LAWS105 Lecture Notes - Lecture 6: Arbitration Clause, Samarai, Puffery
LAWS105 – CONTRACT LAW
Wk. 6 – Avoidance/Vitiating Factors
Avoidance
A properly formed contract may be void, voidable or unenforceable where there is:
Misleading and deceptive conduct
Mistake
Duress
Undue influence
Unconscionable conduct
Unfair terms
Illegality
Void Contract
Contract never existed – totally ineffective
Cannot give rise to contractual rights/liabilities (other rights e.g. restitution,
might arise).
Property cannot pass.
Voidable Contract
Operative unless and until it is set aside (rescinded)
Party entitled to complain may elect to rescind or may affirm the contract:
If rescinded, contract is rescinded abibitio (from the beginning) and
parties returned to original position
If parties cannot be returned to original position (without adversely
affecting third parties) – then rescission is not possible.
Title is able to pass prior to rescission
Where a person acquires an interest in property before rescission, that
person retains the property.
Unenforceable
Contract is operative – it can pass title (can enforce title)
But contract is incapable of being enforced by one or both of the parties
Misleading or Deceptive Conduct
Pre-contractual misleading conduct by one party that induces the other party to
enter into a contract
Most important situation in practice
Both common law and statute deal with this
Pre-contractual misleading conduct by a third party.
find more resources at oneclass.com
find more resources at oneclass.com
Negligent misrepresentation / statue (ACL s236(1))
Common Law or Statute?
Common law: the law of misrepresentation – complex, governs misleading
conduct in relation to contracts.
Broad statutory prohibition of misleading or deceptive conduct introduced into
Australian law in 1974 by s52 of the Trade Practices Act (cth) TPA). Now in
s18 of the Australian Consumer law (ACL).
Advantages of the statute law = broader scope; fewer pre-conditions; not
easily avoided by exclusion clauses; and provides a broader range of remedies.
Competition and Consumer Act 2010
TPA s52 was directed at ‘corporations’.
Later: reach was extended to all “persons” by the state/territory Fair trading
Acts (Fair Trading Act 1987 (NSW) s12).
From 1 January 2011, s18 of the ACL (schedule 2 to the Competition and
Consumer Act 2010 (CCA)) replaced TPA s52.
Nature of the Prohibitions and their Scope
Australian Consumer Law, s18. Misleading or Deceptive Conduct:
“A person shall not, in trade or commerce, engage in conduct that is misleading or
deceptive or is likely to mislead or deceive”.
Preconditions to Liability
1. A person
2. In trade or commerce
(O’Brien v Smolonogov (1983) 53 ALR 107 Williams v Pisano (2015)
NSWCA 177 versus Bervanere Pty Ltd v Lubidineuse (1984 7fcr 325)
3. Engage in conduct
4. That is misleading or deceptive or is likely to mislead or deceive.
(Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982 149 CLR 191:
“to lead into error”)
Application of Prohibition to Contracts
1. Representations of fact
A false representation of fact during pre-contractual negotiations is misleading
or deceptive, if the party to whom the representations were maded was
actually misled (even if the representor took reasonable care to ensure it was
correct: Greco v Bendigo Machinery Pty Ltd (1985) ATPR 40-521).
find more resources at oneclass.com
find more resources at oneclass.com
Statements that are literally true can even be misleading or deceptive IF they
create false impressions e.g. Ward v Premier Ice Skating Rink Pty Ltd (1986)
ATPR 40-681.
2. Expressions of opinion or law
Expressions of opinion – including those about the law – are not misleading or
deception merely because subsequent events show that they were inaccurate.
But there can be misleading or deceptive conduct IF:
The speaker did not hold the opinion (Amadio Pty Ltd v Henderson (1988) 81
FCR 149 and issue is considered in Forrest v ASIC (2012) 247 CLR 486), or,
The expression contained a representation that it was based on research, when
it was not (Thompson v Ice Creameries of Australia Pty Ltd (1988) ATPR 41-
611)
3. Sales puff
Exaggerated statements of fact or opinion that a reasonable person would not
understand as intended to be taken literally will not amount to misleading
conduct.
However, the following have been held to be actionable and not mere puff:
Byers v Dorotea Pty Ltd (1987) ATPR 40-760
Petty v Penfold Wines Pty Ltd (1994) 49 FCR 282
4. Silence or non-disclosure
Non-disclosure (silence) can be misleading if:
Partial disclosure gives a false impression; or
It is understood that the true position will be disclosed.
Cases that considered silence:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
A properly formed contract may be void, voidable or unenforceable where there is: Cannot give rise to contractual rights/liabilities (other rights e. g. restitution, might arise). Operative unless and until it is set aside (rescinded) Party entitled to complain may elect to rescind or may affirm the contract: If rescinded, contract is rescinded abibitio (from the beginning) and parties returned to original position. If parties cannot be returned to original position (without adversely affecting third parties) then rescission is not possible. Title is able to pass prior to rescission. Where a person acquires an interest in property before rescission, that person retains the property. Contract is operative it can pass title (can enforce title) But contract is incapable of being enforced by one or both of the parties. Pre-contractual misleading conduct by one party that induces the other party to enter into a contract. Both common law and statute deal with this. Pre-contractual misleading conduct by a third party.
