The unfair contract terms provisions of the Australian
Consumer Law are important for business to keep in mind. When a
court assesses if a term is 'unfair' it must take into
account whether the term is 'transparent'. A recent
decision about the lay-by of Christmas hampers provides timely
lessons about business and marketing practices that reduce
transparency. The consequence could be that your contract term is
Chrisco is a well-known supplier of Christmas hampers. When it
included a term in its lay-by contracts to allow it to continue
withdrawing funds from customers' bank accounts even after they
had paid for their Christmas hampers, the ACCC decided to take
The ACCC successfully argued the term was unfair, rending the
term void. This was despite the contract including an
'opt-out' option for consumers directly opposite the unfair
In determining whether a term in a consumer contract is unfair,
the court can consider any matters it thinks relevant. But one
matter it must take into account is the extent to which the term is
'transparent'. Thus it's important for businesses to
understand what it means for a term to be
WHEN IS A TERM TRANSPARENT?
The Australian Consumer Law states that a term is transparent if
expressed in reasonably plain language;
presented clearly; and
readily available to any party affected by the term.
The unfair term in the Chrisco contracts had several
characteristics which reduced transparency.
WHAT FACTORS REDUCED THE TRANSPARENCY OF THE CHRISCO TERM?
Firstly, the language of the unfair term was so brief and casual
in nature that it raised more questions for consumers than it
It was not possible for consumers to determine the amount that
would automatically be deducted from their account if they failed
to opt out, and it was unclear as to whether the consumer could
cancel the automatic payments.
Secondly, the font size, colour and marketing devices used to
set out the contract terms in the Chrisco catalogue impacted on the
criteria of legibility, clear presentation and whether the term was
readily available to the consumers reading the contract.
For example, the font size used was less than half the size of
main headings. Some aspects of the contract were highlighted in a
different colour, in italics or bold font as well as within
highlight boxes, which helped draw attention to them.
In contrast, the unfair term was set out in a densely packed
page of small print terms.
LESSONS ON TRANSPARENCY
The Chrisco decision highlights why transparency is important
when drafting contracts that are subject to the unfair contract
Terms which are overly broad, ambiguous or lacking in key
information may not be expressed in reasonably plain language. The
criteria as to plain language requires consideration not only of
the language used but also whether the term and its effect can be
understood in the context of the contract as a whole.
Does the term raise any questions? Can those questions be
answered by the party affected by it?
Even terms drafted in plain language can cease to be transparent
if they are affected by 'formatting' or the way the
contract terms are presented.
The order and visual impact of a contractual document is
important. It can materially reduce the significance of particular
terms while drawing attention to others. Marketing techniques such
as font size, font type and colour can all have an impact on
A proper assessment of transparency does not end once
contractual terms are 'sent to marketing'. A proper
assessment of transparency should be conducted on the final
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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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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