Misrepresentation as a Vitiating Factor

Discuss about the Business Law for Australian Competition and Consumer Act.

There are generally five common law vitiating factors which may affect the formation of a valid contract.  Common law these factors are namely misrepresentation, duress, undue influence, illegality and mistake. In case such factors are present in common law. Where these factors are identified in a contract law they render the contract imperfect. The primary vitiating factor which is at issue in the given situation is that of Misrepresentation.  In the case of Bisset v Wilkinson  [1927] AC 177 provisions regarding a misrepresentation had been discussed by the court. The judges defined misrepresentation as a statement fact which has been made by a party to induce another party for entering the contract and are a wrongful or false statement. The effect of misrepresentation depends on the type misrepresentation which the party has entered into in relation to a contract. A person has the right to challenge a representation which has not formed the part of a contract under the law of misrepresentation   if such representation turns out to be false.  The case of Esso Petroleum v Mardon [1976] QB 801 ruled that when a party has provided a representation which was only an opinion it cannot be considered as a misrepresentation. However, the court provided an exception to this rule via the Smith v Land & House Property Corp (1884) 28 Ch D 7 case, where it stated that when a person is in position to have known that the opinion is false than a claim for misrepresentation takes place.  In the given situation Cindy before getting into the contract to sell the books to Andy has made a statement of fact that she is going to provide him with qMaths Year 2 and Pandora Mathematics. When Andy tried to confirm it she stated “I think so”. This was a statement of opinion provided by Cindy. However as she was in a position to know whether she actually has such books, she can be held to have made a misrepresentation according to the case of Smith v Land & House Property Corp. 

It has been stated in via the provisions of section 18 of the Sale of Goods Act 1954 that when any goods have been sold be descriptions that have to match the description based on which that have been brought.  The section expressly signifies that where there is a contract in relation to the sale of goods through description an implied condition is present in a contract that the goods would be in compliance. It has been stated via the provisions of section 15(3) of the SOGA that a time is an essence of the contract or not is based on the terms of the contract. Unless intention otherwise appears time is not an essence of the contract. In the given situation there had been a contract between Andy and CER and when the contract was formed there was no stipulation as to the time of performance. This means that time is not the essence of the contract between Andy and CER. In addition Andy has got into the contract to purchase goods from Cindy where the type of books has been described by her. In this situation it is an implied condition that the books will correspond to the description. Thus as the books do not correspond to their description the contract for sale of books have been violated by the Cindy under the SOGA

Sale of Goods Act 1954 and Implied Conditions

The Australian consumer law under the provisions of section 3 sets out who is a consumer. A person who does not have commercial purpose and purchases the goods which have a value of less than $40000 is to be regarded as a consumer under the Act. It has been provided under the provisions of section 62 of the ACL that when services are provided they have to be provided within a reasonable time.  The section expressly states that when a person supplied services to the consumer in the course of trade and commerce the time for which the services have to be supplied is not fixed by the contract and have not been determined by the parties to the contract in any manner there is a guarantee that the services have to be supplied within a reasonable time.  It has been provided through the scenario that the books which had been purchased by Andy  has a value of $139. This is a contract for services as CER have to supply the goods. No time frame has been agreed by the parties thus the provisions of section 62 would be applicable. It has already been very late which would not have been considered as a reasonable time by a consumer and thus CER have failed to supply goods within a reasonable time. In this situation Cindy is paying significant price for school books and thus would expect reasonable quality. However the books are having handwriting of students and have different page numbers. This would mean that they are not of a reasonable quality.

In the Poussard v Spiers (1876) 1 QBD 410 case the court had made a ruling that when the most important terms of a contract have been breached which are the terms on which the parties relied to get into the contract the party who has been aggrieved can rescind the contract for the breach of such conditions. It has been stated in the provisions of section 260 of the ACL that when there has been a major breach in terms of a contract the party has the right to rescind the contract and reject the goods. It has also been stated under the provisions of section 64A of the ACL that the sellers are prohibited to add terms into the contract which do not comply with or operate to exclude consumer guarantees.  It has been analysed above that CER has violated the provisions in relation to a reasonable time in the contract with Andy. As it is breach of consumer guarantees and is a major breach Andy can make a claim to reject the goods under the provisions of section 260 of the ACL. It has been stated based on common law that as CER have violated a condition Andy has the right to rescind the contract. 

Australian Consumer Law and Reasonable Time

One of the notable cases in which the provisions regarding substantial performance had been discussed is the case of Cutter v Powell (1795) 101 ER 573. It had been stated by the court in this case that when a party has performed a contract which is in some way not in compliance to the terms of the contract, however it so “early equivalent” that it would not be considered as reasonable for the owner to deny making the payments the doctrine will allow the payment to the party.  It has been provided through the scenario that there was contract between Andy and Cindy in relation to the sale of books. In this situation the contract was related to the sale of qMaths Year 2 and Pandora Mathematics. However the books are having handwriting of students and have different page numbers. In addition the books are being used by Bran with difficulties. In this situation Cindy is paying significant price for school books and thus would expect reasonable quality. However the books are having handwriting of students and have different page numbers. This would mean that they are not of a reasonable quality.  Thus the rules of substantial performance are not applicable in the situation.

