Select Page

Consumer Transactions
South Texas College of Law Houston
Hague, David R.

Professor David Hague

Consumer Transactions

Fall 2014

Consumer Transactions Outline

I. Texas Deceptive Trade Practices Act

a. Intro

i. First created in 1973 to eliminate prior obstructions to consumers bringing suits (low dollar recovery, especially in light of litigation costs/high burden of proof for fraud). Atty fees being awarded can make these cases economically feasible to be tried.

ii. In 1995 Tort Reform set in, and DTPA claims have decreased, since there is now a cap on damages.

b. Exemptions – 17.49

i. Certain things are exempted from coverage of the DTPA.

ii. The impetus for the exemptions came when it appeared that there might be a DTPA case for things like legal malpractice. Attorneys didn’t want to be liable for treble damages and attorney’s fees.

iii. (a) The media is exempted from DTPA cases where they do things like running an ad in the paper (unless they knew it was false).

iv. (c) Legal malpractice cases are exempted from DTPA cases, except for 5 listed occurrences.

v. (e) Products liability cases

c. OVERVIEW OF THE DTPA

i. §17.50 (creates a private right of action for injured consumer) A consumer may maintain an action where any of the following constitute a producing cause of economic damages or damages for mental anguish (DTPA Causes of Action):

1. A false, misleading, or deceptive act or practice that is:

a. specifically enumerated in §17.46 (“the Laundry List”) AND

b. relied on by a consumer to the consumers detriment;

2. breach of an express or implied warranty;

3. An unconscionable action or course of action by any person;

4. a violation of the Insurance Code Ch. 541.

ii. Elements of DTPA Cause of Action

1. Plaintiff is a consumer (consumer standing)

2. Defendant committed a proscribed act in §17.50 (1 of the 4 cons. COA’s)

3. Defendant’s acts were producing cause of the consumer’s damages.

a. “but, for” causation, no forseeability requirement

iii. §17.44: Construction & Application

1. The DTPA is supposed to be liberally construed:

2. (a) This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.

d. CONSUMER STANDING REQUIREMENT — Element 1

i. Having status as a consumer gives a P standing to file suit under the DTPA. Without consumer standing, there can be no cause of action under the DTPA.

1. Whether a D commits a violation actionable under the DTPA is a different question than whether they have consumer standing.

ii. §17.45(4): DTPA definition of “Consumer”:

1. An individual, partnership, corporation, this state, or an agency

a. Businesses too can use the DTPA, not just individuals.

2. Who seeks or acquires

3. By purchase or lease

4. Any goods or services

5. The term does not include a business consumer w/ assets of $25MM or more or that is owned or controlled by a corp. or entity with assets of $25MM or more.

a. Big business limitation to keep the DTPA for small business & individual use.

b. Your DAS need to result b/c of your consumer status.

iii. Test for Consumer Status:

1. An individual, person, or state that:

a. Seeks OR acquires

i. If you buyà you acquire

ii. If you are in the process of buyingà you are seeking.

b. For purchase OR lease

c. Goods OR services AND

d. The goods or services purchased or lease must be the basis of the complaint.

2. The 2 part test:

a. P must have sought or acquired by purchase or lease some goods or services; AND

b. The goods or services purchased or leased must form the basis of the complaint.

3. Standard:

a. If facts are undisputed, then it’s a question of law for the judge.

b. If the facts to determine consumer status are disputed, then it’s a fact question for the jury.

4. “Seek or Acquire”

a. Do not have to purchase in order to have consumer standing, but it does makes it difficult to prove damages.

b. No privity of contract required for the plaintiff to have consumer standing.

c. Important aspect: look at the Plaintiff’s “relationship to the transaction.” NOT as to who sold it to you.

d. A third party beneficiary may qualify as a consumer if he’s a primary intended beneficiary (must be bought FOR this person; not just an “incidental benefit”).

i. If derived for the person, then they may be a consumer; EX:

1. If X buys service for Y, Y has consumer standing.

2. Employee complains about dust and employer buys that employee a respirator.

3. Funeral services are bought for the living relatives of the dead, so the family of the deceased are 3rd party beneficiaries.

4. Baby in hospital is the primary intended beneficiary.

5. Employer provided insurance — employee is primary intended beneficiary & insurance is purchased for that employee .

6. Ex. buying a plot of graveyard land for your husbandà is meant to benefit the wife and the kids.

a. What about the other relatives? They’re incidental beneficiaries. Close relatives are the primary beneficiaries.

ii. Incidental benefit à person is not a consumer:

1. Employer buys a forklift to be used during employee’s employment and forklift is defective and employee is injured.

2. Employee is injured at work by robber because security system was defective.

a. She sues the tenantsà bu

. Obtaining distributorshipà

1. Termination of a distributorship is not a good or service.

a. The goods themselves need to form the basis of the complaint.

iv. Franchise agreementsà

1. Might be a stronger argument than distributorship b/c you’ve purchased product in executing the franchise agreements.

v. Determining Factor: was the borrower’s objective solely to obtain a loan or to obtain a good or service?

vi. Is a good/service:

1. Financing as an objective to seek a good/service.

2. Borrower seeks substantive financial services from the lender independent of the loan.

3. Purchase of loan insurance in order to qualify for a loan, not incidental to the loan.

vii. Is not a good/service:

1. Only getting a loan unconnected w/ good/service

2. Re-financing : consumer only seeking $$.

3. Incidental services associated with getting a loan

4. Free goods associated w/ getting a good/service (i.e. take out a loan and get a free toaster)

7. The goods or services purchased or leased must be the basis of the complaint

a. Customer who is seeking to acquire goods from a store & then slips and falls in the store does not have consumer standing, b/c the basis of the complaint does not relate to the good or services being sought.

b. Kincaid: Plaintiff did not have standing because she did not purchase anything in the settlement agreement. If a settlement agreement about the good/services ensues and then the defendant does follow through with the settlement agreement, the resulting suit on the settlement agreement does not give the plaintiff consumer standing.

8. Examples:

a. Company A wants to buy Company B, requires an audit. Company B hires an accounting firm to conduct audit, and audit says B’s financials are good but they’re really not. Company A has consumer standing even though didn’t buy the audit. It acquired the audit and is a direct intended beneficiary. But if Company B just happens to have an audit on hand and gives to A, no consumer standing.

b. Student buys one netbook for all the professors to use in the lounge, and it blows up and injures Page. Page is direct beneficiary b/c he was here when student bought the netbook. (Newly hired professor would be an incidental beneficiary.)