Misleading conduct and misrepresentation

A Misleading or deceptive conduct

The enforceability of a contract may be affected by defective negotiations, in particular if a party has engaged in misleading or deceptive conduct. During negotiations many things may be said or promised. Some of these things end up as terms of the contract (see <What are the Terms of a Contract?>). If so, and they are wrong or inaccurate, then there may be a remedy for breach of contract. But many things are said or written which do not end up as terms of the contract. Yet they have a legal effect if they are wrong or inaccurate. These are generally called misrepresentations, that is, statements which turn out to be incorrect which played some part in persuading the other party to enter into the contract.

There is a very powerful legislative provision found in the Australian Consumer Law s 18 which states that "a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".

This section applies to individuals and to corporations and is discussed in detail below at <Misleading or Deceptive Conduct>. However it is important to note that the section is not confined to consumer transactions despite appearing in the Australian Consumer Law.

The section is, however, confined to "trade or commerce" and so it does not apply to non-business transactions. For example, if a person misled a potential buyer in the private sale of a motor vehicle, this would not be covered by the Australian Consumer Law s 18 as a private sale would not be regarded as being in trade or commerce.

The effect of this legislation is that a person who has entered into a contract after being misled by the other party may be able to cancel the contract or obtain compensatory damages. There are other remedies available, for example, modification of the contract.

This law also applies to advertisements and it is possible to obtain an injunction under the legislation to put a stop to misleading advertisements. An ordinary citizen cannot afford to do this but can bring the advertisement to the attention of the Australian Competition and Consumer Commission or the ACT Office of Fair Trading.