Damon's old car was worn out, and he decided he needed a newer model. Due to recent financial problems, Damon did not have enough funds to buy a new car so went along to a dealership with his elderly Aunt Anya who had poor English skills. Damon was like a son to Anya, and she would do anything to help him out. They both went to Auto City Ltd and there Damon saw a beautiful, black second hand MG MGB Limited Edition Overdrive Goede Staat 1979 on sale for $30,000.

After admiring the car for a while, a salesperson approached Damon, and asked if he would like to go for a drive. Damon instantly agreed. After the drive, he loved the car so much that he asked his Aunt Anya to be a guarantor for finance on the car. She agreed. It was clear to the Auto City representative that Anya's English skills were limited but they proceeded to enter a contract which could leave her with a lot more liability than she was able to afford. Damon was handed the ownership papers and keys to the car. As they walked back to the car, Damon wanted to make sure that he didn't miss any problems not apparent on his test drive so asked the salesperson to confirm that there was nothing wrong with the car. The salesperson gave him the thumbs up to indicate the car was definitely in good condition. Damon drove off proudly, but four months later the engine failed. The mechanic who was called found that the car was dangerous as it was rusted in places that were not ordinarily visible to someone without mechanical expertise. To make matters worse Damon had not been able to keep up with the finance payments so Auto City Ltd demanded the money from Aunt Anya who is shocked to learn she owes much more than she originally believed to be part of her contract due to high interest charged by the business.

Damon wants to sue Auto City Used Cars because the salesperson implied the car was in good condition. Auto City Ltd want to sue Aunt Anya for repayment of the loan.

1. Using ONLY the Common Law of Contract explain whether Damon could rescind his contract with the car dealer and whether Auto City Ltd can sue Aunt Anya for the repayments. Use case references to support your arguments.

2. Using the case study above in Question 4 and referring ONLY to the Australian Consumer Law explain whether Auto City breached Section 18 and/or any guarantees of the Australian Consumer Law allowing Damon to obtain a refund on any payment made so far on the car.