Analysis of Karen's Contract Termination with Gym & Tonic

Name, Student ID, Tutor, Day, Time 1
HYPOTHETICAL ILAC QUESTION
Issues
Whether Karen can terminate the contract with Gym & Tonic, and if she is liable to pay the $100
fee.
Laws
Section 18 of the Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010
(Cth)) provides that “An individual must not, in trading activity or commerce, engage in conduct
that is deceptive or misleading or has the potential of misleading or deceiving the other party into
contracting.”
The Trade Practices Act (TPA) 1974 (Cth) also warns against traders engaging in misleading
advertisements intended to induce the public into contracting. Section 52 of the Act provides that
“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive
or is likely to mislead or deceive.”
Section 30 of the Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010
(Cth)) particularly prohibits organizations or people from making statements that are false or
misleading by listing a number of areas where such transactions are prohibited. This entails such
dealings as sponsorship, approval or affiliation; the price to be paid for a property; the nature of
the interest in a property; the location of the property; the characteristics of the property; the uses
for which the property or commodity may be used or for which it is capable of being used; and
the availability or existence or facilities that could be connected with the property.
Application
Karen contracted with Gym & Tonic after being lured by an advertisement in the service
providers’ website. Since the advertised statements informed her decision to contract with the
Gym, it is important to assess whether there was a course for misrepresentation of facts. In
common law, misrepresentation makes contracts voidable and only enforceable if the
misrepresented party choses to go on with it. Statutory legislations also protect consumers by
imposing criminal liabilities on service providers who use misrepresentation to promote their
services and products. Therefore, the question as to whether Karen is justified to terminate the
contract and negate paying the $100 fee is answered by assessing whether there has been a
contravention of statutory provision and common law standards on misrepresentation.
In answering this, courts will look at the statements, pictures or material used in the sales
promotion and assess whether they had the potential to fraudulently lure a party into a contract.
The question here is whether the advertised sentences “On sale for this month only! Monthly
gym fee reduced from $60 per month to only $30 per month! Unlimited access!” qualified as
false, misleading or fraudulent statements.
Advertisements made by businesses have to be true and reliable. The advertisers have a duty of
care towards the consumer one of ensuring that the information given is unambiguous and
unequivocal. This was not the case in the advertisement published in the gym’s website. First
because of the misleading pricing and secondly the unspecified manner of access.

Name, Student ID, Tutor, Day, Time 2
On Pricing. The ad stated that the gym fees had been reduced from $60 per month to $30. It was
held in the case of An Arizona Limited Partnership v Colliers International (NSW) Pty Limited
[2011] FCA 442 that statements made in relation to valuation of a service or product that were
not a reflection of the real prices are false and misleading. Similarly, it was easy for consumers
to believe that the $30 membership fees was all that was required of them to access all the gym
equipment. However, as it turns out, the statement was misleading as the fees was only meant for
weight equipment. The advertisers ought to have acted in good faith by specifying the activities
to be covered by the $30 membership fee.
On the Kind of Access. The statement “unlimited access” was also ambiguous and another cause
of misrepresentation. The gym owners’ intention was to mislead the public into believing that
they could access every gym facility by paying the membership fees. In the case of Pryor v
Given (1979) 24 ALR 442, a company had advertised the sale of a piece of land with some
pictures of houses. On the pictures was captioned “a wonderful place to live.” in reality, the land
could not harbor the kind of houses on the pictures. The land required a planning scheme which
was subject to many technicalities even before setting up a structure. The court held that the
advertisement was misleading. It made prospective customers to believe that the land could
harbor the decent houses when it was an almost impossibility. Similarly, the statements made by
the gym were fraudulently made to make consumers believe that they would have unlimited
access for $30 and
Conclusion
The dealing in question between Karen and the gym falls in the list provided by the provisions of
Section 30 of the ACL. The misrepresentation is on the use of a commodities available in a
particular premise and thus within the bracket of dealings to which misrepresentation is
prohibited. The statements published in the site of Gym & Tonic were in contravention of s18
and s30 of the Act and s52 of the TPA. They were misleading and ambiguous and thus failed to
achieve consumer standards.
In common law, misrepresentation makes contracts voidable on the misrepresented party
(LawTeacher, 2013). This means that the party misrepresented can choose to terminate the
contract or go on with it. In essence, it is up to Karen to decide whether she wants to keep up
with her contract with the gym or terminate the contract. Since the contract was founded on
misrepresentation, it was not enforceable. Even though Karen signed the contractual clause that
required her to pay $100 fees for terminating her contract with the gym, the provision cannot be
enforced. It was part of an unenforceable contract and that means it did not impose any
obligation to the misrepresented party. Therefore, Karen not only has the right to terminate the
contract with Gym & Tonic, but also to not pay the $100 fee.
Possible Remedies
Common law remedies include rescission and compensation. Rescission will see Karen restituted
to her financial position before getting into the contract. Compensation is on the losses incurred
by Karen. The court can also issue an injunction to protect consumers from being misled in the
future. This was the case in ACCC v Gary Peer & Associates Pty Ltd [2005] FCA 404. There
was a house for auction and the defendant –who was a real estate agent- had advertised it with a
$600,000 price tag. However, this was far much less than the amount in which the house vendors