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Avoidance of contracts: Misleading conduct

Overview

Pre-contractual misrepresentations may provide contractual remedies at common law or statutory remedies pursuant to the Competition and Consumer Act 2010 (Cth) (previously the Trade Practices Act 1974 (Cth) (TPA)). The statutory remedy is more commonly used as it operates in a wider range of circumstances and generally provides better remedies.


Statute

The statutory prohibition of misleading and deceptive conduct can now be found in s 18 of the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth)). This was previously contained in s 52 of theTrade Practices Act with the result that many of the cases relevant to this provision refer to s 52.

18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

The reference to 'trade or commerce' excludes purely private sales but captures most commercial activity. Where a breach of section 18 is established a range of remedies are available including damages and contractual avoidance or variation.

See further misleading conduct page in the consumer law section.


Common law

Common law misrepresentation overlaps with the statutory misleading conduct provisions and in practice is only relevant where the CCA does not apply; that is, in non-commercial contexts. An actionable pre-contractual misrepresentation occurs where a party makes a 'false representation' (orally, in writing or by conduct), the representation is one of fact (rather than a statement of opinion of law or a prediction about the future), it must be made to the other contracting party and it must induce the contract. Where established the key remedy is rescission (generally damages are not available unless the misrepresentation constitutes a tort - that is, it is also fraudulent or negligent - in which case tortious (but not contractual) damages may be available). Even where misrepresentation is established there are some limits on rescission - most significantly, if restitution is not possible the right to rescind will be lost.