Damian relied on pre-contractual statements to enter into a contract with WF. When talking to Ann, the organizer of the expo, He was informed that payment of $5500 to secure a place in the expo caters for rent and insurance policy. She also promised him that his goods would be very safe, but the boxes full of wristbands was stolen., and insurance company told him he does not have any claim. Damian realized there were empty spaces, and few retailers in the expo than promised by Ann. Damian seeks to know whether, he can be compensated for the stolen wristbands and get a refund for his $5500, on behalf of Fitness Tracker Pty Ltd, the company in which he serves as the director.
Rule and Application
Rule one pre-contractual negotiations
Rights and obligations of the contractual parties are determined by contractual terms. In the analysis of the contractual terms, both post-contractual conduct and pre-contractual negotiations may give rise to the non-contractual rights and obligations, independently from, or in addition to the concluded term of the contract. In Gordon v Macgregor the high court ruled that when the agreement terms are written, the extrinsic evidence such as the oral evidence, cannot be used to indicate existence of other terms 1. However, there exist some exceptions to this rule that include evidence that undermines the validity of the contract, where the agreement is tainted with deception or fraud or there was a misleading conduct2. Party may be induced to buy a product by precontractual statements. The precontractual statements are categorized into terms of the contract, mere representation, collateral contract and sales puff. In Ellul and Ellul v
1 Gordon v Macgregor
2 Carter, J. W. Carter’s guide to Australian contract law. (1st Ed 2015, p. 114)
Oakes the Court held that for a clause to constitute the contractual term, contractual parties must have an intention to make the clause promissory in nature, as it is the case of establishing the party’s intention to create a legal relation3. In this case, the intention is determined objectively. Application
Damian, the Director of Fitness Tracker Pty Ltd, so the expo, organized by Worldwide Fitness Pty Ltd, as an opportunity to talk to the experts and retailers attending to promote his wristbands. Anne, the Event Organizer for WT, told him the space in the Expo would cost $5,500 inclusive of a policy of insurance covering any loss, damage or theft of his equipment. This assurance was contrary to the clause 11 of the contract which provided that the Worldwide Fitness Pty Ltd was not responsible for any theft or damage
The statement by the Anne constitute term, which also constitutes the ‘representation’ in the contract and thus it was intended to create a legal binding relationship. To a reasonable person, it is obvious that Damian considered the statement to be legally binding. Based on this argument Damian has a remedy under the common law given that this statement formed an important part in persuading him to rent a space at the expo. Section 18 of the Australian Consumer Law prohibits misleading and repetitive conduct occurring in business. The conduct is defined in section 4(2) of the CCA as including giving effect to a particular provision or arriving at or making of4.
Rule Two: Deceptive Statements and Sales Puff
The collateral contract must have a promissory note, not intended to be part of the contract, must not correct the main contract, and consideration must have been offered5. Pre-
3 Ellul and Ellul v Oakes 5 JJ Savage v Blakney
4 Radan, Peter, John Gooley, and Ilija Vickovich. Principles of Australian contract law: cases and materials, (23rd Ed 2009, P. 56).
contractual terms constituting terms also constitute the contractual representation. In some situations, the representation is not meant to be promissory, and as such, they do not comprise terms. However, when they are not true, party to which they are directed can get remedies at the common laws6. Under the common law, a contract that was induced through the false representation can be rescinded.
In this case, the statement that the fee of $5,500 is included rental and insurance policy, and that the goods were very safe, were deceptive. This cannot be considered to be ‘sales puff’ because a reasonable person would recognize that this statement was intended to be taken literally. This means that they constitute a representation and as such Damian can get remedy after he realizes that they were false. In JJ Savage v Blakney it was decided that elements which are required to determine that the conduct is misleading to include: the claimant relied on the claim and suffered loss it was misleading in all circumstances, and it was done in the course of commerce7.
Rule three: Misleading statements
The Australian Consumer Law, Section 18 offers different remedies for the misleading conduct that occurs in the course of business8. Finally, pre-contractual terms can just be ‘sales puff.’ This is the exaggerated sales talk which is not intended to be taken literally, and this would be recognized by any reasonable person. This means that the sales puff does not constitute the representation in the term or law and as such, they do not have any remedy if they turn out to be false9.
6 Ellul and Ellul v Oakes
7 JJ Savage
8 Competition and Consumer Act 2010
9 McKendrick, Ewan. Contract Law. (2nd Ed 2015).
In this case, Anne claimed that there would be enough security yet Damian’s boxes full of wristbands was stolen. Anne gave the statement in the course of commerce when Damian was about to sign the contract. This impugned conduct by Anne was in all circumstances deceptive and misleading. On addition, Damian was pleased about the insurance being organized by WF, and as such, he found it unnecessary to arrange for his insurance. As a result of his reliance on the statement given by Anne, Damian suffered a loss when his goods were stolen, and insurance failed to compensate him. This means that Damian should sue Worldwide Fitness Pty Ltd for the loss suffered following the theft that took place in their premise.
In Henjo v Collins it was held that a deceptive or misleading conduct falls under the strict liability offense which means that it is groundless whether the three was an intention to misled, or even whether the claimant may have protected his rights reasonably10. This ruling by the court means that as long as the Damian shows some element if reliance on the statement made by Anne, then Anne may be deemed to have involved herself in a deceptive conduct even when Damian had all the reasons to believe that Anne representation was true11. Strict liability applies in this case because Anne is in a better place to know whether it is true or not that the fee of $5, 500 covers even the insurance policy. The Australia law is construed to move the onus on making sure that representation is true on Anne.
Damian can thus only claim compensation for the goods that were stolen, but he cannot be able to request for the total refund of $5,500. Anne statement that she had one space left and that Damián was lucky to get a space at the expo was a ‘sales puff.’ A reasonable person can recognize that the statement that was not meant to be taken literally. As such, Damian cannot use
10 Re Henjo Investments Pty Limited
11 Codelfa Construction Pty Ltd v State Rail Authority of NSW
the fact that there were many empty exhibition spaces and there were few retailers in attendance to showcase wristbands, as the basis for requesting back the amount of rent that he had paid. Conclusion
As a matter of law, Damian cannot insist upon the return of his $5,500, but he can be compensated for his stolen equipment. He cannot insist upon the return of his $5,500 because the statements that only a single space was remaining and that the retailers would be many constitute the ‘sale puff’ and thus in law or term it does constitute a ‘representation.’ However, he claims a refund from WF, for the stolen equipment because Anne used a deceptive and misleading statement that the fee charged covered even the insurance policy and catered for the stolen goods. Even though this statement is contrary to the written statement, the fact that Damian suffered the loss of his equipment’s as a result of its reliance on the statement by Anne, and that the impugned statement was issued in the course of commerce, makes Damian entailed to claim damages for the stolen wristbands.
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Ellul and Ellul v Oakes (1972) 3 SASR 377
Gordon v Macgregor (1909) 8 CLR 316,
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133)
JJ Savage v Blakney (1970) 119 CLR 435
Re Henjo Investments v Pty Limited  FCA 40, 
Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1 Legislation
Competition and Consumer Act 2010
Radan P, John G, and Ilija V., Principles of Australian contract law: cases and materials. Chatswood, (3rd Ed 2009).
Carter, J. W. Carter’s guide to Australian contract law. (1st Ed 2015). McKendrick, E. Contract Law. City, (2nd Ed 2015).
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