Building Law Analysis of ACL Samples †MyAssignmenthelp.com

Question: Discuss about the Building Law Analysis of ACL. Answer: Introduction The consumers of any nation are given the protection under the respective consumer protection laws, so that they can be safeguarded from exploitations of different manners. In Australia, the consumer protection legislation is the Competition and Consumer Act, 2010[1] which not only provides the protection to the consumers, but also promotes healthy and fair competition. Under this act, the provisions specifically regarding the consumers are covered under Schedule 2 of this Act and the name given to this schedule is Australian Consumer Law, i.e., the ACL[2]. Since January 01st, 2011, the ACL became applicable and replaced the previous act, i.e., the Trade Practices Act, 1974[3]. The applicability of ACL is widespread and touches any and all such fields where there is a consumer, who needs to be protected[4]. In the following parts, the ACL has been critically analyzed to understand the manner in which thelaw affects the developers selling land, with a particular reference to the provisions of unfair contract terms and misrepresentation. This would help in gaining an insight on the applicability of the provisions on the developers, which have result in penalties being attracted towards the developers. ACL The ACL regulates the unfair terms in the standard form of consumer contracts. The ACL has particular significance for the property developers and is going to have a major impact over the contracts which developers undertake with the individuals. Further, it can particularly have an impact over the off-the-plan sales in such cases where the discretion is provided, in general, to the developer[5]. Unfair Contract Terms Under the ACL, the unfair terms contained under the standard form contracts are unenforceable as they are considered as being void. The unfair terms provisions under the ACL are applicable where the contract is a consumer contract, a standard form contract, and also contains unfair terms. The consumer contract, under the ACL includes such contracts which contain the grant or sale of an interest in land for a person in a whole or in a predominant manner for the household, personal or domestic use. This definition is more than mere covering the sales by the developer, and goes on to include the privileges, powers or rights which are given over the land by a developer[6]. For determining if a particular contract falls in the definition of consumer contract, the key factor is the intention of the purchaser. The selling agents of the developers are required to take the detailed notes regarding the intentions of the prospective purchaser; for instance, the intention to purchase for private or investment purpose. The ACL is not applicable in such cases where the developers make sale to the investors as this does not meet the criteria laid down under the consumer contract definition[7]. The contracts of sale which take place between the individuals and developers would be deemed automatically to be a standard form contract, till the time the court can be convinced by the developer that the case is otherwise. The importance of this stems from the fact that the majority of developers prefer the standard contracts over every development for the consistency, for meeting the requirements of the financiers and for the simplicity for selling agents. In order to comply with the challenges which are presented through the advent of ACL, the selling agents of the developers record the negotiations which take place with the purchasers for showing that the purchaser had an effective and genuine opportunity for negotiation, and due to these reasons, the contract was not a standard form document. It is considered to be in developers best interest to make certain that the purchasers are given the chance for having their attorneys review, as well as, negotiate upon the contract befo re signing it. Even though this delays the signing up process by the purchaser, and also results in additional costs, it helps in limiting the risk regarding the contract being a standard form contract under ACL, effectively making it voidable[8]. The contract of the developer, under the ACL is deemed to be unfair in such cases where there is a major imbalance is caused in the matter of the obligations and rights of the parties; where there is no need of protecting the legitimate interests of the developer in a reasonably significant manner; and where it would result in being detrimental for the purchaser in case reliance was made on such terms. There are a range of clauses in the contract of sale of a developer which can operate in the favor of developer providing the flexibility for completion of the project. However, the imbalance, which favors the developer, has to be significant in nature, for breaching the provisions of the ACL. The courts decide whether the standard industry practices regarding the discretionary terms, completion times and warranties would be deemed as a major imbalance favoring the developer[9]. For determining if a particular term is necessary in a reasonable manner for protecting the legitimate interests of the developers, there may be a need for the developer to provide the evidence regarding the market where they operate, the regulations by planning schemes and councils and the economic factors which the financiers impose which are required for a level of flexibility for such developers. There is a need for the developers to make certain that