Introduction
According to Khoury & Yamouni (2010), a contract is a “legally binding agreement that intends to formalize an agreement made by two or more parties and is legally enforceable if it contains the elements of a valid legal agreement. In case of a breach, a legally enforceable contract usually has specific legal remedies.” A contract can cover various issues such as the sale of goods or services, terms of employment or of an independent freelancer relationship, the settlement of disagreements and ownership of property among others. “Contract law was introduced as a means of providing assurance as to the validity of an agreement, whereby both parties intended that their words or actions will have legal consequences if not carried out as agreed. To form a contract between two parties it must be implied or expressed that there is an intention from either parties to become legally bound, that is, the parties must be at a ‘consensus ad idem’ between the ‘parties’, as well as a consideration for the agreement” (Koffman and Macdonald 2007).
Issue
The issue here is if the petitioner, Julia has a claim against the Subaru dealership for breach of contract and the actions, under contract law that she can bring against the dealership.
Rules
There are consumer protection laws which regulate the flow of straightforward information and make sure that the competition in the marketplace is fair. A model of consumer protection laws is the “Trade Practices Act” 1974 stipulated by the Parliament of Australia. These laws are government regulations, which are used to protect consumers from fraudulent trade practices of companies or traders. As well as prevent illegal businesses that use fraudulent means and illegal practices to take advantage of the consumers and also protect weak businesses that are unable to defend themselves. Consumer protection laws would come in handy in dealing with this case as these laws aim to safeguard the interests of the consumers as they control the relationships between individual consumers and the businesses or companies that trade their services or products to them (Moskin, 2002).
As illustrated in the Carpet Call Pty Ltd v Chan case, “Chan, acting upon the recommendation of the seller, purchased for $68,839 a quantity of carpet for use in his night club. When it attested, Chan sued the seller for alleged breach of the implied terms of fitness for the purpose as required by the Queensland Goods Act and in the TPA”1. In addition “the company was contented that the TPA did not apply since the price paid for the goods exceeded $40,000…. The court held that the contract was a consumer contract because the goods were of a type ordinarily acquired for personal, domestic or household use. However, in this case the goods did not lose that definition because they were acquired for commercial purposes”2. The judge held that “Carpet is a commodity or goods ordinarily acquired for domestic consumption, and it did not lose that description by reason of a commercial rating or some quality which makes it last longer than other carpet normally supplied for use in a domestic setting”. This therefore brought about the argument of whether the price paid for the carpet implied the domestic or commercial utilization of the carpet. The TPA would not have applied if it was for commercial use but would apply if it was for domestic use. However, the court stated that since carpets are ordinarily purchased for domestic consumption, that character did not change and the court was ready to imply this term into the contract (Riley, 2005). With this declaration, the Trade Practices Act was therefore applicable as the carpet was assumed to be for domestic use.
Application/Analysis
The client in this case, Julia, needed a car for her outback travelling and she decided to buy a second hand four wheel drive Subaru. She visited a second hand Subaru dealer, and after talking to Albert, the manager of the dealership, she was allowed to test drive a Subaru Forester. Having been satisfied by the car’s performance, she asked Albert if the car had ever been in collision to which Albert replied in the negative. In his words, Albert told Julia, “No, this vehicle is in excellent condition, the price is very fair. The previous owner was a very careful driver.” Afterwards, Julia decided that she liked the car and the price was within her budget, she got Albert to include free floor mats and an internal safety barrier, then paid for the car and took it.
Several weeks later while servicing the car, the mechanic reported to Julia that the car had been in a major collision previously and that the parts used to repair it were not Subaru parts. As a result, this adversely affected the value of the car. This prompted Julia to do an investigation on the car’s history where she discovered that, the previous owner of the car was Albert’s son. In addition, the odometer had been wound back to show that the car had done a maximum of 80,000km at the time of purchase. On the contrary, a discovery of the old log book stuck under the passenger seat showed that the car had actually done 120,000km when Julia bought it.
