The Australian Consumer Law

The Australian Consumer Law applies to all business dealings between customers and merchants. It attempts to shield customers from various unethical actions that might result in financial loss when conducting business. When property sellers use standard form contracts, the new Trade Practices Amendment (Australian Consumer Law) Act 2010 is relevant. Developers who offer land, in particular, must make sure that their interactions with clients do not violate the Consumer Act's prohibitions on misrepresentation and unfair contract terms. Therefore, the paper analyzes the Australian consumer law as regards its effect on developers selling land on matters of misrepresentation and unfair contract

terms. Therefore, the paper analyzes the Australian consumer law as regards its effect on developers selling land on matters of misrepresentation and unfair contract terms.

Misrepresentation

In section 18, of the Australian Consumer Law, “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” In the case, developers selling land, in trade or commerce, have to observe the legislation by ensuring the information provided to the client before the signing of a contract does not mislead or deceive on matters of product specification or cost. The legislation also makes employees of business liable to private litigation. Therefore, it is upon the commercial owners to ensure that the staffs are aware of the legal requirements when engaging clients.

Specifically, section 30 of ACL makes it clear on the application of misrepresentation in the sale of land. The law prohibits the use of false or misleading information with regards to:

“sponsorship, approval or affiliation of the person making the statement;

the nature of the interest in land;

the price payable for land;

the location of land;

the characteristics of land;

the use to which land is capable of being put or may lawfully be put; and

the existence or availability or facilities associated with land”.

Apparently, land sellers can contravene section 30 of the ACL if they show an intention of misleading or offering false information in a transaction. The transaction may fail to complete but the customer has a right to litigate if they feel there were some misrepresentation during the negotiation of the sale. Additionally, the “misleading” or “false” representation can be communicated by verbal, written, gestures, plans, drawings, pictures, or by conduct. Failure to disclose the truth or telling half-truths can also constitute misrepresentation, also when the seller makes a claim of what has ceased to be the truth. According to Barton, any communication about the sale of a property that is against the facts can be termed as “misleading” or “false,” even if the seller believed it to be true.

Since the Australian Consumer Law seeks to protect the clients from unscrupulous dealers, it offers open grounds for litigation in case of misrepresentation. Dominic also points out ACL ensures that sellers of properties take utmost care not to presents information to clients that cannot be substantiated with an aim of making a quick which is especially common to advertisers who sometimes exaggerate the features or cost of a property in a bid to entertain potential buyers. With ACL, developers selling land have to leave the extra details that are often used by other marketers to persuade purchasers.

Case Law Example of Misrepresentation

In the case of Australian Equity Investors, An Arizona Limited Partnership v Colliers International, the Federal Court of Australia found that the respondent, Colliers international, was guilty of misrepresentation. Arizona Limited Partnership bought a piece of land with the intention of building apartments. The seller, Colliers, provided an appraisal in 2004 that the value of the completed project would be up to $6,250,000 by 2006. The cost was arrived after a valuation exercise conducted by John Paul Markopoulos. However, an independent assessor contracted by the applicant established that the seller had overstated the market value of the completed project by almost $2 million. The respondent agreed that the value of the completed apartments could not get to the lower value of $5,400,000. Since he knew about the over valuation at the time of sale, the court ruled that he was guilty of providing misleading and false information to the buyer, Arizona.

The judges established the cost should be on the respondent and not the assessor, Mr. Markopoulos, who was a joint respondent to the case. However, it was clear from the evidence that the seller misled the buyers intentionally by providing a gross realization of the property that could not be achieved. In the litigation, the buyer was protected by the law from the unethical practice of the seller. The Australian Consumer Law intends to check not only the seller of the property, but also the professionals or staffs who partake in the giving of false or misleading information to the buyer of the property. The fact that the gross value of the finished project could not get to the anticipated figure after completion pointed to a clear false information disseminated by the seller.

In essence, even if the buyer, Arizona, failed to complete the project, they could still sue for misrepresentation because the false information provided by the seller contributed to their decision to purchase the piece of land. Therefore, the Consumer Act is effective in ensuring all the information provided by the land seller to the prospective customers is factual. Hence, the buyer can be in position to make a decision based on truthful information about the property and not falsehood aimed at influencing a positive outcome.

Unfair Contract Terms

The provision of “Unfair Contract Terms” is designed to protect consumers from being coerced or tricked into signing a contract that has unfavorable terms. The Act applies when the buyer and the seller sign a “consumer contract” or a “standard form contract”. According to Castley, a contract is when an individual is buying a property of domestic or personal use. On the other hand, “Standard form contracts” have a wide definition and may include contracts that involve the use of a legal entity to prepare the document or the signing of a document that is ready. The act applies in many of the contracts agreed by in real estate transactions such as the sale of land and mortgages. In either cases, the Act makes it clear that the terms must be fair to both parties. Interestingly, real estate transactions often come with a caveat emptor notice to the buyer because of the dynamics that exist in the industry that often favor the seller. Nonetheless, with the Unfair Contract Act of ACL, it is possible for a purchaser to seek legal redress if the contract availed by the land seller is unfair.

