NBC3005 Construction Law

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NBC3005 Construction Law

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NBC3005 Construction Law

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Course Code: NBC3005
University: Victoria University

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Country: Australia

Question:

When an employee signs a contract, is the term unfair not to allow the employee to look for work?

 
Answer:

Introduction
In Australia, the building law covers a range of legislations which have to be strictly followed by the parties on which such laws are applicable. For instance, the most basic law which is applicable is contract law, as any building, whether its purchase or construction, requires a contract to be drawn where the terms of the promise are covered. In case the same is not done, it could result in a breach of contract, and likewise, would attract the penalties for the breach of contract[1]. Due to the involvement of consumers in the building law, the Australian Consumer Law also becomes applicable on the builders, developers and their agents. There is also the involvement of work health and safety related provisions, based on the jurisdiction in which the work is being done. However, the present discussion is restricted to two key elements, i.e., misrepresentation and unfair contract terms, in the context of Australian Consumer Law[2]. Even though misrepresentation is a term covered under the contract law, there are provisions under the Australian Consumer Law which offer protection from such acts. In the following parts, an attempt has been made to highlight these two terms based on Australian Consumer Law and in the context of how these have an impact over the sale of land by the developers.
Australian Consumer Law
The provisions of Australian Consumer Law are covered under the Competition and Consumer Act, 2010[3] which is an act of the commonwealth and has been drawn for protecting the consumers and promoting competition. The provisions of Australian Consumer Law, i.e., ACL, are covered under Schedule 2 of this act[4]. This act replaced the Trade Practices Act, 1974[5] and became applicable from 01st January 2001. The manner in which the provisions of ACL apply on the developers, with regards to misrepresentation and unfair contract terms, have been explained herewith[6].
Misrepresentation
Misrepresentation is a situation in which one person makes a false statement to another person, so that such second person enters in the contract. In order for a case of misrepresentation to be made, it has to be shown that the false statement was made to induce the other party into entering the contract[7]. In Holmes v Jones[8], the man who was selling his farm stated that a particular amount of cattle could be stored in the farm. Upon inquiry, the purchaser found this to be false and still bought it. As the reliance was not found to be on the misrepresentation, the damages were not awarded to the plaintiff. Further, it has to be a statement of fact and cannot be claimed for an opinion[9].
Under the ACL, misrepresentation is protected through section 18, which relates to the misleading or deceptive conduct. The general protections pertaining to this are covered under Part 2.1[10] and 2.2[11]. As per section 18 of the ACL, while being engaged in trade or commerce, the individuals should not indulge in any conduct which is likely to be misleading or deceptive or does actually mislead or deceive[12]. In the case of Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd[13], the false statements which were made during the negotiations were held to be misleading or deceptive conduct. This section provides the remedy in form of ancillary order for varying of the drawn contract.
 
For the developers in the nation, they would be deemed to be indulged in misleading or deceptive conduct when they make false statements during the course of negotiations. Also, it is not necessary that such false statement has to be made while being in the physical presence of the seller. The statements made through the adverts placed in magazines or newspapers, the letters, and the emails, all would make them liable for the breach of section 18 of the ACL, if it contains a misrepresentation[14]. Such statements could relate to a factually wrong statement, which results in the creation of a false impression. Also, the non disclosure of crucial and substantial information to the buyer would also contribute towards a misleading or deceptive conduct, as non disclosure is also deemed false statement. In the similar manner, when crucial information is left out or concealed, or the client is deliberately not provided the updated data or a misunderstanding is willfully not correct, or even the making of inaccurate or false claims would result in the breach of provisions of section 18[15].
Another leading example is the photographic enhancement. The photographs of the property which are touched up for hiding the characteristics which are not desirable and where the features are enhanced could also mislead the consumers. So, the developers should refrain from modifying or allowing the modified photographs to represent the property when they do not present a fair representation. They should also refrain from changing the property appearance by digitally adding or removing certain features; though the adjustment of light to compensate for poor lighting would not be a breach of this section[16].
Price advertising is another thing which would be seen as the breach of the provisions of the ACL. An agent should refrain from misrepresenting the price of property that has been put up for sale or for lease. The prices which have been advertised have to be reasonable and fair and they need to reflect the current expectations and market value of the seller. If any amendments are made during the marketing campaign, it is likely to have an impact over the selling price and this has to be properly reflected in the prices which are advertised. Also, there is a need to refrain the quoting the price of the property which is less than the asking price of the seller, i.e., under quoting. Under quoting takes place when the price of the property is advertised for sale at a price which is less than the price which was asked by the vendor. This is because such prices mislead the consumers by portraying an inaccurate appraisal of the property’s market price. Another point which has to be kept in mind is the price range which is quoted or is advertised. The lowest amount in the price range should not be less than the selling price of the vendor[17].
A very crucial element which would be deemed as misrepresentation and which would lead to a breach of section 18 of the ACL is the representation made regarding the characteristics of land. There is a need to acknowledge the restrictions regarding the permitted use of buildings or land, which can affect the property. Some of the issues included in this are the easements, planning requirements and restrictive covenants. The representations regarding the land characteristic include the previous use of land, the suitability for residential development, the ability to be subdivided, and state of repair and physical condition of the land[18].
Juniper Property Holdings No 15 P/L v Caltabiano (No 2)[19] was a case where the developer had started the marketing of units, back in 2006, at the Surfers Paradise in the “Soul” development. An “off the plan” contract was entered into by the developer for contracting to sell the penthouse apartment at the decided price of $16.85 Million. The development was finished in 2012 and the buyer was called on for settling. The buyer applied for extension in the settlement by two years and the developer agreed to it after applying penalty interest. The receivers and managers were appointed later in 2012 for the undertaking, rights and property of the developer. The buyer did not take part in the settlement and the contract was terminated for the breach on part of the buyer. And the developer bought an action in the Supreme Court of Queensland. The counterclaim of the buyer on this was on grounds of misleading and deceptive conduct[20].
The buyer had to show that the conduct was he suffered a loss after relying on the misleading or deceptive conduct of the developer. Though, the buyer failed in proving this, which led to his counterclaims being rejected by the court. Further, the breach of contract was found on the buyer’s part which led to an order where he was asked to pay $1.4 million, along with the interest, to the buyer, in addition to the legal costs of the developer. Such cases show that the provisions of ACL not only offer protection to the buyers, but also to the developers, where a wrong claim for misleading or deceptive conduct is made by the buyer[21].
 
