Article by Andrew Rankin and Tom McDonald
The introduction of a national consumer law regime has been a key priority on the policy agenda of the Rudd government. One of the main components of the Bill relates to unfair contract terms. Presently, Victoria is the only state to have laws which specifically address unfair contract terms.
Nationally, there are currently 13 generic consumer laws. A key driver of this new national legislation is the desire to reduce the complexity of the present arrangements and to provide greater certainty for business and consumers.
The proposed new laws will give regulators greater powers to investigate alleged breaches of the law. It will also introduce a range of significant new remedies which regulators will be able to seek in response to breaches of the law.
Key provisions of the Bill
The Bill was first introduced into Federal Parliament on 24 June 2009 and, if passed, the Bill's provisions relating to unfair contract terms will commence operation on 1 January 2010.
The Bill proposes to outlaw the inclusion of unfair terms in non-negotiated (standard form) consumer contracts between businesses and consumers. Should a contract contain an unfair term, that provision of the contract will be void, however, the remaining terms of the contract will continue to be binding.
A consumer contract is defined broadly and will include any contract for the supply of goods or services or a sale or grant of an interest in land, made to an individual wholly or predominantly for personal, domestic or household use. This definition will mean that the new laws will apply to contracts between consumers and suppliers, such as standard form accommodation, hire and rental agreements.
There are only limited exemptions from the provisions of the Bill relating to unfair contract terms. These provisions will not apply to insurance contracts, nor will they apply to "business to business" contracts.
A term will be unfair if:
- it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and
- the term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the supply.
The Bill goes on to list various terms which may be unfair. Those terms include those that allow the supplier to:
- impose fees for terminating the contract early;
- vary or terminate the contract for whatever reason;
- renew or not renew the contract; or
- determine whether the contract has been breached.
Action required
In light of the expanded investigatory powers of regulators and the significant new penalties, which are proposed to commence from 1 January next year, it is important that all businesses which use standard form customer agreements review those agreements now to ensure they do not contain terms which would be unfair. If you require advice on this, please contact us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.