Striking the Modern Balance

Between Freedom of Contract and Consumer Rights

14th International Association of Consumer Law Conference
Sydney, 2 July 2013

Steven Rares *

RTF version

1. The Latin expression caveat emptor is emblematic of the concept of freedom of contract. The exhortation, that the buyer should beware, symbolises both civilian and common lawyers' appreciation of the benefits and dangers of freedom of contract. On April Fools Day 2010, the British online retailer, GameStation, added a new clause to its standard online terms and conditions. This was in the section of the site's webpage that inevitably pops up with a box that needs to be ticked saying: "I agree to the standard terms and conditions". That usually has a link to those provisions. It is common experience that these are not short virtual documents. The first new term was:

"By placing an order via this Web site on the first day of the fourth month of the year 2010 Anno Domini, you agree to grant Us a non transferable option to claim, for now and for ever more, your immortal soul. Should We wish to exercise this option, you agree to surrender your immortal soul, and any claim you may have on it, within 5 (five) working days of receiving written notification from or one of its duly authorised minions."

2. GameStation also added the following additional term:

"We reserve the right to serve such notice in 6 (six) foot high letters of fire, however we can accept no liability for any loss or damage caused by such an act. If you a) do not believe you have an immortal soul, b) have already given it to another party, or c) do not wish to grant Us such a license, please click the link below to nullify this sub-clause and proceed with your transaction."

3. All the shoppers were given a simple tick box option allowing them to opt out. Few of them did that even though, if they had, they would have received a ₤5 voucher. News reports suggested that GameStation had estimated that about 88% of people who contracted with it on that fateful day may have paid more than they realised that they bargained for. Luckily, GameStation cancelled those conditions and announced that it did not intend to enforce them after April Fools Day 2010.

4. While this was an April Fools Day joke, GameStation's adventure had a serious side. It exposed what almost everyone does when confronted with standard terms and conditions in any situation. These can be contained not only in an online contract but also in a home mortgage, an insurance contract, an airline ticket, a bill of lading or the ticket one receives when taking a car into a parking station. Nothing has changed since the great British judge, Lord Reid said in 1966:

"In the ordinary way the customer has no time to read them, and if he did read them he would probably not understand them. And if he did understand and object to any of them, he would generally be told he could take it or leave it. And if he then went to another supplier the result would be the same."[1]

5. In this paper I propose to deal with a little bit of history about the development of consumer law in the international context before moving to some more recent developments, particularly in Australia, including online contracting.

Cargoes and sales of goods

6. There is a synergy between commercial law and consumer law. After all, commerce needs consumers just as much as they need commerce. In any market situation there must be rules that govern how parties deal with one another and what their rights are arising from those dealings.

7. In the late 18th Century, Lord Mansfield CJ forged the development of English commercial law by his leadership of the Court of King's Bench. This cemented the place of London as a place for the settlement of legal disputes by the Courts and in arbitrations. His Court recognised that there was a need for certainty in all commercial transactions and that in a given case "it will be necessary for [the] Court to lay down some rule, and it is of more consequence that the rule should be certain, than whether it is established one way or the other"[2].

8. Towards the end of the 19th Century two significant developments occurred in the common law world that affected the contractual right of persons who today are called "consumers". First, the United States Congress passed the Harter Act 1893 (US). That Act was the precursor of international conventions regulating the freedom of carriers of goods by sea to exclude liability for loss or damage that their ships caused to cargo carried across the world's sea lanes. Secondly, Sir MacKenzie Chalmers drafted what became the Sale of Goods Act 1893 (UK). This was based on corresponding provisions in the Code Napoleon which in turn drew upon Roman law, as Chalmers acknowledged in his introduction to the first edition of Chalmers' Sale of Goods Act 1893. Chalmers wrote that in drafting his Act he had made frequent reference to Pothier's Trait´ du Contrat du Vente that had been published more than a century earlier. He said that at that time Pothier's work was the best reasoned treatise on the law of sale that had seen the light of day[3].

9. The Sale of Goods Act distilled and supplemented the essential commercial terms of the common law of contract governing the sale of goods. Those terms were reflective of many aspects of commerce generally, and corresponded to civilian systems in many respects, as Chalmers noted. His synthesis enabled the two systems of law to find clearly articulated areas of common ground.  That culminated in 1980 in the United Nations Convention on Contracts for the International Sale of Goods[4], known as the Vienna Convention.

10. Each of those developments, originating on opposite sides of the Atlantic, had an important, but not exclusive, effect on both international and domestic law. I will try to explain these influences on consumer law as we know it today.

Freedom of Contract for sea carriage

11. Originally a shipowner who agreed to carry a person's goods on his vessel for reward was treated by the common law as a common carrier. This was an incident of the law of bailment. In effect, this meant that that shipowner was an insurer of the goods while they were in his possession against all perils, except acts of God or the Sovereign's enemies. Holt LCJ described these as incidents of this type of bailment in his important judgment in Coggs v Bernard[5]. He explained that this was a rule of public policy that the law imposed on a common carrier, such as the master of a ship. This was because it was necessary for a shipper or consignor to entrust their goods to the carrier to hold and deliver them safely to the consignee at the agreed destination. He reasoned that unless the law imposed strict liability on the carrier, he[6] could do anything with the goods while they were between the points of delivery and destination and the goods' owner would have no way of discovering what had become of them.

12. The Lord Chief Justice distinguished between bailments of that kind and contracts, such as a charterparty, where the shipowner lets or hires the ship to a charterer[7]. In this category, the hirer is a bailee who had to exercise what was then called "the utmost diligence", but today would be called reasonable care. The hirer was not liable if, having exercised the requisite degree of diligence, the goods were lost, such as by theft. The principle today is that a bailee for reward will not be liable if he can prove that he took such care of the goods as was reasonable in the circumstances[8].