the contracts provide the required discretion which is necessary for delivering the end product to the purchaser instead of the excessive freedom, which can be deemed as unfair by the ACL[10]. There is a need for the courts to consider the chances of a detriment being caused to the purchaser, the terms transparency, and the entire contract in its entirety. Under the ACL, the examples of what can be deemed as potentially unfair terms. For instance, the avoidance or limiting of performance of the contract; the termination of contract; penalizing the purchaser for breaching or terminating the contract; variations in the contractual terms; renewal or non-renewal of the contract; variations in the upfront prices without the ability being given to the purchaser to terminate the contract; the variations in the characteristics of the interest held in land, unilaterally, to be granted or sold under the contract; the determination of whether or not the contract has been contravened or to interpret the contracts meaning in a unilateral manner; the limiting of the vicarious liability of the developer for the agents; assigning of the contract for the purchasers diriment without getting their consent; limiting of the right of the purchaser to sue the developer; and limiting the evidence which can be given by the purchaser or which can impose certain evidentiary burden on the proceedings by the purchase, in relation to the contract[11]. However, the purchaser does not hold the similar rights against the developer. On the basis of the present circumstances, the different terms of can be deemed as unenforceable and unfair. The terms would not be deemed as unfair in such cases where they define the contracts key subject matter; are expressly permitted or required by the Statelaw or the Commonwealth law; sets the upfront price which is payable based on the contract. The majority of sale contracts of the developers contain the effective provisions for severance, so as to enable the entire contract to proceed in case particular term is unfair and thus void. Though, in case the void term holds such significance which is a major element of the contract and cannot be severed, the contract can become unenforceable. The void term can be of such significance protection that the preference of the developer may be of not proceeding with the contract without such term[12]. Misrepresentation Misrepresentation refers to a false statement being made particularly for inducing a person into entering of the contract. Under the ACL, the provisions regarding misrepresentation can be found in section 29 of the ACL, which relate to the false or misleading representation[13]. There are specific prohibitions under the ACL for making misleading or false representation regarding the goods or services being offered. The specific issues which have been prohibited under the ACL include the misrepresentation pertaining to the standard, quality, sponsorship, warranty or such issues regarding the property. It is crucial for the developers that whole making the sale, they do not make false or misleading representations[14]. For instance, an advertisement states that the agency is the most successful agency and has sold 200 homes in a particular year. Upon a complaint being made by the competitor, the agency was asked to substantiate its claims. However, the agency failed to do so, and it was held that the agency had breached section 29 of the ACL, pertaining to the misrepresentation about the standard, quality, grade or value of the services or goods. Another example of misrepresentation can be seen in the testimonials. The developer was reviewed on the Facebook page; however, this testimonial was not held to be genuine as the reviewer was a friend. Similarly, if an agent pays someone to post fake online review, it would not be treated as genuine testimonial and would be deemed as misleading representation. Under section 4 of the ACL, if a person makes a representation regarding a future matter, without having reasonable grounds for making such representation it would be deemed as misleading[15]. So, it is crucial for the developers to not make promises or give opinion or predictions without having a reasonable basis for the same. Under the ACL, a specific prohibition has been imposed on making the false representation regarding the affiliation or sponsorship regarding land sale; the nature of land interest; the use, characteristics, location, and price of the land; and the arability of facilities on the land. For instance, if an agency advertises a particular house as having 6 green stars and uses the green star logo, when in reality, the rating had never been carried out by the authorized person, would be deemed to have been involved in misrepresentation. Another example can be seen as the developer telling the buyer that the two penthouse apartments would have full water views. However, this view was blocked due to a project which was built closer to the beach. The developer and his selling agents were sued by the buyer and the agents settled the case out of court for a value of $200,000 for each owner. Care also needs to be taken with regards to the misleading representation of the prices. Numerous complai nts are received by ACC regarding the overstating or understating of the prices[16]. Apart from section 29, the misrepresentation provisions under the ACL are also born from section 18, which relates to misleading or deceptive conduct[17]. Under this section, a prohibition has been placed on the developers to not