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Australian Consumer Law

Australian Consumer Law




Section A


Question 1



  • Enforceability of contract between Sukriti(S) and Rajib(R) for the diamond necklace?
  • Enforceability of contract between Sukriti and Rajib for the loan?




Australian Consumer Law





Since the initiation of common law, the law of contracts was not that much of thing. The legal system used to judge a case on the cause of action and not on facts. It was after the 19th century when countries started recognising this law and incorporating it in a form of texts (O’ Sullivan, 2018). Classical contract theory is the foundation of the modern contract theory. Classical theory talked about three rules which are, first, there has to be a bargain meaning reciprocity in a contract (O’ Sullivan, 2018). For eg., the traditional barter system that happened when the formation of the legal tender had not crept in the society. That time, one used to promise one thing in return of another promised thing. Second, was the contract was formed where the parties were willing to enter into a contract. Third, was where the parties had the freedom to choose which contract to enter into (O' Sullivan, 2018). As per modern law, there are 6 elements to a valid contract. First, there must be an intention to create a legal relationship; second, there must be a valid offer; third, there must be a valid acceptance; fourth there must be a valid consideration in lieu of the contract; fifth, there must be a capacity to create a legal relationship and last, there must be a legal contract.


In the given case, Sukriti was married to Rajib. On their first anniversary, Rajib promised Sukriti to gift her a diamond necklace. Before their anniversary, Rajib lost his job and as a result, could not gift Sukriti the necklace. This issue ended their wedlock. In the meantime, Sukriti lent Rajib $10000 as he going through financial crisis to be repaid in a month.


For our first issue, the Australian contract law does not consider the promise made between husband and wife as a valid contract. The majority of Australian is based on the common law, so this issue shall be solved via that. The common law does not recognise the social and domestic agreements as a contract. In Jones v Padavattan (1969), Mr Jones promised her daughter that he shall provide a monthly allowance to her if she gives up her job in the USA and return to the UK and study how to become to the barrister. Due to some financial problems, Mrs Jones bought a house in London where her daughter resided and used to incur remuneration from tenants. This lead to some disturbances between the two and Mrs Jones asked for repossession of the property. It was held, that since it was a domestic contract and there was no legal intention to create any relationship, therefore Mrs Jones is not liable to claim the house (Halson, Macmillan & Stone, 2018). 



Another case Balfour v Balfour (1919), the husband promised to provide his wife allowance while he is living in abroad. The husband did not do that and in lieu of that, the wife sued her husband. It was held that the arrangement between husband and wife and not contracts as parties do not want to enter into any contract. Also, it was said that the wife did not give any consideration to her husband's promise, so even that too does not constitute a contract (Halson, Macmillan & Stone, 2018). 



So to conclude our first issue, while S and R were married, and R made a promise to S that he shall gift her a necklace which he did does not give S the right to use R for the enforcement of the contract as it was not a valid one.

For our second issue, R and S had ended there wedlock and then S gave a loan to R of $10000 that he was to pay in a month. So according to the contract law, R is entitled to pay S the loan amount as they are no longer husband and wife. This is was held in Merritt v Merritt (1970). In this, the husband and wife and separated from each other. The husband agreed to pay 40 pounds per month as maintenance from which the wife shall repay the mortgage. After the mortgage, the husband shall transfer the house in his wife's name. all of this was a written contract but later the husband refused to transfer the house in his wife's name. It was held that the agreement between husband and wife is an enforceable contract s the agreement was formed after they both had separated. Thus there was an intention to create a binding contract and therefore the husband is entitled to transfer the house in his ex-wife’s name (Halson, Macmillan & Stone, 2018). 



Another case, Simpkins v Pays (1955),  it was held that where there are family members involved in a contract, the court should not presume that it is not a valid contract. Cognizance must be given to whether the money had circulated amongst people and what position to they hold in the contract. Like in this case, it was held that presence of an outsider showed that it was not a family agreement and hence there is was the intention to create a legal relationship (Halson, Macmillan & Stone, 2018). 



So for our second issue, when in December 2018, R and S decided to terminate their marriage that moment they stopped being husband and wife. Hence, when S lent money to R, so she gave it as an individual and as his wife. So as per the terms of the loan, R is entitled to repay the money to S and he did form a legal relationship with her.





For our first issue, there was not a valid contract between R and S as they both were married and the law does not recognize any promise between husband and wife as a valid contract. It is just two people making promises with each other.

For our second issue, R and S had separated when S lent money to him. So there was a valid contract as both of them intended to create a legal relationship. Therefore, R is entitled to repay $10000 to S in a month as promised too.














