Building Law: ACL Impact on Unfair Contract Terms and Land

This report examines the impact of the Australian Consumer Law (ACL) on building law, particularly concerning unfair contract terms and misrepresentation in land sales. It begins by defining the ACL and its relevance to consumer contracts, emphasizing the restrictions imposed on sellers and consumer guarantees provided to buyers. The report then delves into unfair contract terms, as defined by the Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010, and their implications for developers' contracts. It discusses the characteristics of unfair terms, the importance of contract transparency, and the applicability of these provisions to land sales. The report further explores misrepresentation under section 18 of the ACL, providing a case study (Williams v Pisano [2015]) to illustrate the legal consequences of deceptive or misleading conduct in the context of property sales. It also references the Taco Co of Australia Inv v Taco Bell Pty Ltd (1982) case, highlighting the applicability of misrepresentation rules to land vendors. The report emphasizes the need for developers to understand and comply with the ACL to avoid legal liabilities related to unfair terms and misrepresentation.

Running head: BUILDING LAW
Building Law
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The Australian Consumer law or the ACL is the statute that deals with the issue related to
trade or commerce and governs fair consumer protection for all the businesses and individuals in
the country. The statute requires every individual be it a businessperson that sells products or
services to individuals or be it a consumer that purchases such products or services, to be aware
of their rights and obligations under the ACL. With respect to the developer’s contracts in
relation to the individuals who are not investors, the ACL may have a substantial impact upon
the same. The statute prevents the seller, businesspersons or the developers to exhibit any form
of deceptive or misleading conduct in relation to the buyers or the other parties to the contract
and must not incorporate any clauses that amounts to unfair terms.
According to the ACL, a consumer contract may be defined as a contract where a sale or
an interest in land is granted to any individual either predominantly or wholly for personal
household or domestic purpose. The intent of the purchaser of such land or the interest of land is
essential to assess whether a sale contract or a contract for grant of interest is a consumer
contract under the ACL. In case the land purchased is not purported to be used for domestic or
personal purpose, the Australian Consumer Law shall not govern the contract.
In the Supreme Court of West Australia in OPR WA Pty Ltd v Marron [2016]1, the court
found that if a land is used for business purpose it shall not be considered as consumer contract
under the Australian Consumer Law. A sale contract is a consumer contract under the ACL if it
is held for domestic or personal consumer as stipulated under Schedule 2 of the Competition
and Consumer Act 2010. The ACL imposes certain restrictions on the sellers and at the same
time, provides consumer guarantee to the buyers regarding the manner in which they should
perform business operation.
1 [2016] WASC 395.

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The restrictions that are imposed upon the seller include prohibition of application of
unfair terms and bait advertisements, use of deceptive or misleading conduct. The paper
discusses about the impact of the Australian Consumer Law with respect to unfair contract terms
and misrepresentation on the sale of land.
Unfair Contract term
The Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010 (the
ACL)2 was enacted for regulating the unfair terms in standard form consumer contracts. The
statute has significant impact on developers’ contracts with respect to individuals. The statute
contains provisions for unfair terms according to which any unfair terms used in the standard
form of contracts shall be considered as void and unenforceable. The Contracts for sale entered
into between the developer as seller and the individual as buyer is deemed as standard form of
contracts unless the parties establishes otherwise.
The following terms is considered as unfair terms under the ACL:
 terms that causes significant imbalance in the rights and obligations of the parties;
 terms that would affect the purchaser, both financially or otherwise, if the purchaser
relies on such terms;
 terms that are not necessary to safeguard the legitimate interests of the developer;
Further, for the purpose of determining whether any particular term is essential for protecting
the interests of the developer, it is important that the developer provides evidence about the
market in which they operate. The developer is also required to provide evidence related to the
fiscal factors that are imposed by the financiers. Adequate evidences are also required in terms of
2 Trade Practices Amendment (Australian Consumer Law) Bill (No.2) 2010

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planning schemes and other regulations of the councils that are responsible in providing the
developer with a level of flexibility. The statute requires the developers to make sure that the
clauses incorporated in their contracts are such that it provides discretion to the extent necessary
for delivering finished products to the consumers. The developers must further ensure that the
contracts does not include anything or it does not provide any additional freedom that would
amount to unfair contractual terms under the newly introduced statutory provisions of the
Australian Consumer Law.
The new statutory provisions incorporated with respect to prohibition of unfair contract terms
to be used in contracts require the parties to a contract to make transparent contracts. The sale of
land contract consumers are often required to sign standard contracts, hence, the provisions
relating to unfair contract terms require the consumers to enter into contracts that contains clear
clauses so that it becomes easier for them to address any risks associated with the contract. The
provision shall prohibit the developers from incorporating any terms that would affect the
legitimate interests of the consumers. Further, the provisions of the unfair terms shall become
applicable on new standard form small business contracts that either have been entered in to by
the parties or have been renewed by them since 12 November 2016.
According to Schedule 1, section 2 of the Australian Competition and Consumer Act
2010 (Cth), the interest of land is defined to be equal to the legal estate of land3. It also includes
right, shares of a company owning the land, a power, or privilege, held with respect to a land,
including further, the occupancy right in the land or a building erected on it.
3 Australian Competition and Consumer Act 2010 (Cth).

