BUSINESS LAW CASE STUDY

  • Category:
    Law
  • Document type:
    Case Study
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    1747

BUSINESS LAW 8

Business Law — Case Study

Business Law — Case Study

Introduction

Massive Freak was advertised as a new meal that could be consumed by anyone seeking to increase weight. According to the advertisement, the consumer who takes the new meal three times a day for two weeks would without a doubt gain 20 per cent weight. The ad further states that anyone who fails to achieve the 20 per cent after the required 14 days would be paid $5,000. Although the company scrapped the ad, Bill has the right to sue Massive Freak Drink Co for deception, especially after the company representative admitted that the money was simply part of the sales drive. Basically, the advertisement was telling half-truths; therefore, the company is conducting itself in a deceptive and misleading conduct. Making an incorrect statement with the objective of driving sales as evidenced by Massive Freak Drink Co is unacceptable in Australia because it is likely to generate a false impression. Deceptive advertisements and providing half-truths information to the customers in punishable in Australia as pointed out by section 18 of the Australia’s Consumer Law. The common law prohibits companies from taking part in deceptive and misleading conduct. Considering the common law, this case study seeks to establish whether there is a valid and legally binding contract between Bill and Massive Freak with the objective of ascertaining whether the company can be sued for breach of contract.

Discussion

There is an increasing complaint against advertising because many companies are providing untruthful and misleading with the goal of deceiving consumers. As a result, this has led to a general distrust of advertising amongst end-users. Although a number of advertisers have overtly made misleading or false claims, the common law requires them to be honest.1 Still, deception may happen more imperceptibly because of how advertisements are perceived by consumers. It is not easy to determine what could amount to deception and the issue is complicated by the fact that companies have the right to make claims that are subjective. In Australia, the government has tried to control and regulate misleading advertising with the goal of protecting the customers. The contract between Massive Freak Drink Co and Bill is binding because there was an offer and acceptance, which included the exchange of promises ($5,000 if the bill fails to gain 20% of body weight in two weeks) to provide money. The promised money is known as ‘consideration’; therefore, the exchange of consideration between the company and Bill makes the contract to be enforceable and binding. However, the $5,000 promise was deception and untrue, so it is the responsibility of the court to determine whether the consideration exists as well as its adequacy. Information flow between a consumer and the business is addressed by numerous laws.2 In Australia, the common laws protect consumers from neglectful misrepresentation, deceitful torts, defamation and nondisclosure; false advertisements; and other forms of deceptions.

The Australian and Consumer Law (ACL) disallows a corporation or person to get involved in commerce or trade in a deceptive or misleading way such as false advertisements. Without a doubt, the law protecting customers from deceptive or misleading conduct is protected vigorously in Australia. In this case, Massive Freak Drink Co has breached section 18 of Australian and Consumer Law that protects customers like Bill from deceptive or misleading conduct. Imperatively, Section 18 defines what constitutes deceptive or misleading conduct, but does not precisely generate any form of liability, which is normally found in the common law. Besides that, section 18 focuses more on inaugurating the conduct norms from a corporation or an individual taking part in commerce or trade. Therefore, when Bill sue Massive Freak Drink Co for breach of contract, the court will have to interpret the provisions of section 18 so as to determine whether any form of breach has occurred. To establish a breach, three elements have to be met; first, the conduct of the company must cause uncertainty or confuse the public. Specifically, the advertisement must be deceptive or misleading when compared with the conduct impact on the targeted public (in this case, the skinny people like Bill). A conduct can be considered deceptive and misleading through statements, advertisements with puffery or behaviours that infringe the requirements stipulated by the common law.3

Secondly, for the company’s activity to breach the binding contract, the activity should have some aspect of commerce or trade. Lastly, there should proof that the company’s activities are deceptive or misleading in order for a corporation or an individual to be found guilty of breaching section 18. With regard to false advertising allegations, a number of companies normally fail to stand by the accuracy of their assertions. Massive Freak Drink Co did not try to prove to its customers that its products are the best in Australia; rather, they principally admit that the promise of $5,000 was a misleading statement that sought to drive the company’s sales. Therefore, the company’s ad seemed to associate with facts instead of opinion, especially about price and quality, including false statement was a breach of the common law requirements. Although the statements provided by the company appear factual, the ad violated the binding contract between the company and Bill because it was deceptive and misleading. When determining the conduct of the company, the court will have to determine whether or not the advertisement induced an error or expressed a deceitful meaning. With the view to the common law, plaintiffs must provide a substantial evidence of false accusation intended for achieving competitive advantage.4 Under the Consumer Law, besides the statutory responsibility that exists pertaining to every form of advertising, companies are expected to adhere to the ethical obligations, which are directly appropriate to advertising and are sourced from the country’s common law. The common law stipulates that companies have to make sure that their advertising or any form of promotion is not deceptive, misleading or false. Furthermore, the advertisement should not be offensive or manipulative.

