Statutory unconscionable conduct

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The Australian Consumer Law prohibits unconscionable conduct. It prohibits both unconscionable conduct as defined by the equitable doctrine of unconscionable dealing, as well as other conduct, which, although not deemed unconscionable by the definitions of the courts, is deemed unconscionable under the statute. This is commonly referred to as statutory unconscionable conduct.

To be entitled to a remedy for statutory unconscionable conduct, the following requirements must be satisfied:

  • The unconscionable party must have acted in an unconscionable way. What constitutes unconscionable is either:
    • The same as under the definition of equitable unconscionable dealing (unfairly taking advantage of a special disability of the other party[1]). This comes under s 20
    • A literal, broader definition of the word. Typical considerations are mentioned in s 21 (2) (a)-(l). However, if relying on this broad definition, the wronged party must be either:
      • a consumer;(s 21) or
      • a small business (s 22).
  • The unconscionable conduct must have been during trade or commerce - "those activities or transactions which, of their nature, bear a trading or commercial character."[2]

If the sections above are contravened, the victim will be entitled to remedies under the Australian Consumer Law.

This article is a topic within the subject Contracts.

Contents

Required Reading

Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 965 [38.05], 968-975 [38.35-38.40].

Australian Consumer Law: ss 20-22.

Unconscionable conduct

Besides being protected through equity (see: Unconscionable dealing), unconscionable conduct is protected by Chapter 2, Part 2 of the Australian Consumer Law.[3] The act specifies as follows:

  • s 20 applies to unconscionable conduct as defined by the equitable doctrine of unconscionable dealing. It thus mainly means that the equitable doctrine of unconscionable dealing can be remedied by the remedies under the Australian Consumer Law.
  • s 21 applies to consumer type transactions. Although it applies to a more limited type of transactions than the equitable doctrine, the definition of what actually constitutes 'unconscionablility' is greatly expanded (whereas in the equitable doctrine, unconscionablility is knowingly taking advantage of a disability, here it is more broad).
  • s 22 applies to business type transactions. Whilst it is different to s 21 in its application (applies to business transaction and applies to 'acquirers' rather than just suppliers), the way unconscionability is defined in it and the factors considered by the court are consistent with s 21.

If the sections above are contravened, the victim will be entitled to remedies under the Australian Consumer Law.

A detailed explanation of the three sections is available below.

s 20

s 20 applies to unconscionable conduct as defined by the equitable doctrine of unconscionable dealing.

  • s 20 (1) specifies that a person is prohibited from engaging in conduct deemed as 'unconscionable' according to the definition of the courts. This means that conduct which comes within the equitable doctrine of unconscionable dealing is also prohibited by the statute. The significance of this is twofold:
  • s 20 (2) specifies that this conduct (unconscionable as defined by the courts) is to be distinguished to the unconscionable conduct as defined by the rest the Act.

A prolific case which considers what is unconscionable conduct is ACCC v CG Berbatis Holdings:

  • Unconscionable dealing requires a special disadvantage. It is only when such a special disability is taken advantage of that a party is said to have acted unconscionably.
  • "A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests."[4]

s 21

s 21 applies to consumer type transactions.

