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Consumer Law
South Texas College of Law Houston
Bauman, John H.

CONSUMER TRANSACTIONS OUTLINE

FINAL EXAM

· Essay question on Insurance

· Essay question on Debt Collection

· The rest of the exam will probably be multiple choice

Chapter 1: Introduction to Consumer Law and the Texas DTPA

· §17.42

· DTPA is not waivable unless

o The waiver is in writing and signed by the consumer

o The consumer is not in a significantly disparate bargaining postion; and

o The consumer is represented by legal counsel in seeking or acquiring the goods or services

· A waiver is not effective if the consumer’s legal counsel was directly or indirectly, suggested, or selected by a defendant or agent of the defendant

· §17.46 – Deceptive Trade Practices Unlawful

o The 27 listed actions are the only causes of action that a consumer may seek protection from under the DTPA

· §17.49 – Exemptions

o The items covered under this section are exempted from the clutches of the act

o Subsection (a) is the “media exemption”

§ When a newspaper acts as a third party publishing a deceptive ad may not be held accountable unless they knew the ad was false or misleading

o Subsection (c) is the “professional judgment relief”

§ DTPA shall not apply to a claim for damages based on the rendering of professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill, BUT

§ There are EXEMPTIONS

· §17.50 – Relief for Consumers

o (a) Cause of action provision

o (b) the damages provision

o (c) defendant court costs

o (h) is the Tie in Provision

· §17.505 – Notice; Inspection

CHAPTER 2 INRTODUCTION TO THE DTPA

· Overview of the DTPA

· Elements of DTPA

o The plaintiff must be a CONSUMER

o §17.50 – The defendant must have committed one of the following four:

§ (1) use or employment of a false, misleading, or deceptive act or practice that is:

· (A) specifically enumerated in 17.46; and

· (B) relied on by the consumer to their detriment

§ (2) breach of an express or implied warranty;

§ (3) any unconscionable action or course of action by any person; or

§ (4) use or employment of an act that is in violation of the Insurance Code

o The violation was the producing cause of economic or mental anguish damages

· Who is a Consumer?

o Any person seeking to file a claim under the DTPA must have consumer status

§ Consumer status gives the plaintiff standing to sue under DTPA

o Consumer status: Statute

§ Must “seek or acquire”

§ By “purchase or lease”

§ Any “goods or services”

o Consumer:

§ An individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that has assets of $25 million or more, or an entity that has $25 million or more

· §17.45

o Goods—tangible chattels or real property purchased or leased for use

o Services—work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods

· The “TWO-PART TEST”

o (1) The person must have sought or acquired goods or services by purchase or lease; AND

o (2) The goods or services purchased or leased must form the basis of the complaint

o Lisa Kincaid v. Cummins Engine Co.

§ Negotiating a settlement agreement is not a consumer transaction and the Kincaids were not consumers

· The negotiations are not for the purchase or lease of goods or services rather it was negotiations to resolve their complaint regarding the truck’s engine

· SEEK OR ACQUIRE

o Consumer rights can run to third parties without privity of contract based on:

§ Primary intended beneficiary

· If the intent of one party’s act is directly for the benefits of third party the duty runs to all members who are intended beneficiaries

§ Incidental beneficiaries

· If a transaction was done without the primary intent being a benefit to a third party then there is no duty to that third party

o Service Corporation International v. Estela Aragon

§ A plaintiff does NOT have to establish privity of contract to be a consumer

§ A plaintiff’s standing as a consumer is established by their relationship to the transaction

§ A third-party beneficiary may qualify as a consumer as long as the transaction was specifically required by or intended to benefit the third party and the good or service was rendered to benefit the third party

§ You must look at whether the third-party was

· (1) the primary intended beneficiary; or

o Ex. Recipients of insurance benefits from employer

· (2) if they were incidental beneficiaries

o Ex. Heir to a will

o Michelle Rivera v. South Green Limited Partnership

§ As an unintended beneficiary to a contract there is no consumer status and therefore a cause of action under the DTPA is not valid

§ A contract between and employer and a security company is only incidentally beneficial to the employees of the contract and does not give standing for a DTPA suit

· Does a DTPA cause of action survive death?

o DTPA claims do not survive the death of the plaintiff-consumer and cannot be pursued by the consumer’s estate or by individual beneficiaries of the consumer’s estate who are not themselves “consumers”

· Can DTPA actions be assigned?

o DTPA claims are not assignable

o If a third party purchases a property they are only allowed for a breach of warranty suit and not a DTPA claim against the builder

· Assignment interlude

o Dale buys a previously owned car from Mike Hack Auto, which makes several express warranties, including one about the car’s mileage. He sells it to Lucky assigning him all rights. Lucky learns the odometer has been tampered with.

o What causes of action can Lucky bring?

