Case Study: Liability under Contract and Consumer Law in Australia

This case study examines two legal issues arising from the actions of EnviroPro Pty Ltd and Clean Aqua Pty Ltd. The first issue focuses on the impact of an exclusion clause placed by EnviroPro, which attempts to limit its liability for damages. The analysis applies contract law principles, including the Sale of Goods Act (Vic), which distinguishes between consumer and non-consumer transactions. The case explores implied conditions related to the fitness of goods for a particular purpose, especially when the seller is aware of the buyer's intended use. The second issue concerns Clean Aqua Pty Ltd's potential liability under the strict liability provisions of the Australian Consumer Law (ACL). The study explains that under the ACL, manufacturers can be held liable even without negligence if their products have safety defects or fail to meet consumer expectations. The case highlights the importance of statutory guarantees and how they protect consumers. The conclusion of the case study is that Charlie has grounds to initiate claims against both EnviroPro and Clean Aqua for breaches of contract and violations of the ACL.

Q 1
Issue: The issue in this case is related with the impact of exclusion clause mentioned on the sign
placed at the gate of EnviroPro Pty Ltd, which excludes the liability of the company for any
damages.
Rule: Apart from the general rules of contract law, in the present case, sale of goods Act (Vic)
also applies. It makes the remission that the provisions of this legislation apply only in case of
the contracts related with the sale of goods. This Act provides that a difference exists between
consumer and on consumer transactions (Carpet Call Pty Ltd v Chan, 1987). The Act also
provides that the terms that can be implied under Trade Practices Act also apply in case of
consumer contracts concluded in Victoria.
The law defines a consumer contact as a contract related with the sale of goods for less than
$20,000 or when it deals with the goods that are generally acquired over domestic purposes and
when these goods are not going to be used for sale or inputs in the process of manufacture
(Crawford v Mayne Nickless Ltd., 1992). Therefore, as mentioned above, there are certain
conditions that can be implied in case of these contracts. One of the implied conditions. In such
cases is the condition according to which the goods should match the description, when the
goods have been sold by description. Terms can be implied in case of a contract dealing with the
sale of goods expressly or impliedly when the purpose behind the purchase of goods, has been
revealed by the purchaser to the seller (Jillawarra Grazing Co v John Shearer Ltd., 1984).
Similarly, the implied conditions are also applicable when the circumstances are of the nature
that it can be assumed that the seller should have been aware of the fact that the buyer is relying
on skill of the seller to make the purchase. According to section 20 of this legislation, and

implied condition is present, which requires that the goods should be fit for purpose under the
above-mentioned circumstances.
Application: in the present case, a large sign has been placed at the entrance of Enviro Pty Ltd.
This sign mentions an exclusion clause according to which the company will not be liable for
any damages suffered by the consumers except to replace the goods, that too in cases where the
goods were shown as being faulty at the time of sale. In the present case, when Charlie went to
purchase equably, he had toured the salesperson of Enviro Pty Ltd that he was going to use the
product for reclaiming drinking water. The salesperson also gave an assurance that you are that
the water will be fit for this purpose. On the other hand, in reality, the water produced by this
product was not fit for drinking purposes. Therefore, when Charlie consumed this water for some
time, he became ill. As a result, he was forced to miss work, and he also started to suffer from
irritable bowl syndrome. As a result is quality of life was also affected adversely. Under these
circumstances, it is clear in this case that Enviro Pty Ltd. had breached the terms of the contract,
particularly the requirement according to which the goods should be fit for purpose.
Conclusion: in this case, a claim can be initiated by Charlie against Enviro Pty Ltd.

Question 2
Issue: The issue is if Clean Aqua Pty Ltd can be held liable under the strict liability provisions
imposed on the manufactures by ACL
Rule: The Australian Consumer Law is a part of Competition and Consumer Act, 2010. This
legislation has imposed an obligation on the manufactures according to which they should take
the consumers fairly. In case of a breach of the statutory guarantees provided by the ACL, the
law provides that such manufacturer owes a liability for the strict liability offense (Haros v
Linfox Australia Pty Ltd., 2012). The strict liability that has been imposed on the manufacturers
by the ACL provides that a particular manufacturer can be held liable for breach even if there is
no negligence of the manufacturer (Keays v J P Morgan Administrative Services Australia Ltd.,
2011). The statutory guarantees mentioned in the ACL, and the body of strict liability offense so
that it can be ensured that the manufacturers should fulfill the expectations of consumers.
The strict liability provisions mentioned in the ACL are applicable in case of the manufactures
were supplying goods in trade or commerce. The ACL provides that in such cases, a company
can be considered as the manufacture of goods if it has imported goods or resemble the goods or
the brand name of the company has been used to be promoted as the manufacturer. In the same
way, the law provides that it can be said that the goods contain a safety defect if it is found that
the level of safety is not the same that can be generally expected from such goods. Although the
level of safety may vary in each case, however, the ultimate decision has to be made by the court
to see if a safety defect is present or not.
Application: by applying the legal rules mentioned above, it has been provided by the strict
liability provisions of the ACL that these provisions maybe breached even if the manufacturer

was not negligent. Interview of disposition of law, in the present case also, Clean Aqua Pty Ltd.
can be held liable for breach of strict liability provisions.
In this case, Charlie wanted a product that can be used for producing drinking water. But the
reality was that Clean Aqua produced the water that could be used for gardening or swimming
pools etc. The water was not fit for human consumption. On these grounds, it can be held that
Clean Aqua is liable for the breach of a statutory guarantee mentioned in the ACL.
Conclusion: Charlie can bring a case against Clean Aqua Pty Ltd for the violation of strict
liability provisions that are imposed by the Australian Consumer Law on the manufacturers.

References/Case Law
Carpet Call Pty Ltd v Chan (1987) ASC 55-553
Crawford v Mayne Nickless Ltd (1992) ASC 56-144
Jillawarra Grazing Co v John Shearer Ltd (1984) ASC 55-307
Haros v Linfox Australia Pty Ltd (2012) 287 ALR 507
Keays v J P Morgan Administrative Services Australia Limited [2011] FCA 358