Breach of contract can be claimed when the parties to the contract have failed to comply with the express of implied terms in the contract. In the given situation CER has not complied with the provisions relating to a reasonable time. In addition Cindy has no complied with the provisions of COGA section 18 which is an implied condition. She is also not entitled to the doctrine of substantial performance. This means the she has also breach the contract with Andy who can sue her for breach of contract.

Elements of negligence have been provided and analysed by the judges in the landmark case of Donoghue v Stevenson 1932 AC 562.  It has been provided via the case that negligence has the elements of Duty of care, breach of duty and causation. A duty of care is owed by any person who is in a position to cause injury or harm to any other party. There are several tests for indentifying duty of care such as the foreseeability test and the proximity test as given by the case of Caparo Industries pIc v Dickman [1990] 2 AC 605. The objective test as implied in the case of Vaughan v Menlove (1837) 3 Bing. N.C. 467  is used to identify breach of a duty of care. The breach takes place when standards of a reasonable person are not observed by a party resulting in injury for the other party.  Causation element is best identified by a “but for test” application as it was done by the court in the case of Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428. When a party has been harmed because of the other parties breach of duty and the harm would not have been caused if the other party would not have breached the duty an action for negligence can be successfully taken. Here Cindy had a duty of care owed to any person who comes to her house upon invitation as they may get injured due to the features of the house. It had been informed by Cindy to Andy that renovation work is going out in her house. While coming to the house Andy had taken care of all holes which were present and followed the instructions of Cindy to get to her house. However while going back Andy has tumbled on a plumbing line and fallen into one of the holes. In the given situation a reasonable person would have ensured that there is no plumbing pipe in the dark.  The injury would not have been caused to Andy where such plumbing pipe was not present. Thus Cindy has committed negligence. 

Rescinding a Contract and Major Breach

The provisions of contributory negligence have been discussed via the case of Revill v Newbery [1996] 2 WLR 239. In this case it had been ruled by the court that where the provisions of negligence have been established the party who has been alleged to have made the negligence can rely on the defence of contributory negligence.  The court further ruled that for analysing contributory negligence the rules same rules of negligence has to be applied. This means that Andy had duty of care to himself as it is evident that the way in which he behaves makes him injured. He has to act like a reasonable person in the same situation which he has actually not done as he did not use the mobile phone while going back as instructed by Cindy. By using the phone he could have located the pipe and would not have feel. Thus he had contributed to the injury caused to him. In the situation of a contributory negligence it has been stated by the court that there where such defence has been identified the court has the right to proportionate the damages between the injured party and the wrongdoer based in the contributory actions of the injured party as provided in the case of Nettleship v Weston [1971] 3 WLR 370. The court in this case allowed 50% of the damages only to the party who had been injured because of contribution to the harm. 

Damages are provided in case of negligence to the party whose rights have been contravened to compensate them for any losses which have been incurred by them as they have been injured.  In the given situation it has been provided that Andy who has fallen head first has sustained damages in relation to his mobile and glasses. Thus he is entitled to get a claim in relation to the damages caused to these items. The court will only allow damages to compensate Andy for the losses which have been incurred by him. 

The provision of damages depends upon various factors such as the burden of mitigation, reason for the injury and the remoteness of damages. In the case of The Wagon Mound no 1 [1961] AC 388 the court ruled that the inured party has the right to be compensated in relation to all damages which are reasonably foreseeable. In the given situation by the application of the “but for” test it has already been analysed that the element of “causation” has been identified. This is because the damages would not have been caused of the plumbing pipe was not present. In the given situation Andy can recover damages for his glasses at $600 as he has borne such cost to recover the glasses. In addition Andy would be provided with damages of $100 in relation to his phone as it was its actual worth. The loss caused to Andy was reasonably foreseeable. Thus these damages can be claimed. However it can be stated these damages would be reduced for contributory negligence. 

Australian Competition and Consumer Act 2010 (Cth)

Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428

Bisset v Wilkinson  [1927] AC 177

Caparo Industries pIc v Dickman [1990] 2 AC 605

Cutter v Powell (1795) 101 ER 573

Donoghue v Stevenson 1932 AC 562

Esso Petroleum v Mardon [1976] QB 801

Nettleship v Weston [1971] 3 WLR 370

Poussard v Spiers (1876) 1 QBD 410

Revill v Newbery [1996] 2 WLR 239

Sale of Goods Act 1954 (Cth)

Smith v Land & House Property Corp (1884) 28 Ch D 7

The Wagon Mound no 1 [1961] AC 388

Vaughan v Menlove (1837) 3 Bing. N.C. 467