4 Unfair Contract Terms Part 2-3 Rest of ACL: familiar threshold of $40,000 and then goods or services of a kind ordinarily acquired for personal domestic and household use or consumptionMore limited scope than rest of ACL:Must be a consumer contract that is a standard form contractOne of the parties is an individualMust acquire goods or services (including land) wholly or predominantly for personal domestic or household use or consumptionApply to contracts entered into on or after the commencement of the provisionsOr terms varied after that date
5 What is an unfair term? A term in a consumer contract is unfair if : it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; andthe term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the termIt would cause detriment whether financial or otherwise to a party if it were to be applied or relied on.Court must take into account the extent to which the term is transparent and the contract as a wholeList of indicative factors (reproduced from UK and Vic Act) s 7
6 UCT provisions do not apply to terms that: define the main subject matter of the contractset the upfront price payable under the consumer contractare required or expressly permitted by a law of the Commonwealth or a state or territory but only to that extentSome special contracts eg shipping, insurance, constitutions
7 Effect of an unfair term? An unfair term or prohibited unfair term in a consumer contract (that is a standard form contract) is void.Contract will continue to bind parties if capable of operating without the termBoth regulator & individual party to a contract can seek:declarationsinjunctionsnon party redresswith respect to unfair contract terms
8 The Victorian Experience So Far Industry sectors…Car and Goods AuctionsAdvanced Hair StudioInterstate Taxi TrucksInternet EducationRetirement VillagesP & O CruisesDymocks rewards cardColes Myer GiftcardsMobile phonesHire carsFitness centresISPsMajor events (eg Grand Prix, M2006, M2007)Carpet and curtain retailersDomestic building contractsTenancy agreements (incl. REIV)FoxtelCar Parks****ACL GuideVic Guides, ASIC guidance UK bulletins, EU cases, court cases UK and Vic8
9 Standard Form Contract No definition of standard form contractRebuttable presumption that contract is a standard form contractIn determining whether a contract is a standard form contract, the Court may consider any relevant matters, but must consider whether:one of the parties has all or most of the bargaining power relating to the transactionthe contract was prepared by one party before any discussion relating to the transaction commencedanother party was, in effect, required to accept or reject the terms in the contract (other than the ‘excluded terms’) in the form in which they were presented (that is, on a ‘take‑it‑or‑leave‑it’ basis)another party was given an effective opportunity to negotiate the terms of the contract (other than the ‘excluded terms’)the terms of the contract (other than the ‘excluded terms’) take into account the specific characteristics of another party or the particular transaction; andany other matter prescribed by the regulations.
10 Indicative Factorspermits the supplier but not the consumer to avoid or limit performance of the contractpermits the supplier but not the consumer to terminate the contractspenalises the consumer but not the supplier for a breach or termination of the contractpermits the supplier but not the consumer to renew or not renew the contractpermits the supplier to assign the contract to the consumer’s detriment without the consumer’s consentpermits the supplier to vary the price without the right of the consumer to terminate the contractpermits the supplier but not the consumer to vary the terms of the contractpermits the supplier unilaterally to vary the characteristics of the goods or services to be supplied under the contractpermits the supplier unilaterally to determine whether the contract has been breached or to interpret its meaninglimits the supplier’s vicarious liability for its agentslimits the consumer’s right to sue the supplierlimits the evidence the consumer can produce in legal proceedings on the contractimposes the evidential burden on the consumer in such legal proceedings.
11 Lessons from VictoriaSenior management need to be involved to ensure timely and appropriate response to Consumer Affairs Victoria’s concerns and monitor progress closelyInappropriate delegation may cause escalation in compliance actionSenior management likely to be more experienced with contract negotiation to achieve balance of rights and obligations and understand allocation of risk issues.Involve in house counsel or external lawyers in review of termsUCT focuses on construction of clause not on practice or on usual implementation of term. Liability issues may require legal advice.View review of terms as a positive opportunity to improve competitive edge, improve consumer satisfaction and reduce complaints.A simpler and clearer contract also assists staff.
12 Typical IssuesCompletely one sided contracts where all supplier’s obligations depend on statutory guarantiesUnilateral variationFailure to itemise all costs and penalties on terminationTermination for “any” breachPurported exclusion of all liability for lossDebiting arrangements
13 What about these terms?Should the vehicle booked be unavailable through unforseen circumstances, XX reserves the right to substitute an alternative vehicle without prior notification and at no extra cost, save for any additional running costs pertaining to the substitute vehicle. This shall not constitute a breach of contract and does not entitle the customer to a refundWe can cancel the contract if you are in breach of any of the terms of this agreement
14 Terms 2Where your equipment causes a fault in your service, we can charge you a call-out fee and our reasonable charges for rectifying the fault.NowWhere your equipment causes a fault in your service that we need to repair, we can charge you a call out fee and our reasonable charges for repairing the fault. We will tell you the amount of the call-out fee and the hourly rates [supplier] charges for rectifying faults before we commence work.
15 Terms 3a) Our records are sufficient proof that a charge is payable unless they are shown to be incorrect(b) Any claim that charges in a bill are incorrect must be made within 12 months of the bill’s due date.NowWe are required by various industry codes to ensure that our bills are accurate and verifiable and we are committed to complying with these requirements. Our records are sufficient proof that a charge is payable unless they are shown to be incorrect
16 Terms 4 We may change [our terms] without your agreement. Now We cannot change the monthly access fee, minimum monthly fee or any early termination fee that applies to your service during the term of your fixed length contract without your consent. Unless your current fixed length contract ends and you have not agreed to enter into another fixed length contract for your service including as part of an individually negotiated agreement, you will become a casual customer for that service. As a casual customer, we can vary all of the terms of your contract for that service if we follow the process outlined below under [name and number of clause].