Examples of Unfair Contract Terms:
The ACCC has identified several types of contract terms that are commonly found to be unfair. These include:
- Excessive Penalties: Terms that impose disproportionate penalties on consumers or small businesses for minor breaches of contract (e.g., hefty cancellation fees, late payment charges).
- One-Sided Termination Clauses: Clauses that give the business the right to terminate the contract but do not provide the consumer or small business with a similar right (e.g., an agreement where the company can cancel services at will, but the consumer is locked into a long-term contract).
- Non-Refundable Deposits: Clauses stating that deposits are non-refundable under any circumstances, even if the product or service is not delivered as promised.
- Automatic Renewals: Terms that automatically renew a contract without clear, prominent, and timely notice to the consumer or business, making it difficult for them to opt-out or terminate the agreement.
- Unilateral Price Changes: Clauses that allow a business to unilaterally increase prices or change other important terms of the contract, without giving the consumer or small business an option to exit or renegotiate.
- Disclaimers of Liability: Clauses that exempt the business from liability for common issues that could arise, such as defects or failure to deliver a service or product, leaving the consumer or small business at a significant disadvantage.
Legal Framework for Terms
The Australian Consumer Law (ACL), under the Competition and Consumer Act 2010 (CCA), provides that:
- Standard form consumer contracts and small business contracts (typically with fewer than 100 employees or an annual turnover of less than $10 million) are subject to scrutiny for unfair terms.
- If a term is found to be unfair, it can be declared void by a court or tribunal. The term is treated as if it never existed, but the rest of the contract remains valid.
Key Legislation and Amendments:
- Australian Consumer Law (ACL): Under sections 23-28 of the ACL, the unfair contract term provisions apply to standard form contracts for consumers and small businesses.
- Small Business Contract Provisions: In 2016, the law was expanded to include small businesses, ensuring that contracts involving businesses with fewer than 100 employees or a turnover of less than $10 million are subject to the same protections as consumer contracts. This change was a response to growing concerns about the power imbalance between large corporations and smaller businesses.