13. However, by the middle of the 19th Century, sailing ships had become steamships. These were much more efficient at carriage of goods and passengers by sea. The shipowners became line owners and, as our forebears in Australia knew, they had very considerable political influence in London. Primary producers and manufacturers in countries in the British empire shipped their goods to Britain on British ships. The more sympathetic treatment of shipowners' interests as against cargo owners' interests in English courts, including the Privy Council when it had jurisdiction over Australia, was a by-product of that situation. The English courts decided to limit the principle in Coggs to situations in which the shipowner or carrier held himself out as a common carrier: that is, as "one who offers to carry goods for any person between certain termini and on a certain route"[9]. Oliver Wendell Holmes Jnr explained in his 1880 work, The Common Law[10], that notions of public policy, which would not leave parties free to make their own bargains, were somewhat discredited in most departments of the law[11].

14. On the one hand, by the second half of the 19th Centrury, English law, and the law of a number of States in the United States and particularly that of the State of New York[12], allowed a shipowner to contract to limit his liability by clauses in a charterparty or bill of lading where he did not hold himself out as being prepared to assume the liability of a common carrier[13]. On the other hand, the American Federal Courts and some other State Courts did not allow a shipowner to exonerate himself by contract from the liability of a common carrier.

15. Thus, there was a seriously chaotic dysfunction between various significant commercial jurisdictions that impacted on merchants and shipowners engaged in international trade alike. This situation prompted the International Law Association to prepare a model bill of lading. It had a series of exceptions for negligence and other causes but, critically, required the shipowner to have exercised due diligence to make the ship seaworthy and fit to receive the cargo before the commencement of the voyage[14]. This initiative did not produce a workable solution. Cargo owners' interests in Britain and elsewhere were becoming increasingly frustrated with the unreasonable, take-it or leave-it, attitude of shipowners whose sea carriage documents contained more and more extravagant or extensive exclusions of liability and clauses that favoured the shipowner.

16. In 1892, Representative Michael D Harter introduced a Bill into the United States' Congress that was passed the next year and bears his name. The Harter Act provided that if a vessel engaged in coastal or foreign trade into or out of American ports was seaworthy, properly manned, equipped and supplied at the commencement of the voyage, her owners would not be liable for loss or damage that was not due to negligent navigation or management of the vessel during the voyage[15]. The Act made it illegal to contract out of its provisions. In The Delaware[16], the first case the Supreme Court of the United States decided on the Act, Brown J giving the opinion of the Court said[17]:

"It is entirely clear, however, that the whole object of the act is to modify the relations previously existing between the vessel and her cargo. This is apparent not only from the title of the act, but from its general tenor and provisions, which are evidently designed to fix the relations between the cargo and the vessel, and to prohibit contracts restricting the liability of the vessel and owners in certain particulars connected with the construction, repair and outfit of the vessel, and the care and delivery of the cargo. The act was an outgrowth of attempts, made in recent years, to limit, as far as possible, the liability of the vessel and her owners, by inserting in bills of lading stipulations against losses arising from unseaworthiness, bad stowage and negligence in navigation, and other forms of liability which had been held by the courts of England, if not of this country, to be valid as contracts and to be respected even when they exempted the ship from the consequences of her own negligence. As decisions were made by the courts from time to time, holding the vessel [scil: liable] for non-excepted liabilities, new clauses were inserted in the bills of lading to meet these decisions until the common law responsibility of carriers by sea had been frittered away to such an extent that several of the leading commercial associations, both in this country and in England, had taken the subject in hand and suggested amendments to the maritime law in line with those embodied in the Harter Act. The exigencies which led to the passage of the act are graphically set forth in a petition addressed by the Glasgow Corn Trade Association to the Marquis of Salisbury and embodied in a report of the Committee on Interstate and Foreign Commerce of the House of Representatives. As a part of the history of the times, this is a proper subject of consideration[18].

'That, taking advantage of this practical monopoly, the owners of the steamship lines combined to adopt clauses in their bills of lading, very seriously and unduly limiting their obligations as carriers of the goods, and refuse to accept consignments for carriage on any other terms than those dictated by themselves.

That this policy has been gradually extended by the steamship owners until at the present time their bills of lading are so unreasonable and unjust in their terms as to exempt them from almost every conceivable risk and responsibility as carriers of goods.'" (emphasis added)

17. Subsequently, in the first decade of the 20th Century, the Dominion parliaments of Australia, New Zealand and Canada enacted their own versions of the Harter Act[19]. As more nations passed similar legislation, a number of shipowners, particularly in the then British Empire, expressed concern that they would be subject to different regimes for damage caused to cargo in many different countries of the world.

18. Ultimately in 1924 the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading formalised a set of rules, known as the Hague Rules, for carriage of goods by sea. In 1968 a Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading was agreed which was designed to modernise the Rules' provisions[20]. The Hague Rules as amended by that Protocol are known as the "Hague-Visby Rules".

19. In Australia, the Hague-Visby Rules are given the force of law by their inclusion, with certain amendments, in Schedule 1 of the Carriage of Goods by Sea Act 1991 (Cth)[21].

20. Professor Michael Sturley suggested in 1991 that the stimulus for the Hague Rules was the desire of shipowners for international uniformity[22]. But the real purpose of the Hague Rules was explained by Monsieur Louis Franck. He was a member of the Belgium Cabinet (Minister for Colonial Affairs), President of the CMI, and a maritime lawyer. He chaired the 1922 Brussels meetings[23]. During the Brussels meetings, Monsieur Franck said:

"The measures we claim to apply to them [the international rules] are basically limitations on the right of the shipowner to exonerate himself from liability. These measures are therefore made primarily in the interest of the holder of the bill of lading and, consequently, in favor of those whose interest is in the cargo."