Unfair Contract Terms
As has been stated in the introductory segment of this discussion, the building law is such a field where a number of contracts have to be drawn. And in this regard, it becomes very crucial that such contract does not contain an unfair contract terms. The ACL regulates the standard form of consumer contracts in the matter of unfair terms. The provisions contained in the ACL have a major impact over the property developers[22]. In case a contract contains an unfair term in the standard form contract, it is considered as void and makes the contract unenforceable owing to ACL’s applicability. The unfair term provisions covered under the ACL apply to the consumer contracts and standard form contracts when an unfair term is contained in these contracts. The grant or sale of interest which is held in land is included under the consumer contracts, where the individual makes use of these for domestic, personal or household purposes. Hence, the definition not only covers the sale, but also goes beyond it and covers the developer’s powers and privileges, regarding the particular land[23].
The contracts which are made by the developer are considered as being unfair when a major imbalance is caused in the rights and duties of the parties, or in such cases where the legitimate interest of the developer is not protected in a key way, and also where such occurrence would be disadvantageous for the buyer due to the faith they have put in the developer. When the contract of sale is created or drafted by the developer, different clauses are inserted which favor the developer and through which, the developers are given flexibility in different matters, but which mostly relate to the project competition related issues. However, the provisions under the ACL would be deemed to be violated only when it can be shown that an imbalance was caused in the position of the buyer, due to the insertion of such clause by the developer. To evaluate the presence or absence of such imbalance, different factors are considered, which include the standard industry practice with regards to the competition time of a project, the warranties offered, and the discretionary items[24].
When a decision is required to be made for a specific item being important for protecting the interest of the developer in a legitimate manner, the developers are required to put forward the evidence for the market where they have their business operations, the requirement of a particular level of flexibility in hands of the developers, the financier imposed economic factors, regulations which the planning schemes and the councils impose, and the necessary evidence regarding the market in which they operate. It becomes the duty of the developers to make certain that the proper discretion required to deliver the end product to the consumer is covered under the contract, and not such provisions are included which provide unwarranted freedom, which would lead to the provisions been deemed as unfair as per ACL[25].
 
Along with considering the detrimental position in which the purchaser can be placed, there is also to consider the disadvantageous position in which the purchaser is placed, especially when it comes to the matter of entirety of contract and the transparency in the same. The various terms which can be taken as unfair have been properly explained under the ACL. Some of these terms have been stated below:

Avoiding the performance of contract or limiting it knowingly;
Putting changes in the contractual terms;
Imposing limitations on the evidence which can be presented by the purchaser;
Placing evidentiary burden on the contract proceedings on the purchaser;
Modifying the price to be paid without the purchaser been given the opportunity to bring the contract to an end;
Making changes in the interest of land;
Making changes in the characteristics of land;
Modifying the contract whereby the land can be sold off unilaterally;
The contract been assigned in a way which is detrimental for the purchaser where the consent is not taken of the purchaser;
Unilaterally determining if the contract has been contravened or if it is interpreted unilaterally
Limiting the vicarious liability of the developer’s agent;
If limitations are imposed on the purchaser right to sue the developer;
Imposing penalties for terminating the contract on the purchaser; and
Terminating the contract without proper cause[26].

