Fair Trading and Other Acts Amendment Act 2009 became
law on 10 June 2009.
extends the Victorian Fair Trading Act 1999 provisions
regarding unfair contract terms to include consumer credit
contracts, mortgages, guarantees, and leases from 11 June 2009
requires credit providers who provide UCCC regulated finance to
Victorian residents to belong to an ASIC approved external dispute
resolution scheme from 1 July 2009 (this is in addition to the
existing requirement to be a registered credit provider in
Victoria). Lenders who are not currently members of a scheme
need to act promptly.
Victoria has implemented these initiatives to cover the gap
until the Commonwealth take over of the regulation of credit.
The Act provides that an unfair term in a consumer credit
contract is unenforceable.
Injunctions preventing the use of unfair contract terms and
orders in relation to such terms may be applied for in the Supreme
Court, County Court, or the Victorian Civil and Administrative
The court or VCAT can make a variety of orders in relation to
unfair contract terms including:
payments of damages or restitution
variation of the contract, refund of money paid under the
contract, or an order for the return of property
specific performance, rescission, rectification
an order that a provision cannot be enforced or that a debt is,
or is not, owing.
While the Commonwealth legislation and the Victorian legislation
are fairly similar, there are some important differences. The
table below highlights these differences.
Definition of 'unfair'.
A term of a standard form contract is unfair if:
the term would cause a significant imbalance in the
parties' rights and obligations arising under the contract
the term is not reasonably necessary to protect the legitimate
interests of the party advantaged by the term.
A term in a consumer contract is to be regarded as unfair if in
all the circumstances, it causes a significant imbalance in the
parties' rights and obligations arising under the contract to
the detriment of the consumer.
Definition of 'standard form contract'.
None provided, but if a claimant states that a contract was a
standard form contract, it is up to the respondent to prove
A consumer contract that has been drawn up for general use in a
particular industry, whether or not the contract differs from other
contracts used in that industry.
There is also a presumption that a contract is a standard form
contract unless the contrary can be established.
Matters the court must take into account when
determining whether a term is unfair.
the extent to which the term would cause, or whether there is a
substantial likelihood that the term would cause, detriment
(whether financial or otherwise) to a party if the clause was to be
applied or relied on
how transparent the clause is
the contract as a whole.
Matters the court may take into account when
determining whether a term is unfair.
Whether the clause allows one party (but not the other) to:
limit or avoid performance
terminate the contract
be penalised for breach of termination
vary the terms of the contract
renew or not renew
vary the upfront price payable without the right of the other
party to terminate
vary the goods or services to be supplied or the land to be
sold or granted
unilaterally determine that a breach has occurred
limit that party's vicarious liability for its agents
assign to that other party's detriment without the other
limit one party's right to sue
limit the evidence one party can adduce in proceedings relating
to the contract
impose the evidential burden on the other party
Any other matters referred to in the regulations.
Whether the term was individually negotiated.
Whether the term is prescribed by the regulations (none
Whether the term has the object or effect of permitting the
avoid or limit performance
penalise the consumer for breach or termination
vary the terms
renew or not renew
determine the price without allowing the consumer to
unilaterally vary the goods or services to be supplied
limit vicarious liability for its agents
assign the contract to the consumer's detriment without the
limit the consumer's right to sue
limit the evidence the consumer can lead in proceedings
impose the evidential burden on the consumer in court
Effect if term is found to be 'unfair'.
An unfair term of a standard form contract is void.
An unfair term in a consumer contract is unenforceable if the
contract is a consumer credit contract and void if the contract is
any other form of contract.
Prescribed unfair terms
None currently prescribed.
None currently prescribed. It is an offence to use a
prescribed unfair contract term.
terms which define the main subject of the contract (i.e. a
consumer cannot buy goods and then later assert that they changed
their mind and it was unfair that they had to proceed with the
purchase, or borrowed money and then later claimed it was unfair
that the lender enforced the mortgage)
terms which set the upfront price payable under the contract
(ie the consideration for the supply or sale provided it is
disclosed at or before the contract is entered into)
terms required by law
contracts of service (that is, employment contracts).
What contracts are impacted?
All standard form contracts, including business to business
Contracts which on or after 1 January 2010 are:
renewed, in relation to conduct occurring after the
varied, in relation to conduct occurring after the
All contracts to supply goods or services of a kind ordinarily
acquired for personal, domestic or household use or consumption,
for the purposes of the ordinary personal, domestic or household
use or consumption of those goods or services.
Contracts which on or after the day after the Bill receives
royal assent are:
Gadens Lawyers can assist lenders review their
documents to determine whether any changes are required to avoid
challenge as an unfair contract term. We have already worked
with Consumer Affairs Victoria reviewing credit contract terms and
so are uniquely placed to assist you.
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