Introduction
Statements made prior to making a contract, as a rule, are not binding for the parties. At the same time, false or misleading statements made with the purpose of inducing another to enter into a contract can be found invalid, giving an innocent party the right to various remedies under the law. Under the common law, a victim of misrepresentation may be entitled to rescind the contract. Legislation, such as Australian Consumer Law, sets a pecuniary penalty in the event of breach of any of its provisions relating to consumer guarantees or false/misleading statements. Thus, the relevant case law demonstrates that some of the companies tend to misrepresent the terms of the contract during advertising. Companies also may include limitation of liability clauses that are prohibited by the law.
In this report, I would like to present a brief overview of the holiday package brochure, analyze the potential legal effect of representations and terms contained therein, and identify whether any of those terms pose legal risks for the company in light protections and guarantees of the Australian Consumer Law.
Overview of applicable law
Terms and Representations
The terms of the contract determine the rights and obligations of parties under a contract. Terms may be implied (by common law or statute) or express, i.e. determined by the parties and incorporated in written contract or by oral agreement. Terms are a major part of any contract; if one of the terms is breached, an innocent party can repudiate the contract and claim damages. Warranties, on the other hand, are not essential conditions of the contract. The innocent party may claim damages, but has no right to repudiate the contract. (Terms of a Contract)
In addition to terms and warranties, the parties can make various representations in the course of negotiations, which may not be included in the final contract. In most cases, those representations do not constitute binding terms of the contract. However, if the statements made by one of the parties were false, an innocent party may be entitled to remedies under legislation or common law. Thus, a common law gives an innocent party the right to rescind the contract where a contract was induced by a false representation. Statutes also may grant remedies to the victims of false statements. Section 18 of the Australian Consumer Law establishes remedies for misleading conduct of persons and entities in trade or commerce. Thus, both state and Commonwealth legislation make it an offense to induce a person to enter into a contract through misleading or false statement. Accordingly, the law prohibits traders to make misleading statements about any qualities of goods or services with the purpose of persuading a person to enter into a contract. (Terms of a Contract)
False or misleading statements
Section 29 of the Australian Consumer Law provides a list of situations in which a person, in trade or commerce, must not make false or misleading representations about goods or services. In particular, a person must not make false statement that:
Goods are of particular quality, style or model or that they had history.
Services adhere to certain standard of quality or value;
A testimonial describing goods or services was made by a particular person;
Goods or services have specified performance qualities, uses or benefits;
A person in trade has a sponsorship or affiliation;
Goods or services have a particular price;
A certain warranty, right or condition exists or is excluded. (The Competition and Consumer Act 2010 (CCA))
Section 32 of the Act provides that a person in trade must not offer any rebate, gift or other free item with the intention of not providing it, or providing it under different conditions than specified. Among other, this section applies to the supply of goods or services. If a person in trade offers any such rebate or gift, a person must provide rebate or gift within reasonable time and in accordance with the offer. A court may impose a pecuniary penalty if a person in trade violates this section.
Section 34 provides that a person in commerce must not engage in conduct that misleads the public about the nature and characteristics of any services.
Section 35 states that a person in commerce must not offer or advertise the supply of services at a specified price if there is a good reason to believe that a person will not be able to supply those services at that price and for the defined period of time, and that the person is aware about those reasons. (The Competition and Consumer Act 2010 (CCA))
Consumer guarantees regarding the quality of services
Section 60 provides that a person in trade who supplies the services has the obligation to render those services with due care and skill. In addition, section 60 guarantees that the services rendered will be reasonably fit for the purpose for which the consumer acquired those services. This section also guarantees that the services must achieve the result that the consumer wished the service to achieve. Furthermore, section 64 provides that a person who renders services may not exclude, restrict or modify any of the guarantees contained in section 60, or exclude any liability for failure to comply with consumer guarantees of the Act. (The Competition and Consumer Act 2010 (CCA)
Enforcement of consumer protections and guarantees
In 2015, the Federal Court of Australia held that a franchisor who provided carpet and mattress cleaning services, violated section 29 of the Australian Consumer Law. The defendant admitted that in order to boost his advertising campaign, he asked his marketing agent to post fabricated positive testimonials that were positioned as genuine reviews from customers. The defendant also asked his franchisees to post fabricated reviews and testimonials on various websites. The court noted that fabricated testimonials is the form of false or misleading advertisement that potentially misleads a large number of consumers and that is why it was specifically prohibited by the legislature. The court ordered the defendant to pay $215,000 penalty. (Australian Competition and Consumer Commission v A Whistle & Co)
In another case, the Federal Court has found that Valve corporation made misleading statements about consumer guarantees under the provisions of the Australian Consumer Law. Thus, terms and conditions of online game distribution platform Steam provided that consumers were not entitled to a refund for downloaded games. The company also excluded statutory guarantees of acceptable quality. (Australian Competition and Consumer Commission v Valve Corporation (No 3)
In a similar case, the Federal Court ordered the defendant to a pay a total of $52,000 for violation of sections 18 and 29 of the ACL. The court found that the defendant made false or misleading representations about consumer rights. Thus, the defendant along with his staff members represented to consumers that the company had no obligation to provide remedy for defective goods; that the consumers had to file all claims directly to manufacturer, not the company; the company could not provide assistance unless the consumer paid for repair of defective goods. (Australian Competition and Consumer Commission v Bunavit Pty Ltd)
