It is an offence under both Commonwealth and State legislation to induce another party to enter into a contract by using false or misleading representations. Generally traders are not allowed to make false claims about anything that could be used to persuade a person to enter into a contract for goods or services.
It is an offence under the Australian Consumer Law to make false or misleading representations about goods or services [Competition and Consumer Act 2010 (Cth) Schedule 2, s29]. Examples include misrepresentations as to:
- a particular standard, quality, value, grade, composition or style
- a particular history or previous use
- goods being new
- that a particular person has agreed to acquire goods or services
- the availability of facilities for the repair of goods or of spare parts for goods
- the place of origin of goods (see also Part 5-3 Competition and Consumer Act 2010, Schedule 2)
- that goods or services have sponsorship, approval, performace characteristics, uses or benefits
- testimonials for the good or service.
Maximum penalty (see s 151 Competition and Consumer Act 2010 (Cth) Schedule 2):
- Fine of up to $1,100,000 (for a body corporate)
- Fine of up to $220,000 (for individuals)
It is also an offence to make false or misleading representations about the sale of land (s.30).
An example of a misleading representation is marketing a cordial claiming it contains fruit extracts when it does not (see ACCC v Cadbury Schweppes Pty Ltd  FCA 516).
Where a claim or representation has been made to promote the supply of goods or services a supplier can be served with a notice (a substantiation notice) by the Australian Competition and Consumer Commission (ACCC) requiring them to:
- give information and/or produce documents to substantiate the claim or representation;
- give information and/or produce documents to substantiate the quantities or periods relevant to the supply of the goods or services.
[Competition and Consumer Act 2010 (Cth) Schedule 2 s 219]
The Misrepresentation Act 1972 (SA) makes it an offence to induce another party into entering a contract by misrepresentation and provides for criminal sanctions to be imposed [s.4].
If a business makes a false representation inducing a consumer to enter a contract, to pay money, to transfer land or personal property then the trader and/or the agent or employee making the representation are both guilty of a criminal offence.
- Fine of up to $100,000 (for bodies corporate)
- Fine of up to $20,000 (for individuals)
What is a misrepresentation?
A misrepresentation is a false statement or intentional misstatement used to induce a person to enter into a contract.
- If the person who made the statement believed on reasonable grounds that it was true; or
- Where the defendant is not the person who made the misrepresentation:
- they took all reasonable precautions to prevent the commission of the offence by persons acting on their behalf or in their employment; or
- the defendant did not know, and could not reasonably be expected to have known, that the representation had been made or was untrue.
Civil actions and exclusions
In addition, the Misrepresentation Act 1972 (SA) allows a number of civil actions for a consumer to take (see: Contracts) even in the case of a private sale. It also provides that contracts which say they exclude or restrict liability for any misrepresentation made before the contract shall be of no effect unless a court decides that it is fair and reasonable in all the circumstances of the case [s 8].
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