Discuss about the Legal Issues for Accountants.
On the basis of the given case study, the remedies available to a person under the Australian Contract Law, as well as, the Australian Consumer Law have been analyzed.
Whether Brad has any rights against the University of Kew?
Whether the rights would be different in case the fee paid amounts to $30,000, instead of $60,000?
A contract is formed when one party promises the other party to do a certain task, in exchange for a consideration[1]. In order to form a contract, certain essential elements have to be present. These elements include an offer, a consideration, an acceptance, intent, certainty and capacity[2]. In order to form a contract, the first essential is an offer. Generally, before an offer is formally made, some pre-contractual representations are made and these are known as an invitation to treat.
In the case of Partridge v Crittenden[3], it was held that an advertisement placed in a newspaper is an invitation to treat and not an offer to sell. However, in the case of Carlill v Carbolic Smoke Ball Co[4], it was held that the advertisement was an offer, as the wordings of such advertisement showed a clear intent. So, to establish the difference between an offer and an invitation to treat, the intentions of the parties have to be considered[5].
The next essential of a contract is the acceptance. The acceptance on the offer has to be gained, in order to establish a contract. Such acceptance has to be made by the parties to whom the offer was made. A unilateral offer can be accepted by anyone, especially when such offer is made to the general public[6].
A consideration is a crucial element in a contract and such consideration can be anything which is decided amongst the parties to the contract as was held in the case of Chappell & Co Ltd v Nestle Co Ltd[7].
The parties to the contract should have the intention to enter into a legally binding contract. Such intention can be either express or implied. The intention to enter into a contract was established in the case of Rose & Frank Co v JR Crompton & Bros Ltd[8].
The next essential to formulate a contract is the certainty regarding the terms of the contract. When such terms are incomplete or uncertain, no contract is considered to have been formed[9]. Further, the parties to contract should have the legal capacity to enter into a contract.
Misrepresentation takes place when one party provides false information to the other party, before a contract is created, with an intention to induce the other party to enter into a contract[10]. Such false information has to relate to a material fact of the contract, as against a statement of promise or an opinion. Claims made in an advertisement are not considered as representations of fact and hence, are not taken as misrepresentation. However, when factual statements are stated in the advertisement, it is a statement of fact and hence, a misrepresentation can be established if such a statement is false.
In case a party relied on the misrepresented facts and suffered a loss as a result of such reliance, the aggrieved party can get the contract rescinded, or sue for compensation of the losses[11]. However, when a breaching party can establish that they had reasonable reasons to believe that the statement was true, the breaching party may get a relief from the court and can be relived from paying the damages.
At times, there are such clauses in a contract which cancels the liability of a party in case of certain happenings. These clauses are known as exclusion clauses are considered as valid when such contracts have been properly included in the contract, and as long as they are not unlawful[12]. And when such contract is signed, the exclusion clause has the similar effects, as any other clause in the contract. This signed contract, containing the exclusion contract, is considered as a valid and legally binding contract.
However, when an exclusion clause contains such terms whereby the applicability of statutes is excluded, such clause is considered as illegal[13]. The traders have certain obligations towards the customers, which are provided as per the relevant statutes and hence, an exclusion clause, which has the effect of excluding the applicability of statues, is not legal. In cases when the interpretation of an exclusion clause is ambiguous, the interpretation which is most favorable for the consumers is adopted.
Further, the doctrine of contra proferentem states that when the terms of an agreement are unambiguous, the meaning of such term has to be taken in a way which is against the interests of the party who provided such terms[14]. This doctrine in applied in such circumstances where the standardized contracts are used and when the parties do not have equal bargaining powers. The costs of loss, in such cases, have to be borne by the parties who are in the best position to avoid such a loss. This rule is generally applied in the cases where the exclusion clause is ambiguous and as per this doctrine, such exclusion clause is construed against the party who inserted the exclusion clause.
The Australian Consumer Law, through the Section 18(1) prohibits a person, during the course of commerce or trade, from engaging in such conduct which is deceptive or misleading in nature, or is likely to deceive or mislead[15]. This section is applicable not only on the persons, but also on the corporations[16]. To establish a deceptive conduct, an intention to deceive has to be established and a fraud has to be proved. But to establish a misleading conduct, no intention has to be proved. A strict liability is imposed, by the prohibition of misleading conduct, to not lead any other party into an error in any dealings[17]. Any false advertisement is covered in this section and so a misleading advertisement is prohibited as per this section[18].
Such misleading or deceptive conduct has to be made during the course of commerce or trade. The courts interpret this in a broad sense and hence, any sort of commercial activity is covered under misleading conduct, including such dealings which have been made before entering into a contract.
In the case of Singtel Optus Pty Ltd v Australian Competition and Consumer Commission[19], the advertisement of providing unlimited download data plan by Signtel Optus was construed as misleading and deceptive conduct. Further, a penalty on Signtel Optus was to the amount of $3,610,000[20] to be paid to the Commonwealth for such misleading and deceptive conduct.
