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Unfair consumer contracts

27/10/2010

The  Australian Consumer Law has introduced new rules about unfair contract terms.  An agreed term is void and cannot be enforced if it is:

  • in a consumer contract;
  • the contract is a standard form contract; and
  • the term is unfair.

A consumer contract is a contract for the supply of goods, services or land to an individual person (not a corporation) wholly or predominantly for personal, domestic or household use or consumption.  It is a new definition that looks at the individual circumstances of the purchaser. That will make it more difficult for businesses to determine whether certain goods or services are consumer goods.

The rules only apply to all contracts,not just pre-printed forms. All contracts are presumed to be a standard form contract unless the business proves that:

  • neither party has all or most of the bargaining power;
  • neither party prepared the contract before discussions commenced;
  • the consumer was not required to ‘take it or leave it’;
  • the consumer had an opportunity to negotiate the terms; and
  • the terms take into account the specific circumstances of all parties.

The legislation gives numerous examples of unfair terms.  Generally, a term is ‘unfair’ if it:

  • would cause a significant imbalance in rights and obligations under the contract;
  • the business proves that the term is needed to protect its legitimate interests;
  • would cause detriment to a party if it was applied or relied on;
  • is not presented clearly in legible, plain language;

but not to the extent that it

  • defines the main subject matter of the contract;
  • sets the upfront price payable under the contract; or
  • is expressly permitted or required by law.

 

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