Case Study: Gym & Tonic's Potential Breaches of Consumer Law

This case study examines whether Gym & Tonic breached the Australian Consumer Law (ACL) concerning Karen's membership. It identifies potential violations of Section 18 (misleading conduct) and Section 35 (bait advertising). The analysis applies relevant legal principles, including exclusion clauses under Section 64, and explores potential remedies for Karen, such as damages and contract termination. The study also considers misrepresentation under common law, concluding that the gym's advertisement was misleading and Karen may have grounds to terminate the contract and seek damages. Desklib offers similar solved assignments and papers for students.

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Contents
Solution............................................................................................................................................2
Issue.................................................................................................................................................2
Law..................................................................................................................................................2
Application of law...........................................................................................................................3
Conclusion.......................................................................................................................................4
Bibliography....................................................................................................................................5

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Solution
Issue
Whether Gym & Tonic has breached any of the provisions of the Australian Consumer Law
(ACL) and are there any remedies available to Karen?
Law
The ACL is an enactment that was formulated in order to safeguard the interest of the consumer.
As per section 3, a person is said to be a consumer provided he has purchased the goods/services
for a value less than $40000 for personal or household or domestic use. (Morandin & Smith,
2011)
Every consumer has certain rights that can be availed by him.
I. Section 18 deals with defective and misleading activity on the part of the seller. Section
18 submits that no person must engage himself in any trade or commerce that is defective or
misleading in nature. The main essential are (QC, 2014):
i. It deals with activities that are commercial in nature (Miller , 2014);
ii. The seller must make a representation regarding the nature of the services provided;
iii. The seller must have made an untrue representation knowingly in order to deceive the
buyer (Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd , 1993);
iv. If the buyer is aware of the misleading activity then such activity does not come
within the purview of section 18 (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty
Ltd (, 1982);
v. Damages must be suffered by the buyer by relying on the representation.
II. Section 35 (1) does not allow a person who is involved in trade to make an advertisement
regarding the price of the goods or services which he believes or has reasonable chances of
ascertaining that such services will not be offered at such price. Such an advertisement is
considered as bait advertisement and is prohibited under section 35 of the law. Section 35 (2)
submits that if a person is involved in bait advertisement then it is obligatory upon such person to
supply the goods and services at a price which is advertised for a reasonable period of time and
in reasonable quantity (Brucelegal, 2018).
Exclusion clause
Section 64 of the law submit that any contractual term that excludes or modify the rights of the
consumers that are made part of the law then search terms are called exclusion terms and are
considered as void and unenforceable in law.

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Remedy
I. violation of section 18 –
i. remedy can be claimed under section 236 (Italform Pty Ltd v Sangain Pty Ltd ,
2009);
ii. ancillary orders under section 253;
iii. refund of the money;
iv. the contract can be declared as void;
v. injunction order.
II. Any person who is found to be in contravention of section 35 can be imposed with civil
liability of $ 220000; damages, non punitive orders, compensatory orders can also be issued.
Misrepresentation
Misrepresentation is a right that is availed to an aggrieved consumer under the common law. As
per misrepresentation if the defendant makes an untrue statement in order to induce the other
party so as to be established a contractual relationship with him then such a representation is
called misrepresentation. The aggrieved party has a right to cancel the contract and seek damages
from the defendant.
Application of law
Greece owns a gym. An advertisement is issued according to which he was charging for a month
at reduced price of $30 from $ 60 per month. The access was unlimited. The advertisement
shows member of the gym using all different types of gym equipment.
After relying on the advertisement to Karen took the membership of 12 months by signing a
standard form contract.
She returns the next day but was not able to access the equipments. It is submitted that there are
several ACL violations. That is:
i. As per the advertisement the gym of the fee was reduced from $60-to $30and
unlimited access was provided. The advertisement submits that the members of the
gym can use all different types of the gym equipment.
So, the advertisement gives an impression to the parties that by paying $ 30 all the
gym equipments can be used, however, in reality Karen was not allowed to use the
treadmill and she was told that the membership taken by her is only allowed to use
few equipment. If she intent to use all the equipments then she must pay extra $20 per
month.
So, there is violation of section 18 by the gym by giving a misleading and defective
representation regarding the membership. Equipment can be used by the member
however in reality only weight equipment can be used and it results in misleading and
deceptive impression.
ii. Section 35 of the law was violated by the gym as Karen submits that the gym has
never offered monthly membership of $30 per month as the usual cost of the gym is
$40 per month. The advertisement gave an impression that they are giving a sale

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from $60 to 30 and is nothing but a falsification of the price that is offered by the gym
and thus the advertisement is bait.
Further as per section 64, no term can exclude the guarantees of the consumer and such terms are
void. So, the term that if any member wishes to terminate the contract then he must pay $20 is
contrary to the implied guarantees that is provided by the ACL.
Further under common law, the gym was giving representation of fact which were not true in
nature in order to deceive Karen so that a contractual relationship can be established with her.
Conclusion
It is concluded that the advertisement that is issued by gym was a bait advertisement and so
Karen can terminate the contract relationship with gym and can sue for damages. The exclusion
clause that was made part of the contract is invalid in nature as per section 64 of the law.

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Bibliography
Brucelegal. (2018, September 7). Brucelegal. Retrieved September 7, 2018, from Brudelegal:
https://www.brucelegal.com.au/bait-advertising-illegal-australia/
Italform Pty Ltd v Sangain Pty Ltd (2009).
Miller (2014).
Morandin, N., & Smith, J. (2011). Australian Competition and Consumer Legislation 2011.
Australia: CCH Australia Limited.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd ( (1982).
QC, C. (2014). Misleading Or Deceptive Conduct Cases 2 Western Australian Developments.
Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993).