Categories of Contractual Terms
You work for an advertising company and are asked to review a holiday package from a brochure before it goes to print. You are asked to provide advice to the advertising company on the legal effect of the representations in the brochure.
For the purpose of making the report for the present assignment, the holiday brochure of an Australian company needs to be selected. Therefore, the brochure of Austravel Pty Ltd has been selected. This brochure has been designed to provide information to the consumers. Therefore the contents of this holiday brochure have been evaluated in order to make the present report. This analysis is done for the purpose of seeing if there is any information presented in this holiday brochure that can be treated as unconscionable, misleading or deceptive. Similarly, it also needs to be seen if the information that has been mentioned in the brochure by the company makes a false representation. Similarly, this holiday brochure also needs to be evaluated in order to see if any prize or gift has been provided to the consumers by the company or if there's something in the brochure that amounts to bait advertising.
Under the law of contract, the terms of a contract may fall in the category of conditions or warranties or representations. It is also worth mentioning at this point that while in the past, only two categories of the contractual terms were present, conditions and warranties, but after the decision given by the court in Hong Kong Fir Shipping v Kawasaki (1926), third category of innominate terms was also created. It is very significant to correctly decide in which category, a particular term of the contract falls in. The reason is that the remedies that may be available to the innocent party in case of a breach of contract may rely upon the category in which the contractual term falls (Khoury and Yamouni, 2006).
It has also been provided by the law of contract that any false or misleading claims should not be made by the parties to the contract concerning the supply of goods or services. In the same way, the law also prohibits from making false or misleading claims related with the description of the goods or services that the party is offering under the contract. Hence, the law prohibits the businesses from making false and misleading claims that may be related with the quality, value or the standard of the products that have been provided to the customers (Carter and Harland, 2004).
Prohibitions against False or Misleading Claims
A term of the contract can be described as a condition if it is a significant term and this term goes to the root of the contract. Therefore, in case such a term has been breached, the law provides the right to the other party according to which the contract can be terminated by such a party. At the same time, the innocent party is also allowed by the law to claim damages. However, if only a warranty has been breached, which can be described as a minor term, the law does not provide the right to terminate the contract to the innocent party. Therefore, the innocent party can only claim damages for the breach of a warranty (Graw, 2011). As mentioned above, apart from the category of conditions and warranties, a third category has also emerged. This is the category of innominate terms. Therefore, in case of a breach of an innominate term, the court looks into the effect of the breach of the term of the other party. Hence, if the court finds out that due to the breach, the innocent party has been deprived from nearly all the benefit that it was going to achieve under the contract, the court may allow such a party to terminate the contract and at the same time, such party can be allowed by the court to claim damages (Sweeney, O’Reilly and Coleman, 2013).
At this point, the provisions of Australian Consumer Law, particularly section 18 should also be considered. Section 18 provides that, while entering into the contract, the parties cannot be involved in conduct that can be termed as misleading or deceptive while they are going to supply goods or services. For this purpose, it has been stated by the courts that misleading or deceptive conduct may include actions of the party and also the silence of the party.
In the present report, the contents of the holiday brochure of Austravel Pty Ltd need to be examined in order to see if these terms fall in the category of conditions or warranties. It is also worth mentioning at this point that all the terms that have been mentioned in this agreement need to be analyzed in order to see if they fall under the categories of conditions or warranties.
Similarly, it also needs to be mentioned at this point that in Australia, the advertisements are governed by common law as well as the statute law. At the same time, the government agencies, along with self-regulation is also present regarding the claims that are made in the advertisements.
Analysis of Austravel Brochure Terms
When the Austravel brochure is analyzed, it is found that there are a number of terms that have been mentioned in this agreement. These terms fall under the categories of conditions and warranties. For instances, according to a particular term mentioned in this brochure, it has been stated that the consumers will have to pay $35 per day to the company they decide to take along their pets on the holiday. Hence, the brochure clearly states that this amount will have to be paid by the consumers. According to another term that has been mentioned in the brochure, it has been stated that the accommodation provided to the consumers will match the description made in the holiday brochure. However, it is worth mentioning that it has not been clearly stated if the image of the accommodation that has been shown in the brochure is a description of the real accommodation that will be provided to the consumers. Due to this ambiguity, it is likely for a number of consumers to believe that they will be provided the same accommodation that has been shown in the brochure of the company.
