Only two cases have been reported in Australia since the law on
unfair contract terms came into effect on 1 July 2010 as part of
the Australian Consumer Law ("ACL") in the
Competition and Consumer Act (Cth) 2010. Each case
provides further clarity on when a term in a consumer contract will
be unfair. In summary, an unfair term in a consumer contract will
be void and may potentially render the entire contract void. Have
you reviewed your business' consumer contracts to ensure that
there are no terms that could in any way be deemed to be
The ACL includes examples of when a term in a standard form
consumer contract will be considered to be unfair. In addition, in
March 2013, the ACCC released a report on an industry review of the
Unfair Contract Terms and listed some further guidelines on what
terms the ACCC considers to be unfair terms in consumer contracts.
Information on what is an unfair contract terms, the test for
determining whether or not a term is unfair and the ACCC guidelines
in this area are addressed in my article titled "Unfair
Contract Terms: A sleeper no more".
The examples in the ACL and the ACCC report must now be
considered together with the two Australian decisions in this area.
A summary of these are set out below. These cases demonstrate how
the unfair contracts test may be satisfied to prove that an unfair
term is included in a consumer contract. A UK decision is also
referred to below to provide additional guidance in this area.
Case 1: ACCC action against NRM Corporation P/L and NRM
In this decision, the ACCC was successful in proving that both
NRM Corporation Pty Ltd and NRM Trading Pty Ltd included the
following unfair contract term in their consumer contracts as the
fees for termination caused a significant imbalance in the
parties' contractual rights:
'The customer must give 30 days written notice to
terminate the contract. However, this makes the consumer liable to
pay multiple fees, including an administration fee of
Case 2: Customer actions against
In this case, the customer was successful in bringing a CTTT
action against graysonline.com. The consumer contract included a
term that excluded liability for damage to any goods sold to the
customer by graysonline.com and the terms were some 13 pages. The
customer proved that this term was unfair to the customer, was
confusing, included inconsistent terms in the contract and the CTTT
found that the terms were not reasonably necessary to protect the
interests of graysonline.com. The CTTT ruled that the term be
Similar unfair contract terms provision exists in the UK, which
may provide some insight into how the ACCC and the Courts in
Australia may also assess whether a term is unfair. Terms in the UK
that were held to be unfair include:
terms that locked consumers into a fixed membership period of
one year, with early termination triggering an obligation to pay
all fees payable during the minimum period;
terms that impose a termination fee based on the number of
monthly payments left under the contracts term with no discount of
the fee for accelerated payment; and
terms that permitted the contract to be terminated by the
service provider for minor breaches, such as several days late
payment, by the customer.
The UK decisions indicate that prominence should be given to
terms that operate against the consumer. UK decisions have held
that the supplier cannot, deliberately or unconscionably, take
advantage of a consumer's weak bargaining power, lack of
experience, unfamiliarity with subject matter or the necessity of
the contract to the consumer.
What should you do?
If any of the contracts that your business issues to individual
consumers are standard form contracts, these contracts should be
reviewed promptly using the three elements test set out above to
ensure that it would comply with the unfair contract terms
provisions in the ACL.
If you have any questions about the unfair contract terms or how
they may affect you, the team at Coleman Greig can assist you. We
can also provide you with details advice on how the CCA affects
your business and deliver training sessions including compliance
training for your relevant staff. If you need assistance with
respect to the ACL or review of your contract, please contact:
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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The Sportscraft refunds and returns policy limitations went beyond consumer's rights under the Australian Consumer Law.
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