Unfair Contract Terms Analysis

This assignment requires you to examine a provided membership agreement and identify any clauses that might be considered unfair under the Australian Consumer Law. The analysis should consider concepts like unconscionability, procedural fairness, and the impact on consumer protection. Specific attention is drawn to potential breaches of Section 25 of the ACL. You are also advised to recommend changes to the agreement to mitigate legal risks for the company.

Applied contract law
Assignment 2
10-Jan-18
(Student Details: )
I have read and understood the Curtin Plagiarism policy.
This assessment task submission has not previously been submitted by me or
any other student or person at Curtin or any other university.

Applied contract law
Contents
Question 1(a)...............................................................................................................................................3
Issue........................................................................................................................................................3
Rule.........................................................................................................................................................3
Application..............................................................................................................................................5
Conclusion...............................................................................................................................................6
Question 1(b)...............................................................................................................................................7
Issue........................................................................................................................................................7
Rule.........................................................................................................................................................7
Application..............................................................................................................................................8
Conclusion...............................................................................................................................................9
Question 2.................................................................................................................................................10
References.................................................................................................................................................12
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Question 1(a)
Issue
Whether a successful claim of misrepresentation be brought against lovematchforyou.com by Carl, or
not?
Rule
Misrepresentation is deemed as the false statement of law or fact through which an individual is
induced by the representee to get in the contract (Stone, 2005). In such cases where a statement is
made when the negotiations are going on, it is deemed as representation instead of being deemed as an
action for making a claim of misrepresentation, which can be undertaken when the statement is proved
to be untrue (Harris and Croese, 2014). When a case of misrepresentation is found, the contract
becomes voidable at the option the aggrieved party. The remedy which is available in cases of
misrepresentation includes rescission or damages (Cartwright, 2012).
A key requirement regarding the misrepresentation claim to be upheld is false statement to be made
regard a fact, instead the same being a prediction regarding the future or an opinion (Clarke and Clarke,
2016). In the case of Bisset v Wilkinson [1927] AC 177, the plaintiff bought farm land and while this was
being done, he had enquired the seller for how many sheep would be held in the land. Even though this
land had not been used, he had given an estimate of two thousand sheep. Relying on this statement, the
plaintiff purchased the land; and found out that the estimate was wrong. When a claim of
misrepresentation was brought, the Privy Council declined the claim on the basis of the statement been
one of opinion and not of fact (McKendrick, 2014).
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However, an exception to this case is such an opinion given, where the representing party held the
position of knowing about the facts. In Smith v Land & House Property Corp (1884) 28 Ch D 7, a hotel had
been bought by the plaintiff. When selling this hotel, the seller described the tenant in the building as
the most desirable one. The fact here was that the seller clearly knew about the rent of the tenant being
in arrear and that he was also on the verge of going bankrupt. This was deemed as a statement of fact
instead of one of opinion, owing to the position of the seller to know about these facts (Networked
Knowledge, 2018).
Another important point in this regard is reliance to be placed on the false statement which has been
made by the representor. So, where a false statement has been made to induce the other party, the
other party must be induced by such false statement, to make a case of misrepresentation (Latimer,
2012). Where the representee was not aware of false statement made, a case of misrepresentation
would not hold, as was seen in the case of Horsfall v Thomas [1862] 1 H&C 90. In this case, a gun with
concealed defect was bought by the plaintiff. As he had not inspected the gun before making the
purchase, his claim of misrepresentation failed (Poole, 2016).
There are different types of misrepresentation and on the basis of the type of misrepresentation, the
remedy is made available. The three types include fraudulent misrepresentation, negligent
misrepresentation, and wholly innocent misrepresentation. In cases of fraudulent misrepresentation,
the available remedies are rescission of contract and claim of damages (Stone and Devenney, 2017).
In Derry v Peek (1889) 5 T.L.R. 625, fraudulent misrepresentation was defined by Lord Herschell as a
statement which is made either knowingly to be false; without believing in the same to be true; or
carelessly or recklessly making a statement which could be either true or false. In this case, in the
prospectus of the company, the defendant had stated that the company had the right of using steam
powered trams in comparison to the horse powered trans. Though, these trams at that time required
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approval from the Board of Trade which had been later on denied. The shares in company were
purchased by the plaintiff after relying on this statement and a claim was brought for fraudulent
misrepresentation. However, this claim was denied owing to honest belief of the approval being
attained (Arvind and Steele, 2012).
Application
In the given case study, Carl wants to bring forth a claim of misrepresentation against
lovematchforyou.com. For this purpose, there is a need to satisfy the conditions which have been stated
above. In this case, Carl had been told by Romeo that the majority of the previous members who took
the services of the dating site were married now. He had also assured Carl that he would get the soul
mate on his website. These statements were made so that Carl could be induced into getting in the
membership contract with lovematchforyou.com. Here, a fraudulent misrepresentation could be
applied, as the false statement had been made by Carl to induce him in getting the membership. The
statement was false in the context of being represented that the members had married after using the
dating services. However, the reality was that none of the previous members got married to someone
they met on the dating website.
