All businesses, regardless of size, will enter into hundreds, possibly even thousands of contracts. Businesses contract to acquire and dispose of assets, leverage resource capabilities and establish partnerships with other corporate entities, to name a few. In doing so, contracting parties tend to focus on the form of the written agreement without having much regard to the surrounding circumstances.

Pre-contractual negotiations and promises made as part of the sales pitch may alter the contracting parties’ liability, especially if they don’t correspond to the contract’s written terms. Below, we look at when pre-contractual negotiations and statements made during a sales pitch will be considered misleading or deceptive.

What Is Misleading or Deceptive Conduct?

Australian Consumer Law (ACL) under section 18 prohibits misleading or deceptive conduct in trade or commerce. Parties contravene the section where:

1. A person;

2. Engages in conduct;

3. In trade or commerce; and

4. The conduct is misleading or deceptive or is likely to mislead or deceive.

Section 2C of the Acts Interpretation Act 1901 (Cth) defines a person to include a body corporate and so a company can offend section 18.

Conduct includes doing or refusing to do any act. Consequently, a person contravenes the provision if they mislead or deceive through either oral or written representations.

‘In trade or commerce’ is also construed broadly and encompasses pre-contractual negotiations between contracting parties (Bevanere Pty Ltd v Lubidineus (1985) 7 FCR 325).

Determining whether conduct is misleading or deceptive requires an objective assessment of the conduct as a whole. The party’s subjective intention is irrelevant, and a person can contravene section 18 where they acted reasonably and honestly (Yorke v Lucas (1985) 158 CLR 661). Typically, a representation will be regarded as misleading or deceptive where it is capable of leading a person into error (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44).

What Representations Can Lead Someone Into Error? 

In the context of pre-contractual negotiations, for a representation to lead a person into error it must act as an inducement.That is, it must be the thing that prompts the parties to enter into contractual relations. Representations which merely cause confusion cannot be categorised as misleading or deceptive. The Courts have held that a person will not be lead into error where they fail to take reasonable care of their own interest (Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302).

How Reliable Are Pre-Contractual Representations?

Pre-contractual representations are usually verbal. Unsurprisingly, parties rarely write down every offer and counter-offer during the bargaining process. So what weight, if any, can be assigned to these verbal pre-contractual negotiations? Vision Eye Institute Ltd & Anor v Kitchen & Anor [2014] QSC 260 states that in determining whether oral communications are reliable, the following are relevant factors:

  • The amount of time passed between communications;
  • Whether either or both parties precisely recall what was said;
  • The probability of the statements being made;
  • Any inconsistencies between the pre-contractual oral communications and the documents forming part of the transaction; and
  • The general reliability of the evidence under cross-examination, if relevant.

What’s the Effect of Contractual Disclaimers?

Parties cannot contract out of the ACL. Any clause in a contract purporting to limit or exclude liability for misleading or deceptive conduct is void.


Questions? Let our Consumer Lawyers know on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Vanja Simic
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at

View Privacy Policy