On 14 March 2013, the Australian Competition and Consumer
Commission (ACCC) issued its report on the
outcomes of its industry review into unfair contract terms and
signalled its intention to take enforcement action against those
businesses whose standard form consumer contracts contain unfair
What is the prohibition on unfair contract
Section 23 of the Australian Consumer Law (Schedule 2
to the Competition and Consumer Act 2010 (Cth)
(ACL) prohibits terms of a standard form consumer
contract which are unfair. This prohibition on unfair terms applies
only to standard form contracts with individual consumers for
goods, services or the sale or grant of interests in land, which
are for personal, domestic or household use or consumption. It
doesn't apply to:
contracts with other businesses or government bodies;
shipping contracts (charter parties, marine salvage or towing,
carriage of goods);
contracts for financial services or products (which are covered
by an equivalent prohibition in the ASIC Act).
What is a standard form consumer contract?
Standard form consumer contracts will be familiar to most
businesses who deal with consumers. They are in contracts in
the business has all or most of the bargaining power;
the business has prepared the contract before any discussion
with the consumer;
the consumer is required to either accept or reject the
contract without an opportunity to negotiate the terms; and
the terms of the contract do not take into account any specific
characteristics of the particular consumer or transaction.
Standard form contracts are commonly used in industries such as
the fitness, travel, airline, telecommunications, vehicle rental
industries as well as by online traders. It was these industries
which were the subject of an extensive national review by the ACCC
in conjunction with Consumer Affairs Victoria.
When will a contract term be unfair?
An unfair contract term is one which:
would cause a significant imbalance in the parties' rights
and obligations arising under the contract;
is not reasonably necessary to protect the legitimate interests
of the party who would be advantaged by the terms; and
would cause detriment (whether financial or otherwise) to a
party if it were to be applied or relied on.
There is a presumption that a term of a consumer contract is not
reasonably necessary to protect the legitimate interests of the
party who seeks to rely on it, unless that party proves
In determining whether a term is unfair, a court must look at
the term in the context of the entire contract and must consider
the extent to which it is transparent (i.e. expressed in reasonably
plain language, legible, presented clearly, and readily available
to the consumer).
An unfair contract term is void and cannot be enforced or relied
What was the outcome of the ACCC review?
The ACCC's review concentrated on eight "key
issues" which were terms that:
allow the business to change the contract without consumer
cause confusion about agency arrangements which apply and seek
to unfairly absolve the agent from any liability;
unfairly restrict the consumer's right to terminate the
provide for suspension or termination of the services being
provided to the consumer under the contract;
make the consumer liable for things that would ordinarily be
outside of their control;
prevent the consumer from relying on representations made by
the business or its agents;
seeking to limit consumer guarantee rights; and
seek to remove the consumer's right to a credit card
chargeback facility when buying the goods or service through an
The ACCC found that in the majority of industries reviewed, most
businesses changed their standard form contracts to ensure
compliance with the prohibition on unfair terms. However, they
found a number of instances where it regarded the terms of standard
form consumer contracts to be unfair.
What should be done as a result of the ACCC
Given the ACCC's stated intention to commence enforcement
action, it is, in the words of the ACCC "a good time for
businesses across all sectors to undertake a comprehensive review
of their standard form consumer contracts, and more broadly, their
customer handling processes and practices, to ensure that the
contractual arrangements in place with their customers are
consistent with the new national unfair contract provisions. Such a
review will also allow businesses to ensure that their general
customer handling processes and practices promote conduct by the
business on a day to day basis which is compliant with the broader
consumer protection provisions of the ACL."
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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