21. The most recent international instrument in this area is the 2008 United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea[24], known as the Rotterdam Rules. UNCITRAL's secretary-general said that the final draft of the Rotterdam Rules had significant safeguards and provisions to ensure shippers were not deprived of their basic rights. In contrast, the European Shippers' Council had criticised that draft of the convention as presenting a serious danger of a return to "… a pre-Hague Rules free-for-all"[25] to the detriment of the small and medium sized shipper. That view echoed the Australian Government's official position that:

"…the draft convention may be read as giving greater weight to carrier interests rather than striking an equitable balance between the interests of shippers and carriers. While some shippers have sufficient negotiating power to be able to conclude fair contracts, Australia's primary concern is how the draft convention will impact on small and medium shippers."[26]

22. Thus, the rampant march of freedom of contract in the second half of the 19th Century led to international conventions to protect the consumers of international shipping services from shipowners' abuse of the freedom.

Sale of Goods

23. The Sale of Goods Act 1893 (UK) was adopted in many of the British Dominions, including by the Australian States, although it took until 1923 for it to be enforced in New South Wales[27]. The most relevant provisions for consumers are the statutorily implied terms created in ss 17 to 19 of the New South Wales Act namely:

  • a condition that the seller has, or, when title is to pass, will have, a right to sell the goods[28];
  • a warranty that the buyer shall have and enjoy quiet possession of the goods[29];
  • a warranty that, except as agreed, no third party has a security interest in the goods at the time of contracting[30];
  • when the goods are sold by description, a condition that the goods will correspond with that description[31];
  • subject to the Act itself and any other statute, s 19 provides that there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. That is subject to the important exception that there is an implied a condition that the goods shall be reasonably fit for a particular purpose if, first, the buyer expressly or by implication makes known to the seller that purpose for which the goods are required so as to show that the buyer relies on the seller's skill and judgment and, secondly, the goods are of a description that it is in the course of the seller's business to supply[32]. However, if a specified article is sold under its patent or trade name, then there is no implied condition as to its fitness for any particular purpose[33]; and
  • a condition that the goods are of merchantable quality where they are bought by description, except for defects which an examination ought to have revealed, if the buyer has examined the goods[34].

24. The New South Wales Act was amended in 1974 to add Pt 8. It deals with consumer sales, namely sales by a seller in the course of a business where, first, the goods are of a kind commonly bought for private use and consumption and, secondly, they are sold to a person who does not buy, or hold himself out as buying, them in the course of a business[35]. In addition, the court can join a manufacturer, or an Australian importer, of goods that were not of merchantable quality and make a order directly against it to remedy the defect or pay the cost of remedying it[36].

25. One of the leading cases on the implied conditions of fitness for purpose and merchantable quality concerned a South Australian doctor, Richard Grant. In June 1931, Dr Grant bought some woollen underwear with the wonderfully descriptive name, "Golden Fleece", from a retailer, John Martin & Co Ltd. Dr Grant wore his new underwear without having first washed it. That turned out badly for everyone.  However, the problem persisted after the garment was washed. Australian Knitting Mills Ltd had manufactured the underwear but had left sulphur dioxide in it. When Dr Grant wore the underwear it kept him warm. When he sweated, the moisture combined with the sulphur dioxide and that reaction produced sulphuric acid. Dr Grant contracted very severe dermatitis – so severe that at one point he nearly died. He spent months in hospital. He sued the retailer on the statutory warranties in the Sale of Goods Act and the manufacturer in negligence.

26. The case, Grant v Australian Knitting Mills Ltd[37], was decided by the Privy Council[38]. Lord Wright, who gave the advice, explained that the implied conditions of fitness for purpose and merchantable quality had changed the old rule of caveat emptor to a rule of caveat venditor. He said that "the change has been rendered necessary by the conditions of modern commerce and trade"[39]. Lord Wright took a common sense, pragmatic approach in evaluating how a customer deals with a retailer for the purpose of determining whether the customer relied on the retailer's skill or judgment in making a purchase. He said[40]:

"It is clear that the reliance must be brought home to the mind of the seller, expressly or by implication. The reliance will seldom be express: it will usually arise by implication from the circumstances: thus to take a case like that in question, of a purchase from a retailer, the reliance will be in general inferred from the fact that a buyer goes to the shop in the confidence that the tradesman has selected his stock with skill and judgment: the retailer need know nothing about the process of manufacture: it is immaterial whether he be manufacturer or not: the main inducement to deal with a good retail shop is the expectation that the tradesman will have bought the right goods of a good make: the goods sold must be, as they were in the present case, goods of a description which it is in the course of the seller's business to supply: there is no need to specify in terms the particular purpose for which the buyer requires the goods, which is none the less the particular purpose within the meaning of the section, because it is the only purpose for which any one would ordinarily want the goods. In this case the garments were naturally intended, and only intended, to be worn next the skin." (emphasis added)

27. Lord Wright also held that any ordinary examination of the underwear by a buyer would not have revealed the hidden presence of sulphites. Accordingly, the retailer was liable to Dr Grant in contract by reason of the statutorily implied conditions of fitness for purpose and merchantable quality[41]. The manufacturer was found liable for the tort of negligence. The Privy Council applied[42] what Lord Atkin had said in the then recent case concerning the snail in a bottle, Donoghue v Stevenson[43], namely:

"A manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer's life or property, owes a duty to the consumer to take that reasonable care."

28. Their Lordships found that the presence of the sulphites in the garment, due to negligence in their manufacture, was not detectable by Dr Grant: just as the snail could not have been seen through the opaque bottle before its contents were consumed[44].

Consumer protection

29. Groucho Marx once quipped that: "The secret to success in business is honesty and fair dealing; if you can fake those, you've got it made." Much of modern consumer protection legislation seems to be premised on the assumption that the business community operates in that way.

30. When the Parliament enacted the Trade Practices Act 1974 (Cth) it was 88 pages long. The consumer protection provisions in ss 52 to 74 were on 11 pages with 6 more pages dealing with enforcement in ss 75 to 87. The critical provision was s 52(1) which stated:

"A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive."

