The Australian Competition and Consumer Commission (ACCC) and
Federal Court have recently demonstrated that they will take a
strong stance against businesses that use unfair terms in their
standard form consumer contracts.
The transition from a compliance-based focus to an
enforcement-based approach has been in action since the March 2013
ACCC report on unfair contract terms, where the ACCC set out a
number of problematic commonly used terms that it would focus on as
a priority this year.
The ACCC illustrated its enforcement-based approach in its
recent action against ByteCard Pty Limited (ByteCard), an internet
service provider. The ACCC instigated proceedings against the
company alleging that a number of provisions in its standard form
consumer contract were unfair and prohibited by the Australian
Consumer Law (ACL).
Section 23 of the ACL outlines that the terms of a contract for
the supply of goods or services to a person will be void if the
terms are unfair and the contract is a standard form contract.
Standard form contracts are contracts where the terms and
conditions are set by only one of the parties to the contract, and
the other party has no ability to negotiate more favourable
The Federal Court declared that a number of provisions in the
ByteCard consumer contract were unfair and therefore void and
ineffective. The Court found that the contract terms were unfair as
enabled ByteCard to unilaterally vary the price under existing
contracts with consumers, and failed to provide the customer with a
right to terminate the contract;
required the consumer to indemnify ByteCard in any
circumstance, even where the contract had not been breached by the
customer, as well as in situations where liability, loss or damage
resulted from a breach of contract by ByteCard; and
gave ByteCard unilateral rights to terminate the contract at
any time with or without cause or reason, and without giving
compensation to the consumer.
The Court found that the terms were unfair on the basis
they created a significant imbalance in the parties' rights
and obligations under the consumer contract;
ByteCard failed to prove that the terms were reasonably
necessary to protect its legitimate business interests; and
if the contract was relied upon by ByteCard, it could cause
financial detriment to the customer.
The proceedings initiated by the ACCC against ByteCard are the
first that the ACCC have taken based solely on a breach of the ACL
unfair contract terms provision, and indicate that it will be
important for businesses that deal with customers and use standard
form contracts to review their provisions and ensure they would not
be considered unfair under the ACL.
Businesses that fail to do this run the risk that proceedings
may be brought against them to make such terms void and
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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