A significant decision for standard consumer contracts was released by the Victorian Civil and Administrative Appeals Tribunal (VCAT) in Director of Consumer Affairs v AAPT Limited on 2 August 2006. The decision, finding many terms in standard AAPT contracts for prepaid and mobile phone services void, was the first to consider Victoria’s unfair terms provisions under the Fair Trading Act 1999 (Vic)(FTA).
Unfair Terms Under The FTA
Victoria is the only Australian jurisdiction which expressly prohibits the inclusion of unfair terms in consumer contracts. Any unfair terms in a consumer contract are void and unenforceable.
A term will be unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer. The definition does not specify what indicates a significant imbalance or the role of the good faith within the relevant provisions.
Justice Morris decided that there is no separate requirement of good faith in consumer contracts, but that good faith is relevant to determining whether a term in a contract causes an imbalance which is ‘significant’ between the parties. Justice Morris also noted that good faith had procedural and substantive aspects, and that in some cases a term in a consumer contract may cause such an imbalance that the term is unfair, even if it is individually negotiated or has been brought to the notice of the consumer.
Were AAPT’s Standard Terms Unfair?
Several terms in the standard AAPT contract were found to be unfair and void, as they gave AAPT unilateral and wide-reaching powers to terminate or vary the contract, which, taking into consideration the principles of good faith, caused significant imbalance between the parties. For example, a clause allowing AAPT to vary the contract at any time was unfair because ‘it permits AAPT to vary any term of the agreement, at any time, for any cause’.
The decision signals that other entities, particularly those utilising standard consumer contracts in Victoria, should be careful to ensure that the terms of their contracts are not too far-reaching and unilateral, that they will be declared void. Furthermore, terms may be judged as unfair despite the fact that they have been individually negotiated and notice of them has been provided.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In some cases these fees or surcharges are higher than what a bank charges to these merchants for use of the system.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).