31. This was amended soon after to add a suffix "or likely to mislead or deceive". The whole community could understand that simply expressed norm of conduct. The consequence of the enactment of s 52(1) was a profound change in litigation in this country. Not only did "consumers" sue under s 52, but soon after its enactment, it came to be relied on as a general remedial measure, often by persons complaining merely that they had made a contract and sometimes by reason of some public activity of a corporation that affected them in a way similar to passing off[45]. Frequently s 52 and its analogues, to which I will come soon, have been used in litigation as a means of renegotiating a contract, not just by consumers who may have been in need of some form of statutory protection, but also by very substantial public listed companies.

32. An old common law principle known as the "parole evidence rule", prohibited the giving of evidence of negotiations for a contract that had been wholly reduced to writing. However, s 52 allowed any party to a contract, despite a freely agreed "entire agreement" clause, to allege that at some obscure point in the negotiations someone had said or written something that was not put into the contract but which somehow mislead or deceived that party into making it. Of course, the other party could always plead back that it had been mislead or deceived by the complainant's willingness to agree to the entire agreement clause which expressly disclaimed reliance on anything not in the contract and represented that the contract was the universe of the parties' relationship.

33. These scenarios raise the questions of who is being protected by "consumer protection" legislation, why it is necessary and what its cost and benefits are for the community as a whole.

34. Since the misleading retitling of the Trade Practices Act to the Competition and Consumer Act 2010 (Cth), the consumer protection and some related enforcement provisions have been moved into the petite 259 pages of Schedule 2 of that legislation which is called the Australian Consumer Law.

35. In his second reading speech for the Trade Practices Amendment (Australian Consumer Law) Bill 2009, the Minister for Small Business, Independent Contractors and the Service Economy, Minister Assisting the Finance Minister on Deregulation and Minister for Competition Policy and Consumer Affairs, the Hon Craig Emerson MP, asserted that one, commendable objective of all the nation's Parliaments was to reform and streamline Federal, State and Territory consumer protection laws into one, cognate Act. He said, without intentional irony:

"As we move towards a single, national market—a seamless national economy as called for by the Business Council of Australia and the 2020 Summit—this tangle of consumer laws must be rationalised. We must reduce confusion and complexity for consumers and provide consistency of consumer protection. We must reduce compliance burdens for business."

36. Yet s 131A of the Competition and Consumer Act states that that Act and all but Pt 5-5 of Sch 2, does not apply to the supply or possible supply of financial services or products. Why not? Well, because seemingly it was necessary to replicate these provisions with their own lengthy definitional labyrinths in a morass of dense, difficult to understand other legislation, namely the Corporations Act 2001 (Cth) and the Australian Securities and Investments Consumer Act 2001 (Cth). In the summary I gave when delivering my reasons in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (In Liq)[46], I said:

"Those Acts, that now deal with misleading and deceptive conduct, apply differently depending on distinctions such as whether the alleged misleading conduct is in relation to "a financial product or a financial service" (s 1041H(1) of the Corporations Act 2001 (Cth)) or "financial services" (s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth)). Those apparently simple terms are nothing of the sort. A "financial product" is defined in mind-boggling detail in 7 pages of small type in Div 3 of Pt 7.1 of the Corporations Act while a "financial service" takes another 6 pages to be defined in Div 4 of Pt 7.1. The ASIC Act only takes about 4 pages to define "financial service" in s 12BAB. Obviously, there are differences in what each of these Acts and definitions cover – but why? The cost to the community, business, the parties and their lawyers, and the time for courts to work out which law applies have no rational or legal justification. The Parliament should consider returning to a simple clear two line long universal norm of conduct, as was contained in s 52, if it considers that misleading and deceptive conduct in trade or commerce ought be prohibited."

37. I can mention that s 1041H of the Corporations Act deals with a civil contravention by misleading or deceptive conduct, in relation to a financial product or service; then, s 670A imposes criminal consequences in respect of misleading or deceptive takeover documents while s 728 deals with misleading or deceptive fundraising documents.

38. Now the question arises as to who is a "consumer" for the purposes of the Australian Consumer Law. No doubt it was a great relief to the drafters of that legislation to identify just some of the intended beneficiaries in a mere three page long definition of "consumer" in s 3. This must have been one of the benefits of plain English. Regrettably, as I will shortly explain, the Australian Consumer Law has at least three other definitions or concepts of a "consumer" that are different from that in s 3 and each other.

39. Needless, to say the definition in s 3 itself has one or two possible anomolies. For example, it retains the definitional concept used in the Trade Practices Act that a person is deemed to have acquired goods or services as a consumer if the price paid or payable as worked out, so we are told, under s 3(4) to (9), did not exceed $40,000, or any greater amount prescribed in the Regulations.

40. The High Court demonstrated in Qantas Airways Ltd v Aravco Ltd[47] that a large corporation could be "consumer" and could contract to limit its liability under the Act. In 1992, Qantas contracted with Aravco to service and move a plane that Aravco had hired from BAT Industries Plc for about $5,000. When Qantas negligently backed another plane into the one it was servicing for Aravco, BAT sued Qantas for about $1 million in damages. Qantas' contract with Aravco provided that Aravco would indemnify Qantas regardless of its negligence for any liability incurred by Qantas in connection with the contract. The contract had a condition implied by what is now s 60 of the Australian Consumer Law[48], that Qantas' services (not being those of a kind ordinarily acquired for personal, domestic or household use or consumption) would be rendered with due care and skill.   It also provided that Qantas' liability under that implied condition would be limited to the cost of supplying the services again under what is now in s 64A(2)[49].

41. Brennan CJ, Gaudron, McHugh and Gummow JJ held that Qantas could seek to rely on its indemnity to make a claim against Aravco for the whole of what it had to pay BAT, other than the $5,000 contract price. On the other hand, Aravco could seek to claim under what is now s 64A(3), if it was not fair or reasonable for Qantas to rely on those contractual provisions[50].