For a contract to be deemed as unfair for making it unenforceable under the law, the situation which was present at the time of making the law and the circumstances which led to the unfairness have to be considered. The term would not be unfair when the main issue of the contract is covered under it, and the same has been expressly allowed through the law of state, territory or the commonwealth, and also contains the upfront prices to be paid pursuant to the contract. Even if a term is unfair, the attempt is first made to severe the term, as the severance clauses are usually covered in such contracts. Though, if the unfair term holds such significance, that it cannot be severed, the contract in its entirety becomes unenforceable, and so void[27].
For a successful claim to be made for such unfair terms there is a need to show that a major imbalance was caused and that reliance on it would be detrimental. The key issue is to establish that a major imbalance had actually taken place. The factors which would be taken into consideration for this purpose include the clarity of terms, the term being clearly written and the like. In ACCC v Chrisco Hampers Australia Ltd[28], the court held that the terms used by the defendant were false and misleading representation for the consumers due to the reason that they were not stated clearly. Further, a reasonable person would not have been able to understand such terms because if the consumer had actually understood the result of such terms, then by being a prudent person, they would not have signed the contract. So, property developers have to be careful that such terms are not included in the standard contract which cannot be interpreted clearly.
 
A crucial requirement for a claim to stand for unfair contract terms is to show that if the term is relied upon, it would prove to be disadvantageous for the party relying upon the same. This detriment can be of delay, distress or financial detriment. This can be further clarified from the case of Wakefield Trucks(P)  Pty Ltd v Lach Transport Pty Ltd [29]. In this case, the defendant was sold a vehicle by the plaintiff and the plaintiff made certain representations regarding the vehicle during the negotiations pertaining to the fuel consumption, which was less than the real consumption of the fuel. As the defendant had relied upon this statement, the court held that the defendant was entitled to get all of the resulting losses which flowed from this reliance. Along with this, the recovery of interest which was incurred, regarding the extra fuel cost was also permitted by the court.
Some other factors which need to be considered for successfully claiming against the developer includes the setting under the ACL, as the social, family or domestic setting cannot give rise to a legal binding contract, as was held in the matter of Balfour v Balfour[30]. The developers have the intention of selling the land and obtaining maximum monetary benefit out of it. An unfair term, under the ACL, would be to allow a single party to terminate the contract. Further, an offer once accepted by the buyer, cannot be withdrawn by the developer as was held in the matter of Souter v Shyamba Pty Ltd 2002[31]. Lastly, to consider the unfairness of a contract term, the whole of the contract has to be taken into consideration, and not a small statement, which can be interpreted in different manner, as was held in the case of Hussey v Horne-Payne[32].
Hence, for the claims to be made against the developers there is a need to fulfill these basic requirements on part of the buyer.
Conclusion
The discussion carried above highlights the manner in which the concepts of misrepresentation and unfair contract terms are applied under the ACL on the developers when it comes to the sale of land to a prospective buyer. Misrepresentation is a concept under the contract law and is applied through section 18 of the ACL on the developers. Based on this section, the developers are to refrain from indulging in such a conduct which can be considered as misleading or deceptive conduct. This can be done in different ways, as has been stated above, for instance, advertised price being wrong or the photograph of the property being digitally enhanced. The case of Juniper Property Holdings No 15 P/L v Caltabiano (No 2) made it very clear that the provisions of ACL are not just meant to protect the consumers, but the developers as well. The discussion then moved on to the unfair contract terms, which can make the contract void based on the provisions of ACL. And when a case of unfair contract term is found, the attempt is made to severe the term where possible, and when the same is not possible, the contract becomes unenforceable as it.
 
References
Tom Davie, ‎Tony Earls, and ‎Jeremy Coggins, Understanding Construction Law (LexisNexis Butterworths, 2016)
Ian H. Bailey and ‎Matthew Bell, Construction Law in Australia (Thomson Reuters Australia, Limited, 3rd ed, 2011)
Competition and Consumer Act, 2010 (Cth)
Competition and Consumer Act 2010, sch 2
Trade Practices Act, 1974 (Cth)
Stephen G. Corones, The Australian Consumer Law (Lawbook Company, 2nd ed, 2012)
Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
(1907) 4 CLR 1692
John W. Carter, Elisabeth Peden and Greg Tolhurst, Contract Law in Australia (LexisNexis Butterworths, 5th ed, 2007)
Australian Consumer Law, pt 2.1
Australian Consumer Law, pt 2.2
 Australian Consumer Law, s18
17 ACSR 495
Dilan Thampapillai, ‎Vivi Tan and ‎Claudio Bozzi, Australian Commercial Law (Cambridge University Press, 2015)
Department of Commerce WA, Australian Consumer Law (2013)
News Media Works, Misleading and Deceptive Conduct in Real Estate (2017)
Ibid
At 15
[2016] QSC 5
Supreme Court of Queensland, Juniper Property Holdings No 15 P/L v Caltabiano (No 2) [2016] QSC 5 (2016)
Tom Davie, ‎Tony Earls and ‎Jeremy Coggins, Understanding Construction Law (LexisNexis Butterworths, 2016)
Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne, Australia: How The New Australian Consumer Law Will Affect Property Developers (11 May 2010)
 Julian Bailey, Construction Law (CRC Press, 2014)
Justin Lethlean, Joanne Daniels, Murray Deakin and Travis Payne, Australia: How The New Australian Consumer Law Will Affect Property Developers (11 May 2010)
 Ibid
 Ibid
[2015] FCA 1204
(2001) 79 SASR 517
(2002) 11 BPR 20,369
[1879] 4 App Cas 311

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