indulge in such a conduct which misleads or deceives the purchaser in a manner where they are wrongly told about something, just to get them to enter into the sale contract[18]. The applicability of this section is on any and all types of communication and conduct, which include the emails, letters, advertising, negotiations, discussions and the like. The conduct which can be deemed as misleading or deceptive includes factually correct information which gives a false impression; concealing or leaving out significant information; making inaccurate or false claims; being silent about material factors, i.e., non-disclosure; intentionally misleading the client; not updating regarding changed information; and not correcting a misunderstanding. In order to avoid m isrepresentation, it is crucial that all material fact is disclosed to the party[19]. The application of section 18 on the real estate agents where the vendors acted on sale of land was seen in the case of Butcher v Lachlan Elder Realty Pty Limited[20]. This decision was primarily related to the brochure which contained the disclaimer and its effects. The court stated that the conduct had to be deemed as misleading or deceptive when it was capable of inducing or induced error. In this case, the nature of parties, the transaction and the brochure was deemed as relevant. The plaintiff was shrewd and intelligent businessman having a lot of money. The disclaimer was deemed as significant. So, taking into account all these facts, the misleading conduct was not found in this case. This shows that the ACL is not biased towards the purchasers and does not favors the purchasers. The provisions of ACL are such that they safeguard both the buyers and developers in case of a possible case of misrepresentation, particularly through section 18 of this act[21]. In another case which took place in the nation, the court gave the decision in favor of the investors who had purchased the unit off the plan, by believing that a ten year 7% rental guarantee, which was offered by an international hotel chain, as implied in the brochure. This was due to the fact that the guarantee was actually worthless for the reasons of being underpinned through a two dollar company. The parent company was held liable in this case and the judges have the decision in the favor of buyers[22]. An example of conduct which can mislead the buyer can be seen in the pop-up internet ads which come up when the name of company is searched by a person, leading to a website of a different company, where the chances of consumer being mislead are high. Such a case was seen in Australian Competition and Consumer Commission v Trading Post Australia Pty[23], where the court held that the defendant used the name of the competitor to trigger their own advertisement on Google search an d this was a misleading or deceptive conduct, under the erstwhile act of Trade Practices Act, 1974, section 52[24]. Conclusion On the basis of the discussion carried above, it becomes clear that ACL is a crucial law in Australia which protects the consumers in each and every sphere. With a particular reference to the developers regarding the sale of land, the provisions regarding the misrepresentation and unfair contract terms are very strict. In the first part of this discussion, the manner in which the ACL governs the unfair contract terms was done. The discussion clarified on the very definitions of consumer contract and what are deemed as unfair terms. When a developer undertakes such acts whereby an unfair term is contained in the contract, the term becomes voidable. However, where such term forms a major part of the contract, without which the contract cannot be fulfilled, the entire contract becomes unenforceable. The misrepresentation provisions in such cases relate to the false or misleading representations and the misleading or deceptive conduct of the developers, whereby the buyer is misled in a m anner, so as to induce them to be a part of the contract. As highlighted through the case law, in such case, the buyer can sue the developer for breaching the provisions of this act. References Competition and Consumer Act, 2010 (Cth) Competition and Consumer Act 2010, sch 2 Trade Practices Act, 1974 (Cth) Stephen G. Corones, The Australian Consumer Law (Lawbook Company, 2nd ed, 2012) Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne, Australia: How The New Australian Consumer Law Will Affect Property Developers (11 May 2010) https://www.mondaq.com/australia/x/100132/How+The+New+Australian+Consumer+Law+Will+Affect+Property+Developers Neville Allen and Cameron Sheather, The effect of the New Australian Consumer Law on Property Developers (19 August 2011) https://www.holdingredlich.com/property-real-estate/the-effect-of-the-new-australian-consumer-law-on-property-developers Julian Bailey, Construction Law (CRC Press, 2014) Tom Davie, Tony Earls and Jeremy Coggins, Understanding Construction Law (LexisNexis Butterworths, 2016) Australian Consumer Law, s29 Elizabeth de Stadler, Consumer Law Unlocked (Siber Ink,2013) Department of Commerce WA, Australian Consumer Law (2013) https://www.commerce.wa.gov.au/sites/default/files/atoms/files/aclagentsmanual2013_0.pdf Legal Vision, A Guide to Misleading or Deceptive Conduct and False Misrepresentation (14 April 2016) https://legalvision.com.au/a-basic-guide-to-misleading-and-deceptive-conduct-and-false-misrepresentations-australian-consumer-law/ Dilan Thampapillai, Vivi Tan and Claudio Bozzi, Australian Commercial Law (Cambridge University Press, 2015)