ACL Breach: Soft 'N Cuddly Case Study

This assignment analyzes a case study involving Soft 'N Cuddly Pty Ltd, who potentially breached the Australian Consumer Law (ACL). It examines their misleading conduct regarding product origin and company name resemblance to another business. The analysis focuses on sections 18 and 29 of the ACL, referencing relevant case law like Kingisland Meatworks and Cellars Pty Ltd. The consequences and potential penalties for Soft 'N Cuddly's actions are also explored.

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Business Law
Legal Analysis Report
27-Jan-18
(Student Details: )

Business Law
Question 1
Issue
Whether Zoe can sue Wizard for the breach of contract in this case, or whether the clause 8
proves to be successful?
Rule
A contract is a legally binding document which covers different terms. It is important to fulfil the
terms covered under the contract; otherwise a breach of contract takes place. One of such terms
is exclusion clause, which has the effect of restricting or limiting the liability of one part of the
contract, due to the reasons mentioned. However, exclusion clauses have to fulfil certain key
requirements, in order for them to serve their purpose. The first one in this regard is that the
exclusion clause has to be properly incorporated in the contract. It has to be carefully brought to
the contracting party, particularly the one which would be at the weaker side where this
exclusion clause was to become applicable (McKendrick and Liu, 2015)).
Where an unfair term is to be relied on by a party, there is a need for the party to give reasonable
notice for the same, in context that they brought the term to the attention of the other party.
Where the exclusion clause is not brought to the attention of party, it would not be valid
(Lambiris and Griffin, 2016). This was seen in Thornton v Shoe Lane Parking [1971] 2 WLR
585. In this case, upon entering the parking lot, the individual got a parking ticket, and the
exclusion clause was printed on the back of it. The court stated that this exclusion clause was
invalid as it had to be inserted prior to the contract was made, and here the contract was made
when the individual got the parking ticket (James, 2017).
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Though, when such happens that the written contract covering the exclusion clause is signed by
the parties, the exclusion clause becomes bending, irrespective of the fact whether the party had
read this clause or not. This was established in L'Estrange v Graucob [1934] 2 KB 394, where
the court stated that in signing the order form, the claimant became liable for the terms covered
in the form, despite the claimant not having read the same (Gibson and Fraser, 2014).
Application
In the given case study, for contracting the services of Wizard, Zot approached them and for
rendering these services, an order form was created between the two. The contract which was
formed between the two provided Wizard to provide a number of stunning images which would
load swiftly. However, when the actual website came into functioning, the images loaded slowly.
This was a breach of promise made by Wizard and for which Zot can sue Wizard.
However, the order form covered clause 8. The wordings of this clause are such that they remove
the liability of Wizard for errors of programming. Here, Zot can state that the exclusion clause
was not brought to his attention in a proper manner as the order form covered the exclusion
clause. As per Thornton v Shoe Lane Parking, this exclusion clause was not brought to Zot’s
attention when the contract was formed. Though, this claim is likely to fail due to the precedent
given in L'Estrange v Graucob. The facts of this case study match this case, so the ruling of this
case would be applied here. Zot had signed the order form which covered the exclusion clause.
And based on the quoted case, this would result in the proper exclusion of order form, as upon
signing the contract, the terms become binding irrespective of the parties having read the same or
not. Clause 8 here would be relevant as the breach claimed by Zot was for programming error
only.
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Conclusion
Thus, it can be concluded that Zot would fail in his attempts to sue Wizard for the breach of
contract, due to the validity of exclusion clause in this case, owing to proper inclusion of it in the
order form, and the same being signed by the contracting parties. So, Zoe would not be able to
get compensation from Wizard.
Question 2
Issue
Whether the company is legally entitled to get compensation from Mick in this case or not?
Rule
Upholding the terms of the contract is very important for the contracting parties. Where the terms
mentioned under the contract are not fulfilled, it results in a breach of contract. For breach of
contract, the aggrieved party gets different remedies, which can be used by them against the
breaching party. Where it is indicated by the party that they would not be performing their
contractual promise, the aggrieved party is not to wait for the breach to take place and can claim
anticipatory bring. They can also wait for the breach before bringing the action (Latimer, 2012).
The first remedy is damages, which are an award of money for compensating the aggrieved
party. In Addis v Gramophone [1909] AC 488, it was stated that the purpose of compensating the
aggrieved party was to put them in place where they would have been, where the contract had
been properly performed. For damages to be awarded there is a need to show causation,
remoteness, and the duty of mitigating loss (Coci, 2015). In Hadley v Baxendale (1854) 9 Ex Ch
341 it was provided that the only losses which could be recovered were the ones which naturally
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Business Law
arise from the breach of contract and which was reasonably contemplated at the time of
formation of contract (Australian Contract Law, 2018).
In Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B 528, as a result of
the breach of contract, the claimant lost a lucrative contract as the boiler was not present. The
court held in this case that the reasonable compensation which could be claimed was the loss of
profit from the lack of use of boiler, but not for the loss of lucrative contract as the defendant had
not been aware of this contract (Case Brief, 2012).
Application
In the given case study, the company had contracted Mick for carrying out certain work and for
this purpose a contract had been entered between the two. However, due to the disagreement
between the two, Mick refused to complete the work wrongly. Here, even though the refusal by
Mick was wrongly made, but it was nevertheless made. This meant that the company could bring
forth a claim of breach of contract in anticipatory manner. This would therefore justify the
actions of the company in hiring another builder to complete the work.
As the work was not completed by Mick, there was a breach of contract on his part. Based on
Addis v Gramophone, this would allow the company to claim damages for the loss which they
