responsible, liability is joint and several.

Limitation period - 3 years after person becomes aware of loss, defect and identity of manufacturer and -10 years from supply.

©MNoonan2011

Hardchrome Engineering P/L v. Kambrook Distributing P/L (2000)VSC 359 (13/9/2000)

Hardchrome installed a titanium nitrate coating process machine. Decision made to apply a wax coating to the hardened articles to protect them against damage during transport. It had to be heated to 160-180. Article was then dipped into the wax. Hardchrome purchase a Kambrook KD53 deep fryer usually used to deep fry food and was powered by electricity. Turned on at 5.45 am and turned off at 3.15 then turned on at 5pm and off at 7pm. Electrical cord to fryer attached to extension cord attached to timer, attached to double adaptor which was inserted into a double electrical plug on side of an electrical power cabinet. Fire.

Court concluded fryer defective and not of merchantable quality. The defect, an inadequate gap in thermostat probe caused arcing which ultimately led to the contact points being welded and a continuous supply of electricity to the fryer…which overheated and caused the fire. Lots of expert evidence.

Kambrook negligent in selling defective item. Court refused to imply conditions (from instructions) that appliance only to be used in domestic setting because instructions not part of contract…came later…and not necessary to carry out contract.

©MNoonan2011

GLENDALE CHEMICAL PRODUCTS P/L V. ACCC(1998) 1571 FCA

Mr Barnes had a blocked drain and purchased 500g Caustic Soda at supermarket. A friend had advised him to pour hot water down the drain and tip the whole 500G in. He followed advice, kneeling down while doing it. A column of hot water emerged from the pipe causing burns to his face and eyes. Was Glendale a “manufacturer” for purposes of Part VA? Glendale purchased bulk from Redox Chemicals and repackaged it. The trial judge said if a corporation causes or permits the name of the corporation or a brand or mark of the corporation to be applied to goods supplied by the corporation the corporation is to be deemed for the purposes of Part VA to have manufactured the goods. The FC agreed. Did the caustic soda have a “defect”? (75AC) s. 75AC(2) applies even if no inherent defect in the goods. A substance which is marketed as being suitable for a particular purpose without warnings as to the particular way in which that purpose should be achieved may have a defect because use in some ways would not be safe. Warnings inadequate in that nothing about use with hot water when that is clearly very dangerous. Avoid Contact with Eyes and Skin…plus a warning that the product is corrosive. Always wear rubber gloves and safety glasses when handling caustic soda. Aluminium or zinc covered (galvanised) utensils must not be used Did Mr. Barnes contribute to his injuries such that there would be a basis under s. 75AN(1) for reducing Glendale’s liability under 75AD? No, Glendale submissions dismissed in case and this was confirmed on appeal.

©mnoonan2011 liability for goods and services to consumers-acl module 5 winter 2011

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