The Commission notes that the Australian Consumer Law (ACL) "incorporates various provisions targeting specific consumer issues, including provisions which render void unfair terms in standard form consumer contracts".
The ACCC reviewed standard form consumer contracts through the lens of these provisions in the airline, telecommunications, fitness and vehicle rental industries, as well as some contracts commonly used by online traders. A select number of standard form contracts used by prominent travel agents were also examined.
During these reviews, the ACCC identified issues under both unfair contract term laws and broader consumer protection laws. The ACCC worked with businesses to remove or change unfair terms in standard form contracts and address identified issues.Its report summarises the outcomes of the reviews, commenting that the following types of terms were of particular concern -
1. Contract terms that allow the business to change the contract without consent from the consumer.
2. Terms that cause confusion about the agency arrangements that apply and that seek to unfairly absolve the agent from liability.
3. Terms that unfairly restrict the consumer’s right to terminate the contract.
4. Terms that suspend or terminate the services being provided to the consumer under the contract.
5. Terms that make the consumer liable for things that would ordinarily be outside of their control.
6. Terms that prevent the consumer from relying on representations made by the business or its agents.
7. Terms seeking to limit consumer guarantee rights.
8. Terms that remove a consumer’s credit card chargeback rights when buying the service through an agent.The ACCC states that "particularly significant changes were achieved in relation to standard form contracts of major airlines, with 79% of problematic terms identified by the ACCC amended or deleted as a result of the review".
The ACCC goes on to note that
The national unfair contract terms laws came into effect on 1 July 2010. Part 2–3 of the ACL provides a court may determine that a term of a standard form consumer contract is unfair and therefore void. Under the ACL, a ‘consumer contract’ means a contract for the supply of goods and services or the sale or grant of an interest in land, to an individual who acquires it wholly or predominately for personal, domestic or household use or consumption.
Although the unfair contract terms provisions do not define a ‘standard form contract’, they outline a number of factors that the court must take into account in determining whether a contract is a ‘standard form contract’. In broad terms, it will typically be one that has been prepared by one party to the contract and is not subject to negotiation between the parties – that is, it is offered on a ‘take it, or leave it’ basis.
The unfair contact terms laws do not apply to a contract to supply goods or services from one business to another for business use.
Similar unfair contract terms provisions exist under the Australian Securities and Investments Commission (ASIC) Act in relation to standard form consumer contracts for financial products and services.
A test consisting of three elements is used to determine whether a term is unfair.
A term of a consumer contract will be considered unfair if: 1. it would cause a significant imbalance in the parties’ rights and obligations under the contract 2. it is not reasonably necessary to protect the legitimate interest of a party to the contract (note that the party who would be advantaged by the term must prove that it is reasonable necessary), and 3. it would cause detriment to a party to the contract if it were to be applied or relied upon.
All three elements of the test must be proved in order for a court to find that a term is unfair. In determining whether a term is unfair in accordance with the test, the court must take into account the extent to which the term is transparent, and the contract as a whole. xxxx The laws also provide examples of the types of terms that may be considered unfair and provide a framework for assessing the transparency of terms. Terms that set the upfront price and subject matter of a contract, and terms that are expressly required or permitted by another law are excluded from the unfair contract terms provisions.
Enforcement of the unfair contract terms is shared between the ACCC, ASIC and the state and territory consumer protection agencies. Individual consumers can also seek to enforce their rights under the law. The ACCC, ASIC and the state and territory consumer protection agencies may apply to the court for a declaration that the term of the contract is unfair. It is then the role of the court to determine whether this is the case.
If a court makes a declaration that a term is unfair and a party subsequently seeks to apply or rely on the unfair term, the court may make orders including to vary the contracts or arrangements; an order refusing to enforce any or all of the terms of the contract; or an order directing the person to refund money or property to the injured person.