Misrepresentation Misleading And Deceptive Conduct Notes

III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct Non-Statutory Misrepresentation Statement made by parties to induce entry to contract may be incorporated into the contract as a term: Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965], or operate as a collateral contract: Shepperd v Ryde Municipal Council (1952) However, there are situations that a false statement may still give rise to rights and remedies even though it is not effective as a term of the contract, i.e., merely a warranty of a contract. Where such a statement is false, (i.e., a statement made by one party to another to induce entry into the contract), it will be misrepresentation. Misrepresentation does not affect the operation of the contract, that is to say, the contract is not void. The innocent party will have the right to rescission --- right to avoid the contract, (i.e., not void, but voidable). Where the contract is rescinded, there is no right to claim damages. * The right of damages differs according to whether the misrepresentation is fraudulent, negligent or innocent. There are three types of misrepresentation: A PRE-CONTRACTUAL REPRESENTATION - A Statement (or Conduct) - Not a "puff " - Can be incorporated as a term (but generally not) FRAUDULENT A deliberate untruth ! SUE in TORT of DECEIT and RESCIND - if not affirmed ELEMENTS: - One party to the other - A statement of Fact - Must be a false statement - Was intended to induce the contract - Did induce the contract MISREPRESENTATION INNOCENT Defendant thought it was the truth NEGLIGENT A negligent untruth ! SUE in TORT of NEGLIGENCE and RESCIND - if not affirmed NO SUIT . But can RESCIND - if not affirmed * Fraudulent misrepresentation. * Innocent misrepresentation. * Negligent misrepresentation Differentiate misrepresentation: * Advertising puffs are not considered as a statement of fact: Magennis v Fallon (1828) * A promise and assurance for the future cannot be verified as true or false, and does not itself constitute a misrepresentation: Civil Service Co-operative Society of Victoria Ltd v Blyth (1914) * Statements of opinion and intention are not verifiable as a person may change their minds in the future: Bisset v Wikinson [1927] * Generally, a statement of law is not a misrepresentation of fact. Establishing Misrepresentation The time at which a representation must be evaluated is when the representee enters into the contract. If the facts change between the time when a representation is made and the time when the representation is acted upon, the statement becomes a false statement of fact: With v O'Flanagan [1936] * Contrastingly, the right to sue can be lost if one party makes an inaccurate claim but then corrects it before final agreement is reached: Homes v Jones (1907) 1 III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct The mere fact that a party has the opportunity of investigating and ascertaining whether a representation is true or false is not sufficient to disprove the inducement: Redgrave v Hurd (1881) Inducement is disproved where the representee actually knew that the statement was untrue or did not act relied upon the statement. (i.e., a question of fact): Redgrave v Hurd (1881) In an action to recover damages for fraudulent misrepresentation inducing a contract, the plaintiff must 1. The defendant desiring to sell his medical practice got into touch with the plaintiff in January 1934, and stated that his practice had brought in PS2,000 per annum for the three previous years and that he had a panel of 1,480 persons. 2. This statement was true when made. 3. Negotiations lasted until 1 May, when the contract of sale was signed. 4. During this period the defendant was ill and was forced to absent himself from time to time from the practice, with the result that the takings of the practice dwindled to practically nothing and the number of panel patients was reduced to 1,260. 5. These facts were not disclosed to the purchaser, and upon discovering them immediately after completion he brought this action for rescission of the contract. Held, the statements made, though true at the time, had become untrue during the negotiations and there was an obligation to disclose this fact to the purchaser. No disclosure having been made the plaintiff was entitled to rescind. Such an obligation to disclose arises in the case of all contracts and not only in the case of those uberrimae fidei (utmost good faith) or where the representation is in respect of an intention. 1. While negotiating the sale of a pastoral property, the defendants innocently misrepresent the number of stock on it. 2. They later informed the plaintiff 's agent of the true position (and the agent verified it). 3. Agreement and sale followed. 