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Business contracts are not subject to the statutory provisions of the Australian Consumer
Law. This is because the applicability of the provisions in relation to unfair terms is only
confined to standard form of contracts. Nevertheless, section 27(1) of the Act stipulates that a
standard form of contract must not establish the contrary4. It is on the seller to prove that the
contract was subject to negotiation. For the courts to determine a standard form of contract, must
have regards to the factors that are provided under section 27(2) of the ACL as all the contracts
are considered as standard form of contract provided the seller establishes the contrary. In
Director of Consumer Affairs Victoria v Craig Langley Pty Ltd & Matrix Pilates and Yoga Pty
Ltd (Civil Claims) the court held that if a contract has been negotiated by the parties it must not
include any term that may constitute an unfair term and be detrimental to the purchaser relying
on such term.
The businesses must not incorporate any terms into the contract that violates the rights of
a party excluding the restricted terms at the time of entering into a sale of land contract. The
contract must not include terms that provide that only one party be entitled to rescind the
contract, or any terms that imposes penalties only on one party; or any other clauses that allows
unilateral variation of interest in land. It must not include any terms that prohibit either party
from exercising his/her legal rights against another party to the contract.
Again, in Director of Consumer Affairs Victoria v Craig Langley Pty Ltd & Matrix
Pilates and Yoga Pty Ltd (Civil Claims) the court rules that a contract, which has been subject to
negotiation, cannot incorporate a term that shall be considered as an unfair terms.
4 Australian Competition and Consumer Act 2010 (Cth)

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In ACCC v Bytecard Pty Ltd 2013, the court ruled in favor of the Australian Completion
and Consumer Commission against the defendant company with respect to the sale of an interest
in land. This is the first case where the relevant provisions relating to the newly incorporated
unfair contract terms under the ACL were duly applied for the first time.
It is essential for the developers to ensure that they have adequate knowledge regarding
the rules that have been imposed on them provisions relating to unfair contract terms under the
ACL to prevent incorporation of unfair terms in a contract. In case the court is of the opinion,
that the term of a contract is unfair, the aggrieved parties must be entitled to terminate the
contract on the ground of violation of the rights. However, if there is a scope that a contract can
be enforceable even after the removal of the unfair terms from the contract, the court shall order
to remove such unfair term and declare that the contract shall continue to have binding effect
upon the parties.
The kind of contracts that becomes applicable to the provisions of unfair terms in context
of property are the contracts for the sale of land by the developers5. Such developers intend to
use the property for residential purposes or use such property as their primary place of residence.
In case of lease contracts, those leases that have been provided for domestic purpose or personal
use are governed under the provisions of section 24 of the Australian Consumer Law. Any
interest vested to an individual with respect to a land for domestic purpose such as easements are
also governed under section 24 of the Act6.
Therefore, any contract that is regarded as a standard form of contract, it shall become
subject to the section 24 of the ACL that prohibits incorporation of unfair terms in a contract. If
5 Knake, R. N. (2014). Legal Information, the Consumer Law Market, and the First Amendment.
6 Australian Competition and Consumer Act 2010 (Cth).

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the terms of the contract purports to cause imbalance in the rights and duties of the parties and
signifies detrimental effect in relation to the legitimate interests of the purchasers, such terms
shall amount to unfair terms and must be excluded from the contract.
Misrepresentation
According to section 18 of the Australian Consumer law, no person engaged in trade or
commerce is permitted to conduct in any manner that is deceptive or is misleading in nature or is
likely to conduct in a deceptive or misleading conduct. In Williams v Pisano [2015] NSWCA
177, the issue before the NSW Court of Appeal was to determine whether a seller of a private
home who admitted that he had committed misrepresentation regarding the quality of the house
was liable for conducting misleading and deceptive conduct stipulated under statutory provisions
of the Australian Consumer Law. The court had regards to the proportionate liability regime as
provided by Part VIA of the statute while settling the issue7. In this case, the seller of the
property was the owner of the building, which signifies that the owner shall be responsible for
any defects that may arise out of the work carried out, by the owner in relation to the building.
The seller and his wife were the owner of the plot for many years, which they decided to
renovate. The wife supervised the refurbishing that was being conducted by the builder, which
she hired along with some consultants but she did not supervise the architectural work conducted
by the builder. When they gave an advertisement for selling the property and hired a real estate
agent, the wife introduced herself as the project designer of the house. The sellers and agent
convinced the purchaser that the renovation work was conducted effectively and sold the house.
7 Australian Competition and Consumer Act 2010 (Cth).

