Chrisco is a well-known provider of Christmas hampers, supplying
to customers across Australia. Its business model allows customers
to pay for hampers through instalments during the year - this was
referred to as the 'HeadStart Plan'. However, its standard
form contracts recently caught the attention of the ACCC, which
brought proceedings against Chrisco in the Federal Court in
This blog focuses on the Court's finding that the 2014
HeadStart Plan contained an 'unfair term' within the
meaning of s24 of the Australian Consumer Law
(ACL)1 with the effect that the term was declared void.
As this case concerned liability only, the penalty will be
determined at a hearing next year. The ACCC is seeking pecuniary
penalties, declarations, injunctions, non-party consumer redress
The unfair term
The relevant term of the HeadStart Plan (the "HeadStart
term") allowed Chrisco to continue to withdraw funds through
direct debit after a customer had paid in full for
the hamper. The HeadStart term continued to apply unless the
customer chose to 'opt out'. Chrisco contended that this
system enabled customers to 'keep saving for next year's
order'. Customers were able to request a refund of any money
deposited – but without interest.
The meaning of unfair under the legislation
Section 24(1) of the ACL provides that a contractual term will
be deemed unfair if:
it would cause a significant imbalance in the parties'
rights and obligations arising under the contract; and
it is not reasonably necessary in order to protect the
legitimate interest of the party who would be advantaged by the
it would cause detriment (whether financial or otherwise) to a
party if it were to be applied or relied on.
In considering the imbalance caused by this arrangement, Justice
Edelman noted that whilst the HeadStart Plan gave Chrisco the right
to withdraw money from the customer's account, the customer did
not have any corresponding right under the contract. Chrisco
submitted that the HeadStart Plan meant that payments made were
less than they would have been without the term. This was rejected
by his Honour who found that the time value of money meant that
customers on the HeadStart Plan would end up paying more as they
would be paying the same overall amount but starting their payments
at an earlier point in time.
The legislation also provides that in assessing whether a term
is unfair, the Court should consider the contract as a whole, and
also the extent to which the term is transparent.
The transparency requirement
A term is transparent if it is:
expressed in reasonably plain language; and
presented clearly; and
readily available to any party affected by the term.
His Honour noted that the font size of the HeadStart term was
printed in a small font - it was less than half the size of the
main heading in the contract. Another issue concerning legibility,
clarity and availability was that the HeadStart term and the
opt-out provision were at opposite ends of the four pages of the
catalogue. They also failed to refer to one another. It was held
that it would, therefore, not have been clear to customers that
there was the possibility of opting-out of the HeadStart Plan.
Moreover, the HeadStart term did not clearly identify the amount of
money that would be debited from the customer's bank account,
or how the amounts would be determined.
The contract as a whole
In considering the contract as a whole, his Honour noted that
the contract was designed to be convenient for the consumer.
However, this did not militate against his finding that the term
Significance of the decision
The Court's decision sends a strong message to traders that
they must strictly comply with all of their obligations under the
ACL, including the unfair contract terms.
This case is also timely in light of the fact that earlier this
year, Federal Parliament passed legislation extending the unfair
contract term protections to small businesses. Under the amended
legislation (which will take effect on 13 November 2016 and will
apply to contracts entered into after this date), the unfair
contract provisions will apply to standard form contracts entered
into by businesses that:
employ less than 20 employees; and
the upfront price payable does not exceed $300,000; or
if the contract has a duration of more than 12 months and the
upfront price payable does not exceed $1,000,000.
This change is unlikely to have a great impact on businesses
that already deal with consumers. However, it will require
attention from businesses that operate solely in the business to
business environment and have, up to now, not had to concern
themselves with unfair terms legislation.
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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