42. Thus, a large corporation can be a "consumer" for some purposes if it enters a contract for the supply of goods or services for a price less than $40,000. One wonders why such corporations have any need for the thicket of protection given to a consumer in the Australian Consumer Law. In a recent article, Challenging the notion of a Consumer: Time for Change[51], the authors set out a table identifying the reach of who a consumer is in various countries' laws. They said that the European Union's Unfair Terms in Consumer Contracts Directive 1993 was restricted to persons acting for purposes outside those of a trade, business or profession. Similarly, they said that a purchase could not be for the purposes of trade if it were to come within in New Zealand's Consumer Guarantees Act 1993 (NZ). However, and understandably, they noted that the Law of the People's Republic of China on the Protection of Consumer Rights and Interests 1993, provided for the benefit of that legislation to extend to peasants who purchased means of production for direct agricultural uses.

43. Another feature of the comprehensive nature of the Australian Consumer Law, is its indifferent reach in creating liabilities for, and obligations on, every provider of goods or services from the largest multinational corporation to the sole proprietor of a local corner store. Each provider has to comply with all the 259 pages of plain English in that legislation that are relevant to its dealings with a "consumer". For example, there are 11 pages of consumer guarantee provisions, but s 65(1)(b) excludes from these suppliers of gas, electricity or telecommunications services. Just in case one might wonder what a telecommunications service is, s 65(2) defines it as "a service for carrying communications by means of guided or unguided electromagnetic energy or both".

44. There must be a rational reason why some of the most common service providers with whom consumers of all kinds interact should be excluded from what one could mistakenly think was beneficial a law of general application. Perhaps the reason was that the providers of gas, electricity and telecommunication services could be subjected to some other, pellucidly expressed legislation creating other, or perhaps, identical liabilities and obligations. However, the reason escapes my simple mind. The former Lord Chancellor of Britain, Lord Hailsham of St Marylebone, once described a Bill introduced by his successor as an example of the Government thinking with its bottom.

45. A person who supplies all other kinds of services in trade or commerce to a consumer must guarantee to do so under s 62, where no time for supply is fixed, within a reasonable time. Apparently, if a consumer contracts for gas, electricity or a mobile phone or internet service, that guarantee or obligation does not apply under the Australian Consumer Law.

46. Happily the common law had held that these "guarantees" existed anyway. So, in Electronic Industries Ltd v David Jones Ltd[52], Dixon CJ, McTiernan, Webb, Kitto and Taylor JJ said:

"Nothing could be more certain than that clear and definite contractual obligations undertaken by the parties were intended by them to continue in force notwithstanding that at the instance of one of them the specified day was allowed to pass. It would be absurd for the law to say that nevertheless they were discharged from their obligations. On the contrary the law supplies the means of ensuring the performance of the contract by making very simple and natural implications. Example after example could be given of commonplace contracts for the performance of work or the rendering of services where one man must make himself or his premises or his goods available to another at some mutually convenient time which is left unfixed or if fixed is allowed to pass. A contract to tailor a suit of clothes, to decorate the interior of a building or to repair a ship's hull is not unenforceable because no time is fixed for the attendance of the customer upon the tailor or for the commencement of the decorator's work or for the entry of the ship into a dry dock when it may become available." (emphasis added)

47. It is possible that our legislators have overlooked, or have no idea about, the very simple and natural implications that the common law makes. The guarantees created by the Australian Consumer Law cannot be excluded. But, it is not difficult to envisage that a supplier who does not want to be bound to provide goods or services within a reasonable time, can have its contracts drafted to provide expressly for time periods that exceed what would be "reasonable". That specific contractual provision could possibly be found to mean that the guarantee did not apply, because the contract had a time stipulation for performance. It may be that this could be the basis of a claim that the term was unfair. However, this is all mere speculation on my part as to what might happen.

48. The problem is that the mere fact that a statute sets out lots of rights does not relieve the party aggrieved of the need to go to court to enforce the right, any more than if it were a common law right that had been infringed. But now, simple and clear common law rights are being replaced with a series of cascading or alternative rights that are not necessarily clear or intelligible. Each variation or permutation of some right, liability or obligation that the drafter of statutes like the Australian Consumer Law expresses, has to be pleaded and then considered in proceedings in order to seek its enforcement. This must be done because of the real danger for the party aggrieved that, if only one alternative were pleaded, the Court might cons the availability another of the plethora of alternatives as excluding the availability of the chosen statutory provision. That consequence adds to the burden of litigation in its complexity, length and cost. The very people who can least afford expensive litigation are prejudiced by the over-enthusiastic attempt to burden everyone with unnecessarily complex, arcane legislative rights, liabilities and obligations.

49. This complexity is one of the difficulties evident in the Australian Consumer Law. This partly flows from its status as a consolidation of overlapping, but not congruent, Federal, State and Territory laws. The Trade Practices Act applied generally to trading and financial corporations, but had limited reach to individuals. Hence, many of the provisions of State and Territory Fair Trading Acts mirrored those of their federal analogue but extended them to apply to persons not subject to federal regulation for constitutional reasons. However, other State and Territory legislation went further, such as Victoria's which had provisions dealing with "unfair" contract terms[53].

50. The governmental compromises that resulted in the Australian Consumer Law saw the introduction of a national regime that deals in Pt 2-3 of the Law with terms that are found to be "unfair" in standard form contracts entered into by a member of a particular class of consumers. But, the persons who can seek relief are not "consumers" as that word is defined in s 3 of the Law. Rather, s 23 identifies a class of "consumer contracts" that can contain an "unfair" term for which the Law provides a remedy. A consumer contract for these purposes is one for the supply of either, first, goods or services or, secondly, an interest in land, in each case, to an individual who makes that acquisition wholly or predominantly for personal, domestic or household use or consumption.

51. Needless to say, much of the wording of these provisions is repeated in Subdiv BA of Div 2 of Pt of the Australian Securities and Investments Act 2001 (Cth), which for some reason has to deal separately with a standard form contract for a financial product or supply, or possible supply of financial services to a member of the same class[54].

