Australia: An Introduction to Commercial Risk IV

The first article in this series identified that there is a particular and unique risk in trading with, or transacting in, Australia, and it focused on the statutory claim for misleading and deceptive conduct in trade or commerce, which is actionable regardless of intent. Part Two introduced the statutory claim for unconscionable conduct in trade or commerce, emphasising that the statutory concept will apply much more broadly than the equitable concept, which requires a disability that is evident with the result that there is an absence of a reasonable degree of inequality. Part Three looked at remedies and this article, Part Four, considers what might be done to regain a degree of party autonomy by contractual drafting.

The previous articles in this series made two key points which anyone doing business in or with Australia needs to know. The first was that the statutory claims cannot be simply avoided by contractual exclusion. The second was that the available remedies are far broader than familiar remedies at law and are a matter of judicial discretion. In theory at least, the statutory claims are indifferent to the parties’ intentions.

Because the liability enquiry is essentially factual, two things follow.

First, standard drafting techniques such as boilerplate disclaimers and no reliance clauses will not simply be accepted at face value. It depends on the broader circumstances at the time of contracting. For example, if a party actually turns its mind to the contents of a clear and specific risk identification in a contractual instrument, then that may be enough.

One argument that has been tried is to draw a distinction between misleading and deceptive conduct, which results in a contract containing a disclaimer and contravening conduct which does not. The contention in effect was that it was not contrary to public policy to exclude liability unless the exclusion itself was procured by deception. That argument is now ruled out. That is, it does not matter whether the instrument containing the disclaimer is not itself procured by contravening conduct, the disclaimer will not take effect regardless – it will simply be part of the broader factual inquiry into whether conduct was actually misleading.

However, it follows that appropriate drafting may be practically effective as part of the evaluation of the course of conduct as a whole. Entire agreement clauses may assist, as may “own enquiry” provisions. The more complex the factual setting, the more difficult it will be, particularly if the opportunity for investigation and verification is limited. This is a common problem in complex procurements. Another technique is pre-settlement of claims in the contractual instrument itself.

Finally, it is not uncommon now to see warranties given by recipients of information to the effect that they have not been misled. This is often accompanied by a provision that the information provider has relied on the recipient’s warranty. The idea is that a contravenor may thereby neutralise the consequences of any contravening conduct, even though it cannot avoid its effect on the recipient by an exclusion clause. One difficulty with this approach is that it will likely fail to create a liability in the recipient which matches the contravenor’s own liability. This is because the counterfactual is not equivalent.