The Australian Consumer Law came into force in 2010 with “unfair terms” rules only extended to small businesses as recently as 2016. This is an emerging area of law in which experienced business litigation lawyers who are expert in consumer law can provide valuable practical assistance to businesses.
Extensive legal remedies are available to investors, businesses and consumers under the Australian Consumer Law – you just have to know what they are.
Be sure your business lawyer has the expertise, depth of knowledge and insight into these unique remedies that dramatically increase the power of your punch in commercial disputes.
What are unfair contract terms?
Consumers and small businesses (less than 20 personnel whether full-time, part-time or casual) are protected against unfair terms in “standard form” contracts for the supply of goods or services. A term may be “unfair” for many reasons including, if:
- it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
- it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Even if you are not a small business but your supplier has less than 20 personnel whether full-time, part-time or casual – your business gains protection against unfair terms in that supplier’s supply contract.
A contract term is presumed not to be reasonably necessary to protect the legitimate interests of the party who would be advantaged by it unless that party proves otherwise. Terms that are not “transparent” are likely to be considered unfair.
Examples of contract provisions that may amount to unfair terms include:-
- the way in which price variations and discounts are applied
- where a supplier can escape obligations or terminate, vary or extend the contract
- automatic rollover of contract supply periods
- supplier entitlement to change specifications
- contract termination obstacles or charges eg see this example
- contract liability limitations or waivers
- obligation to acquire related goods or services from a supplier or specified source
What is a “standard form” contract?
The Australian Consumer Law provides that a contract is presumed to be a “standard form” contract unless proven otherwise by establishing that:-
- the parties had equal bargaining power and opportunity to negotiate its terms; and
- the contract takes into account the specific characteristics of the other party and the particular transaction.
When is a contract term “transparent”?
The Australian Consumer Law provides that a contract term is “transparent” if it is clearly expressed in reasonably plain language, is legible, is presented clearly and is readily available to any affected party. See here for an example of a supplier whose terms were buried in fine print and therefore not “transparent”.
Contact us for a review of your contract terms if you are a supplier or – if you are a buyer of goods or services for advice about whether you can challenge your supply terms.
Supply of Goods + Services liability assessment tool
Want an assessment on whether a supply contracts terms are potentially “unfair” or whether a breach of a statutory guarantee may apply? Try our interactive assessment tool to measure what risks or opportunities apply.
What happens if a term within the contract agreement is ‘unfair’?
The unfair term of the contract will be struck out without affecting the balance of the agreement. If the contract can not be performed once the ‘unfair’ term is removed, the contract will fail.
What should I do if there’s an unfair term within an agreement?
All businesses should review their contracts so that they do not include unfair conditions. Our experienced contract lawyers at QLD Business + Property Lawyers provide advice and representation in all areas with regard to contracts, contract disputes and contract drafting. Contact us today for detailed unfair contract terms advice.