Unfair Contract Terms

There are national (federal) laws that protect consumers and small businesses from unfair contract terms.

Unfair contract terms are characterised if they would:

• Cause significant imbalance in the parties rights and obligations under the contract
• Cause detriment (such as financial loss) if to a consumer if relied upon
• Be deemed not necessary to protect the business.

Some examples of terms that fall under this are:

• Only one party has the right to terminate or end the contract
• Only one party has the right to amend the contract terms
• Assign or transfer the rights of the contract without the consent for the other party
• Avoiding or limiting liability for negligence
• Allowing one party to determine if there is a contract breach
• Limit the right of the other party to sue the other party

Contracts can arise from verbal to written by events such as:

• Entering into a document
• Buying goods in-store or online
• Accepting on a website by clicking “I agree” or similar type of button
• Accepting terms in an email or via letter

It is important that businesses and consumers are clear on what the agreement is and reviewing any contracts before agreeing to the terms and conditions.

Australia Consumer Law and this protects consumers entering into standard form contracts against unfair contract terms. A court can declare that a term in the contract void if:

Protections that apply to Small Businesses contracts were introduced and apply to contracts entered into or renewed after the 12 November 2016 if the value of the contract is $300,000 in a single year or $1 million if the contract runs for longer. A small business is a business that employs less than 20 people.

Standard Form Contracts

Standard form contracts are general contracts that are prepared by one party and are not generally subject (or have the power) to negotiation by the consumer. They are often presented on a “take it or leave it” basis. These are commonly used by businesses in everyday transactions such as:

• Memberships for Gyms and Clubs
• Purchase of Motor Vehicles or equipment
• Online Stores
• Software providers
• Private Education providers
• Travel contracts
• Domestic Building Contracts
• Power and other utility Companies

As a business owner, it is important that your contracts are fair and comply with Australian Consumer Law (ACL). If it doesn’t it may lead to complaints to the authorities such as ACCC and Consumer Affairs. Both of these bodies have the ability to impose fines and remedies for the consumer. It is important that before you start your venture that your get the proper legal advice on what your terms and conditions in your contracts should be.

Businesses have been prosecuted typically by the ACCC or Consumer Affairs or by the consumer or business for breaching the Australian consumer law. It is important that if you are a business or organisation that has standard form contracts that they do review existing contracts and ensure that they are compliant.

Breaches of the ACL can be costly as well as cause brand damage in the process.

One approach typically taken by the ACCC is to seek enforceable undertakings. If you have been accused of breach the ACL you should seek legal advice before entering into such undertakings. As the name suggests they are enforceable and the ACCC will be looking to impose harsh terms in the undertaking as their initial position.

Proper legal advice and representation would seek to minimise the extent of any undertakings so that you can rectify the breach and be free to continue trading. We would also look to reduce or avoid any penalties such as fines that they could impose.

Our contract lawyers can provide you with timely advice. To discuss your situation, please call us on 1300 907 335 or otherwise please complete the contact form on this page.

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