all businesses that use standard form, non-negotiated
all businesses that transact with consumers, including those in
the financial services industry
unfair contract terms to be void from 1 January 2010
increased enforcement powers for state-based consumer
regulators and the ACCC
a consistent national approach to consumer protection law
As reported in our commercial law ealert on 23 February 2009, a
major aim of the Rudd Government's proposed new Australian
Consumer Law is to "crack down" on unfair contracts.
On 11 May 2009, the Assistant Treasurer Chris Bowen released the
draft national unfair contract terms provision for public comment.
The provision is proposed to be enacted as Schedule 2 to the
Trade Practices Act 1974 (entitled The Australian Consumer
Law), and as new sections 12BA-12BK to the Australian
Securities and Investments Commission Act 2001 (to bring
financial services contracts into the net). The consultation paper
on the proposed legislation is available at the treasury
Submissions on the draft legislation close on 22 May 2009. This
"important first part of the first tranche of the
Australian Consumer Law" as it is described by the
Assistant Treasurer, is intended to be introduced to Parliament in
the Winter sittings (June 2009), for commencement on 1 January
2010. The Assistant Treasurer has said the final legislation will
also include new enforcement powers for the ACCC, but these are not
included in the exposure draft attached to the consultation paper.
Common national guidance on enforcement is to be issued by the
relevant enforcement agencies prior to commencement of the
The draft legislation reflects the model agreed by the
Ministerial Council on Consumer Affairs (MCCA) in August 2008, and
by the Council of Australian Governments (COAG) in October
In summary, so far as unfair contract terms are concerned, the
exposure draft of the legislation provides that:
an unfair term of a standard form contract is void but the rest
of the contract will continue to bind the parties if it is capable
of operating without the unfair term;
a term of a standard form contract is 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 interests of the party who would be advantaged by the
In deciding whether a term of a contract is unfair a court can
take into account matters it considers relevant but must take into
account the following:
the potential for the term to cause financial or other
detriment to a party if it was applied or relied on;
the extent to which the term is expressed in plain language, is
legible, is presented clearly, and is readily available to any
party affected by it; and
the contract as a whole.
The draft legislation also contains a (non-exhaustive) list of
14 examples of the kinds of terms of a standard form contract that
may be considered unfair; 9 of these relate to terms that have a
unilateral effect – these are terms that allow only one
of the parties to do the following:
avoid or limit performance
terminate the contract
penalise the other party for breach or termination
vary the contract
renew or not renew the contract
vary the upfront price with no right for the other party to
vary characteristics of the subject matter of the contract
determine whether the contract has been breached or interpret
its meaning or
assign the contract to the detriment of another party without
that party's consent.
Terms that limit one party's: vicarious liability for its
agents, right to sue another party, or evidence in legal
proceedings are also in the list, as is any term that imposes the
evidential burden in legal proceedings on just one party. Other
examples of unfair terms may be prescribed in the regulations.
It is important to note that particular circumstances may
justify the use of such terms.
The regulations may also prescribe terms that are prohibited. It
is not proposed to prohibit any terms at this time, but if there
are such terms prescribed in the future, including them in
contracts or applying or relying on them will be a contravention of
the relevant Acts and will attract a pecuniary penalty.
Contract terms that define the main subject matter, set the
upfront price payable, or are required or expressly permitted by
law, are excluded from the legislation.
If the legislation comes into force, existing contracts will not
be affected, but contracts entered into after 1 January 2010 will
be affected, as will those that are renewed or varied after that
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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