Julia decided to go through the contract she had signed with Albert before confronting him. In it, she found a clause that states that the “Purchaser warrants that he/she relies on his/her own judgment in deciding to purchase the vehicle. Purchaser does not rely on any statements made by the dealership”
In accordance to Julia’s complaint against the dealership manager, the manager took advantage of Julia’s lack of knowledge on the internal functioning of a car. Albert did not give her sufficient information on the car’s history despite having possession of it. By including the aforementioned clause, Albert was able to protect himself from further allegations on the fraudulent sale of the car as well as the insinuations of his words. For a contract to be legally enforceable, it has to been in written in a form which is easy to prove. In this case, Albert only assured Julia of the viability and the condition of the car through word of mouth which is thus considered as an implied provision. However, the written contract clearly states that the purchaser of the car, agreed to have made the decision to buy the contract from her own judgment, without influence from the dealer. The assumption made from this clause is that Julia was shown the car, inspected it and decided from her own ruling that the car was satisfactory for her and in a good condition (Cohen & Macdonald, 2005).
Case in point, she can sue for damages at common law, for the breach of an implied contract, as she still relies on the statutory condition that is formed by the Trade Practice Act 1974. This act has fixed remedies which only operate in relation to infringement of the act, whereby getting involved in actions that the act has outlawed amounts to infringement. Nonetheless, the Act does not only outlaw certain actions but rather gives specific enforceable liberties. Consequently, “it gives the consumer a right to seek damages at common law, rather than under the act in the case of breach of a statutory implied clause or guarantee” (Terry & Giugni, 2009). In addition she can seek for rescission. In this case, she may decide to return the car to Albert and in return, be given back the amount of money she paid to him for the car. Conversely, by seeking damages from the dealer in respect to the flaws of the car, she can get the amount that is equal to the cost of appropriately repairing the car or the difference between the real value of the car and the price that she paid for it. Moreover according to the consumer transaction Act 1972, if the consumer has already taken possession of goods, rescission of a contract means that the right to the property returns to the company and the consumer is then able to recover the amount paid to the company as a debt (Indemaur & Bennet, 1997).
As in the Sherwood V. Walker3 case where P purchased a cow from D believing it to be sterile, only for D to cancel delivery of the cow after finding out that it was in fact pregnant and thus more valuable than the agreed price. After P tendered the agreed upon price, he filed suit against D for breach of contract. “The logic is that the contract was made as both signatories were thinking that the cow was sterile and that amounted to misstatement of the material fact”4. In this case, the holding of a person being allowed to rescind if the contract was made upon a mistake of fact which led to the induction of the contract, was used.
As exemplified in the Carpet Call Pty Ltd v Chan case5, the TPA would also be applicable to Julia’s case in that without her being conversant with car mechanisms, the dealer’s terminologies and information regarding the car is assumed and implied to be accurate.
Conclusion
Albert made a fraudulent sale because he did not provide Julia with factual information regarding the Subaru in order to give her a chance to make an informed decision. As a rule of the law, the chief aim of a consumer who has been deceived into getting into a defective contract or who has been supplied with unbefitting goods is to be relieved of the commitment they assumed under that contract, or be compensated for loss or damage suffered. However, owing to the clearly stated clause in the contract, Julia cannot legally claim for a breach of contract but she can legally seek for compensation that is satisfactory to her and sufficient to cater for any losses she might have incurred.
References
Carpet Call Pty Ltd v Chan case (1987) ASC 55-553.
Cohen, N., & McKendrick, E. (2005). Comparative remedies for breach of contract. Glidden, WI: Hart Publishing.
Indermaur, J., & Bennett, E.H. (1997). Principles of the Common Law. Buffalo, NY: Wm. S. Hein Publishing.
Khoury, D., & Yamouni,Y., (2010). Understanding Contract Law, 8th Edition. Ottawa, ON: LexisNexis Butterworths.
Koffman, L., & Macdonald, E. (2007). The law of contract. Bethesda, MD: Oxford University Press.
Moskin, M., (2002). Commercial contracts: strategies for drafting and negotiating, Volume 1. Frederick, MD: Aspen Publishers.
Riley, J. (2005). Employee Protection at Common Law. Falls Church, VA: Federation Press.
Sherwood v Walker (1887) 66 Mich. 568, 33 N.W. 919.
Terry, A. & Giugni, D. (2009). Business & the Law, 5th Edition. London: Thomson.
Footnotes
- Carpet Call Pty Ltd v Chan (1987) ASC 55-553.
- Carpet Call Pty Ltd v Chan (1987) ASC 55-553.
- Sherwood v Walker (1887) 66 Mich. 568, 33 N.W. 919.
- Sherwood v Walker (1887) 66 Mich. 568, 33 N.W. 919.
- Carpet Call Pty Ltd v Chan case (1987) ASC 55-553.