There are certain legal rules related with the statements that have been made by the company in fine print. The law provides that by using these statements made in fine print, a company cannot evade its duties. In view of these provisions of law, an obligation has been imposed on the company by the law that it should clearly mention if the consumers are going to be provided with the same accommodation that has been shown by the company in its brochure or the accommodation will be equipped differently (Vermeesch and Lindgren, 2011).
There is another term present in the holiday brochure of the company which it has been stated that the company cannot be held accountable for providing any compensation to the consumers in case a loss or damage has been suffered by them. Therefore, all the responsibility lies with the consumers only. It appears that through this term present in the holiday brochure of the company, which has made an attempt to restrict its liability in case the consumers suffered any loss or damage. But the consumer law provides that a company cannot rely on the disclaimers if the conduct of the company can be described as misleading or deceptive. At the same time, it is also worth mentioning that the consumers cannot ignore such a disclaimer totally. According to the law of contract, the company can rely on such a disclaimer for the purpose of limiting its liability if the disclaimer has been brought to the notice of the consumer before entering into the contract. Hence, such a clause can provide protection to the company if it has been properly included in the contract. But in the end, the enforcement of an exclusion clause is a matter that depends on the facts of each case.
Restrictions on Exclusion Clauses
There is another clause present in the holiday brochure according to which, it is the responsibility of the holidaymakers that they should leave their rooms tidy and clean. The brochure of the company mentions that in case the company has to incur extra expenditure for cleaning the room, the company reserves the right to charge these expenses from the consumer. In this way, the consumers have been clearly informed that if any extra amount has to be spent by the company on the cleaning of the room, the company has the right to charge these expenses from them.
There is another clause present in the agreement of Austravel through which the company has tried to exclude its liability in case the goods of the passengers are lost or damaged. Hence this term, states that in case the belongings of the consumers are lost or damaged otherwise, the company cannot be held responsible to pay damages in such a case. By inserting this clause in the agreement, an attempt has been made by the company to place full responsibility on the consumers alone regarding their belongings and the company owns no liability in this regard.
According to another clause present in this agreement, it has been stated that the company will not refund the booking amount to the consumers in case anybody wants to cancel the booking. It is also mentioned in this clause that if the total charge of the holiday is less than $100, in such a case the consumers are required to deposit the full amount. In this way, effect of this clause is that if the consumer is going to book a holiday that costs less than $100, and later on wants to cancel the booking, it is possible that the company may refuse to return the whole amount.
Another exclusion clause has been implemented by the company in this agreement. Through this term, an attempt has been made by the company to exclude its liability or at least to limit the liability of the company. This term mentions that the holiday company cannot be held liable for any loss or damage suffered by the consumers due to reasons like mechanical failure, inclement weather, acts of government, etc. in the same way, there is another clause present in this agreement, which provides that the company is not accountable for the loss or damage caused to the consumers due to acts of God like fire or flood or similar other causes. In the same way, there is another clause, which provides that in case any loss is suffered by the consumers from the neighboring properties, in such a case also, the company cannot be held accountable. In this way, the analysis of various terms of this agreement reveals that these terms have been mentioned in the brochure of the company with a view to exclude or limit the liability under certain circumstances.
Bait advertising generally takes place when a particular product is advertised by the business at a certain price, but the business does not have the reasonable supply of such a product so that the consumer is made by it (ACCC v Channel Seven Brisbane Pty Ltd., 2009). What can be termed as 'reasonable supply' depends on several factors, including the nature of the product and what was claimed by the business in its advertisement.
However the analysis of the present knowledge of mission has revealed that there is no bait advertising on part of the company. In the same way, the company has not offered any gifts or prizes to the consumers in its holiday brochure.
Carter and Harland, 2004, ‘Contract Law in Australia,’ 4th ed., Butterworths Lexis Nexis
Graw, Parker, Whitford, Sangkuhl, 2015, Understanding Business Law 7th ed LexisNexis Butterworths
Graw, S., 2011, An Introduction to the Law of Contract, 7th Ed., Thomson Reuters.
Khoury and Yamouni, 2006 ‘Understanding Contract Law,’ 7th ed., Butterworths Lexis Nexis
Latimer, P, 2016, Australian Business Law CC, 2016 Edition
Sweeney, O’Reilly & Coleman, 2013, Law in Commerce, 5th Ed., LexisNexis.
Vermeesch,R B, Lindgren, K E, 2011, Business Law of Australia Butterworths, 12th Edition Case Law
Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Limited  HCA 19
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd  EWCA Civ 7
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