Misleading Conduct Action against a Business - Essay Example

Consumer Law Name Course Lecture Date Introduction This paper discusses misleading contact in trade and commerce, and the operation of exclusion clauses in Australian business contracts. The paper analyzes the elements one needs to prove in order to be successful in a misleading conduct action against a business. It also discusses the elements that need to be present for an exemption clause to be accepted into a contract. Using legislation and common laws precedents, the essay concludes that Bliss Island were liable for misleading conduct since they made misrepresentation about the quality of their services. It also notes that the exclusion clause in the contract was invalid as the couple became aware of the clause long after they had completed their contract for accommodation with Bliss Island. Part I: Misleading conduct Facts Julian and Anna are planning to go on holiday to celebrate their wedding anniversary. The Couple come across a brochure of Bliss Island. The brochure shows Bliss Island as a five star resort located on a beautiful Tropical Island. The brochure also asserts that the best reef diving can be found on Bliss Island It also shows a number of delicious cakes and asserts that Bliss Island employs the best Chef’s in Australia. Since Anna and Julian are keen divers and Anna loves cakes, the couple thinks Bliss Island is their perfect holiday getaway. When they call Bliss Island to enquire about the diving and the food they are assured that the diving is Brilliant. Sandra goes on to add that the food on the Island is exceptional. Once the couple gets to the Island they find that an algae bloom has affected the visibility of the diving sites. The couple also found that the resort is unable to cook the delicious cakes displayed on the brochure. Instead of Australia top chef, the main chef on the Island is a two-hat Pakistan Chef. Therefore, the food is not exceptional as described by Sandra. Legal issue The legal issue in this case is whether Bliss Island is liable for misleading information that entices a consumer to purchase their services. Law Australian Consumer Law 2010 (cth) prohibits business from deceiving consumers through misleading information about their products. Under section 19 of the Act, businesses are not allowed to use misleading or deceiving conduct to influence the purchase decision of consumers1. For a consumer to prove to a court a business is liable for misleading conduct, he must prove each of the four elements: a) The business engaged in misleading conduct in the course of trade or commerce; b) The conduct is proved to be misleading; c) The consumer relied on the misleading conduct to make a purchase decision; d) The consumer suffers loss or damage as a result of relying on the misleading conduct. Application The first element of misleading conduct is proving the plaintiff is engaged in trade or commerce and the plaintiff misleading conduct occurred in the course of Trade and commerce2. This element is quite easy for Julian to prove. Bliss Island is in the resort business; it offers hospitality, recreation and sightseeing services as advertised in their brochure. The misleading conduct that is the subject of the case was committed in an effort to attract more tourists to the Island and therefore there is no doubt the impugning conduct was committed in the course of trade and commerce. The second element involves showing that the plaintiff conduct in the case mislead the compliant to make a bad purchase decision. Section 18 of the act makes prohibits businesses from making false or misleading descriptions of their goods or services3. Specifically references to quality, value and standard of the good must be accurate and factual4. Instead, Bliss Island claimed that they employed Australia’s top chefs and also printed enticing photographs of cakes on the brochure. These photographs and the reference to top chefs were supposed to mislead consumers to believe that they served excellent meals. The resort also claimed that they had the best reef diving sites in the world which was not also true. According to Paul Latimer, it is enough to prove that the plaintiff’s conduct was misleading regardless of his intent to mislead or not5. Julian and Anna also have to prove that they relied on the plaintiff’s misleading conduct to make the decision to spend their vacation on Bliss Island6. As avid lovers of diving, it is clear the couple were influenced by the reference to good diving on Bliss Island. In addition, the photographs of delicious cakes and the claim by Bliss Island that it had the best chefs in Australia enticed Anna to choose the Island for their holiday. Finally, the couple has to prove the last element of misleading conduct which is concerned with the question of loss due to reliance on the business’s misleading conduct. In the case, the couple paid Bliss Island a handsome amount of money is exchange for a holiday with good diving and excellent food. Therefore, the couple suffers a loss when they discover the diving around the Island is not so good and the food is not what they expected. The couple also suffers the loss of travelling to the Island believing it to