You may not realise it, but when you are making online purchases or downloading software as a small business, you are entering into contracts. Most online businesses will enter into online contracts with their customers using a ‘tick box’. Here, customers accept the terms and conditions before using the service or purchasing a product online. These types of contracts are also known as click wrap agreements. Online agreements may not seem like traditional ‘contracts’. However, that does not mean that the terms in these online agreements cannot be unfair to customers. This article explains what an unfair term is and gives examples of unfair terms in online agreements.   

What Does the Australian Consumer Law Say?

The Australian Consumer Law (ACL), set out in the Competition and Consumer Act, provides certain protections to customers and small businesses when entering into standard form contracts. There is no statutory definition for a standard form contract. Although, a typical example is a click wrap agreement where customers click a button to ‘accept’ the online terms and conditions, without being able to negotiate them.

Some online agreements you may enter into include:

  • downloading a ride-sharing app;
  • a monthly online entertainment subscription;
  • buying clothing or shoes online; and
  • using a website and agreeing to the terms and conditions, website terms of use and privacy policy.

The ACL provides protections for customers around ‘unfair’ contract terms and ‘unfair’ contracts when entering into standard form contracts.

What is the Meaning of Unfair?

A term of an online agreement is unfair if it:

  • would cause a significant imbalance in the parties’ rights and obligations arising under the contract. In determining whether a contract has a significant imbalance to one party, the court or tribunal will look at whether the term is transparent and consider the contract as a whole;
  • is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
  • would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

What Are Examples of Unfair Terms in Online Agreements?

Customers often do not read the online agreements they are entering into. However, you should be aware of the terms that cause detriment to you, both financially and non-financially. Examples of unfair terms in an online agreement include where the online business:

  • changes their monthly subscription fee without letting you know and continues to charge you;
  • terminates your agreement without informing you and you suffer a detriment because of the termination; or
  • fails to inform you they are substantially changing their services and continues to charge you without letting you cancel the service or providing you with a refund.

An online business may change their agreement with you without asking. However, if the changes made to the online agreement are material, such as changing their prices or services offering, then the business should email you in advance. In the email, the online business should:

  • notify you of the changes; and
  • give you an opportunity to stop using the services or obtain a refund if appropriate.

What Are Examples of Terms That Are Not Unfair?

If you agree to an upfront price in a standard online agreement and later decide you no longer want to pay that amount, and the services offered are the same, this will not be considered unfair under the ACL.

Furthermore, if you can negotiate the terms with the online business, then the terms are likely not to be unfair. This is because you had the chance to review and negotiate the terms beforehand.

What Should You Do if You Think Terms in Your Online Agreement Are Unfair?

The ACL provides that customers can seek remedies if there are unfair terms in an online agreement. This means that individuals can bring private actions against online businesses. However, before taking the matter to court, you should consider resolving the dispute through alternative dispute mechanisms, such as mediation and arbitration.

There is no strict financial penalty for a business if its online agreement, or any of its terms, are found to be unfair. In saying this, offending conduct may fall under other ACL protections, such as false or misleading conduct, which do attract financial penalties for online businesses.

Regulators like the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission (ACCC) and various state and territory regulators have powers under the ACL to regulate unfair online agreements. However, courts have the ultimate power to determine whether a term in an online agreement is unfair. If a court or tribunal finds that a term is unfair, the term will be void. This means that the parties will not be able to enforce it, although the rest of the contract will be legally binding to the extent it is capable of operating without the unfair term.

Key Takeaways

If you are signing up to online agreements, you have some protections under the ACL. For example, courts may strike an unfair term out of the agreement. Therefore, in such instances, you will not need to comply with it.

Whether a term is unfair depends on the specific situation. However, where a term in an online agreement suggests the business can change important parts of their service, or change prices under a subscription, without properly notifying you, then it is likely that term is unfair. If you have any questions, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Lauris De Clifford
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