It is common for businesses to offer consumers the same or a similar contract. This is known as a standard form contract, and they are often used for business efficiency, particularly with increasing technology and speed of transactions.
Unfair contract terms laws protect consumers from unfair terms in circumstances where they have little or no opportunity to negotiate with businesses, such as with standard form contracts. In broad terms, a standard form contract is one that has been prepared by one party to the contract, and it is offered on a take it or leave it basis.
Most terms in standard form consumer contracts are covered by the unfair contract terms law. However, the following terms are exempt:
- terms that set out the price
- terms that define the product or service being supplied
- terms that are required or permitted by another law (such as terms limiting liability permitted by Australian Consumer Law).
The following types of contracts are exempt:
- most insurance contracts;
- constitutions, including the constitutions of many superannuation funds, companies, and managed investment schemes;
- contracts for the shipping of goods.
The following questions can help you recognise a potentially unfair term, but it is important to note that the final decision on whether a term is unfair can only be made by a court. You should also be aware that the fairness of a term must be considered in the context of the contract as a whole – for example, a term that seems unfair in one context might be alright in another.
– Does the term cause a significant imbalance between your rights and obligations and those of the business? Eg. Does the business have more power than you? Are you penalised if the contract is terminated (through no fault of your own) but the business is not penalised? Can the business change important terms of the contract without asking you? Can only the business decide whether the contract has been
– Is the term reasonably necessary to protect the legitimate interests of the business? Eg. While it may appear to you that a term is unfair, the business may have a genuine commercial reason for including it. However, it is up to the business to prove to the court that it has a good reason.
– Would the term cause you detriment (financial or nonfinancial) if the business tried to enforce it? Eg. Would you lose money or suffer inconvenience, delay or distress if the term was enforced?
– How transparent is the term? Eg. Can you understand what the term says? Is the term presented clearly and expressed in reasonably plain language? Or is it hidden in fine print or written in complex technical language?
Unfair contract terms laws are relatively modern, and many consumers and business are unaware of their existence. It is important, both as a business and consumer, to ensure your contracts comply with the law, to provide certainty for all parties. Further, if you feel a term in a contract you are party to, is unfair, contact a lawyer, or you can call the ACCC for more information.