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After the sale, then purchaser noticed significant defects as significant as, water
penetration issue in the house that arose because of the short cuts used by the builder while
renovating the house. The Court held that the defendants were liable for paying damages worth
$1.2 million. The judge asserted that the wife infringed the warranties for which she was
accountable being the owner of the building. The purchaser made a further claim under the
provisions of ACL that the husband was not accountable for the warranties8. It was held by the
judge that William made representation with respect to the claim, and the representation was
made with respect to “trade and commerce” hence, a penalty of $1.7 million was imposed upon
the husband. The court found that each of the vendors was entitled to joint liability.
In Taco Co of Australia Inv v Taco Bell Pty Ltd (1982), the court was of the opinion that
with respect to sale of land, the rules of misrepresentation shall be applicable to the vendors of
land. This decision was followed by the judge against the appeal made by the husband on the
ground that the representation made by the vendor was not within ‘trade or commerce’ hence the
ACL was not applicable under such circumstances.
In Australian Equity Investors, an Arizona Ltd Partnership v Colliers International
(NSW) Pty Ltd (No 4) [2011]9 the court ruled out that the provisions stipulated under Section 30
of the ACL had been infringed. The violation was caused in relation to valuation on the ground
that it made misleading and false statement related to the price that was payable in relation to the
land.
8 Greenwood, Verity, and Larry Dwyer. "Consumer protection as essential to destination
competitiveness." CAUTHE 2015: Rising Tides and Sea Changes: Adaptation and Innovation in Tourism and
Hospitality (2015): 486.
9 [2011] FCA 442.

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In Given v Pryor (1979)10, the court provided an explanation about misrepresentation and
misleading conduct. In this case, the court found that representation is not merely confined to
verbal statement but also extends to any form of written or oral statement, drawings, maps and
words, plans, photographs and gestures and other conducts. Any person who remains silent about
any a fact shall also be deemed as misrepresentation where silence can have a negative impact on
the purchaser, in particular, under the mentioned circumstances.
Further, in Latella v LJ Hooker Ltd (1985)11 it was found by the court that it is not
mandatory bring a legal action against any person who made a representation. In fact the plaintiff
is entitled to bring a claim against the defendant, provided the plaintiff is able to establish that
the misrepresentation made by the defendant had a detrimental effect upon him and as a result of
which the plaintiff had suffered loss12.
Furthermore, in Given v CV Holland (Holdings) Pty Ltd (1977)13 the court held that a
false representation may be defined as an act of providing information that is completely
inconsistent with or contrary to the original facts14. Thus, where the wrongdoer makes a false
representation, it is sufficient to establish that the defendant has provided wrong or false
information; it does not matter whether the wrongdoer had intended to make such false
representation, that is, the intention of the wrongdoer is not necessary to establish the claim of
false representation. Therefore, even if a land seller believes that the information being provided
by them is true, it would not discharge the seller of the land from the liability that he becomes
subject to for providing false misrepresentation.
10 [1979] 39 FLR 437.
11 [1985] 5 FCR 146.
12 [1985] 5 FCR 146.
13 [1977] 29 FLR 212.
14[(1977] 29 FLR 212.

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The aggrieved persons are entitled to several remedies in case of contravention of section
18 of the ACL. The aggrieved either may claim damages under section 236 of the Act or may
obtain an injunction order from court. In addition to these remedies, the aggrieved persons are
entitled to several remedies in case of contravention of section 18 of the ACL. Thus, the
businesses must be careful about the fact that while entering into contracts with the consumers
the contracts do not entail any unfair terms and any misleading or deceptive conduct is
prevented, ensuring fair trade practice.

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Reference list
ACCC v Bytecard Pty Ltd 2013
Australian Competition and Consumer Act 2010 (Cth)
Australian Equity Investors, An Arizona Ltd Partnership v Colliers International (NSW) Pty Ltd
(No 4) [2011] FCA 442
Director of Consumer Affairs Victoria v AAPT Ltd (Civil Claims) [2006] VCAT 1493
Director of Consumer Affairs Victoria v Craig Langley Pty Ltd & Matrix Pilates and Yoga Pty
Ltd (Civil Claims)
Given v CV Holland (Holdings) Pty Ltd (1977) 29 FLR 212
Given v Pryor (1979)[1979] 39 FLR 437
Greenwood, Verity, and Larry Dwyer. "Consumer protection as essential to destination
competitiveness." CAUTHE 2015: Rising Tides and Sea Changes: Adaptation and Innovation in
Tourism and Hospitality (2015): 486.
Knake, R. N. (2014). Legal Information, the Consumer Law Market, and the First Amendment.
Latella v LJ Hooker Ltd (1985) 5 FCR 146
Latimer, Paul. "Protecting Consumers from Unfair Contract Terms: Australian Comparisons."
(2016).
Miller, RV 2013, Miller’s Australia Competition and Consumer Law Annotated, 35th ed,
Thomson Reuters, Pyrmont, New South Wales.

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Nahan, N., and Eileen Webb. "Unfair contract terms in consumer contracts." Consumer Law and
Policy in Australia and New Zealand. 2013.
Supreme Court of West Australia in OPR WA Pty Ltd v Marron [2016] WASC 395
Taco Co of Australia Inv v Taco Bell Pty Ltd (1982)[1982] 2 TPR 48
Trade Practices Amendment (Australian Consumer Law) Bill (No.2) 2010
Williams v Pisano [2015]NSWCA 177