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As you are starting a business, you may find you have made a statement to a consumer that is incorrect and misleads the consumer. This conduct is known as misleading or deceptive conduct and is prohibited under the Australian Consumer Law (ACL). One of the key provisions of the ACL provides consumers with broad rights against businesses owners who engage in conduct that is likely to mislead or deceive. This article sets out what misleading or deceptive conduct is, how businesses can minimise liability and the remedies consumers may be entitled to.

When Have You Misled or Deceived?

In order for conduct to be misleading or deceptive:

  • a person must engage in conduct;
  • the conduct must be during the person’s business dealings; and
  • the conduct must mislead or deceive or be likely to mislead or deceive.

For example, misleading or deceptive conduct may include:

  • where you advertise online that a product’s price is lower than its actual sale price;
  • a sales representative who tells a consumer that a product is fit for a particular purpose while knowing otherwise. For example, they may incorrectly tell the consumer that a jacket is waterproof and is perfect for long hikes; or
  • an advertisement which includes a small and unnoticeable disclaimer which the consumer is unlikely to see.

Whether or not conduct is misleading or deceptive is assessed as a question of fact. Therefore, you must consider your conduct as a whole, within the context of the surrounding facts and circumstances. Conduct will be misleading or deceptive if it induces or is capable of inducing a person into error. For example, during a phone call you may have made a false statement but corrected yourself within that same conversation. A court would not examine this one statement alone, but rather the whole conversation.

Even if you have acted honestly and reasonably, you may nevertheless be liable for a breach of the ACL if your conduct misled or deceived a consumer. Therefore, your intention is irrelevant when determining whether or not you have engaged in misleading or deceptive conduct.

Effect of Disclaimers

When entering into business contracts, some owners will rely on contractual clauses to exclude the liability of their actions. However, disclaimers and exclusion clauses made in a claim under the ACL are not often very effective. This also applies to advertising collateral.

However, this does not mean that disclaimers and exclusion clauses are ignored entirely in misleading or deceptive conduct matters. To determine whether or not conduct is misleading or deceptive, the conduct is assessed in all the circumstances, including the use of disclaimers or exclusion clauses. A court will consider disclaimers when determining any connection between your conduct and the damage the consumer suffered.

Therefore, it is possible your conduct will not be misleading if:

  • you include an exclusion clause in your agreement or qualify your representations with a disclaimer; and
  • the context of the disclaiming statement suggests no intention to be misleading. This may occur if the conduct and disclaimer occur at the same time or in the same document.

For example, you may tell a consumer that the antique cabinet you are selling them is 100 years old. But, you may also say they should not rely on that statement as you cannot guarantee it is 100 years old. In this case, your conduct is less likely to mislead or deceive.

While you may be able to minimise your likelihood of misleading or deceiving others by using disclaimers, you cannot exclude the application of the ACL altogether. Therefore, you cannot include a clause in your contract stating the ACL will not apply to your contract. If you do, your contract will not be binding.

Remedies

Where a business’ conduct is misleading or deceptive, a consumer will be entitled to remedies, including:

Damages

A person who suffers loss or damage as a result of being misled may recover the amount of that loss or damage.

The loss must be because of the misleading conduct. Therefore, it is necessary for the consumer to establish that the conduct in question caused the loss or damage.

Compensatory orders

A court may also make orders it thinks are appropriate against someone who has been misleading or deceptive to compensate the affected person. This may occur in circumstances where a person has suffered or was only likely to suffer loss or damage.

In this case, the court may decide to revoke your agreement. This cancels the contract and puts the parties back into their respective positions before entering into the contract. For example, the consumer would no longer be purchasing your goods and you would have to pay them back.

Key Takeaways

The ACL provides various remedies to consumers for misleading or deceptive conduct. This conduct receives broad interpretation and offers reliable protection for consumers. Therefore, it is important you pay close attention to your business practices, such as:

  • marketing
  • consumer contracts
  • what your employees say to customers; and
  • your employees’ conduct.

Businesses can try to include disclaimers and exclusion clauses to protect themselves. However, you should remember that it is not always effective and you may still be liable for misleading or deceptive conduct.

If you are concerned you have misled consumers or you need some assistance in drafting a disclaimer or an exclusion clause, get in touch with one of LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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