laz, help! i'm doing a practice question for a past paper... does this sound alright for a 10 mark question (for a 60 mark exam)?
In my discussion of the contractual and statutory consumer provisions, I shall deal with the following issues: the hospital’s contract for the sale of masks, the advertisement in the Herald Newspaper and the sale of masks to the consumers who subsequently suffered damage.
The hospital in the article entered into a contract with Evans Pty Ltd. for the supply of 1000 SARS masks. Evans subsequently could not meet the demand for the quantity of masks within the stipulated time, because “demand was so strong” and “they had made a much bigger profit on the masks sold to the customers”. Therefore Evans is seen to have breached what is an essential term of the contract.
If the term of delivery was a condition, then the hospital may seek to repudiate the contract and sue Evans for damages. If the term of delivery was one of warranty, then the hospital cannot rescind the contract but can apply for the equitable remedy of specific performance and/or sue for damages.
Since the article does not clarify on the matter, an alternative scenario is Evans could not meet the hospital’s demand because of forces beyond its control, such as the running out of raw materials. In this case the contract is terminated by frustration, whereby the hospital can rescind the contract and recover any monies paid.
The second issue is that of the advertisement. An advertisement was placed in the Herald Newspaper for the sale of “SARS-proof masks” and the company guaranteed it was impossible to catch SARS through the masks. Since two consumers have subsequently been infected with SARS, Evans might find that the advertisement is in breach of section 52 of Trade Practices Act for misleading and deceptive conduct and it is in breach of the penalty provision Section 75AZC(1)(a) of the same Act for false representation of standards and quality.
It is in breach of s 52 because Evans is “a corporation… in trade or commerce… [engaging] in conduct which is misleading or deceptive”: in this case, it is an untruth to state that the masks are SARS-proof. Breach of s 52 would give rise for a claim for damages by the consumers, ancillary orders to publish the truth and an injunction to order Evans to stop advertising in this way.
It is a breach of s 75AZC(1)(a) because Evans is “a corporation… in connection with the promotion of any means of supply… falsely represent[ing] that the goods are of a particular standard, quality, grade”. As per the decision in Hartnell v Sharp Corp of Australia (1975), such a false representation could lead to a maximum penalty of $1.1 million for a corporation like Evans.
The final issue is that of the Evan’s liability as a manufacturer. The liability of a manufacturer arises when the consumer (in this case Kevin and Jean) suffers personal injury because of the defective nature of the goods. Under Part V Division 2A of TPA, Evan’s as a manufacturer is liable because the goods are not of a merchantable quality (s 74D), they are not fit for the purposes for which the goods are supplied (s 74B), they do not correspond with description as ‘SARS-proof’ (S 74C). Further they are liable under the same section for breach of the express warranties they made in their advertising material (s 74G). Consumers who suffer personal damage as a result of manufacturer liability can bring an action for damages against the manufacturer without the need to prove negligence under this Division.
Therefore it can be seen that Evans is liable on many accounts. They are liable for damages and penalties due to their failure to supply and subsequent breach of the hospital’s contract. They are liable to the consumers for the misleading and deceptive conduct and false representations in their advertising. Furthermore they are liable for their liability as a manufacturer of those masks to the consumers for failure to ensure the masks are of merchantable quality and fit for the purpose of protecting against SARS.
