Business Law: Contract Termination and Remedies for Misleading Conduct

Introduction to Business Law

Hypothetical ILAC Question
Issue
Whether Karen can terminate the contract with Gym & Tonic and whether she is liable to pay
$100 as cancellation fee? Whether Gym & Tonic has breached any provisions of Australian
Consumer Law and what remedies are available for Karen?
Law
While managing their business operations in Australia, individuals and entities have to
comply with the provisions given in the Australian Consumer Law (ACL) to avoid legal
penalties. These regulations bind the parties to legal relationships while there are conducting
trade practices in Australia. The Competition and Consumer Act 2010 (Cth) provides key
provisions which are necessary to comply by people and organisations. Section 18 of the act
imposes restrictions on businesses by providing that they must not engage in any conduct
which can be considered as misleading or deceptive or likely to do so regarding trade or
commerce. Section 29 of the act imposes similar restrictions on individuals and entities by
providing that they should avoid making misleading or deceptive representations regarding
their products in advertisements. Individuals and corporations should not make any
statements made regarding products or services which are false and likely to mislead or
deceive customers.
ACCC v TPG Internet Pty Ltd (2013) HCA 54 is a recent example in which the company
misleads its customers regarding the prices of ADSL2+ unlimited broadband. In its
advertisement, the company provided that the cost of its product for a month is $29.99. The
company also included in small print that this cost is bundled with a home line rental which
costs $30 per month. The High Court provided that the advertisement is misleading and
deceptive and ordered the company to remove it along with imposing penalty on the
company. As per common law, a contract which is formed based on misrepresentation is
considered as voidable. The party who has signed the contract has the right to either set aside
the contract or comply with its terms. Remedies for breach of these provisions include
damages, rescission, specific performance, injunction, and repudiation.
Application
In the given case study, Karen entered into a contract with Gym & Tonic based on the
advertisement posted by the company in which the company shows that it is giving its $60
member for only $30 per month. The advertisement displayed unlimited access to the gym
along with a picture of people working with different equipment. However, Karen finds out
that unlimited access is limited to weight equipment only and the cost of monthly
membership is $40.
Gym & Tonic has breached section 18 and 29 of ACL by engaging in misleading conduct and
making false representations regarding its services respectively. Since the contract is based
on misleading conduct of the company, Karen has the right to set it aside due to which she
did not have to pay $100 fee as discussed in ACCC v TPG Internet Pty Ltd case. Moreover,
Karen can demand the remedy of damages in this case to compensate the loss suffered by her
due to the misleading advertisement.
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