The unfair contract terms came into effect on 1 July 2010 as part of the Australian Consumer Law ("ACL") in the Competition and Consumer Act (Cth) 2010.

ACCC's latest report released in March 2013 puts all businesses on notice that the ACCC is moving to an enforcement response to resolve non-compliance by businesses of the unfair contract terms provisions set out in the ACL. This follows ACCC revealing that 79% of the consumer contracts issued by major airlines incorporated problematic terms and the problem may be more widespread across all businesses issuing standard form consumer contracts. Are you in their sights?

The following table summarises how the unfair contract terms differ from the consumer guarantees:

Are you in the ACCC's sights?

ACCC has put businesses on notice that it is in the process of considering whether or not further action should be taken and in some cases whether court action is warranted against those businesses that continue to issue contracts to consumers that are deemed to be unfair.

Why should businesses review their standard form consumer contracts?

A consumer contract containing an unfair contract term may be challenged by a consumer, ACCC or ASIC, who may:

  1. raise an unfair contract term as a defence to an action by business enforcing a term in a consumer contract;
  2. bring an action seeking various remedies, including compensation, under the unfair contract term provisions that arise due to the businesses continued use of the unfair contract term; or
  3. bring a pre-emptive action seeking a declaration that a term in a consumer contract is unfair, so as to prevent the business from relying on that term in the future.

Any term that goes beyond what is permitted pursuant to the ACL, will be void. Furthermore, there is a risk that the Court will consider the whole contract to be void if that contract is unable to operate without that term.

What should businesses look for?

All businesses should be aware that a term in a standard form consumer contract will be considered to be unfair if:

  1. it would cause a significant imbalance in the parties' rights and obligations under the contract;
  2. it is not reasonably necessary to protect the legitimate interest of a party to the contract; and
  3. it would cause detriment to a party to the contract if it were to be applied or relied upon.

If all three elements are satisfied it is very likely that the term in the contract will be unfair.

In its industry report on Unfair Contract Terms, the ACCC has identified the following addition terms that it will focus on in addition to those unfair contract terms set out in the ACL as 'unfair':

  1. terms that allow a business to alter the contract without the consent from the consumer;
  2. terms that cause confusion about the agency arrangements that apply and seek to unfairly absolve the agent from liability;
  3. terms that unfairly restrict the consumer's right to terminate the contract;
  4. terms that suspend or terminate the services being provided to the consumer under the contract;
  5. terms that prevent the consumer from relying on representations made by the business or its agents;
  6. terms that limit the consumer guarantee rights; and
  7. terms that seek to remove the consumer's rights to a credit card chargeback facility when buying the services through an agent

Broader Implications?

ACCC has also identified broader non-compliance of the CCA and privacy laws by businesses across a range of industries including the vehicle rental industry and online operating businesses. ACCC has also found significant issues with respect to transparency of contracts and lack of plain-English use in them. In addition, the ACCC has identified online consumer issues as a priority, which includes:

  1. online terms and conditions;
  2. online competition between online traders; and
  3. fake testimonials

If any of the contracts your business issues to individual consumers are standard form contracts, these should be reviewed promptly to ensure that each standard form consumer contract complies with the unfair contract terms.

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.