52. Take for example, a bank acting under its power of sale as mortgagee in possession which also happens to be financing the incoming home purchaser. It will have to navigate not one, but two federal Acts of some perplexing complexity to consider whether a court one day may find a term in either the contract for sale of the home or its mortgage is "unfair". I dare not mention the National Consumer Credit Protection Act 2009 (Cth) and its National Credit Code. The obvious issue is that all of this legislation requires the consumer's contractual counterparty to spend a lot of time, effort and money in complying. That cost has to be passed on in the form of higher prices charged by the non-consumer party or it may result in a reluctance in, at least some, market participants to offer the particular goods, services or interests in land to consumers. Those matters can have an impact on the efficiency of competition in the market, the availability of choices to consumers and the prices they must pay. Of course, the concerns with these impacts are not just the legal questions which they create for commerce and the Courts. There is also concern about the degree of coherence in piecemeal regulation using such complex forms imposed by the nation's various Parliamentary and government bodies.

53. Worse still is the fact that within the Australian Consumer Law itself, there are other specific situations in which separate definitions of "consumer" regulate relations between such persons and others. Thus, for the purposes of the product safety provisions in the Law, s 2 has its own definition of "consumer goods".  Those are goods that are intended, or are of a kind likely, to be used for personal domestic or household use or consumption. There is a further category of persons entitled to protection created by ss 21 and 22, this time from unconscionable conduct. That category comprises any person, other than a listed public company. Jacqueline Downes' article, The Australian Consumer Law – is it really a new era of consumer protection?[55] discussed how this definitional morass creates practical, commercial and legal problems for someone who deals with more than one of the three different defined classes of "consumer" and the additional class of persons not being listed public companies. She concluded that "in attempting to be too prescriptive in some areas, [the Australian Consumer Law] runs the risk of over-legislating rather than relying on the broad principles espoused by the Productivity Commission."[56]

54. These examples illustrate how the Commonwealth's current legislative style, that seeks to provide for every conceivable alternative or situation, risks losing sight of the wood for the trees. Principles based drafting of legislation, in general, identifies the broad nature of the target that Parliament wants to hit and leaves it to the Courts to work out answers, in the pragmatic cauldron of litigious situations dealing with specific facts.

55. The Law Reform Commission of Victoria stated in 1992 that a successful code should have two basic characteristics, namely, first, it must be the only authoritative statement of law, functioning as a "clean slate" and, secondly, "its propositions must be both sufficiently specific to serve as points of certainty and sufficiently general to be enduring"[57]. Those characteristics underlie the civil law system. For centuries these substantially informed the common law system as well. Simplicity and succinctness aid, first, comprehension and, secondly, identification of the purpose of the provision. That Commission also sagely opined: "The belief that detailed rules can produce certainty, by doing away with looking at the facts, is a delusion".

56. The current Commonwealth legislative draft style's enthusiasm for unbridled prolixity to deal with the minutiae of every conceivable possibility simply confuses and, because its authors are human, leaves holes or creates anomalies. It is untenable to suggest that non-lawyers or "consumers" can find their way around this legislative blancmange. That is because they have no concept of the principles of statutory construction, including that the legislation must be read as a whole and that different statutory expressions ordinarily will be consd to give each a different meaning. Legislative phone books are not user friendly for anyone, including their intended targets or beneficiaries, let alone professionals who must give advice on them or judges who must cons and apply them as the law of the land.

57. On 12 June 2013, the United Kingdom Government published a draft Consumer Rights Bill 2013 (UK). The accompanying explanatory notes identified general agreement across business and consumer groups that that country's existing consumer law was unnecessarily complex, as well as being, among other things, fragmented. The proposed Bill is only about 40 pages and 86 sections long, excluding a substantial number of schedules that amend other legislation. It defines "consumer" in cl 2(3) as "an individual acting for purposes that are wholly or mainly outside the individual's trade, business, craft or profession". There are some limited exclusions from that definition[58], including where the individual buys secondhand goods at a public auction that individuals have the opportunity of attending. The substantive text of the Bill covers, among other matters, sales of goods, digital content, unfair contract terms in relation to consumer contracts and the powers of regulators and courts. It seeks to locate all consumer rights in the new legislation and to amend existing legislation to remove its application to consumers as defined in cl 2 of the Bill. The Bill will no doubt be a topic of consideration at this conference.

58. The UK Bill still has areas of complexity but these look simple compared to the Australian behemoth's intricacies. Indeed, in June 2011, Alison Williams and Professor John Carter lamented that despite the fact that one of the stated objectives of the Australian Consumer Law was to consolidate existing consumer protection into one national regime:

"… it would appear that no serious analysis has been undertaken to look at how rights and obligations under the Act will operate together with rights and obligations that still exist under the state and territory Sale of Goods legislation – the impact could be to lessen the effect of the ACL and create confusion for consumers."[59]

59. They also commented that other failures of the consolidation attempt were that State and Territory Fair Trading legislation still existed and, as mentioned above, there was no single definition of "consumer". They noted that the non-excludable consumer guarantees would apply beyond matters such as title and quality and to transactions in which the "consumer" was actually a business. Those commentators made the valid point that the pervasive application of those guarantees is hard to justify in the context of the supposed purpose of the Australian Consumer Law as being the protection of consumers. They concluded:

"While the intention behind the ACL is laudable, it is a shame that the final version of the ACL does not do more to provide a workable regime which is focused on the needs of '' consumers."

60. I can only add that this lack of coherence is typical of modern Commonwealth legislation. It is generally labyrinthine. But then, what would one expect from the drafters who produced the Commonwealth's incomprehensible taxation laws and gave up the simplification attempt in the half written Income Tax Assessment Act 1997 (Cth)? This lack of legislative clarity and succinctness raises real issues for the rule of law in our country[60].

