The Law
November/December 2001

Laws that Protect Consumers

By Tom Williams, Solicitor

With the growth of the 'consumer movement' since the 1960's, numerous statutory provisions have been introduced, aimed at reducing the instances of unfair practices by traders and to help consumers take effective action where such practices occur.

Here I will consider some of the key consumer protection legislation, especially the general provisions of the Commonwealth Trade Practices Act (TPA) and parallel states Fair Trading Acts (FTA) relating to market practices, the standard of goods and services, and product safety.

Misleading conduct: Section 52 of the Trade Practices Act and sections of the Fair Trading Acts give people who purchase goods or services for personal, domestic or household use protection against conduct by traders which is misleading or deceptive or likely to mislead or deceive. Such conduct may occur in the context of advertising, during pre-contractual negotiations or after the purchase has been made. It might even occur as a warranty in the contract itself.

Whether or not the conduct in question can be regarded as misleading depends on whether, objectively speaking, there is a real possibility that the average member of the target audience could be misled.

Most importantly, the misleading conduct provisions of the TPA and the FTA's apply as long as misleading conduct is found to have occurred - nothing further is required. In particular, there is no need to prove that the trader acted either fraudulently or negligently: as long as the consumer suffered loss as a result of relying on the conduct, they are entitled to compensation.

The statutory protection against misleading conduct is very broad and is impossible to give anything like a complete list of the range of activities to which it might apply.

Some specific marketing practices which are illegal: As well as prohibiting misleading conduct in trade or commerce in general, the TPA and FTA's make a number of specific unfair market practices illegal. These include:

ª Offering free gifts and prizes with the intention of not providing them, or not providing them as offered.

ª Accepting payment without intending to supply the goods as ordered.

ª Advertising goods for sale at a particular price without being able to supply a reasonable quantity of the goods at that price for a reasonable period.

ª Referral selling which involves selling goods on the understanding that the buyer will receive a benefit for introducing prospective buyers to the suppliers; and Pyramid selling that promises recovery of one's own enrolment fee from new enrollers.

ª Supplying unsolicited goods - The receiver of unsolicited goods is not liable to pay for the goods. However, the receiver cannot have prevented the supplier from repossessing the goods.

ª Advertising only part of the price - e.g. advertising a low deposit or low repayments without disclosing the total price. The total cash price must be disclosed where any such price claims are made.

Despite the range of conduct potentially covered, the misleading conduct provisions of the TPA and the FTA's are not applicable in some situations involving such conduct. For example:

ª Advertising Puff - The courts have accepted that a certain amount of exaggeration is inevitable in the advertising context. However, if the advertiser's claims are sufficiently precise and factual in character, a breach may be involved.

ª Private transactions -A private sale by an individual of, for example, their home or motor vehicle is not regarded as having the required trading or commercial nature.

Remedies: The TPA and FTA's offer a wide range of remedies to private individuals who take legal action under these Acts. Apart from damages, they can seek injunctions (orders to stop conduct from continuing) corrective advertising; and 'any other orders that the court thinks appropriate', including orders declaring a contract void, varying its terms, refusing to enforce the contract, to refund money or pay another party's loss or damage, and to repair goods, provide parts, or undertake specific services.

Unconscionable conduct and unjust contracts: In some situations, a party to a contract may have a basis for release from their contractual obligations under the general law doctrine of unconscionability. Consumers and certain businesses are also given protection by the TPA and the FTA's against 'conduct that is in all the circumstances unconscionable' of traders, suppliers, manufacturers, etc. A closely related statutory regime is the Contracts Review Act 1980 (NSW) (CRA) which enables a court which 'finds a contract or a provisions of a contract to have been unjust in the circumstances relating to the contract at the time it was made' to make a variety of orders giving relief to the affected party.

Substandard goods and services: Dissatisfaction with goods and services is a common consumer complaint that occurs for a number of reasons. What a consumer can do about the situation depends on the particular reasons for complaint. It will also depend on whether, in supplying the goods or services, the seller has broken a 'condition' or a 'warranty' of its contract with the buyer.

Where a breach of a condition has occurred, a consumer can choose to either end the contract, reject and return the goods and claim damages (compensation) for the loss they have suffered, or keep the contract alive (keep the goods and pay the price) and sue for damages.

A breach of a warranty on the other hand only entitles the consumer to claim compensation - but not to return the goods.

The Trade Practices Act implies certain conditions and warranties into consumer contracts. The specific terms implied into consumer contracts by the TPA are considered below.

Goods not of merchantable quality: It is an implied conditions that goods sold must be of 'merchantable quality'; that is, fit to be used for the purpose for which they are commonly bought. This implied condition does not apply if: the defects were specifically drawn to the buyer's attention before the contract was made, or the buyer examined the goods before buying them and the defects ought to have been revealed by that examination.

Goods unfit for purpose: Where a consumer has told the seller, what they want the goods for, and the consumer relies on the skill or judgement of the seller, it is an implied condition of the contract that the goods will be reasonably fit for that purpose.

Goods not as described or as per sample: It is an implied condition that if the buyer buys or hires goods on the basis of the seller's description of those goods, the goods will conform to that description. The same principle applies where a consumer buys goods relying on a sample.

Goods not owned by seller: Sometimes a person in possession of goods purports to sell them when in fact they do not have the right to do so. In such a situation, the true owner will usually be able to reclaim the goods from the purchaser.

Unsatisfactory services: The TPA implies certain non-excludable warranties into contracts for services. As these are warranties and not conditions, a consumer will not be entitled to end the contract for a breach, but will be entitled to claim damages. These warranties, which cannot be excluded in a consumer contract, are: that the services will be rendered with due care and skill; that any materials supplied in connection with those services will be reasonably fit for the purpose; and that where the consumer makes known the purpose of the services, or the results to be achieved, the services will be reasonably fit for that purpose.

These warranties do not apply to contracts of insurance, and the warranty of fitness for purpose is excluded from contracts for professional services provided by qualified architects or engineers.