According to the Act, a contract can be classified as “unfair” if it causes imbalance, in the rights and obligation of the parties involved, it protects the interests of the advantaged party unreasonably, and it causes harm to a party if executed. Many of the contracts that can be termed as unfair gives one party ether undue powers over the contract or allows the burden of the contract to be upon one party. For example, a contract can be unfair if one party has the right to terminate it without according the other party similar rights. Or only one party has the right to sue in case of a breach. However, contracts cannot be unfair if they define the subject, if the upfront price has been paid, or if the law allows it to be so. The responsibility to declare a contract as unfair rests on a regulatory body that may include a state department or even a court of law.

Application of the Unfair Contracts Act

A good example of the usefulness of Unfair Contracts Act is “off the plan” sales. Regarding the case, individuals purchase a house that is yet to be contracted on a piece of land. The seller and the buyer have to agree on the specification of the construction and the time limits for completion. In a fair deal, both the seller and the customer should have some flexibility on deciding the finished product. The contract should capture the main features of the “off the plan” property while the details should be agreed upon by both parties. However, if the seller retains all the rights to adjust the contract, it becomes unfair to the purchaser. The constructor can change the features of the house to the disadvantage of the buyer. Therefore, a good contract should give the parties involved sufficient powers to protect their interests while at the same time allowing for reasonable changes in the development of the property.

The same applies to land lease agreements where the owner of the land offers long-term leasing contract to an individual. The terms of the contract should give each party powers and protection. The land owner should not hold all the powers to terminate the contract without costs or dictate the use of the land to the lease. Maley notes that in many cases, land lease agreements have been abused because the contract is imbalanced. The Australian Consumer law is particularly concerned in protecting the rights of the buyer, who is often forced to sign an unfair contract that favors the seller or the land owner.

Given the requirements of the Act, it is upon developers to ensure that they adhere to the provisions of the law. First, they must see to it that all their contracts allow the buyer to negotiate as opposed to having a closed contract. They should be keen to read all the clauses of their contracts and revise any area that sounds unfair to the client. Contracts that are “unfair” can be terminated and renewed to allow the buyer to have fairer terms to the agreements. The developers should also ensure that their selling agents do not have separate contracts with the clients that can be considered unfair as per the ACL act. As noted earlier, the developer has a responsibility to ensure the employees and the all the free agents understand the laws protecting the consumers.

Consumers also need to understand that with the ACL, it is possible for them to have fair deals in the real estate business. Despite the risks associated with buying properties, the law is ready to ensure that even the naïve buyers get a good deal courtesy of the Unfair Contracts Act. The Act is particularly important because it guards against abuse of long term contracts in the real estate industry that are likely to favor the land owners. As noted, consumers intending to take advantage of the low cost “off the plan” property can do so with the backing of a mutually agreed contract that does not give the agent undue advantage over the specification of the property or timeline for completion. Lethlean notes that industry players are still eager to see how the courts will rule on the matter. Like any new legislation, it may take time before the ground is set in terms of case determination and building of precedence.

Conclusion

A critical analysis of the Australian Consumer Law shows that it gives the buyers of property the opportunity to get fair deals and be protected from the excesses of the sellers. The misrepresentation clause of the Consumer Act makes it clear that providing misleading and false information to the purchaser is a big risk on the side of the seller. the land developer who intends to sell directly to a customer or through an agent needs to observe due diligence with the information given about the product. The valuations companies, the advertisers, the financial institutions, and all the parties involved in the transaction have an obligation to give factual info about the property being sold to the client. Any attempt to mislead the customer can result in a costly law suit in future.

The same applies to the Unfair Contracts Act that aims to level the ground for negotiations between the seller and the buyer. It is the duty of the developer to ensure that the prospective consumers take part in the negotiation of the contract terms and none of the contract clauses gives undue advantage to either parties. Ultimately, ACL has been effective in the real estate industry where the rights of all the parties involved needs to be protected. The clients are particularly insulted against the excesses of the sellers and agents involved in land and property deals.

Bibliography

A Articles/Books/Reports

Barton, Philip, "The Effect of Pre-Contractual Representations’ (2013) Legalwise Contract Risk Management Seminar Melbourne.

Castley Matthew, 'The Unfair Contracts Act And Real Property: Should The Seller Beware?' Clay to Nutz (31 August 2010)

Lethlean Justin et al, 'How the New Australian Consumer Law Will Affect Property Developers' Mondaq (11 May 2010)

Maley Dominic, 'Are You Selling Land as A Vendor in Trade & Commerce: Does Australian Consumer Law Apply to You? Maclarens Lawyers (4 Nov 2015)

B Cases

An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No 4) [2011] FCA 442

C Legislation

Australian Government, Competition and Consumer Act 2010 (Cth)) s.18

Department of Commerce WA, Australian Consumer Law Real Estate Agents and Business Brokers (2013) v2