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Commercial Q&A: Fair Trading Act

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Key Issues

Before answering these questions you should be familiar with the following issues:

  • The situations where a person may be classified as being in trade for the purposes of the Fair Trading Act 1986.
  • In particular, you should be aware of the impact that continuity of business transactions has on determining whether a person is in trade.
  • The range of conduct that may be relied on in showing that there has been a breach of the FTA, including the factors that must be considered when deciding if silence is conduct.
  • The meaning of ‘misleading’ and ‘deceptive’.
  • Who would be considered the target audience for certain types of conduct and the characteristics of this audience.
  • In what circumstances the use of a disclaimer or clarifying statement may assist in preventing a breach of the FTA.
  • The requirements to show a breach of s 19, ‘bait advertising’, and the defences available to a trader.

 

Keep in Mind

  • Whether it was reasonable for a person to be misled in a situation where a person has been misled.
  • Accurately determine who the target audience may be.
  • Determine whether all requirements of a section have been proven.

 

Question 1

Tim visits Shoes For Less, a store that sells shoes at discounted prices. He spots a pair of shoes that look exactly like a pair of ‘Fins’ shoes, an expensive brand of shoes that are the latest fashion. The price of the shoes is well below what a pair of ‘Fins’ shoes normally cost. Tim, thinking the shoes are ‘Fins’, grabs a pair and rushes to the counter to pay for them. The sales assistant knows, but does not tell Tim that the shoes are actually made by ‘Crud’, a company that produces imitations of top-brand shoes. The shoes that Tim buys have a label inside the shoe bearing the

‘Crud’ trademark.

Explain whether Tim could take an action based on s 9 of the Fair Trading Act 1986.

Answer Plan

You will need to consider the following in your answer:

  • Are Shoes For Less and/or the ‘Crud’ shoe company in trade?
  • What conduct would Tim be relying on to show a breach of s 9?
  • Would this conduct be likely to mislead or deceive the target audience for the shoes?
  • Whom can an action be taken against? You need to discuss the liability of both Shoes For Less and the ‘Crud’ shoe company.

 

Question 2

Barry is a lecturer who decided to move to Dunedin to lecture at Otago University. Instead of selling his house in Palmerston North he chose to rent it. He contacted a rental agency called ‘Shady Rentals’ and requested they find suitable tenants. Barry gave the agents a written report on the property. The report described a backyard shed as being suitable for a workshop. Barry did not write in the report that the shed had been built over an old swimming pool. The pool was never in-filled; the shed floor is just planks of wood over the empty pool. Barry also did not include the fact that the wooden floor was rotten in some places. Shady Rentals did not know what the shed was really like as they did not inspect the property. They just handed Barry’s report to Jake (the new tenant) when he first inspected the property. Unfortunately Jake was using the shed to repair his motorbike when the floor collapsed and the bike fell into the old swimming pool causing a lot of damage. Jake would like to know if he can take an action against either Barry or Shady Rentals for a breach of s 9 of the Fair Trading Act 1986.

Answer Plan

You will need to consider the following in your answer:

  • Is Barry and/or Shady Rentals in trade?
  • Has Barry and/or Shady Rentals engaged in conduct?
  • Was any conduct misleading or deceptive?

 

For the full sample answers and more see Sayles Questions and Answers: Commercial Law (2nd ed, LexisNexis, Wellington, 2014).