Business Law: Contract Terms and Australian Consumer Law

This article discusses the legal provisions of contract terms and Australian Consumer Law. It covers the rights of consumers and corporations, and the consequences of misleading and deceptive conduct. The article also provides an analysis of relevant cases and legal principles. The subject is Business Law, and the course code is not mentioned. The college or university is not mentioned.

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the student:
Name of the University:
Author Note

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Question One:
Issue:
In the given scenario, the issue that has been identified is whether Justin and Kate can get out
of the contract with Green Haven Pty Ltd.
Rule:
In case of written contracts, the rights and the obligations of the parties to the contract are
provided as express terms. Examples of terms include negotiation of sale, stipulated price for
the fulfilment of the promise (McKendrick, 2014). Terms of a written contract can be
categorized in conditions, warranties and intermediate terms according to the degree of
seriousness and the likelihood of affecting the terms of the contract.
Condition can be considered to be the most important term of the contract which is central to
the meaning of the purpose of the contract. In case of a breach of condition the aggrieved
party can repudiate the contract and sue for damages (Knapp, Crystal and Prince 2016). The
case Poussard v Spiers& Pond provides an example of condition
Warranties are less important terms of the contract. The case Bettini v Gye provides an
illustration of a warranty. For breach of warranty the innocent party can only claim damages
but cannot rescind the contract.
Intermediate term of a contract falls between a warranty and a condition. Such intermediate
term is to be analysed as in accordance with the seriousness of breach of such term. The case
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd provides an illustration of an
intermediate term.

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The next rule that is relevant in case of written contracts is the Parole Evidence Rule. The
Parole evidence rule states that when a contract is in writing either wholly or partially any
other evidence would not be acceptable which are likely to vary or contradict the terms of the
written contract as held in the case Mercantile Bank of Sydney v Taylor. The rationale
behind this rule is to preserve the integrity of the written contracts. To take into consideration
any other evidence, which contradicts the terms of the contract, would contribute to the
futility of the original written contract (Epstein, Archer and Davis 2014). However, it is to be
mentioned that the Parole Evidence rule is not absolute in nature, and there are numerous
circumstances in which other evidence related to the written contract are taken into
consideration.
A Collateral Contract is an important example of an exception of the aforementioned Parole
evidence rule. A collateral contract can be defined as a contract which has a separate
existence from the original contract but is related to the main contract. An illustration of
collateral contract had been illustrated in the case of Heilbut, Symons & Co v Buckleton by
Lord Moulton. The consideration for entering the main contract is provided to the other party
by the collateral contract. In the De La Salle v Guildford case ER 495, [1901] 2 KB, a
tenant wished to take an apartment on lease however he had one condition. He only wished to
taker the apartment on lease on the condition that the drains were working. The owner of the
apartment provided the tenant with the verbal assurance that the drains were working. The
Tenant took the apartment on lease and later on found out that the drains were not working.
In this case the problem that had been faced by the Tenant was that the Parole evidence rule
did not allow thesubmission of the verbal assurance that had been provided to the tenant by
the owner in relation to the proper functioning of the drains. However it had been held by the
court that the tenant could allege the breach of the collateral contract and in reliance of such
co lateral contract claim damages. It can be stated that for the establishment of the collateral

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contract the party who wishes to establish it must prove that it fulfilled the following
essentials:
 The collateral contract was promissory in nature
 There was intention of inducement
 Such collateral contract is consistent with the main contract.
However as held in the Heilbut, Symons & Co v Buckleton by Lord Moulton a party cannot
repudiate the main contract for breach of the collateral contract.
Application:
It has been provided through the facts of the case Justin and Kate had seen the advertisement
of of Green Haven Pty Ltd about a housing development called “Possum Retreat”. It had
been provided in the brochure which contained the advertisement that the air was pure in this
are as there was no mine or factory within a radius of two hundred kilometres. Justin had
also further mentioned to Mike while negotiating the purchase that he was interested to buy
the apartment only because the air was pollution free due to the absence of any factory or
mine near the housing development. Mike who had been negotiating on behalf Green Haven
Pty Ltd provided Justin the assurance that the air would be pollution free as there was no
factory or mine located near the housing development. Thus by the application of the De La
Salle v Guildford case, it can be stated that Justin had entered into the contract of purchasing
the apartment by relying on assurance provided to him by Mike. Thus in in this case a
collateral contract can be said to be existing which is consistent with the main contract as
such collateral contract had been formed in relation to the main contract. The assurance of
Mike was promissory in nature. There was an element of inducement on the part of Mike so
that he would buy the apartment by relying on his assurance. However later it turned out that
the Green Haven Pty Ltd had been aware of the fact that coal-mining operations were to start