§ Lucky can bring a warranty claim outside of the DTPA but does not have a DTPA claim

· BY PURCHASE OR LEASE

o Roderick B. Rayford v. Jani Maselli

§ To be a consumer you must purchase or lease goods or services

§ Gratuitous services are NOT purchased and do not give rise to consumer status

o Kenneth F. Jones v. Star Houston, Inc.

§ A person does not have to pay for goods or services to be a consumer under the Act.

· A warranty repair that is done for free is paid for during the purchase of the automobile

§ Payment is not determinative of DTPA bc their standing is determined by their relationship to the transaction, not their contract

· ANY GOODS OR SERVICES

o GOODS

§ Tangible chattels or real property purchased or leased for use

· For use:

o Items do not have to be used up but they must be used

o Ex: (1) purchase for resale; (2) Purchase of cattle as breeding stock

· Intangible assets such as securities or a businesses good will DOES NOT constitute a “goods”

o James Knight v. International Harvester Credit Corporation

§ Credit is NOT a good or service

· A person seeking only and advancement of money or credit is not purchasing a good

§ But credit used for the purchase of a good is grounds for standing as a consumer

· But if the credit is afforded to purchase a good such as a dump truck then the purchaser is a consumer

o SERVICES

§ Work, labor, or services purchased or leased for use, including services furnished in connection with the sale or repair goods

o Kyle Allen v. American General Finance, Inc.

§ A borrower whose sole objective is a loan does not become a consumer merely because the lender provides services incidental to the loan that are not independent objectives of the transaction

§ However, when a borrower’s objective is to obtain goods and services and the loan provides the means for obtaining the goods or services, the borrower qualifies as a consumer

§ Likewise, when the borrower seeks services from the lender as an independent objective and not merely ancillary to a loan, the borrower is a consumer with respect to

a DTPA misrepresentation

o West Anderson Plaze v. Exxon Mehdi Feyznia

§ Section 17.46 (12) of the DTPA does not create a cause of action for ANY statement about contractual rights or obligations that is later determined to be incorrect.

§ The legislative intent rather than the strict letter of the law will be the controlling factor

§ The underlying purpose of the DTPA is to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty

§ Disagreements about the wording of a contract are the normal and do not entail unfairness or deception

· Therefore a contractual dispute over language is not a deceptive trade practice

· If the court allowed for the DTPA to be used in contractual disagreements over wording and not deception it would be used to reach absurd and unjust results

· This would create a chilling effect on business relations

§ Factors for the applicability of the DTPA

· Whether the representation was clearly factual, clearly interpretive, or some less clear combination of the two

· Whether the relevant contractual language was ambiguous or unambiguous

· Whether the parties were in a substantially equal position of knowledge and information

· Whether there was evidence of overreaching or victimizing

· Whether there was evidence of unconscionable conduct

· Whether there was a confidential or fiduciary relationship between the parties

o Who Can Sue Whom, and For What?

o Church & Dwight Co., Inc. v. Michael Huey

§ The manufacturer in any case involving DTPA must be connected to the consumer transaction in order to be held liable for deceptive trade practices

§ Component part manufacturers who have no control over the finished and marketed product cannot be held liable for DTPA to the consumer

o M. L. Bennet v. Lenore Bailey

§ Unconscionable act or course of action

· An act or practice which, to a person’s detriment:

o (a) takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree; or

§ grossly unfair

· glaringly noticeable, flagrant, complete and unmitigated

o (b) results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration

§ Taking advantage of a grieving widow and playing on her unstable emotions to induce her to sign expensive contracts was considered unconscionable and the court found that the defendant had employed deceptive trade practices

o Mills Latham v. Ernest Castillo

§ Can failure to file a lawsuit within the statute of limitations rise to a level of DTPA

· Yes if the attorney represents to the client they have filed the suit and are actively pursuing the claim

§ To have a claim under (a) for unfairness the result must be:

· Glaringly noticeable, flagrant, complete and unmitigated

§ A claim may have more than one legal basis in the law

§ A legal malpractice claim may also have in addition a DTPA claim

· The legislature intended for the DTPA to serve to deter deceptive business practices and to limit a plaintiff’s claims to one area of law would undermine the purpose of the statute