Legal Effect of Greece Holiday Brochure
Testimonials
The brochure contains testimonials posted by clients and travel agents on the website of Greece and Mediterranean Centre. It is important to make sure that those testimonials do not purport to mislead potential clients as to the quality of services and that they are not fabricated contrary to Section 29 of the Australia Consumer Law. (in accordance with Australian Competition and Consumer Commission v A Whistle & Co)
Representations
The brochure also contains numerous descriptions of travel services and accommodations. The company offers to arrange a stay at the hotel or assist in renting a house or an apartment. For example, a company offers to rent a downtown apartment in Athens:
“Find your new true home away from home during your stay in Athens, either for 2 days or 10 months with peace of mind regarding linen cleaning, housekeeping and/or utilities such as internet, gas, water, etc. Apartments are located in a late 1940's low rise building situated next to the pine forest surrounding the all-marble Panathenaic stadium of the Modern Olympics of 1896. It is located within walking distance from all the main tourist attractions of Athens such as Plaka, the Acropolis, Greek Parliament, Constitution Square and the upscale Kolonaki district.” (p. 11)
In addition, some of the hotels offer various discounts and rebates, such as “Stay 3 Pay 2 Nights” or “10% off Discount of nightly rate if paid by 31 Mar 16”. (Greece Holiday Brochure, p. 12)
All those statements must be truthful in fact. Australian Consumer Law prohibits false or misleading statements made by the person in trade in order to induce another to enter into a contract. (ACCC v Apple Pty Ltd [2012] FCA 646; ACCC v Giraffe World Australia Pty Ltd (1999) FCA 1511) Consistent with Sections 34 and 35, the company must make sure that all descriptions, including hotel accommodations, living conditions in private houses and apartments, conditions of travel arrangements and tours, etc. are truthful and that the company is capable of supplying the services in accordance with those descriptions.
Additionally, any rebates or discounts offered must be provided to a client based on conditions specified in the brochure and in a timely manner. For example, the company must ensure that the guests of Royal Myconian Resort receive the following complimentary services “American buffet breakfast with champagne. Fruits and wine in the room upon arrival daily, welcome drink & early check-in and late check-out subject to availability. Private section on the beach and free WIFI.” (Greece Holiday Brochure p. 97)
Limitation of liability
“Greece and Mediterranean Travel Centre Pty Ltd shall in no circumstances whatsoever be liable to the client or any person travelling with him/her, for death, personal injury, sickness, accident, loss or any misadventure howsoever caused: any act, omission, default or any hotelier, carrier or other person or by servant or agent employed by them who may be engaged or concerned in the provision of accommodation, refreshment, carriage facility or service for, or any person travelling with him howsoever caused; the temporary or permanent loss of or damage to baggage or personal effects howsoever caused.” (Greece Holiday Brochure p. 124)
Such form of exclusion of liability is not prohibited by the legislation so this term can be included in a contract with a client. First, applicable legislation such as Australian Consumer Law does not impose an obligation on the service provider to compensate consumers` damages incurred as a result of death, personal injury, sickness, accident or any misadventure, if any of that was beyond provider`s control or was caused by a third party. Thus, it is only reasonable on the part of the company to protect its interests and exclude the possibility of litigation in case if a client decides to bring an action against the company to compensate for misfortunes covered by this provision. This clause aims primarily to exclude Company`s liability for the actions beyond Company`s control, i.e. for the actions or omissions of those who directly render the services but who are not employees or agents of the company – “hotelier, carrier or other person or by servant or agent employed by them”. Thus, the exclusion is legitimate and consistent with the common law principle of causation, which prohibits to held a person liable for damage if there is no direct link between this person`s acts or omissions and the damage incurred (Royal v The Queen [1991] HCA 27). Second, this clause does not exclude any of the consumer guarantees found in section 60 of the ACL, such as the guarantee that the service is rendered with due care and skill, that it fits the client`s purpose and achieves the result that the client intended to achieve. Finally, this clause fits within criterion of fairness of contractual terms set forth Section 24 of Australian Consumer Law; the term does not cause significant imbalance in the parties` status under the contract, the clause is reasonably necessary to protect the legitimate interests of the Company, the term would not cause financial detriment to the client.
Therefore, the exclusion clause found in the brochure does not violate neither of the rights or guarantees granted to consumers.
Conclusion
In general, terms and representations contained in the brochure do not present significant legal risks for the company. At the same time, the company must make sure that the representations are truthful and that the company is capable to fulfill its minimal “duty of care and skill” in rendering the services. Thus, testimonials must be truthful and not fabricated, services must be provided in accordance with description, discounts and gifts must be provided to clients based on specified conditions and in a timely manner.
Bibliography
Hannebery, John. Australian Consumer Law Update: ACCC Cases Targeting False or Misleading Representations. Davies Collision Cave, March 17, 2016. Retrieved from: http://www.davies.com.au/ip-news/australian-consumer-law-update-accc-cases-targeting-false-or-misleading-rep
Australian Competition and Consumer Commission v A Whistle & Co (1979) Pty Limited [2015] FCA 1447
Australian Competition and Consumer Commission v Bunavit Pty Ltd [2016] FCA 6
Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196
ACCC v Apple Pty Ltd [2012] FCA 646
ACCC v Giraffe World Australia Pty Ltd (1999) FCA 1511
Royal v The Queen [1991] HCA 27
The Competition and Consumer Act 2010 (CCA)
Terms of a Contract. ACL Retrieved from: http://www.australiancontractlaw.com/law/scope-terms.html
Greece Holiday Brochure, pp 11, 13, 97, 124.