Another case of misleading representation was established in the case of ACCC v Cadbury Schweppes Pty Ltd[21], where the contention of the claimant that the product contained fruit extracts, was held as misleading.
As stated above, a false or misleading representation about the services or goods, under the Australian Consumer Law, is considered as an offence. Some of the examples of misrepresentations include history of particular use; price; a specified standard, grade, style or quality of product; and goods or services having the necessary approvals or sponsorships[22].
In cases where the aggrieved party can be partly blamed for the damage or loss suffered by such party, than as per the section 137(b) of the Competition and Consumer Act, 2010 (CCA) [23], the liability of such damages can be reduced[24]. However, this section is not provided in the Australian Consumer Law and so, a person who is engaged in a misleading conduct, has to bear the full responsibility for the loss incurred by the other party, even when the other party was to be partly blamed for the loss suffered. But in cases where such person is a corporation, the provisions of the CCA, are applicable on it, and accordingly, a reduction of damages can be claimed for the contributory fault of the other party.
An inclusion of such a clause in the contract, which has the effect of removing the potential liability arising out of legislation, is not allowed. The Courts are of the view that the parliament has established a set standard of conduct through the relevant legislatures and so, it is not possible to take such standards out of a contract[25]. As long as a person has been misleading, during the course of commerce or trade, a contract cannot remove this fact. This is applicable irrespective of the fact, if the clause is a main clause or an exclusion clause.
In order to claim damages against an action involving misleading conduct, it has to be brought within six years of the accrual of said cause of action as stated under section 236(2) as well as 237(2) of CCA[26]. The maximum penalties, as stated under the section 151 of the CCA include a fine on body corporate of up to $1,100,000 and a fine for individuals of up to $220,000[27].
In Australia, universities have been established by a legislation which are generally the state or territorial legislations. The universities in Australia are regulated by the Corporations Act, 2001[28]. Australian universities are statutory corporations and these are governed internally by the respective enabling legislation[29].
Consumer is defined under the Section 3 of the Australian Consumer Law. As per this section, a person who acquires some particular goods or services would be considered as a consumer only if the amount payable or paid for acquiring such goods or services does not exceed $40,000[30].
In the present case, the advertisement placed in newspaper was a unilateral offer to the world, to enroll in the course of Doctor of Accountancy provided by University of Kew to become a Chartered Accountant or Certified Practicing Accountant. This advertisement was not an invitation to treat and to establish that the words of the advertisement have to be analyzed. Anyone could enroll in the course, and there was no restriction to suggest it was an invitation to treat, as was established in the case of Partridge v Crittenden. Further, the wordings of the advertisement clearly establish that the intent was to enroll students into the said course, no matter what their qualification was. So, it was a valid offer.
Here, the application signed by Brad can be deemed as a contract. There was an offer for the course; this offer was accepted in form of enrolling for the said course; a consideration in form of student fee of $60,000 was involved; intention has already been established; Brad had the capacity to enter into a contract; and lastly, there was a clarity regarding the terms of the course.
This contract contained an exclusion clause in large red font. As stated above, an exclusion clause is valid as long it is lawful. Here, the exclusion clause contained three segments. The first segment of this exclusion contract makes the unlawful as this clause excludes the applicability of statues. The next part of this clause denies the reliance of any misrepresentation by an employee or by the University. Again, this clause is unlawful. The last part of this clause is contrary to the offer that was made. In the offer, the duration of the course as well as the outcome of the course was mentioned. So, this clause is against the offer that was made, and hence, is contrary to the base of this contract. So, this exclusion contract is not legal.
There is also a presence of misrepresentation in this case. At the time of the advertisement, in early 2013, the accreditation application was pending. But the advertisement stated that the person would become a Certified Practicing Accountant or a Chartered Accountant. The University did not have the proper authority to make this contention, as the application was still pending. So, a misrepresentation was made.
The principle of contra proferentem is also applicable in this case, as Brad was given a standardized form and had no power to bargain the terms of such form. So, the clause stated in such form, would be construed against the University.
So, as per the Australian Contract Law, Brad has the right to seek damages, as there a case of misrepresentation is present. Through such misrepresentation, the University induced the students to enroll into the course. And so, Brad can claim for damages in form of compensation from the University for such a misrepresentation. Also, the exclusion clause is not valid in this case.
Under the Australian Consumer Law also, the University had made the misrepresentation on the basis of goods or services having the necessary approvals or sponsorships. The University did not have the proper accreditation as the application was pending. Without the proper accreditation, they could not claim to certify a person for the said qualifications. So, Brad can claim damages for the misrepresentation made under the Australian Consumer Law.
