MLC101 Law for Commerce – Exam Practice Problems Question 6 Harry and Meghan have both retired and are looking to purchase their perfect retirement home. They soon find their dream home for sale, a spectacular three-bedroom waterfront mansion. The mansion is that only one in the area that is for sale. They negotiate the sale with the owner of the property, Elizabeth. However, following the exchange of the contracts of sale, but prior to settlement of the transaction, Elizabeth changes her mind and no longer wants to proceed with the sale. What remedy is available to Harry and Meghan if they want the house and are not interested in suing for damages? You do not need to cite cases for this question, but you should cite the textbook in support of your answer. Suggested answer Issue: This question concerns the issue of remedies, in particular specific performance, where damages are not adequate. Rule: Specific performance is an order by the court requiring a party in breach of a contract to carry out and perform contractual obligations and promises. The order requires a party to perform its positive contractual obligations and will only be granted if damages are inadequate, e.g. where the subject matter of the contract is unique or rare and as a result cannot be easily obtained elsewhere or replaced. The law treats contracts involving real estate or land as special and unique. Equity traditionally grants specific performance for contracts involving the sale or purchase of land, as common law damages are generally not seen as an adequate remedy. (Turner, Trone & Gamble, p. 211) Application: The contract involves real estate or land. On the facts, this mansion is viewed by the law as something special and irreplaceable. Harry and Meghan could choose to claim damages for breach of contract but would not get the house and may find it difficult to locate another similar property. If they want the house then damages will not give him that. Conclusion: Harry and Meghan could claim specific performance and the court would order Elizabeth to complete the sale and sign the documents to transfer ownership of the house to them. Bonus mark: The court will not grant specific performance if it will cause unfairness or undue hardship to Elizabeth. Question 7 Perfecto Pty Ltd (Perfecto) sells high-end kitchen appliances in Australia. One of its products, SoKool, has a multitude of functions and is retailed for approximately $1500 each. Between 7 February 2019 and 15 May 2019 (the relevant period), Perfecto became aware that there was a safety issue with SoKool. There was a potential risk of serious injury if SoKool’s lid lifted or moved and any hot food or liquid escaped from the mixing bowl. Nevertheless, during the relevant period, Perfecto continued to supply and promote SoKool and did not disclose the safety issue. On 10 May 2019, after reading about the many features of SoKool, Lily decided to buy one. Before she did so, she asked the sales representative whether the appliance was safe. She was assured that it was. She was so excited about her latest acquisition that she used it every day. On the 8th day, Lily was severely burned when hot steam escaped from the mixing bowl when the lid was on. She was very shocked by the incident, as she had followed all the instructions when using the appliance. Lily knows that she has legal recourse if Perfecto has contravened the Australian Consumer Law (ACL). Which three sections/subsections of the ACL has Perfecto most likely contravened? Briefly explain why. (DO NOT DISCUSS MANUFACTURER’S LIABILITY OR REMEDIES AVAILABLE TO LILY.) Suggested answer ISSUE There are three issues. Whether Perfecto has engaged in misleading or deceptive conduct.Whether Perfecto has made specific false or misleading representations.Whether Perfecto has breached any consumer guarantees. RULES (You only need to mention three because that is what the question asked for.) Section 18 of the ACL states: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.Section 29(1) of the ACL states: A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services make a false or misleading representation: that goods are of a particular standard or quality. Section 54(1) of the ACL states: Where a person supplies goods to a consumer in trade or commerce, there is a guarantee that the goods are of acceptable quality. S 54(1)(c) states that goods are of acceptable quality if they are free from defects. The consumer guarantees regime applies to Lily because the appliance cost $1500 (less than $40,000) – s 3 ACL.Section 33 of the ACL: misrepresenting the nature, characteristics and suitability for purpose of the product. Bonus mark: ACCC v Thermomix in Australia Pty Ltd [2018] FCA 556 APPLICATION Perfecto continue to supply and promote SoKool even though it became aware of the safety issue. By doing so, it was representing to consumers who purchased SoKool during the relevant period that it was not aware of any safety risk with SoKool. This conduct was misleading or deceptive in breach of s 18. It has also made false or misleading representations, in breach of s 29(1)(a), that SoKool was of a particular standard or quality, were fit for purpose and safe to use when this was not the case. OR Perfecto misrepresented the characteristics and suitability for purpose of SoKool in breach of s 33. SoKool was also not of acceptable quality because it was defective – s 54(1)(c). The sales representative assured Lily that the product was safe. Further, for the price that she paid, it would be reasonable to expect it to be of acceptable quality, i.e., safe – s 54(2). CONCLUSION Perfecto has breached sections 18, 29(1)(a) and 54 of the ACL for the reasons explained above. Bonus mark if students mention this: The facts state that Lily followed the instructions so she has not done anything to cause the appliance to be damaged – s 54(6).
