Legal Issues in Misleading Advertisements and Consideration in Contracts

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MASTERS IN PROFESSIONAL ACCOUNTING: Case Study
Student’s Name
Course
Professor’s Name
University
Date

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Part A (i) invitation to treat
Issues
 Machine Express Pty Ltd placed an announcement directed towards the local people.
The chief objective of the firm was to lure the local public to buy the coffee machine
at a half price.
 However, there were a number of errors during the advertisement as they did not
indicate whether the advertisement is an offer or an invitation to treat.
 It was later announced that the advertisements were a “mere puff.” As a result, Heidi
felt confused as to the objective of the advertisement as she felt let down.
Rule
Misleading advertisement
 The advertisement by the NewBean Coffee machine is an invitation to treat. This
implies that Heidi and other prospective customer are invited to make their counter-
offer.
 When such offer are made by the client, the seller can accept them or reject them. An
advertisement is a mere invitation to treat and customers cannot consider it as a valid
offer.
 The seller has no contractual obligation binding him to the advertisement, as for a
legal contract to be valid, an offer has to be made with explicit agreement of the offer
by both the offeror and the buyer.1 Contractual agreement for the seller to perform the
contract does not exist in this cases as Heidi and the seller didn’t form any agreement.
1 Philip ,Stoop. (2013).
The concept ‘fairness’ in the regulation of contracts under the
Consumer Protection Act 68 of 2008(Doctoral dissertation).
http://uir.unisa.ac.za/handle/10500/8507

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Application
Section 18 of the ACL
 In accordance with Section 18 of the ACL, Conducting “false advertisements” or
other misleading activities are illegal and attracts heavy punishments.2
 The Competition and Consumer Act 2010 further indicates that “all persons are
prohibited from trading using false business activities.
Laundry Ltd v Newman Industries Ltd
 The case of Victoria Laundry Ltd v Newman Industries Ltd [1949] 2 KB 528
prohibitions also include selling of low-quality products and services.” The law was
established as an effort to create a positive norm within the economy.3
Conclusion
Heidi does not have any claim against the seller. This is for the reason that the
manager made an offer directly to Heidi but she gave conditional acceptance which largely
depended on the occurrence or non-occurrence of particular events.4
2 Alison, Bashford, and Philippa Levine. "Introduction: Eugenics and the modern
world."
The Oxford handbook of the history of eugenics (2010): 3-24.
3 Paterson, and Gadir, J. (2013). Looking at the fine print
: Standard form contracts for
telecommunications products and consumer protection law in Australia.
UW Austl. L.
Rev.,
37, p.45.
4 Eugenia Kolivos, and Anna Kuperman. "Consumer law: Web of lies-legal implications of
astroturfing."
Keeping good companies 64, no. 1 (2012): 38.

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Part A (ii) consideration.
Issues
 Heidi made an offer to buy the NewBean coffee machine and the seller gave her an
opportunity to go and check whether she had some space in her shop where she could
put it.
 Heidi didn’t make any form of written agreement - Any terms set by Heidi and the
seller would determine the rights and obligations of both of them to the promise.
 Australian General Law- Any terms and conditions between a buyer and seller must
be kept in writing5.
 Terms of trade- it is important for every consumer to understand the terms and
conditions under the law, prior to establishing any form of an agreement. Any
agreement should be properly analysed with the implications set out clearly by both
parties. Where such factors are not applicable, court intervention might be preferred
in order to interpret the implications of such actions. That being said, multiple rules
and regulations have been developed to help the court in conducting its work
effectively.6
Rule
Consideration
 The seller made an offer to sell the machine to Heidi but it was still open to be
purchased by other prospective buyers. Prior to selling the machine, Heidi had only
made a mere promise into the set terms of buying the machine.
5 House of Representatives Standing Committee on Industry, Science and Technology,
Finding a balance: Towards fair trading in Australia, May 1997, p. 1
6 Australian Consumer Law (n 67) s 3(1)-(3). Competition and Consumer Law Act 2010
(Cth) sch 2 ('Australian Consumer Law')’