Electronic Consumer Contracts

61. The sale of one's immortal sole as part of an online contract is not the only agreement one can make on the internet. More and more of our ordinary retail and commercial dealings, as individuals, as well those of businesses, occur online. Some of these contractual dealings are regulated by statute, such as the facultative Electronic Transactions Act 1999 (Cth). Part 2A of that Act makes provision in respect of the use of electronic communications in the formation and performance of a contract. This gives effect, as a law of general application, to a number of concepts used in the United Nations Convention on the use of Electronic Communications in International Contracts[61]. However, that convention applies only to the use of electronic communications in connection with the formation or performance of contracts between parties whose place of business is in different countries. It also does not apply to contracts concluded for personal, family or household purposes[62].

62. That exclusion has not been carried over into the Electronic Transactions Act. That Act, like the convention, provides in s 15D that if a natural person makes an input error in an electronic communication exchanged with an automated message system of another party, and that system does not provide the person with an opportunity to correct the error, then the person, or party on whose behalf he or she was acting, has a limited right to withdraw the erroneous part of the communication. The right can be exercised if the person or party notifies the other party of the error as soon as possible after learning of the error, indicates that he or she made that error in the communication and he or she has not used or received any material benefit or value from the goods or services, if any, received from the other party[63]. However, that right is not, of itself, a right to rescind or otherwise terminate the contract.  The consequences of the withdrawal of the erroneous portion of the communication under s 15D must be determined in accordance with any applicable rule of law[64].

63. The common law rules for formation of a contract, including as to the incorporation of terms, apply to online dealings[65]. These rules can interact with the parties' rights in a variety of ways when a contract is made online, as I discovered when eBay sued the promoter of the Big Day Out music festival in December 2006. That festival has taken place for many years in late January or early February at venues at the Gold Coast in Queensland, Sydney, Melbourne, Adelaide and Perth. Australian and international performing artists appear at each venue. eBay alleged that the promoter had engaged in misleading or deceptive conduct.

64. As is well known, eBay operates websites here and internationally as online market places on which registered users can buy and sell almost anything. Big Day Out's promoter had a condition of sale printed on its tickets that was specifically directed to online market or auction sites, such as eBay. That condition provided that if a ticket were resold for profit it would be cancelled and the holder would be refused entry. eBay contended that this condition conveyed misleading representations that every ticket resold for profit would be cancelled, its holder would be refused entry to the Big Day Out concert, the promoter had that means to detect and cancel such tickets and the condition actually was enforceable. There were four different ways that the tickets were sold that created four different contractual situations, namely: online sales from either the Big Day Out website or from the ticket agency Ticketmaster, and direct over the counter sales from Ticketmaster or a retailer. 60% of sales were made online.

65. All of the tickets for the 2007 concerts had the condition against resale printed on their reverse. However, the online version of the terms of ticket sales on the promoter's agent's website initially had a different and less assertive version of the condition against resale for the initial selling period that had been used for concerts in previous years.

66. I decided that the promoter's use of the condition against resale was misleading: eBay International AG v Creative Festival Entertainment Pty Ltd[66].  The common law provides that where a person purchases a ticket that contains terms, such as an exemption clause or a foreign jurisdiction clause, the issuer cannot rely on such clauses unless it did all that was reasonably necessary to bring those terms to the other party's attention at or before the time of sale[67]. Many online purchasers knew nothing of the impugned condition because, at the time of their purchases, only the condition from previous years was on the website and, as I found, formed part of the contract. Accordingly, the condition printed on the ticket which the purchaser received in the mail had no contractual force.

67. In contrast, the Ticketmaster website for online sales did not give any notice at all of the condition against resale. The first a purchaser would know of it was when he or she received the ticket in the mail and only then, if he or she read it[68]. Again, for the online purchasers from Ticketmaster, the condition was unenforceable for the reason that Lord Denning MR gave for refusing to give effect to an exclusion clause on the reverse of a parking station ticket. He said in his inimitable style, in Thornton v Shoe Lane Parking Ltd[69]:

"All I say is that it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. ... In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it - or something equally startling."

68. When a person bought a ticket over the counter from Ticketmaster, once again the first he or she knew of the impugned condition was after payment. Another printed condition provided that no refunds would be made after purchase. Once again, at common law, this condition was not part of the contract.

69. After the promoter became aware of eBay's complaint, it arranged, perhaps conscious of Lord Denning's admonition, for its other retailers to have A4 or A3 displays of the ticket conditions, including the one prohibiting resale for profit which was printed in red ink. However, there was no evidence of how many tickets were purchased when those displays were apparent. The promoter had no way of knowing if a ticket had been resold, let alone resold for profit, unless it was lucky enough to ascertain any ticket numbers that might have been shown on eBay by a proposing vendor[70]. Thus, the promoter was enjoined from seeking to enforce the condition against resale at a profit.

70. Whether this was a victory for consumer protection was a moot point. The promoter's purpose in drafting that condition was to discourage "scalpers". All the tickets for the Sydney concert available through Ticketmaster were sold within 2.5 hours. I said at the end of my reasons that the result was unfortunate because the promoter had been trying to protect the market from cynical exploitation by scalpers who had created an artificial scarcity of tickets and:

"The scalpers then use sites such as eBay's webpages to make large profits for themselves. eBay itself profits from this practice. While there may be cases in which purchasers of tickets who bought intending to attend a Big Day Out festival subsequently find themselves unable to attend and need to sell, the evidence suggests that most sales on eBay are by scalpers preying on the desire of music fans to attend an event which was sold out early to scalpers."[71]


71. Of course there is a question of policy for Parliaments whether legislation is necessary to protect individuals, and perhaps some small businesses, from inappropriate use by a trader or supplier of services of its freedom either to impose some contractual terms or not to accept some responsibility. But, when legislatures chose to enact rights and obligations that are intended to protect or benefit a class of persons, it will help for them first to engage in some clear thinking about exactly what is the target and how to hit it.

72. Consumer protection legislation should be well thought through, clear, succinct and have an intelligible purpose. It should not result in significant "collateral damage" to unintended or unnecessary targets. A shotgun approach is not likely to be beneficial. Nor should a law impose disproportionate burdens on the whole community through increased costs, greater need, if not necessity, for every level of commerce to use professional advisers such as lawyers, and increased use of litigation over Delphic, legislative cascades of alternative causes of action.