Question 2




  • The validity of the act of bankruptcy and sequestration order




Bankruptcy Act of 1966





In this, the James(J) issued a bankruptcy order against Tony (T) when he failed to give $15000 to him at the end of December 2014. J called for a creditor's meet where they shall grant sequestration order against T. just before the hearing, T paid $9000 to J and is arguing that he had paid the money to J and now the order and the act of bankruptcy should be set aside.


As per the sequestration order, the court is entitled to make a debtor bankrupt. The bankrupt's estate shall be managed by the trustee who shall control the property and other financial affairs of the debtors with that of the creditors (Federal court of Australia, 2020).


As per section 40, Part IV Division 1, which states what shall be termed to be bankruptcy, there is a debtor owes the creditor more than $5000 (Federal court of Australia, 2020). Where the creditor has served a notice to the debtor and he did not show up, then within 21 days the notice being served, they are entitled to start the bankruptcy proceeding against the debtor (Federal court of Australia, 2020). 


Clause 4 of  Section 40 states that where the creditor had sent a notice to the creditors to call a meeting on that day the act of bankruptcy is deemed to have completed.  The act also states that where the debtor feels that the petition in the Court against him is frivolous and does not hold any legal binding, then he must tell the judicial registrar and the legal reasons why he believes so. The common  grounds of opposing that are if he did not commit any bankruptcy as per the petition, or he does not owe the money claimed or is able to pay the debt; has the similar claim against the creditor which he has against him; or any other 'sufficient cause.' This shall be incorporated in writing along with a form B5, notice of grounds of opposition (Australian Law Reform Commission, 2010).

In a decided case, it was held that where the debtor claims any grounds of opposition only verbally with no mere evidence, so that shall not be enough to have any merit in court.


The ground of sequestration order, is when the creditor is able to prove that the debtor had committed bankruptcy within 6 months of the petition; and he owes more than $5000 of debt; and he has the evidence to prove the asserted version, and the petition was served to the court and the debtor within time.






in our given case, T was duly served a notice by J in June 2015 when he did not pay the amount of $15000 due in December 2015. J called for the creditor meeting where they were about to issue a sequestration order against T, but T before that gave $9000 to J. So that does not defend him from the issued order against him. he is still liable to be issued the order against the bankruptcy. T's contention was that he is not insolvent and that he does not fall under the definition of acts of bankruptcy, but that he cannot prove as he did not pay J for about 6 months.  The reasons where the debtor can challenge the petition is listed in Form B5 but T's conduct does not even cater to that. He still owes J $6000 which is above the limit where the creditor can issue a notice of bankruptcy.

Therefore, he cannot claim the defences he claimed and hence he is liable to be issued the sequestration order as he had defaulted in his payments.












































Section B



Question 1




  • Has the shop done any consumer law violation as per ACCC?




Competition and Consumer Act 2010




Schedule 2 of the above-mentioned act talks about the Australian Consumer Law. as per section 3 of the act. "consumer" means a person who acquires goods for personal, domestic or household things, that person is a consumer. as per section 7, "manufacturer" means a person who grows, produces or assembles goods or he depicts himself to be the manufacturer of the goods. Fresh and Organic is a shop who shows in its advertisements that they produce fresh and organic vegetables and sells them in the market. So as per section 7, they are manufacturers of it.


Chapter 3, Part 3-1, section 29, states that where a person in a trading business, makes any false and misleading advertisements in relation to its standard, quality, value etc is termed to be a false representation. Fresh and Organic shop did make misleading advertisements and deviated the consumers by depicting that they made organic vegetables and also charged higher than other vegetables.


Chapter 4, Part 4-1, Division 1, section 151, states that any manufacturer who misleads the consumers with wrong advertisements, so they shall be liable for $1,100,000 if a body corporate and $220000 if not a body corporate.


In 2018, Heinz, an FMCG company had taken a huge hit of $2.25 million for making misleading advertisements for its Little Kids Shredz products (CMO, 2018). The claim was regarding that their Little Kids Shredz products was beneficial for children aged 1-3 years. But this was completely false as the product contained near about two-third of sugar.

In 2019, Samsung Australia was also sued for giving misleading advertisement that its Galaxy phones shall be suitable for all kinds of water like the ocean water, swimming pools and will not get affected due to that. However, it wasn’t the case (Long, 2019).





so to conclude, Fresh and Organic, did mislead the people by advertising false features of his products. It was later revealed by their employee that as the name suggests that the products there are fresh and organic but it is not so. When ACCC investigated their shop, they found 30% of the products to be frozen and that they endure the perishability of the products, they use chemicals and fertilizers too. This is a complete violation of the consumer law as that is misleading the consumer in consuming products which are not at what they are costed. Also by the use of chemicals and fertilizers, that's even hampering the health of the consumers. So ACCC can impose a penalty under section 151 of the act for their reckless behaviour.