had to bear in order for them to be put in place where they had been, in case Mick had completed
the contractual work. The costs which the company had to bear would be the one which would
be awarded as damage based on this case.
When it comes to the compensation for the expected rent of the shopping centre, precedents need
to be applied. In this regard, applying the case of Hadley v Baxendale, such loss can be awarded
as damages which naturally rose from the breach of contract. Based on the breach of contract
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undertaken by Mick, he could not have reasonably foreseen that there was a lucrative
accommodation contract. This could not have been contemplated when the contract was formed
between the two. Further, based on Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd,
Mick had no knowledge about the lucrative accommodation contracts. He could not have
foreseen the expected rent from shopping centre.
Conclusion
Thus, based on this discussion, it can be concluded that the company can make a claim of breach
of contract against Mick. However, in this case, the only damage which would be awarded to the
company would be for $250,000 and not for missing out the lucrative accommodation contracts.
So, Mick would have to compensate the company for the loss sustained by them owing to the
breach of contract.
Question 3
Issue
Whether any consumer laws had been breached by Soft ‘N Cuddly Pty Ltd or not?
Rule
The Australian Consumer Law is covered under schedule 2 of the Competition and Consumer
Act, 2010 (Cth) (Coorey, 2015). Under section 18 of this act, the prohibition is placed on an
individual in commerce or trade from being engaged in conduct which is deceptive or misleading
or where the same would possibly result in deceiving or misleading (Corones, 2012). Under
section 29 of this act, the prohibition is placed on an individual in commerce or trade from
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making misleading or false representations regarding the services or goods (Australasian Legal
Information Institute, 2018).
In the case of Australian Competition and Consumer Commission v Kingisland Meatworks and
Cellars Pty Ltd [2012] FCA 859, interesting considerations were made regarding the place of
origin and the brand name, when it could be deemed as misleading and deceptive, and also as a
false representation regarding the place of origin of goods. The crux of the matter was that where
the place of origin is used by the company or in the brand name, a representation is made that the
product is sourced from this place. And for this purpose, there is a need for a major part of the
goods to be sourced from this location. In this case, Murphy J gave an obiter where he stated that
seventy percent was the acceptable amount for this purpose. This led to the court stating that
there had been a breach of section 18 and section 29 in this case and for this purpose, different
orders were made. These orders included declaration of contravention, restriction on the
company for three years, publishing corrective notice at its premise, and paying the costs of
ACCC and a pecuniary penalty of $50,000 (Hartley and McGushin, 2013).
Application
In the given case study, two sections can be claimed to have been contravened by Soft ‘N Cuddly
Pty Ltd and these two are 18 and 29 of ACL. Here, the company indulged in misleading conduct
by using the name of the American company since last many years. The similarity in the name of
the two companies was bound to create confusion in the minds of the consumers and was a
conduct which could be best defined as misleading conduct. Further, this case also involves such
representations on party of Soft ‘N Cuddly Pty Ltd which created a false representation in the
mind of the consumers, which was bound to mislead or deceive them. This is because of the
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representation that the product was of Australia. However, the truth was that the skins of toy
koalas used by Soft ‘N Cuddly Pty Ltd was imported from China.
The company has claimed that over 50% manufacturing cost had to be incurred in Australia for
the label to be attached for product of Australia. However, the precedent given in Australian
Competition and Consumer Commission v Kingisland Meatworks and Cellars Pty Ltd provides
that 70% had to be deemed as the acceptable amount. Here the manufacturer cannot show that
the costs which they bore in Australia was over 70% and it cannot be denied that the product was
imported from China and merely labelled from being of Australia. Based on the quoted case, this
would also attract the provisions of misleading and deceptive conduct, in addition to the false
misrepresentation. Accordingly, the penalties would be made as per the case, where Soft ‘N
Cuddly Pty Ltd would not only have to bear the pecuniary penalties for wrongly stating that the
product was Australia made but also for the false representations regarding the same. The
misleading conduct with regards to the resemblance in company name would further add to the
value of penalties.
Conclusion
Thus, from this discussion, it can be concluded that Soft ‘N Cuddly Pty Ltd would be liable for
breaching section 18 and 29 of the ACL, based on the cited case law.
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References
Australasian Legal Information Institute. (2018) Competition and Consumer Act 2010 - Schedule
2. [Online] Australasian Legal Information Institute. Available from:
http://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html [Accessed on:
27/01/18]
Australian Contract Law. (2018) Hadley v Baxendale. [Online] Australian Contract Law.
Available from: https://www.australiancontractlaw.com/cases/hadley.html [Accessed on:
27/01/18]
Case Brief. (2012) Victoria Laundry v Newman Industries. [Online] Case Brief. Available from:
http://casebrief.me/casebriefs/victoria-laundry-v-newman-industries/ [Accessed on: 27/01/18]
Coci, L. (2015) It's Time Exemplary Damages Were Part Of The Judicial Armory In Contract.
The University of Western Australia Law Review, 40(1).
Coorey, A. (2015) Australian Consumer Law. London, United Kingdom: LexisNexis
Butterworths.
Corones, S.G. (2012) The Australian Consumer Law. New South Wales: Lawbook Company.
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne: Pearson Education
Australia.
Hartley, L., and McGushin, E. (2013) Misleading company and brand names – ACCC v
Kingisland Meatworks and Cellars Pty Ltd – is your use of a place of origin in your company or
brand name allowed? [Online] Lexology. Available from:
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https://www.lexology.com/library/detail.aspx?g=227e4cfa-da8e-4b25-aae4-eb3c844fe601
[Accessed on: 27/01/18]
James, N. (2017) Business Law. 4th ed. Milton Qld: John Wiley & Sons Australia, Ltd.
Lambiris, M., and Griffin, L. (2016) First Principles of Business Law 2016. Sydney: CCH.
McKendrick, E., and Liu, Q. (2015) Contract Law: Australian Edition. London: Palgrave.
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