be an excellent place for a holiday. Part II: Exemption Clauses Facts On holiday to mark their wedding anniversary, Julian and Anna check into Bliss Island resort. On the door to their room there is a prominent notice informing them that Bliss Island is not liable for the loss of any valuable they leave in the room. The notice also proclaims that the resort cannot be held liable either in tort or contract. On the very first morning, the housemaid forgets to lock their room door and Pete enters the couples room and steals Anna’s jewelry and Julian’s wallet. Legal issue Can the exclusion clause found in the room exempt the resort liability for the loss of the couple’s valuables under negligence and/or contract? Law According to Linda Mulcahy, there are two crucial factors in deciding where an exclusion clause forms part of a contract7. The two factors are: 1. Reasonable notice8 2. Timing and;9 Application On the issue of notice, Brennan J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 required a party that was intent on relying on an exclusion clause to have taken steps to bring the other party’s attention to the clause10. Lord Denning in J Spurling Ltd v Bradshaw (1956) EWCA Civ 3 argued that exclusion clauses needed to be printed in red ink on the face of the document to attract the attention of the party whose contractual rights are limited by the exclusion clause11. Bliss Island offers adequate notice by displaying the exclusion clause in the couple’s room. The sign just behind the room door was large and stood out so that the couple could notice the exclusion clause. However, the sufficiency of the notice will not be considered if the timing of the notice is wrong. The attention of the contractual party must be brought to the exclusion clause before the contract is completed. On the timing issue, Olley v Malborough Court Ltd [1949] 1 KB 532 asserted that for an exclusion clause to be valid it must be incorporated into the contract before completion of the contract12. In facts very similar to the Bliss Island case, a hotel had put an exclusion clause in a hotel room. The court argued that the exclusion clause was invalid as the contract has already been formed before the claimant entered the hotel room. Similarly, the contract for the couple’s accommodation at Bliss Island resort had already been completed by the time they entered the room. This point of view is supported by Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 which ruled that an exclusion clause printed on a ticket for a clause was not incorporated into the contract as the contract was made in Australia and the ticket later issued in Australia. Lord Denning in Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, at 169 also asserted that an exclusion clause has to be brought to the attention of a contract party prior to entering the contract. Negligence Since the exclusion clause is rendered ineffective, Julian and Anna may also have sufficient grounds to sue Bliss island and the housemaid for negligence. As espoused by Donoghue v Stevens [1932] AC 562 both the housemaid and the resort had a duty of care to ensure that the couple’s belongings remained safe13. However, the housemaid negligently omitted locking the couple’s room door therefore leaving the couple’s property vulnerable to theft. Pete took this opportunity to steal Anna’s jewelry and Julian’s wallet. Conclusion In conclusion, Julian and Anna can win a misleading conduct action against Bliss Island. In such an action it is easy to prove all the four elements of misleading conduct. First, Bliss Island is in the resort business and offers holiday packages. In an effort to sell their services to Julian and Anna they make several misleading descriptions of the quality of food and diving on the resort. Bliss Island is intent on misleading as they know that the quality of diving and food on the Island is not as claimed in the brochure. The management of Bliss Island may be held liable for the loss of Julian’s and Anna’s wallet in both contract and tort. The exclusion clause that purported to limit the Resort’s liability for the loss of valuables left in guests’ room is rendered ineffective. The term cannot be considered part of the contract for the couple’s stay in the resort as they became aware of the term through a notice in the room. The invalidity of this clause leaves Bliss Island open to prosecution for the housemaid’s failure to lock the couple’s room which consequently led to the theft of their valuables. Bibliography A. Articles/Books/Report Latimer, Paul, ‘Australian Business Law 2012’ (CCH Australia Limited, 2012). Mulcahy, Linda, ‘Contract Law in Perspective’ (Routledge, 2008). B. Case Law Australian Consumer Law 2010 (cth), s. 19 Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 Donoghue v Stevens [1932] AC 562 J Spurling Ltd v Bradshaw (1956) EWCA Civ 3 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Olley v Malborough Court Ltd [1949] 1 KB 532 Olley v Malborough Court Ltd [1949] 1 KB 532 Re Henjo Investments Pty Limited [1988] FCA 40, [42] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129 TPC v Pacific Dunlop limited (1994) ATPR 41-307 C. Legislation Australian Consumer Law 2010 (cth), s. 19 Read More