Misrepresentation In Gym Memberships - Legal Essay.

Background and Facts

1. In the Mabo case, native title was being claimed over a particular island. What is the name of the island? What is the name of the Aboriginal peoples who occupy that island?

2. In the Mabo case, the claimants were successful with their claim. What were the claimants entitled to do with the land? According to Justice Brennan’s judgement in the Mabo case, when will the foundation of native title have disappeared?

3. As explained by Graeme Neate, President of the National Native Title Tribunal, what is the difference between “land rights” and “native title”?

4. What was the name of the Act that was introduced after the Mabo decision? What was decided in the Wik case?

5. The Yorta Yorta people were among the first to lodge a native title claim after the Mabo decision. How much time passed between the time the claim was lodged and when the final decision was handed down? Why were they unsuccessful?

After a few months of overindulgence, Karen decides that it’s time to get fit. She searches for local gyms on the internet and comes across a nearby gym called “Gym & Tonic” which is owned and run by Grace. An advertisement on the Gym & Tonic website says “On sale for this month only! Monthly gym fee reduced from $60 per month to only $30 per month! Unlimited access!”. The advertisement shows members of the gym using all different types of gym equipment. The following day she goes to Gym & Tonic and tells the receptionist Jack that she wants to become a member of the Gym. Jack shows Karen the Gym’s standard form contract. He asks Karen for her address, date of birth, contact details and bank account details and he inserts this information into the contract. Karen tells Jack that she would like to sign up for 12 months. Karen signs the contract and Jack gives her a membership card.

Karen returns the next day, eager to start her first gym session. She shows her membership card to Grace, the owner, who is working at the reception desk, and asks Grace to show her where the treadmills are. Grace explains that the $30 membership fee only includes the weight equipment, and that she must pay an extra $20 per month if she wants to use the cardio equipment. Karen becomes angry and says that the advertisement on the website said “unlimited access” so she should be allowed to use all the equipment. Grace explains that “unlimited access” means unlimited visits to the gym each month, not unlimited access to all the equipment. Karen tells Grace that the advertisement created the impression that she could use all of the equipment, and that the only reason she signed up was because she wanted to use the cardio equipment. Karen tells Grace that she wants to terminate her gym membership immediately, however Grace draws Karen’s attention to Clause 5 of the membership contract that Karen signed the previous day which says:

“The Gym may terminate the contract at any time, without notice and without penalty. If the Member wishes to terminate the contract for any reason, the Member must pay a $100 early termination fee to the Gym”.

Karen tells Grace that the gym is a complete rip off and that she’s never coming back. As she is walking to her car, she runs into her friend Will who works at the restaurant next door to the gym. Karen tells Will what happened at the Gym and Will tells her that he’s heard a few restaurant customers complain about the same thing. He also tells her that the gym has never offered monthly memberships for $60 per month. The usual cost is $40 per month.

Karen comes to you for advice. She would like to know if she can terminate the contract with Gym & Tonic, and if she is liable to pay the $100 fee. As part of your answer, you should discuss whether Gym & Tonic has breached any of the provisions of the Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth)) and any remedies available to Karen. Also discuss how the common law applies to this scenario. Do not discuss any liability under contract law.

Background and Facts

Whether Karen can terminate the contract with Gym & Tonic, and if she is liable to pay the $100 fee.

Section 18 of the Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth)) provides that “An individual must not, in trading activity or commerce, engage in conduct that is deceptive or misleading or has the potential of misleading or deceiving the other party into contracting.”

The Trade Practices Act (TPA) 1974 (Cth) also warns against traders engaging in misleading advertisements intended to induce the public into contracting. Section 52 of the Act provides that “A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Section 30 of the Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth)) particularly prohibits organizations or people from making statements that are false or misleading by listing a number of areas where such transactions are prohibited. This entails such dealings as sponsorship, approval or affiliation; the price to be paid for a property; the nature of the interest in a property; the location of the property; the characteristics of the property; the uses for which the property or commodity may be used or for which it is capable of being used; and the availability or existence or facilities that could be connected with the property.

Karen contracted with Gym & Tonic after being lured by an advertisement in the service providers’ website. Since the advertised statements informed her decision to contract with the Gym, it is important to assess whether there was a course for misrepresentation of facts. In common law, misrepresentation makes contracts voidable and only enforceable if the misrepresented party choses to go on with it. Statutory legislations also protect consumers by imposing criminal liabilities on service providers who use misrepresentation to promote their services and products. Therefore, the question as to whether Karen is justified to terminate the contract and negate paying the $100 fee is answered by assessing whether there has been a contravention of statutory provision and common law standards on misrepresentation.

In answering this, courts will look at the statements, pictures or material used in the sales promotion and assess whether they had the potential to fraudulently lure a party into a contract. The question here is whether the advertised sentences “On sale for this month only! Monthly gym fee reduced from $60 per month to only $30 per month! Unlimited access!” qualified as false, misleading or fraudulent statements.

