Product Liability and Misleading Advertising

This assignment presents a case study where a consumer, Charlie, ingested water from a product labeled 'Clean Aqua,' believing it to be safe for drinking. He subsequently fell ill. Analyze the situation through the lens of Australian Consumer Law, specifically focusing on potential misleading conduct in advertising and product liability under Part 3-5. Examine relevant court cases and legal principles to determine the strength of Charlie's case against the manufacturer.

Running head: Contract LawPAGE \*
1
Contract Law
Name of the Student
Name of the University
Author Note:
Contents

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Title 2
Solution 1 3
Issue: EviroPro Pty Ltd. 3
Rule of Law 3
Application of Law 4
Conclusion 5
Solution 2 5
Issue: Clean Aqua Pty Ltd 5
Rule of Law 5
Application of Law 6
Conclusion 7
References 8

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Title 3
Solution 1
Issue: EviroPro Pty Ltd.
Whether a case can be brought against Enviro Pty. Ltd. by Charlie under the general rules of
contract and the Sale of Goods Act (Victoria) (“SA”)?
Rule of Law
The statements which are made at the time of negotiation amount either to a
representation or to a contractual term. It is essential to understand in the given situation
whether the statement made by the salesperson was a representation as that will determine the
remedy that would be appropriate. If it is a statement that amounts to a term of contract that has
not been fulfilled the party may sue for breach of the contract. If however, the statement made is
a mere representation that is no true then an action for misrepresentation can be brought.
If the knowledge of the representor is greater than the knowledge of the representee then
in that case the statement made would form a contractual term. As in the case of Dick Bentley
Productions v Harold Smith Motors wherein the statement with respect to the condition of the
car was made by the defendant who was a car trader specializing in the prestige market (Dick
Bentley Productions v Harold Smith Motors, 1965). This statement turned out to be not true, the
issue that arose was whether this statement formed a term in the contract or was a representation,
if then it would be an innocent misrepresentation then due to time lapse there would be no
rescinding of right to claim. The court however opined that this statement was a term in the
contract since the car dealer had higher expertise and reliance was placed by Mr. Smith on it.
Further, in the situation where the representee indicates to the representor the statement’s
importance it would be a term. As in the case of Bannerman v White wherein the court opined
that the statement made by the salesperson that the hops had not be treated with sulphur was not
a representation but a term of contract as it had been communicated by the claimant the term’s

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Title 4
importance and reliance had been placed on it (Bannerman v White, 1861). The action for breach
of contract was successful.
Section 13 of SA provides that the description of the properties and the goods should
match. It is not the quality but the the description of the product that this section concerns with
(Arcos v Ranaason, 1933). Further section 14(3) states that where it has been informed by the
buyer to the seller of requirement of certain qualities then higher standards are placed. The seller
under this would be liable even in the situation wherein the safety aspect has been met however,
the product is not specific to what was required by the purchaser (National Foods Ltd v Pars
Ram Brothers (Pte) Ltd, 2007).
Application of Law
In the given situation, the statement was made by the salesperson with respect to the
specific requirement of Charlie, where the salesman dealing with the item had more knowledge
of it as compared to Charlie, that the item was very good and reliance was placed by Charlie on
this statement, thus applying the principle established in the Bannerman’s case and Dick Bentley
Productions case the statement made was a term of contract and this had been breached as the
equipment did not provide with water that was safe for drinking.
Further as per section 13 the description of the product did not correspond with the item,
whereas it was stated that the item would provide drinking water however, the same was not true
and section 14(3) where Charlie had informed the salesperson that he specifically needed the
item for producing drinking water higher standards are to be placed.
Conclusion
A strong case can be bought by Charlie against EviroPro Pty. Ltd.

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Title 5
Solution 2
Issue: Clean Aqua Pty Ltd
Whether a case can be brought against Clean Aqua Pty Ltd. by Charlie under the strict
manufacturer liability in the Australian Consumer Law
Rule of Law
ACL: Part 2-1: provides that manufacturers are required to prohibit from deceptive or
misleading conduct; or unfair practices or likely to deceive or mislead. Section 18 of the
Australian Consumer Law (“ACL”) provides that “A person must not, in trade or commerce,
engage in conduct that is misleading or deceptive of likely to mislead or deceive.”
In ACCC v Singtel Optus Pty Ltd (No 4) [2011] FCA 761, wherein for a misleading
advertisement with respect to plans of an internet broadband a penalty of $5.26 million was
ordered against Optus (ACCC v Singtel Optus Pty Ltd (No 4), 2011). In the case of ACCC v
Yellow Page Marketing BV where a penalty of of $1.35 million was ordered for a “directory
scam” against two companies by making representation that was misleading that they had an an
affiliation with the Yellow Pages® (ACCC v Yellow Page Marketing BV (No 2), 2011).
In the case of ACCC v TPG Internet Pty Ltd the court had opined that the message that is
dominant is central for assessing as to whether the advertisement led to a conduct that was
deceptive or misleading; and the statements that are qualifying which accompany the headline
are required to be sufficiently clear and put in prominence so as to avoid misleading the
customers (ACCC v TPG Internet Pty Ltd, 2013).
However, the users have been given the right under Part 3-5 of the Australian Consumer
Law to place direct liability can be placed on the manufacturer in the case wherein damage is

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Title 6
caused by a product that is defective. There is required to be a safety defect in the goods meaning
thereby that the safety of the product is not what is is acceptable generally. As was opined in the
case of Cook v Pasminco that “it is a poison that does not do its deadly work that is defective
rather than one that does.” (Cook v Pasminco, 2000).
Application of Law
Though in the given scenario there is a possibility of there being a misleading conduct in the
manner in which the manufacturer has named and is advertising the product as “Clean Aqua”
that it can lead the purchaser to believe that the water is safe for consumption. However, there is
no safety defect in the item and the item is performing the functions that are to be performed by
it which has been specifically mentioned by the manufacturers while advertising on the box that
it is not suitable for oral consumption. The decision of the High Court in ACCC v TPG Internet
Pty Ltd that the dominant message is what is central for assessing as to whether the
advertisement led to a conduct that was deceptive or misleading; and the statements that are
qualifying which accompany the headline are required to be sufficiently clear and put in
prominence so as to avoid misleading the customers. In the given situation the name of the
product was the dominant message which was advertised and the warning was placed only on the
box which could mislead the customer.
However, it is only under part 3-5 that users have been given the right to put direct
liability on the manufacturer if there is a product defect. The product was not defective as in the
case of Cook v Pasminco, it was functioning in the manner it was required to function since it
was not manufactured for providing drinking water.

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Title 7
Conclusion
The position of Charlie is not as strong in the given situation for an action against the
manufacturer.
References
ACCC v Singtel Optus Pty Ltd (No 4), FCA 761 (2011).
ACCC v TPG Internet Pty Ltd, HCA 54 (2013).
ACCC v Yellow Page Marketing BV (No 2), FCA 352 (2011).
Arcos v Ranaason, AC 470 (1933).
Bannerman v White, 10 CBNS 844 (1861).
Cook v Pasminco, FCA 677 (2000).
Dick Bentley Productions v Harold Smith Motors, 1 WLR 623 (1965).
National Foods Ltd v Pars Ram Brothers (Pte) Ltd, 2 SLR 1048 (2007).