Basically, there is a breach of contract because one of the terms and conditions that Massive Freak Drink Co laid out in the contract while selling the product to Bill has broken. Therefore, breaching the contract has resulted in the breaking down of the contract; therefore, a claim for damages through legal action is the viable solution for Bill. Because of the strong effect of advertising, it was the company’s moral duty to ensure they are ethical while marketing its products. The advertising objective must be the consumer guidance instead of deceiving and blackmailing them so as to buy the product. Massive Freak Drink Co should have carried out its advertisement in an effective and proper way, and this could have enabled the company to improve its market share and brand image. However, the company decided to use the deceitful statement to attract desperate customers like Bill. There are some technical requirements stipulated by the Australian Food Standards Code on every aspect of beverages and food as well as information needed for the packaging. Some restrictions have been set out by the Code for companies that make claims about nutrition and health in advertising.5 Therefore, Massive Freak Drink Co violated the code by claiming that its product has weight-increasing properties. Australian Consumer Law regulates the food advertisement in Australia and ensures that claims made by companies in advertisements are not deceptive or misleading. The company used quality descriptors like “20 per cent weight gain in 14 days,” but these claims as experienced by Bill was not true. Therefore, the company has not just violated the Australian Consumer Law, but also the binding contract with its customers because of its false representation concerning its product. The breach is attributed to the intentional misrepresentation of information with the objective of attracting more customers and driving sales. Knowingly, Massive Freak Drink Co made erroneous representations concerning their product and this false representation is without a doubt a violation to Australian Consumer Law; as a result, it should carry higher penalties.

Conclusion

is untrue, inaccurate and cannot be substantiated. Besides that, the company has breached the binding contract with its customers and has also violated the Australian Consumer Law; therefore, it should be sued and forced to compensate bill for proving misleading information and also be penalised for violating the common law. In Australia, the common law ensures fair business practices, but providing a misleading statement can result in reduced consumer trust as well as poor relationships between the company and customers. Therefore, Bill right to fair marketing has been violated since the company has not adhered to the consumer protection rules outlined by the Australian Consumer Law. The company deceived the customers that if they do not gain 20% of their body weight in two weeks’ time they will be rewarded $5,000 dollars; however, this was a false statement that sought to drive sales and can be deemed as a breach of both Australian Consumer Law and the binding contract with the customers. Massive Freak drink The company’s advertisement representing the valid and legally binding contract between Bill and Massive Freak; therefore, the company should be sued for breach of contract. case study has demonstrated that there is a thisIn conclusion,

Bibliography

Edman, Thomas W., ‘Lies, Damn Lies, and Misleading Advertising: The Role of Consumer Surveys in the Wake of Mead Johnson v. Abbott Labs’ 2001 43(1) William & Mary Law Review 419.

FindLaw Team ‘Deceptive and misleading conduct by corporations: the provisions’, FindLaw Australia, (online), 2016 <http://www.findlaw.com.au/articles/4433/deceptive-and-misleading-conduct-by-corporations-t.aspx>.

Klass,
Gregory, ‘Meaning, Purpose, and Cause in the Law of Deception'(2012) 100 The Georgetown Law Journal 454.

Montibeler, Leanne and Tony Anisimoff, ‘A Hitchhikers Guide to Advertising Law in Australia’ Anisimoff Legal (online),
17 July 2014 <http://anisimoff.com.au/publication/al14/>.

Waller, David S., ‘Photoshop and Deceptive Advertising: An Analysis of Blog Comments’ (2015) 3(1) Studies in Media and Communication 110.

1
David S. Waller, ‘Photoshop and Deceptive Advertising: An Analysis of Blog Comments’ (2015) 3(1) Studies in Media and Communication 110.

2
Gregory Klass, ‘Meaning, Purpose, and Cause in the Law of Deception'(2012) 100 The Georgetown Law Journal 454.

3
FindLaw Team ‘Deceptive and misleading conduct by corporations: the provisions’, FindLaw Australia, (online), 2016 <http://www.findlaw.com.au/articles/4433/deceptive-and-misleading-conduct-by-corporations-t.aspx>.

4
Thomas W. Edman, ‘Lies, Damn Lies, and Misleading Advertising: The Role of Consumer Surveys in the Wake of Mead Johnson v. Abbott Labs’ 2001 43(1) William & Mary Law Review 419.

5
Leanne Montibeler and Tony Anisimoff, ‘A Hitchhikers Guide to Advertising Law in Australia’ Anisimoff Legal (online),
17 July 2014 <http://anisimoff.com.au/publication/al14/>.