Legal Issues and Laws

Advertisements made by businesses have to be true and reliable. The advertisers have a duty of care towards the consumer one of ensuring that the information given is unambiguous and unequivocal. This was not the case in the advertisement published in the gym’s website. First because of the misleading pricing and secondly the unspecified manner of access.

On Pricing. The ad stated that the gym fees had been reduced from $60 per month to $30. It was held in the case of An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2011] FCA 442 that statements made in relation to valuation of a service or product that were not a reflection of the real prices are false and misleading. Similarly, it was easy for consumers to believe that the $30 membership fees was all that was required of them to access all the gym equipment. However, as it turns out, the statement was misleading as the fees was only meant for weight equipment. The advertisers ought to have acted in good faith by specifying the activities to be covered by the $30 membership fee.

On the Kind of Access. The statement “unlimited access” was also ambiguous and another cause of misrepresentation. The gym owners’ intention was to mislead the public into believing that they could access every gym facility by paying the membership fees. In the case of Pryor v Given (1979) 24 ALR 442, a company had advertised the sale of a piece of land with some pictures of houses. On the pictures was captioned “a wonderful place to live.” in reality, the land could not harbor the kind of houses on the pictures. The land required a planning scheme which was subject to many technicalities even before setting up a structure. The court held that the advertisement was misleading. It made prospective customers to believe that the land could harbor the decent houses when it was an almost impossibility. Similarly, the statements made by the gym were fraudulently made to make consumers believe that they would have unlimited access for $30 and

Conclusion

The dealing in question between Karen and the gym falls in the list provided by the provisions of Section 30 of the ACL. The misrepresentation is on the use of a commodities available in a particular premise and thus within the bracket of dealings to which misrepresentation is prohibited. The statements published in the site of Gym & Tonic were in contravention of s18 and s30 of the Act and s52 of the TPA. They were misleading and ambiguous and thus failed to achieve consumer standards.

Application and Analysis

In common law, misrepresentation makes contracts voidable on the misrepresented party (LawTeacher, 2013). This means that the party misrepresented can choose to terminate the contract or go on with it. In essence, it is up to Karen to decide whether she wants to keep up with her contract with the gym or terminate the contract. Since the contract was founded on misrepresentation, it was not enforceable. Even though Karen signed the contractual clause that required her to pay $100 fees for terminating her contract with the gym, the provision cannot be enforced. It was part of an unenforceable contract and that means it did not impose any obligation to the misrepresented party. Therefore, Karen not only has the right to terminate the contract with Gym & Tonic, but also to not pay the $100 fee.

Common law remedies include rescission and compensation. Rescission will see Karen restituted to her financial position before getting into the contract. Compensation is on the losses incurred by Karen. The court can also issue an injunction to protect consumers from being misled in the future. This was the case in ACCC v Gary Peer & Associates Pty Ltd [2005] FCA 404. There was a house for auction and the defendant –who was a real estate agent- had advertised it with a $600,000 price tag. However, this was far much less than the amount in which the house vendors had planned to sell the house. The agent was held to be in contravention of s18 of the Australian Consumer Law and was required to stop marketing the house.

Answer 1

The place is Murray Island occupied by the Murrains.

Answer 2

Claimants were entitled to possession, occupation, enjoyment and use of the island

According to Justice Brennan’s judgment, the foundation of native title will have disappeared when the tide of history has washed away any real acknowledgement of traditional laws and any real observance of traditional customs.

Answer 3

Land rights are realized by the government creating opportunities for aboriginal people to be given title to land and even to make claims about certain areas of land while native title recognize the land already owned by indigenous Australians, which were inherited form ancestors way before the colonizers asserted their sovereignty in the land. In essence, native title is the recognition of what is already owned by the native title holders and is not a creation of legislations or the government of Australia. On the other hand, land rights are subject to the government’s control.

Answer 4

The Native Titles Act

In the Wik case, it was decided that land rights under consideration by the court as established in the Natives Titles Act did not bestow rights of exclusive possession on the title holders.

Answer 5

It was 8 years between the time the Yorta Yorta people lodged the claim and a final decision was made. They were unsuccessful because they had failed to establish a continuous connection with the land.

References

ACCC v Gary Peer & Associates Pty Ltd [2005] FCA 404.

An Arizona Limited Partnership v Colliers International (NSW) Pty Limited [2011] FCA 442

LawTeacher. (November 2013). Misrepresentation and making contracts void. Retrieved from https://www.lawteacher.net/free-law-essays/contract-law/misrepresentation-and-making-contracts-void-contract-law-essay.php?vref=1

Pryor v Given (1979) 24 ALR 442

The Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010 (Cth))

The Trade Practices Act (TPA) 1974 (Cth)