4. The plaintiff subsequently sought to have the contract set aside because of the defendants' "misrepresentation". Held, because the defendants had corrected their earlier misstatement, the contract had not been induced by their "misrepresentation". Therefore, it could not be set aside. When there is a difference between the fair value of the property at the time of the purchase and the value agreed in the contract, actual loss is established. The contrast is therefore between: * Fraud: compensating the plaintiff for loss or damage suffered by reason of entering into the contract; and * Breach of contract: putting the plaintiff in the position which would have been occupied had the contract been performed. prove: Homes v Jones (1907) * that the misrepresentation was fraudulent, * that the contract actually entered into was in fact induced by the misrepresentation, and * that he suffered actual loss by entering into the contract. * Actual loss means the difference between the price actually paid and the fair value of the property at the time of the purchase With v O'Flanagan [1936] Ch 575 In dealing with a contract of sale of property it is probably more convenient to speak of the necessity for disclosure than of a continuing representation. In strictness the theory of the law upon the point here in question is said to be that the material time at which the truth of a representation must be established is the time when it is acted upon and not the time when it is made. It often happens that there is no appreciable interval between the two dates; but if there is, and the representation relates to an existing state of things and not to a past event, the person making the representation is deemed to be repeating it at every successive moment during the interval unless he withdraws or modifies it in the meantime. The critical moment, however, at which it must be true if there is not to be misrepresentation, is the moment when it is acted upon by the person to whom it is made. In other words, if its falsity at the time it is acted upon be proved, it is immaterial that it was true when made; and from a practical point of view the result is better stated thus: if the person making a representation which is not immediately acted upon finds that the facts are changing, he must before the representation is acted upon, disclose that change to the person to whom he made such representation. b. Statement induces the contract Homes v Jones (1907) 4 CLR 1692 * In an action to recover damages for fraudulent misrepresentation inducing a contract, the plaintiff must prove * that the misrepresentation was fraudulent, * that the contract actually entered into was in fact induced by the misrepresentation, and * that he suffered actual loss by entering into the contract. * So, where the owners of a pastoral property, in offering it for sale, made false statements as to the numbers of the stock upon it, but the purchaser refused the offer, and afterwards, having been informed of the inaccuracy of the statements made in the original offer, negotiated for a sale upon a totally different basis as regards the stock, inspected the property and stock, and as a result of the inspection, decided to purchase, and entered into a contract of sale upon the new basis, he could not afterwards say that he relied upon the misrepresentations made by the vendors in the first instance. * The duty of a vendor, who has made false statements in offering his property for sale, to correct them and bring the correction to the knowledge of the purchaser before acceptance, may be fulfilled by giving notice of the actual facts to an agent of the purchaser with apparent authority to receive such information on his behalf. * The measure of damages in such an action is not the same as that in an action for breach of warranty, but is the difference between the price actually paid and the fair value of the property at the time of the purchase; and, therefore, it is not sufficient for the plaintiff merely to show that the property sold was not worth as much as it would have been worth if the representations had been true; he must show that it was worth less than he actually paid for it. Damage is the gist of action: Damages for a breach of warranty are given on the principle that, where a person contracts to do something and fails to do it, he must put the other party in the same position as if the thing had been done, so far as money can do it. But where the complaint is that the contract has been induced by a fraudulent misrepresentation, the remedy for that wrong is to put the party, who has been induced to make the contract, as far as possible in the position he would have been in if he had not entered into the contract. To put him into that position he must be recompensed for the damage he has sustained by 2 III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct entering into the contract. In order to ascertain the extent of that damage the whole contract must be looked at. If it should turn out that though in one respect the contract is less beneficial to the other party than it would have been if the representation had been true, yet in other respects it is so profitable that on the whole he loses nothing, no damage has resulted from his entering into the contract and he cannot recover.Thus damage is an essential factor in the cause of action. 1. Hurd was induced to purchase part of Redgrave's legal practice by Redgrave grossly overstating its earnings. 2. Hurd had been given an opportunity to examine the accounts and, had he done so, he would have discovered the truth. 