Unlike the case of Bisset v Wilkinson, this was not a statement of opinion and was one of fact. Even
when this is taken to be a statement of opinion by Romeo, the case of Smith v Land & House Property
Corp would prove it as a statement of fact. This is because Romeo being the sale consultant had clear
knowledge of what was going on in the company. As a result of his position, he knew that none of the
previous members got married to someone they met on the dating website. It is very clear that Carl
relied on the statements made by Romeo and entered in the membership contract; thus, satisfying the
reliance condition placed through Horsfall v Thomas. The fraudulent misrepresentation is also present
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owing to the knowledge of Romeo about the statement being made being false, regarding the people
getting married after using the dating services, on the basis of Derry v Peek.
The presence of these fraudulent misrepresentation would allow Carl to not only get the contract
rescinded, regarding the automatic renewal of the dating services; but would also be able to claim
damages in terms of the membership fees paid.
Conclusion
Thus, a successful claim of misrepresentation can be brought against lovematchforyou.com by Carl.
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Question 1(b)
Issue
Whether a successful claim of unconscionable conduct be brought against Brandi by Carl, or not?
Rule
Unconscionable conduct revolves around the transaction which takes place between the dominating
and the weak parties. As a result of this, there is an overlapping of unconscionable conduct with the
concepts of undue influence and duress. It is prohibited under the common law and also under the
statutory law. Though, as this case revolves around unconscionable conduct being established against a
person in normal course, instead of an entity in course of business or trade, the focus is on
unconscionable conduct through common law (Vout, 2009). The unconscionable conduct in equity
relates to the one in which a party is taken advantage of by another person owing to a special disability,
which is held by such another person. Some of the examples of special disability include age, lack of
education, illiteracy, or a combination of these or some other factors. The result of unconscionable
conduct, for the weaker party, is harsh and oppressive (Australian Contract Law, 2018a).
In Commercial Bank of Australia v Amadio (1983) 151 CLR 447, Armadio had signed a mortgage for the
Bank of Australia for securing loans for the sons. They had not been informed regarding the details of
this mortgage and they had no idea regarding what was actually transpiring. As they were Italian, they
did not speak much English, as a result were deemed as almost illiterate. Upon the Bank of Australia
attempting to seize the house, Armadio challenged the validity of mortgage. The court in this case ruled
in favour of Armadio and stated that there was a clear case of unconscionable conduct present here.
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This was due to the disadvantageous position in which Armadio were owing to their lack of English
language knowledge (Australian Contract Law, 2018b).
In the case of Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61, D had been infatuated with L and used
to shower her with gifts time and again. Upon D proposing L, she refused. Later on, L told D that she had
been depressed and that she would be evicted from the house in which she lived. Where this would
happen, she would commit suicide. All of this was majorly false. As a response to this, D agreed to
purchase the house for her and he put the house in the name of L her insistence. After some years, the
relationship between D and L became deteriorated. L was asked by D to transfer the house in his name,
which she refused to do and so D brought a case against L for recovering the house. When the case went
to trial, D succeeded and King J stated that D had been beneficially entitled to the land as it would be
unconscionable for L to get the house in the given situation. When an appeal was made by L, she lost the
appeal and the next appeal was made in the High Court of the nation (Australian Contract Law, 2018c).
In this case the High Court held that L had created an atmosphere of crisis, which was never present. D
was in such a position where he was emotionally dependent on L. The purchase of home for L by D was
such which was explicable only on the footing of D being emotionally dependent and being influenced
by the appellant for disregarding entirely his own interest. The conduct of L was completely
unconscionable which was carefully calculated by L to induce D and did actually induce a transaction
which benefitted her. As a result of this, the appeal of L was dismissed (Australian Contract Law, 2018c).
Application
In the given case study, in order for Carl wants to bring forth a claim of unconscionable conduct against
Brandi. For this purpose, there is a need to satisfy the conditions which have been stated above. In this
case, Brandi clearly knew that Carl was looking for a loved one. He was 30 and lonely and he wanted to
find a wife to settle down to have a family. This put him at a weaker position, which was clearly known
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to Brandi. On the basis of Commercial Bank of Australia v Amadio, this made it easy for Brandi to take
advantage of him.
The facts of this case are similar to the case of Louth v Diprose. Here also Brandi used the weak position
of Carl as was done by L in case of D. She created an atmosphere of crisis. She told Carl that she required
$20,000 for paying to the bank in order to keep the house. She had told Carl that she had no source to
fund this payment and that no one was ready to pay her the requisite sum. As a result of her portrayal
of her condition, Carl got emotional and agreed to give her the twenty thousand dollars which she
required for the home. Here also, like L did with D, Brandi left Carl and reunited with her husband. This
shows that she had simply used the weak position of Carl to get the money required for sponsoring her
house. Her conduct was clearly unconscionable. As a result of this, Carl can ask her to pay back the sum
which he paid to her or ask her to give her the house, which was brought from the money he gave to
her. On the basis of the quoted case, Brandi would have to do so.
