Does your business have an unfair contract under the Australian Consumer Law?

Has your business considered its standard terms and conditions that apply to its customers to ensure they do not break the law? Did you know that customers may have a right to challenge unfair terms in your contract to supply goods or services, regardless of what the agreement says?

If you answered “no” to either question, you should seriously consider a review of your terms and conditions to ensure that they comply with the Australian Consumer Law.

Australian Consumer Law      

The Competition and Consumer Act, referred to as the Australian Consumer Law (ACL), is a Federal Act aimed at protecting consumers and promoting healthy competition. Whilst the ACL is far-reaching and deals with a number of areas of law, it is especially powerful in its application to “consumer contracts”.

Basically, the ACL could apply where a standard form consumer contract has a term that is unfair. For the ACL to apply, the contract has to be a “consumer contract”, which:

• is a contract for a supply of goods or services or a sale of an interest in land; and
• the consumer is an individual, who is acquiring the goods or services or interest in land for personal, domestic or household use (i.e. no business to business contracts).

Examples of such contracts might include gym memberships, building contracts, customer loyalty programs and many other agreements for businesses to provide goods or services (e.g. hire companies, service providers and sale of goods).

Unfair Contract Terms

If the contract is a consumer contract, then it could be affected by the ACL if it contains an “unfair term”, which is defined as:

• a term that would cause a significant imbalance in the parties’ rights and obligations under the contract;
• a term that is not necessary to protect the legitimate interests of the party who is advantaged by the term; and
• the term would cause detriment to the consumer (whether financial or otherwise) if it were to be applied or relied on by the other party.

Whilst the ACL lists a number of examples of unfair contract terms, some further examples of unfair contract terms might include:

a term that allows a business to make unilateral changes to the contract (e.g. increasing charges or varying the type of product to be supplied) with no right for the consumer to cancel the contract without penalty;

a term that requires consumers who breach the contract or end it early to pay an excessive amount in compensation or cancellation charges; or

a term that permits one party (but not the other) to terminate the contract;

What can happen?

If your customer terms and conditions have unfair contract terms, your customer could dispute the validity of particular terms or even the whole agreement. At best, it could mean that you might not get paid for the good or service supplied; at worst, you could be investigated, implicated in legal proceedings, fined or ordered to pay compensation.

If your customer contract has an unfair term giving rise to a dispute, the customer could try to involve the Australian Competition and Consumer Commission (ACCC), the Queensland Office of Fair Trading or the Australian Securities and Investment Commission (ASIC) for financial services and products, which could be costly for your business.

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers

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