Further, there was also the presence of a misleading conduct by the University. It misled the consumers into believing that the person would become a Chartered Accountant or a Certified Practicing Accountant after completing the course of Doctor of Accountancy. The University did not have the proper base to make such a contention and hence, was involved in a misleading conduct.
Further, the exclusion clause is also not valid as per the Australian Consumer Law. An inclusion of such a clause in the contract, which has the effect of removing the potential liability arising out of a misleading conduct, is not allowed. Here, the exclusion clause, aiming to remove the liability of the University, arising out of the CCA, as well, as any other consumer protection legislation, is unlawful.
The provisions of Corporations Act, 2001 (Cth) are applicable on the University. And so the provisions of Section 18(1) of the CCA are applicable on the University[31]. The University had certain obligations, which are provided as per the relevant statutes and hence, an exclusion clause which has the effect of excluding the applicability of statues, is not legal.
Further, when the application was rejected for the accreditation of the course, the University failed to disclose this material fact. And so, a misrepresentation is again established in this case.
But, the value of the course enrolled was $60,000. And hence, Brad is not a consumer as per the Australian Consumer Law. So, Brad does not have any rights against the University.
So, it is advised to Brad, to initiation actions against the University, for damages, under the Australian Contract Law. However, he cannot initiate any action against the University, as per the Australian Consumer Law, as he does not fall under the definition of the Consumer, as given in this act.
In case where the value of the course is $30,000, instead of $60,000, Brad would be considered as a consumer, as per the Australian Consumer Law. And he would have the right to sue the University for the not only the misrepresentation, but for the misleading conduct as well. Brad has the rights to seek damages in this case in form of monetary compensation.
However, since Brad failed to check the status of accreditation even when he was warned by his friends, he contributed to the damages caused by the misleading conduct, and hence, the liability of the University can be decreased in this case.
So, in the second case, it is advised to Brad, to initiation actions against the University, for damages, under the Australian Contract Law, as well as the Australian Consumer Law.
Conclusion
Hence, it can be concluded, that Brad does not have any consumer rights, under the Australian Consumer Law in the first case. However, he does have the rights under the Australian Contract Law, as a valid contract was formed and a misrepresentation was established. And as a result, he can sue the University for damages, as per the Australian Contract Law.
In the second case, he is a consumer, and so he can sue the University for damages, as per both the Australian Consumer Law, as well as, the Australian Contract Law.
References
Articles/Books/Reports
John Orr, Australian Corporate Universities and the Corporations Act, 2012, 17(2), International Journal of Law & Education, pp. 123-148
Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Palgrave Macmillan, 2015)
John W. Carter, Cases and Materials on Contract Law in Australia (LexisNexis Butterworths, 6th ed, 2011)
John W. Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)
Paul Latimer, Australian Business Law 2016, (OUP Australia and New Zealand, 35th edition ed, 2016)
Cases
ACCC v Cadbury Schweppes Pty Ltd [2004] FCA 516
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, CA
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
Partridge v Crittenden [1968] 2 All ER 421
Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 (7 March 2012)
Legislation
Australian Consumer Law (Cth)
Australian Contract Law
Competition and Consumer Act, 2010 (Cth)
Corporations Act, 2001 (Cth)
Others
Australian Competition and Consumer Commission, Advertising and selling guide, 2016 < https://www.accc.gov.au/publications/advertising-selling/advertising-and-selling-guide/avoid-misleading-or-deceptive-claims-or-conduct/misleading-or-deceptive-conduct>
Gilbert, Tobin, Singtel Optus Pty Ltd v Australian Competition and Consumer Commission, 2012 <https://www.lexology.com/library/detail.aspx?g=46cac7c5-c732-4001-b553-98f620b75935>
Hobart Community Legal Service Inc., Misleading or Deceptive Conduct under the ACL, 2013 < https://www.hobartlegal.org.au/tasmanian-law-handbook/consumers-money-and-debts/australian-consumer-law/misleading-or-deceptive>
Law Teacher, Advertisement Was an Invitation to Treat, Not an Offer To Sell, 2016 < https://www.lawteacher.net/free-law-essays/contract-law/advertisement-was-an-invitation-to-treat-not-an-offer-to-sell-contract-law-essay.php>
Legal Services Commission of South Australia, Exclusion Clauses, 2011 <https://www.lawhandbook.sa.gov.au/ch10s02s06.php>
Legal Services Commission of South Australia, False or misleading representations, 2013 < https://www.lawhandbook.sa.gov.au/ch10s03s03s03.php>
Legal Services Commission of South Australia, Misrepresentations, 2009 <https://www.lawhandbook.sa.gov.au/ch10s02s10.php>
Scott Alden, Alex Ottaway and Jennifer Tetstall, Australia: Drafting contracts: guidance on managing ambiguity, 2012 <https://www.mondaq.com/australia/x/163072/Contracts+Deeds/Drafting+contracts+guidance+on+managing+ambiguity>
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