Conclusion
Thus, on the basis of this discussion, it becomes clear that Brandi was involved in unconscionable
conduct. So, where a case is made by Carl against Brandi, he would be successful in his claim of
unconscionable conduct against her. And as a result of this, he would be able to attain the sum paid by
him to her.
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Question 2
TO: CEO, lovematchforyou.com
FROM: Paralegal, lovematchforyou.com
DATE: January 10, 218
CC: Senior associate, lovematchforyou.com
RE: Membership Contract terms
This is with reference to the membership contract terms drafted by the company, which could be
deemed as unfair contract terms pursuant to the Competition and Consumer Act, 2010, under its
schedule 2, which covers the Australian Consumer Law.
Under this act, a term is deemed as unfair where it can be proved that such a contract would result in a
major imbalance being caused between the rights and obligations of the parties. This is followed by it
not being reasonably required to safeguard the legitimate interest of the party who would attain the
advantage by the term. And lastly, the same is detrimental to the party where they rely on the term.
Thus, there are three conditions which result in a term being deemed as unfair term under the
Australian Contract Law, i.e., significant imbalance, not reasonable necessary, and causing detriment.
These have been covered under section 25 of the Australian Consumer Law (Legal Commission of South
Australia, 2016).
The Membership Contract of the company provides that the membership cannot be cancelled for the
initial three months, which puts the members at a disadvantageous position, as they do not have the
option of getting out of membership in the initial three months. The term where the membership is
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automatically renewed as it is a major imbalance on the right of the party to chose the renewal and they
unnecessarily get obligated to renew the contract. This in turn requires members to pay the
membership fee which is a financial detriment to them, without their choice. The membership requires
a one month notice for ending of this renewed membership. This one month notice is quite harsh. This
could be proved through the case of Carl, where he had a bad experience with the company. And apart
from this, he had to bear the costs of auto-renewal of membership, as he could not give a full month’s
notice period. This was not only detrimental financially but also emotionally, due to what he had to bear
with Brandi.
The membership fee being changed without the members being given a notice, and the same having to
be paid by the member is out rightly detrimental for members and causes significant imbalance in the
position of the dating website and of their members. Even though this might not reasonably be required
to protect the legitimate interest of the members, it would still be deemed as an unfair contract. The
last clause regarding one introduction per month is the only term which would not be deemed as an
unfair term, as it shows a simple policy of the company, where they allow only a single introduction for
each month.
On these bases, it is recommended to bring changes in the membership agreement, as the company
faces a chance of breaching section 25 of the Australian Consumer Law owing to the unfair terms in the
membership agreement.
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References
Arvind, T.T., and Steele, J. (2012) Tort Law and the Legislature: Common Law, Statute and the Dynamics
of Legal Change. Portland: Hart Publishing.
Australian Contract Law. (2018a) Unconscionable Conduct. [Online] Australian Contract Law. Available
from: https://www.australiancontractlaw.com/law/avoidance-unconscionable.html [Accessed on:
10/01/18]
Australian Contract Law. (2018b) Commercial Bank of Australia v Amadio. [Online] Australian Contract
Law. Available from: https://www.australiancontractlaw.com/cases/amadio.html [Accessed on:
10/01/18]
Australian Contract Law. (2018c) Louth v Diprose. [Online] Australian Contract Law. Available from:
https://www.australiancontractlaw.com/cases/louth.html [Accessed on: 10/01/18]
Cartwright, J. (2012) Misrepresentation, Mistake and Non-disclosure. 3rd ed. London: Sweet & Maxwell.
Clarke, P., and Clarke, J (2016) Contract Law: Commentaries, Cases and Perspectives. 3rd ed. South
Melbourne: Oxford University Press.
Harris, J., and Croese, C. (2014) Contract Law in Context. Sydney, NSW: CCH Australia Limited.
Latimer, P. (2012) Australian Business Law 2012. 31st ed. Sydney, NSW: CCH Australia Limited.
Legal Commission of South Australia. (2016) Unfair Contract Terms. [Online] Legal Commission of South
Australia. Available from: https://www.lawhandbook.sa.gov.au/ch10s03s06.php [Accessed on:
10/01/18]
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McKendrick, E. (2014) Contract Law: Text, Cases, and Materials. 6th ed. Oxford: Oxford University Press.
Networked Knowledge. (2018) Networked Knowledge - Contract Law Casenotes. [Online] Networked
Knowledge. Available from: http://netk.net.au/Contract/SmithLand.asp [Accessed on: 10/01/18]
Poole, J. (2016) Textbook on Contract Law. 13th ed. Oxford: Oxford University Press.
Stone, R. (2005) The Modern Law of Contract. 6th ed. Sydney: Cavendish Publishing Limited.
Stone, R., and Devenney, J. (2017) The Modern Law of Contract. 12th ed. Oxon: Routledge.
Vout, P.T. (2009) Unconscionable Conduct: The Laws of Australia. 2nd ed. Pyrmont, NSW: Thomson
Reuters.
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