  • s 21 (1) specifies that person who supplies goods or services to another (consumer type transactions) is prohibited from acting unconscionably.
  • s 21 (2) describes what the court may take into considerations when determining whether conduct is unconscionable as defined by the statute (these considerations are not limiting):
    • (a) Strength of bargaining positions of the supplier & consumer.
    • (b) Whether the consumer was forced to comply with conditions not necessary for the protection of the legitimate interests of the supplier
    • (c) Whether the consumer was able to understand the documents/discussions properly.
    • (d) Whether any undue influence, unfair pressures or tactics were used on the consumer by the supplier.
    • (e) The difference between the supplier's price and the reasonable market price for the same goods/services.
    • Note: the wording of this sub-section (s 21 (2)) means that unconscionablility as defined by the statute extends to more than that which qualifies as unconscionable dealing in equity.
  • s 21 (3) specifies that the mere institution of legal proceedings by a consumer does not automatically mean that the supplier acted unconscionably.
  • s 21 (4) specifics that when determining whether a supplier contravened s 21 (1) (acted unconscionably), the court:
    • (a) Doesn't take into account circumstances that were not reasonably foreseeable at the time of the contravention.
    • (b) May take into account conduct occurring before the commencement of the Australian Consumer Law.
  • s 21 (5) specifies that 'goods and services' means any goods or services used for personal, domestic or household use or consumption (stressing how this section is restricted to consumer type transactions).
  • s 21 (6) specifies that this section does not apply to consumers who plan on re-supplying these goods or using them for trade or commerce (consumer type transaction rather than business).
  • s 21 (7)
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s 22

s 22 applies to business type transactions.

  • s 22 (1) specifies that a person must not act unconscionably when:
    • (a) supplying goods or services to a person other than a limited public company; or
    • (b) acquiring goods or services from a person other than a limited public company
    • Note: this section applies to business transactions including small businesses. It protects persons who are not 'limited public companies'.
  • s 22 (2) describes what the court may take into considerations when determining whether conduct by a supplier to a business consumer is unconscionable (these considerations are not limiting):
    • (a) Strength of bargaining positions of the supplier & business consumer.
    • (b) Whether the business consumer was forced to comply with conditions not necessary for the protection of the legitimate interests of the supplier
    • (c) Whether the business consumer was able to understand the documents/discussions properly.
    • (d) Whether any undue influence, unfair pressures or tactics were used on the business consumer by the supplier.
    • (e) The difference between the supplier's price and the reasonable market price for the same goods/services.
    • (f) The extent to which the supplier's conduct with this business consumer was consistent to his conduct with other business consumers.
    • (g) The requirements of any applicable industry code.
    • (h) The requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code.
    • (i) The extent to which the supplier unreasonably failed to disclose:
      • (i) Any intended conduct of the supplier that might affect the interests of the business consumer; and
      • (ii) Any risks which may arise from such conduct and might not be foreseen by the business consumer.
    • (j) If there is a contract:
      • (i) The extent to which the supplier was willing to negotiate the terms and conditions.
      • (ii) The terms and conditions of the contract.
      • (iii) The conduct of the supplier and the business consumer in complying with contract.
      • (iv) Any conduct either of the parties engaged in after entering the contract.
    • (k) Without limiting sub-section (j), whether the supplier has a contractual right to vary unilaterally a term or condition relating to goods/services.
    • (l) The extent to which the parties acted in good faith.
  • s 22 (3) describes what the court may take into considerations when determining whether conduct by an acquirer to a small business supplier' is unconscionable (these considerations are not limiting):
    • The considerations are the same as in ss 22 (2) (a)-(l).
  • s 22 (4) specifies that the mere institution of legal proceedings by a consumer does not automatically mean that the supplier acted unconscionably.
  • s 22 (5) specifics that when determining whether a supplier contravened s 22 (1) (acted unconscionably), the court:
    • (a) Doesn't take into account circumstances that were not reasonably foreseeable at the time of the contravention.
    • (b) May take into account conduct occurring before the commencement of the Australian Consumer Law.
  • s 22 (6) & (7) specify that supply or acquisition of 'goods and services' for this section means for the use of trade or commerce (this makes it business type transactions)
  • s 22 (8)
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References

Casebook refers to Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009).

Textbook refers to Paterson, Robertson & Duke, Principles of Contract Law (Lawbook Co, 3rd ed, 2009).

ACL refers to the Australian Consumer Law.

  1. Commercial Bank of Australia v Amadio (1983) 151 CLR 447, 461 (Mason J)
  2. Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 604
  3. Part of the Competition and Consumer Act 2010 (Cth) and applies throughout all Australian jurisdictions.
  4. (2003) 214 CLR 51, 64
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