Unfair Contract Terms in Standard Form Contracts Part 1 – An Introduction

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Table of Contents

• But wait, there is protection at hand
• Who is protected against Unfair Contract Terms?
• Conclusion

It is typical for businesses, particularly online businesses, to use standard form contracts in order to achieve business efficacy. Generally speaking, these contracts are a set of terms and conditions that apply consistently to all of the business’ customers across the board. They are offered generally on a take it or leave it basis, meaning very little time is spent on negotiating this document. Any one who has been involved in contract negotiations would understand how much time this can save!

Whilst there is nothing wrong with having efficient business practice, some businesses abuse their power in such contractual offerings by including unusual or unfair terms in the standard form contract. Offered on a take-it-or-leave-it basis, a customer may accept such a term, even with sufficient notice, believing that they cannot get a contract with rights more neutral to both parties. The unbalanced negotiating power is a problem to the unsuspecting (even a suspecting) consumer.

But wait, there is protection at hand

Standard Form Contracts are typical in many consumer arrangements as they are generally offered by businesses with a large customer base where individual contract negotiation is impractical or infeasible. Typical examples include a set of terms and conditions for the sale of goods or services (think the Iconic, the Apple Store etc).

The introduction of the Australian Consumer Law under the Competition and Consumer Act 2010 (ACL) also included laws prohibiting unfair contract terms applicable across Australia. These were based on consumer protection laws previously enacted in Victoria (since been repealed by the ACL). The Australian Competition and Consumer Commission (ACCC) regulates laws prohibiting unfair contract terms under the ACL. State and territory consumer protection agencies (e.g. NSW Fair Trading, VIC Consumer Affairs) also offer some state based consumer protection where relevant. The Australian Securities and Investment Commission (ASIC) regulates UCTS for financial services in accordance with the ASIC Act.

Who is protected against Unfair Contract Terms?

The ACL offers protection from unfair contract terms in consumer contracts. A consumer is protected from UCTs only if it is a consumer contract, in a standard form contract, and the term is unfair.

A consumer contract is a contract for a supply of goods or services, or for a sale or grant of an interest in land to an individual whose acquisition of the goods, services, or interest is wholly or predominantly for personal, domestic or household use or consumption.

Certain contracts are expressly excluded from the application of the ACL. These are:

• a contract of marine salvage or towage;
• a charter party of a ship;
• a contract for the carriage of goods by ship; or
• constitutions of a corporation, managed investment scheme or other kind of body.

Stay tuned next week as we delve further into standard form contracts, including features of such a document.

Conclusion

The ACL prescribes rules against unfair contract terms in standard form contracts. These rules are administered by the ACCC. If you are a business using a Standard Form Contract, you should ensure that such a document protects your rights and limits your liability, but does not contravene rules against unfair contract terms. Our team of contract lawyers have extensive experience in standard form contracts for both hardcopy and online execution. If you would like assistance with reviewing, amending or drafting a Standard Form Contract, or some advice generally, contract LegalVision on 1300 544 755.