Question 4




  • Can Ahabab(A) sue to the Red and Hot(R & H) for negligence?
  • Defences for R &H




Law on Torts







For the tort of negligence to be proved, three major elements are there to be proved. First, the defendant had a duty of standard of care against the plaintiff. Second, the defendant breached the same duty meaning he bungled in performing the said duty. Third, there exists a direct link between the breach of duty of the defendant with the loss or injury suffered by the plaintiff. The term 'negligence' gained its prominence in the 20th century. Before that, the English law or as a matter of fact, no country recognized this term. There was no compensation for the unintended injury earlier (Kiefel, 2015). In the 19th century, when the industrial revolution was as its peak, there could be seen a considerable increase in the law of negligence. In the 1930s, the modern law of negligence took place where the above three elements came into being for prosecuting any individual on the law of negligence.  


For the given case, A bought a coffee from R & H, had driven off keeping that coffee between his legs. While he was driving, a motorcycle came in front of him due to which he had to suddenly stop the car and as a result, his coffee spilled. Hence he suffered from several injuries and had to undergo plastic surgery as well. As per the above paragraph, which tells that to sue anyone for negligence, the defendant must owe a duty of standard and that he had breached the same. Also, there is to be a direct link between the duty and the breach. So considering that R &H conduct is to be seen as a shopkeeper who is selling coffee. He received many complaints about his coffee being too hot which resulted in people burning their tongues, still, he did not do anything about that. He was negligent on the part that when he received so many complaints on his coffee he didn’t pay any heed to that and served the same hot coffee to A.

A very famous case Donoghue v Stevenson [(1932) UKHL 100], it was held that where the manufacturer owes a duty of care to his defendant and breaches that duty, then that is termed to be negligence. Here R &H should have rectified this fault when he received complaints.


However, R & H has a defence. I agree that it holds a duty of care to his customers to serve them mild coffee but what happened with A isn't justified that the plastic surgery and leg injury was a result of R & H's coffee. He took the coffee and placed it between his legs which were utter stupidity on his part. Himself was negligent in handling his coffee as there was no need to put that between his legs. In every car, there is a coffee stand where one can place it. due to his lack of judgement, he spilled the coffee and suffered injuries so on that part R & H is not at fault. He must have considered that even if it was a mild coffee but when placed between his legs shall result in its spillage because one is driving. You never know what might turn up on a road.




Hence, there was no direct link between the R &H coffee and A’s leg injury and hence they can take this defence.






















































O’ Sullivan, J. (2018). O'Sullivan and Hilliard's The Law of Contract. Oxford University Press, 2018.  


Law Teacher. 2019. Elements of a Valid Legal Agreement Which Is Enforceable by Law. Retrieved from https://www.lawteacher.net/free-law-essays/contract-law/elements-of-a-valid-legal-agreement-which-is-enforceable-by-law-contract-law-essay.php


Halson, R., Macmillan, C. & Stone, R. (2018). Contract Law. University of London, 2018


Federal Court of Australia. 2020. Bankruptcy Information Sheet 6. Retrieved from https://www.fedcourt.gov.au/law-and-practice/guides/guides-bankruptcy/information-sheet-6


Federal Court of Australia. 2020. Bankruptcy Information Sheet 3. Retrieved from https://www.fedcourt.gov.au/law-and-practice/guides/guides-bankruptcy/information-sheet-3



Australian Law Reform Commission. 2010. Australian remedies: debt and insolvency. Retrieved from https://www.alrc.gov.au/publication/legal-risk-in-international-transactions-alrc-report-80/7-australian-remedies-debt-and-insolvency/


CMO. 2018. Heinz hit with $2.25m in penalties for misleading advertising claims. Retrieved from https://www.cmo.com.au/article/645769/heinz-hit-2-25m-penalties-misleading-advertising-claims/


Danielle Long, 2019. Samsung Australia sued by consumer watchdog for misleading advertising. Retrieved from https://www.thedrum.com/news/2019/07/12/samsung-australia-sued-consumer-watchdog-misleading-advertising



ACCC. 2020. False or misleading claims. Retrieved from https://www.accc.gov.au/consumers/advertising-promotions/false-or-misleading-claims


Kiefel, S. (2015). Developments in the law relating to medical negligence in the last 30 years. Retrieved from https://www.cla.asn.au/News/be-warned-medical-negligence/#gsc.tab=0



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