73. In my opinion, the current consumer Law regime in Australia could do with a comprehensive review by the Australian Law Reform Commission, aided by references from each of the States and Territories. That body has a history of thorough research and excellent drafting. It also has the advantage of being objective and disengaged from the many different agendas that are evident in the cacophony of the current so called "consumer protection" laws in this country. At the moment, it is difficult to discern any underlying purpose in what are called "consumer protection" laws in Australia. It is now even harder to read and understand them. That situation is a signal that reform is needed.

* This paper was presented on 2 July 2013 at the 14th International Association of Consumer Law Conference, held at the University of Sydney

[1] Suisse Atlantique Société D'Armement Maritime SA v N V Rotterdamsche Kolen Centrale [1967] 1 AC 361 at 406C

[2] Lockyer v Offley (1786) 1 TR 252 at 259 per Willes J

[3] See "Introduction to First Edition (1894)", reproduced in Chalmers' Sale of Goods Act 1979 (1981: 18th ed) Butterworths, London, at ix

[4] done at Vienna on 11 April 1980

[5] (1703) 2 Lord Raym 909 at 914-915, 918; (1878-1865) 92 ER 107

[6] because in those days they were all men

[7] the third category of bailment: Coggs 2 Lord Raym at 916

[8] Thomas National Transport (Melbourne) Pty Ltd (1966) 115 CLR 353 at 367 per McTiernan, Taylor and Owen JJ; see too Shee, W, Tenterden's Law of Merchant Ships (1867: 11th ed) at 304-305, 337; Carver, T G: A Treatise on the Law Relating to the Carriage of Goods by Sea (1900: 3rd ed) Stevens & Sons, London, at 1-8

[9] Nugent v Smith (1876) 1 CPD 423 at 427 per Cockburn CJ

[10] (1991: reprint) Dover Publications, New York, see "Lecture V, Bailment" at 205

[11] citing Jessel MR in Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 at 465

[12] Knauth AW, Ocean Bills of Lading (1947: 3rd ed) American Maritime Cases Inc, Baltimore, at 108

[13] Nugent 1 CPD at 427-418

[14] Knauth: op cit at 108

[15] s 3

[16] 161 US 459

[17] 161 US 459 at 471-472

[18] American Net & Twine c. v T Worthington 141 U. S. 468, 474

[19] Carriage of Goods by Sea Act 1904 (Cth), Shipping and Seaman Act 1903 (NZ) and Water Carriage of Goods Act (R.S.C. 1985, c. C-27 (repealed)) respectively

[20] The Protocol was adopted in Brussels on 3 February 1968 and entered into force on 23 June 1977

[21] These are called the "amended Hague Rules – unmodified text". The Act also includes a unique modification of the Hague-Visby Rules implemented by Australia in 1998, contained in Schedule 1A.

[22] Sturley, MF, "The History of COGSA and the Hague Rules" (1991) 22 (1) J Mar L & Com 1, 25-27

[23] Sturley, MF, The Legislative History of the Carriage of Goods by Sea Act and the Travaux Préparatoires of the Hague Rules – Volume 1 (1990) pp 12, 423

[24] done at New York on 11 December 2008

[25] Hailey, R, "European shippers slam draft UN cargo rules", 4 July 2008, Lloyd's List online, 7th ed

[26] UNICTRAL (41st session, New York, 16 June - 3 July 2008) A/CN.9/658

comments by Governments and intergovernmental organizations – States – Australia – 14 April 2008, "General comments on the text as a whole", par 8

[27] Sale of Goods Act 1923 (NSW)

[28] s 17(1)

[29] s 17(2)

[30] s 17(3)

[31] s 18

[32] regardless of whether the seller is the manufacturer or not

[33] s 19(1)

[34] s 19(2)

[35] s 64(1)

[36] s 64(5), (6)

[37] [1936] AC 85; (1935) 54 CLR 49

[38] Viscount Hailsham LC, Lords Blanesburgh, Wright and Macmillan and Sir Lancelot Sanderson

[39] [1936] AC at 98

[40] [1936] AC at 99

[41] [1936] AC at 100

[42] [1936] AC at 105

[43] [1932] AC 562 at 599

[44] [1936] AC at 105

[45] Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45

[46] [2012] FCA 1028

[47] (1996) 185 CLR 43

[48] then s 74 of the Trade Practices Act

[49] then s 68A

[50] 185 CLR at 52

[51] L Griggs, A Freilich and E Webb: (2011) 19 Competition and Consumer Law Journal 52 at 55

[52] (1954) 91 CLR 288 at 298

[53] Pt 2B of the Fair Trading Act 1999 (Vic) and see too the Unfair Terms in Consumer Contracts Regulations 1999 (UK)

[54] s 12BF

[55] (2011) 19 AJCLL 5

[56] ibid 26

[57] Discussion paper No 27: An Australian contract Code (September 1992) Law Reform Commission of Victoria at p 4.

[58] in cl 2(5) and (6)

[59] Williams, A and Carter, J, Thinking about the new Australian Consumer Law (2011) June Competition and Consumer Law News at 90-93

[60] see my recent discussion in Rights, Legality and Statutory Interpretation, presented at the 2013 AGS Administrative Law Conference, Canberra, 20-21 June 2013

[61] done at New York on 23 November 2005

[62] Art 2(1)

[63] s 15D(2)

[64] s 15D(3) and (4)

[65] see generally: S Blount, Electronic Contracts: Principles from the Common Law (2009) LexisNexis Butterworths, Australia)

[66] (2006) 170 FCR 450

[67] see 170 FCR at 456-457 [19]-[22]

[68] 170 FCR at 463 [45], 465 [53]-[55]

[69] [1971] 2 QB 163 at 170D

[70] 170 FCR at 469 [74]

[71] 170 FCR at 471 [82]

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