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near the housing development from June 1. Justin and Kate had just moved in the house on 1st
May. Therefore in this case it is clearly evident that there was breach of the collateral contract
and due to the same Kate and Justin can claim damages but cannot repudiate contract.
Conclusion
Thus to conclude it can be said that Justin and Kate cannot repudiate the main contract for
breach of the collateral contract. However, they can claim damages from Green Haven Pty
Ltd.
Question 2:
The Australian Consumer Law which has been provided in schedule 2 of the Australian
Competition and Consumer Act 2010 sets out the rights of the consumer and aims to regulate
the conduct of corporations so as protect the rights of the consumers. The Australian
Competition and Consumer Commission aims to protect the rights of the consumers, rights of
the business, monitor prices and prevent illegal behaviour of corporations which is anti
competitive in nature by implementing the provisions of the Australian Consumer law
(Howells and Weatherill 2017). It has been provided in section 18 of the Australian
Consumer law that corporations must not engage in misleading or deceptive conduct. It can
be stated that corporations must refrain from creating a misleading and false impression to the
public. This rule is applicable to advertising of products, packaging of products and any
information which is provided by the staff of the employer who engages in misleading and
deceptive conduct. This rule is also applicable to statements of the business which are
released in the media and or online. As held in the ACCC v Google Inc. case intention of
engaging in false and misleading conduct is not relevant (Australian Competition and
Consumer Commission 2018).

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In the notable case Australian Competition and Consumer Commission v Hewlett-Packard
Australia Pty Ltd [2013] FCA 653 a pecuniary penalty of 3 million dollars had been imposed
on HP for breaching the provisions of section 18 of the ACL. Further it has been provided
specifically in section 30 of the ACL that no person is allowed to provide misleading and
false representations about the sale of land. It can be stated that any person who engages in
providing false and misleading statements about the sale of land and in the process
contravenes the provisions of the section 30 will be liable to pay a penalty pecuniary in
nature.
Therefore by analysing the legal provisions of section 18 and 30 of the ACL and applying the
same to the facts of the given case study it can be said that the organization Green Haven Pty
Ltd. had engaged in misleading and deceptive conduct. The advertisement given Green haven
Pty Ltd. Contained the provision that the housing development being built by Green Haven
would be far away from the hustle bustle of the city. It was specifically provided that there
was no mines or factories within a radius of 200 kilometres of the housing development
complex. Justin and Kate had relied on such advertisement and purchased a house in that
housing development. However it was later discovered by them that the operations of a mine
were about to start very close to their apartment. Later it was also discovered by the Justin
and Kate that Green Haven Pty Ltd had known about it all along. Therefore it is clearly
evident in this given scenario that Green Haven Pty Ltd that they engaged in misleading and
deceptive conduct by providing misleading advertisements to the public. Therefore as per the
provisions of section 18 and 30 of the ACL Green Havens Pty Ltd is liable to pay pecuniary
damages to those who were deceived by their conduct.

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Reference List:
Cases
Poussard v Spiers and Pond (1876) 1 QBD 410
Bettini v Gye (1876) 1 QBD 183
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7
Mercantile Bank of Sydney v Taylor (1891) 12 LR (
De La Salle v Guildford case ER 495, [1901] 2 KB) 252
Heilbut, Symons and Co. v Buckleton [1913] AC 30.
Australian Competition and Consumer Act 2010
Google v ACCC (2013) 294 ALR 404
Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd
[2013] FCA 653
Textbook
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press
(UK).
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and
materials. Wolters Kluwer Law & Business.
Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge
Journal Articles

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Epstein, D.G., Archer, T. and Davis, S., 2014. Extrinsic Evidence, Parol Evidence, and the
Parol Evidence Rule: a Call for Courts to Use the Reasoning of the Restatements Rather than
the Rhetoric of Common Law. NML Rev., 44, p.49.
Media Article
Australian Competition and Consumer Commission. (2018). ACCC takes action against
Apple over alleged misleading consumer guarantee representations. [online] Available at:
https://www.accc.gov.au/media-release/accc-takes-action-against-apple-over-alleged-
misleading-consumer-guarantee-representations [Accessed 4 May 2018].