3. Instead, he relied on the appellant's statement and, when he discovered they were untrue, he sought to rescind the contract. Held, Hurd succeeded. He had been misled by Redgrave's representation and, having thus been induced to enter into the contract, he was entitled to avoid it. Redgrave v Hurd (1881) 20 Ch D1 * The mere fact that a party has the opportunity of investigating and ascertaining whether a representation is true or false is not sufficient to deprive him of his right to rely on a misrepresentation as a defence to an action for specific performance. * Where you have neither evidence that he knew facts to show that the statement was untrue, or that he said or did anything to show that he did not actually rely upon the statement, the inference remains that he did so rely. Rescission The innocent party can rescind the contract ab initio, but that right may be lost due to variety of factors: Costal Estates v Melevende [1965] Right to rescission is lost where the innocent party affirms the contract after becoming aware of the falsity of the misrepresentation: Costal Estates v Melevende [1965] * An election between affirmation and rescission will not occur until the innocent party knows that he has the right to elect: Costal Estates v Melevende [1965] * To prove the existence of an affirmation, onus rests on the opposite party (the party who wants to continue the contract) to prove that the innocent party has sufficient knowledge of his rights at any relevant time: Costal Estates v Melevende [1965] * Nevertheless, according to the principle of estoppel, the innocent party may find that the right of rescission is not available following reliance by the opposite party on the words or conduct of the innocent party itself: Costal Estates v Melevende [1965] * Further, lapse of time after the misrepresentation can be evidence of affirmation of the contract: Leaf v International Galleries [1950] * In a contract for the sale of land, if the contract has been executed, that is, if it has proceeded to settlement or completion, the right to rescind for an innocent misrepresentation is lost: Seddon v North Eastern Salt Co [1905]; Svanosio v McNamara (1956) Equity may intervene to rescind a contract by restoring the parties substantially to the status quo, where the contract is induced by fraud and precise restitutio in integrum is impossible: Alati v Kruger (1955) * However, the innocent party, after giving notice of rescission, is under a duty to take reasonable care to preserve the property so as to ensure the substantial restoration: Alati v Kruger (1955) In some circumstances, where substantial restitutio in integrum is impossible the court will use its power to impose terms that will create justice in the case, for example, partial rescission: Vadasz v Pioneer Concrete (SA) (1995) The general requirement that notification of the rescission be communicated to the other party can be waived if communication is impossible: Car & Universal Finance Co Ltd v Caldwell [1965] Where third party acquires the rights in good faith and for value as a result of the contract, this prevents the contract from being rescinded: Car & Universal Finance Co Ltd v Caldwell [1965] * However, the rule may not apply if the notification is impossible: Car & Universal Finance Co Ltd v Caldwell [1965] a. Affirmation If an innocent party affirms the contract after becoming aware of the falsity of the representation the right to rescind is lost. 3 1. In September 1960, the plaintiff, the purchaser, was induced by fraudulent misrepresentations to purchase land from the defendant (the vendor) by a terms contract of sale. 2. He paid a deposit and instalments. 3. He never in fact entered into possession. 4. Although he became aware of the falsity of some of the misrepresentation in early 1961, he made payments under the contract, and tried to sell the land or renegotiate with the defendant. 5. he was not aware of the right to rescind until he consulted his solicitor in September 1962. 6. Shortly after, he brought an action in the County Court claiming return of the money. 7. His action in the County Court succeeded, on appeal by the defendant. Held, Appeal dismissed.The plaintiff was entitled to rescind the contract. Right for rescission may lost where: * Affirmation of a contract. * Adverse to the other party (see exceptions above) * Unfair to a third party * Unreasonable delay in election. III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct Costal Estates v Melevende [1965] VR 433 General Rule The ultimate question to be answered in cases where affirmation is relied upon as a defence to a rescission is whether the representee has after discovery of the falsity of the relevant misrepresentations, in truth elected to affirm the contract and thereby elected not to avoid it. Because the making of an election necessarily presupposes a knowledge that a choice between alternative courses is open, in general, no question of affirmation can arise in the absence of such knowledge. Exceptions There appears, however, to be one important qualification upon this. If a representee, after discovery of the facts which entitle him to avoid the contract, exercise, in an unequivocal manner, rights under the contract adversely to the other party he will in general be deemed to have elected to affirm it, although not aware of his right to elect. Onus of Proof The ultimate onus of establishing all elements of the defence of affirmation rests on the representor, it would be sufficient perhaps to say that the evidence fails to establish affirmatively that the purchaser had sufficient knowledge of his rights at any relevant time. Lose right of rescission * Once a representee has, by discovery of the truth, been put to his election, he will of course lose his right to rescind once he as elected not to rescind. --->Affirmation * Affirmation as a defence to a claim to rescind a contract rests on the principle that having elected to adhere to a contract after discovery of the falsity of the representations inducing it, the right to rescind is lost. * Once he has made his election, he cannot resile from it. -->Consequence of Affirmation * He may lose his right of avoidance where by reason of his own conduct, or of other circumstances, it would be unjust or inequitable that he retain any right to elect. * Again delay in electing to rescind may make it unjust to others that the right to elect continue. b. Restitutio impossible Rescission is only possible if the parties can be placed in their original positions. Precise restitution is not needed, and the court can use its power to impose terms to do substantial justice. 