Unjust and unfair terms

From Uni Study Guides
Jump to: navigation, search

Under Chapter 2, Part 3 of the Australian Consumer Law,[1] unfair or unjust terms of a consumer contracts are void.[2] Three main requirements must be satisfied in order for a term to be void under the act:

  1. The term must be unfair.[3] To qualify as unfair, a term must satisfy all the following requirements:[4]
    • (a) it would cause a significant imbalance in the parties’ rights and obligations.
    • (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.
    • (c) it would cause detriment (whether financial or otherwise) to a party.
  2. The contract must be a standard form contract.[5]
    • The onus is on the party claiming it is not a standard form contract (basically, considered standard form until proven otherwise)[6]
    • Standard form contracts (or adhesion contracts) are business contracts which are prepared by a business to be used repeatedly in similar scenarios (car hire, travel, loans).[7] Considerations usually regarded by the court are listed in s 27 (2).
  3. The contract must be a consumer type contract.[8]
    • A consumer contract is a contract made with an individual, whose buying goods/services/property for non-business purposes.[9]

In addition, terms are immune from s 23 to the extent which they:[10]

  • (a) define the main subject matter of the contract; or
  • (b) sets the upfront price payable under the contract; or
  • (c) is a term required, or expressly permitted, by Australian laws.

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. 978-979 [38.55].

Australian Consumer Law: ss 23-27.

Introduction

Under the Australian Consumer Law, unfair or unjust terms of a consumer contracts are void. The act specifies as follows:

s 23

s 23 sets the prohibition against unfair terms, and describes what sort of contracts are affected by the act.

  • s 23 (1) specifies that a term of a consumer contract is void if:
    • (a) the term is unfair; and
    • (b) the contract is a standard form contract.
  • s 23 (2) specifies that the rest of the contract remains binding if it is capable of operating without the unfair term.
  • s 23 (3) specifies a consumer contract is a contract with an individual whose acquisition of:
    • (a) a supply of goods or services; or
    • (b) a sale or grant of an interest in land;
  • is predominantly for personal, domestic or household use or consumption.
  • Note: basically, someone whose buying goods/services/property for non-business purposes.

s 24

s 24 describes the meaning of an unfair term.

  • s 24 (1) specifies that a term is unfair if (all are needed):
    • (a) it would cause a significant imbalance in the parties’ rights and obligations.
    • (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.
    • (c) it would cause detriment (whether financial or otherwise) to a party.
  • s 24 (2) specifies that in determining whether a term is unfair, the court consider such matters as it sees fit, yet must take into account:
    • (a) the extent to which the term is transparent (see below).
    • (b) the contract as a whole.
  • s 24 (3) specifies that a transparent term is (all are needed):
    • (a) expressed in reasonably plain language.
    • (b) legible.
    • (c) presented clearly.
    • (d) readily available to any party affected by the term.
  • s 24 (4) specifies that a term is presumed to be in contravention of subsection (1) (b) (not necessary for protection of legitimate interests) until proven otherwise.
    • Note: thus, the onus is on the defendant to prove that a term is necessary to protect his legitimate interests.

s 25

s 25 provides some examples of unfair terms. The examples, however, are not limiting.

  • s 25 (1) - Without limiting section 24, the following are examples of the kinds of terms of a consumer contract that may be unfair:
    • Note: the wording has been edited here to provide a concise list. Please ensure that you check the act for a full understanding.
    • (a) permits one party (but not another party) to avoid or limit performance;
    • (b) permits one party (but not another party) to terminate;
    • (c) penalises one party (but not another party) for a breach or termination;
    • (d) permits one party (but not another party) to vary the terms;
    • (e) permits one party (but not another party) to renew or not renew;
    • (f)permits one party to vary the upfront price payable under the contract without the right of another party to terminate;
    • (g) permits one party unilaterally to vary the characteristics of the goods or services to be supplied, or the interest in land to be sold or granted;
    • (h) permits one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
    • (i) limits one party’s vicarious liability for its agents;
    • (j) permits one party to assign the contract to the detriment of another party without that other party’s consent;
    • (k) limits one party’s right to sue another party;
    • (l) limits the evidence one party can adduce in proceedings relating to the contract;
    • (m) imposes the evidential burden on one party in proceedings relating to the contract;
    • (n) a term of a kind prescribed by the regulations.
  • s 25 (2) sets limitation on what regulations can be proscribed for the purposes of subsection (1) (n). These are not so important for the course.

s 26

s 26 indicates that terms defining the main subject matter of the contract are immune to s 23 and thus cannot be voided by it.

  • S 26 (1) specifies that s 23 will not apply to a term to the extent (and only to the extent) of which the term:
    • (a) defines the main subject matter of the contract; or
    • (b) sets the upfront price payable under the contract; or
    • (c) is a term required, or expressly permitted, by Australian laws.
  • S 26 (2) defines that the upfront price means the considerations that is:
    • (a) provided for the supply, sale or grant.
    • (b) disclosed at or before the time the contract is entered into
  • But does not include other consideration that is contingent on the occurrence or non‑occurrence of a particular event.

s 27

s 27 specifies what constitutes a standard form contract.

  • s 27 (1) specifies that if a party alleges that a contract is a standard form contract, it is presumed to be so until proven otherwise.
  • s 27 (2) describes what the court may take into considerations when determining whether a contract is a standard form contract (these considerations are not limiting):
    • (a) whether one of the parties has most of the bargaining power;
    • (b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;
    • (c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented;
    • (d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1);
    • (e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction;
    • (f) any other matter prescribed by the regulations.

Contract Review Act

Unfair contracts are also prohibited by the Contracts Review Act 1980 (NSW). The act is broken down as follows:

s 6

s 6 specifies who is not protected by the act. These include:

  • (1) Any public authority, the Crown, or a corporation.
  • (2) Any type of contract in trade or commerce (those would be covered under the Australian Consumer Law), but not if it is related to farming (ie, farmers will be protected by the arts).

s 7

s 7 s 7 specifies


Sorry! This section is still incomplete. If you wish to help us, please click here.


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. Part of the Competition and Consumer Act 2010 (Cth) and applies throughout all Australian jurisdictions.
  2. ACL, s 23 (1) (a)
  3. ACL, s 23 (1) (a)
  4. ACL, s 24 (1)
  5. ACL, s 23 (1) (b)
  6. ACL, s 27 (1)
  7. Robert A Hillman and Jeffery J Rachlinski, 'Standard-form contracting in the electronic age' (2002) New York University Law Review 429 in Casebook, pp. 340-5 [12.05]
  8. ACL, s 23 (1)
  9. ACL, s 23 (3)
  10. ACL, s 26
Personal tools
Namespaces

Variants
Actions
Navigation
Toolbox