Principles of Business Law, Semester 2 2024 PDF

Principles of Business Law Semester 2 2024 TOPIC 9: CONSUMER LAW UNCONSICONABLE CONDUCT Unconscionable conduct: Overview There are two statutory provisions that prohibit unconscionable conduct: 1. Section 20 (which prohibits unconscionable conduct within the meaning of the unwritte...

Principles of Business Law Semester 2 2024 TOPIC 9: CONSUMER LAW UNCONSICONABLE CONDUCT Unconscionable conduct: Overview There are two statutory provisions that prohibit unconscionable conduct: 1. Section 20 (which prohibits unconscionable conduct within the meaning of the unwritten law). 2. Section 21(which prohibits unconscionable conduct in connection with the supply or acquisition of goods or services). Unconscionable conduct: Section 20 Unconscionable conduct within the meaning of the unwritten law  Section 20: 'A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time'.  What does ‘within the meaning of the unwritten law’ mean?  Unconscionable dealing (vitiating factor)?  (Perhaps) other equitable doctrines such as undue influence? Unconscionable conduct: Section 20 Why was s 20(1) introduced?  Section 20(1) applies only to conduct regulated by the ‘unwritten law’.  One of the advantages of bringing an action under s 20(1) is the range of available remedies:  s 224 – pecuniary penalties  s 232 – injunctions  s 236 – damages  s 237 – other orders (including rescission, partial rescission, non-enforcement of selected terms, re-writing the contract etc)  Individuals, as well as the Australian Competition and Consumer Commission can bring a s 20(1) action. Section 20: ACCC v CG Berbatis Holdings FPBCL p 308 Facts  Mr and Mrs Roberts leased a shop from CGBH.  As their daughter was suffering from a serious illness they decided to sell their business.  A prospective purchaser offered to purchase the business, subject to satisfactory assignment (transfer) of an (extended) lease.  The Rs made it known to GCBH that they were anxious to sell their business and that they needed to negotiate a new lease to assign to the new owner.  Tenants in shopping complex (including the Rs) believed that they had been overcharged by GCBH by approximately $50,000.  GCBH offered to grant the lease extension and assignment on the condition that the Rs release GCBH from all claims (including the overcharge claim).  The Rs felt they had no option but to agree to the release condition.  Later, other tenants settled their overcharge claims – it was estimated that the Rs would have received less than $2,500. Section 20: ACCC v CG Berbatis Holdings (ctd) Issue  Did the conduct involve unconscionable conduct within the meaning of the unwritten law?  Did the conduct involve unconscionable dealing of the kind at play in Commercial Bank of Australia v Amadio? Decision  The conduct did not involve unconscionable dealing. Reason  Recall test from week 8.  Special disadvantage?  Mr and Mrs Roberts were not labouring under a special disadvantage – they could sensibly decide whether it was in their best interests to release CGBH from all claims so as to secure the extended lease. Section 21: Unconscionable conduct in connection with the supply or acquisition of goods or services  Section 21 is intended to apply in a wider range of circumstances than those recognised by the general law.  Section 21(1): “a person must not, in trade or commerce, and in connection with the supply or acquisition of goods or services to or from a person, engage in conduct that is, in all the circumstances, unconscionable.”  We have already considered the meaning of ‘person’ and ‘in trade or commerce’  The words ‘in connection with’ require merely a connection between the unconscionable conduct and the supply or acquisition of goods or services Unconscionable conduct: Section 21 The section 22 factors Section 22 lists various factors which a court may take into account when deciding whether a supplier or acquirer of goods or services has engaged in unconscionable conduct under s 21. These include:  the relative bargaining position of the parties;  whether a party imposed conditions that were not reasonably necessary to protect their legitimate interests;  whether a party was able to understand documents relating to the transaction;  whether any undue influence or pressure or any unfair tactics were used by a party;  the circumstances and the amount for which a party could have acquired identical or equivalent goods or services from another person; Unconscionable conduct: Section 21 The section 22 factors (ctd) Section 22 factors (ctd):  the extent to which a party's conduct was consistent with their conduct in similar transactions with other business consumers;  the requirements of any applicable or other relevant industry code;  the extent to which a party was willing to negotiate the terms and conditions of any contract;  the terms and conditions of the contract and the conduct of the parties in complying with the terms and conditions of the contract;  whether a party has a contractual right to vary unilaterally a term or condition of a contract;  the extent to which the parties acted in good faith. Unconscionable conduct: Section 21 Garry Rogers Motors v Subaru FPBCL p 356 Facts  GRM was appointed an authorised S dealer in 1991. Its initial appointment of three years was renewed in 1994.  When GRM resisted complying with new marketing requirements imposed by S, S terminated the dealership agreement.  When GRM ‘repented’ (ie indicated that it would comply with the new marketing requirements), S refused to reinstate the dealership agreement. Issue  Was S’ decision to terminate/refuse to reinstate the agreement a breach of s 51AC of the Trade Practices Act (the predecessor to s 21 ACL)? Unconscionable conduct: Section 21 Garry Rogers Motors v Subaru (ctd) Held  The decision not to reinstate the dealership agreement did not involve unconscionable conduct. Reason  Although S had failed to comply with an industry code (in that it had not provided written reasons when terminating the franchise), this did not establish that the conduct was unconscionable even though such conduct is on the section 22 list of relevant factors.  S acted to protect its own legitimate commercial interests.  S had reasonable doubts about GRM’s willingness to comply with the new marketing requirements going forward.