1. The respondent purchased from the appellant a fruit business, carried on in leasehold premises at Toowong for the price of $700. 2. The respondent alleged that he had been induced to enter into the contract of purchase by a fraudulent misrepresentation as to the taking of the business made by the appellant. 3. The respondent also alleged, alternatively, that in consideration of his entering into the contract and paying the agreed price the appellant had warranted that the average taking of the business were $100 per week. 4. He claimed rescission of the contract, the return of the purchase money, and damages. Issues: In the present case, the validity of the respondent's rescission depended only upon the question whether restitutio in integrum was possible in the circumstances as they existed at the commencement of the action. Held, the rescission was valid. But attention should be paid that the position might have been different if the buyer had abandoned the business so that it ceased to exist. Alati v Kruger (1955) 94 CLR 216 * A court exercising equitable jurisdiction will hold valid the disaffirmance by the party aggrieved of a contract induced by fraud, even though precise restitutio in integrum is not possible, if the position is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, the court can do what is practically just between the parties and thereby restore them substantially to the status quo. * It seems to follow from the fact that restitutio in integrum is a condition of rescission that a purchaser remaining in possession after giving notice of rescission is under a duty to take reasonable care to preserve the property, so that what he has received from the other party may, so far as reasonably practicable, be restored to that other party. If the property includes goodwill of a business, the purchaser in possession must carry on that business and take reasonable care to preserve the goodwill. When the fraudulent representation is a term of the contract, three available choices for an innocent party in regards of a contract induced by fraudulent representation: * Sue for damages for breach of the warranty (or condition, or intermediate term), for the statement in that clause clearly formed one of the terms of the contract and was not only a representation. -->Sue for breach of contract * Sue to recover as damages for fraud the difference between the price he had paid and the fair value of the property at the time of the contract: Holmes v Jones (1907) -->Sue for damages for fraud * Provided that he was in a position to restore to the appellant substantially that which he had received under the contract, he might avoid the purchase and sue to recover his purchase money back from the other party. --> Rescission Difference between Common Law and Equity: But it is necessary here to apply the doctrines of equity, and equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo. ...The function of a court in which proceedings for rescission are taken is to adjudicate upon the validity of a purported 4 III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct 1. Vadasz was a director of a company that carried on business as a concrete piling contractor. 2. The company fell into financial difficulties and Pioneer, which supplied it with readymixed concrete, threatened to stop supplies unless Vadasz provided a personal guarantee. 3. Vadasz understood that the guarantee would be limited to the company's future debts to Pioneer -- a belief which the court found Pioneer had actively encouraged and of which it had been aware. 4. When the company failed, Pioneer sued Vadasz for the full $357,005 that was owning for concrete supplied both before and after the guarantee. 5. Vadasz countered by seeking an order rescinding his guarantee in total. Held, while Pioneer had obtained Vadasz's guarantee of the company's past debts by misrepresenting the true nature and effect of the document,Vadasz had been fully aware that he was guaranteeing all of its future debts. Accordingly, it was reasonable to make him liable for those debts. He was, therefore, ordered to pay $170,929. 1. Caldwell sold his car to a rogue, Norris, who paid him with a cheque that was later dishonoured. 2. Caldwell immediately informed the police and the automobile association and asked them to help him find his car. 3. When found, the car had been bought by the appellant finance company. 4. They refused to return it, on the basis that Caldwell had not properly terminated his contract with Norris -- because he had not given him notice of rescission. 5. Accordingly, they said, Noriss had had good title, which he had validly passed to him. Held, that argument failed. In the circumstances, express notice was not required.Where one party prevents the other from communicating rescission by absconding, neither he nor those who acquire their title through him can insist on actual notification. In the circumstances, Caldwell had done all that was reasonable, his rescission was good and he was entitled to recover the car. 1. The plaintiff was induced to buy a painting that was represented to him as being by John Constable. 2. Five years later, he took the painting to Christies, intending to sell it, and discovered that it was not a Constable. 