The unfair contract provisions under the Trade Practices
Amendments (Australian Consumer Law) Act 2010
("Act") came into force on 1 July 2010.
This means that standard form consumer contracts entered into from
1 July 2010 are subject to the unfair contract provisions of the
What types of contracts are subject to the unfair contract
The unfair contract provisions apply to unfair contract terms in
"standard form consumer" contracts.
Standard form contracts are widely used for financial products
and services such as loans, credit cards, telecommunications
products and utilities services.
"Consumer" contracts include contracts for the supply
of goods or services, financial products or financial services, and
the sale or grant of an interest in land. A consumer contract can
only exist if one of the parties is an individual and is acquiring
goods or services predominantly for personal, domestic or household
Contracts that are negotiated, contracts between businesses, and
insurance contracts are not subject to the unfair contract
What is an unfair contract term?
Under the unfair contract provisions of the Act, a term in a
standard form consumer contract is unfair if:
it would cause significant imbalance to the rights and
obligations under the contract;
it is not reasonably necessary to protect the legitimate
interests of the party advantaged by the term; and
it would cause financial or other detriment to a party.
Factors which a court will consider in determining whether a
term is unfair include whether the term is legible, presented
clearly, expressed in plain English and readily available to all
parties, and the terms of the contract as a whole.
What if your contract was entered into before 1 July 2010?
Contracts already in existence on 1 July 2010 are only subject
to the unfair contract provisions if the contract is renewed or a
term is varied on or after 1 July 2010.
What is the effect if a term is unfair?
If a party to a standard form consumer contract believes a term
is unfair, they may apply to a court to have the term declared
unfair and void, or make a complaint to the Australian Competition
and Consumer Commission (ACCC) or the Australian
Securities and Investments Commission (ASIC) who
may apply to a court on behalf of the party.
If a court finds that a term in a standard form consumer
contract is unfair, the term will be void. However, the parties may
continue to be bound by the other terms in the contract, if the
contract is capable of operating without the unfair term.
What should you do if you use standard form consumer
Businesses should review whether their contracts are standard
form consumer contracts under the Act and whether any terms may be
Hunt & Hunt can advise in relation to standard form consumer
contracts and can assist with re-drafting the terms if this is
necessary to comply with the Act.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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