3. He sought to rescind the contract and recover the purchase price. Held, rescission was refused because the plaintiff had not rescinded within a reasonable time. He had had ample opportunity to examine the painting after he had bought it, he had not done so and it was unfair, five years later, to allow him to rescind. disaffirmance as an act avoiding the transaction ab initio, and, if it is valid, to give effect to it and make appropriate consequential orders. The difference between the legal and the equitable rules on the subject simply was that equity, having means which the common law lacked to ascertain and provide for the adjustments necessary to be made between the parties in cases where a simple handing back of property or repayment of money would not put them in as good a position as before they entered into their transaction, was able to see the possibility of restitutio in integrum, and therefore to concede the right of a defrauded party to rescind, in a much wider variety of cases than those which the common law could recognise as admitting of rescission. Of course, a rescission which the common law courts would not accept as valid cannot of its own force revest the legal title to property which had passed, but if a court of equity would treat it as effectual the equitable title to such property revests upon the rescission. Vadasz v Pioneer Concrete (1995) 130 ALR 570 * In some circumstances, where substantial restitutio in integrum is impossible a court may make a declaration for partial rescission. * The unconscionability works in two ways. In its strict sense, it provides the justification for setting aside a transaction. More loosely, it provides the justification for not setting aside the transaction in its entirety or in doing so subject to conditions, so as to prevent one party obtaining an unwarranted benefit at the expense of the other. c. Notification of rescission Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525 Where a contracting party could be communicated with, and modern facilities make communication practically worldly wide and almost immediate, it would be unlikely that a party could be held to have disaffirmed a contract unless he went so far as to communicate his decision so to do. It would be what the other contracting party would normally require and unless communication were made the party's intention to rescind would not have been unequivocal, or clearly demonstrated or made manifest. But in circumstances such as the present case the other contracting party, a fraudulent rogue who would know that the vendor would want his car back as soon as he knew of the fraud, would not expect to be communicated with as a matter of right or requirement and would, deliberately, as here, do all he could to evade any such communication being made to him. In such exceptional contractual circumstances, it does not seem to me appropriate to hold that a party so acting can claim any right to have a decision to rescind communicated to him before the contract is terminated. To hold that he could would involve that the defrauding party if skilful enough to keep out of the way could deprive the other party to the contract of his right to rescind, a fight to which he was entitled and which he would wish to exercise as the defrauding party would well know or at least confidently suspect. d. Lapse of time Leaf v International Galleries [1950] 2 KB 86 The innocent party must elect to rescind a contract within a reasonable period of time, and that the particular period of time is governed by whether the delay is sufficient to constitute unequivocal conduct amounting to affirmation. Rules in Seddon's Case Where an executory contract has been completed by formal conveyance of title the right to rescind for innocent misrepresentation is lost. this rule applies to sale of any interest in land and to some sales of shares. Seddon v North Eastern Salt Co [1905] 1 Ch 326 In a contract for the sale of land, if the contract has been executed, that is, if it has proceeded to settlement or completion, the right to rescind for an innocent misrepresentation is lost. Svanosio v McNamara (1956) 96 CLR 186 SALE OF GOODS ACT 1923 5 III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct Provides that incorporation of a representation as a term of the contract does not deprive the representee of the remedies for misrepresentation. (pp 406 CLA) 4 Savings (2A) Without affecting the generality of subsection (2), the rules of equity relating to the effect of misrepresentation apply to contracts for the sale of goods, but such a contract may be rescinded under those rules for a misrepresentation even though either or both of the following apply: (a) the misrepresentation has become a term of the contract, (b) the contract has been performed. Damages The right of damages differs according to whether the misrepresentation is fraudulent, negligent or innocent. Fraudulent Misrepresentation: * A fraudulent misrepresentation occurs where a representor lacks belief in the truth of the representation; or makes it recklessly, not caring whether it is true or false: Derry v Peek (1889) * Principle relating to inducement: Gould v Vaggelas (1985) * Reliance of the representation is necessary to constitute inducement. * The inference of inducement may be rebuttable if the representee's actual knowledge of fact at the time of the contract is proved. * To constitute inducement, it is sufficient the representation is a cause, trivial or not, of the formation of the contract. * In terms of the damage for fraudulent misrepresentation, the plaintiff is to be put, as far as possible in the position he would have been in if he had not acted on the fraudulent inducement: Gould v Vaggelas (1985) 1. The defendants were the directors of a tramway company. 2. They issued a prospectus stating that the company was entitled to use stream and other mechanical power to run its trams. 3. That statement was false. 4. The company had applied for the necessary consents but they had not been forthcoming. 5. Relying on the representation, Peek subscribed for shares. 6. When the company was later wound up because the consents were never received, Peek sued the directors alleging fraud. 7. The directors argued that they were not liable because they had honestly believed that getting the consent was mere formality. Held, the director were not liable. Because they had honestly believed the statement were true, they were not guilty of fraud. 1. A husband and wife were induced by misrepresentations to purchase, on behalf of a company to be formed and controlled by them, a tourist resort on terms which included the transfer to the vendors of valuable property and a mortgage back to the vendors to secure the balance of the price. 2. The company was formed and the purchase was completed. 3. After nearly two years of unprofitable trading the company defaulted. 4. The vendors exercised their power of sale as mortgagees to recover a deficiency and sued the husband and wife as guarantors. 5. Having suspected fraud, the husband and wife counterclaimed for damages for deceit. 6. The company was wound up. 7. The liquidator had no funds with which to take proceedings against the vendors. a. Fraudulent misrepresentation The representor must have lacked an honest belief in the truth of the statement; the innocent party can obtain damages for the tort of deceit. Derry v Peek (1889) 14 App Cas 337 Fraudulent misrepresentation as a statement which is made either: * knowing it to be false, * without belief in its truth, or * recklessly, careless as to whether it be true or false. Gould v Vaggelas (1985) 157 CLR 215 * Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case. * If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. * The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation. * The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract. * In terms of the remedy for fraudulent misrepresentation, the plaintiff is to be put, as far as possible, in the position he would have been in if he had not acted on the fraudulent inducement. b. Negligent misrepresentation c. Innocent misrepresentation * Common law provides no right to damages for innocent misrepresentations. 6 III. Misrepresentation & Statutory Liability for Misleading or Deceptive Conduct * Courts have therefore sometimes stretched other rules to provide remedies, i.e., there is a cause of action under statute. Dick Bentley Productions v Harold Smith (Motors) [1965] 1 WLR 623 Statutory Liability for Misleading or Deceptive Conduct Restrictions Person: "person" includes a partnership. In "trade or commerce" Query the nature of the conduct, whether it bears an essential trading or commercial character: Concrete Constructions (NSW) v Nelson (1990) * To acquire and dispose of business during the course of a corporate life falls within the scope of "trade or commerce": Bevanere v Lubidineuse (1985) * Gratuitous service does not bear an essential trading or commercial character: E v Australian Red Cross Society (1991) "Conduct": s 2(2) Australian Consumer Law Not restrict to conduct between the contractual parties, i.e., doctrine of privity does not work: Accounting System 2000 (Development) v CCH Australia (1993) Contractual promises (i.e., provision of a contract), can be misleading, i.e., to a contractual party, both breach of the contract and violation of the legislation can be claimed simultaneously: Accounting System 2000 (Development) v CCH Australia (1993) Conduct capable of being "misleading and deceptive" Four critical components of the "misleading or deceptive" aspect of s 18: Whether particular conduct is misleading or deceptive can only be judged against the background of the audience to whom that conduct was direct. * Consideration must be given to the class of consumers likely to be affected by the conduct, including both the inexperienced and the experienced, that is, the effect of reasonable members of the class: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) * The sole qualification is by assessing from the likely impact on a "hypothetical individual who would have been a member of that ordinary or reasonable class": Campomar Sociedad Ltd v Nike International Ltd (2000) The conduct must have been capable of leading members of that audience into error. * Merely wondering or confusing is not capable of rendering a conduct misleading and deceptive: Campomar Sociedad Ltd v Nike International Ltd (2000) Evidence that someone has actually been led into error is not necessary, and * In every case it is up to the court to determine, as objectively as it can, whether particular conduct was or was not misleading or deceptive --- and in reaching that decision it can, but need not, consider particular instances of individuals being led into error. It must be shown that the conduct actually caused the error. * Whether the relevant public has been induced into believing an erroneous assumption as a result: Taco Co of Australia Inc & Anor v Taco Bell Pty Ltd (1982) * Referred from the relevant public's reliance on the misleading or deceptive conduct when entering the contract, however, the misleading and deceptive conduct need not be the sole cause to lead to the error: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd 7

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